Reason Foundation

Throwing Money at Bridges Will Not Fix the Problem

Posted on June 17, 2013, 3:20pm | Daniel Bier

A near-disaster at the Skagit River Bridge in Washington State sent three people plunging into the river in Washington last month. Poor signage and a functionally obsolete bridge appear to be the major factors. Predictably, bureaucrats and politicians are using this occurrence to demand even more money for unnecessary projects, while critical infrastructure needs are neglected. Voters shouldn’t let bureaucrats reward inefficiency by approving new taxes while existing funds are being frittered away.  

On May 23, a portion of the I-5 bridge over the Skagit River failed when a truck carrying an oversized load struck an overhanging brace, sending two cars into the river. Fortunately, no one was killed, and the drivers escaped with only minor injuries. But the collapse has served to reignite a debate about bridge safety and infrastructure maintenance, both in Washington and throughout the country.  

The I-5 bridge serves as a major artery, carrying around 62,000 cars and 8,500 trucks every day, but at the time of its collapse, it was nearly 60 years old and was graded “functionally obsolete” by the Federal Highway Administration, meaning that it could no longer meet current traffic demands. The Washington State Department of Transportation explains the deficiency rating: “A bridge can be categorized functionally obsolete a number of ways like having substandard lane widths, or narrow shoulders. Another example would be a bridge that doesn’t have enough vertical clearance for large trucks to pass under, causing repeat hits and damage to the bridge.” 

This is only part of the story. The Skagit River Bridge was also “fracture-critical,” like many similar bridges constructed in the 1950s; the failure of a single component could cause the entire bridge to collapse. The otherwise structurally-sound bridge could not withstand repeat damage, so when a truck load 15 feet, 9 inches tall hit a brace 14 feet, 8 inches high, the entire span buckled and collapsed into the water.  

As one may expect, this incident has been met with calls for increased transportation spending to address the state’s 135 structurally deficient bridges and the 185 fracture-critical bridges owned by WSDOT. Former Pennsylvania Governor Ed Rendell, co-founder of the group Building America’s Future, declared, “Regardless of how this happened, the collapse of the Skagit River Bridge in Washington State is a timely reminder of our nation’s need to invest in critical infrastructure upgrades.”  

But it’s clear that a lack of funding is not Washington’s problem when it comes to bridge maintenance. A study by Reason Foundation released in February found that between 1989 and 2008, spending per mile of state-managed roads increased by more than 100% in Washington State, in inflation-adjusted terms. Transportation revenues for the current biennium are forecast to be over $4.3 billion, a 5.7% increase over 2009-2011. In the last two decades, Washington ranked 4^th in the nation in terms of spending increases per mile, but only 34^th in progress on fixing deficient bridges. In terms of overall performance and efficiency, the state is ranked near the bottom, at 42.  

Nonetheless, the Skagit River Bridge collapse is putting increased pressure on legislators to approve an $8.4 billion transportation revenue proposal, of which barely a tenth would go towards road and bridge maintenance. This is despite the state’s C-minus ranking on bridge repair by the American Society of Civil Engineers.  

Others are using this event as a call to action on the long-postponed $3.2 billion Columbia River Bridge connecting Oregon and Washington which would replace the current obsolete bridge. While Oregon has already approved $450 million in funding, Washington has been cautious about proceeding given the project’s enormous costs, including $750 million to build a light-rail line that will never pay for itself. Washington must also approve $450 million this year in order to capture $1.2 billion in federal funds for the project; and the Skagit River incident further serves to focus pressure on the Legislature to approve new taxes for this expensive light rail line.  

There are many things that can and should be done to improve Washington’s bridges and roads. Directing funds towards maintenance and away from flashy new transit projects and a focus on more efficient use of existing funds are both crucial. Better signs indicating height, weight and speed restrictions on deficient and obsolete bridges could make relatively little money go a long way toward preventing future accidents and collapses.  

But currently taxpayers are being offered a bait-and-switch, as politicians emphasize the danger of old bridges in order to secure additional funding for unrelated pet projects, like stormwater-mitigation and light rail. Voters and legislators should not allow this event to pressure them into supporting inefficient and uneconomical projects that will divert desperately needed funds away from necessary maintenance and improvements. Washington State’s bridge problem lies with poor management, not poor funding.

Reducing BAC from .08 to .05 Will Not Significantly Reduce Drunk Driving

Posted on May 24, 2013, 8:21am | Baruch Feigenbaum

In an Op-Ed in today’s Atlanta Journal Constitution, I detail why lowering the Blood Alcohol Content (BAC) from .08 to .05 will not significantly reduce deaths. 

Of the more than 36,000 traffic fatalities in the U.S., less than one percent was caused by drivers with a blood alcohol content between .05 and .08. Two thirds of fatalities involved drivers with a BAC of 0.14 or higher. Each person’s body processes alcohol differently. Some people can safely drive with a BAC of .10. Others cannot safely drive with a BAC of .02. Setting one standard is arbitrary. 

There are many factors that make driving dangerous. Talking on a cell phone, having kids in the car and adjusting the radio can make it more likely for a driver to have an accident than a BAC of .08. Driving will never be risk free. 

Driving has become safer. In 2012 there were 10,000 fatalities per 100 million vehicle miles traveled. This is a substantial decrease from 1955 when there were 55,000 fatalities per 100 million vehicle miles. 

The entire Op-Ed is available here. I have included the first few paragraphs of the Op-Ed below 

Everyone wants travelers heading to Lake Lanier, family barbecues or other events to be safe this Memorial Day weekend. Too many Americans continue to die from drunk driving. However, there is little factual evidence that a new proposal to lower the blood alcohol content standard used to determine drunk driving from 0.08 to 0.05 will reduce deaths. 

Lowering the standard will not save many lives. The statistics the National Transportation Safety Board used to recommend a lower standard are questionable. NTSB claims that lowering the standard will cut many of the nearly 10,000 annual deaths from alcohol-impaired driving. But of the more-than 36,000 yearly traffic fatalities in the U.S., less than 1 percent were caused by drivers with a blood alcohol content between 0.05 and 0.08. Two-thirds of fatalities involved motorists with a BAC of 0.14 or higher. Surprisingly, drivers with a BAC of 0.01 to 0.03 were involved in more fatal accidents than drivers with a BAC of 0.08 to 0.10. 

Studies indicate that any number of things — talking on a cell phone, eating, adjusting the radio or having kids in the car — can make it more likely for a driver to have an accident than having a 0.08 BAC. When the BAC was last lowered, from 0.08 to 0.10, alcohol-related traffic fatalities actually increased. 

The rest of the article is available here.

I-5 Bridge Collapses; Washington State Ranked 34th In Making Progress on Deficient and Functionally Obsolete Bridges

Posted on May 23, 2013, 11:45pm | David T. Hartgen

The Seattle Times reports:

An Interstate 5 bridge collapsed into the Skagit River on Thursday evening, according to the Washington State Patrol. Trooper Mark Francis wrote on Twitter that people and cars are in the water. Both the north bound and south bound lanes were in the water, Francis wrote.

Our Reason Foundation study, "Examining 20 Years of U.S. Highway and Bridge Performance Trends," found Washington ranked 34th out of 50 states in terms of making progress reducing its percentage of deficient and functionally obsolete bridges from 1989 to 2008. Overall the findings on functionally obsolete and deficient bridges were: 

Federal law mandates the uniform inspection of all bridges for structural and functional adequacy at least every two years. Bridges are rated “deficient” if they are deemed either “functionally obsolescent,” for instance being too narrow for current traffic, or “structurally deficient” in condition. About one-half of deficient bridges are in each group. Funds are allocated to states based on estimated costs to repair deficient bridges.

The nation has made considerable progress in reducing the backlog of deficient bridges over the past two decades. The percentage of bridges rated deficient nationwide has been reduced by about 14 percentage points, from 37.8% to 23.7%. However, the rate of reduction seems to be slowing, since in the last 10 years, the percentage of deficient bridges has been reduced by about 4.5 percentage points, or about 0.45 percentage points per year. At this rate, it would take about 52 years to exhaust the backlog of deficient bridges nationwide. Further, since most of that money is spent on structurally deficient bridges, the percentage of functionally obsolescent bridges has not reduced as much.

The progress in meeting bridge deficiencies has been quite widespread. Of the 50 states, 40 registered improvement in the percentage of deficient bridges over 20 years. They are led by Mississippi and Nebraska, reporting an improvement of 31.7 and 31.5 percentage points, respectively. Nine states, led by Colorado, cut their percentage of deficient bridges by half or better.

On the other hand, 10 widely scattered states reported a worsening percentage of deficient bridges. They are led by Hawaii and Alaska at 14.3 and 10.5 percentage point increases, respectively. Arizona reported the highest relative increase, a more than doubling of its percentage of deficient bridges, but from a very low 1989 base of just 5.4%.

Full report here (.pdf).

Give Managed Lane Conversions Time

Posted on May 16, 2013, 9:34am | Baruch Feigenbaum

Los Angeles’ new I-10 and I-110 HOT lanes have been a source of controversy. I wrote in a Los Angeles Daily News Op-Ed that there is a learning curve to any change and it may take up to a year for highway and transit users to receive all of the benefits of the conversion. After 12 months, the HOT lanes in L.A. are likely to significantly benefit highway users and bus riders. 

To reduce provide more reliable travel times and improve transit services, many state DOT’s are converting High Occupancy Vehicle (HOV) lanes to High Occupancy Toll (HOT) lanes. Atlanta, Miami, Minneapolis, Northern Virginia, San Francisco and Seattle have all made these conversions. 

Unfortunately, these conversions are rocky. Single occupant drivers have to decide when the travel time-savings are worth paying a small toll to use the lane. All motorists need to understand the new traffic patterns. Transit users have to acquaint themselves with the new more dependable transit services. These conversions are challenging; it typically takes up to one year for everyone to receive the maximum benefit from the lane. The roughest opening of a HOT lane was the I-85 conversion in metro Atlanta. However, since opening 18 months ago trips in the lane have almost tripled. 

The complete Op-ed is available here.

The new toll lanes on Interstate 10 and the 110 Freeway have opened to a lot of complaints, particularly from drivers not using them. While some have shaved 30 minutes or more off of their commutes by using the toll lanes during rush hour, many other drivers are understandably upset that traffic has gotten worse in the non-toll lanes. 

Atlanta, Miami, Minneapolis, Northern Virginia, San Diego and Seattle have all converted car-pool lanes to toll lanes in recent years. And as drivers learned how to get the most value out of the lanes and save the most time, the lanes grew in popularity.

Atlanta converted car-pool lanes to toll lanes last year and had a rough start. But since October 2011, the number of toll lane trips has grown 270 percent, from 160,000 to 440,000 trips as of March 2013.

In Minneapolis, where car-pool lanes were converted to toll lanes in 2005, 76 percent of the public is satisfied with the toll lanes and 85 percent are satisfied with the traffic speed. 

The rest of the Op-ed is available here.

FedEx Founder Makes the Case for Air Traffic and Highway Improvements

Posted on April 26, 2013, 1:27pm | Cathy Reisenwitz

FedEx Founder Fred Smith, a former Reason trustee, testified before the U.S. House Committee on Transportation and Infrastructure on Wednesday. He advocated, among other things, three improvements that Reason has studied and called for at length: the NextGen air traffic control system, improved aviation infrastructure and extending the national standard for twin trailers from 28 feet to 33 feet.

BizJournals reports:

The founder, president, chairman and CEO of Memphis-based FedEx Corp. (NYSE: FDX) focused mainly on runway and road infrastructure, but also talked about the importance of more sustainable energy sources.

Smith said FedEx Express is excited about the possibilities of the Federal Aviation Administration’s NextGen air traffic control system which is being developed. The GPS-based system could enhance safety, reduce delays and save fuel. For FedEx, it could save money by shaving minutes off flight times and reducing fuel costs.

Smith also singled out aviation infrastructure as key, saying it takes an average of 20 years to build a runway from planning to completion.

“However, within 10 years, the top 20 airports in the U.S. will become overly congested,” he said. “While control of traffic in the air will help, new runways and facilities will still be needed and existing ones will need maintenance.”

Reason’s recent study on air traffic control consolidation flagged the FAA’s ongoing modernization struggles:

Without consolidating airspace and ATC facilities, NextGen is at risk of becoming merely a very costly upgrade of hardware and software, without the large productivity gains that should constitute a major portion of the business case for this transition. And without a timely commitment to large-scale facility consolidation, the Air Traffic Organization will be forced to spend billions in coming decades refurbishing and rehabilitating aging and unneeded facilities. Consequently, the time for action on these issues is now.

And in a recent edition of his Air Traffic Control Newsletter, Reason’s Robert Poole added:

This succession of ever-lower annual forecasts of aviation growth makes it ever-harder to justify spending $20 billion or so on NextGen based on the argument from capacity. On an aggregate basis, that case is simply not there, due to significantly reduced growth expected in all but the airline category. To be sure, there are still major problems with capacity in large metro areas served by major hub airports (sites of FAA's Metroplex efforts). But it seems to me the primary case for NextGen now rests on efficiency and productivity gains attainable by replacing the old paradigm of detailed control of every aspect of a flight with the new paradigm of air traffic management of aircraft trajectories. New tools and procedures will make it possible for far more direct routes, optimal altitudes most of the time, and time-based flow management. All of this will reduce fuel consumption and reduce delays, especially for airlines and business jets. That is definitely worth doing.

For ground shipping, Smith wants the national standard for twin trailers extended:

On the road side, FedEx supports increasing the national standard for twin trailers from 28 feet to 33 feet as a way of increasing shipping volumes in a less expensive way than widening or building roads.

“Longer trailers will mean fewer truck trips to move the same volume,” he said. “This can result in a reduction in congestion. At a time when adding more lanes may be problematic given budget cuts, this is a way to help alleviate an acute problem without spending more federal dollars.”

