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New York City Launches Parking Meter Privatization Initiative

Posted on May 24, 2012, 7:00am | Leonard Gilroy

Last week, the Bloomberg administration in New York City announced plans to issue a request for qualifications from private bidders interested in a potential lease of the city's parking meter system, following in the footsteps of Indianapolis and Chicago, which have inked similar deals in recent years. This is a sensible move for NYC, as privatization can not only unlock value trapped in parking assets, but it can also provide a powerful means of deploying new, cutting-edge parking technology at a time when fiscal conditions prevent the city from making such investments on its own.

As Ted Mann wrote in The Wall Street Journal last week:

Officials said they are motivated in part by a belief that a private company could help alleviate some of the well-known frustrations of parking in New York: circling block after block in a search for an empty spot or dashing out in the middle of dinner to feed a meter.

Although other cities have embraced more driver-friendly technologies, New York has been slow to catch up.

The city's 7,800 muni-meters represent only a slightly more modern approach—they accept credit and debit cards—than the 31,000 single-space meters that gobble coins in boroughs outside Manhattan.

With enough incentive, officials believe, an outside party could come up with innovations for the Internet age, such as a system to pay with a smartphone or a mobile app that would direct drivers to vacant spaces detected through sensors in the pavement.

In the Bronx, the city Department of Transportation is running a pilot program to test pavement sensors, including whether they will work in New York's climate. But that is a small test, and broadening that program, or one like it, to the entire city could be risky and expensive.

"The odds are higher that [private companies] will move with greater alacrity," Deputy Mayor Robert Steel said.

A deal also could offer potential savings for the city on labor costs, but officials said it is too soon to say what a contract might look like.

[…] New York City officials said they aren't looking for an upfront balloon payment and wouldn't strike a deal that relinquished control over the setting of parking-meter rates—a key source of friction in Chicago.

New York's meters brought in $149 million in revenue in the last fiscal year, a spokesman for the city DOT said. Parking tickets are handled separately from meter operations, and neither enforcement nor parking-ticket revenue would be included in any privatization deal, a city spokeswoman said.

"We're not looking to sell out the system, which some people have done and which I don't understand at all," Mr. Steel said. "Our process has been to consider locking in the current performance, and, if it makes sense, transferring the risk to a third party."

[…] If the city's request for qualifications reveals suitable bidders, a request for proposals would follow, likely several months from now.

More here from Noah Kazis at Streetsblog, as well as this follow-up article from Mann.

Notably, the Bloomberg administration has been emphatic that if a deal is ultimately reached, the city will retain controls over parking rates and parking violation enforcement. Some journalists have misconstrued this to imply that similar deals in Indianapolis and Chicago lacked those controls, but that is not the case.

For example, Chicago officials authorized a set schedule of rate increases for the first five years of the 75-year lease term, and then rates are allowed to adjust annually beyond that with a maximum cap (capped by inflation). However, city council approval is required for any rate increase after the first five years. So the private concessionaire cannot just change whatever rates it wants; rates are controlled either in the contract (first five years) or must be approved by the city council (remainder of lease term). The Indianapolis privatization has similar rate controls.

Earlier this week, my colleague Harris Kenny posted his parking asset privatization update extracted from Reason Foundation's recently released Annual Privatization Report 2011 (APR2011). The article offers an update on last year's news from the Chicago and Indianapolis parking leases, and it also provides an overview of other governments' efforts in 2011 to explore similar parking transactions, including Los Angeles, Sacramento, New Jersey Transit and Pittsburgh.

Momentum appears to be continuing in 2012. In addition to New York CIty, some of the more notable developments thus far in 2012 include:

Ohio State University: As Harris noted in APR2011, last year Ohio State University officials released a request for qualifications—and approved seven potential bidders for—a potential long-term lease of its parking system, which would be a first-of-its-kind asset monetization by a public university. Last last month, OSU took the next step, issuing a request for proposals seeking at least $375 million in an upfront payment from a private operator in return for a 30-50 year concession. If a deal is finalized, then the school would put the entire upfront payment into its long-term investment pool to support the university's long term academic mission. Bids are due by the end of this month. More details are available on the university's parking proposal homepage. Predictably, students and professors don't like it.

Sacramento, CA: As Harris and I wrote back in March, officials in Sacramento had been pursuing a lease of its downtown parking meters and garages in order to help finance a brand new downtown NBA arena to try to keep the Sacramento Kings from leaving town. As we wrote, parking privatization makes sense on its own, but doing so in order to subsidize a boondoggle arena and its wealthy patrons does not. Luckily for Sacramento taxpayers, this arena deal crashed and burned last month, when the city and the Kings' owners reached an irreconcilable impasse in their larger negotiations to finance the arena. More details here. Interestingly, one media outlet reported recently that city staff have left open the possibility of a standalone parking asset lease to generate revenues for other capital assets.

Harrisburg, PA: The state receiver charged with paying down Harrisburg's staggering debt and closing structural budget deficits is pursuing several potential sales and long-term leases of city assets as part of the city's fiscal recovery plan, including a long-term lease to operate the city's system of parking garages, meters and surface lots. Back in March, the city's receiver shortlisted 12 of 18 potential bidders for a long-term lease of the city's parking assets, and last month nine of those bidders submitted responses to a request for qualifications. The receiver is expected to make a final selection by June. The state's Commonwealth Court must approve any final deal, and officials expect that the Court could make its determinations as early as late June.

Wilkes Barre, PA: Last Friday, the Wilkes-Barre City Parking Authority released a request for qualifications for a 30-year or 50-year lease of its 2,273 garage and surface lot spaces and 800 parking meters. It has also hired a parking consultant to help assess the potential value of its parking assets and prepare the RFQ. City officials are seeking an upfront payment of at least $20 million, and responses are due back by June 8, 2012. The RFQ is available here.

Reason Foundation has a lot of research available in its archive on the privatization of parking assets. For more, see here.

CA High-Speed Rail and Positive Train Control in the News

Posted on May 18, 2012, 4:30pm | Baruch Feigenbaum

During the past few weeks, High-Speed Rail (HSR) and Positive Train Control (PTC) have both been in the news. 

First, last Thursday Secretary of Transportation LaHood warned California lawmakers to take action on high-speed rail. According to The Sacramento Bee:

U.S. Transportation Secretary Ray LaHood warned California lawmakers Thursday not to wait until fall for a vote on high-speed rail, urging its approval in a budget vote next month.

"We need to make sure that the commitment is there to obligate the money," LaHood told reporters at the Capitol, where he was meeting with lawmakers and Gov. Jerry Brown.

The state's commitment, LaHood said, will be demonstrated when lawmakers "put it in the budget and take a vote on it."

Brown and the California High-Speed Rail Authority want to start construction on a $68 billion rail project by early next year, proposing initially to use $2.6 billion in state rail bond funds and $3.3 billion in federal funds.

Lawmakers remain skeptical, however, and the nonpartisan Legislative Analyst's Office has recommended against it.

Not only has the nonpartisan Legislative Analyst’s Office recommended against it, so has every other independent research group and government watchdog. The Legislative Analyst’s Office has criticized the project for relying on uncertain federal funding. Of course there are a multitude of reasons to dislike HSR in California:

• The new line is not true high-speed rail and will not connect Los Angeles and San Francisco in two hours forty minutes or less (as required by the state ballot initiative). The 600 mile circuitous route is at least 200 miles longer than the route would be if it were a direct line.
• HSR will not reduce pollution dramatically. The California business plan fails to account for the greenhouse gas emissions of building the rail-line or the reduced greenhouse emissions from new cars and airplanes.
• The slower speed will attract fewer passengers. Most high-speed rail lines attract passengers primarily from airplanes. A slower speed means fewer air travelers will switch to high-speed rail.
• California is relying on revenue from an untested environmental cap and trade system. The revenue is supposed to support environmental causes, which HSR is not.
• No serious private investor would touch this project. Private investors rely on making money. Almost all HSR lines throughout the world have been publicly financed because governments outside of California realize no private sector group would be interested.
• State revenue could be better used on transit repairs, or school improvements or…

The current California high-speed rail plan is a classic government boondoggle. California should decline its federal grant. If it takes the money it will be required to build the line and operate the service. California does not have the additional $55 billion it needs to build the system. And the first part of the line will travel between Merced and the San Fernando Valley instead of starting in downtown Los Angeles or San Francisco. If the Obama administration is committed to HSR, it should use the California money to begin work on a true high-speed train in the Northeast corridor. That project will not be cheap but at least it makes sense. Of course if the Obama administration understood or cared about transportation in the first place they would have started with the Northeast corridor but that is a discussion for another day.

For more on HSR in Fantasyland see my blog post here and my colleague Adam Summers excellent commentary here.

Meanwhile the Federal Railroad Administration (FRA) has modified its rule on positive train control; unfortunately the changes are minor in nature. The new rule requires PTC on 63,000 miles of track as opposed to 73,000 miles. The FRA changed its ruling since the 10,000 affected miles of track are not expected to transport hazardous materials in 2015. The new rule is displayed in its entirety here.

First, the positive, railroads will not be required to install PTC on routes that do not transport poisonous materials or are used for transporting passengers. Now, the negative, the change does not go nearly far enough. The FRA should be congratulated for using a little common sense to modify the rule. However, PTC is still required on most tracks. As I mentioned in a commentary here requiring PTC on any track by 2015 is problematic:

• Railroads are one of the safest forms of transportation with a fatality rate of 0.2 per 100 million passenger miles.
• PTC will prevent only 4% of current railroad accidents at a cost of $14 billion.
• PTC can prevent accidents but so can many other technologies. The FRA failed to require PTC in 2005 because it miserably failed any cost-benefit comparison. Senators, most of whom know very little about transportation, decided they knew better and passed a law in 2008 mandating PTC on all class 1 tracks.
• PTC may make rail travel more dangerous. As the railroads have to spend $12 billion implementing the technology in three years, track maintenance and ofter safety issues may be ignored.
• PTC will make train travel slower and less efficient by prematurely slowing the train. Humans are much better at breaking than today’s PTC systems.

While the FRA decision is a step in the right direction, it is only one baby step. Congress needs to delay PTC implementation until the benefits outweigh the costs.

