Reason Foundation - Authors > Peter Samuel

Pennsylvania Turnpike Alternatives: A Review and Critique of the Democratic Caucus Study

bob.poole@reason.org (Robert Poole) info@reason.org (Peter Samuel) — Tue, 01 Apr 2008 00:00:00 EDT

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Leasing the Pennsylvania Turnpike: A Response to Critics of Gov. Rendell's Plan

info@reason.org (Peter Samuel) info@reason.org (Geoffrey Segal) — Fri, 01 Jun 2007 16:28:00 EDT

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Federal Interference in State Highway Public-Private Partnerships Is Unwarranted

bob.poole@reason.org (Robert Poole) info@reason.org (Peter Samuel) — Tue, 22 May 2007 15:33:00 EDT

Rep. James Oberstar (D-MN) and Rep. Peter DeFazio (D-OR), chairmen of the top transportation committees of the U.S. House of Representatives, recently sent a misleading and most unhelpful letter to state governors, legislators and public officials. In their May 10 missive, Oberstar and DeFazio "strongly discourage" states from entering into public-private partnerships "that are not in the long term public interest."

State officials do not need to be warned by U.S. congressmen against signing agreements that are not in the public interest. State officials make their own judgments of what agreements are in the best interests of their publics. In all the recent transportation public-private partnership agreements of which we are aware, the state and local officials concerned have followed a rigorous approval process and been advised by both in-house and outside experts, specialist attorneys and financial analysts.

The letter repeatedly alleges states are in a "rush" to sign public-private partnership deals. There is no rush. The states have each taken time to consider and pass public-private partnership legislation, moving carefully to make amendments where problems have arisen. For example, Texas is currently updating its public-private partnership law to address taxpayer concerns. The states that are furthest advanced - Texas, Georgia and Virginia - now have a carefully evolved legislative and regulatory framework for PPPs and considerable expertise based on experience in handling them.

Other states like Illinois, New Jersey, and Pennsylvania are newer to the process, but they are approaching it in the same deliberative fashion, hiring expertise where it isn't available in-house, learning from the experience of others, seeking legislative support, and analyzing how concession agreements can be detailed in order to protect the public interest.

In every state and in every project, concession companies have to pass an initial screening that weeds out those lacking adequate financial backing or experience. Unsolicited proposals are subject to competitive bids. Proposals are assessed by panels of experts, and final selections are subject to negotiation on every last detail. Agreements are only finalized after top officials have signed off.

The only "rush" here is Oberstar and DeFazio's misguided rush to condemn this useful, vital infrastructure tool. States with collectively many more years of close involvement in the public-private partnership process, and far more knowledge on this topic than resides in Congress, do not need warnings or threats from Washington, D.C.

Oberstar and DeFazio also threaten that their committee will "work to undo" any state public-private partnership agreements which they judge deficient. This is an outrageous threat and abuse of power.

Federal legislators' role is to legislate, not to attempt to undo state contracts legitimately entered into. If there are disputes over contracts, the courts will adjudicate them, though concession contracts have carefully crafted provisions for negotiation, conciliation, and arbitration before litigation. Congressional committees have no business interfering in contracts entered into by state authorities.

The chairmen express various specific concerns about toll concessions in general, concerns that on detailed examination have little grounding in reality. One major complaint they have is that private concessions "threaten to undermine the integrity of the national (highway) system."

Except in national parks, national forests, on Indian reservations, and on military bases, the federal government has never been directly involved in planning or managing highways. The Interstate system and the National Highway System have always been under diverse control of the 50 state DOTs, metropolitan planning organizations, counties, cities, public toll authorities, bi-state agencies, and a few private facilities. The federal role has been limited to overall network planning, setting standards, and providing partial funding. Interconnections between states have been managed through ad-hoc bilateral arrangements, corridor associations, and other avenues of give and take. There is no detailed central planning as assumed by the chairmen's notion of a national system under threat. Public-private partnerships fit easily into the existing ad-hoc framework, just as state toll authority roads have done for over 50 years. Concessionaires have a strong self-interest in cooperating to provide connectivity since the more connections they have with the larger road system, the more toll-paying traffic they will have.

The letter also targets so-called non-compete clauses, which it claims will prevent capacity additions and safety improvements. Only one concession agreement - for California's 91 Express Lanes (written in 1991) - banned extra capacity. That provision was drafted at a time when environmentalists wanted, and got, promises that additional roadways would not be added. The 91 Express Lanes non-compete clause was a mistake, as all subsequently realized. Since then there has never been a ban on adding capacity to parallel free routes near toll roads. Some concession agreements contain provisions for compensation for toll revenues lost if free capacity is expanded beyond an amount agreed to in the concession – and if the private companies can prove the new roads are causing financial losses. This is usually a sensible measure to reduce uncertainty in selling toll revenue bonds and to improve the value of concession bids, though obviously there are matters of judgment in the trade-offs. This much is clear: states do not need, or want, one-size-fits-all policy on non-compete compensation imposed by the federal government.

Oberstar and DeFazio also claim that only public-private partnerships that immediately provide new capacity are in the public interest. This is quite a turnaround for self-styled progressives. Not long ago their mantra was that “we can't build our way out of congestion” and should just use our existing highways more efficiently. Now they apparently dismiss the benefits of businesslike management to use the existing roadways more efficiently (e.g., with value pricing) in favor of the test of how much new capacity they add. In truth both are needed, but the mix of more efficient management and extra capacity will vary from project to project.

Existing toll roads may not need much additional capacity at first, but concessions can still be a good idea. By keeping tolls in line with inflation, they ensure proper maintenance and repair and additions of the latest technology. Concession agreements can provide congestion trigger points that require the companies to make capacity additions. The Indiana Toll Road concession is a model in this regard. It requires immediate lane additions in the busiest stretch plus a deadline for electronic toll collection implementation, promising major improvements in travel times and safety. For the longer term it requires capacity additions so as to maintain a minimum Level of Service C in rural stretches and Level of Service D in urban stretches. It is foolish to judge concessions solely by how much extra pavement they lay down, when other measures such as removal of bottlenecks or interchange ramps or toll plaza automation may be more cost effective in the near term.