The move could also save fuel and reduce emissions. In the less-than-truckload industry, 1.1 million to 3.2 million pounds of carbon could be saved and 102 million to 305 million gallons on concomitant fuel could be saved.

In their trucks-only toll lanes paper, Robert Poole, Peter Samuel and José Holguin-Veras wrote about the use of Longer-Combination Vehicles (LCVs):

This study suggests that, rather than rebuilding all lanes, federal and state governments should 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.

Poole and Samuel identified the most promising urban Interstate corridors for truck-only toll lanes here.

New Year, Same Old Transportation Budget from the White House

Posted on April 12, 2013, 6:00am | Baruch Feigenbaum

President Obama has released his 2014 transportation budget. It includes much the same nonsense as his 2010, 2011, 2012 and 2013 budgets. And since Congress is no more likely to approve the projects for 2014, it is just as pointless. 

Let’s detail the old proposals in the new budget: 

$50 billion in stimulus spending: In February 2011, September 2011, and February 2012, the President requested $50 billion in one-time stimulus spending. None of these three previous proposals ever made it out of a committee. Republicans have promised the fourth time will be no different. 

Transportation Trust Fund: In FY 2012 and FY 2013 the budgets proposed to convert the Highway Trust Fund into a Transportation Trust Fund. Why? The President wanted to transition Amtrak and high-speed rail funding into mandatory trust funds so that they would be exempted from discretionary funding caps. The problem is that the gas tax, which supports the trust fund is intended for highway use only since it is paid for by drivers and bus users. And this same gas tax is going broke; before MAP-21’s gimmicky accounting rules provided a temporary fix, the highway trust fund needed 10 bailouts from the general fund. What is the solution for an account going bankrupt in part because it funds activities it was never designed to support? In Washington, the answer is to add new activities but not the revenue to pay for them. For this reason, Congress clearly rejected this approach when it passed MAP-21. Yet less than a year after MAP-21 was signed, the President wants to undo this change and increase funding by $2.7 billion for Amtrak and $3.7 billion for high-speed rail. 

Increasing the statutory cap on passenger facility charges: In the FY 2012 and FY 2013 budget the President wanted to increase the statutory cap on passenger facility charges at the largest airports in exchange for removing these airports from the Airport Program grants. However, in the 2012 FAA reauthorization law Congress rejected this approach and did not change the funding level. This reauthorization locks in existing levels until 2015. This is actually a very good idea that would save several hundred million dollars and I must give credit to the White House for proposing it. But just because a new policy is a good idea that does not justify discarding current law in the middle of a long-term authorization. And just how Congress would implement this is a mystery. 

In his FY 2010, 2011, 2012 and 2013 budgets the president proposed creation of a national infrastructure bank. While the exact details changed, the proposal never went anywhere in Congress. The 2014 national infrastructure bank would use $10 billion in seed money to finance transportation, water and energy projects. There is no reason that the transportation projects could not rely on TIFIA. Congress substantially increased the funding of TIFIA in lieu of an infrastructure bank in MAP-21. And while loans are important, the White House has not articulated why it needs an infrastructure bank. 

The White House proposal includes a few elements that are more realistic such as pipeline user safety fees and the relocation of the Research and Innovative Technology Administration from its own administration to the Office of the Secretary of Transportation. Further, the funding proposals for Surface Transportation are more realistic than in the past. (Although the targets for the FAA remain completely unrealistic.) But too many of the proposals are completely unrealistic. 

But the White House has knowledgeable transportation experts (Not Ray LaHood) who know this budget proposal is completely unrealistic, so what is really going on? The budget has always been a political document more about setting priorities than offering a real outline forward. But President Obama’s transportation budgets have taken politics to a level never before seen. The White House’s goal is to build support behind these changes for the next transportation reauthorization whether it is the Surface Reauthorization in 2014 or 2015 or the Aviation reauthorization which may not occur until after the President leaves office. The budget has become completely political. 

Transportation in Washington D.C. has become almost all about building coalitions and scoring political points; there is very little focus on solving actual real world problems. Despite passage of long-range Surface and Aviation transportation bills, U.S. transportation policy is at a crossroads. A new funding source to supplement or replace the declining fuel tax and removal of waste in the transportation budget remains a priority. After four long years the administration has finally admitted that public-private partnerships are a critical part to solving the transportation problem. I had my own unrealistic hopes that this White House might get serious about fixing our transportation problems. But I should have realized that the President’s main use for transportation is politics. In reality this administration cares very little about actual transportation policy.

Alexander's Concerns Over Tolling are Bogus

Posted on April 11, 2013, 1:52pm | Baruch Feigenbaum

Last week, Rachel Alexander a writer on Townhall.com who typically authors columns on socially conservative viewpoints such as how “Taking God out of the schools has contributed to the decline in society,” and how the “Disney Channel is fueling a degenerate culture because it is full of hyper, crass-behaving children,” decided to take on toll roads. Her very creative but very incorrect column on PPPs is so blatantly wrong that most blog commentators trashed it. Toll roads that allow the market to dictate when to build a new road or add capacity are as free market libertarian as any transportation concept. Let’s dissect Ms. Alexander’s myths one by one:

Myth one: It is an illusion that toll roads are a free market way to solve a growing government expense. Toll road contracts are set up as public-private partnerships, which are not the same thing as privatization. Public-private partnerships (PPPs) result in government-sanctioned monopolies granted to one or more favored companies, essentially crony capitalism. It is easy for the government to write specifications for projects so they will only fit select businesses. The PPPs may last from 30 to 100 years, granting an extremely long monopoly without competition.

Reality: Procuring a public-private partnership is an open competition with many stages. All bidders must pass through many steps including a request for qualifications, a request for proposal and a bid. It is not a monopoly since the private bidder has to meet very real performance standards. If those standards are not met the government can cancel the lease, reassume control of the highway and restart the bid process. Public-private partnerships are not the same as privatization, and where truly private roads are realistic, we support them. But full privatization is not realistic for most roads. There has been no evidence that governments have written PPPs to favor one company. But if they did, this is a failure of government not of PPPs. PPPs are long-term contracts because the public sector, the private sector and toll road users get the best deal. If the state wants to choose a shorter contract, it is free to set a contract for any length that it wants.

Myth two: The most expensive highway project in the U.S. (the big dig) was paid for by tolls, and so mismanaged that taxpayers filed a lawsuit against the state of Massachusetts over being required to pay tolls for the enormous expense.

The big dig was a conventional toll project not a PPP. Its costs escalated because after the initial plan was created, politicians put pressure on the state to add unneeded elements. Had the big dig been a PPP, this cost escalation would NOT have happened since PPPs help insulate projects from politicians. Ms. Alexander actually made a point in favor of PPPs!

Myth three: There are reports that 80 percent of the money raised from tolls goes to the company managing the toll roads. Tolls rarely disappear after enough money has been raised to pay for a project. Proponents admit this, but defend the perpetual tolls by stating that the money goes to ongoing maintenance. Isn't that what gas taxes are for? 

Reality: Tolls are the method used to finance the road. Financing is a far better method to pay for roads than funding. Since private companies build the road, it is only logical that they get paid for their work. As the private operator is responsible for road maintenance such as repaving, mowing and updating signs, they receive small continual payments for this service. For private toll roads, the owner collects the toll and operates the road. And as Ms. Alexander points out earlier in the report gas taxes do not pay for all maintenance costs since they have much less buying power than 10 years ago. Private operators receive the funds because they are the entity that is managing the road.

Myth four: The traffic diversion that results from toll roads increases congestion on roads in other locations. This leaves too few motorists on the toll roads to make them efficient.

Reality: Traffic diversion from toll roads is very minor. Often the alternative roads are just as congested or take much too long to be a realistic alternative. Toll roads put an economic price on an otherwise unpriced trip. Since gas taxes do not fully pay for roads, driving is artificially cheap. Toll roads help restore economic balance to the system.

Myth five: Those who do not pay the tolls, for whatever reason, are treated practically like criminals and fined incredible amounts of money. Not to mention the state may suspend their driver's license and registration.

Reality: Enforcement is not any toll road operator’s favorite task. And some toll road operators wait to begin enforcement until multiple violations have occurred. Those who do not pay tolls are breaking the law; as many toll roads do not receive gas tax money, they have no other source of funding. If everybody freerode like these toll violators there would be no money to maintain the road or pay back the bonds. Each toll violation is a small fine. But if somebody has 50 violations, that is going to be a significant amount of money. Suspending someone’s license is the last alternative and only occurs after someone has racked up multiple violations.

Myth six: There is a deafening silence from the left about the disparate impact toll roads have on the poor. The left is also noticeably silent regarding the extra wasted fuel that is used and dispersed into the environment as motorists drive extra miles to avoid the toll roads. 

The Transportation Research Board has studied equity issues in toll roads and found a very minor impact. Lower income individuals often value toll roads more than others because they face more serious repercussions from being late to their jobs. Drivers with children in daycare value toll roads because the cost of the toll is far lower than the cost of picking up their children 15 minutes late. Some toll operators have studied vouchers. But since the equity effects are so minor, it is generally not good public policy.

Myth seven: Toll roads wouldn't be quite as bad if government would adopt them in place of gas taxes. 

Reality: Toll roads can be funded without gas taxes. And Mileage Based User Fees (MBUFs) may allow gas taxes to eventually disappear. But gas taxes pay for local, state, and federal roads and only a fraction of these roads have tolls. 

Myth eight: Gas taxes may not be a perfect way to fund roads, but they aren't much more of a tax than toll roads. 

Reality: Gas taxes are not a perfect way to fund roads and tolling is much better. With tolls the highway operator can charge users the exact amount the highway costs to build and maintain. And to manage congestion, the toll can be varied depending on the time of day. A gas tax is a flat instrument that pays for all roads equally. Roads that are more extensive to maintain such as freeways are charged the same rate as roads that are cheaper to maintain such as neighborhood streets. And part of the federal gas tax and many state gas taxes supports transit, bicycling, walking and removal on non-native vegetation. It is hard to understand how a tax that supports these non-highway project is a better way to pay for highways. 

There are some other important facts that Ms. Alexander forgot to mention. It was President Eisenhower’s and many other transportation policy makers choice to toll the interstate highway system from its inception in 1956. However, lower traffic counts in the west and the lack of technology made this unrealistic. But now where traffic counts are feasible there is no reason not to build new toll roads. In poll after poll motorists favor tolls over increasing the gas tax. The left-of-center Brookings Institute, the fiscally and socially conservative Heritage Foundation, the moderate Eno Foundation, and yes we heathenous libertarians at the Reason Foundation, Cato Institute and the Competitive Enterprise Institute all support tolling because it is the fairest and most economic way to pay for infrastructure. 

New at Reason: Looking Back at the Last Year in Toll Roads, HOT Lanes, Infrastructure Finance

Posted on April 8, 2013, 9:00am | Leonard Gilroy

The rollout of Reason Foundation's Annual Privatization Report 2013 continues today with the release of the Surface Transportation section—authored by Reason's Robert Poole—which provides a comprehensive overview of the latest on toll roads, HOT lanes, infrastructure finance and other news on privatization and public-private partnerships in surface transportation. Topics include:

• Federal Reauthorization—MAP-21
• State Public-Private Partnership Enabling Legislation
• Transportation Infrastructure Finance 2012
• Private Activity Bonds
• Major Public-Private Partnership Highway Projects
• Leasing Existing Toll Roads
• Managed Lanes and Networks

And in case you missed it, Reason Foundation released the Air Transportation section of the Annual Privatization Report 2013 last week, also authored by Poole. It offers an overview of the latest on privatization and public-private partnerships in air transportation, with topics including airport privatization, U.S. airport security, and air traffic control.

» Annual Privatization Report 2013: Surface Transportation
» Complete Annual Privatization Report 2013

New Study Suggests Transportation Priorities for North Carolina

Posted on April 3, 2013, 2:45pm | Baruch Feigenbaum

The Hartgen Group and the Reason Foundation have released Transportation Priorities for North Carolina, a report recommending several significant changes to North Carolina’s transportation management process such as setting clear performance measures and using maintenance contracting. The election of both Governor Pat McCrory and new legislators to the North Carolina General Assembly provides a rare opportunity for North Carolina to examine its transportation system. The full report is available here and the executive summary is available here. The analysis considered all transportation modes: highways, aviation, freight and passenger rail, ferry, transit and non-motorized transportation. 

The report reviews prior studies, plans, visions, legislation and other state practices to identify suggestions for transportation improvements. The report also solicited suggestions from stakeholder groups and others familiar with North Carolina’s transportation system. One-hundred fifty seven separate suggestions are analyzed by goal, time frame, mode, cost or savings potential, feasibility and regional equity. 

The suggestions can be grouped into 3 categories. The first includes major changes to the transportation program that can be implemented by increasing maintenance and limiting  expansions to highways of statewide signficance. One major recommendation included in this section is to constrain the State Transportation Improvement Program (STIP) to merit-based project selection and to shift some of the savings to maintenance, major projects and rural safety. Fully implemented, these recommendations could save $50 million annually. 

The second category includes several recommendations to strengthen maintenance management and project selection such as using head to head project evaluation, adding maintenance needs for funding formulas and contracting out maintenance. Fully implemented, these recommendations could cost $30 million but provide substantially improved system maintenance. 

The third category includes 10 smaller recommendations that are intended to strengthen Long-Range Planning and improve communications. These measures should also increase organizational efficiency by making increased use of design-build flexibility and strengthen measures of project and performance delivery. 

I want to highlight five report recommendations. More details on each can be found in the New Approaches section starting on page 41.

