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Reason Foundation

Surface Transportation Innovations # 39

Topics include: new evidence questioning "induced demand;" concessions advancing, along with the backlash; Bus Rapid Transit in Latin America; learning about Europe's tunnels; resisting transportation earmarks; and other news.

Robert Poole
January 1, 2007

In this issue:


New Evidence Questions the Reality of "Induced Demand"

It is widely believed, both by editorial writers and reporters and by many transportation professionals, that adding to urban roadway capacity is a counterproductive approach to dealing with traffic congestion. The underlying idea is that of "induced demand"—specifically, that if you add more lanes to a congested freeway, in a few years they will just fill up and you’ll be back where you started with a congested freeway—minus a billion dollars.

Actual evidence for induced demand of that magnitude has always been rather slim. Some careful studies have showed that in many cases we do see trips that had previously shifted to parallel arterials moving back to the freeway when new capacity is added—but of course, that has the effect of reducing arterial congestion. There is also the question of how much suppressed demand has built up over the years, if capacity additions have been put off for decades while trip-making continued to grow. It’s conceivable that modest capacity additions, in that situation, would indeed fill up quickly because the new capacity was only a fraction of the catch-up amount needed.

But last month saw the release of an important new study by the Conference Board of Canada, looking into this question using the most comprehensive data on vehicle ownership and use in Canada. The study ("Build It and Will They Drive? Modeling Light-Duty Vehicle Travel Demand," by Greg Hoover and Michael Burt) describes the creation and use of an econometric model, in which various socio-economic variables were tested as determinants of travel demand. The single largest factor was found to be population density, and the second was the number of vehicles per person of driving age. Other important factors were population growth and real per capita disposable income. The amount of lane-kilometers per capita turned out to be a very minor factor. The model found only a weak relationship, whose significance was too low (outside the 80% co nfidence level) to be included in an econometric model.

In a summary of the findings, the Conference Board noted that the results "challenge the widely held view that expanding roads and highways inevitably leads to more traffic and greenhouse gas emissions. The Conference Board research shows that building roads and highways at a rate that matches the growth in the driving-age population does not significantly increase road usage by motorists." Far more important to the extent of driving is where people live, so the report supports increases in urban density and the use of congestion tolls.

In fact, the report ends up recommending both road pricing and capacity additions as the best way forward: "Improvements to physical infrastructure are also [in addition to pricing] very effective at improving traffic flow and eliminating 'wasted' GHGs [greenhouse gases]. Given the absence of induced travel if lane-kilometers grow at the same rate as the population of driving age, expanding the capacity of the road network becomes part of a comprehensive strategy to improve the efficiency of the transportation network."

You can download the report from www.e-library.ca.

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Concessions Keep Advancing—But Now Comes the Backlash

The last few months have been happy times for those who've concluded that long-term toll concessions will be a crucial ingredient in developing a 21st-century highway system. The possible long-term leases of the Illinois State Toll Highway system, the Pennsylvania Turnpike, and the New Jersey Turnpike system have gotten most of the recent headlines. But in parallel (and far more important for the longer-term, in my view), plans by state DOTs to use concessions for major new toll projects keep popping up in Georgia, Florida, Indiana, Texas, and Virginia. In Florida and Texas, it is becoming almost standard practice to consider long-term concessions for most or all major new toll road or toll-lane projects.

Earlier this month, as part of its new Congestion Initiative, the U.S. DOT released a "working draft" of its promised model state enabling legislation for public-private partnerships (PPPs). As expected, it has drawn from the best practices of states like Texas and Virginia that have had successful PPP enabling acts in place the longest, and have seen the private sector come forth with billions of dollars in proposals for new toll projects. On my first reading, it looks pretty solid—and non-controversial.

