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Reason Foundation

Surface Transportation Innovations #17

Topics include: the reauthorization's tolling provisions, academic support for tolled express lanes, Reason's latest transit study, and other breaking news stories.

Robert Poole
July 1, 2004

In this issue:

Getting to Yes on Reauthorization's Tolling Provisions

Although there is still some uncertainty over the level of funding between the House and Senate reauthorization bills, one of the most contentious issues now facing the conference committee is the widely divergent tolling provisions in the two bills. Rep. Mark Kennedy's floor amendment to substitute his FAST lanes proposal for nearly all the other tolling provisions approved by the Transportation & Infrastructure Committee would wipe out the important Value Pricing program at Federal Highways, and permit only temporary tolling of much-needed congestion-relief lanes added to Interstate highways and freeways. And the House bill also failed to include the much-needed $15 billion worth of private activity (toll revenue) bonds included in the Senate bill. But it was the elimination of the pilot program to let three states rebuild Interstate facilities with tolls that was apparently the main focus of strong trucking industry lobbying in favor of Kennedy's coup. And that lobbying continues as the conference committee deliberates.

The truckers and their auto-club and taxpayer group allies have a valid concern: they don't want to see tolling become an open-ended tax on highway users, diverted to bike paths and transit projects (as now occurs with an increasing share of fuel tax monies). So any compromise measure that preserves a broad expansion of tolling (a la the Senate bill, which largely followed the Administration's tolling proposals) must take these concerns seriously.

There are several possible ways to address these issues in modifying the Senate bill. One, as I've previously written, would be to tighten up the language about the use of toll revenues. There needs to be very clear prioritization that toll revenues be used first for paying for the cost of building, financing, operating, and maintaining the tolled facility. Only then does the subject of "surplus revenue" arise. And those surplus revenues should be usable for expanding the system of tolled lanes, and possibly other transportation facilities in the corridor where the tolled lanes exist. Definitely NOT anything as open-ended as general transit funding under Title 49, as the Senate bill now reads. Another possible fix would be to eliminate the one line in S. 1072's Sec. 1609 that would permit tolling on existing general-purpose lanes. Yes, that would reduce the congestion-management potential of broader pricing, but could be a necessary price to pay for gaining a more expansive tolling agenda.

What about the truckers' real bete-noir, the pilot program to rebuild several Interstates with tolls? This provision was included in TEA-21 in recognition of the fact that portions of the Interstate system are nearing the end of their design life and must be completely rebuilt; in most cases, they also need lane additions. Because it's been very difficult politically to increase fuel taxes enough to pay for such major new projects, tolling has been suggested as a better way. Arguments about these highways having been "already paid for" out of fuel taxes are irrelevant: today's level of fuel taxes is simply not enough for billion-dollar-scale rebuilding projects. But since a compromise seems to be necessary here, an alternative would be to pay for at least the new lanes in such rebuilding projects with tolls.

Obviously, this loses the advantage of spreading the toll over all vehicles on that Interstates and means that the tolls on the new lanes would have to be much higher. And high toll rates would tend to drive traffic away, not attract it. Unless, that is, the new lanes offer something very valuable, obtainable in no other way. That valuable thing could be the ability for trucking companies to operate rigs carrying double the payload of current 18-wheelers, as proposed in Reason's Toll Truckways policy paper (www.reason.org/ps294.pdf). Long double- and triple-trailer rigs, on barrier-separated lanes, would be safer than 18-wheelers operating in general-purpose lanes, which is why the National Safety Council endorsed this concept when we unveiled it in June 2002. And the American Trucking Associations continues to support this approach.

Interestingly, the American Highway Users Alliance, though signing on to the ATA letter opposing the Senate tolling provisions, actually supports Truck-only Toll Lanes for which "States [would] have full authority to set size and weight limits . . . that may exceed the limits on general-purpose lanes." (see their position paper at www.highways.org/toll%20position%20paper.pdf). So this might be the best approach to dealing with this Interstate rebuild issue: permit the lane additions to be toll lanes, including Toll Truckways offering much greater value to truckers than current free lanes.


Another Argument for Tolled Express Lanes

It's encouraging to see academics breaking new ground in transportation modeling, stimulated by the success of using variable pricing on the HOT lanes in San Diego and Orange County, California. A new paper by three such researchers explores the subject of "heterogeneity" in driver preferences regarding express travel at rush hours.

Ken Small, Cliff Winston, and Jia Yan have realized that standard models tend to assume a uniform "value of time" for everyone in a metro area. We all know this is incorrect; value of time varies not only from person to person but from trip to trip, depending on its purpose, traffic conditions, etc. What they set out to do is to explore the extent of this heterogeneity, using real-world data from the 91 Express Lanes in Orange County and then to use this information in modeling alternative pricing policies.

Using data from both stated preference (SP) surveys and revealed preference (RP) surveys, they used new analytical methods to estimate heterogeneity, not only of travel time itself but also of the reliability of travel time. The results are pretty surprising. The median value of rush-hour time estimated from RP data (what people actually do) is $21.46/hour, as compared with that from SP data (what people say in response to hypothetical questions), which was only $11.92/hour. But even more interesting is the range of time values. In the RP case, this ranges from a low of $11.47/hr. up to $29.32/hr., with correspondingly lower figures for the SP case.