1) Public-Private Partnerships (PPP): While North Carolina has enabling PPP legislation, the state has made little use of PPPs. PPPs are not appropriate for all projects; typically PPPs are best for large or very large projects including new toll roads, new toll bridges, adding express toll lanes to congested freeways, major reconstruction of existing highways and major bridge replacements. PPPs have several major advantages including lower-risk funding, more total funding, greater risk transfer, guaranteed maintenance, minimized life-cycle costs, innovations. Additionally, these private partners pay taxes.

2) Tolling: North Carolina depends heavily on per-gallon fuel taxes as its highway funding source. But as the fuel-tax is not a dependable revenue source, the National Surface Transportation Infrastructure Finance Commission recommended that fuel taxes be replaced as the primary funding source. North Carolina does not have the funding to substantially expand or rebuild any of its major freeways. Tolling freeways that need to be substantially rebuilt or expanded is one solution. However, any new tolling needs to be implemented carefully. North Carolina should NOT put a per-mile charge on existing highways but it should consider tolling new highways, new express or HOT lanes, and reconstructing and modernizing existing highways.

3) Priced and Managed Lanes: Traffic congestion is a major problem especially in Charlotte and the Research Triangle areas. Adding Managed Lanes can substantially reduce congestion. Such lanes have the added benefit of improving transit service. There are several different types of Managed Lanes; all allow vanpools and buses to use the lane for free but some allow free access to 2 or 3 person carpools while others require carpools to pay a small toll. Potential candidates for Managed Lanes in North Carolina include I-40 in Raleigh and I-77 and I-85 in Charlotte.

4) Interstate/Freeway Widening: A modernized widened Interstate system has three main benefits. First, it makes commuting quicker and less stressful. Second, it makes logistics and shipping more dependable. Third, easily navigable roads may increase tourism. While North Carolina uses a Level-of-Service D standard for widening highways, funding constraints may force the DOT to hold off on widening. (North Carolina DOT typically widens a highway from 4-6 lanes if it is expected to carry more than 58,400 to 67,900 vehicles per day depending on topography and truck share.) Some potential candidates for widening include I-26 in Asheville, I-40 near Hickory, Winston-Salem, Greensboro and Raleigh, I-77 between exits 4 and 31 and I-85 around Gastonia and between Kannapolis and China Grove.

5) Performance-Based Highway Maintenance Contracting: Many transportation agencies in the United States have contracted some road and highway maintenance. However, outside of highway landscaping the NCDOT has made limited use of such contracting. Current best practices in highway maintenance contracting rely on longer-term, multi-year performance-based road maintenance contracts. The public agency defines an end goal and the contractor decides how best to meet that outcome. Such contracts create clearly defined performance measures and timetables. The Transportation Research Board has praised contracting as a way to reduce agency costs, increase service, change to a customer-oriented focus, shift risks from public agency to private contractors and other benefits.   

More details are available here.

Reason recommends transportation solutions at the state and local level. Other recent state focused reports include: 

Examining 20 Years of U.S. Highway and Bridge Performance Trends

XpressWest Train Likely to Fail, Costing Taxpayers Up to $6.5 Billion

Reducing Traffic Congestion and Increasing Mobility in Chicago

President Obama Shouldn’t View Infrastructure Spending as a Jobs Program

Posted on March 31, 2013, 7:56pm | Cathy Reisenwitz

At PortMiami Friday, President Barack Obama proposed ways to include private investment in his "Rebuild America Partnership," which seeks to spend $40 billion in public money repairing roads and bridges.

The president suggested allowing states and local government to issue more bonds for a wider variety of projects, exempting foreign pension funds that invest in infrastructure and real-estate from taxes, giving $4 billion in loans and grants to public-works projects and a National Infrastructure Bank.

On the National Infrastructure Bank, which made another comeback Friday, Reason’s Robert Poole has written: 

Proponents of a National Infrastructure Bank (NIB) present it as a solution to two major problems: insufficient investment in transportation (and other) infrastructure and poorly targeted (read politicized) infrastructure spending. It is plausible that some version of an infrastructure bank could help address both problems.

Today, America pays for most public sector transportation infrastructure (e.g., highways) out of current cash flow. Shifting to a model that finances that investment would be a way to do a large one-time catch-up, even if there was no significant increase in the ongoing cash flow. But if the investment was in major projects that generated net new revenues (e.g., from tolls or other new user fees), then total investment would increase, in addition to being front-loaded.

Second, if the NIB were set up as a genuine bank, operated on commercial principles, it would fund only projects that met pretty rigorous investment criteria, including well-documented revenues that would repay the bank’s investment. That way the NIB would be a going concern, like state revolving loan funds for infrastructure. As a national entity, the bank should be chartered to concentrate on projects too large to be readily funded by a state department of transportation, projects involving multi-state corridors, etc. So this whole set of factors would target the investments to projects with high ratios of benefits to costs.

These ideas come as part of Obama’s “Rebuild America Partnership,” a program that aims to spend $40 billion in public money repairing roads and bridges, which the president featured in his State of the Union address. President Obama claimed the infrastructure spending would boost the economy and create jobs, although the White House cannot provide an estimate on how many.

However, as a Reason paper, Ensuring Productive Investment in Transportation Infrastructure stated: “Research shows that this kind of ‘job creation’ seldom involves real economic growth; it simply redistributes resources from one use or location to another use or location.” 

More importantly, infrastructure funding should be focused on improving the mobility of people and goods. Road, port and aviation projects should be selected for funding based on how much they’ll improve mobility, not on how many jobs they’ll create. As Poole recently wrote about the president’s “Fix-it-First” plan to repair roads and bridges, all road repairs aren’t created equal and transportation spending needs to increasingly focus on cost-benefit analysis:

…the Federal Highway Administration runs an array of capital investment strategies through its detailed models to identify investments whose benefits exceed their costs. Were fix-it-first a sensible national policy, these models should identify most or all justified highway and bridge investment as “rehabilitation,” rather than as “capacity expansion and enhancement.” But the actual results of this analysis are strikingly different...A national policy of fix-it-first would misallocate resources very significantly, even if there were a federal funding source available for it.

Photo by Auggie.Wren

Solving the Parking Problem in DuPont Circle

Posted on March 29, 2013, 8:47am | Ike Brannon

One of our neighbors bought a genuine London Cab a couple of years ago. Importing such a vehicle is very challenging: the new cabs off the assembly line do not meet US emissions laws and those that qualify as antiques—and thus are exempt from such standards—are usually rusted through and unusable.  The only way for a London Cab to be legally brought over (as this one was, based on the stickers in its window) is to have a team of mechanics completely rebuild an existing one, virtually from the bottom up, while clearly documenting each step of the operation. Needless to say this cab represents a pricey investment.

However, such cabs are relatively cheap to store: Since our neighbor purchased his London Cab it has been parked on the street, in front of our building in the exact same space. The annual cost to its owner for the decal on his car that allows him to park it on our street is a mere $25.

In some places a fee that low would make perfect sense, but we happen to live on the edge of two very dense, affluent neighborhoods in Washington DC where parking is exceedingly scarce. Private parking spaces rent out for as much as $350 a month, and a parking spot in an underground garage recently sold for $60,000.  In other words, street parking is over 100 times cheaper than private parking.

As a result, street parking is extremely difficult to find in our neighborhood.  During nights and weekends, when people flock to the neighborhood to dine, a significant proportion of the traffic consists of people looking for a parking spot.  Even during the day local residents who park on the street spend a considerable amount of time looking for an open space.

The economist’s solution would be to charge something closer to the market price for the scarce resource of on-street parking, which is precisely what a local politician has suggested. The result has been predictable:  He has been bombarded with vitriol well in excess of anything he’s seen before, and he has since retreated from this stance.

I get why this cohort might be opposed, but simple opposition does not make good policy: there are all kinds of government services that some folks would rather get for free but offering such services for free doesn’t make economic sense. Our National Parks charge an entrance fee, for instance, and public high schools and colleges charge fans to come and watch football and basketball games in arenas and stadia paid for by tax money. They do so because failing to charge a fee would often result in overflow crowds and because asking those who use the facilities to defray some of the costs seems like a fair way to do things. I submit that the same logic applies to people who wish to park (or store) their cars on the street.

Those protesting the proposed parking permit increase offer a variety of arguments as to why it shouldn’t go forward: Some suddenly discovered libertarianism and wish to keep the government from amassing more tax revenue to spend on its nefarious agenda, while others have protested this plan by arguing that it will have a disproportionate impact on the poor, who cannot afford to pay more for a parking fee.

No one in my neighborhood is as worried as I am about the government amassing too much power or money (I suspect that is literally true, given that the Green Party typically fares better than Republicans in our precinct), but this isn’t a valid concern here.  The revenue that would be raised from this would be a pittance compared to how much the District generates from its ten percent sales tax and a personal income tax with rates that exceed nine percent, neither of which are apparently all that objectionable to my neighbors with automobiles. Offsetting this revenue by lowering property taxes in the neighborhood would be one trade-off that should assuage those with this complaint.

And virtually free parking for all is a terrible way to help the lower class in our neighborhood, who are much less likely to own a car than middle or upper income households. If there were a goodly number of working poor who needed inexpensive parking to maintain their cars it would not be terribly difficult to devise a program that would give low-rate permits just to them.

“Nearly free” is a terrible price for a scarce resource, even if it is one that the government owns. Setting a price that reflects the value the market places on on-street parking would greatly alleviate the irritating parking shortage and raise more money in a progressive way than nearly any tax program could hope to accomplish. 

Ike Brannon is director of research at the R Street Institute, a think tank based in Washington DC.

Pull the Plug on Electric Vehicle Charging Stations

Posted on March 19, 2013, 9:59pm | Baruch Feigenbaum

The Atlanta Journal-Constitution published my op-ed against subsidizing electric vehicle charging stations.

In summary, the city of Atlanta is using federal subsidies to install electric vehicle car-charging stations. This may sound like a good way to invest in the future. Unfortunately, there are several significant problems with this taxpayer supported subsidy.  

First, electric vehicles in GA are not cleaner than traditional gas-powered vehicles. Most electricity in Georgia is generated by coal power, which produces far more carabon dioxide than gas engines. And the lithium batteries, which power most electric vehicles, requires mining lithium. The negative environmental consequences of mining lithium far outwiegh any positive benefits from operating electric vehicles. 

Electric vehicles are used mostly by the wealthy. For example, the average income of a Chevrolet Volt owner is $170,000. The only automaker whose customers have a higher income is Mercedes-Benz. Why are taxpayers subsidizing new cars for the rich who can already afford them?

And even with the subsidy auto sales are not exactly taking off. Ford sells more F-Series pickups in a year than Chevrolet sells Volts and Nissan sells Leafs combined in a year. The combined federal and Georgia subsidy of up to $15,000 cannot make customers but a product they do not want. 

The complete op-ed is available here.

Innovators in Action: Georgia DOT, Tolling Agency Officials on Atlanta's Managed Lanes Network

Posted on March 19, 2013, 4:20pm | Baruch Feigenbaum

Earlier this month, I interviewed GDOT Deputy Commissioner Todd Long, incoming SRTA Executive Director Chris Tomlinson and SRTA Director of Operations Steve Corbin about the Georgia Managed Lane Network. 

There are different types of Managed Lanes. High-Occupancy Vehicle (HOV) lanes allow vehicles with a specified number of occupants [usually 2 or 3] to use the lane while High-Occupancy Toll (HOT) lanes allow drivers who pay a toll to use the lane. All transit vehicles may use HOV lanes for free and all registered transit vehicles may use Georgia’s HOT lanes for free. HOT lanes are a better solution for most of Georgia’s corridors. 

These managed lanes can offer this reliable travel time 24 hours per day for many years because their tolls increase or decrease based on congestion in these lanes. Building a complete network is important because Atlanta has at least 10 distinctive employment centers. 

The I-85 conversion project between Chamblee-Tucker Rd and Old Peachtree Rd was the first managed lanes project in Atlanta. The launch was rough. Our initial toll rates the Monday of the launch were too high. The dynamic pricing algorithm placed too much emphasis on the congestion in the general purpose lanes and not enough emphasis on the light volume in the express lane. Many people wanted to use the lane but did not have Peach Passes. The combination resulted in relatively empty lanes. We needed to make adjustments and we quickly did. 

Several new managed lanes are being planned or under construction. We are currently extending the I-85 lane from Old Peachtree Rd to Hamilton Mill Rd. We are also building 2 reversible Managed Lanes on I-75 south from SR 155 to the I-675/SR 138 area. We hope to have this project under contract later this summer. Lastly, the I-75/I-575 North project is the largest of our efforts. This project will add two reversible lanes on I-75 and one lane on I-575. Bids for that project open in April and a record of decision is expected by next January. We plan to start construction next year; we estimate that project will open in late 2017 or early 2018. We have several other corridors we are looking at for the future. SR 400 and I-285 from I-75N to I-85N are the next two. Currently, we lack funding for either of those projects. All of these managed lanes projects will add capacity. 

The full interview is available here.

Like most states, Georgia faces a major challenge in delivering future transportation infrastructure given the declining purchasing power of the federal gas tax, the rising maintenance needs of an aging highway network and the increasing costs of construction materials. Georgia spends a majority of its gas tax revenues on maintenance; finding sufficient money to build a transportation system fit for the 21st century is very challenging. 

The Georgia Department of Transportation (GDOT) and State Road and Tollway Authority (SRTA) have embraced a managed lanes network plan as the best way to use existing resources and reduce congestion on metro Atlanta interstates and freeways. There are different types of Managed Lanes. High-Occupancy Vehicle (HOV) lanes allow vehicles with a specified number of occupants [usually 2 or 3] to use the lane while High-Occupancy Toll (HOT) lanes allow drivers who pay a toll to use the lane. All transit vehicles may use HOV lanes for free and all registered transit vehicles may use Georgia’s HOT lanes for free. The current plan was approved in 2010 and is being implemented across the region. 