But apparently not everyone sees it that way. The day after the draft was released, I got a call from CNN asking to interview me about the subject of toll road privatization, triggered by the DOT release. They would tape an interview and use portions as part of the report that very night . . . on the Lou Dobbs program. I should have known better, since I happened to see a December segment of this show, with Dobbs ranting and raving about the possible "sale" of the Pennsylvania Turnpike to "foreigners." But I figured, they have asked for my views, and maybe I can do some good. So I taped about six minutes of pretty straightforward Q&A with Dobbs' reporter Lisa Sylvester, covering all the usual points that I've been discussing with reporters just about weekly for the past year. At the end, she even asked if there was anything else I'd like to add, so I explained (recalling the earlier Dobbs segment) that for those concerned about the "outsourcing of America"—meaning the shift of U.S. investment and jobs overseas—the lease of U.S. toll roads to global companies was exactly the opposite. It’s "insourcing"—attracting billions of dollars in foreign investment here, to create jobs by expanding and modernizing our highway system.

Needless to say, neither that line nor any of my other points responding to critics of toll road PPPs were shown; all they used was three sentences about why people are frustrated by congestion and the inability of the status quo to make large new investments. The other two "experts" interviewed were Rep. Peter DeFazio (D, OR)—who falsely claimed that such PPP agreements and model legislation would give private companies the power of eminent domain and unlimited ability to raise tolls (I’d answered those claims)—and a spokesman for the organization of truck owner-drivers, who simply ranted.

A few weeks earlier, the leftist magazine Mother Jones carried a major feature story attacking toll road concessions, "The Highwaymen," by Daniel Schulman and James Ridgeway. It gave DeFazio plenty of space to make his critique, and even quoted Ralph Nader in opposition (though in fairness, Schulman interviewed me at some length, along with DOT's Tyler Duvall and Goldman Sachs's Mark Florian). The article also accepted at face value the flawed financial critiques of Dennis Enright, which I addressed in my May 2006 Public Works Financing column (email me if you want a copy).

It seems likely that the new Democratic majority in Congress will hold hearings into toll road concessions. When they do, I hope they will invite prominent Democrats like former Congressman Dick Gephardt, former California Treasurer Kathleen Brown, Chicago Mayor Richard Daley, New Jersey Governor Jon Corzine, and Pennsylvania Governor Ed Rendell, all of whom seem to agree that toll road concessions are an important good-government innovation.

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Bus Rapid Transit: It's Not Just for Latin America

Back in the mid-1990s, when I was part of an informal coalition (including professors from UCLA and USC and the [Marxist] Bus Riders Union) opposing the Los Angeles subway, everyone from Mayor Riordan on down got excited over the extensive bus rapid transit (BRT) system of Curitiba, Brazil. A whole group of prominent Angelenos toured Curitiba, marveling at this system of over 1,200 buses, providing nine different types of service, including rail-like Express Service on 50 miles of dedicated busway. The entire 50-mile busway subsystem cost only $45 million, a small fraction of a proposed (but not built) subway that would have cost $96-113 million per mile.

More recently, considerable attention has been focused on the much newer TransMilenio BRT system in Bogota, Colombia. The master plan calls for an eventual 241 route miles, with the first two phases, now in operation, totaling 40 miles. The system already carries (by early 2006) over a million passengers per day, according to a May 2006 report from the Center for Urban Transportation Research (CUTR) at the University of South Florida. Phases 1 and 2 cost a total of $785 million, an average of less than $20 million per mile. The report points out that the projected cost of the entire 241-mile system--$3.32 billion—is about the same as a that of an 18-mile rail system proposed in 1997 for $3.04 billion. The CUTR report, "Applicability of Bogota's TransMilenio BRT System to the United States," acknowledges that Bogota differs in many ways from large U.S. metro areas. But it makes the case that the vastly superior cost-effectiveness of BRT compared with rail means that a much larger BRT system could be provided in a given city for the same total investment.

Given the high visibility of the Bogota and Curitiba systems, it's not surprising that they have come under attack from some quarters. A friend recently sent me a link to an article in Sustainable Transport, the journal of the Institute for Transportation & Development Policy (www.itdp.org). The title tells the story: "Rail Interests Target Bogota and Curitiba." Author Oscr Edmundo Diaz describes the "powerful lobbying efforts to build a metro in Bogota and Curitiba." It goes on to provide details of how rail proponents are seizing on any operational hiccups to argue that BRT can never deliver the servi ce that heavy-rail systems offer (but neglecting to address the at least 10 times higher cost per mile of such systems).