In short, the Oberstar-DeFazio letter is purely negative and completely overlooks the benefits of public-private partnership concessions:

Providing access to large new pools of capital, at a time of huge highway funding shortfalls;
Bringing true business management into toll roads in place of political appointees;
Making use of value pricing for traffic management to prevent overloading of facilities and a breakdown in traffic flows;
Insulating road pricing from short-term political expediency and allowing prices to be set at realistic levels reflecting underlying costs and the value of free-flow travel.

The chairmen offer no alternative to public-private partnerships. The revenues from traditional fuel taxes, licensing, and registration fees are fully committed to maintenance and minor improvements to the existing free system. Concessions offer access to tens and ultimately hundreds of billions of dollars to finance much-needed improvements to our highway system.

The federal government should be trying to help states improve mobility for their citizens and keep local and state economies growing. Instead of threatening to “undo” much-needed state projects, Oberstar and DeFazio would be well-served to ask states, “How can we help?” Public-private partnerships certainly offer states, taxpayers, and commuters a lot more than two congressmen butting into state business.

The Role of Tolls in Financing 21st Century Highways

info@reason.org (Peter Samuel) bob.poole@reason.org (Robert Poole) — Tue, 01 May 2007 18:00:00 EDT

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Debunking Claims About Texas Toll Roads

info@reason.org (Peter Samuel) — Fri, 16 Mar 2007 10:41:00 EDT

There's a lot of wild and woolly talk in Texas about the threat of private toll roads right now. It wouldn't be so surprising if it were coming only from property owners feeling threatened or from the usual groups who oppose anything involving automobiles. What's weird is how some conservatives are joining the anti-toll road groups and adding to the confusion with misinformation.

State Sen. Jane Nelson (R-Lewisville), for example explained her support for a two-year freeze on toll concessions in a statement on her website, every single sentence of which is false. She says of the toll concessions: "non-compete clauses prevent the state from building roads that would compete..."

In fact, section 11.3.1.1 of the State Highway 130 5 and 6 concession contract says that TxDOT will have "the unfettered right in its sole discretion at any time and without liability to... add capacity..."

The state may have to compensate the concessionaire if he can show the added capacity beyond that provided for in existing plans damaged toll revenues. An identical clause is in the State Highway 121 concession.

Nelson's statement also claims next that "buy-back provisions require us to repay the up-front money." I've read and searched through both concessions signed to date. No such provisions for repayment exist.

Then she says "the operators have unlimited authority to raise toll rates." That is untrue, too. Exhibit 4 of the 130 5 and 6 concession titled “Toll Regulation” has three pages describing the formula for regulating maximum toll rates. The 121 contract has similar provisions which spell out limits to toll rates set by the concessionaire.

Nelson speaks of a "rush" to build toll roads. To those of us who have been following the process it hasn't been a rush, but a protracted process over several years. For each and every project expressions of interest have been solicited, briefings given, statements of qualifications submitted, qualified companies invited to make proposals, proposals assessed, preferred concessionaires evaluated, and negotiations undertaken.

Of course the common criticism of government is that it takes forever to get things done so I suppose the charge they are in a "rush" here to provide new roads could be taken as a compliment. I've had my own criticisms of TxDOT's approach. I don't think they've ever developed any coherent rationale for the mixing of tax monies and toll financing, and they have been secretive at times. However when those secrets have been busted open - as in the case of the State Highway 130 5 and 6 concession - no scandal has emerged. The state auditor's report didn't find any huge problems in the Corridors program, just some improvements of process that are needed.

State Sen. Robert Nichols (R-Jacksonville), lead sponsor of the freeze legislation, says "We must closely evaluate private toll contract provisions before we sign away half a century of control of our transportation system."

Those contract provisions are available on TxDOT's website for download and evaluation, and yes the senators should evaluate them, because it is crystal clear they have not done so to date. If they had read them - admittedly they are hard reading - they would see that they maintain public control. What they turn over to private operators is the right to operate the toll business side of the highways they build - the right to raise the capital, to employ operations staff and to collect tolls - all under terms laid down by the state.

The objection to “foreign” companies running a toll business in Texas is ridiculous. We drive foreign made cars, running largely on foreign fuel, watch TVs made in foreign countries, wear clothes manufactured overseas, and enjoy a standard of living and way of life based on international trade. It happens that companies in Spain, Australia, France and Italy have done toll roads as a business much longer than any company in the U.S. Certainly, their interests are in making a buck, just like American companies, but they have to work within our rules.

Ownership, policing and security on the roads will remain fully under state control.

The freeze is a fraud. It will halt the whole toll concessioning process in which Texas has shown the way to the rest of America in harness the private sector to public purposes. By all means you should scrutinize and debate and amend, but reject this freeze.

Building New Roads Through Public-Private Partnerships: Frequently Asked Questions

Thu, 01 Mar 2007 13:44:00 EST

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Leasing State Toll Roads: Frequently Asked Questions

info@reason.org (Peter Samuel) — Thu, 01 Mar 2007 13:36:00 EST

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Innovative Roadway Design

info@reason.org (Peter Samuel) — Fri, 01 Sep 2006 00:00:00 EDT

Executive Summary

Despite today’s horrible traffic congestion, it is tough gaining support for expanded road capacity. Amassing the funds for major urban expressway projects is slow under centrally allocated trust funding because of the political pressure to spread annual appropriations over most districts and different modes. Many planners and transit advocates are quietly happy with the growing misery of road congestion. They believe public policy should drive people to transit use, or to higher density living near their jobs. Others believe that no matter how much road capacity we add, it will simply fill up to congested levels. But perhaps the most widespread belief is that there is simply no room left to expand urban highways without enormous negative consequences.

Compounding the problem is that people don’t like the look or feel of many of our big highways. They have gotten so large and so bleak that they are offensive, like some kind of alien implant in our urban areas. A dislike of highways predisposes people to dislike all proposed new road projects, even those that are designed with more concern for aesthetics and better mitigation of impacts.