In March 2013, Reason Foundation Transportation Policy Analyst Baruch Feigenbaum interviewed GDOT Deputy Commissioner Todd Long, incoming SRTA Executive Director Chris Tomlinson and SRTA Director of Operations Steve Corbin to discuss the concept of Managed Lanes, current operations and future plans for the network. 

Baruch Feigenbaum, Reason Foundation: Many metro areas across the country are studying and implementing Managed High Occupancy Toll (HOT) Lanes as a way to reduce congestion. What are the principles behind a HOT Lane Network and why is it appropriate for Atlanta? 

Todd Long, Deputy Commissioner, Georgia Department of Transportation: Due to right-of-way costs we cannot continually widen highways. And in a growing metro area like Atlanta, new unpriced highway lanes will quickly become congested again. This principle called induced demand limits the effectiveness of adding general-purpose lanes. When complete, the Managed Lanes Network will offer a reliable travel time throughout the metro area. These managed lanes can offer this reliable travel time 24 hours per day for many years in the future because their tolls increase or decrease based on congestion in these lanes. Building a complete network is important because Atlanta has at least 10 distinctive employment centers. We need the entire network to provide quality connections between residential locations and these centers.

Chris Tomlinson, Incoming Executive Director, SRTA: Metro Atlanta has significant congestion issues. As Atlanta continues to grow economically, congestion will become much worse. Although GDOT has eminent domain powers at its disposal, taking land for improvements is never popular. Additionally, it is not a realistic solution because of constrained funds and induced demand. GDOT realized that the combination of growing demand, limited funding, and lack of right-of-way made continuing on our current path of traditional road widenings unsustainable. So staff recommended that the State Transportation Board adopt a Managed Lanes plan. In 2007, the board adopted the Managed Lanes plan in which any additional capacity in metro Atlanta is to be “Managed.” Managing, or in this case pricing, capacity can help control congestion and increase reliability. The network primarily relies on adding new priced lanes; however, in limited situations it considers converting existing lanes. When considering a conversion we examine both performance of the corridor and accessibility of the lane. The first project, the I-85 demonstration project, was a conversion project. In 2008, Georgia received a $110 million Congestion Reduction Demonstration (CRD) Program Grant to Atlanta. This federal government transit grant led to the implementation of a managed lane, enhanced transit service and innovative technology. 

Feigenbaum: Does the network have to be priced? Did metro Atlanta consider a (HOV) network? 

Long: The plan started as an HOV network, in 2000, before High Occupancy Toll (HOT) lanes became popular. After conducting revenue studies, we determined that there was neither sufficient funding nor projected demand to justify building an HOV network. While the HOT network has higher user forecasts and more forecast revenue, total revenue is not quite sufficient to fund the project. Working with the private sector and using Public Private Partnerships can provide 20-25% of the total project costs. The best solution is a Managed Lanes network that utilizes PPPs. 

Feigenbaum: What are the specific benefits of tolling or managing a lane? 

Long: For the I-85 lane specifically, data shows a slight reduction in the travel times in the I-85 general-purpose lanes but over time the general purpose lanes have returned to about the same level of congestion as before the HOT lanes were installed. However, the managed lanes now offer a reliable trip for cars and buses compared to the previous HOV lane where there were significant delays. One of the biggest improvements in the corridor has been to transit service. Both the number of buses and total ridership have increased as a result of the federal grant and new managed lane. Both the regional transit agency Xpress and local operator Gwinnett County Transit (GCT) have increased service, which is exactly what we hoped.

Tomlinson: The number one goal is for the lane to provide a predictable and reliable trip for both auto and transit users. Our customers highly value this benefit and are willing to pay for this higher level of service.

Feigenbaum: Is the I-85 lane different from other HOT Managed Lanes? Have there been any issues with customers being charged the wrong toll?

Steve Corbin, Director of Operations, SRTA: SRTA has a special program to monitor reliability. If something happens in the lane that significantly affects motorists such as an accident, we have the ability to refund or waive a portion of the customer’s trip or waive a violation. This is used to address some special circumstances unique to having a non-barrier separated HOT facility. We are the only non-barrier Managed Lane in the U.S. to offer such a program. Our goal is to be the number one customer-centric tolling agency in the country. 

Occasionally a customer will have a payment issue. One of the best tests of whether or not we are providing good customer service is if we resolve the customer’s problem. For example, during the past calendar year we have had only a few customers who notified of us an issue with the price they paid for the Managed Lanes. All were resolved to the customer's satisfaction. We believe providing this level of service is the best way to find new customers.

The rest of the interview is available here.

Atlanta Journal-Constitution: I-85 HOT Lanes are Working

Posted on March 5, 2013, 10:12am | Baruch Feigenbaum

The launch of the Georgia I-85 High-Occupancy-Toll (HOT) lane in October 2011 from Chamblee-Tucker Rd to Old Peachtree Rd was rocky. Prices were too high, cars were too few, and many drivers were ready for a public hanging. 

Changing the usage rule for any lane is challenging. And making two changes is doubly risky. (This is the first managed lane conversion that changed two factors at one time.) Both the occupancy requirement, minimum occupancy for carpools increased from 2 to 3, and the cost, all 1 and 2 person vehicles were required to pay a small fee, were changed. The State Road and Tollway Authority (SRTA), which operates the lane admits it made mistakes. 

And even though the lane is now working well, some refuse to use it. 

The biggest problem with the rocky launch was that people became angry with the Managed Lanes concept instead of merely the implementation. Over the last 16 months on any given day the I-85 HOT lane moves more people through the corridor than the previous High Occupancy Vehicle (HOV) lane ever moved. Yet despite this fact some insist that traffic congestion is worse than before the conversion. 

Some transportation types thought the media coverage of the lane was overly negative. (This tends to happen when your new transportation project initially makes congestion worse.) Many of those types were happy that Atlanta Journal-Constitution reporter Mark Arum explained how and why the lane is succeeding. Arum looked at the lane from a business perspective:

Let’s pretend you own a business. In January of 2012 your business had 254,075 customers. Not too shabby. A year later, in January of 2013, you increased your number of customers to 401,183 people. That’s pretty impressive year-to-year growth, no matter what business you are in. Not only did you increase the amount of customers that you had, but each customer spent almost 12 percent more with you in January of 2013 then they did in 2012.

The numbers I referenced above are the year-to-year figures released by the State Road & Toll Authority last week on the I-85 Express Lanes. Between January 2012 and January 2013, the number of trips taken in the High Occupancy Toll lanes increased by 147,108 trips and the average daily fare increase from $1.26 per trip to $1.42 per trip.

I think the statistics show that the express lanes are working, and that more and more commuters are using them in their daily commutes.

I know the express lanes have their critics. Often very vocal, the complaints generally center around the perception that traffic has gotten worse since the installation of the express lanes.

As someone who covers the I-85 commute on a daily basis, I can assure you traffic is no worse on I-85 than it was when the HOT lanes were HOV lanes. Is it better? That’s debatable. I think all things being equal, if there is no bad weather, and no bad crashes, drive times have slightly decreased since the express lanes went into effect.

As more people acquired the necessary Peach Pass to use the express lane and saw the benefit of that option ridership naturally increased. The Toll Authority is required to keep the average speed in the express lane at 45 miles per hour or more. As more people use the lane, it makes it more difficult to keep those speeds. That is why we’ve seen an increase in the toll price year-to-year. That is why the daily average fair has jumped from $1.26 to $1.42. 

To those who are still upset, here are a couple of things worth considering. Changes are seldom easy. Georgia converted the lane for four reasons. But two of these reasons are often misunderstood. First, the I-85 conversion differed from other conversions in that the carpool lane was failing federal performance requirements. Atlanta’s HOV lanes were paid for with federal funding. That funding comes with the attached string that if the lane does not operate at 45 miles per hour or more 90% of time, the state of GA has to reimburse the federal government 100% of the construction costs of that lane. The I-85 HOV lane failed that requirement. And if the lane had continued to fail the requirement, there is an excellent chance that GA would have had to pay money it did not have to the federal government. Second, one of the major goals of the project was to improve transit since Atlanta has some of the lowest transit use of any major metro area in the country. The grant from the Federal Transit Administration (FTA), not the Federal Highway Administration (FHWA) offered a low-cost way to significantly improve transit service. 

Throughout the U.S., managed lanes offer choice to commuters, increase the number of people commuting by transit by decreasing the travel time, guarantee a reliable travel time to all drivers willing to pay a small toll, and provide access to emergency vehicles such as ambulances transporting those will life-threatening conditions to the hospital.  

The success of the I-85 managed lane indicates that such lanes should be a major part of solving Atlanta’s transportation problems. And Atlanta has three other managed lanes projects in the works. All three other managed lane projects will include new lanes, not existing lane conversions. Since customers will not be forced out of their lane the transition period should be much smoother. However, to receive the full benefit of these lanes metro Atlanta travelers have to accept managed lanes. And they have to be honest with themselves about solving congestion. With the federal debt, and absent a politically unpopular major increase in the gas tax, resources for new free capacity are going to be very limited. Commuters are urged to step back and take an objective look at managed lanes. For the Atlanta region, there is a lot to like.

President Obama 's SOTU Transportation Component Similar to "Groundhog Day"

Posted on February 13, 2013, 2:47pm | Baruch Feigenbaum

In last night’s State of the Union speech, President Obama’s displayed how transportation remains a low priority for the White House. After admitting that he did not focus on transportation in his first term, the President promised to devote more attention to it in his second term. Let’s hope this speech is not representative. It is fitting the President delivered the speech only 8 days from Groundhog Day since the President’s approach to transportation reminds many of the movie “Groundhog Day.” In the movie the main character, Bill Murray keeps reliving the same day until he changes his attitude. And similar to Groundhog Day unless the President changes his approach, he and the transportation system will keep reliving the same day again and again. 

In the State of the Union speech, a President has many issues to address. And unless we want a 3-hour speech (we don’t), a President cannot detail all plans. But in President Obama’s 6,421-word speech, he spent only 192 words or two paragraphs addressing transportation. Far more time was devoted to environmental issues (592 words) of less concern to most Americans. 

And the context of those 192 words is mostly forgettable:

America’s energy sector is just one part of an aging infrastructure badly in need of repair. Ask any CEO where they’d rather locate and hire: a country with deteriorating roads and bridges, or one with high-speed rail and internet; high-tech schools and self-healing power grids. The CEO of Siemens America – a company that brought hundreds of new jobs to North Carolina – has said that if we upgrade our infrastructure, they’ll bring even more jobs. And I know that you want these job-creating projects in your districts. I’ve seen you all at the ribbon-cuttings.

Tonight, I propose a “Fix-It-First” program to put people to work as soon as possible on our most urgent repairs, like the nearly 70,000 structurally deficient bridges across the country. And to make sure taxpayers don’t shoulder the whole burden, I’m also proposing a Partnership to Rebuild America that attracts private capital to upgrade what our businesses need most: modern ports to move our goods; modern pipelines to withstand a storm; modern schools worthy of our children. Let’s prove that there is no better place to do business than the United States of America. And let’s start right away. 

Let’s address the President’s big ideas. A Fix-It-First program is a good investment. But most departments of transportation already have such a program. Since 2000, the majority of state, county and city DOTs have moved to a state of good repair mentality where they prioritize maintenance projects. These departments already spend 60, 80, and in some cases 100% of their money on maintenance. So fix it first is a good idea. But it was innovative in 2001; in 2013 it is standard practice.

And most places would welcome private capital. In fact they already do. Some 33 states have some form of Public-Private Partnership (PPP) law. The Federal Highway Administration’s Office of Innovative already disperses TIFIA loans, private activity bonds, section 129 loans and other innovative programs. Many transit projects such as the Eagle Rail Project in Colorado use PPPs. It is good the President supports these programs. But use of private capital is neither new nor innovative.

If the President wants to increase private sector involvement, he needs to spend more time changing laws and practices and less time on grandiose statements. For example, the President wants to use PPPs to improve ports. This is a great idea. But as long as ports get free taxpayer money in the form of federal earmarks to permanently deepen their harbors, they have no incentive to partner with private entities. President Obama needs to change the law so that ports must rely at least partly on private capital to deepen their ports. 

The issue the President most needs to address and did not is the cost of infrastructure projects in the U.S. One of the biggest problems is not the amount of money we spend but how we spend it. Many projects such as the New York City Second Avenue subway are ten times more expensive to construct in the U.S. than they would be in another country. Expensive art and a multitude of contractors, both largely unneeded, lead to some of these cost increases. Provisions such as Buy America and David-Bacon that increase capital and labor costs also play a role. Environmental Rules, while streamlined under MAP-21, increase costs by delaying projects. Infrastructure projects often take 12 years to be completed because of these rules. European projects can be constructed in half the time with less environmental damage than most American projects. 

The President’s approach to viewing transportation as primarily a jobs program does not help. Transportation increases economic development by quickly and efficiently moving people and goods from point A to point B. In comparison, the effects of hiring a small number of temporary workers are very minor. Further, more construction workers employed and more unnecessary federal laws such as those that require a living wage, inflate the project’s cost and therefore fewer projects can be built. On some level, the President may have to choose between transportation and another policy objective. And transportation is likely to lose. 

And one part of the President’s speech shows he still does not understand transportation. A CEO would choose a country with well-maintained roads and bridges over a country with poorly maintained infrastructure. But why are our bridges and roads not well maintained? Our President’s main goal is to build a multi-billion dollar high-speed rail system. And the local money that states like California are using for that project is money that they are taking from road and bridge maintenance. While a high-speed rail system is a nice dream, most states with constrained budgets cannot build high-speed rail, and upgrade and improve their transportation networks. As President Obama mentioned in his failed joke--politicians love ribbon-cuttings. And given a choice between the ribbon cutting of a new largely useless train line and the maintenance of existing highway and transit systems, politicians will choose the ribbon cutting. This combined with federal pressure to accept free money leads politicians to choose high-speed rail over maintenance.

