In this issue:
- Infrastructure funds alive and well
- Comparing modes on energy and emissions
- New book: Mobility First
- Progress on truck toll lanes
- Clean diesel locomotives
- Caltrans rapid repair
- Upcoming Conferences
- News Notes
- Quotable Quotes
One of the questions I've been asked repeatedly over the past two months is whether private capital is still interested in investing in infrastructure projects such as toll roads. Broadly speaking, the answer is a definite yes. As the global financial markets go through a massive credit crunch, one of the few categories in which there is increasing interest in investing is revenue-producing infrastructure. Let me give you some supporting information for that statement.
First, I have spoken at two invitation-only conferences for infrastructure investors during the past two months. In both cases, the general sentiment was the same: that while debt is going to be more expensive and more conservatively invested, it will definitely be available for good projects. What will change is the leverage in these deals. Instead of debt/equity ratios of, say, 80/20 or 70/30 pre-crisis, going forward we will see much larger percentages of equity, at least in the near term.
Second, there is strong evidence that the major providers of equity-infrastructure investment funds, insurance companies, and pension funds-continue to be strongly interested in infrastructure. Probitas Partners, whose 2007 survey of this area I reported on last year, last month released a follow-up survey of institutional investors. They find that over $21 billion was raised for infrastructure funds in the first nine months of 2008, "a pace that falls just short of 2007's record fundraising but an amount already in excess of the 2006 total." Probitas reports a high level of interest in the infrastructure sector, generally considered a separate category by such investors, with stable and increasing allocations to this sector. And 28% of respondents said their allocations are likely to increase, compared with only 5% expecting to decrease. An appendix to the report li sts large infrastructure funds already in the market or expected to come to market over the next 12 months. The total in these funds is $93.7 billion, at current exchange rates (some are quoted in Euros or British pounds). So even at a 50/50 debt/equity ratio, these equity funds could support nearly $200 billion worth of infrastructure projects.
Also appearing in October was the 18th annual Public Works Financing survey of public-private partnerships in infrastructure, including roads, rail, water, and buildings. Since 1985, according to PWF's database, over $585 billion has been invested in such projects, of which 500 highway projects (mostly toll roads) account for $265 billion. Just over half of these road projects ($136 billion) are in Europe, with a rather paltry $14 billion in the United States thus far. There continues to be great interest in the potential of the U.S. market, given the huge difference between existing highway funding sources and the need for capital investment.
Thus, I was hardly surprised by recent headlines such as "UBS Infrastructure Fund is a Hit" (Wall Street Journal, Nov. 3, 2008) and "New York City Comptroller Eyes Infrastructure Funds Investment" (The Bond Buyer, Oct. 22, 2008).
The challenge for policymakers going forward is to make sure they craft state and federal policies that welcome this much-needed investment.
As transportation energy use and greenhouse gas (GHG) emissions rise higher on the policy agenda, all sorts of claims are being thrown around as to which modes of transportation are "greener" or more energy-efficient. Since the consequences of bad choices could have huge implications for both personal mobility and goods movement, we really need good information on which to base policy decisions. Everything under the sun is being promoted as smart transportation by those who favor a particular mode, whether it's bicycles, short-sea shipping, or light rail transit. I've recently come across two studies that offer some useful data to help us sort these things out.
The first begins with a detailed spreadsheet on energy use and CO2 emissions for 15 urban transit modes. Most of the data come from the 2006 National Transit Database, with energy use (BTUs) and CO2 emissions calculated by the analyst from reported fuel use data. The data are for all transit agencies that report to the Federal Transit Administration. (http://americandreamcoalition.org/NTD06sum.xls). Analyst Randal O'Toole has drawn on this database for a recent Cato Institute paper titled "Does Rail Transit Save Energy or Reduce Greenhouse Gas Emissions?" (www.cato.org/pubs/pas/pa-615.pdf). In the paper, O'Toole compares BTUs and CO2 emissions per passenger mile for various transit modes, as well as current passenger cars. By far the worst performer is f erry boats (1.73 pounds CO2/passenger mile) and the best is the Toyota Prius (0.26). The current automobile fleet averages 0.54, light trucks (SUVs, pickups, etc.) average 0.69, and motor buses average 0.71. By contrast, light rail systems average 0.36, commuter rail 0.29, and heavy rail 0.25.