Getting back to the U.S. situation, we are certainly a more affluent country than Brazil or Colombia. But as we learned in Econ 101, resources are always limited. If you have $1 billion available for urban transit, if you spend it on option A, it's not available to spend on option B. So even in our affluent country, it makes sense to look at how much transportation you get for each billion spent. In the 2005 Reason study on what we dubbed "Virtual Exclusive Busways," Ted Balaker and I did a back-of-the-envelope comparison of light rail, heavy rail, and BRT-on-priced lanes systems for large urban areas. From our previous work on HOT Networks, we'd estimated the costs of approximately 500 lane-mile (250 route-mile) HOT Net works in specific cities at from $3.5 to $6.8 billion, with an average of $5.4 billion. Data from FTA's recent New Starts projects gave us the capital cost per route-mile for nine light rail and three heavy rail systems. Using those numbers to estimate the cost of 250 route-mile systems gave us an average of $31 billion for light rail and $38.5 billion for heavy rail. Thus, a network of priced lanes that functioned as the virtual equivalent of exclusive busways would cost only 17% as much as an equivalent-size light rail system and only 14% as much as a heavy rail system.

Thus, while the comparison between BRT and rail is not quite as dramatic as in Bogota and Curitiba, the same general principle holds. You get a log more bang for the buck with BRT on exclusive or virtually exclusive lanes.

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Learning About Tunnels from Europe

In recent policy papers focusing on Atlanta and Southern California, several of the innovative highway capacity solutions my colleagues and I have proposed included large-scale highway tunnels. These ideas didn't emerge from a vacuum. Rather, they were inspired by multi-billion dollar urban toll tunnel projects (done as long-term concessions) in places like Paris, Madrid, Sydney, and Melbourne. Yet because of the fiasco represented by Boston's (non-toll, non-concession) Big Dig, urban tunnels are having difficulty gaining acceptance among U.S. transportation planners.

That's why I'm pleased to tell you about the report of a study tour of European transportation tunneling, sponsored by the Federal Highway Administration. "Underground Transportation Systems in Europe: Safety, Operations, and Emergency Response—June 2006" is the report (www.international.fhwa.dot.gov/uts/index.htm).

The 11-member team toured tunnels and interviewed officials in Denmark, France, Norway, Sweden, and Switzerland in autumn 2005. Their report found much that could be adapted to this country, including the development of AASHTO guidelines for transportation tunnels, more research on incident-detection and response systems, better signage and procedures for escape routes, and better design features for optimal driver performance. The report cites the $2 billion A86 toll tunnel outside Paris as an example, for its full-size mockup used to test alternative visual treatments and other m otorist-friendly design features, and the use of LED edge-lighting systems in European tunnels to mark the pavement edges.

I think roadway tunnels have a key role to play in adding much-needed capacity to congested urban freeway systems—filling in missing links, providing previously inconceivable parallel routes, and perhaps putting certain existing freeway routes underground, to reclaim very valuable urban-core land (whose value could help pay for the project, unlike in Boston). Value-priced tolling and long-term concessions will be critically important for such tunnels: the former to keep them uncongested while raising a major portion of their capital cost and the latter to shift much of the risk from taxpayers (as with the Big Dig) to sophisticated investors.

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Making the Case Against Earmarks

The first time I got involved with the issue of earmarks in federal transportation bills was back in 1997, when the Mack-Kasich bill proposed devolving nearly all of the federal program to the states. The year before, California Gov. Pete Wilson's Commission on Transportation Investment, on which I'd served, had endorsed devolution, and Caltrans was lobbying in support of that position. One of the arguments Caltrans staff developed was the alarming (even then!) growth in earmarking by members of Congress. What I learned then was that this process greatly distorts the allocation of transportation resources within states. When a Congress member earmarks $X million for Project ABC, that's almost always just a small portion of the total cost of that project. So not only is this project elevated in priority, generally way ahead of projects that the state's own prioritization process has judged to be more cos t-beneficial. In addition, the earmarking means the state DOT has to raid other projects to come up with the rest of the money to implement Project ABC.