This study argues that in too many American cities, despite much planning, we are planning highways poorly. Traffic generation studies show the optimum expressway network is on a grid of roughly four miles with a denser grid of surface arterials with signalized intersections at intervals of between half a mile and three-quarters of a mile. Instead of planning such a denser grid of modestly sized roads and innovating with new kinds of roadways, we have simply enlarged the existing too-sparse grid of highways to gargantuan proportions.

This paper suggests new ways of thinking about highway design. Many of our highways have gotten too big, not because anyone wanted them to be that way, but because widening an existing highway was the simplest thing to do at each point—the line of least political resistance. But ever-wider highways create cascading functional problems. Multilane ramps are needed at interchanges of expressways, while on surface arterials enormous intersections with multiple turn waiting lanes are needed, plus long signal cycles. Overly wide arterials make handling left turns a huge challenge, and in the end limit capacity.

But with the kinds of innovative design concepts discussed in this paper, highways needn’t get ever wider. They can be built upward as elevated roadways in certain contexts, using new, cleaner styles of construction. Conventional double decking involves enormous structures, but car-truck separation can make possible far smaller scale double-deck structures for auto-size vehicles only. Creating specialized roadways is one key to a more sensible highway system. Heavy truck volumes can be handled by specialized truck-only roadways. And in some places delivery and pickup, and other high-value commercial trips that will pay for premium service, should be catered to separately.

We need to find ways to build better grids of highways—smaller highways but more of them. At the expressway level denser grids could keep most expressways to six lanes or less, while on surface arterials spaced at half a mile, left turns become manageable without resorting to acres of asphalt at intersections and two-minute signal phases.

One key to adding more highway corridors is to make use of underutilized railroad rights of way, power line reservations, and flood control channels. These need not be several hundred feet wide to be useful; a four-lane, value-priced congestion-relief roadway for cars and buses needs as little as 60 to 70 feet. New designs handle the left-turn traffic at stressed arterial intersections, using limited grade separations.

The biggest move to make highways more acceptable is likely to be moving some of them underground. A lot of this is already happening overseas in Europe and Australia where urban highways were less developed than in the United States until recently. Where we have need for increased capacity in bottleneck corridors we’ll need to look at undergrounding— either beneath the existing corridor or parallel to it several miles away—because no surface facility or elevated structure is acceptable. Undergrounding ranges from entrenching within walls, to caps, cut-and-cover, and more extensive mined tunnels or those built with tunnel- boring machines.

Adding capacity with innovative design concepts is generally more expensive than adding lanes to mammoth freeways. But congestion and loss of mobility from not providing needed highway capacity are also hugely costly. Our productivity and quality of life depend heavily on being able to move ourselves and freight swiftly and predictably around our metropolitan areas. That way people have a wide range of opportunities for jobs, shopping, education and recreation, and employers have the widest choices to hire labor and services and get supplies and shipments handled efficiently. Areas that provide good internal mobility will thrive and prosper while others will languish. Innovative design will be essential to gaining acceptance of needed additions to highway capacity.

Expressways to Boulevards-A Bad Idea

info@reason.org (Peter Samuel) — Mon, 10 Jul 2006 00:00:00 EDT

The city of Toronto has made major efforts the past couple of decades to revive the waterfront on Lake Ontario and to link it better to the central business district. The revival is generally a success. Scores of handsome condo/apartment towers have gone up. Heavily used ferries now provide service to islands just offshore to newly created hiking trails, a nature preserve, and attractive promenades where wharves once rotted. A nicely streetscaped Lake Shore Boulevard runs the length the waterfront, and of course there's a new trolley line.

Toronto's laissez-faire, Houston-style approach to zoning—no historic district or plan reviews, no affordable housing requirements, no car parking requirements, very liberal floor/site ratios etc.—is probably forging the rapid developments that capitalize on lake views and downtown proximity. Freedom from stifling U.S.-style zonings has produced a vibrant mix of activities and services... The area is thriving.

What doesn't work is the walk

One thing that doesn't work is the pedestrian connection between the financial district—the closest part of the central business district—and the waterfront area. The walk south to the lakefront area, less than half a mile, is still circuitous and unattractive. For years it has been conventional wisdom that the problem was the Gardiner Expressway, a 6-lane 1960s elevated that runs east-west between the two, and which looks very like the now-demolished John Fitzgerald Expressway (I-93) in Boston or the Gowanus Expressway (I-278) in Brooklyn, New York. The big elevated roadway was an offputting visual barrier, a 'great wall,' they all said between downtown Toronto and the waterfront.

Discussion of what to do about the elevated Gardiner has tended to focus on burying it "Big Dig"-style in a tunnel, and indeed Canadian Highways (CHIC) of 407ETR fame once proposed to the city a toll franchise to do the undergrounding of the Gardiner. But it would need substantial subsidies.

Some architects and planners suggested a second boulevard—a Gardiner Boulevard. They wanted to convert the elevated expressway to a surface boulevard. But the traffic volumes on the Gardiner, over 100k/day, make a mockery of that proposal. Because of its much lower carrying capacity, a boulevard lane will need more lanes to produce a similar level of service—at least twice as many. So converting an elevated 4-lane expressway will need about a 10-lane boulevard to carry the same traffic volume. If you want to minimize "paving over America" you need to build expressways in place of surface arterials, not the other way round.

Boulevards now seen as the barrier

Now, as reported by The Bulletin, Toronto's Downtown Newspaper, in issue 2006-04—a copy of which a reader kindly sent us—it is NOT the 1960s elevated expressway that is being seen as the barrier to a pedestrian link but the 1990s Lake Shore Boulevard. The progressivist York Quay Neighborhood Association (YQNA), the major political force in the waterfront area, says it is time to rethink: "Gradually the Gardiner is disappearing from being an ugly barrier between downtown and the waterfront. It is becoming a ribbon of traffic that runs between very tall buildings. The visual intrusion has been softened by these structures... Realizing that Toronto does not have the billions of dollars to bury the Gardiner, now or in the foreseeable future, YQNA's Planning and Development Committee recommends that the central part of it stay in place and that a decision is made (by government) soon to that effect."

