Reason Foundation

http://www.reason.org
http://www.reason.org/news/show/surface-transportation-may-2010

Reason Foundation

Surface Transportation Innovations #79

US DOT's strategic plan, expanding highway capacity, private funding for rail and more

Robert Poole
May 13, 2010

In this issue:

The US DOT's Disappointing Strategic Plan

At a time when it is increasingly acknowledged that the federal government is on an unsustainable fiscal course, you would think the first thing a cabinet agency's new strategic plan would do is attempt to figure out which of its historical functions are truly federal and should be continued. But that sort of prioritization is entirely absent from the U.S. DOT's draft Strategic Plan, posted online for comment at https://dotstrategicplan.ideascale.com . Instead we are given a vast array of poorly justified expansions of the federal role into every nook and cranny of how Americans and their goods should travel-as well as how and where we should live.

One prevailing theme is frustration that current law does not permit the DOT to exercise as much micromanagement as its leaders think they should be doing. For example, the plan laments the lack of federal authority to regulate the safety of mass transit, as well as the lack of federal control over which specific highway and bridge projects states spend their federal highway monies on (as opposed to the numerous programs into which the feds already divide up these funds). It even laments that "DOT's Federal-aid roadway design standards are not enforceable on local streets," so that unless the law is changed, the DOT can only "encourage" more states to adopt the "complete streets" model in which every street in America must be equipped with sidewalks and bike paths.

Another recurrent theme is performance measures-but they are selectively and inconsistently applied. For example, something as basic as a minimum benefit/cost ratio threshold (perhaps 1.5) would weed out numerous low-priority projects that sound nice but aren't worth the money. The only instance in which such a standard is discussed is with regard to possible airport expansion. It is not mentioned with respect to with DOT's newly favored sectors: transit, streetcars, high-speed rail, the "marine highway," etc. The phrase "data-driven" appears several times, but only in limited contexts such as multimodal safety problems-not to evaluate favored modes or favored themes. The notion of a level playing field among transportation modes is mentioned several times-but the only aspects where analysis is suggested are on fuel-use, safety, and environmental benefits. What about a level-playing field comparison of goods-movement modes on cost, delivery time, and reliability?

A major focus of the previous Administration's DOT, under both Democrat Norm Mineta and Republican Mary Peters, was congestion reduction. This applied to both surface and air transportation, and included active promotion of market pricing in both areas (with no success in aviation, alas). Unfortunately, while the draft strategic plan gives lip service to reducing congestion, its approach to doing this in urban areas is to expand transit, promote ride-sharing and flextime, and support the demand-management form of road pricing. (Tellingly, that reference to pricing is buried in the "State of Good Repair" chapter, which is mainly about asset management.)

And that provides a clue to one of the major omissions from the Plan: capacity expansion. While it expresses limited support for expanding airport capacity, in highways its only concession is the possibility of "targeted investments" in "our national freight highway corridors to address bottlenecks." But as far as motorists are concerned, there is not a word about adding capacity to cope with projected growth and reduce congestion. In fact, the plan even suggests that more cities do as San Francisco did after its last earthquake and tear down urban freeways that may no longer be needed. And in its redefinition of "functionally obsolete" bridges, it refers to not having "adequate lane widths, shoulder widths, or vertical clearances," but makes no mention of not having enough lanes. It also uncritically accepts the "We can't build our way out of congestion" mantra, despite extensive evidence to the contrary (especially with priced capacity).

Entire chapters are devoted to the Secretary's two favorite topics: Livability and Environmental Sustainability. Both are notable for broad assertions presented without acknowledging considerable data and analysis calling them into question. For example:"A comprehensive strategy that promotes livability and reduced the demand for auto travel will significantly lower the long-run cost of transportation (and other infrastructure) for both household budgets and taxpayers." (p. 30) That's an astounding claim, accompanied by zero evidence. Transit and smart-growth advocacy groups typically argue that substituting transit for driving saves an individual money-but they ignore the large taxpayer cost of the highly subsidized transit alternative.