Transportation Policymakers Need to Use Congestion Pricing More

Posted on May 18, 2012, 3:58pm | Baruch Feigenbaum

Earlier this week I was at a congestion pricing workshop hosted by the Federal Highway Administration, Federal Transit Administration, and consulting firm ICF in Providence, Rhode Island. Four of these workshops have already been held around the country and although this workshop was intended primarily to attract participants from the New England states, participants came from as far away as California, Florida and Iowa. The workshop included Planners and Engineers from Chicago, Dallas, Denver, Minneapolis, Los Angeles, San Francisco and Washington D.C. 

In congestion pricing highway operators charge a variable price based on congestion to manage demand on an expressway or arterial. Although some projects generate revenue, this is not the primary purpose of congestion pricing. 

There are at least five different types of priced facilities. Priced lane facilities charge for some but not all lanes on an expressway. California State Highway 91 was the first project with variable priced lanes. Priced expressways include charging for all the lanes on a facility. Washington State Highway 520 over Lake Washington is an example of a priced highway. In priced zones or cordon zones drivers are charged either a fixed or variable fee to enter a certain area of a city. Central London is an example of a cordon zone. A priced road network uses a network of variably priced highways or a network of priced lanes on an expressway network. The Dallas metro area is developing such a network. Finally, pricing involves other transportation-related resources including performance parking: prices are adjusted to ensure a certain number of curbside parking spaces; pay as you drive insurance: drivers are charged for the number of miles they drive instead of a flat fee; carsharing: people rent cars for a short period of time from an hour to a day; and dynamic ridesharing: people who travel to a certain location are matched in one vehicle using technology (informal carpooling). 

Many U.S. metro areas have experienced the benefits of congestion pricing. The Los Angeles region reduced travel time by 10% and was able to decrease congestion sufficiently so that 132,000 additional people, 1.2% of the overall employment in the region, entered the workforce. While other factors were clearly in play, most of the growth can be traced to congestion relief. Another example is the Dallas region in which Planners and Engineers brought the public, business community, transportation agencies, elected officials and legislative leaders together to agree on a network of variable priced lanes. Dallas’ system has several innovative features including a rebate if speeds in the managed lane drop below 35 miles per hour. A third example is Chicago. Before the variable priced lanes, the average expressway speed during rushhour was less than 10 miles per hour. Commuters needed to multiply the time it would take them to reach downtown Chicago in off-hours by six to reach downtown Chicago during rushhour. San Francisco has also demonstrated how pricing reduces congestion and improves bus service. Additionally, since the proceeds from such a system are reinvested in transportation improvements, there have been no major equity issues in San Francisco. 

Congestion pricing is not one size fits all; different metro areas need different solutions. While Atlanta could benefit from a priced road network, Austin may need only a priced lane on I-35. While a cordon zone may be appropriate for New York it would not work as well in New Orleans.

Whichever systems a state or metro area chooses, congestion pricing can decrease traffic congestion, improve transit services, offer a guaranteed consistent commute time and improve safety. Unfortunately, many leaders are unaware of congestion pricing, do not understand it or are reluctant to try the concept. 

I hope that FHWA, FTA and ICF continue these congestion pricing workshops. While they require resources the workshops present a fact-based understanding of this concept. Additionally, political leaders, Planners and Engineers need to push for congestion pricing. With fiscal austerity the new reality, and a growing importance placed on improving and maintaining infrastructure, congestion pricing is one of the best tools to solve congestion. 

Polling Metro Denver Voters' Support of Tax Hikes for Public Transit

Posted on May 18, 2012, 12:09pm | Harris Kenny

Last month I wrote on Reason Foundation's Out of Control Policy Blog about the Denver Regional Transportation District (RTD) Board's decision to abandon a proposed tax hike that would have doubled the current transit-dedicated, 0.4 percent regional sales tax along the Northwest Corridor.

For context, the new revenue would have specifically gone towards FasTracks, a regional transit program approved by voters in 2004 projected to cost $4.7 billion and be complete by 2017. According to the latest estimates, FasTracks costs ballooned up to $7.4 billion and won't be complete until 2042. For more on FasTracks see my previous posts here, here and here.

Two major factors behind RTD's decision were uncertainty over voter support and ambiguity over the proposed use of funds. A reader recently sent me a poll conducted by Ciruli Associates, a Colorado-based research and consulting firm, which sheds light on metro Denver voters' attitudes towards tax hikes for FasTracks. This poll was released prior to RTD's decision and likely played a role in their decision.

According to Ciruli Associates:

The Ciruli Associates question in this survey used a historical context of the revenue provided for the project since its 2004 inauguration.  Previously, polls have shown people like transit, especially light rail, and would like the system built out quicker.  But, the decline in trust in government makes RTD and its ability to manage finances and the project an issue in this election.

First, the broad numbers. 49 percent of voters support the tax increase, while 46 percent of voters oppose it. Only 17 percent of voters definitely support the tax increase, while 30 percent (almost one-third) definitely oppose it.

Next, a breakdown by party affiliation. A majority of Democrats (65 percent) support the tax increase, while a majority of Republicans (57 percent) and independents, or unaffiliated, voters (56 percent) oppose it.

Finally, a breakdown by geography. Ciruli Associates note that interestingly, "Voters in the two counties that should receive the most benefit from the next phase of transit expenditure, Adams and Boulder, are among the least supportive of the tax increase. Even Denver is only mildly supportive."

This poll was conducted from April 6-10, 2012 in the seven-county metro area known as the Northwest Corridor by Ciruli Associates for The Buzz. Ciruli Associates used RDD probability sampling with 500 voters and calculated a margin of error of ⁺ 4.4 percentage points.

This poll was not widely cited in the lead up to the RTD Board's vote and only came to my attention today, however its results remain informative. Most Colorado transportation observers recognize that the relevant question is not if RTD will seek voter approval for another transit-dedicated tax hike, but when?

For related research, see Reason-Rupe's December 2011 national poll on transportation and public transit here.

Private Sector's Increasing Role in Infrastructure Investment

Posted on May 17, 2012, 9:16pm | Harris Kenny

Today my colleague Leonard Gilroy and I published a piece on Real Clear Markets entitled, "States and Cities Going Private With Infrastructure Investment," which explains "...that new infrastructure financing models and sources of capital will be the only viable option to support and sustain growth." The challenge is simple: while governments at all levels are strapped for cash and continue to feel the effects of the Great Recession, they face pressing infrastructure needs.

Enter the private sector, where investors are demonstrating a willingness and capability to partner with governments to modernize and expand infrastructure, according to Reason Foundation's recent Annual Privatization Report 2011. The report finds that the amount of capital available in private infrastructure equity investment funds reached a new all-time high last year. And since 2006, the 30 largest global infrastructure investment funds have raised a total of $183.1 billion dedicated to financing infrastructure projects; the bulk coming from U.S., Australian and Canadian inventors. In fact, eight major privately financed transportation projects were under construction in the U.S. in 2011 totaling over $13 billion.

Historically, U.S. policymaker interest in public-private partnerships has been in surface transportation, however 2012 ushered in a wave of new social infrastructure considerations (along the lines of what is already seen across in the developed world.)

For a preview of the future, just look to Puerto Rico, where innovative infrastructure financing has been a priority of Governor Luis Fortuño's administration. Prior to his tenure, massive budget deficits and weak credit ratings left the territory with a limited ability to finance infrastructure. In fact, public infrastructure investment (as a share of GDP) had been on a steep decline in Puerto Rico since 2000.

Put simply, if Puerto Rico was going to maintain-much less expand and modernize-its infrastructure, it was going to need outside help. Policymakers proactively adopted a 2009 law authorizing government agencies to partner with private firms for the design, construction, financing, maintenance and/or operation of public facilities across a wide spectrum that includes transportation, ports, schools and other asset classes. The law also established a Public Private Partnership Authority (PPPA), a new unit of the Government Development Bank, to conduct due diligence on these infrastructure partnerships and take worthy projects to market in competitive procurements.

The piece goes on to highlight promising new efforts in Chicago, Texas, Connecticut and elsewhere, continuing:

Puerto Rico isn't alone though. For example, Chicago Mayor and former Obama chief of staff Rahm Emanuel stood with former President Bill Clinton last month to propose an ambitious $7.2 billion infrastructure program that will rely heavily on public-private partnerships and private financing for a broad spectrum of projects including roads, water, transit and more. To implement this program, city policymakers recently created a new Chicago Infrastructure Trust, a nonprofit infrastructure bank that can package deals and blend public and private financing to advance projects. Early pledges of up to $1 billion in private capital from several financial institutions, including Citibank, Macquarie and JPMorgan suggest the model may be viable.

Elsewhere, both Texas and Connecticut enacted broad-ranging laws to authorize private sector financing for state and local assets in 2011. In New York, The Yonkers Public Schools recently hired a team of financial, legal and technical consultants to evaluate the potential to tap private financing to help deliver a $2 billion K-12 school modernization program. Like Puerto Rico, Yonkers has a number of aging facilities over 70 years old that need reconstruction, yet lacks the ability to undertake large-scale renovation through traditional taxes and bonds given current fiscal and financial constraints.

We ultimately conclude that, "Infrastructure represents the arteries and capillaries of our economy, and if we let those deteriorate, the heart itself will soon follow." Read the full piece available online here. For more on this policy area, read my colleague Leonard Gilroy's previous post on Puerto Rico here.

Senate Transportation Bill Uses Creative Math

Posted on May 17, 2012, 10:07am | Baruch Feigenbaum

It has been three months since the Senate passed its Transportation bill, MAP-21. This has given analysts time to examine the bill in more depth. Unfortunately, the more transportation analysts research the bill, the more non-transportation spending they find. Since the House passed a shell bill, the eventual bill that becomes law will have many similarities with the Senate bill. Ken Orski who publishes Innovation NewsBriefs has highlighted many of the problems with the bill. I want to detail a few of his insights:

The non-transportation provisions that are raising eyebrows include the creation of a new National Endowment for the Oceans, Coasts and Great Lakes to be housed in the Department of Commerce (Sec. 1603(4) of MAP-21), and a seven-year reauthorization for the Land and Water Conservation Fund which is a National Park Service program within the U.S. Department of the Interior (Sec. 1701 of MAP-21). Indeed, the Senate bill includes over $6.8 billion in new non-Highway Trust Fund spending that has nothing to do with the core purpose of the bill. 

Creating an endowment for Oceans, Coasts and Great Lakes may be a good program. The same is true for the reauthorization of the Land and Water Conservation Fund. Two other unrelated provisions, the Restore Act and Rural Schools, each received more than $1 billion each in dedicated funds. The Restore Act sends money to the four gulf states affected by the BP oil spill. The Secure Rural Schools and Community Self-Determination Act reimburses counties for tax-exempt federal lands. However, both are environmental programs that have nothing to do with transportation. If Congress wants to fund these four programs, it should do so through a subject-related bill. While all four of these programs have some merits, none is transportation-related. These programs have no place in a transportation bill. 