That's why, with the quantum leap in earmarking in the most recent reauthorization, I was delighted to see this issue on the front page of the Wall Street Journal the day after Christmas. Profiled there was Colorado DOT director Tom Norton's battle against earmarks for that state, on exactly the same grounds we were citing 10 years ago in California. The article cites as an example a $500,000 earmark in SAFETEA-LU to design a wildlife bridge over I-70. The earmark was authored by Sen. Wayne Allard (R, CO) and Rep. Mark Udall (D, CO). The bridge would cost nearly $10 million to build—money that would be taken away from projects that are actually on the state's prioritized list of projects.

The article notes that CDOT officials have written a memo to the new governor, "arguing that earmarks have so undermined the state's transportation planning process that the state needs a new system for allocating funds." And they plan a trip to Washington next month to make the case to Colorado lawmakers that earmarks distort the planning and resource-allocation process, with low-priority projects displacing higher-priority ones.

Bravo to CDOT for making this case, and thanks to the Wall Street Journal for giving it such prominent play.

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Quotable Quotes

"The service derived from the transportation network is mobility for citizens and businesses. Mobility is an enabler of economic growth, similar to monetary policy or public education. Congestion is a constraint to economic growth, the same as limited access to capital or raw materials."

--Greg Hoover and Michael Burt in "Build It and Will They Drive?" Conference Board of Canada, December 2006

"Why do we spend 18 months at public hearings, meetings, and planning sessions to put together our statewide plan if Congress is going to earmark projects that displace our priorities?"

--Heather Copp, chief financial officer, Colorado DOT, Wall Street Journal, Dec. 26, 2006.

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News Notes

FTA Counts HOT Lane Conversions for Transit. In a Federal Register announcement on January 11th, the Federal Transit Administration published a final version of its new policy concerning the status of HOV lanes that are converted to HOT lanes. As long as certain conditions are complied with, these lanes can continue to be included in the total of "fixed guideway miles" in FTA's funding formulas. That removes a possible barrier to such conversions, by metro areas that had feared a reduction in transit funding if those lanes were no longer considered as transit guideways. Unfortunately, FTA rejected proposals from 18 of us that it should count new HOT lanes, as well as conversions from HOV, as fixed guideway miles, as long as transit bus service is provided on the new HOT lanes. FTA argued that if it did that, and had only the same total funding available, it would shift the distribution of that funding. It passed the buck to Congress to consider that issue.

BC Makes PPPs the First Resort for Infrastructure. British Columbia Premier Gordon Campbell announced a new infrastructure policy last fall. From now on, he told a municipal officials' conference, public-private partnerships (called P3s in Canada) will be the base case for all infrastructure projects over C$20 million, unless Partnerships BC (the P3 agency) says there's a good reason to do otherwise. In his speech, Campbell mentioned several specific projects, including a section of the Trans-Canada Highway and a truck bypass highway in the South Fraser area. (Source: Public Works Financing, November 2006).

New York's PPP Symposium. Last year New York State held its first symposium on public-private partnerships for transportation infrastructure, very possibly laying the groundwork for PPP enabling legislation this year. The proceedings have now been posted on-line at: www.nysdot.gov/portal/page/portal/main/partnerships/repository/proceedings.pdf

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Speaking Engagements

My usual hectic schedule of taking part in transportation conferences is off to a rousing start this month. Next week's huge Transportation Research Board Annual Meeting in Washington, DC has me giving presentations on two panels:

In February, I address the (invitation-only) meeting of the Bastiat Society in Charleston, SC on the 7th. And on Feb. 23 I speak on the future of PPP toll roads on the second day of the 3rd Annual PPP USA Summit, in Washington, DC.

In March, I will be in San Diego for the Institute of Transportation Engineers Technical Conference. My topic, for a panel on road pricing on March 27 and a forthcoming ITE paper, is "Pricing and Fiscal Implications of Different Approaches to HOT Lanes."

I hope to see you at one or more of these events.

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


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