Another example is a tricky little game played with transportation data. The National Household Travel Survey (NHTS) did indeed find that 11.6% of all individual trips are made by walking of bicycling. Page 51 contrasts that figure with the less than 2% of annual Federal Aid Highway funds spent on walking and biking. First, this ignores the other NHTS finding that in terms of person-miles traveled, biking and walking together come to just 0.9% of the total (but still get 2% of the funding). Second, federal highway funds are supposed to fund important federal highways , like the Interstates. There is also the factoid that 40% of all metro-area trips are two miles or less in length and therefore "could be taken on foot or bicycle"-if you ignore how people value their time, the vagaries of weather, the stuff they have to carry, etc.

Yet another assertion, presented with no attempt at substantiation, is that "Creating livable communities is just as important to residents of rural areas as it is to residents of urban and suburban areas."

Finally, in the chapter on sustainability, this allegedly data-driven, performance-based plan simply asserts that "to reduce carbon emissions, improve energy efficiency, and reduce dependence on oil," the nation must begin "development of a national network of high-speed rail corridors." A similarly vague justification is given for DOT to "strategically expand the marine highway system." These mode choices are never presented as having emerged from a data-driven, mode-neutral benefit/cost analysis; they are simply assumed to be wise choices on which to expand billions of federal tax dollars. In particular, nowhere in the entire document is there any mention of using a cost/ton standard (such as no more than $50/ton) to sort out cost-effective greenhouse gas reduction measures from highly wasteful ones.

This draft plan is presumably a preview of what the Administration will set forth in its proposal for reauthorizing the federal surface transportation program. That amply demonstrates the need for a fundamentally different alternative to emerge from Congress.

» return to top

AASHTO's Case for Highway Capacity Expansion

The American Association of State Highway and Transportation Officials has released the first in a series of four reports from a project called Transportation Reboot: Restarting America's Most Essential Operating System. This one is "Unlocking Gridlock," and it makes a straightforward case that expanding the capacity of our highway system is essential to the country's continued economic growth. Between now and 2050, the population will grow by over 100 million (to 420 million), freight carried by truck is projected to double, and vehicle miles of travel on highways will increase from 2.9 trillion miles in 2009 to 4.5 trillion in 2050. Highways currently carry 95% of passenger trips and 93% of freight, by value. And no realistic projections of what alternative modes can do will make more than a dent in those figures.

As AASHTO's John Horsley has been saying, the U.S. DOT "has been largely silent on the need for more highway capacity for freight and motorists." This new report makes a well-supported case for adding capacity over the next 40 years, rather than doing as the Administration seems to be doing, which is to largely adopt the "fix it first" idea embedded in the current House reauthorization bill and promoted aggressively in a new report from the Public Interest Research Group. "Road Work Ahead: Holding Government Accountable for Fixing America's Crumbling Roads and Bridges" was released last month, about the same time as the AASHTO report. Its basic premise is that given the limited amount of highway funding available, the first priority should be to bring all roads and bridges into a state of good repair, before even thinking about capacity additions. (www.uspirg.org)

This near-simultaneous release of two markedly different reports led to the National Journal transportation blog debate topic for the week of May 3rd being "How should we prioritize highway spending?" In my blog post, I argued that both the AASHTO and PIRG reports are flawed, in that neither makes use of benefit/cost analysis to sort out wise spending from wasteful spending. AASHTO's call for annual (federal+state+local) highway capital investment of $175 billion comes from the 2008 FHWA Conditions and Performance Report. But that number is based on a B/C screen of only 1.0. With even a modest 1.2 threshold, that number drops to $157 billion, and with a more return-on-investment-like screen of 1.5, annual investment would be $137 billion. That's still a lot more than the current $79 billion, but it's a far more credible number. And please note that a majority of the capital investments in these figures are for rehabilitation of existing capacity; less than half is for new capacity.