The Republican House has been criticized for trying to include the Keystone Pipeline in its transportation bill. While the Keystone Pipeline is badly needed, it is not transportation and should not be included in a transportation bill. However, it is hypocritical for Democrats in the Senate to complain about Keystone when they have funding for non-germane programs in the Senate bill. 

This is Washington politics at its best; stick a program in at the last minute and hope that nobody notices. A total of $6.8 billion in new non-Highway Trust Fund spending is a substantial amount for a two-year bill. 

Further:

Critics are also paying close attention to changes that were quietly slipped into the Senate bill and approved on the floor by unanimous consent without debate on March 13, one day before the final passage of the bill.  They include, notably, an amendment affecting the treatment of transportation "enhancements" (Sec. 1113 of MAP-21). This provision shifts the flexibility to decide how to spend the enhancements set-aside money from the state DOTs to local government agencies, thus substantially modifying an earlier agreement reached by the leaders of the Environment and Public Works (EPW) Committee. As the Committee's chairman, Sen. Barbara Boxer (D-CA) and its ranking member Sen. James Inhofe (R-OK) agreed at the November markup of the bill, it was only a compromise on that contentious issue that allowed the parties to move forward on the entire bill.  

Transportation enhancements funded by the gas tax and included in the highway section of the transportation bill fund non-highway related provisions such as acquisition of historic battlefields, rehabilitation of historic transportation buildings and establishment of transportation museums. Of all the wasteful non-highway spending in the transportation bill, Transportation Enhancements may be the most egregious. The last minute change slipped into the Senate bill shifts program administration from state DOT’s to local government agencies. While Senate Republicans should have eliminated Transportation Enhancements, the Senate bipartisan approach is a welcome change in DC. But Republicans should not accept wasteful programs in the name of bipartisanship. Under the original Senate agreement, state DOT’s would have controlled enhancement funds. At least in this scenario, program funds could serve some sort of statewide purpose. If local governments control the purse, the funds will be used for local piecemeal projects making a mockery of a national bill. If local governments want to support transportation museums they should do so with local funds. It is doubtful they would since spending for actual roads, schools, hospitals, etc. is far more vital. 

Additionally:

Other MAP-21 provisions that have raised questions include … authority to revoke passports of tax delinquents (which the bill estimates would raise $743 million over ten years to help cover the $12 billion shortfall in transportation spending).

Finally, the bill is supposed to find offsets for new spending. It is doubtful the Senate could have offset the entire amount, but the authors could have made a better effort. The bill relies on provisions such as raising $743 million from revoking passports of tax delinquents. However, these types of provisions only total $3.1 billion. Where is the other $9 billion? How can the Senate justify that the bill will not increase the deficit? The Senate will be using offsets over the next 10 years to fund a 15-month bill. These future year transportation funds will not be able to support future transportation needs. Further, it requires a great deal of “imagination” to tote a bill as balanced when much of the funding for this two year bill comes from tax revenue projected over the next 10 years. 

Most transportation types want a new transportation bill. We are now on the 9^th extension of SAFETEA-LU that expired 2 ½ years ago. Hopefully the conference committee will eliminate much of the non-germane funding from both the Senate bill and the House proposal. But if this is the best we can do, maybe we need a 10^th extension to get serious about creating a transportation bill that actually funds transportation within our current budget. 

Puerto Rico's Infrastructure Renaissance Continuing in 2012

Posted on May 15, 2012, 4:40pm | Leonard Gilroy

Under the leadership of Gov. Luis Fortuño, Puerto Rico continued to emerge as a leader in attracting private investment in public infrastructure in 2011, with public-private partnerships (PPPs) undertaken or underway that include a modernization of 100 K-12 schools, a $1.5 billion toll road lease and an ongoing procurement for a long-term lease of San Juan's international airport. As I wrote in Reason Foundation's recently released Annual Privatization Report 2011 (see Puerto Rico excerpt here):

In two short years, the administration of Governor Luis Fortuño has turned Puerto Rico into a privatization leader among its state peers. To address the territory's chronic deficits and unsustainable debt, the administration has advanced a range of reforms that include major spending reductions, optimization of government operations and the enactment of a new law in 2009 inviting private investors to modernize or develop new infrastructure across a variety of sectors.

That law, Act No. 29, is now bearing fruit. It authorized government agencies to enter into public- private partnerships (PPPs) with private firms for the design, construction, financing, maintenance or operation of public facilities, with a set of priority projects that include toll roads, transit, energy, water/wastewater facilities, solid waste management and ports. The law also established a new Public Private Partnership Authority (PPPA), a new center of excellence within the Puerto Rico Government Development Bank responsible for identifying, evaluating and selecting PPP projects and for monitoring and enforcing the terms of PPP contracts.

Despite its short life, the PPPA has built a world-class PPP program utilizing global best practices, and it has already seen some major successes advancing projects through the procurement pipeline.

Read the rest of the Annual Privatization Report 2011 article here for more on Puerto Rico's schools, toll road and airport PPP initiatives that advanced in 2011.

I'm pleased to report that momentum has continued into 2012. Earlier this year, Puerto Rico's Public-Private Partnership (PPP) Authority announced what will become the next PPP project in their infrastructure pipeline—a design-build-finance-maintain project for a new 600-bed, privately-financed juvenile correctional detention and treatment facility, a project estimated to potentially save the commonwealth over $4 million annually. This will be Puerto Rico's first social infrastructure project in corrections, and upon completion, operations of the facility will remain in the public sector (though the private developer will continue be responsible for ongoing facility maintenance). The PPP Authority decided to move forward into procurement for this project based on the results of a feasibility and value-for-money analysis prepared for the project, available here. Statements of qualification from interested bidders were due last week. More information on this project is available here.

Also, earlier this month, the PPP Authority and the Ports Authority announced two consortia— Grupo Aerpuertos Avance (a team combining Ferrovial and Macquarie) and Aerostar Airport Holdings (a team combining Aeroportuario del Sureste and Highstar Capital)— as finalists for a long-term lease of San Juan's international airport. Six consortia were shortlisted last September out of 12 applicants, and the winning bidder is expected to be announced next month.

For more on Puerto Rico's robust and impressive PPP program, see:

• My February 2012 live, video interview with PPP Authority director David Alvarez at Reason Weekend in San Juan.
• My August 2011 print interview with Alvarez.
• Puerto Rico's PPP Authority website.

For more of the latest in state and local government privatization, see the full Annual Privatization Report 2011.

Washington Outer Beltway and I-495 BRT Have Benefits

Posted on May 11, 2012, 8:27am | Baruch Feigenbaum

Last Week transportation reporter Martin Di Caro of Metro Connection received a dressing down by David Alpert of Greater Greater Washington. Alpert argued in a column that Di Caro’s transportation article was one sided. Specifically, Alpert took notion with the idea that an Outer Beltway or other arterial highway could solve congestion in the Washington area. Other environmental and smart growth advocates issued similar critiques. 

Alpert accurately highlighted some of the shortcomings of the article. He was honest in noting that all of his articles are opinions and in detailing the difference between editorials and objective news coverage. I also agree with him about the quality of transportation coverage. Washington DC is fortunate to have dedicated, knowledgeable transportation reporters such as Robert Thompson of the Washington Post. But transportation is not as big a priority as issues such as taxes or defense. Sometimes transportation beat reporters are just passing through to other more lucrative positions. Most of the DC media tries very hard to offer balanced transportation coverage; but transportation is often the red headed stepchild.

However, I think there are several good reasons that Albert is not considering for building a parallel expressway. While some pro-highway groups can serve as boosters for new roads that may not be justified, some environmental groups are just as guilty of bias. Environmental groups have delayed many needed highways with minimal environmental impacts. 

Yes, new highways do induce demand. But that does not mean highways should never be built. A highway linking western Fairfax and western Montgomery could also serve drivers trying to avoid the Capital Beltway. As Alpert notes the Capital Beltway does not serve its original purpose. As many commuters travel from one location along the Beltway to another, travelers trying to bypass Washington D.C. become stuck in the 4-hour morning and 5-hour afternoon rush-hour traffic jams.

New highways do not necessarily induce new development. Several steps can be taken to lessen this phenomenon. First, the number of exits can be limited. Much of the new development occurs near exits because highways offer quick access between existing jobs and new residences. Second, the exits can be placed in areas that are already developed. Small existing communities are prevalent in Western Fairfax and Western Montgomery counties. 

Further, Washington is a growing metro area. While some new residents move to the District, Bethesda, or Tysons Corner those locations are not right for everybody. Some residents prefer to live outside the beltway or in the exurbs; others cannot afford to live close-in. Proclaiming that we are never ever going to build new highways is “solutionism” where one solution is the answer for every problem. It is no better a policy than deciding to build new highways everywhere, wherever there is a slight amount of traffic congestion. 

The region absolutely needs better transit solutions between Bethesda and Tysons Corner. The challenge is finding the best solution. In many corridors it is bus-rapid-transit (BRT) and not rail. BRT runs managed lanes such as high-occupancy vehicle (HOV) or high-occupancy toll (HOT) lanes. In addition to providing operating space for reliable, cost-effective and attractive transit, managed lanes encourage carpooling and vanpooling. Virginia will allow single person vehicles to use the managed lanes providing they pay a small toll. However the tolls will rise and fall with congestion to ensure buses will always travel at 45 miles per hour or higher. Virginia is building managed lanes from I-95 to The Dulles Greenway. Maryland is studying the system. A managed lanes system from The Dulles Greenway to I-270 could be operational in less than ten years. 

In many situations the solution is not rail. The most recent cost estimate for Maryland’s proposed purple line from Bethesda to New Carrolton is almost $2 billion. While Maryland is hoping that the federal government will pick up half the tab, opposition to the route and the cost continues to grow. A deluxe BRT system would cost less than a third of the light-rail line. The BRT system would also cost about $10 million less per year to operate. More details on why BRT is a better choice for that corridor are available here.