They say pipedreams about burying the Gardiner are paralyzing practical planning.

The Downtown Newspaper's Mike Comstock writes that the real 'Mistake by the Lake' is not the elevated expressway but "the physical division created by the multilane Lake Shore Blvd." The report continues: "This east-west barricade presents a huge obstacle to meaningfully connecting the greater city to the waterfront. Imagine that there weren't a Lake Shore Boulevard... The key thing is giving pedestrians a route that means they don't have to cross Lake Shore Blvd traffic."

Like most boulevards, with turning lanes it is eight or more lanes wide at intersections where pedestrians normally cross. And of course pedestrians face long waits for traffic signals, and danger from motorists turning on amber and early in the red phase.

"If the city wants the waterfront to be accessible to pedestrians, they're going to have to bite the (Lake Shore Blvd) bullet at some point," the report says.

York Quay Residents Association chair Ulla Colgrass is quoted also: "The city needs to assist the pedestrian flow by focusing not on (removing) the Gardiner, but on Lake Shore Boulevard. That's the real obstacle to connecting the city core with the waterfront."

Likewise in New York. . .

Similiarly on the lower westside of New York City the abandonment of the depressed Westway in favor of a riverfront boulevard has blocked pedestrian access to the riverbank, the precise opposite of what the self-styled progressive planners predicted. Not long before he died Daniel Patrick Moynihan, the great icon of New York liberalism and a one-time boulevardist said he thought it was a mistake. Looking at the operation of the surface West Street, Westway, the subsurface expressway, would have been the better solution, Moynihan concluded.

Capacity down 60 percent, fatalities up 90 percent

Boulevards inevitably perform worse than expressways in carrying through traffic. Their capacity is about 60% lower, and they have more than double the fatality rate. Whereas an expressway lane carries up to 2500 vehicles/lane/hour, a surface arterial of which a boulevard is a variant carries only about 1,000 to 1,100 vehicles/lane/hour. That is because speeds are lower and because of time stopped at signals, or negotiating intersections, as opposed to the grade-separated nature of expressways. If you are concerned about saving lives and reducing injuries and property damage from car crashes you want expressways, not boulevards. Boulevards are less safe than expressways. At-grade intersections produce more crashes and risk the lives of pedestrians whereas expressways place cross traffic, both pedestrian and vehicular on a separate level with a bridge over or under the main lanes. Urban expressways have 6.1 fatalities per billion vehicle-miles traveled versus 11.5 for arterials (Calculated from USDOT, FHWA "Highway Statistics 2004" FHWA-PL-05-013 fatalities by functional system and annual travel by functional system, tables hm20.xls and vm2.xls) so conversion of an expressway to a boulevard can be expected to increase fatalities by about 90%.

Congress for a New Urban fad

Some planners associated with the Congress for the New Urbanism however ignore all this and urge mass conversions of expressway to boulevard. They misleadingly cite some exceptional examples where it makes sense.

Milwaukee demolished Park East Freeway, Buffalo talks taking down Skyway

In Milwaukee, an old elevated expressway called the Park East Freeway (WI-145) was demolished 2002-2004 (see http://www.mkedcd.org/parkeast/) and is being replaced by a surface arterial - the poster project of former Mayor John Norquist, now CEO of the Congress for the New Urbanism. The Park East was a spur expressway about a mile long, planned to be part of a never-finished network of downtown expressways. The most important point about it, apart from its ugliness, was that it carried only 22,000 vehicles per day, about a third of the capacity of a 4-lane expressway and easily capable of being handled by a 2x2-lane surface arterial, a boulevard. In fact they are building a 2x3 lane boulevard and improving the carrying capacity of other surface streets as well. Eliminating the unneeded elevated has allowed good streetscape improvement and opened up valuable real estate for redevelopment. A new lower level bridge over the Milwaukee River has opened up the riverfront for development.

In Buffalo, Milwaukee's Park East example is being cited in moves to replace the Buffalo Skyway (NY5) an elevated spur off I-190 near the downtown. It goes high over the Buffalo River from the days when that river carried real shipping. The high bridge is no longer needed. Nor is the expressway itself. It goes about 3 miles down the lakefront to Lackawanna—a once-great steel and automobile manufacturing center but now a rustbelt ghost town with a mere 18k population.

Buffalo, like Milwaukee, is a metro area with a chronically stagnant and slightly declining population, and no prospect for increased traffic. The Skyway's high level bridge over the Buffalo River is no longer needed because of the disappearance of shipping. And the expressway goes nowhere.

Eliminating under-used aging elevated expressway spurs in cities like this makes sense, though there is probably less justification for throwing taxpayer money on the replacements. Much of the planner and politician talk about the revival and redevelopment that will follow the boulevard is ballyhoo. If the underlying local economy is weak then these civic improvements probably won't stimulate much new development. If the local economy is strong then the developments could probably fund the associated streetscaping and other improvements.

The bottom line however is that in these instances the removal of an ugly and under-utilized expressway may do some good.

However these are special cases. Most urban expressways in America are heavily utilized and face increasing traffic. They can't be replaced with boulevards. If the elevateds cause blight, then that needs to be dealt with by improving their surroundings, as they are doing with the Gardiner in Toronto. Or they can be put underground.

Heavy traffic needs to get from point A to point B by some route, and the quickest and safest is by expressway, without throwing pedestrians into the mix and sacrificing safety and speed. Converting busy expressways into boulevards usually makes no sense.

Peter Samuel is a senior fellow at Reason Foundation and editor of TollroadsNews.com. Reason's transportation research and commentary is here.

Should States Sell Their Toll Roads?

info@reason.org (Peter Samuel) — Wed, 01 Jun 2005 18:00:00 EDT

Executive Summary

The 99-year lease of the Chicago Skyway for $1.83 billion has put privatization of existing toll roads and turnpikes onto the public policy agenda. Was that transaction a special case, or would something similar make sense for other tolled bridges, tunnels, expressways, and long-distance toll roads?