And the President once again pushed for unrealistic, unworkable solutions. As Politico’s Morning Transportation elegantly puts it:

President Barack Obama bemoans the country’s crumbling infrastructure, offers up a $50 billion package of immediate spending on transportation infrastructure and says we should pay for a long-term boost in spending with war savings.

This is another example of reliving Groundhog Day. As mentioned earlier, the reason that the country’s infrastructure is crumbling is because the President has been pursuing large-scale, sexy construction projects instead of needed maintenance. Transportation projects take a long time to build; immediate short-term spending might fit the President’s Economic Stimulus goals but does not improve the transportation network. And the war savings money is fictional. The President is using money towards transportation that he never intends to spend. 

And transportation supporters in Congress are growing increasingly frustrated. All quotes are from Politico Morning Transportation. Oregon Representative DeFazio would like:

(A) new emphasis on delivery here.

Earl Blumenauer when asked about budget specifics:

Well, let’s see what comes with the budget.

And those are the Democrats. The Republicans were more skeptical. Jeff Denham asks,

It certainly is encouraging to hear him talk about building things across the nation. The real question is at what cost and where does the money come from? With high-speed rail, again, other countries are doing it. But they’re doing it at a far less cost than we are and they’re doing it in a far greater speeds with greater ridership numbers. 

And Transportation and Infrastructure Chairman Bill Shuster was not a fan of the speech, 

He didn’t say anything. We’ve heard some of this stuff before; how’s he going to pay for it? I think he’s lying about CEOs — they want to invest in a country that has high-speed rail? Really? Tell me what CEO said that, that cares about high-speed rail. Manufacturers want to invest in a country that has roads that are built, they want the infrastructure to be right for the transportation system, but to say one of the reasons they’re going to invest in America and manufacturing plants is because of because of high-speed rail is crazy, 

While slightly better than past speeches, the President is still presenting variations on the same old transportation vision. He finally highlighted the importance of infrastructure maintenance and the use of the private sector, but some of his policies such as large grants for HSR show he still does not understand transportation. Hopefully, his next Secretary of Transportation will create a comprehensive transportation plan by considering why the U.S. does not have a better transportation system. Until then, the U.S. will remain stuck in a version of Groundhog Day. And unlike the movie all Americans, and not just Bill Murray, are reliving the same scenario again and again.

2012 Urban Mobility Report Indicates as Economy Improves Congestion Returns

Posted on February 13, 2013, 9:47am | Baruch Feigenbaum

The Texas Transportation Institute released its 2012 Urban Mobility Report last week. The major finding is that after remaining static since 2005, congestion is growing thanks to an improving economy.

While the report is best known for analyzing traffic congestion, it also details the role of transit in reducing congestion. Further, it explains how congestion worsens air quality. TTI has been producing this report annually since 1982. During that time, congestion has tripled in many U.S. metro areas. 

TTI made several changes this year, but the most noteworthy is a new metric, The Planning Time Index (PTI) that explains the amount of buffer time needed to reach a location on time in 19 out of 20 instances. According to TTI:

If the PTI for a particular trip is 3.00, a traveler would allow 60 minutes for a trip that typically takes 20 minutes when few cars are on the road. Allowing for a PTI of 3.00 would ensure on-time arrival 19 out of 20 times.

PTIs on freeways vary widely across the nation, from 1.31 (about nine extra minutes for a trip that takes 30 minutes in light traffic) in Pensacola, Florida, to 5.72 (almost three hours for that same half-hour trip) in Washington, D.C. 

The best way to reduce the PTI may be managed lanes and managed arterials. Managed lanes are freeway lanes that are free to buses and large carpools. Single person vehicles may use these lanes for a small fee that varies based on congestion. This small fee helps keep managed lanes free-flowing 24 hours a day even during rush hour. Managed arterials are bridges or tunnels at major intersections that drivers can choose to pay to avoid congestion. Managed arterials are free-to-use for transit vehicles With managed lane and managed arterial networks commuters are guaranteed a congestion-free ride and can factor in less planning time. As a result, commuters will have more free time for other activities. 

The traditional metric that TTI uses to measure congestion is the Yearly Delay per Auto Commuter. The ten metro areas with the worst congestion from heaviest to lightest are Washington D.C., Los Angeles, San Francisco, New York City, Boston, Houston, Atlanta, Chicago, Philadelphia and Seattle. 

As these metro areas are the largest in the country, there are no major surprises. Although some areas with relatively smaller populations have relatively large congestion problems while some of the biggest metro areas have relatively moderate congestion issues. 

Washington D.C., the 8^th largest metro area, ranks 1^st in congestion. This is due to several reasons including the strong regional economy, the large number of face-to-face jobs where personal contact is important and the poor regional freeway network. Despite the presence of a strong subway network, D.C. area residents still have the worst commute in the country. Other metro areas where congestion is more severe than population include San Francisco, Boston and Seattle. 

Chicago, the 3^rd largest metro area, ranks 8^th in congestion. This is likely the result of a poor regional economy, better freeway and arterial network, and stronger regional cooperation. The other major metro area where congestion is less severe than population is New York City. 

As the economy improves congestion will increase. This is the time for metro areas to develop a comprehensive cost-effective, congestion-reduction strategy. This includes new managed lanes, new managed arterials and new, targeted freeway and arterial widenings. This strategy also includes enhanced use of tolling, cost efficient local bus/BRT systems, and increased use of intelligent transportation systems. 

Metro areas that are improving thier transportation system fare better than metro areas that are not upgrading thier systems. Let’s take a closer look at one of the latter--Atlanta. Atlanta’s congestion increased from 13^th worst in 2011 to 7^th worst in 2012. This is a large jump due in part to new methodology. However, Atlanta’s increase in population, increase in vehicle miles of travel and decrease in transit usage are the larger factors. Atlanta is on the road (bad pun intended) to returning to its early 2000’s pattern of severe congestion. 

An improving metro economy is one reason for the growing congestion. After lagging behind the rest of the country for much of the recovery, metro Atlanta foreclosures recently hit a six-year low. The unemployment rate has declined from almost 11% to 8.5%. According to William Frey of the Brookings Institute, the most important growth factor of the past 50 years has been average January temperature. And while Atlanta will likely not return to its growth rate of the 1980’s and 1990’s, it figures to continue its increase in population. 

Inadequacy of the transportation network is the other contributing factor. Atlanta has not substantially widened its freeway or arterial network over the last 20 years. It has not added redundancy or upgraded insufficient suburban arterials either. Nor has it invested in a high-quality, low-cost bus and BRT network. A metro area that is growing but not improving its transportation network is going to face major congestion problems. In a way the recession saved Atlanta from far worst congestion. But with growth continuing Atlanta remains without a comprehensive plan to solve its transportation challenges. 

Other metro areas such as Dallas, Houston, Los Angeles and Miami with major congestion problems are investing in managed lanes, managed arterials, reconstructing arterials, and implementing cost-effective transit service. Meanwhile Atlanta is doing very little. Without improvements, increased growth will lead to increased congestion. The smart money says Atlanta’s travel time index will be much worse than 7^th in the future.

How to Reform and Get More Value From Federal Transportation Programs

Posted on January 9, 2013, 1:00pm | Robert Poole

As Congress grapples with impending budget cuts, we need to do a fundamental rethink of how the federal government assists with much-needed transportation infrastructure. The reality going forward is that there will be no such thing as “general revenue” funding for much of anything beyond entitlements, defense, and interest on the national debt. As long as the federal budget remains grossly unbalanced, general-fund investments in infrastructure are essentially borrowed from China—an unsustainable situation.

Three key principles are necessary for a sustainable federal role in infrastructure:

1. Users should pay for the infrastructure they use;
2. Large capital projects should be financed, via revenue bonds and other mechanisms; and,
3. The federal role should be narrowed to do only things that are truly interstate in nature, which means shifting more responsibility to the states, metro areas, and the private sector.

Reason Foundation’s new policy brief, “Funding Transportation Infrastructure in a Fiscally Constrained Environment,” explains why the model used for federal transportation programs—user taxes feeding centralized trust funds that make annual grants for cash-based investments, increasingly subsidized by general-fund money—needs replacing:

• Because these user taxes are seen as taxes, Congress seldom increases them, even when their real value declines due to inflation and other factors.
• Each transportation program involves large cross-subsidies, in which some users pay for other users’ projects, often for projects of low real value.
• Federal money comes with costly strings attached, such as Davis-Bacon and Buy America requirements, needlessly raising the cost of federally aided projects.
• Federal programs over-emphasize new capacity, leading to large amounts of deferred maintenance on existing infrastructure.
• Most federal programs encourage state and local governments to fund large capital projects out of annual cash flow, rather than financing them over time, as businesses (and home-buyers) do.

The report sets out a comprehensive set of organizational, tax policy, and regulatory changes that would implement the above principles, thereby ensuring needed, cost-effective investment in airports, air traffic control, highways and bridges, ports and waterways, transit, and passenger rail.

Airports already make use of much of the proposed approach, and the report recommends that airports be liberated from federal grant funding by being allowed to self-fund their runway and terminal expansion projects. The only thing Congress would have to do is to remove the federal cap on individual airports’ passenger facility charges, which would enable airports to expand their revenue bonding abilities for such projects. Eliminating airport grants for passenger airports would save $2 billion a year.

The air traffic control system could easily be self-supporting from fees and charges, as are the air traffic control systems in Western Europe, Australia, Canada, and even South Africa. A decade ago Congress reorganized the Federal Aviation Administration, creating the Air Traffic Organization (ATO) within it. The ATO should be separated from FAA as a government or nonprofit corporation, funded and governed by its users and regulated for safety by the FAA.

The Highway Trust Fund (HTF) should be refocused on interstate commerce, rather than trying to do surface transportation at all levels of government, from sidewalks and bike paths to urban transit to recreational trails. Its revised focus should be the Interstates and others that make up just the National Highway System. Thus refocused, the HTF would no longer need the large general fund subsidies provided since 2007. To help states accommodate their enlarged responsibilities, the remaining federal barriers to states use of tolling should be abolished, and a larger share of federal aid should be in the form of loans via the TIFIA program, rather than grants.

The Harbor Maintenance Trust Fund is broken, but not only because Congress spends only half the money generated by the Harbor Maintenance Tax each year. It is also broken because it takes money from ports that don’t need significant dredging and spends it on ports that do. But since all ports are in competition with one another, that policy makes no sense. Each port should self-fund whatever dredging it needs, with the cost being borne by that port’s users.

Federal waterways policy is even less sustainable, since the diesel tax paid by commercial carriers covers only eight percent of federal spending on channel dredging and lock-and-dam capital and operating costs. Waterways interests are calling for large increases in federal general fund support, but even the research arm of the Army Corps of Engineers has suggested the alternative of self-funded waterways, with larger user fees making possible revenue bond financing of needed improvements.

Passenger rail is problematic, because airlines and bus lines provide basically unsubsidized service to the vast majority of inter-city passengers. Where niche markets for passenger rail exist (e.g., the Northeast corridor), passenger fares and related real-estate value-added should become the means of support. The private sector may have a role to play in such service, especially if Congress deregulates post-Amtrak rail labor.

Urban transit, while playing an important role, is quintessentially the responsibility of specific urban regions, which derive all the benefits from such service. Federal funding has biased many transit investment decisions away from cost-effective bus and bus rapid transit projects to very costly and not very effective rail projects. Subways and commuter rail have a key role to play in very dense urban areas with large traditional central business districts, but that description applies to only a handful of America’s largest urban areas.

In short, federal transportation infrastructure programs are in dire need of major reform. This is not simply because the federal government is running out of discretionary funding. It is also because all of these programs misallocate resources. What this country cannot afford is to continue putting tens of billions of dollars into programs that waste resources by favoring low-value projects over high-value projects. A large-scale shift to users-pay/users-benefit, revenue bond financing, and devolving some federal responsibilities to state, metro-area, and private-sector parties will revitalize U.S. transportation infrastructure, allocating investment dollars where they will be most productive.

The Top Transportation Issues to Watch in 2013

Posted on January 8, 2013, 10:57am | Baruch Feigenbaum

After detailing the 12 biggest transportation stories of 2012, it is time to detail the transportation issues to watch in 2013. 

1) New Ports/Waterways Bill: Ports, inland waterways, and the freight they move are often overlooked in transportation. Currently, the federal government collects a harbor maintenance tax for maintenance dredgings. However, the Army Corps maintains the trust fund and decides to whom and how to distribute that funding. Tax money from ports, such as Los Angeles, that have naturally deep harbors support ports such as Charleston that do not. And other port users such as ships do not pay anything to maintain the harbor. The Army Corps typically spends less than half of that funding on dredging and keeps the remainder in an account. Inland Waterways have a separate trust fund supported by a $0.20 per gallon tax on barge fuels. But $0.20 raises very little funding; it is not a sustainable, robust funding source for waterways. Meanwhile, East Coast ports are seeking earmarks to permanently deepen their harbors ahead of the Panama Canal. However, with the earmark ban in the house, it is not clear how they will obtain any funding. Senators Graham and Lindsey introduced a bill last October and will likely introduce a similar version in the 113^th Congress. But whether there is sufficient motivation for a bill is unclear. 