But before you jump to conclusions, you also need to do what O'Toole does in the paper and look at trends in modal emissions. New rail systems being planned today won't begin running till about 10 years from now, and will have about the same energy consumption as current ones. But fuel economy for autos and light trucks will be steadily improving over that time period, and much progress is also possible with hybrid-electric buses and biodiesel buses. We really need to do such calculations looking forward, not backward.
Another recent work takes a broader view of the subject, estimating full lifecycle energy and GHG impacts (though of a more limited number of modes). The authors are Mikhail Chester and Arpad Horvath of UC Berkeley. Their analysis includes five modes of transportation and 12 sample vehicles, including a Toyota Camry and a Boeing 747. By "lifecycle," the analysts mean the energy and GHG impacts of producing the vehicles and their infrastructure, as well as their operating and maintenance costs over their useful lives. Among the results:
- Urban buses during peak periods have the best energy and GHG performance, but are the worst performers during non-peaks, when they operate with very low passenger loads;
- Air travel is environmentally competitive with rail travel, and outperforms rail on these measures when aircraft load factors exceed 80% (as they have recently);
- Urban diesel buses are "greener" than rail systems (such as the Bay Area's BART) once infrastructure and other lifecycle effects are included.
This lifecycle analysis did not include future automobiles such as plug-in hybrids, or even conventionally fueled vehicles after the fleet turns over in response to the new federal CAFÉ requirements. So it's hard to tell what these comparisons would look life for, say, 2020 or 2030. This appears to be an ongoing project, so I'm looking forward to further analysis from these researchers.
Two years ago my Reason colleagues Ted Balaker and Sam Staley produced a short but powerful book, The Road More Traveled, about urban traffic congestion as a solvable problem. Now Staley and Reason vice president Adrian Moore (a member of the federal Infrastructure Finance Commission) have produced a follow-up volume called Mobility First. As one of the peer reviewers of this volume, I recommend it as a powerful contribution to the debate on what our 21st-century urban transportation system should be and do.
Their starting point is a critique of obsolete urban planning thinking that still envisions urban areas as mono-centric, with a large fraction of all jobs in a "central business district." While that model retains some relevance for a handful of U.S. metro areas (e.g., New York), it fails to capture the decentralized nature of the vast majority of our urbanized areas. Solutions that made sense for a 20th-century urban form won't cut it in the 21st-century, in which dramatically different land-use patterns and rising affluence put a premium on personal mobility and customized travel.
Staley and Moore call for rethinking both highways and transit, in this revised frame of reference, and they sketch out new kinds of networks which in many cases will facilitate both more-flexible transit and a new generation of personal vehicles. They also challenge the centralized 20th-century funding model as having largely outlived its usefulness, highlighting the benefits of both value-priced tolling and private capital investment to create their proposed new networks.
You can meet Sam Staley and get a preview of the book next week, if you are attending the 15th World Congress on ITS. The official release of the book takes place at the Javits Convention Center from 12:30 to 1:30 PM on Monday, Nov. 17th.
Mobility First: A New Vision for Transportation in a Globally Competitive 21st Century (224 pages) is published by Rowman & Littlefield at $27.95 and is available from Amazon.com.
In September I chaired a panel on truck-only toll lanes at the ARTBA Public-Private Ventures conference. In addition to overview discussions on the federal Corridors of the Future program and the general concept of truck toll lanes, two presentations focused on specific project proposals, one long-haul and the other urban.
The long-haul project would add truck-only lanes (almost certainly tolled) to I-70 across four states: Missouri, Illinois, Indiana, and Ohio. That would serve the important truck corridor from the multimodal centers of Kansas City on the west to Columbus (and a bit beyond) on the east. Presenter Steve Wells summarized the current supplemental environmental impact study that HNTB is conducting for Missouri DOT on the truck lanes concept. MoDOT has conducted public opinion research which found strong support for the widening of I-70 to be accomplished via truck-only lanes.
The presentation that I found most exciting was on the plan for truck toll lanes in greater Los Angeles, linking the ports of Long Beach and Los Angeles to the warehouses and distribution centers in the Inland Empire, about 60 miles to the east. The presenter was Keith Killough, former Director of Information Services for the Southern California Association of Governments, the MPO for the region. The purpose of the truck toll lanes is to handle much of the current 60,000 daily drayage truck trips to and from the ports, a figure expected to double over the next 25 years. While the truck toll lanes project has been under study for nearly a decade and is included in the region's long-range transportation plan, until recently it has not been clear whether the value such lanes create for truckers would be enough to justify tolls high enough to cover the estimated $20 billion cost of the complete 142-mile system (including 86 miles beyond the Inland Empire along I-15 to Barstow). Killough's presentation presented new analysis aimed at answering that question.