This study provides context for the debate on toll roads privatization. It reviews the private sector’s emerging role in developing new U.S. toll roads and summarizes the recent global experience with the sale of longterm concessions to operate and manage existing toll roads.

Next, the study explores the fiscal implications of toll road privatization. Whether such transactions make financial sense for the city or state involved depends critically on how the proceeds are used. Governments should follow the Chicago precedent and use the proceeds to strengthen their balance sheets (e.g., paying off debt, creating reserve funds, investing in one-time infrastructure projects) rather than to address short-term budget deficits.

Of at least equal importance is the question of whether privatizing a toll road would result in better outcomes for motorists. The study reviews the constraints and incentives faced by government toll authorities, and finds that it is difficult for them to provide the kind of customer service that we expect from market-driven businesses. It also contrasts project investment decision-making and financing alternatives in state toll agencies with companies operating under long-term concession agreements. The study also addresses a number of concerns that arise with privatization, and assesses several possible alternatives (such as making the toll agency operate more like a business or going the nonprofit corporation, public-private partnership route).

Finally, it provides a detailed set of guidelines for policymakers who conclude that privatizing an existing toll facility or agency is the preferred course of action. This includes procedural issues such as the typical steps involved, the need for outside professional assistance, and various lessons from Chicago’s privatization process. The report also discusses a number of issues that must be addressed in the long-term concession agreement, such as toll rate controls, length of the concession term, employee transitions, and the need to provide for revisions and modifications during the life of the agreement.

This paper concludes that privatizing existing toll facilities and agencies is a viable option that can benefit governments and also toll road customers. But as with many other complex undertakings, the devil is in the details. This study is intended to provide the kinds of details needed to get the process done correctly.

Sell New York's Bridges and Tunnels

bob.poole@reason.org (Robert Poole) info@reason.org (Peter Samuel) — Mon, 14 Feb 2005 00:00:00 EST

New York Sun

Governor Pataki's proposal to lease bridges, highways, and subway lines to private companies and allow the operators to collect the tolls or fares has created quite a stir. As the government struggles to fund transportation projects, naysayers should consider the potential revenue and significant improvements that would come from leasing some of the Metropolitan Transportation Authority's productive, income-earning assets.

The seven toll bridges and two toll tunnels owned and operated by MTA subsidiary the Triborough Bridge and Tunnel Authority currently gross $1.1 billion a year in toll revenues. These are highly lucrative undertakings even under government operation and the state is wise to consider making the most of them by inviting private sector bids — but they aren't the first to do this.

The city of Chicago recently did the same thing on its much smaller Chicago Skyway toll road. The winning bidder is paying Chicago $1.83 billion in return for a 99-year lease and operating rights (referred to as a toll concession agreement).That is 41.6 times the annual toll revenues of $44 million of the Chicago toll road. Applying that same ratio to New York MTA's toll bridges and tunnels suggests they could be worth $46 billion. The breakdown would be as follows:

Verrazano Narrows Bridge $10.8 billion
Triborough Bridge $10.3 billion
Bronx Whitestone Bridge $8 billion
Throgs Neck Bridge $7.8 billion
Queens Midtown Tunnel $4.4 billion
Brooklyn Battery Tunnel $2.4 billion
Henry Hudson Bridge $1.7 billion
Marine Parkway Gil Hodges Bridge $446 million
Cross Bay Bridge and Parkway $396 million.

In announcing sale of the Skyway, Chicago Mayor Richard Daley said running a toll road "is not a core function of city government." It isn't a core function of state government either. Such business operations are better done by business, as is generally the case for other large infrastructure such as electric power, gas, and telecommunications. These network utilities are usually investor-owned, operating under long-term franchises to protect the public from monopoly abuses. In the case of the Chicago Skyway, the contract puts clear limits on the amount and timing of toll increases the private company can impose.

Why lease? The Triborough Bridge and Tunnel Authority has debts of $6.7 billion and the MTA's other divisions have debts of $14.8 billion. Consequently, a long-term lease of the bridges and tunnels would eliminate the debt and produce a significant surplus — probably $25 billion to $35 billion after debt retirement. These funds could be used for major improvements to New York's transportation infrastructure that the state would never be able to afford otherwise.

The actual amount that could be raised by capitalizing on the TBTA's toll crossings would depend on the details of the toll concession agreements. The longer the lease term and the more freedom given to set toll rates, the higher the amount MTA could get. Thirty-year terms tend to yield about half the price of 99-year terms. The British government gave investors a 53-year term and complete freedom to set their toll rates on the M6 Toll road near Birmingham. By contrast, a shorter, 35-year term with heavy restrictions on toll increases reduced the value of Italy's Autostrade concession on 2,118 miles of toll motorways. Chicago seems to have drawn a middle line, granting a 99-year term and allowing the private companies some flexibility to vary tolls by class and time of day, but limiting overall increases to the rate of inflation.

The world is increasingly embracing these public-private partnerships. Japan, France, Italy, Portugal, and Spain are privatizing their state toll roads. And a Bush administration review of investor toll projects finds that they can save between 6% and 40% in costs, according to Secretary of Transportation Norman Mineta. In a recent speech, Mr. Mineta said the survey showed that bringing in investors produces "quantifiable cost and time savings (and) that quality and innovation increase by involving the private sector."

"Our goal is to encourage states to experiment and innovate, to become the laboratories of democracy and show us and each other how to work with the private sector to build roads that open faster, require less repair work later, and give us safer, smoother rides at less cost," Mr. Mineta stated.

If New York can retire MTA debts and garner some tens of billions of dollars for infrastructure investment, while transferring these business operations to entrepreneurs, then everyone could win. Discussion of this is long overdue.

Robert W. Poole Jr., founder and director of transportation studies at Reason Foundation, has advised the last four presidential administrations on transportation issues. Peter Samuel is publisher and editor of Toll Roads Newsletter.