PIRG makes the same kind of error by ignoring B/C analysis. It makes no commercial or good-government sense to eliminate every pothole or instance of surface roughness on every road in the land, regardless of how little traffic it carries. Likewise, not every "functionally obsolete" bridge should be brought up to modern standards. Rather, state DOTs should analyze how best to allocate spending between new capacity and upgrading the condition of existing capacity so as to maximize overall benefits. And a B/C threshold of something like 1.5 would be an excellent way to do so.

Note: You can find the whole 15-person National Journal debate on this subject at: http://transportation.nationaljournal.com/2010/05/how-should-we-prioritize-highw.php.
Or you can read just my commentary at http://reason.org/blog/show/highway-spending-benefit-cost.

» return to top

Will the Private Sector Fund Rail?

In a number of writings in recent years, I have tried to disabuse transportation planners of the idea that either rail transit or high-speed rail is a business, in which the private sector would invest and take business risks in order to make a return on its investment. Thus far, of new high-speed rail systems worldwide, only two (Tokyo-Osaka and Paris-Lyon) have recovered their capital costs from the farebox. All the others have gotten a large fraction, and in some cases 100%, of their capital costs from general taxpayers. And every one of the new US urban rail transit systems developed in the past 40 years has been built entirely with taxpayer money (and most recover half or less of their operating costs from their passengers).

The only two states now going forward with true high-speed rail projects (on separate right-of-way) are California and Florida. Both are hoping to attract private money, but when you read the fine print, it's not likely to be at-risk capital investment. A recent Bond Buyer article quotes a Florida HSR consultant suggesting a "super turnkey" type of involvement, under which the state would design and build the line and the private sector would operate and maintain it.

But a different type of public-private partnership is being negotiated in France, for that country's newest TGV line: 186 miles from Paris to Bordeaux. The government last month selected the winning bidder (from among three teams) for a 50-year concession to partly finance, build, operate, and maintain the high-speed guideway for this line. Under the terms of the bid, the national and local governments would put up 50% of the capital costs while the LISEA consortium, headed by Vinci, will put up the other half. The consortium would be paid track access charges based on the number of trains run by state railway operator SNCF and potentially other train operators, once EU rail service is deregulated in the near future. Thus, the consortium would actually be taking traffic and revenue risk on its half of the $9.6 billion project cost (assuming the deal gets signed without the insertion of some kind of state revenue guarantee). My source at SNCF tells me this would, indeed, be the first such case in France, and to the best of my knowledge, it would be the first time in the world where the private sector takes HSR traffic risk.

Something equally new is being attempted in the Dallas/Ft. Worth metro area, for the proposed Cotton Belt commuter rail line that would link both Ft. Worth and various Dallas suburbs to the DFW airport. The Regional Transportation Council (the MPO) is going out to bid for an "innovative finance partner" to think outside the box and come up with a way for the private sector to fund, not just finance, this $1 billion project. In other words, new revenue sources, not just financial engineering, is what the RTC hopes to find. Among the ideas to be considered, according to Public Works Financing , are:

Frankly, I remain a skeptic of both the French HSR project and the Cotton Belt line, but I will certainly keep an open mind as we see what happens with these innovative attempts.

» return to top

New Life for Suburbs

Amidst all the wishful thinking about how the housing-market bust was the coup de gras for suburbia, two reports crossed my screen in recent weeks that reinforce my skepticism. The first, from the Wall Street Journal (April 16th), was headlined "More Singles Buying in Suburbia." It reported that today's housing bargains are attracting a larger fraction of single people to buy homes; in 2009, some 21% of home buyers were single females (vs. 15% in 2001) and 10% were single males (vs. 7% in 2001). And more than half of these singles chose a house in the suburbs, as opposed to urban or rural areas. I guess the cool vibes of mixed-use downtowns aren't irresistible after all.

The second report, from NewGeography.com, was titled "The Downtown Seattle Jobs Rush to the Suburbs." If any place has a cool downtown that is attractive to companies as a good place to recruit employees to come and work, you'd think it would be Seattle. Yet data from the Puget Sound Regional Council show that between 2000 and 2009, employment in the central business district declined by 12%--a loss of 20,000 jobs. And most of those job losses occurred before the housing bust and the subsequent recession.