This recent SCAG modeling quantified not only the 2030 peak period travel time savings, but also the buffer-time savings, given the importance of reliability for truckers and shippers. The study used $73/hour as the value of time for heavy-duty trucks such as those used in port-related drayage service; that is close to the $77/hour (2005 dollars) used in the Texas Transportation Institute's 2007 Urban Mobility Report for truck travel time. The model showed nearly free-flow conditions in the truck lanes, versus highly congested (though somewhat improved, thanks to the truck lanes) conditions in the adjacent general purpose lanes. Consequently, with an assumed toll rate of 86 cents per mile, the value of travel time savings was many times that rate. In fact, Killough's paper for the 2008 TRB Annual Meeting cites a "return-on-investment ratio" for truckers of between $5 and $11 for every $1 of toll cost. And that large net benefit does not factor in the likelihood that a drayage operator could make one or more additional round trips per day, thanks to the large time savings realized by using the truck toll lanes. Nor does the study explicitly model the additional productivity gains to truckers if they are allowed to use Longer Combination Vehicles (LCVs) such as double-container-chassis on the truck lanes.
Because environmental considerations loom especially large in smoggy Southern California, the study also modeled the impact of uncongested truck trips on particulate emissions. Using the latest heavy-duty truck particulate speed correction factors, there would be substantial decreases in shifting peak-period truck from their current average 30 mph to 60 mph on the truck lanes.
This very important paper is included on the TRB 2008 Annual Meeting CD-ROM. If you don't have access to that, send me an email and I will put you in touch with the author.
Diesel trucks have been moving toward drastically reduced particulate emissions since January 1, 2007, with a combination of low-sulfur diesel fuel and tougher emission requirements for all new engines. But until recently, comparable reductions for diesel-powered goods-movement vehicles were lacking. Earlier this year, however, the Environmental Protection Agency issued new emission regulations for diesel-powered locomotives, ships, ferries, and tugboats, though they will be phased in over time. For example, the revised emission standards for new marine power engines apply as of 2014 and for new locomotives in 2015. For existing locomotives, the new emission levels apply whenever an engine is rebuilt, which is about every five years.
Some interesting changes have been taking place this year, in response to the new regs. Several railroads have been purchasing low-emission yard switch engines, called "genset" locomotives. Instead of a single large diesel engine, these switch engines are equipped with a whole set of smaller ones, adding up to the same total horsepower. Since a yard switcher sits idling much of the time, the genset switcher can turn off most of the diesels when sitting still, significantly reducing fuel consumption and emissions. Union Pacific, BNSF, and CSX are among the railroads introducing genset locomotives this year, in several cases with partial government funding.
That brings me to an interesting case reported by John Boyd in (Traffic World, Nov. 3, 2008). California's aggressive air quality management districts want to jump-start the introduction of low-emission locomotives, and UP has received some state aid for genset switchers prior to now. But its newest deal involves line-haul (long-distance) locomotives. UP is getting $1 million apiece from the state for 10 new lower-emission "Tier 2" locomotives, which covers about half their cost. But unlike yard switchers, a line-haul diesel can go anywhere--and would do so unless that is forbidden. Sure enough, the price of the state aid is a guarantee that UP will use the new locomotives only in California for the next 15 years.
In addition to putting a constraint on the railroad's flexibility, the deal has another odd side effect. The locos that the new ones are replacing are not going to be scrapped. Instead, the company will select "the oldest available engines" and send them out of state. According to the Traffic World article, these are likely to be Tier Zero locomotives, the biggest polluters in the fleet. Diesel-dumping, anyone?
A significant source of non-recurrent traffic congestion is highway reconstruction and maintenance projects, all too many of which occur during daytime hours that include the morning and afternoon peak periods. The value of lost time and wasted fuel from motorists stuck in congestion due to such projects often exceeds the cost of the project.
The California DOT (Caltrans) is trying out a new approach: doing the project on a 24/7 basis in order to drastically shorten its duration, thereby minimizing delays to motorists. The Urban Transportation Monitor (June 27, 2008) reported a recent use of this approach on I-5 near Sacramento. The project involved replacing the entire drainage system on a ¾-mile portion of the freeway. The normal approach had a 114-day estimated duration. But by using the 24/7 rapid repair approach, the time was compressed to just 32 days (of 12-hour shifts).