2) Sustainable Funding Source for Transportation: While Congress recently approved a new 2-year surface transportation bill, 2 years passes very quickly. As a result, the transportation committees in Congress will be hard at work on a new bill. The top issue to address is funding. For the past 50 years, Congress has been able to rely on the gas tax as the major source of transportation funding. As the federal government has funded ever more transportation projects, Congress has started tapping the general fund. Due to inflation and more fuel-efficient vehicles the gas tax has lost more than 50% of its buying power since it was last increased in 1994. For MAP-21 rather than increasing taxes or cutting bloated unnecessary programs, Congress created an accounting gimmick that uses 10 years of transportation revenue to create a 2-year program. While the gas tax will continue to play a role in the future, Congress will need a new funding source. More general funding is possible; but this further exacerbates the debt and has no users-pay users-benefit link. A national sales tax is another option but it also suffers from the users-pay problem. TIFIA and bonding are excellent ways to leverage funding but require a base amount of money and are not appropriate for every project. Value Capture works well for some but not all transit projects. A combination of mileage-based-user fees and tolling are most experts top choice. But an MBUF system is several years from a national rollout. And both MBUF and tolling are opposed by short-sighted politicians. States are likely to take a larger role in funding transportation because the funding challenge for the next bill will be major. 

3) Ray LaHood: President Obama asked Secretary LaHood to stay on temporarily past the election to provide stability in his cabinet. It is not clear if LaHood will stay on for another term. LaHood announced he was leaving after one term but then walked the decision back last fall. Transportation types are hoping Mr. LaHood goes. LaHood, with no professional transportation knowledge of any kind has not been a forceful advocate for transportation and many industry types hold LaHood and Obama responsible for not enacting a new 6-year transportation bill in 2009. A new transportation secretary could explain the importance of transportation to both the President and the American people. He or she could bring analytics back to the DOT and make substantial changes to policy. The three most likely candidates are Ed Rendell, Antonio Villaraigosa, and Steve LaTourette. Of those three, Rendell is the strongest choice. He has been a mayor, and a governor and has worked in policy. He helped set up Building America’s Future to address infrastructure challenges. And as a moderate Democrat from a swing state he could be politically useful to the administration. Villaraigosa has shown a passion for infrastructure. And the President would like to add a Hispanic to his cabinet. But Villaraigosa has no statewide experience. He is not as much a national figure as Rendell. And he is more of a cheerleader for transportation than an analyst. The next Secretary of Transportation should be part cheerleader, but he also needs to understand transportation and be able to balance facts objectively. LaTourette is the weakest choice of the 3. LaTourette abandoned transportation in the House to serve on Appropriations. He announced in early 2012 he wanted to reclaim his seniority on the Transportation and Infrastructure committee and run for Chair. And, the House steering committee's decision to give the gavel to somebody actually on the T & I committee played a promiment part in LaTourette's decision to retire from the House. LaTourette may not have the best personality for a cabinet position as he has a bit of a temper. 

4) Changes to TSA: The organization set up by Republicans in the wake of 9/11 has proven to be an enormous mess. And fixing the problem is a challenge. Last year Congress required TSA Administrator Pistole to start approving contracted screening at interested airports. Pistole stopped TSA contracting in 2011 because he concluded that there were no cost-savings from contracting. (The facts said otherwise.) But even with the program restarted only 16 airports have opted out in the 11 years the program has been in existence. The TSA has failed to improve security because it concentrates on screening passengers at the front of the airport but leaves the back door wide open. There is no protection from intruders entering the secure side of an airport through a fence or waterway as happened earlier this year at Kennedy International Airport. In Newark a knife-wielding intruder got onto the tarmac by scaling an eight-foot fence. In Dallas a group bypassed all security and posted a video of themselves on YouTube. These problems could be remedied if airports and not TSA oversaw screening on their property. Currently, TSA has dual purposes—conducting the screening and overseeing the screening process. Having airports run security screening and allowing TSA to focus on overseeing screening would end this conflict. But this would require interim legislation. With John Mica in charge of the oversight committee and TSA disapproval from both Democrats and Republicans, Congress could pass a bill to make small but significant changes to TSA. But real change may have to wait until the next aviation bill and a new president. 

5) Bill Shuster in charge of the House Transportation and Infrastructure Committee: Shuster formerly headed the Railroads, Pipelines, and Hazardous Materials Subcommittee but with former chair John Mica term-limited, and now on the House Oversight and Government Reform committee, Shuster takes the Chairman’s gavel. Nobody knows how Shuster will differ from Mica. But most transpo types believe he will be less partisan and have better working relations with the Senate. Shuster’s priorities include a new water resources bill, a railroad reauthorization and groundwork for the 2014 surface transportation bill. Shuster believes that high-speed rail can work in the northeast but not the rest of the country and wants to privatize Amtrak. Shuster is as much if not more of a transportation wonk than Mica and has an ability to explain complex transportation terms in simple language. While Shuster’s dad, Bud, ran the T & I committee with an iron fist from 1995-2001, and earmarked numerous pointless projects for his Pennsylvania district, Shuster Jr. will be more likely to seek consensus. 

6) New Amtrak Bill: With Amtrak up for reauthorization in 2013, this could be a critical year for the government corporation. Amtrak has never made a profit; only its higher speed Acela service makes money. All other lines require large annual subsidies from the government. Republicans want to end subsidies and privatize the successful Acela service. There is some precedent as other countries such as Japan have privatized some of their high-speed rail lines. Much has changed in the 163 years since the B & O railroad reached the Ohio River. Passenger service was initially profitable for railroads but with new more cost-effective forms of transport such as cars, buses and planes and faced with bankruptcy, Class I railroads offloaded their passenger service to the federal government in 1970. With the exception of the northeast corridor, passenger rail service has continued to lose money over the last 43 years. With planes offering the speed advantage, buses offering the price advantage, and cars offering the customization advantage, passenger-rail has no advantage over the other transport modes. However, politics are powerful and with jobs at stake Amtrak will most likely continue to receive enough support to survive although not enough to create a robust system. 

7) HSR in California: High-speed-rail in California moves onward. CA HSR is similar to the latest big movie flop. It is completely unbelievable but the producer (CA governor Jerry Brown) and the director (Chairperson Dan Richard) want a legacy. That the legacy will be the state drowning in debt is less important than that they will be remembered. Only in this story, federal taxpayers, not the studio head, will be on the hook. And unlike the studio head who could kill this mess, taxpayers seem powerless to derail this project. Republicans from California tried. But since Democrats now have a supermajority in Congress, even with many Democrats trying to kill the project it may live on. What are the facts? To reduce costs the latest version of the CA HSR business plan proposes for commuter and high-speed-rail trains to share tracks around Los Angeles and San Francisco. While this cuts $30 million from the costs, it makes the system less than high-speed. Further, it makes impossible one of the explicit reasons for building the system—to provide a 2 hour and 30 minute trip between Los Angeles and San Francisco. The slower speed will make it more challenging for the service to attract passengers. Most other high-speed-rail lines have attracted primarily airline passengers. Drivers are unlikely to use rail because they value the flexibility to stop for food or stretch their legs or need the car at the other end of their destination. The funding plan relies on money from a cap and trade pollution system intended for environmental purposes and private investors who want to lose money. The circuitous route through the mountains further increases the costs. As a result the GAO estimates the project needs $42 billion from U.S. taxpayers, most of who live far from California. It was time to pull the plug two years ago and concentrate on HSR in the Northeast Corridor. But the politics says this project limps on. 

8) Space Travel: With the end of NASA’s space shuttle, privatized space travel is likely to take off over the next five years. While NASA can pay the Russians to get people and cargo to the international space station, Russia-U.S. relations may not make that realistic. Four private companies are competing to provide a vehicle for the Commercial Crew Integrated Capability program. SpaceX, the farthest along, has already carried people and cargo to the space station. Blue Origin, Boeing, and Sierra Nevada are also in the running. NASA has unfunded agreements to collaborate on tourism efforts with United Launch Alliance, Alliant Technsystems/ATK, and Excalibur Almaz. Another company, Golden Spike, plans to charge $1.5 billion for a round-trip expedition to the moon. NASA would like additional federal funding to speed-up development of its craft. But in a time of high budget deficits, it is hard to argue space travel is needed. What is more likely is that a private company such as SpaceX develops a system for tourists and NASA forges a partnership with the company to use its vehicles for its missions as well.

Top 12 Transportation Stories of 2012

Posted on January 3, 2013, 10:20am | Baruch Feigenbaum

The start of the new year provides a great opportunity to look back at the major transportation stories of the past year. 2012 was an active year in transportation. Below are the top 12 stories of 2012 in order of importance. 

1) Passage of MAP-21 Surface Transportation Bill: The U.S. had been operating on the tenth extension of SAFETEA-LU--the last multi-year transportation bill that expired in 2009. Most observers believed that a new transportation bill would have to wait until 2014 since transportation was not a big priority for decision makers. In addition Congress lacked the financial resources and the House instituted a moratorium on earmarks. However, many failed to realize how hard Senator Barbara Boxer and Congressman John Mica would work for a bill. The new bill had several noteworthy aspects. It did not include a major increase in funding. In fact in order to keep the same funding levels, the 2-year bill borrowed against the next 10 years of revenue. Still, holding the line on funding increases is a big deal--especially in Washington D.C. The bill also expanded the TIFIA program from $150 million in funding to $1 billion. In addition, the bill slightly expanded the tolling provisions. 

2) Passage of a new Federal Aviation Administration Bill: Often overshadowed by the new surface transportation bill, the U.S. had been operating under the 23^rd extension of the last FAA bill that expired in 2007. The new bill creates a framework for the needed Next-Generation radar system. But without much funding, implementation of the system will be slow. The bill also forced TSA to resume accepting applications that want to opt-out of federal screening. This option was written into the original post 9/11 TSA bill. However, clarification was needed after TSA Administrator John Pistole refused to allow any additional airports to opt out of federal screening. The new bill also creates rules for future drone flights. 

3) Hurricane Sandy, Natural Disasters and Transportation: Hurricane Sandy demonstrated the vulnerability of much of the East Coast to major storms. A Senate bill to provide $60 billion in aid died in the House leaving the region in limbo. House Republicans refused to pass the Senate bill for two reasons. First, because of the size of the bill, most of the Sandy revenue came from the general fund not the transportation fund. Second, much of the $60 billion in funding had little to do with emergency relief. While the logical long-term fix would be for the government to stop backing mortgages to residents who live in flood plains, this country seldom does logical. Since future disasters are inevitable and the Northeast’s run of good luck may be over, the U.S. should provide a realistic level of emergency funding, fund infrastructure directly affected by the storm only, and decide how best to distribute such funding. More info is available here. 

4) Managed Lanes Momentum: The concept of adding priced capacity continues to gain momentum. Transportation Planners know that widening highways in fast-growing metro areas can be a frustrating exercise. While mobility is enhanced in the short-term, growth and the resulting additional trips return the highways to its congested state in approximately 2-5 years. Priced lanes offer a long-term congestion reduction strategy and in some cases help fund new improvements. The biggest opening was the I-495 lanes in Virginia from I-95 to the Dulles Toll Road. These lanes provide much needed new capacity for one of the busiest interstates in the country. Virginia is also converting the I-95 HOV lanes from Dumfries to I-495 to Managed Lanes and extending the lanes south to Stafford. Texas added Managed Lanes on the North Tarrant Express in the Dallas/Fort Worth Metroplex. California is in the process of converting many of its HOV lanes to HOT lanes. While political challenges remain, managed lanes continue to be the most realistic way to add capacity in urban and suburban areas.

5) Failure of Georgia Transportation Investment Act in 9 of 12 regions: While 2/3 of local transportation ballot measures pass, some fail and some that fail do so in spectacular fashion. The latter describes what happened in the metro Atlanta region. While the poor state of the economy and the state’s conservative electorate were factors, the entire process was a mess. The Georgia legislature, which could have increased funding by itself, punted the issue to local governments. These governments made political decisions, not transportation decisions on which projects to add. The MPOs attempted to create the best list of projects but were told by politicians which projects to choose and how much those projects would cost. The top-down campaign antagonized the tea party, the Sierra Club, and the NAACP. The advertising campaign was a failure; the more times citizens saw the pro-tax adds, the less likely they were to vote for the tax. While most experts expected the tax to fail, the 37%-63% margin was surprising. What are the takeaways? The defeat is not necessarily transferrable to other areas. But other metros should ensure that any proposed tax actually funds merit-based transportation projects. Funding economic development through a transportation tax was not popular in metro Atlanta. And the Atlanta community needs to find a better way to explain and promote transportation.

6) San Juan Airport Privatization: Most airports in the United States are publicly owned and operated. Most cities resist privatization of their airports at all costs. This is unfortunate since running an airport is a specialized skill in which most public entities do not excel. However Governor Fortuno of Puerto Rico approached the situation differently. Fortuno led the process by approving a concession agreement with American Airlines and a request for proposals in 2011. In 2012, the Commonwealth accepted bids. While the deal has not yet reached financial close, its new Governor Padilla, from a different political party, supports the privatization and is trying to finalize the transaction. This bipartisan effort may lead more cities to consider airport privatization in 2013. Privatizing airports may be especially intriguing to struggling cities, which can make a lot of money from leasing or selling their airport. These cities can use those funds to support education, public works or unfunded pension programs. 

7) High-Speed Rail--The Saga Continues: High-speed-rail remains in the news both domestically and internationally. California continues to be the biggest U.S. story. Legislators approved Governor Brown’s request to begin selling $4.5 billion in voter approved bonds including $2.6 billion that will fund the central valley line. This occurred after the CA HSR Authority approved another new business plan that allows its high-speed rail trains to share the track with local commuter rail trains in San Francisco and Los Angeles. This reduces the total price tag from $98 billion to $68 billion. But that plan still relies on billions from the federal government, revenue from an untested cap and trade plan that is intended for environmental uses and a private partner that would fund this money-losing venture. The circuitous route from Los Angeles to San Francisco is another major flaw. The most logical HSR route in the United States is the northeast corridor. While construction on this route would be expensive, its density may justify its high costs. Yet President Obama seems to have little interest in this corridor. Fortunately other countries seem to be a little more logical. Portugal has abandoned its high-speed rail plans. Spain has halted construction on most new lines. China may be the biggest country to watch. While the country halted construction as a result of its latest HSR crash, it appears to be building HSR again with a lower top speed of 186 miles per hour. Most average Chinese cannot afford the train and remain opposed to the construction. China’s central government does not concern itself with whether its citizens approve of its spending but the $640 billion debt from building HSR might cause China to slow down future construction.