Easing California's Transportation Crisis with Tolls and Public-Private Partnerships

bob.poole@reason.org (Robert Poole) info@reason.org (Peter Samuel) — Sat, 01 Jan 2005 18:00:00 EST

Executive Summary

California’s population is projected to reach 50 million by 2030, an increase of 16 million people. The majority of this growth will occur in the state’s three major urban regions (Los Angeles, San Francisco, and San Diego). Vehicle miles traveled by individuals will increase by 30 to 50 percent in these regions, with truck traffic growing even faster, especially in greater Los Angeles. Yet California’s urban freeway systems are already nearing capacity, with pervasive congestion during ever-lengthening peak periods and little planned expansion of their capacity.

The metropolitan planning organizations (MPOs) in the three largest urban regions forecast transportation spending of nearly $400 billion between now and 2030. Yet most of this money will be used to operate, maintain, and rehabilitate the existing freeways and transit systems. Only a small fraction will be spent to expand the capacity of the highway system that will continue to carry more than 90 percent of all commute trips and the vast majority of freight. Consequently, congestion will still be a major problem in 2030. And this is the best-case projection by the MPOs, assuming that transportation finance in California quickly returns to business-as-usual from its current dire crisis state. Any number of factors could make the outcome significantly worse.

This report suggests that business-as-usual is not sufficient, not if California is to compete with fast-growing states such as Colorado, Florida, Texas, Virginia, and others. Those states have learned two important lessons from abroad as urban regions in Europe and Australia have coped with similar pressures of growth versus limited public finances. First, they found that global capital markets are willing to invest billions of dollars in highway transportation projects, if those projects charge tolls to repay the investment. Second, they have found that long-term public-private partnerships can deliver even large-scale “mega-projects” with less delay and less risk of cost overruns than traditional, public sector methods, such as were used on Boston’s infamous Big Dig tunnel project.

To illustrate the potential of large-scale, toll-funded projects to address real transportation needs in urban California, this report includes four case studies. The first is a $2.3 billion tunnel linking Palmdale with Glendale beneath the Angeles National Forest. With value-priced tolls to keep traffic free-flowing at rush hours, it would cut 45 minutes to an hour off the time between North County and downtown Los Angeles. This would make it far more practical to develop serious airline service at the Palmdale International Airport site (the last remaining alternative to meet the region’s air-service needs).

The second case study is an alternate approach to San Diego’s current plan to add $2 billion worth of “managed lanes” to several major freeways. Our plan would build a more ambitious $8 billion managed lanes network, funding it largely via toll revenue bonds (unlike San Diego’s current plan). For the same investment of taxpayers’ dollars, San Diegans would gain a much larger system of uncongested premium lanes for both commuters and express bus service.

The third and fourth case studies are of toll truckway systems for greater Los Angeles and the East Bay region of greater San Francisco, respectively. Our Los Angeles proposal builds on recent analysis by the Southern California Association of Governments (SCAG), but proposes a longer truckway system, extending all the way from the twin ports to the California-Nevada line. By offering truckers both faster speeds (due to no congestion) and much greater payloads, the $10.4 billion truckway system would be self-supporting from toll revenues. In the Bay Area, our proposed truckway would link both the Port of Oakland and Silicon Valley with I-5, via I-580. At a cost of $9.1 billion, it, too, could be self-supporting from toll revenues.

We modeled all four studies as funded by 40-year, tax-exempt toll revenue bonds. And because of the high risks to taxpayers of cost overruns and revenue shortfalls if procured using conventional methods, we recommend that such mega-projects follow the best practices becoming standard for such projects overseas and in Texas and Virginia—to be developed under long-term public-private partnership arrangements. Wellcrafted build-operate-transfer (BOT) partnerships shift construction risks and traffic/revenue risks to the private sector partners, a feature that is especially important for mega-projects such as our four case study examples.

Nearly two dozen states now have some form of transportation public-private partnership legislation, though only a few of these mirror the best practices of advanced countries in Europe and Australia. Those practices include the ability to enter into long-term partnership agreements under which the private sector can design, finance, build, and operate a transportation facility, making a return on its investment from toll revenues. Such projects could originate from either the public sector (via a request for proposals) or the private sector (via unsolicited proposals).

California’s one previous attempt to engage the private sector to develop toll roads was flawed. The 1989 AB 680 private toll road law required 100 percent private financing, rather than permitting a mix of public and private support that gives both parties a stake in successful outcomes. It applied only to Caltrans, despite the subsequent devolution of significant transportation authority to regional/local levels of government. And it led to overly restrictive non-compete clauses in franchise agreements. Second-generation public-private partnership laws, like those in Texas and Virginia, are far more flexible.

For California today, we recommend that a state-of-the-art tolling and public-private partnership law be enacted. It would authorize both Caltrans and other levels of government (cities, counties, joint powers authorities, etc.) to initiate toll-funded transportation infrastructure projects, and permit them to partner with the private sector to carry out such projects, using both RFPs and procedures for dealing with unsolicited proposals. This would enable California to enter the global capital markets, as well as tap world-class expertise for modernizing its vitally important highway system.

Corridors for Toll Truckways

bob.poole@reason.org (Robert Poole) info@reason.org (Peter Samuel) — Sun, 01 Feb 2004 00:00:00 EST

Executive Summary

America is facing a major shortfall in highway capacity to handle the projected growth in freight traffic, 90 percent of which is hauled by trucks. America has also been unable to realize the shipping cost savings which would be possible via nationwide use of double-and triple-trailer rigs (known as Longer Combination Vehicles or LCVs). At the same time, there is widespread concern about the dangers of big trucks and the 5,000 annual deaths in which they are involved. And there is growing congestion on many key Interstate routes.

All four problems could be addressed by a federal policy change to permit toll truckways to be added to Interstate highways. As defined in a 2002 Reason Public Policy Institute study, toll truckways would be heavy-duty, barrier-separated new lanes added to Interstates on which it would be legal to operate LCVs. Trucking companies indicate that they would be willing to pay tolls to obtain the productivity gains from expanded LCV operations, and the toll revenues offer serious potential as a funding source for such truckways.

In this new study, we sought to identify the most promising initial Interstate corridors where toll truckways could be implemented, as in a federal pilot program to test the concept. We made use of a large-scale federal goods-movement database, plus a survey of trucking companies that currently operate LCVs, and corridorspecific information obtained from state departments of transportation.