This approach was suggested by contractor C. C. Meyers, the same firm that has rebuilt earthquake-damaged freeway bridges in record time, thanks to incentive contracts. Key elements of the approach include having plenty of manpower and equipment on the site, the 24-hour work days with 12-hour shifts, use of fast-drying concrete, creation of an optional truck detour, a dedicated tow truck service, and widespread public outreach efforts.
This looks to me like a model that could be widely used on reconstruction projects, with major benefits for motorists. Further details are at www.fixI-5.com.
I don't have space to list all possible transportation conferences of interest; those listed here are only ones that a Reason colleague or I will be speaking at.
Government Infrastructure Needs and the Private Sector, Richmond, VA. Nov. 17, 2008, Dominion Resources Corporate Center. Details from firstname.lastname@example.org.
The California Infrastructure Summit, Anaheim, CA , Dec. 2-3, 2008, Sheraton Garden Grove-Anaheim South Hotel. Details at www.CityandFinancial.com/pppca1.
Transportation Solutions in a Recessionary Era, Reston, VA, Dec. 4, 2008, Hyatt Regency Reston. Details at www.americandreamcoalition.org/dullescorridorconference.php.
IBTTA Transportation Finance Summit, Washington, DC, Dec. 7-9, 2008, Fairmont Hotel. Details at www.ibtta.org/Events/eventdetail.cfm?ItemNumber=2889.
Outsourcing Highway Engineering Upheld in California. Way back in 2000, California voters approved a constitutional amendment aimed at counter-acting a bizarre state Supreme Court ruling that interpreted the civil service provisions of the state constitution as forbidding the outsourcing of any work done by civil servants (a case brought by the militant engineers' unions at Caltrans, PECG). That union and its allies in the legislature have subsequently thwarted most efforts to actually use the new provision, generally known as Proposition 35 (which was narrowly drafted to permit outsourcing only of architect and engineering services). In 2006 the legislature approved a bill supposedly allowing the Los Angeles MTA to use design-build to construct a new HOV lane project. But that new law specified that Caltrans engineers be used to prepare all the architectural and engineering documents. Thankfully, that law has now been overturned by the state Court of Appeals, as inconsistent with the Constitution as amended by Prop. 35. So maybe design-build has a future in California after all.
What Goes Up May Come Down. One unanticipated side effect of the recent reduction in vehicle miles traveled has been lower traffic on the 91 Express Lanes in Orange County. Since the toll rates on this pioneering value-priced project are based on ensuring free-flow, uncongested traffic, they are determined by an algorithm based on traffic volumes. For almost the entire 13-year history of the Express Lanes, the toll rate adjustments have been upward. But the reduction of trips from 14.6 million in fiscal year 2007 to 13.4 million in fiscal 2008 has now led to 50-cent reductions during many time slots, including the Thursday and Friday afternoon hours that had been charging $10 and will now charge $9.50. The lowest toll rate to travel the 10-mile length of the Express Lanes is $1.25.
FHWA Creates Office of Innovative Program Delivery. What had been a number of separate offices dealing with value pricing, tolling, public-private partnerships, and innovative finance have been reorganized into a new Office of Innovative Program Delivery at FHWA, as of October 31, 2008. The new office will provide a one-stop-shopping service to assist state DOTs in making use of the growing number of programs created by Congress to foster new approaches in highway finance and project delivery.
Correction to Megaprojects Article from Issue No. 60. Last month's article that included the EDR Group's study of the impacts of Boston's Big Dig project included an obsolete URL for the report, as several readers hastened to tell me. The correct URL is: www.edrgroup.com/images/stories/Transportation/mta-economic-v1.pdf. Sorry for the error.
"Truckers . . . tell me that they don't know how to pass [tolls] on to the shippers they carry goods for. But today they're passing on fuel surcharges to those folks because they see the rate difference in the price of fuel, and they're able to pass that on. I'm willing to work and to use some research dollars, if we need to, to try to find a way to look at a business model that would accommodate pricing in the commercial vehicle arena. Maybe we could look at truck-only lanes in some places and allow heavier, larger loads if that traffic is segregated from other traffic, and we build the lanes to accommodate the heavier loads and longer, wider vehicles."
--Mary Peters, Secretary of Transportation, interview with Traffic World, July 7, 2008.