Unfortunately, many urban interstates were built through low-income minority neighborhoods. Routes were built in these locations because land prices were the cheapest and opposition the least well organized. In addition highways were used for socially nefarious goals. While urban interstate construction was often curtailed for good reasons, DC never built a highway network. As a result there are a limited number of ways for traveling in the DC region. The Potomac River and the lack of interjurisdictional cooperation further increase congestion. While it is much more challenging to build a new highway now than it was 40 years ago, a well-placed new expressway could provide many benefits. 

Private Screening Could Solve TSA Theft Issues

Posted on May 9, 2012, 1:36pm | Baruch Feigenbaum

The Transportation Security Administration (TSA) is hiring screeners without adequately checking their backgrounds. Recently, the TSA purchased equipment that does not work, mishandled screening of congressional members and allowed a loaded gun on a plane.

According to Bloomberg:

The arrest April 25 of two current and two former TSA screeners at Los Angeles International Airport marked the third bribery case involving agency employees this year. Also in April, a TSA screener admitted to accepting $1,200 in bribes from drug traffickers sending the narcotic oxycodone from Florida to Connecticut through an airport in White Plains, New York.

Agency officers have also been accused of stealing iPads, cash, laptops and jewelry from baggage.

“This pattern suggests there’s something wrong in the vetting process TSA uses in hiring and screening its own people,” said Robert Poole, director of transportation studies at the Reason Foundation in Los Angeles, which advocates for free market solutions to policy issues. “It’s certainly a question Congress should be asking.”

All TSA security officers undergo thorough criminal background checks, submitting their fingerprints to the FBI and cross-checking names against terrorist watch lists, Kawika Riley, a TSA spokesman, said in an e-mail. 

Further:

Applicants are supposed to be disqualified for any one of 28 criminal offenses ranging from interference with navigation to espionage, treason and felony arson. Theft and bribery felonies are on the list, as are unpaid taxes, child support arrears or $7,500 in delinquent debt.

The TSA said in a 2008 post on its official blog that more than 200 employees had been fired for theft. Last year, taking a closer look at agency numbers, the news website New York Press concluded the number had expanded to about 500.

Agents were sentenced to jail terms after being convicted of stealing $40,000 from a checked bag at New York’s John F. Kennedy International Airport.

All agencies both public and private are going to have some personnel issues. Hiring is an imperfect science. However, the TSA has a problem with a much higher percentage of its employees than other government departments or private companies. Assuming DOT is accurately checking the background status of its employees, the agency is targeting the wrong people. The agency needs to study its hiring and recruiting standards to determine why so many future employees might be tempted to steal from customers.

One solution for solving this problem is for TSA to set the security standards but have private companies run the screening operation. If private screening company employees engage in criminal activity, the companies could face penalties or contract cancellation. As a government monopoly the TSA has no incentive to improve its hiring. Creating a better process would be the “right thing to do” but I am not convinced TSA leadership will be moved by a moral argument. 

The U.S. screening model is different from the process in many other countries. In most European countries and Canada private screening is the responsibility of private companies. The Governmental Accountability Office and others have studied private contracting and found the performance of TSA screening contractors to be as good or better than that of TSA’s own screeners. A 2008 catapult study commissioned by the TSA suggested that the agency expand private screening to several different types of airports. Instead of implementing the report's findings, TSA ignored its own study and refused to publish the results.

In the recently passed FAA reauthorization bill Congress requires that TSA now provide details on any opt-out application it denies. In the past, TSA has denied most of the applications because they did not provide a "clear and substantial benefit."

According to my colleague, Bob Poole, in March’s Airport Policy and Security Newsletter #77:

CNN reported on Feb. 2^nd that TSA turned down two pending airport requests to take part in the Screening Partnership Program while approving one. Both Mooney Airport in Montana and Orlando Sanford in Florida (in Rep. John Mica’s district) were denied access to the program, because they “failed to demonstrate an operational, security, or cost advantage that provides a clear and substantial benefit over federalized screening operations.” Those criteria are not in the 2001 Aviation and Transportation Security Act legislation; they are the creation of Pistole and his TSA team. Moreover, insisting that the airport demonstrate a cost savings in advance is very difficult, since the airport itself is unable to issue an RFP and select the most responsive and cost-effective TSA-approved company. Instead, the way TSA has always managed the process, the airport applies to TSA for permission and if TSA deigns to grant it, TSA itself selects (by a process known only to itself) the security firm it deems the best fit for that airport. 

The airport that was approved is West Yellowstone in Montana. That airport is only open about half the year, and so under TSA screening, the agency flies in a team of its screeners each spring, puts them up in local lodging, and flies them home again in the autumn. Hence, if the airport hires qualified locals to do the screening, the cost will be about half, once travel and lodging costs are eliminated.

In the past, TSA director John Pistole and the Obama Administration relyed on ideological reasons and not sound policy analysis for their rejection of private screening. Maybe the new aviation bill will change that; but its doubtful.

Safety and cost issues should override politics in something as critical as airport security. But that’s not how the TSA operates.

For more details on private screening see the Annual Privatization Report 2011: Air Transportation.

Much of the Capital in PPPs Comes from American Sources

Posted on May 4, 2012, 6:00am | Baruch Feigenbaum

The Reason Foundation’s Annual Privatization Report 2011 Surface Transportation Chapter reveals that much of the capital in Public Private Partnerships comes from American sources. Specifically as my colleague Bob Poole explains:

In the United States, concerns continue to be raised about “foreign takeovers” of infrastructure. It is therefore worthwhile to compare the nationality of the funds providing equity for infrastructure projects with the nationality of the concession companies that are implementing the projects. Based on Infrastructure Investor’s analysis of the 30 largest investors, 34% of the capital comes from U.S-based institutions, with Australia’s share at 29%. When you add Canada to the U.S. share, the total of North American investors is 54%. European institutions constitute 14% of the capital.

The large majority of project experience is European. Of the top 10 companies, eight are from Europe, one from Australia and one from China. Of the top 20 companies, 14 are from Europe (Spain, France, Germany, UK and Portugal), three from China, and one each from Australia, Mexico and Brazil. A U.S. firm does not show up until position 33. We can see that while the large majority of infrastructure development and operational expertise currently resides with European firms, the majority of the capital is coming from North American and Australian investment funds. Those who raise political concerns about foreigners “buying our toll roads” seem to have missed the difference between those who are building and operating these infrastructure projects and those who are financing them. More than half of all the equity investment is coming from North American funds.

The reason why “foreign control” has become an issue is because the United States entered the infrastructure privatization arena late in the game. Many European countries as well as Australia, Brazil, India and many others have been using PPPs for more than 20 years. Since foreign nations used PPPs before the U.S., it is only natural that many foreign companies are leaders in PPPs. Additional U.S. PPP infrastructure projects will lead to additional U.S. companies becoming involved in PPPs. 

For many years, the U.S. was fortunate to have a robust federal funding source: the federal gas tax. Although the country could have enhanced its infrastructure with PPPs there was no pressing need. Times have certainly changed. As a result of inflation the gas tax has diminished purchasing power. Vehicles are more fuel-efficient than ever resulting in less money for infrastructure. Additionally, an increasing amount of fuel tax revenue is diverted to transit, non-motorized transportation uses, or economic development projects. While PPPs are not ideal for every transportation project they can reduce the contributions from cash-strapped governments allowing projects to be built far sooner than if the public sector acted alone. PPPs are more important than ever for constructing a robust infrastructure system.

Unfortunately, xenophobic politicians who exaggerate the influence of foreign companies have become a major threat to PPPs. These xenophobes can be found in both political parties and appeal to union members and tea-party members alike. While fear of foreign investment is misplaced and illogical, it is also not accurate. While infrastructure development and operational experience resides with foreign companies, the majority of the capital is coming from U.S. sources. In addition, most contractors hired by foreign companies are American. While foreign companies may be managing the process, they are employing American workers.

Annual Privatization Report 2011: Surface Transportation

Annual Privatization Report 2011: Homepage

Secretary LaHood Should Focus on Real Driving Dangers

Posted on May 3, 2012, 5:00pm | Baruch Feigenbaum

While DOT Secretary LaHood obsesses over cell-phone use, a new report from the Society of Automotive Engineers details how improper use of turn signals causes twice as many accidents as distracted driving. (Cell-phone usage is one aspect of distracted driving.)

According to Autoblog:

A total of 12,000 turning and lane-changing vehicles were observed with visible turn signal usage (or neglect) data recorded. The study shows that the neglect rate for lane changing vehicles is 48% and the neglect rate for turning vehicles is 25%. That translates to an astonishing 750 billion times a year that drivers neglect turn signals on U.S. roadways, or over 2 billion times per day. Each incident of neglect elevates the risk of a multi-vehicle crash.

Obviously, not every absent turn signal results in a crash, but the study concludes that the collective result of turn signal neglect is as many as 2 million crashes per year. In comparison, the U.S. Department of Transportation states that Distracted Driving causes about 950,000 crashes per year, so Turn Signal Neglect is actually a more significant safety issue. While the causes and remedies to combat Distracted Driving remain a matter of ongoing debate, the remedy for Turn Signal Neglect is simple, direct, effective, and cost-saving: The singular cause is driver neglect. 

There are two solutions to this problem. The first is through technology. “Smart Turn Signals” which use vehicle sensors and computer control assist the driver in turning on and turning off turn signals. Drivers are encouraged to turn signals on via a warning light similar to the flashing dashboard light that reminds drivers to use their seatbelt. Signals turn off automatically after a turn. This new technology senses turning motions more precisely than current systems. This Smart Turn Signal has been in development for several years. The Society of Professional Engineers indicates that this technology will have no new costs since the vehicle sensors needed are already required equipment on all new cars. However, there could still be implementation issues. As a result this solution should not be mandated. However, it would be an excellent option on new vehicles. 

The second solution is education. The NHTSA can detail in fact-based campaigns why turn signals are important. Most states require use of a turn signal to make a left or right turn, to pull away from the curb, and to switch lanes. Some drivers may not fully understand all turn signal laws. A national campaign can highlight turn signal safety and laws that apply in every state. 

This study provides further proof that Secretary LaHood’s anti cell-phone campaign is misplaced. An earlier post highlighted the different distractions that drivers face including the radio, the application of make-up, children in the backseat and mechanical problems. This research highlights the number of yearly accidents (2,000,000) caused by improper turn signals usage dwarfs the number of accidents caused by cell phone usage. All yearly distracted driving accidents (which include cell phones) combined total 950,000. Although cell phone use can distract the driver, placing undue emphasis on cell phone safety could cause other safety issues such as improper turn signal use to be overlooked. 