8) Growth of BRT over Rail: While intercity HSR continues to be popular, intracity Bus-Rapid-Transit continues to gain popularity over new rail. BRT is often less than a tenth the cost of rail. And BRT comes in many different forms. Expressway BRT makes use of managed lanes, either HOT or HOV, to offer a reliable travel time on highways. Arterial BRT makes use of queue jumpers and special lanes to move faster than the regular traffic on busy arterials. And a new concept called managed arterials would allow buses to use arterials with tolled grade separations to provide a faster, more reliable travel speed. Such a BRT network can be coupled with a robust local bus network to create a comprehensive transit system. Over the past five years, the implementation of new BRT lines has been increasing while the implementation of new light-rail lines has been decreasing. 

9) Obama White House MIA in Transportation: Discussing the White House’s lack of involvement in transportation is like beating a dead horse but the lack of realistic ideas from Pennsylvania Avenue remain a major problem. The White House has proposed stimulus style spending and infrastructure bank grants. But neither of these ideas helps transportation. Stimulus spending is bad economic policy but it is especially foolish for transportation. Most of the needed transportation projects are long and take multiple years. Short term spending only funds repavings and minor repairs. In order to make such spending effective, state DOT’s and MPO’s have to move money around, a convoluted approach for sure. The President’s infrastructure grant program chooses projects on a political basis. If the selection criteria were merit based that might help, but most transportation watchers are not interested in another TIGER based stimulus grant program. The President’s lack of interest in transportation has had negative consequences for fellow Democrats. The White House’s failure to pass a new bill in 2009 helped lead to the defeat of many moderate democrats in 2010; this year the President had to accept a much less urban-friendly bill. Replacing Ray LaHood with someone with both a background and passion for transportation would help. 

10) Tidewater Tunnels: It was a busy year for transportation in the Commonwealth. VDOT reached a deal with Elizabeth River Crossings to begin construction on the new Midtown tunnel. The deal doubles capacity of the Tunnel and improves both the quality and quantity of bus and ferry transit service between Portsmouth and Norfolk. While the tunnel will have a toll between $1.59-$1.84, this is 40% lower than the initial estimate. The project also makes substantial upgrades to the Downtown Tunnel and extends the Martin Luther King Expressway from London Blvd to I-264. Both projects will help relieve traffic congestion on the area’s bridges. And the user-pays user-benefits nature of tolling is fairer for taxpayers. Virginia advanced two lesser projects in the I-95 reconstruction and the new expressway between Petersburg and Norfolk. I-95 tolling for reconstruction is a promising idea but the current plan to have one tollbooth near the North Carolina border needs to be reworked. Building an unneeded expressway with money the state does not have is a bad idea and should be abandoned. 

11) Chicago Infrastructure Bank: In contrast to his former boss, former White House Chief of Staff and current Chicago mayor Rahm Emanuel is heavily involved in transportation. In April, Emanuel and the city council approved a new infrastructure bank to increase private investment. The Infrastructure Trust would review projects that generate revenue and projects such as a BRT system could be funded by the private sector. Many investors have already put up more than $2 billion for the Infrastructure Trust. The Infrastructure bank provides access to funds the city could not otherwise obtain and is also a hedge against risk. The city can offload risk to private investors for projects with uncertain benefits. At the same time, Chicago has to create well-structured deals. Chicago undervalued its parking meters in 2008. As a result the city negotiated a poor deal for itself. True infrastructure banks are an excellent way to increase funding without raising taxes. In today’s economy more cities may look at Chicago’s example. 

12) TSA In the News: The Transportation Security Administration is like a bad song on Top 40 radio. Every time it makes news it annoys and yet nobody can find a way to get rid of it. TSA screeners steal personal items and abuse thier power. But more significantly the agency has failed to improve security. Why? The TSA concentrates on screening passengers at the front of the airport but leaves the back door wide open. There is no protection from intruders entering the secure side of an airport through a fence or waterway as happened earlier this year at Kennedy International Airport. In Newark a knife-wielding intruder got onto the tarmac by scaling an eight-foot fence. In Dallas a group bypassed all security and posted a video of themselves on YouTube. These problems could be remedied if airports and not TSA oversaw screening on their property. Currently, TSA has dual purposes—conducting the screening and overseeing the screening process. Having airports run security screening and allowing TSA to focus on overseeing screening would end this conflict.

[Interview] Conversation with Colorado's High Performance Transportation Enterprise

Posted on January 2, 2013, 9:00am | Harris Kenny

On Monday, I chronicled the year in review for Reason Foundation's Innovators in Action 2012. Today, I'm publishing the first interview of Innovators in Action 2013, available here. I recently had the privilege to sit down with Michael Cheroutes, director, and Nick Farber, enterprise specialist, of the Colorado Department of Transportation's High Performance Transportation Enterprise (HPTE) to discuss their work.

States are struggling to adequately invest in infrastructure, a challenge compounded by the declining purchasing power of revenue from the federal gas tax and lower revenue from more fuel efficient automobiles. Meanwhile, continued deadlock at the federal level fails to inspire confidence that help is coming. Innovative policymakers, like the ones at HPTE, are applying new approaches to solve these problems. 

Read an excerpt from the interview below:

Harris Kenny, Reason Foundation: How is HPTE unique from the rest of the Colorado Department of Transportation?

Michael Cheroutes and Nick Farber, HPTE: HPTE is unique because it is the innovative transportation finance arm of CDOT. HPTE’s vision is to pursue public-private partnerships (and other innovative and efficient means of financing multimodal projects), make sure innovative projects are properly prioritized and accelerate delivery of those projects to facilitate the state’s economic recovery – we’re much more than just a tolling agency. 

Kenny: What is one of HPTE’s most successful projects underway today?

Cheroutes and Farber: One would be Phase 2 of the US 36 Project, which is currently underway. The US 36 Project is an eighteen-mile (from downtown Denver to Boulder), 50-year DBFOM project. Construction for the project is an estimated $100 million, in addition to operation and maintenance. US 36 is funded in part by tolls paid to the concessionaire. CDOT, the Regional Transportation District (RTD), the Denver Regional Council of Governments (DRCOG) and some local governments are also contributing funds to help finance the project. In other words, private equity is playing a role, but it’s not all private equity.

Kenny: What are some upcoming projects that HPTE is excited about?

Cheroutes and Farber: We issued an RFP for the I-70 East project, which, among other things, will replace a viaduct going into Denver on the east side of the city that was built in 1964. The RFP is specifically seeking a financial advisor to help evaluate options on how to finance the preferred for the I-70 East project. 

For more, read the full interview here. Stay tuned to reason.org/innovators for new content, or visit here to read our interviews from 2012.

Follow Harris Kenny on Twitter @harriskenny

Innovators in Action 2012, Year in Review

Posted on December 31, 2012, 12:00pm | Harris Kenny

Reason Foundation's Innovators in Action series profiles innovative policymakers in their own words, highlighting good government efforts that are delivering real results and value for taxpayers. In 2012, these thought leaders joined us from across the United States--and even Puerto Rico--to share insight into their process. Check out our year in review, below:

• Privatizing Lottery Management in Pennsylvania
  Interview with Pete Tartline, Executive Deputy Secretary of the Budget, Commonwealth of Pennsylvania
  Leonard Gilroy
  December 20, 2012
• Delivering Florida's 21st Century Transportation System Through Tolling, Managed Lanes and Public-Private Partnerships
  Interview with Ananth Prasad, Secretary, Florida Department of Transportation
  Leonard Gilroy
  November 21, 2012
• Addressing Ohio's Transportation Funding Challenges Through Streamlining, Public-Private Partnerships
  Interview with Jerry Wray, Director, Ohio Department of Transportation
  Leonard Gilroy
  November 13, 2012
• Implementing Managed Lanes in Minneapolis-St. Paul 
  Brad Larsen, MnPASS Policy Manager at the Minnesota Department of Transportation, Discusses Successfully Adopting Managed Lanes
  Baruch Feigenbaum
  September 10, 2012
• Transforming Education at the Local Level: Douglas County Leading the Way 
  Interview with Dr. Elizabeth Fagen, Superintendent of Douglas County (Colorado) School District
  Harris Kenny
  August 28, 2012
• Making Phoenix a 24-Hour City: Privatizing City Permitting to Cut Red Tape and Drive Economic Development
  Interview with Sal DiCiccio, Phoenix (AZ) City Councilman
  Leonard Gilroy
  July 31, 2012
• Looking Back at Indianapolis’ Parking Meter Lease, One Year Later
  Interview with Michael Huber, Deputy Mayor for Economic Development, City of Indianapolis, Indiana
  Leonard Gilroy
  June 27, 2012
• Creating a Culture of Competition to Improve Corrections
  Interview with Gary Mohr, Director of the Ohio Department of Rehabilitation and Correction
  Leonard Gilroy
  May 31, 2012
• Reinventing Libraries in Osceola County, Florida: Partnering with the Private Sector to Create Standards of Excellence
  Interview with Osceola County, Florida Commissioner Frank Attkisson
  Harris Kenny
  April 12, 2012
• The Dynamic Duo of Carrollton, Texas: Creating a Culture of Competition in City Government
  Carrollton, Texas City Manager Leonard Martin and Director of Competition Tom Guilfoy
  Leonard Gilroy
  April 5, 2012
• Offering State and Local Governments New Tools for Infrastructure Delivery in Texas
  Interview with Texas State Rep. Jim Murphy
  Leonard Gilroy
  March 5, 2012
• Reforming Local Government in Colorado Springs
  Interview with Chuck Fowler, CEO and Chairman of The City Committee of Colorado Springs
  Harris Kenny
  February 14, 2012
• Tulsa: Open for Business
  Tackling city's challenges requires willingness to embrace innovation, competition and market ideas
  Dewey Bartlett, Jr., Mayor of Tulsa, Oklahoma
  January 13, 2012
• Building a World-Class Infrastructure PPP Program in Puerto Rico
  Interview with David Alvarez, executive director of the Puerto Rico Public-Private Partnerships Authority
  Leonard Gilroy
  September 8, 2011

Innovators in Action kicks off again in the new year with my interview with Michael Cheroutes, director, and Nick Farber, enterprise specialist, for the Colorado Department of Transportation's High Performance Transportation Enterprise. Visit reason.org/innovators for the latest content.

Follow Harris Kenny on Twitter @harriskenny

Federal Aid Program for Transportation Disasters Needs Major Changes

Posted on December 20, 2012, 11:12am | Baruch Feigenbaum

Hurricane Sandy has exposed problems with the Federal Emergency Relief Program. While critical infrastructure damaged by storms needs to be quickly replaced, the current national program lacks fiscal restaint, checks to make sure the funding is related to emergencies, and a systematic approach. 

First a little history: The highway emergency relief program was first authorized in 1956. As part of the Moving Ahead for Progress (MAP-21) bill, the latest reauthorization of the program dedicates $100 million per year from the highway trust fund. Since $100 million is not sufficient for major disasters, MAP-21 authorizes additional funds on a “such sums as may be necessary” basis. Before Hurricane Katrina this funding came from the highway trust fund. However, with trust fund balances decreasing, in 2005 Congress designated the General fund as the source of future supplementary funding. These funds are typically provided in annual or emergency supplemental appropriations. Funds expended in in the first 180 days for emergency repairs to restore essential traffic, to minimize the extent of damage or to protect the remaining facilities are reimbursed 100% by the federal government. Permanent repairs, which are intended to restore damaged bridges and roads to pre-disaster conditions and capabilities, receive the same 80-90% share as they would receive as a federal-aid highway facility.

Transit facilities have a similar program authorized in MAP-21 that covers most Capital and some Operating costs. There is no dedicated money; all funding comes from the general fund. While the federal share is supposed to be 80%; the DOT Secretary may waive the local match. 

Since emergency funds are authorized on a “such sums as may be necessary” basis, the program often receives substantially more funding than is budgeted in any given year. In February 2007, the Government Accountability Office released a report that expressed concerns about the budgetary implications of increased ER spending. As the ER program is mostly funded by general fund revenues when the…

[N]ation faces a pending fiscal crisis, raising concerns about future use of the general fund and the financial sustainability of the ER program ... ER funds are not intended to replace other federal-aid, state, or local funds to increase capacity, correct non disaster-related deficiencies, or make other improvements. However, contributing to future financial sustainability concerns is the fact that the scope of eligible activities funded by the ER program has expanded in recent years with congressional or FHWA waivers of eligibility criteria or changes in definitions. As a result, some projects have been funded that go beyond repairing or restoring highways to pre-disaster conditions ... [such as] projects that grew in scope and cost to address environmental and community concerns.... Congress has also directed that in some cases the program fully fund projects rather than requiring a state match. 

The report noted that from 1990 to 2005, 86% of ER program funds were made through supplemental appropriations. This further complicated budgeting and led to project backlogs as states waited for Congressional action on this supplemental appropriations legislation. The nation faces an even bigger fiscal crisis in 2013 yet the emergency appropriations process continues unchanged. If the Senate approves President Obama’s $60.4 billion in Sandy requested-aid, the annual appropriations will be only .00016% of the total or less than 1/1000 of 1%. The $60.4 billion is more money than the budgets for the departments of Interior, Labor, Treasury, and Transportation combined. Clearly, this is not good budget policy. 