After identifying about four dozen possible corridors, we used projected (2020) truck volume to narrow the scope to 20 high-volume corridors between logical origins and destinations. The 20 routes were assessed first for potential ability to generate toll revenue if toll truckways were added to them, using a variety of factors. We then assessed the 10 corridors judged to have the highest revenue potential to determine the degree to which they have right of way available (generally in the median) to add truckways, and the nature of the terrain through which they pass. This led to the selection of what we consider to be the most promising corridors for pilot toll truckway projects.

The most important federal policy change necessary for toll truckways is permission for LCVs to use these new barrier-separated lanes in states where LCV use is now forbidden by federal law. Obviously, too, federal permission would be needed to charge tolls on these lanes in Interstate corridors. Because most toll truckways would traverse more than one state—and would be most viable and logical as multi-state facilities—federal law needs to include a mechanism to facilitate multi-state corridor planning and development.

The pending reauthorization of the federal surface transportation program in 2004 offers an ideal opportunity to create a pilot program for toll truckways. Doing so would permit a serious test of (1) a way of financing much-needed additions of highway capacity by using a new funding source, and (2) a way of making the U.S. economy more productive by reducing shipping costs thanks to greatly increased productivity in longhaul trucking.

Toll Truckways

Sat, 01 Jun 2002 00:00:00 EDT

Executive Summary

he United States needs a fresh approach to long-distance inter-city trucking. The current system, which integrates large trucks and smaller passenger vehicles in mixed traffic lanes, leads to frequent conflicts between cars and trucks. It also unduly limits the potential productivity of long-haul trucking.

This policy study offers a viable alternative: self-financing toll truckways. These toll truckways would consist of one or more lanes in each direction for sole use by large trucks, separated from existing lanes by concrete barriers, and generally equipped with their own ingress and egress ramps. These truck “freewayswithin- the-freeway” would be custom-built and designed for use by longer and heavier trucks, which would have exclusive rights to the lanes, and would keep the general motoring public free from exposure to big rigs in the mixed-traffic lanes. If permitted by the 2003 reauthorizatioin of the federal surface transportation program, the first toll truckways could be in service by the end of the decade.

In August 2000, the U.S. Department of Transportation (DOT) published its Truck Size and Weight Study. That study documented the significant productivity gains (net savings of between $10 billion and $40 billion per year) which would be possible if longer combination vehicles (LCVs) were permitted on more of America’s major highways. Since those heavier LCVs can cause significantly greater wear and tear on the highways, pavement and bridges would have to be improved to accommodate heavier loads. The DOT’s Truck Size and Weight Study included an estimate of the costs of rebuilding major portions of the Interstate system to handle heavier trucks. Unfortunately, the DOT did not reach any conclusions regarding the safety implications of allowing longer and heavier trucks to use the nation’s highway system.

This report suggests a new approach. The DOT’s estimate of the cost of upgrading the infrastructure to accommodate heavier loads assumed that all travel lanes on the affected highways would have to be improved. This study suggests that, rather than rebuilding all lanes, federal and state governments should T authorize only specialized truck lanes which would be designed for exclusive use by large trucks. This approach would significantly reduce the amount of money it would take to improve the nation’s highways in order to accommodate greater use of LCVs. Moreover, if large trucks were separated from automobiles and smaller vehicles as this study suggests, safety would actually increase along with transportation efficiency.

The quantitative analysis in this study assesses the costs of developing and operating such specialized truckways along existing Interstate rights-of-way (e.g., in currently unused medians). The estimated productivity gains in this study are modeled on the assumption that LCVs and other heavy trucks would operate on such dedicated truckways and not in mixed traffic lanes. The analysis assumes that trucking firms would be willing to pay a toll of up to one-half of the cost savings that would be generated from the use of such truckways. The analysis concludes that toll truckways of the kind proposed in this study would be selfsupporting and could even yield commercial rates of return. Thus, it is possible that some could be developed as private business ventures, in cooperation with state departments of transportation.

The study recommends that, since trucks using the truckways would pay tolls to cover the costs of building and operating the lanes, those trucks should not be charged ordinary state or federal fuel taxes or other truck user taxes for the miles they actually drive on the truckways. The same electronic toll-collection system used on the truckways could be used to record the miles driven and would provide the information required to rebate state and federal user taxes. After factoring in the rebate of user taxes, the net cost of using the truckways would, in many cases, be comparable to the current expenses heavy trucks incur using existing turnpikes.

Several policy changes are required before toll truckways could be implemented. The most important of these changes include: (1) providing a right-of-way along existing highway corridors on the federal-aid system; (2) easing current federal truck size and weight regulations for trucks using the truckways; and (3) providing a rebate of federal and state truck user taxes for miles driven on toll-supported truckways.

Busway vs. Rail Capacity

info@reason.org (Peter Samuel) — Fri, 01 Feb 2002 00:00:00 EST

Introduction

One of the major misconceptions in U.S. transportation planning is the claim that rail has inherently higher capacity and provides better service than buses. Rail supporters aim to exclude bus modes from the list of alternatives as early as possible in any feasibility analysis. That is because buses almost always look good once they are properly analyzed for several primary reasons:

The right of way—typically a lane of asphalt—is invariably cheaper than an assemblage of rails and power supplies and signals;
Buses themselves are mass-produced by highly competitive manufacturers whereas rail cars are custom-designed by a handful of companies worldwide; and
Like other motor vehicles, buses are adaptable and can take people from close to the actual beginning of their trip to close to the end of their trip. Moreover, as traffic and demographic patterns change, so too can bus routes. Rail, by contrast, is much more static and is substantially more limited in its ability to offer “door to door” service.

In an era of downsizing and economic decentralization away from core urban hubs, the small scale of the bus and its adaptability are a huge advantage over rail.