Secretary LaHood has made usage of cell phones his top issue. New facts are unlikely to change his crusade. Perhaps he can add turn signal safety to his anti cell-phone campaign. While the two important safety issues are not the most pressing problems for the transportation community, at least his press releases will have a little more variety.

Chicago, Los Angeles, Tulsa and Jacksonville and Other Local Governments Turning to Privatization

Posted on April 30, 2012, 7:20pm | Harris Kenny

In case you missed it, the rollout of Reason Foundation's Annual Privatization Report continued last week with the release of the local government privatization section. This section details the latest trends and government reforms being implemented in cities across the United States.

For example, Chicago Mayor Rahm Emanuel recently announced a plan to raise $7 billion—largely through private financing—to rebuild the city’s critical infrastructure. Emanuel, former White House chief of staff to President Barack Obama, has followed the path blazed by former Mayor Richard Daley, who privatized dozens of city services, including long-term leases of Chicago’s parking meters and the Chicago Skyway toll road, during his tenure. Emanual also implemented a new competitive bidding program in recycling that has lowered costs by over $2 million in the six months since private companies started competing with city crews.

Last year in Los Angeles, Mayor Antonio Villaraigosa worked to advance public-private partnerships for city-owned parking garages, the Los Angeles Zoo, animal shelters and public art facilities. While Los Angeles hasn’t moved ahead on zoo reforms yet, Tulsa Mayor Dewey Bartlett successfully partnered with a nonprofit to privatize management of the Tulsa Zoo. Mayor Bartlett is pursuing an ambitious reform agenda with initiatives such as identifying underutilized city assets that could be closed (maintenance garages) and sold (over 500 city vehicles).

Similarly, new Jacksonville Mayor Alvin Brown is looking to partner with the private sector. Shortly after taking office in 2011, Mayor Brown created a new Office of Public Private Partnerships that’s currently exploring ways to reduce costs on city services and optimize public assets.

This section of the Annual Privatization Report identifies the privatization of parking garage and meter operation as an emerging local privatization trend of the past year, led by newcomer Indianapolis. New York, Sacramento, Pittsburgh, Memphis and Harrisburg are some of the cities that have also investigated parking privatization.

You can find the complete local government section of Reason Foundation’s Annual Privatization Report available online here.

» Annual Privatization Report 2011: Local Government Privatization

» Complete Annual Privatization Report 2011 homepage

Being Taken for a Ride on High-Speed Rail in California

Posted on April 27, 2012, 4:21pm | Adam Summers

In my latest commentary, I once again tackle the boondoggle that is the California high-speed rail project, specifically, the most recent version of what passes for a business plan from the California High-Speed Rail Authority (CHSRA).

When the High-Speed Rail Authority recently released yet another version of its purported business plan, it was just another day in the world of the ever-changing high-speed rail plans and assumptions made by the Authority and its backers. The fourth incarnation of the plan relies upon sharing tracks with commuter trains in both Los Angeles and the Bay Area in order to trim estimated costs from $98.5 billion to "only" $68.4 billion—still more than 50% more expensive than the plan voters thought they were approving in November 2008. But, as the non-partisan Legislative Analyst's Office (LAO) observed, this plan makes no more sense than any of the previous ones.

The LAO analysis concludes,

We find that HSRA has not provided sufficient detail and justification to the Legislature regarding its plan to build a high-speed train system. Specifically, funding for the project remains highly speculative and important details have not been sorted out. We recommend the Legislature not approve the Governor’s various budget proposals to provide additional funding for the project.

The vast majority of the expected funding continues to be wishful thinking. As I relate in my article,

As with every other attempt at a plan, the latest effort from the CHSRA lacks any basis in reality. Once again, most of the funding is to come from unidentified federal and private-sector sources that almost certainly will not materialize. In fact, 83.2 percent of the project’s proposed funding is unaccounted for, including $38.6 billion the CHSRA hopes to receive in federal funds (in addition to the approximately $3.5 billion in federal stimulus and transportation funds that has already been allocated), $13.1 billion expected from private investors, and $5.2 billion to come from other sources such as local governments.

In response to such criticisms, CHSRA Chairman Dan Richards argued that it is simply common practice for transportation projects to go forward without knowing from where the money will come. “I spent 12 years on the [Bay Area Rapid Transit] board in the transit world; we never knew where all of the money was coming from,” Richards said. “Our colleagues in Southern California just adopted a $540 billion regional transportation plan for the Southland, for the next 20 years, same time period we’re talking about here. They don’t know where all of the money is coming from.” Added Richards, “It is just part and parcel of the transportation world that people don’t know these things now.”

If ever there was a window into the mindset of a government central planner, this is it. So the excuse for such irresponsibility and carelessness with scarce taxpayer dollars is the notion that “Everyone else (in government) is doing it!” Besides, who needs to know minor details like how something is going to be paid for when your state faces yearly multi-billion-dollar deficits?

Yet CHSRA board member Mike Rossi calls the new business plan “credible, reasonable, and transparent.” Many of the high-speed rail planners are clever people, so it is hard to believe that they could be so divorced from reality. There are many special interests involved in a project of this scope, however (which is yet another reason why such things should be left to the voluntary decisions of people in a free market, rather than forced down people's throats through the political process), so perhaps it is simply an attempt to intentionally delude taxpayers whom they hope will be too apathetic or uncritical to notice otherwise.

One of the things that continually amazes me is how basic assumptions such as the cost of the project and the estimated ridership—which affects everything from how much revenue the system will generate to how much it will affect traffic congestion and greenhouse gas emissions—can change so dramatically, so quickly, and yet the supporters of high-speed rail cling to the project with religious fervor and never question how these seemingly arbitrarily-determined numbers affect the viability of such a large project. As I argued in my column,

The CHSRA and many advocates of high-speed rail have demonstrated that they are beyond reason, despite all the facts that contradict their hopes and assumptions. High-speed rail advocacy has become more of a religious crusade than a policy position. Avoiding the facts stacking against this project is how cost estimates can triple, then be reduced by one-third. It’s how ridership estimates can magically plummet to one-third of their original estimates (see this CalWatchdog article for a good summary on the project’s changing assumptions). It’s how major decisions such as changing from dedicated high-speed rail tracks to tracks shared with slower commuter trains on both ends of the system can be made. And yet with all these arbitrary changes, high-speed rail acolytes have not batted an eye or even questioned how the plan can still be considered feasible, much less profitable.

Moreover, the bond measure (Prop. 1A) that voters narrowly passed back in 2008 requires that a trip between Los Angeles and San Francisco on the high-speed train system take no more than 2 hours, 40 minutes. That probably would not have happened even under the older plans, but seems to be pure fantasy now that the high-speed trains will have to share tracks with slower commuter trains at both ends of the system. As Quentin Kopp, former California state senator and CSHRA chairman who was a leading figure in pushing for the passage of Prop. 1A and the creation of the CHSRA, admitted of the new plan, “This isn’t high-speed rail.” Added Kopp, “High-speed trains have separated tracks. That’s how they could achieve speeds and travel times promised to voters in the 2008 ballot measure.”

The high-speed rail project is such a disaster on so many fronts—economically, politically, even environmentally—that one can only hope that the plug will be pulled before California wastes more billions of dollars it does not have. At the very least, voters should have the chance to re-vote on such a project that is so different from the one put before them in 2008. Barring that, it will be up to the voters to use the initiative process to kill the high-speed rail system in order save themselves from more financial waste and abuse.

See my full article here.

The Year 2011 in Surface Transportation and Aviation Privatization

Posted on April 26, 2012, 10:53am | Baruch Feigenbaum

The rollout of Reason Foundation’s Annual Privatization Report 2011 continues today with the release of the Surface Transportation Privtization and Aviation Privatization sections authored by Reason’s Bob Poole. The Surface Transportation section provides a comprehensive overview of the latest on toll roads, HOT lanes and other news on privatization and public-private partnerships in surface transportation. The Aviation section provides a comprehensive overview on the latest news on domestic and international airport privatization and privatization of airport security. Topics include:

 Surface Transportation

• In 2011, infrastructure finance continued to recover from the credit market crunch of 2009. The amount of capital available in infrastructure equity investment funds reached a new all-time high.
• Over the past five years, the 30 largest global infrastructure investment funds have raised a total of $183.1 billion dedicated to financing infrastructure projects, with the bulk coming from U.S., Australian and Canadian inventors. 
• Eight major privately financed transportation projects were under construction in the U.S. in 2011 totaling over $13 billion investment, including megaprojects in Virginia, Texas and Florida. 
• In 2010 CalPERS, the largest U.S. public employee pension fund, purchased a 12.7% equity stake in London Gatwick Airport, and public pension funds in Arizona, Louisiana, Oregon, Texas and San Diego are seeking similar investments. 
• Puerto Rico’s Public-Private Partnership Authority announced a $1.5 billion lease of the PR-22 and PR-5 toll roads, their as its first large-scale project.  Ohio officials are considering a similar lease of the Ohio Turnpike.
• Other topics include the federal role in private infrastructure finance, an update on high-occupancy toll and express lane projects in the U.S., and a review of toll road developments in the states and across the world.

Aviation 

• In the aftermath of the credit markets crunch of 2008–2009, the airport market continued its recovery in 2011, with efforts including Puerto Rico's current plan to privatize San Juan’s Luis Munoz Marin International Airport and Chicago's continued interest in a potential Midway Airport lease. 
• A total of 48% of European air passengers were handled by partly or fully privatized airports in 2011, with that share likely to grow with impending privatization initiatives in Spain and Greece. 
• Amid public outrage over TSA’s introduction of body scanners and aggressive pat-downs, the administration and Congress continued to battle over proposals to allow airports to opt-out of TSA security and hire private screeners. However, some progress was made in Washington D.C. over reviving the trusted traveler program, advancing a more risk-based approach to security.
• Since 1990, 51 governments have commercialized their air traffic control systems, separating the air traffic control functions from regulatory bodies, removing them from civil service, and making them self-supporting from fees charged to aircraft operators. However, there was no significant progress in 2011 toward commercializing air traffic control in the United States. 
• Other news on domestic and international airport privatization and air traffic control commercialization 

Las Vegas City Neighborhoods Fare Worse Than Suburbs

Posted on April 25, 2012, 5:00pm | Baruch Feigenbaum

Much of the hype from the Great Recession has focused on how exurbs are losing population while closer in neighborhoods are gaining population. In reality the opposite is often true. At last week’s American Planning Association conference in Los Angeles, Alan Mallach of the Brookings Institution highlighted that in Las Vegas the suburbs and exurbs have survived the recession while the older parts of the city have not fared as well.