In addition to travel time itself, they estimated the value of travel-time reliability during rush hours. Again, the RP values were much higher, with a median of $19.56 and a range of from $6.26 to a whopping $42.80/hour. Adding the two medians (value of travel time plus value of reliability) produces a value very close to the peak toll rate charged during rush hours on the 91 Express Lanes during the time period when the survey data were collected.

Small, et al. then tested several different pricing policies for a situation like that on SR 91, where Express Lanes compete with general-purpose lanes in a congested corridor. They estimate that a policy of market-pricing the Express Lanes and not charging the general-purpose lanes produces overall social welfare gains for drivers in the corridor (compared with a no-toll case), given the assumption about heterogeneity. Without that assumption, the social welfare gain is close to zero. They then test several alternatives, including a modest toll on the general lanes and a higher toll on the Express Lanes. This produces 50% more social-welfare gains (and is similar to the express toll lanes being proposed by the Miami-Dade Expressway Authority for several of its toll roads). Small and colleagues estimate much greater welfare gains if all lanes could be tolled at high levels, but recognize that this is not politically feasible. So the bottom line is that "road pricing policies that cater to varying preferences can substantially increase efficiency" while meeting the realities of political feasibility.


North Carolina Transit Study Wins Praise

The Federal Transit Administration is faced with far more New Starts funding requests for urban rail projects than it can possibly fund. This plethora of requests has come about as metro areas scramble to get their piece of the funding pie — all too often without carefully thinking through what they can actually accomplish by adding rail to their transportation mix.

Clear thinking about this subject is provided in a new policy study by my colleague at Reason, Ted Balaker. His report analyzes the justifications being given for new rail projects in three North Carolina metro areas. What he finds is eye-opening. In all three cases, rail is being argued for as a kind of urban revitalization cure-all: to fight sprawl, reduce pollution, spur economic development and (almost as an afterthought) improve mobility and reduce congestion.

Ted's thoughtful analysis suggests that transportation planners pare down their list of goals, focus on the core mission of cost-effective mobility improvement, and then assess the costs and benefits of each transportation improvement option. I don't have the space here to do justice to this important study, but you can read the summary version here: www.reason.org/ps321polsum.pdf. The details, including quantitative justifications for all the main points in the summary, are in the full version at: www.reason.org/ps321.pdf.

Let me close by quoting the assessment of a transit consultant colleague, formerly a senior financial official with one of the nation's largest transit agencies:

"This is one very fine piece of work. It reads well, and I believe that even those with no real background in the technical materials will find it easy to understand and easy to use . . . It also makes some very important arguments about how transportation planning should be conducted that, in my opinion, is a significant contribution to the professional literature — as well as being a 'must read' for every elected official who is confronted with the question of how to approach such decisions."


Can We Afford to Give Away Space to Car-Pools?

My colleague Ken Orski (in an Innovation Briefs editorial) has called attention to my latest column in Public Works Financing on rethinking HOV and HOT lanes. In that column I argue that, with urban freeway lane additions now costing in the vicinity of $10 million per lane-mile (and up), we need to build such additions as toll lanes rather than as free lanes if we're to have any hope of amassing the needed funds. But our national attachment to car-pooling has become a serious impediment to doing so. Eleven years ago I edited the RPPI policy study that introduced the concept of HOT lanes: lanes in which car-pools would go at no charge while other vehicles paid a market-based toll. At the time, that seemed like a big improvement over continuing just with pure HOV lanes. But now that HOT lanes are catching on across the country, the political need to preserve a large fraction of the restricted lanes' capacity for free use by car-pools is becoming a serious barrier to generating enough toll revenue to pay for what it really costs to build and operate such lanes. Even worse is the new push, in California and in Congress, to let hybrid cars go free in HOV and HOT lanes.

I don't have the space to make the full argument here, but the PWF column is available here. After you've read it, I'd be interested in your thoughts.


Speaking Engagements

My wife and I finally moved into our new home in mid-May, which put a crimp in my normal travel schedule. But I'm back up to speed and thought you might like to know who's listening to my thoughts on surface transportation these days.

In May I gave a presentation on a new paradigm for 21st-century highways to the Florida Transportation Commission, meeting in a historic building in St. Augustine. My thoughts led the next day's newspaper story on the meeting. Last month I spoke on Managed Lanes in two different settings. The first was a day-long conference on transportation finance in Wisconsin, organized by my colleague Kevin Soucie and attended by nearly 200 business and government people. That event's consensus was that tolling will have to be part of the state's transportation finance future, despite the opposition of the current governor. The second was a workshop for the Miami-Dade County Metropolitan Planning Organization, jointly organized by Florida DOT, Florida Turnpike Enterprise, and Miami-Dade Expressway Authority. I was one of several speakers giving a tutorial on Managed Lanes, which all three agencies are seriously exploring for the Miami area.

This month I will be taking part in the Transportation Research Board's summer meeting in Park City, Utah and the co-located Federal Highway Administration Value Pricing Project Partners workshop. And in August I will be speaking at the Texas Transportation Summit in Dallas. The topic in all three cases will be HOT/Managed Lanes.


Robert Poole is Searle Freedom Trust Transportation Fellow and Director of Transportation Policy


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