It turns out that "All of the employment growth in the Seattle area has been in the suburbs. While the city, including the downtown, was losing nearly 30,000 jobs, the suburbs of King, Pierce, Snohomish, and Kitsap counties added 90,000 jobs." Redmond, home of Microsoft's main campus, added 19,000 of those jobs. (www.newgeography.com/content/001518-the-downtown-seattle-jobs-rush-suburbs)

These are just two pieces of information, not a systematic study. But they certainly don't support the belief that singles and businesses are returning to the central cities in meaningful numbers, or that the suburbs are losing their attractiveness as places to live and work. Transportation planners should be paying attention.

» return to top

More Toll Roads Going Cashless

The conversion of toll roads to all-electronic/no-cash tolling seems to be accelerating. I'm drawing on several recent articles from Tollroadsnews.com for this update. Already operating on a cashless basis are the E-470 in Denver and the West Park in Houston (which has been cashless from its opening day).

The next big system to go completely cashless will be the North Texas Tollway Authority (NTTA) in Dallas. It's already converted two of its five toll facilities-the George Bush Turnpike and the Sam Rayburn Tollway. Its busiest toll road, the Dallas North Toll Road, will be converted during the fourth quarter this year, while its two smallest facilities (Mountain Creek Lake Bridge and Addison Airport Tunnel) will transition in the third and fourth quarters, respectively.

In Florida, the first conversion to cashless tolling will be the 47-mile Homestead Extension of Florida's Turnpike (HEFT), which is the Miami area's outer beltway. It plans to shut off cash collections by next spring. Customers will either use the SunPass transponders or will go with Pay-by-Plate video tolling. The nearby Miami-Dade Expressway Authority (MDX) is under way on a facility-by-facility conversion, with its first small toll road (SR 924) going cashless next month, and two others (SR 874 and SR 878) following in July. The Airport Expressway (SR 112) will convert in 2012 and the Dolphin Expressway (SR836) in 2013. The MDX conversion is more complex than most because it also involves converting from an open system (in which fewer than half of users encounter a toll plaza) to a closed system in which everyone must pay.

Further north in Florida, the Selmon Crosstown Expressway-Tampa's only toll road-plans to go cashless in September. Its elevated reversible express lanes have been cashless since they opened several years ago; now the rest of the toll road will follow suit, junking rather than replacing its aging cash collection system.

Finally, the North Carolina Turnpike Authority is developing its first toll roads and bridges to be cashless from the start. Its signature project is the $1 billion Triangle Expressway now under construction on the western side of Raleigh. In deciding on its toll system, Turnpike officials took into account that their state sits between the large northeastern E-ZPass system (which is interoperable from Maine to Virginia and as far west as Chicago) and the large but different SunPass system in Florida. So it went out to bid for a system that could accommodate out-of-state transponders from both. NC Turnpike customers will have a choice between a low-cost (under $10) sticker tag and a $25 hard-case eZGo transponder capable of operating in Florida and the E-ZPass territory.

We are still a long way from nationwide interoperability of transponders and (the more complex) interoperability of payment systems nationwide. But these are important milestones heading in that direction.

» return to top

Upcoming Conferences

Note: I don't have space to list all the transportation conferences going on; below are those that I or a Reason colleague are participating in.

Innovations in Pricing of Transportation Systems: Workshop and Conference, May 13-14, Orlando, FL, Royal Plaza Hotel in Walt Disney World Resort. Details at:
http://conferences.dce.ufl.edu/pricing. (Robert Poole speaking)

Fourth International Conference on Financing Surface Transportation, May 19-21, New Orleans, LA, Roosevelt Hotel. Details at:
http://onlinepubs.trb.org/onlinepubs/dva/ConferenceFinance2010Call.pdf. (Adrian Moore speaking)