Mr. Mallach who researches urban revitalization and real estate divided sun-belt towns into four categories: bust high-cost, bust low-cost, small-decline and stable. Mallach found that although some cities particularly in California, Florida, and Nevada have high unemployment rates and depressed housing prices, any notion that the sunbelt is declining is a myth. Some sunbelt cities are outperforming the rest of the country. Texas metro areas have been some of the least affected places in the country by the recession. Mallach found that over the past fifty years, the only significant variable in predicting migration and growth is the average January temperature. This research supports the idea that the Sunbelt will begin growing again when the recession ends.

Typically the ghost towns in boom/bust cities such as Las Vegas are not distant suburbs but closer in neighborhoods. Home prices in the newer planned suburban communities decreased less than home prices in the older urban neighborhoods. The “less walkable” suburban developments saw smaller price depreciation than the “more walkable” urban developments. The vacancy rate in the new planned communities actually decreased during the recession. And during the recession, most home buyers continued to purchase a dream-house in a planned community with a 15-30 minute drive from their workplace. These homeowners do not consider a 15-30 minute one-way drive time an inconvenience. Other boom/bust cities across the country have housing characteristics similar to Las Vegas.

Mr. Mallach does not expect a radical change in the economy of demographic patterns. The most popular places in boom/bust cities like Las Vegas will most likely remain the suburbs. 

There are two takeaways from this research. First, while many have been quick to promote the death of the suburbs and the rebirth of central cities, in many metro areas this is not the reality. While revitalized cities have many positives, policymakers need to use facts not desires to create new policy. 

Second, many people still prefer to live in suburban areas. Yes many people, particularly the young prefer cities for their variety and excitement. Historically, younger people prefer cities. As these younger people age, have families, look for better schools and more affordable housing, they often move to the suburbs. People should be free to choose between the cities and the suburbs; both have advantages and disadvantages. The U.S. is a large country; promoting the same solution for every metro area is not the way to improve the neighborhood or the economy.

Romney's Transportation and Land Use Policies may be Little Different than Obama's

Posted on April 25, 2012, 1:54pm | Baruch Feigenbaum

Many people know that “Obamacare” was modeled on former governor Mitt Romney’s Massachusetts health-care law. However, few know that one of President Obama’s landmark “smart growth” initiatives known as the Partnership for Sustainable Communities was also based on a Romney program. 

When Romney was governor of Massachusetts he fought sprawl and encouraged density. According to The Grist, in 2002 he said, “Sprawl is the most important quality of life issue facing Massachusetts.” After winning Romney changed the state’s land-use laws in several ways. First, he created the Office for Commonwealth Development and appointed environmentalist Douglas Foy to lead it. According to Commonwealth Magazine, the business community was furious. The state office ensured that transportation, housing, energy, and environmental offices all worked together to promote smart growth. The Partnership for Sustainable Communities has accomplished the same goals on the federal level with the department of transportation, department of housing and urban development and the environmental protection agency.

Romney’s administration worked to concentrate development in town centers, construct housing near transit stations, and improve existing roads instead of expanding them. 

Further according to The Grist:

Romney was a vocal advocate for the cause. “I very much believe in the concept known as smart growth or sustainable development, which is the phrase I used in the campaign,” Romney told Commonwealth Magazine in 2003. “You do not want to deplete your green space and air and water [in order] to grow, and the only way that’s possible is if your growth is done in a thoughtful, coherent, strategic way.

As Romney put it in 2005, “By targeting development to areas where there is already infrastructure in place, not only can we revitalize our older communities, but we can also curb sprawl as well.” His administration actively pursued a “sustainable development agency” and promoted “transit-oriented development,” “multi-modal transportation,” “village-style zoning" “green building,” “mixed use” development, “mixed-income housing,” and other approaches that would delight any green-leaning city planner — and rile up any red-blooded Tea Partier.

Environmental activists still found plenty to criticize in Romney’s approach to land use and development, but many greens and smart-growth advocates were pleasantly surprised, at least in the first half of Romney’s term. In 2006, the U.S. EPA gave Massachusetts’ Office for Commonwealth Development its National Award for Smart Growth Achievement.

There are several parallels between Romney’s state program and the current federal program:

Just as Romney’s Office for Commonwealth Development incentivized local communities to embrace smart growth by offering grants, so does the Partnership for Sustainable Communities. Since its launch, the partnership has helped to allocate about $3.5 billion in grants and other assistance to more than 700 communities that want to better coordinate housing, transportation, and economic-development projects and make neighborhoods more walkable, transit-accessible, and sustainable.

In fact Romney’s policies were smart growth oriented until his last year as Governor when he decided to quit the Regional Greenhouse Gas Initiative (RGGI):

 [I]n mid-December (2005) Romney abruptly pulled the state out (of the RGGI)— despite the fact that several staffers in his administration had spent two and a half years and more than half a million dollars negotiating and shaping the deal.

Romney had until (December of 2005) been an advocate and architect of RGGI, which includes a market-based trading system that will let big fossil-fuel power plants buy and sell the right to emit carbon dioxide. As recently as November (2005), he was publicly talking up the agreement: “I’m convinced it is good business,” he told a clean-energy conference in Boston. “We can effectively create incentives to help stimulate a sector of the economy and at the same time not kill jobs.”

So why did then Governor Romney pull out? It was about this time he considered running for the Republican 2008 nomination for President. 

So where does Romney stand now? He recently told several donors that he might eliminate HUD, the department his father headed during the Nixon administration. He has said the EPA under President Obama is “out of control.” Would he approach smart growth in a similar manner to health-care and argue that promoting smart growth at the state level makes sense while promoting it at the federal level is unconstitutional? Since the President’s smart growth policies mostly apply at the local level, applying the health care reasoning to the smart growth arena is not the same. 

Still people who worked with Romney are not sure of his real views. I will try to hazard a guess. Romney is a moderate Republican; in a few states he might qualify as a Democrat. He believes in smart growth, providing universal healthcare, reforming immigration, and is pro-choice. However, to become President his views have “evolved” to become more in line with the base of the Republican party. While he is not the first politician to switch his views to become more electable, he is pressing the limits of believability. 

The question is what happens after he is elected. Will his true opinions on smart growth shine through or will he take a politically popular path. And what happens if he is elected to a second term?

Much of the current opposition to smart growth has arisen as a result of a United Nations document titled Agenda 21. The non-binding agenda that came out of the 1992 Rio Earth Summit contains many policies that could be harmful to the United States. However similar to most other bad United Nations policies it has been ignored by most of the world and will likely continue to be ignored. Some in the tea party are making a mountain out of this molehill of a document. Neither Obama’s nor Romney’s policies are based on Agenda 21. In reality, they are based on smart growth dogma that is emotionally charged and largely factually unsubstantiated. Programs such as the Partnership for Sustainable Communities, applied indiscriminately with no regard for the differences between different places, are potentially more damaging to the United States in the long-term than any United Nations document. 

From a land use and transportation viewpoint, Romney’s policies may be little different than Obama’s policies. In some ways Obama is more believable because he actually believes in what he preaches. Romney preaches just to be elected. In transportation matters, President Obama has been one of the least effective Presidents in the last fifty years. The fact that Governor Romney may be little different is a depressing thought indeed.

Denver's RTD Abandons Tax Hike for FasTracks

Posted on April 25, 2012, 12:56pm | Harris Kenny

Monte Whaley of The Denver Post reports:

A FasTracks proposal to link commuters in the northwest Denver metro area to downtown is stalled after the Regional Transportation District (RTD) board of directors decided Tuesday night not to pursue a tax increase in November that would fund the idea.

All 12 members of the RTD board said the timing is wrong for any kind of tax hike—which would have gone for to all unfunded and partially funded corridors—and there still remains too many questions about the plan.

This vote shelves an ongoing conversation about solving surface transportation needs in the Denver metropolitan area. In this piece I highlight two motivating factors behind their decision, and offer three takeaways for what to expect moving forward.

First, for those unfamiliar, I outlined the context of this vote in a reason.org commentary last month:

In 2004 voters in Denver’s Northwest Corridor approved raising a regional 0.4 percent sales tax, generating $894.6 million to build a Commuter Rail Transit (CRT) line known as the Northwest Rail Line by 2017. The proposed 41-mile diesel, 7-station diesel-powered (non-electric light rail) CRT would start at Denver’s Union Station and would have stations in Westminster, Walnut Creek, Broomfield, Louisville, Boulder, Gunbarrel and Longmont. The Northwest Rail Line is one piece of a larger regional transit program known as FasTracks...

Overall FasTracks is a multi-billion dollar transit expansion program that aims to ultimately comprise of 122 miles of CRT and light rail, 18 miles of bus rapid transit (BRT) and 21,000 new complementary parking spaces across eight counties. When voters approved FasTracks it was projected to cost $4.7 billion - these estimates have proven to be totally inaccurate.

Fast forward to spring 2012: FasTracks costs ballooned from $4.7 up to $7.4 billion and the system is not expected to be complete until 2042. Last year alone FasTracks' system-wide capital costs increased by $968.3 million and eighty five percent of that increase came from the Northwest Rail Line. The RTD Board of Directors weighed four options for the Northwest Rail Line that all hinged on ballot placement, and voter approval, doubling the initial FasTracks regional sales tax from 0.4 percent up to 0.8 percent. They pursued—and ultimately abandoned—a hybrid option prepared by the RTD staff that would have provided supplemental BRT from Westminster to Longmont until CRT was complete.

The RTD Board of Directors essentially punted on making a decision by abandoning the tax hike for the hybrid option, and they were primarily motivated by two factors.

1. It's uncertain whether or not voters would approve a tax increase this fall. For example, last fall voters rejected Proposition 103, which would have collected an estimated $3 billion in tax revenue for education, by nearly 40 points. Gov. John Hickenlooper famously described the state of the electorate last fall saying, "There's no appetite for taxes anywhere, all over the state." In addition to their analysis and public outreach, RTD reportedly conducted telephone polling to gauge voter willingness to support a tax increase and they likely weren't encouraged by the results.
2. Several board members expressed concern over the ambiguity of the proposed hybrid option. Board member John Tayer was quoted in The Denver Post saying, "I will not support going forward... until we have a specific plan and a specific time frame."