And then there is the money in the relief bill that has nothing to do with Hurricane Sandy. Unrelated items include $2 million to repair roof damage at the Smithsonian buildings in DC that pre-dates the storm; $4 million to repair sand berms and dunes at the Kennedy Space Center some 1,000 miles away from the storm; $41 million for clean up and repairs at eight military based along the center’s path including Guantanamo Bay, Cuba. The FBI wants $4 million to replace office equipment and furniture while the Customs and Border Protection wants $2.4 million to replace “destroyed or damaged vehicles, including mobile X-Ray machines. The Small Business Administration is seeking $50 million for Women’s Business Development Centers among other priorities. One federal official’s quote is priceless. In defending some of the spending to ABC news he said, “On the federal items, we know what the damage is because we are the federal government.” 

The budget request also repeats an Obama Administration pattern of funding substantial improvements to infrastructure rather than sufficient repairs in an emergency budget request. Emergency appropriations are intended to repair conditions to pre-existing status not make improvements. The $13 billion requested for mitigation projects to prepare for future storms should be a part of future annual budgets not an emergency appropriation. Similar to its efforts to make the Gulf of Mexico cleaner than it was prior to the Deepwater Horizon oil disaster, the government is using an emergency process to make non-emergency repairs. Checked by Republicans on regular spending, the White House is trying to find projects already rejected by Congress. 

Further, while there has been a great deal of research into planning for disasters, there has been little research or discussion into how to distribute emergency transportation funding. The 2007 GAO report recommended tightening the eligible criteria for funding, rescinding unused emergency funding, and improving communication between DOT offices and local governments. While FHWA has slightly improved its communications, criteria for emergency transportation funding has been loosened not tightened. Most decision makers glanced at the GAO report, threw it in a drawer, and did not think about it again. 

There are questions as to the government’s role in disaster funding. Should the federal government distribute funding to state DOTs or another entity? Should states match a larger percentage of the total federal funding? What transit agency should receive emergency federal funding-- an MPO, a regional transit board, or the transit operator? Should Davis-Bacon and other federal stipulations that increase the cost of repairs be in effect during emergencies? 

Further, should states receive federal funds even though they have refused to use state funds to fix pre-existing problems? New Jersey, New York, and Connecticut were warned that they would suffer major damage from a hurricane if they did not have an adequate plan for coastal protection. Rather than fix the problem, state leaders decided to punt the problem to the federal government and hope that their good luck would continue. It didn’t. Natural disasters are major tragedies that incur enormous property damage and often tragic loss of life. Due to the emotional nature of the tragedy, there has never been a comprehensive fact-based study that examines how to best solve this problem. Politicians have been very good at lobbying for funding but a complete failure at studying whether the current system is the most-effective way to repair critical infrastructure. 

Despite substantial political pressure to do something, Congress should not pass an emergency-funding bill unless three key problem-areas are resolved. First, all non-emergency funding should be eliminated from the bill. This includes future remediation efforts. Protection of critical infrastructure is important but states need to contribute a substantial part of their own resources to such efforts. Second, future transportation bills need to devote a realistic amount of funding to emergency relief. The current lack of sustainable funds for disaster relief leads to unsustainable emergency appropriations. This process lacks planning and fiscal discipline and substantially increases the federal debt. Third, Congress and the White House should commission an outside group of transportation experts to study the most efficient way to distribute transportation resources in emergencies. Upon receipt of this report, Congress and the White House should amend current laws to make disaster relief less political. Hurricane Sandy has highlighted the problems with emergency transportation relief. We need to fix this problem to avoid both physical and financial disaster.

Toll Collection Cost Comparable with Fuel Tax Collection Cost, Finds New Reason Study

Posted on November 27, 2012, 10:00am | Robert Poole

Conventional wisdom says that fuel taxes are the most efficient way to pay for highway use, costing only 1% of the revenue collected to administer. By contrast, conventional wisdom says collecting tolls eats up 20 to 30% of the revenue collected. But a new study from the Reason Foundation says both of those beliefs are wrong. The real cost of collecting revenue via fuel taxes is actually about 5%, and 21st-century all-electronic tolling (AET) can cost as little as 5% of the revenue collected.

The principal author of the study is Daryl S. Fleming, PhD, PE. Dr. Fleming has been helping implement electronic toll collection for nearly 25 years, both as a toll operator and consultant. He and one of his three co-authors helped develop the world’s first AET system, implemented 15 years ago on the then-new Highway 407 electronic toll road in Toronto.

Dr. Fleming and colleagues critically analyzed three recent reports that assessed the costs of collecting highway revenues via tolling. All three were primarily backward-looking, thereby capturing costs that are rapidly disappearing as toll facilities shift from cash to electronic tolling. They also identified and studied in some detail three U.S. toll operators that have pioneered all-electronic (cashless) tolling. Despite all three being small agencies, they were able to achieve the low costs of collection that might be expected of much larger agencies that can spread fixed costs over a larger volume of transactions. Extrapolating their findings to larger toll roads, they estimate that AET can achieve a cost of toll collection as low as 5% of the revenue collected, using streamlined business models.

Fleming and colleagues also used information from a recent National Cooperative Highway Research Program report (and other sources) to re-estimate the cost of collecting highway revenue via per-gallon fuel taxes. Thanks in part to new information on fuel-tax evasion and exemptions, as well as a detailed review of tax and other costs hidden within the fuel-delivery supply chain, they estimate that the true cost of fuel-tax collection is close to 5% of the revenue collected.

These findings have major implications for the future of highway finance and funding. Some of the concerns over shifting from increasingly inadequate per-gallon fuel taxes to a per-mile charging system has been the assumed much-higher cost of charging by the mile. The authors suggest that, for the limited-access highway system (i.e., urban expressways and major highways such as the Interstates), it would be feasible today to begin the conversion from gasoline and diesel taxes to AET. This would not require any equipment in the vehicle other than a standard transponder (such as the E-ZPass transponder in the Northeast and Midwest). That would be a major first step toward a possible broader shift to per-mile charging on other roadways.

The full study, Dispelling the Myths: Toll and Fuel Tax Collection Costs in the 21st Century, is here (.pdf) and a summary is here. 

Reason's transportation research is here.

Innovators in Action: FDOT Secretary Ananth Prasad on Delivering Florida's 21st Century Transportation System Through Tolling, Managed Lanes and Public-Private Partnerships

Posted on November 21, 2012, 9:00am | Leonard Gilroy

Like most states, Florida faces a significant challenge in delivering future transportation infrastructure, given the declining purchasing power of the federal gas tax, uncertain future revenues resulting from the increasing efficiency of automobiles, and other challenges that are making it increasingly difficult for most states to even maintain the infrastructure they already have, much less expand and modernize their transportation systems to meet the demands of the 21st century economy.

The Florida Department of Transportation (FDOT) has been working to meet that challenge in recent years, increasingly embracing innovations in project finance, road pricing and other areas of transportation policy that allow them to better control costs, as well as deliver major projects to reduce congestion and improve mobility amid an uncertain transportation funding future.

In our latest interview in the Innovators in Action 2012 series, I sat down with Florida Department of Transportation (FDOT) Secretary Ananth Prasad to discuss how his agency has embraced innovations like public-private partnerships, cutting-edge tolling projects, private highway maintenance and more.

Here's a brief excerpt from the interview:

Leonard Gilroy, Reason Foundation: Florida has become one of the leading states in the U.S. with regard to embracing innovations like public-private partnerships, private infrastructure financing and cutting-edge tolling projects. What challenges prompted this shift? And can you explain why partnering with the private sector makes sense for FDOT?

Ananth Prasad, Secretary, Florida Department of Transportation: As you know, Florida is a very outsourced state, and we rely on the private sector to deliver a lot of our projects. As with most states, 100% of the construction is done by the private sector in Florida, but we’re also at upwards of 80% when it comes to planning, design, engineering, inspections and the like. So in our work, we rely a significant amount on the private sector to help us deliver.

When it comes to public-private partnerships (PPPs), I think it’s just another tool in the toolbox, trying to leverage what private investment is out there, what innovations may be there when it comes to a procurement or contract management or a delivery technique. That’s basically what prompted us going into PPPs.

At the outset, Design-Build was our first foray into trying to take a traditional design function that was done by a department—either in-house or by consultants—and combine it with a construction contractor and package it together. And that evolved into “OK, if you can do design and build together, why can’t you operate and maintain together?” And that morphed into “why can’t you finance it, if it’s a long-term, corridor-type project?” It’s a natural evolution of what various departments of transportation do, and we’re just trying to make sure that we utilize all of the tools in the toolbox to deliver infrastructure improvements.

When we look at unfunded transportation needs, we estimate Florida would need in excess of $131 billion for the state’s most critical assets between now and 2040. PPPs are not going to close that gap, but they can help us deliver long corridors today by leveraging private equity and financing, and then also bringing innovations through combining the design and the operations and maintenance into a contract so that we’re designing and building a project with a holistic view rather than just designing it or just building it or just operating and maintaining it.

When it comes to tolls, we obviously have a long track record with our toll road—the [Florida] Turnpike—and in the last few decades with the various expressway authorities. Tolling allows us to diversify the revenue stream to fund transportation. As you know, the gas tax is not keeping pace and while Florida’s gas tax is indexed [to inflation], the federal gas tax is not. And with fuel efficiency standards going up and with alternative fuel vehicles, people will be driving the same amount of miles but not contributing to the upkeep and future improvements to the infrastructure. Toll roads answer that question because if you use it, you pay for it.

The full interview is well worth a read and is available here. The topics discussed include the state's current public-private partnership projects, the expansion of managed lanes in different regions, the use of "toll lanes within toll lanes," the state's efforts to capitalize on the expansion of the Panama Canal, and much more. 

[Note to readers: In previous years, we have published Innovators in Action in an annual report format, the last edition having been released in early 2010. The publication was on a temporary hiatus in 2011, but we have resumed publication in a slightly different format. In order to deliver timely content to our readers on a more frequent schedule, we're publishing one Innovators article per month on reason.org. Other articles featured in the Innovators in Action 2012 series are available here.]

Innovators in Action: ODOT Director Jerry Wray on Addressing Ohio's Transportation Funding Challenges Through Streamlining, Public-Private Partnerships

Posted on November 13, 2012, 11:26am | Leonard Gilroy

State departments of transportation are increasingly cutting costs and seeking new ways to finance and deliver transportation projects as revenues from traditional funding sources—primarily federal and state fuel taxes—continue to erode. In our latest interview in the Innovators in Action 2012 series, I sat down with Ohio Department of Transportation (ODOT) director Jerry Wray to learn how the agency is trying to address its long-term challenges by innovating today through streamlining measures, public-private partnerships (PPPs), and other strategies.

Facing an estimated $1.6 billion highway funding gap in coming years, Ohio policymakers began taking concrete steps to develop new cost-saving and project financing tools in 2011, passing legislation authorizing a potential long-term lease of the Ohio Turnpike to private investors and granting ODOT the authority to enter into PPPs to finance and develop new transportation projects.

ODOT took another major step earlier this year in establishing a new internal Division of Innovative Delivery to identify alternative transportation funding solutions. Among its early initiatives, the Division is exploring PPPs to modernize the Ohio Turnpike, develop non-Interstate rest areas, and establish a corporate sponsorship program for state-owned rest areas, bridges, interchanges and sections of highway. Further, the Division is also exploring innovative financing approaches for several different state transportation projects, including the Brent Spence Bridge over the Ohio River in the Cincinnati area, the Portsmouth Bypass in Scioto County.

Here's a brief excerpt from the interview:

Gilroy: Can you describe some of the solutions you’re advancing at ODOT today?

Wray: We have to produce projects at the retail level: quick delivery of projects is what people want from us. Everything we do—from plowing snow to building new interchanges and highways—our citizens want faster and better.

To help us meet citizens' expectations, we've been exploring many different ways of saving money since January 2011. For example, we've reduced staff by over 400 through attrition and saved over $34 million annually, a savings that will repeat year after year. We expect further staff reductions through attrition in the coming years as well, which we expect will generate further savings.

We've also moved to zero-based budgeting this year. ODOT used to carry forward lots of money as a cushion for future years, but we can't afford to let that money sit on the books when we can use it to build projects around the state. We will free up millions of dollars this year alone.

We've also re-budgeted $150 million off of our previously adopted biennium budget, taking a hard look at areas like equipment usage, overtime control, and vehicle usage and purchasing. We believe we could reduce our vehicle fleet by up to 40 percent, for example.

That's what we can do internally, as an agency, to identify areas where we can deliver the same great service ODOT is known for and do it at a lower cost to our customers. But we’re not stopping there. I oftentimes tell groups of people when speaking at public events that, “this isn’t your grandpa's ODOT.” And it isn’t. We’re embarking on a new program—the Division of Innovative Delivery—that will allow us to essentially do two things: 1) reduce construction costs by partnering with the private sector, and 2) generate additional money by leveraging the value of state-owned assets.

For instance, we are conducting a top-to-bottom review of all of ODOT’s assets that could potentially generate money for the department. We have a website that provides real-time traffic information to the motoring public. Is there a market for ODOT to sell advertising space on that website? We’re about to find out. We have thousands of bridges, interchanges and other transportation features that private businesses could pay us millions of dollars to sponsor. So, we’re pursuing an aggressive sponsorship and advertising program.

We're also looking at new and innovative ways to finance transportation projects, and we see great value in engaging the private sector through public-private partnerships.

The full interview is well worth a read and is available here.

[Note to readers: In previous years, we have published Innovators in Action in an annual report format, the last edition having been released in early 2010. The publication was on a temporary hiatus in 2011, but we have resumed publication in a slightly different format. In order to deliver timely content to our readers on a more frequent schedule, we're publishing one Innovators article per month on reason.org. Other articles featured in the Innovators in Action 2012 series are available here.]