The Future of Tolling: Going Mainstream through ORT and Interoperability, May 23-25, Boston, MA, Park Plaza Hotel. Details at: www.ibtta.org/Events/EventDetail3.cfm?ItemNumber=4420&token=43815&userID=.
(Adrian Moore speaking)

National Road Pricing Conference, June 2-4, Houston, TX, Westin Galleria Hotel. Details at: http://tti.tamu.edu/conferences/nrp10/. (Robert Poole speaking)

Infrastructure Investor: Southeast, June 3, Miami, FL, Kovens Conference Center. Details at: www.peimedia.com/Product.aspx?cID=7441&pID=208667. (Shirley Ybarra chairing)

Transportation Research Board Joint Summer Meeting, July 11-13, Minneapolis, MN, Marriott City Center Hotel. Details at: www.trb.org/conferences/2010/Summer. (Adrian Moore and Robert Poole)

22nd Annual Public-Private Partnerships in Transportation Conference, July 22-23, Washington, DC, Renaissance Washington Hotel. Details at: www.artbap3.org. (Robert Poole speaking)

» return to top

News Notes

Performance-Based Principles for Transportation Funding
In my April column in Public Works Financing, I discussed my concerns with some of the current rhetoric about making the federal surface transportation program performance-based and mode-neutral. I ended up with four principles that I think would move us forward, despite those concerns. We've posted the piece on the Reason Foundation website: http://reason.org/news/show/future-of-transportation-funding.

Risk Transfer with Sydney PPP Tunnel
Last month's article on what happens when PPP toll projects declare bankruptcy suggested the likelihood that Sydney, Australia's Lane Cove Tunnel would be purchased by another toll road firm at about 40 cents on the dollar. The Wall Street Journal on May 11th reported that this, indeed, has just taken place. Transurban, which owns the concessions on several other Sydney toll roads (including the M2 Motorway which connects with Lane Cove) has agreed to buy the tunnel for A$630.5 million (compared with its original cost of A$1.6 billion). Once again, there was no taxpayer bailout. The original investors in Lane Cove have lost much of their investment, but the tunnel will be in good hands with its new owner/operator.

Five Myths About Green Energy
That's the title of an excellent article in the Washington Post, April 25th, by Robert Bryce, a senior fellow at the Manhattan Institute. It's based on his just-published book, Power Hungry: the Myths of "Green" Energy and the Real Fuels of the Future. I haven't read the book, but the article is well-done and suggests that the book will be well worth reading.

CAFÉ Standards' Hit to Highway Trust Fund
The new corporate average fuel economy (CAFÉ) standards for model years 2012-2016 will significantly reduce fuel use and hence CO2 emissions-but that will exacerbate the declining viability of fuel taxes as the principal highway funding source. Transportation Weekly 's April 8th issue includes a detailed article on the impact of the new regulation. Based on EPA and NHTSA estimates that over their lifetimes the vehicles produced in those model years will use about 61 billion fewer gallons of gasoline and diesel fuel than under previous CAFÉ standards, that translates into $11.1 billion in reduced revenues to the Highway Trust Fund (based on current federal fuel tax rates). And of course there will be comparable reductions in state fuel tax revenues.

Update on Bankrupt Las Vegas Monorail
In Issue No. 76 (February 2010), I reported on attempts by the bond insurer for the defaulted revenue bonds that financed the Las Vegas monorail to shift the bankruptcy proceedings from Chapter 11 to Chapter 9. The latter applies to municipal bankruptcies, and would have opened state and/or local governments to claims that they should bail out bondholders. But on April 26th, the bankruptcy judge declined to shift the proceeding to Chapter 9. That preserves the risk-transfer principle under which the project was financed as a public-private partnership and protects the taxpayers from being tapped for a monorail bailout.

Traffic Growth and Congestion Resuming
Two recent analyses from the US DOT find that the recession-induced slowdown in vehicle miles of travel (VMT) and in urban congestion have now reversed and resumed their general uptrend. The Bureau of Transportation Statistics in April released "Upward Trend in Vehicle-Miles Resumed During 2009." And FHWA's Urban Congestion Report for the first quarter of calendar 2010 found that congestion in its 22-city sample increased on all three measures: the average Travel Time Index increased from 1.19 to 1.20, the average duration of weekday congestion was 5 minutes longer than last year, and the Planning Time Index increased from 1.47 to 1.50.