This vote is only a temporary setback, as the Board explains in a press release:

RTD will continue to work aggressively to seek alternative funding sources for the program including grants, public-private partnerships and unsolicited proposals. The Board will continue to explore pursuing a sales and use tax election in the future when the time is right for the region.

There are three takeaways from this vote by the RTD Board of Directors.

1. It's only a matter of time before another revenue raising ballot measure is discussed for the Northwest Rail Line. Stakeholders along the corridor have expressed continued dismay over the fact that full service won't be provided until 2042 at the earliest.
2. This may open the door for more innovative alternatives. Initial cost and completion projections have been totally inaccurate throughout FasTracks with the exception of one aspect: the Eagle P3 Project. The Eagle P3 project is a 34-year design-build-finance-operate-maintain (DBFOM) public-private partnership signed with Denver Transit Partners in July 2010. As mentioned above, RTD has signaled willingness to pursue similar public-private partnerships in their efforts to complete the line. RTD currently evaluating an unsolicited proposal for rail along I-225. 
3. Finally, with more time, it's likely that officials will be convinced of the merits of BRT. A recently launched global database on BRT systems demonstrates their efficacy in 134 cities around the world carrying over 22.4 million passengers daily. U.S. BRT leaders include New York City, Pittsburgh and Boston. The Board considered BRT prior to choosing the hybrid option. Compared to the CRT option, the BRT option would have offered: an earlier competion date, more frequent on-peak and off-peak service and more frequent stops; while offering comparable travel times, costing half as much in the short run and requiring lower annual operation and maintenance costs in the long run.

This project is one to watch in the coming months and years ahead because RTD has signaled interest in the types of innovative alternatives that would meaningfully address the Denver metropolitan area's surface transportation needs—before 2042 and beyond.

For more on the Northwest Rail Line and FasTracks, see my previous posts here and here.

Privatization and Public-Private Partnership Trends in Local Government in 2011

Posted on April 25, 2012, 12:00am | Harris Kenny

The rollout of Reason Foundation's Annual Privatization Report 2011 continues today with the local government section, which provides an overview of the latest on privatization and public-private partnerships at the local level. Highlights include:

• 57 percent of city finance officers report their cities were less able to meet their financial needs in 2011 than in 2010 while general city revenues declined for the fifth straight year, according to the National League of Cities. This “new normal” fiscal condition is hitting local governments across the U.S. that continue to feel the squeeze of the prolonged economic downturn.
• Chicago Mayor Rahm Emanuel, and former White House Chief of Staff to President Obama, hit the ground running during his first year in office. He implemented managed competition for the city’s Blue Cart recycling program allowing private companies to compete with the public sector, the move is projected to provide Chicagoans cost-savings exceeding 50 percent. The city began outsourcing the water bill call center in summer 2011 and is considering outsourcing the collection of city ambulance fees to improve collection rates.
• Parking assets remain the hot item in local government privatization. Chicago and Indianapolis are realizing substantial gains from their reforms and were joined in 2011 by a host of cities (such as New York, Pittsburgh, Sacramento, Memphis and Harrisburg) that are considering similar efforts.
• San Diego, California is finally implementing the managed competition mandate approved by voters in 2006. City employees won bids for the Publishing Services Department and Fleet Services Division, with new contracts expected to save y 30 percent ($5.2 million) and 13 percent ($22 million) respectively over the separate five-year contracts. Officials are also exploring street sweeping services, utilities call centers, street and sidewalk maintenance and landfill operations.
• Toronto Mayor Rob Ford championed efforts to privatize trash collection in District 2 could save residents anywhere from $35-$92 million over the course of the seven-year contract. Half the city’s trash collection is now provided by the private sector, allowing for cost and service comparison before further privatization.
• New mayors in Tulsa and Jacksonville have quickly moved to apply competitive forces to public service delivery. In Tulsa, Mayor Dewey Bartlett is implementing 1,134 strategic opportunities compiled by KPMG to realize cost savings, enhance revenue collection and improve efficiency. In Jacksonville, Mayor Alvin Brown appointed a new public-private partnership commissioner who will oversee a wide range of streamlining initiatives.
• Contract cities in Georgia continue evolve, with the latest improvement coming in the form split service contracts that saved taxpayers almost 30 percent, or over $7 million, in Sandy Springs for example.
• A 2011 survey conducted by American University found that 93 percent of city officials support government contracting with the private sector, and 63 believe that most public agencies do a good job at contract management.
• Jefferson County, Alabama filed the largest government bankruptcy in American history. The county held approximately $4.23 billion in debt owed to more than 5,000 creditors that traced back to a 1996 federal judge ruling that obligated the county to rebuild its sewer system.

» Annual Privatization Report 2011: Local Government [pdf, 1.7 MB]

» Complete Annual Privatization Report 2011 homepage

New at Reason: Review of Federal Privatization Issues in 2011 and Today

Posted on April 23, 2012, 11:59pm | Leonard Gilroy and Harris Kenny

The rollout of Reason Foundation's Annual Privatization Report 2011 begins today with the release of the Federal Government Privatization section, authored by Reason's Adam Summers and Anthony Randazzo. This section of Reason Foundation's Annual Privatization Report 2011 provides an overview of the latest federal insourcing, housing finance, private spaceflight and other news on privatization and public-private partnerships in the federal government. Topics include:

• The ongoing dispute over what constitutes “inherently governmental” functions continued in 2011, and new Obama administration regulations could undermine federal outsourcing policy standards dating back to 1955.
• Regulators implementing the Dodd-Frank Act are creating significant risk for both mortgage investors and securitizers and appear likely to undercut the private mortgage industry while benefitting government mortgage providers. 
• In 2011, Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) combined to purchase or guarantee 95 percent of all new mortgages in America with some mortgages worth as much as $729,750. Every one of these mortgages is backed by taxpayer money.
• Federal agencies, under the encouragement of President Obama, are expected to generate nearly $13 billion in cost savings from asset divestiture, $9.8 billion of which comes form the Department of Defense’s Base Realignment and Closure (BRAC) efforts.
• The federal government owns approximately 1.2 million properties that cost $20 billion a year to maintain. Recent Congressional efforts to pass a Civil Property Realignment Act could save as much as $15 billion, according to the Office of Management and Budget.

» Annual Privatization Report 2011: Federal Government Privatization [pdf, 1.9 MB]

» Complete Annual Privatization Report 2011

Midtown Tunnel Could Die Without Tolls

Posted on April 16, 2012, 6:00am | Baruch Feigenbaum

Recently, in a column originally published by the Jefferson Policy Journal, my colleague Len Gilroy and I detailed the importance of moving forward with the Midtown Tunnel extension in the Hampton Roads area. 

Despite the U.S. Department of Transportation providing a $422 million loan for the Midtown Tunnel project and Skanska Announcing the official financial close for the project, Hampton Roads area officials seem bent on delaying or cancelling the proposed public-private partnership (PPP) for the $2.1 billion Midtown Tunnel expansion. 

More stringent fuel efficiency mandates and inflation have been yielding diminishing returns for federal and state gas taxes in recent decades. There is a consensus among economists, state transportation agencies and other experts that it’s a matter of when, not if, we make a dramatic shift away from gas taxes to other more direct and financially sustainable types of user fees, such as tolls. Additionally, Tolls are fairer than taxes, as those who benefit from the tolled facility pay for it as they use it.

But after years in the making, some Hampton Roads area pols have cynically stepped in at the last minute to undermine the Midtown deal, holding the state budget process hostage for more state transportation money so they can lower planned local tolls.

The Midtown PPP illustrates well the sorts of PPP benefits now in jeopardy. First, PPPs expand the funding pool by allowing governments to tap into new sources of capital not typically used in traditional tax- or debt-funded transportation projects. Second, a PPP provides the only viable method to finance new road capacity in the Midtown Tunnel. The new tunnel will also improve the frequency and reliability of bus service. Finally, PPPs transfer key project risks to the private sector and away from taxpayers. This is in contrast with traditional infrastructure projects where government sponsors shoulder most project delivery and operational risks.

Attacking the Midtown Tunnel PPP will do nothing for the region but make the project more costly and forestall needed congestion relief. The full commentary is available here.

Denver’s RTD Publishes 2011 Report on FasTracks

Posted on April 15, 2012, 5:56pm | Harris Kenny

Every year Denver’s Regional Transportation District (RTD) publishes a report detailing ongoing rapid transit projects within the boundaries of the Denver Regional Council of Governments (DRCOG). RTD’s largest project is FasTracks, a multimodal, multi-billion dollar transit expansion program that aims to ultimately comprise of 122 miles of commuter rail transit (CRT) and light rail, 18 miles of bus rapid transit (BRT) and 21,000 new complementary parking spaces across eight counties.

When Denver-area voters approved FasTracks in 2004 the system was slated to cost $4.7 billion and be complete by 2017. RTD has been unable to finish FasTracks on budget or on time. The report notes that overall costs increased from $4.7 billion in 2004 up to approximately $7.4 billion in early 2012. All other things unchanged, the system won’t be done until 2042. So, what’s next?

Last week RTD published its 2011 Annual Report to DRCOG on FasTracks. For a detailed system-wide update by region, see the full report available online here. The report includes an RTD map with a comprehensive view of the system:

FasTracks Plan, Rapid Transit Lines

Source: Regional Transportation District, 2011 Annual Report to DRCOG on FasTracks, April 3, 2012.

While the system is large, the Northwest Corridor has been at the center of the conversation over the past six months. RTD is asking DRCOG to approve a new option that would double the original regional 0.4% sales and use tax along the Northwest Corridor to generate more revenue for FasTracks. This option would expedite portions of rail construction and provide intermediary BRT service until rail is complete. Ultimately RTD hopes to complete the Northwest Rail Line out to Longmont, and estimates they will initiate construction and begin revenue service between 2026-2032. If DRCOG approves this option, then RTD will begin the process of placing the initiative on the November 2012 ballot.

For more on FasTracks see my previous reason.org commentary, "Denver’s RTD Weighing Options for Northwest Corridor."

Washington's Road to Economic Decline

Posted on April 12, 2012, 4:55pm | Adrian Moore

I have a column up at Real Clear Markets today about the "long history of bi-partisan bonehead thinking on Capitol Hill about transportation, jobs and the economy."

It is no surprise that in an economic slump, or any other time really, politicians would focus on the jobs "created" by transportation spending. Leaving aside the flawed logic that taking money from one group of people to fund work by others in any real way "creates" jobs. The stopgap transportation bill is a poster child for how Washington has long been thinking about transportation, which explains the decisions it has made that have undermined economic growth in the United States.