Veteran transportation analyst John F. Kain of Harvard summed it up: “With few exceptions studies of the cost-effectiveness of alternative modes have found that some form of express bus system, operating on either an exclusive right of way or a shared facility, would have lower costs and higher performance than either light or heavy rail systems in nearly all, if not all U.S. cities. The tendency of policymakers to ignore the abundant evidence on the superiority of high-performance bus systems is explained by a prior commitment to rail and a willingness to ‘cook the numbers’ until they yield the desired result.” Other scholars and researchers have come to the same conclusion: rubber-tired transit on roadway lanes is, in nearly all cases, more cost-effective, more flexible, and enables a higher level of service to riders than rail.

Putting Customers in the Driver's Seat

info@reason.org (Peter Samuel) bob.poole@reason.org (Robert Poole) — Fri, 01 Sep 2000 00:00:00 EDT

Executive Summary

Highway tolls should not be viewed as a last-resort or temporary financing mechanism. Rather, this study argues that, for a number of reasons, tolls should become the payment mode of choice for 21st-century highways, gradually replacing fuel taxes.

Because operating costs are comparable with capital costs over a highway’s life, it is wrong to maintain that tolls should come off as soon as the initial capital costs have been recovered. And even on well-designed roads, pavement completely wears out after 30 or 40 years (the age of many U.S. freeways and Interstates) and must be replaced-—often at much higher cost than it took to build the road originally.

Thanks to a doubling of average fuel economy since the 1950s (from14 miles/gallon to 28 mpg), today’s fuel taxes bring in far less revenue per mile driven than those of 40 or 50 years ago. According to the Federal Highway Administration, simply preventing the present highway stock from deteriorating would require an additional $8 billion per year in capital spending. And to keep pace with projected growth in population and travel, highway investment would have to increase by another $32 billion per year. To generate that level of investment would require massive gas-tax increases.

The alternative to major gas-tax increases is to selectively increase the use of tolling, for specific projects that will produce direct benefits to users. Already about 10 percent of major U.S. highways are operated as toll roads, and a number of fast-growing urban areas—including Dallas, Denver, Houston, Miami, Orlando, Orange County (Calif.)—have turned to toll roads to keep pace with their growth.

Tolls offer a number of advantages over gas taxes, including:

Fairness: only users of a toll road pay for it, and directly in proportion to their use;
Large Scale: a toll revenue stream permits large sums to be raised in the capital markets, making it possible to build large-scale projects in a short period of time;
Less Pork: having to prove to the bond market that a toll road is viable tends to weed out pork-barrel projects;
Greater Safety: the accident rate on toll roads is one-third less than on comparable free roads;
Better Maintenance: bondholders insist on legally enforceable requirements for proper ongoing maintenance, for which there is no counterpart on free roads;
Traffic Management: time-variable tolls (high at rush hour, low at off-hours) smooth out traffic flows, greatly reducing rush-hour congestion.

Much of the traditional opposition to tolling can be addressed with new methods and technology. Toll plaza congestion can be reduced (and later eliminated) via nonstop electronic toll collection. Fully automated toll roads, designed completely without toll booths, are in operation today in Toronto, Canada and Melbourne, Australia, and others are on the way. We need never build another toll booth or toll plaza, ever again. And we can begin now to phase out all existing toll booths and plazas.

“Double taxation” can be eliminated by giving rebates to toll road users for the amount of gas taxes they have paid for all miles driven on toll roads. Such programs already exist on toll roads in New York and Massachusetts. Electronic toll collection makes it easy to calculate and pay the rebate amounts. Eliminating this form of double payment should reduce opposition to expanded use of tolling, since drivers would then be paying either a toll or a gas tax—but never both.

States could encourage a shift toward greater use of tolling by enacting gas-tax rebate programs and also by enacting modern public-private partnership laws, under which private consortia can finance, build, and operate tolled bridges, tunnels, and highways. And Congress could encourage this trend by rewarding states for phasing out toll booths in favor of all-electronic tolling and by creating a level playing field in highway finance for toll road bonds. A positive tolling agenda of this sort ought to win support from highway users, taxpayer groups, and those environmental groups that strongly support the user-pays principle.

How to "Build Our Way Out of Congestion"

info@reason.org (Peter Samuel) — Fri, 01 Jan 1999 00:00:00 EST

Executive Summary

Transportation planners project unbearable gridlock on urban freeways over the next two decades. The planners’ conventional wisdom maintains that “we cannot build our way out of congestion.” Yet the best they can offer is a menu of costly and ineffective alternatives—spend billions more on transit that hardly anyone can or will use, and try to force people into carpools that do not match their actual ways of living and working. All over the world people are increasingly choosing to travel by automobile, because this flexible mode best meets their needs. But a gridlocked expressway system threatens automobility —and the conventional wisdom offers no good solutions.

The good news is that we can make significant improvements that will expand mobility for autos and trucks alike. To be sure, pushing new freeways through dense and expensive urban landscapes will seldom be economically or politically feasible. But we can make far more creative use of existing freeway rights of way to increase capacity and ease congestion. One key to doing this is to provide separate lanes for cars and for trucks. The former need much smaller dimensions; hence, cars-only lanes can be done as double decks, either above the surface or in tunnels beneath high-value real estate. Overseas, Paris, Melbourne, and Sydney are developing new urban expressways using some of these new concepts. Special-purpose truck lanes could permit larger, heavier trucks than are now legal in most states, and would allow trucks to bypass congested all-purpose lanes, thereby facilitating just-in-time deliveries valued by shippers and receivers.

Reconstructing freeways with some double decks and new tunnels will be costly—and could never be done as long as we rely only on today’s federal and state fuel taxes. But charging tolls for such expensive new capacity is both technologically and economically feasible. New electronics technology (already in use on Toronto’s Highway 407) makes it possible to charge users automatically, using sophisticated time-of-day pricing, without using any toll booths or toll plazas. Electronic tolling costs far less than labor-intensive toll booths, is far more flexible, and is more user-friendly. Demand-responsive market pricing has been found highly effective in keeping toll lanes from becoming congested in two Southern California projects.

In short, the combination of innovative highway redesign, separation of types of traffic, toll financing, variable pricing, and electronic toll collection will allow us to offer auto drivers and truckers real alternatives to gridlocked freeways. Using these methods in combination, we CAN build our way out of congestion.