Innovators in Action Highlights Sydney Tollroads
The 2009 edition of Reason Foundation's Innovators in Action report has articles by or interviews with nine public-sector innovators. Of particular interest to transportation people is "Good Roads Sooner: PPPs in New South Wales," by Bob Carr, former Premier of Australia's largest state. Go to: http://reason.org/news/show/1009348.html.

Lessons Learned from NYC Congestion Pricing Attempt
Bruce Schaller of the New York City Department of Transportation has written an informative and thought-provoking article on the politics of the ultimately unsuccessful attempt to implement congestion pricing in midtown and downtown Manhattan. In particular, I think Schaller's lessons-learned are important ideas for future pricing endeavors. "New York City's Congestion Pricing Experience and Implications for Road Pricing Acceptance in the United States" will appear in Transport Policy, Volume 17, August 2010, pp. 266-273.

How Successful Are Recent U.S. Rail Transit Projects?
The most comprehensive report I've encountered on the rail transit systems implemented in U.S. metro areas over the past 40 years has been published by the Cato Institute. "Defining Success: The Case Against Rail Transit," provides very sobering tables on the ridership, capital costs, operating costs, farebox recovery, commute mode share, and other data on rail systems in 30 metro areas-commuter rail, light rail, heavy rail, and people-movers. You may not like author Randal O'Toole's conclusions, but his data raise serious questions about what kind of bang for the buck taxpayers have received for the close to $100 billion spent on building these systems. Go to:
www.cato.org/pub_display.php?pub_id=11608.

Data on Greenhouse Gases and Transportation
The Transportation Research Board has produced another useful report on greenhouse gas and energy issues in transportation. Its five chapters provide basic data on what we know and what is being worked on for each of five modes: roads, rail, air, marine, and transit. "Modal Primer on Greenhouse Gas and Energy Issues for Transportation" is Transportation Research Circular E-C143 dated April 2010 and can be downloaded from www.trb.org.

» return to top

Quotable Quotes

"I started saying a year ago that we were facing four years of short-term extensions of existing programs, and I am sorry to say this is a prediction that I believe will come true. . . . What worries me is that the whole concept of the Trust Fund is breaking down. You can't make the argument with a straight face that the Trust Fund should be . . . walled off from the appropriations process while at the same time getting huge sums of money from general revenues."
--James Burnley, former DOT Secretary, "A Lobbyist's-E ye View of the Washington Transport Scene," DC Velocity, April 19, 2010. (www.dcvelocity.com)
 
"With no increase in the fuel tax being considered, . . . could a future six-year bill accept that the HTF [Highway Trust Fund] has limits, define where its funds are to be spent, and rely on the General Fund for other transport and construction programs once paid for by the HTF? According to [Ken] Orski, as much as 25 percent of the HTF revenue is spent on non-highway programs such as walkways, trails, and bike paths. One way to partially restore solvency to the HTF, he points out, would be to limits its use to highway expenditure and transfer all of its non-highway obligations to the General Fund."
--John Latta, "Back to Business as Usual For Now," Better Roads, April 2010.

"The $10 billion that Congress and the administration have provided [for high-speed rail] thus far is a pittance compared to the overall sum that is needed. A new fast-rail system will be expensive-about $65 million per mile, according to the National Conference of State Legislatures, or $600 billion for a complete 17,000-mile national network, according to the U.S. High Speed Rail Association [which works out to only $35 million per mile]. Funding from private investors or governments is hard to come by, for even the most commonplace infrastructure, much less one that aims to fundamentally change how Americans get from place to place and whose public benefits are, according to the NCSL, 'difficult to predict.'"
--Audrey Dutton, "Rail Plans Raise Hope and Doubts," The Bond Buyer, April 28, 2010.


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


Print This