I go on to explain how transportation infrastructure really effects the economy, with some emphasis on how disastrous is our federal, state and local government's decisions to allow congestion to continue growing. I conclude:

Our economy needs an oil change in the form of revamping transportation policy to focus on providing an effective transportation system that fuels economic growth rather than political ambitions and the creation of jobs "immediately," as Rep. Pelosi put it. Two years ago, a colleague and I sketched out in some detail what a more effective highway trust fund reform would look like. The most important things we focused on were transportation investments that maximize transportation benefits and mobility, and funding transportation with user fees, not taxes. Our economy depends too much on effective transportation for it to be a political pony to ride.

Read the whole thing here.

China Can Use Market-Based Solutions for its Congestion Problems

Posted on April 12, 2012, 11:25am | Baruch Feigenbaum

According to a recent article in The Atlantic the car has replaced the bike in the streets of Beijing:

Today the cars have taken over. In fact, Beijing more and more is just another traffic-clogged city with Chinese characteristics. Its bike lanes are rapidly filling with parked cars, auto rickshaws spewing exhaust, and strolling pedestrians.

To many Chinese, bikes are now for losers. The iconic Beijing bicycle is a sorry one-gear affair with a metal basket on the front which breaks so regularly that every street corner seems to have a makeshift fix-it stand.

"There is a quote: ‘I would rather cry in a BMW than smile on a bike,'" says Jinhua Zhao, an urban planning professor at the University of British Columbia who's conducting a study of cycling in Beijing. He’s found that bicycle use in Beijing has dropped from about 60 percent in 1986 to 17 percent in 2010. At the same time, car use has grown 15 percent a year for the last ten years. 

This has caused some bicycle advocates to start waxing poetic: 

The loss of a bike culture is a shame, says Shannon Bufton, the Australian-born founder of an NGO called Smarter Than Car. "It’s like Venice and gondolas. They go together, Beijing and the bike," he says. 

Chinese consumers buy automobiles for the same reasons that American consumers buy them: a growing middle class and urbanization. Over the last ten years more than 300 million Chinese have moved into the middle class. Contrast that with the 310 million people in all of the United States. According to Forbes, by 2030 China will have 1.4 billion middle class consumers compared with 365 million in the U.S. and 414 million in Europe. China’s demand-driven economy is creating a middle class, something most U.S. policy analysts believe is a positive. This large American middle class is one reason that the U.S. has such a strong economy.

As recently as 1985 no more than 20 percent of all Chinese lived in cities. By 2005, the number had climbed to 50%. By 2045, it may reach 75%. 

With more cars comes more congestion. The congestion and the resulting pollution are real problems, but ultimately solvable. China has tried conventional big government solutions to fix its problem without much success. During the 2008 Olympics, its 50,000 rental bikes sat largely unused at kiosks. China’s policy of blocking drivers from entering Beijing one day a week has not reduced congestion. Limiting registrations for new cars and imposing strict driving time restrictions on car owners have proven more successful. But at what cost? Draconian government restrictions limit China’s demand-driven economy 

Building new highways is part of the solution, but it is no panacea either. Beijing is expected to have 7,000,000 drivers by 2015. Each day an average of 1,900 new vehicles enter the capital city. And while seven new highways beginning in Beijing will be constructed by 2015, they will likely only be a short-term solution to the congestion problem. 

China can solve the problem by implementing market-based solutions. For example, single-occupant vehicles could be required to pay a small fee to use a stretch of highway and vehicles with three or more occupants could use the highway for free. Buses can use special express lanes to take a guaranteed congestion-free trip throughout the city. Major arterials could have queue jumpers that allow commuters to pay a modest price to avoid congestion.

Market-based solutions can be implemented on transit as well. To reduce crowding, Beijing’s metro can charge different prices based on the level of congestion. The most popular travel times would have the highest prices. Off-peak hours would have a lower price. The country could use the resulting funds to build new train lines or add extra trains during the most popular hours. If the transit commute was faster and more reliable additional commuters might use it. Pricing also encourages some travelers to make their trip to work slightly earlier or later.

China’s economy is creating a large number of middle-class employees. And these employees are using their wealth to buy automobiles in record numbers. However, arbitrary regulations that do little to reduce congestion are not the solution. And pining for the good-old-days when everybody commuted by bicycle and lived in the lower class won’t help either. China is embracing its own version of Capitalism at a record pace. It is time for the country to use market-based pricing to start solving its congestion issues.

DOT OIG Uncovers Financial Mismanagement in TIGER Grants

Posted on April 11, 2012, 9:38pm | Baruch Feigenbaum

The Office of Inspector General (OIG) of the Department of Transportation has uncovered financial management problems in a significant number of the TIGER stimulus programs. Inspector General Calvin Scovel detailed some of these problems in last week’s testimony before the House Subcommittee on Transportation, Housing and Urban Development.

According to The Fiscal Times:

But federal investigators have uncovered widespread financial management problems with many of the projects. As of early March, federal authorities were investigating 66 cases of alleged false statements, bid rigging, fraud and embezzlement, according to a report by Calvin L. Scovel III, the Department of Transportation’s inspector general. Justice Department lawyers are scouring 47 of those cases for potential prosecution, according to Scovel.

Twenty-five of those cases involve alleged fraud by minority-owned or operated enterprises that received preferential treatment in the awarding of the contracts, while 22 involve allegations of false claims. Investigators are also looking into nine cases of alleged violations of the prevailing wage law, three involving corruption and one case involving embezzlement, according to a report Scovel presented to the House transportation appropriations subcommittee on March 29. A spokesman for Scovel’s office declined to provide further details of the ongoing investigation, but stressed, “We take very seriously any allegations of waste, fraud, abuse or violations of the law.”

The section is part of a larger report on DOT management practices where OIG studied effective stewardship of the department’s resources and enhancing aviation, surface, and pipeline safety. The report states that a number of, “Ongoing and emerging management challenges remain.” The full report is available here. 

Among the findings, FHWA has not yet enhanced the local public agency program that managed projects overseen by cities, counties, and other local entities. The OIG found “persistent risks” including insufficient state oversight, non-compliance with federal labor requirements, and improper processing of contract changes. FTA directed a significant amount of funding to major projects, which had not been adequately monitored. For example, the department awarded $423 million to the Fulton Street project, which “had experienced significant cost increases and delay.” Meanwhile FRA and MARAD are still implementing oversight practices for grants some two years after the first grants were awarded.

The agency should have expected problems with the TIGER Grants. Any new program, no matter how well designed, brings new opportunities for fraud. And the TIGER program was not well designed; the administration rushed to create it without implementing sufficient checks and oversight. Without additional monitors, the TIGER Grants Program could be a goldmine for corruption.

How can DOT solve these problems? First, FHWA should immediately create a task force to fix the local public agency program. This task force should include state and local agency heads and create interim deliverables and a full-report within a year that details how to improve management and cooperation of local governments. FTA should create a special review team to oversee large projects. The OIG indicated that large transit projects have the majority of problems; creation of a special team over the next six months to monitor only these projects should not be that expensive or difficult. FRA and MARAD need to implement review teams immediately. While resources are always constrained, it is inexcusable that the divisions have been awarding TIGER Grants for two years and still have not implemented oversight practices. If these two divisions have not implemented practices by this August, Congress should reduce the budget for these two divisions. 

Creating new discretionary spending programs is challenging. It is impossible to consider all of the implementation challenges and opportunities for fraud. One of the disadvantages of large government programs, including merit-based programs, is they bring out the crooks. Grant programs need to be created methodically. While the Obama Administration wanted to create its program quickly for economic reasons, a more deliberate creation process would have yielded more benefits and less fraud. Hopefully, future discretionary grant program creators will take note and work to prevent some of the problems of the TIGER grants in any new program.

Ybarra and Gilroy in Virginian-Pilot: Midtown Tunnel PPP needs to move ahead

Posted on April 11, 2012, 3:31pm | Leonard Gilroy

My Reason Foundation colleague Shirley Ybarra and I have a new op-ed in today's Virginian-Pilot on why the current political gamesmanship over Midtown Tunnel PPP is counterproductive, why it's the most viable path forward to reduce congestion in the Hampton Roads region, and why other states are using similar tolling and public-private partnership strategies to supplement the increasingly insufficient gas tax to get needed projects built.

Here's an excerpt:

Many local officials are trying to delay the $2.1 billion expansion of the Midtown Tunnel. Some are worried about the expected toll rates. Others want the government to build it. It is this never-ending political gamesmanship and short-term thinking that make building critical infrastructure so difficult.

Freeways aren't free. And neither are tunnels.

The possibility of a $1.84 toll for the tunnel during rush hour reflects the costs of building and maintaining this important project. Legislators and pundits suggesting that the government should raise gas taxes and build the tunnel are fooling themselves. Drivers are not about to embrace a 10-cent a gallon, or higher, increase in the gas tax they'll feel every time they go to the pump.

A national Reason-Rupe poll of 1,200 Americans asked voters if they'd rather pay for new transportation projects through higher gas taxes or pay tolls when they use new roads.

Fifty-eight percent of Americans said new roads should be funded by tolls, while just 28 percent said new road capacity should be paid for by tax increases. A whopping 77 percent said they'd oppose raising the federal gas tax.

And let's not forget that Hampton Roads voters shot down a one-cent sales tax increase for transportation at the ballot in 2002, just as Northern Virginia voters did with their proposed half-cent sales tax increase.

More importantly, the gas tax is no longer a viable way to pay for major projects. Cars keep getting better mileage per gallon, which means the tax delivers less and less to government coffers. That Toyota Prius is racking up the mileage on roads while paying less in gas taxes thanks to its fuel efficiency. In fact, electric car owners, like those driving Nissan Leafs, will cause wear and tear on roads while never paying the gas tax.

The government has been promoting and mandating fuel efficiency for decades. As a result, gas tax revenue is dwindling.

Unless the state and feds want to reverse course by banning fuel-efficient and electric cars and mandating Hummers, it's time to face facts: The United States and Virginia need a new long-term, sustainable funding source for transportation. User fees and tolls are the fairest, most equitable way to do that.

The Midtown Tunnel public-private partnership is a great example of why that's the case. The region and state are expected to put in $362 million to build a $2.1 billion project. It is a project Virginia and Hampton Roads simply cannot afford on their own. [...]

Continue reading the rest of the commentary here.

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