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Reason Foundation

Surface Transportation Innovations #73

Progress converting carpool lanes into toll lanes, vehicle miles traveled and the economy, and phasing out gas taxes

Robert Poole
November 13, 2009

In this issue:


HOV to HOT: a Coast-to-Coast Phenomenon

America is now in its second generation of projects that convert high-occupancy vehicle (HOV) lanes to high occupancy toll (HOT) lanes, with projects moving forward in Houston, Miami, Minneapolis, and Los Angeles—and continued support from the federal government.

In Houston, the local transit agency (Houston Metro), which developed its reversible HOV lanes originally as exclusive busways, has undertaken a project to convert all five of them to HOT lanes. As reported on Tollroadsnews.com, Metro has awarded $81 million worth of contracts, the largest of which is for installation of electronic tolling equipment at 52 tolling points and 47 access/egress points on five radial freeways: I-45 North, US 59 North, I-45 South, US 59 South, and US 290. The lanes are to be in operation by 2011. Besides these five HOT lanes, Houston also has new HOT lanes (two per direction) on the I-10 (Katy) freeway plus three toll roads: the Hardy, Sam Houston, and Westpark. Altogether, they will constitute something of a HOT Network (though not a seamless one).

Miami’s I-95 Express Lanes project came in first in the People’s Choice category of the 2009 America’s Transportation Awards. The northbound lanes (two per direction) have been in operation since last December, and the southbound lanes (which required more construction work) are set to open in January. Phase 2 of the project will extend the lanes northward to Ft. Lauderdale, with construction beginning next year. According to the Florida DOT’s 2009 Midyear UPA Evaluation Report, from December 2008 through June 2009 the lanes carried 130% of projected traffic and raised 89% of projected revenue. One reason for both numbers is the unexpectedly large number of toll-exempt trips, the majority of which are hybrids. Express bus ridership has increased by 30% over the previous year. Travel speeds during peak periods are 39 mph faster than speeds in the former HOV lanes. And the Florida Highway Patrol reports that accidents on I-95 in Miami are down 15% this year compared with 2008. A second express lanes corridor is under development for I-595 in Ft. Lauderdale, and studies of adding similar lanes to other area expressways are proceeding, which could lead to a managed lanes network.

Minnesota DOT opened its second HOT lanes facility in Minneapolis on Sept. 30th, this one on I-35W. Two sections of what will be 14 miles of HOT lane (one per direction) are operational thus far, using a combination of HOV lane conversions and shoulder conversions. Gov. Tim Pawlenty has authorized MnDOT to conduct a new study of which other corridors would benefit from the addition of “MnPass Lanes,” to be completed by September 2010. Among the possible new routes are I-94 and state highways 77 and 169.

Los Angeles continues with implementation planning for its first to HOV-to-HOT conversions, on the I-110 Transitway and the I-10 El Monte Busway. Both will be two lanes per direction and are scheduled to be in operation by December 2010.

For those transportation planners considering such projects, two FHWA resources can be useful. One is a spreadsheet tool called POET-ML - Policy Options Evaluation Tool for Managed Lanes, developed by Booz Allen Hamilton and HNTB and released in December 2008.  The other is the “Federal-Aid Highway Program Guidance on High Occupancy Vehicle (HOV) Lanes,” August 2008, which helps planners navigate through applicable laws and regulations concerning both HOV lanes and HOV-to-HOT conversions. The document makes clear that decisions on occupancy and other eligibility requirements are up to each state, including the decision on converting from HOV to HOT (see p. IV-4). It also defines the federal requirements for the minimum average operating speed (p. IV-2) that HOV and HOT lanes must meet. (www.fhwa.dot.gov/operations/hovguide01.htm)

Vehicle Miles of Travel and the Economy

Earlier this year, Sens. Jay Rockefeller (D, WV) and Frank Lautenberg (D, NJ) introduced a bill called the Surface Transportation Policy & Planning Act of 2009. One of its principal goals was to “reduce per-capita motor vehicle miles traveled [VMT] on an annual basis.” Since then, a number of environmental and planning organizations have promoted VMT reduction as a key tool of transportation policy aimed at reducing greenhouse gas (GHG) emissions. A number of transportation policy people (including me) have objected to the idea of the federal government mandating that Americans drive less, but until now there has been no serious economic analysis of VMT reduction.

That gap has now been filled by economist Randall Pozdena of EcoNorthwest and QuantEcon, Inc., two Oregon-based research firms. The report is called “Driving the Economy: Automotive Travel, Economic Growth, and the Risks of Global Warming Regulations.” Pozdena first reviews the literature on the relationship between energy use and the economy, where causality seems to go in both directions. On the specific question of VMT and the economy, only one previous study (by Liddle in 2007) addressed the issue, likewise finding that GDP, fuel prices, and VMT are “cointegrated” and hard to disentangle.

But there are techniques for doing this, such as pairwise causality testing and impulse response analysis, both of which Pozdena employed. These produced evidence that “VMT is a large and statistically significant driver of GDP,” despite the fact that effects work in both directions. His tests also confirmed that VMT is not very sensitive to shocks in fuel prices alone, as recent experiences demonstrated. There’s a lot more detail to the findings in the paper, which I don’t have space to summarize here, but I urge you to download and read it.

Based on his findings, Pozdena then turns to various proposed energy and GHG policies aimed at reducing VMT. He finds that carbon-pricing schemes (cap and trade, carbon tax) would likely not be very effective in reducing VMT or producing shifts to lower-GHG vehicles. Other indirect ways of reducing VMT, such as mandating higher density land-uses, are also likely to be ineffective (and Pozdena promises another paper soon elaborating on this point). Directly regulating VMT per capita “will have a negative impact on the economy nearly in direct proportion to the VMT reduction achieved in the short run, with a longer-term effect about half that size but still large and persistent.”

He concludes that the best way forward is roadway congestion pricing. This policy would have the best results, because “its potency for affecting VMT is high but its economic footprint may be positive, rather than negative.” In contrast to higher fuel tax rates or flat-rate VMT charges, congestion pricing would distinguish between high-value and low-value trips, so that whatever reductions in VMT come about would be those that contribute least to economic vitality.

Pozdena’s paper has prompted a lively discussion on the Congestion Pricing List-Serve. I don’t have the space to summarize it here, but you may want to review it by joining this ongoing online conversation. (con-pric@lists.umn.edu)

PPP Infrastructure Deals “Drying Up”?

Just a few days after a poorly researched late-October USA Today article headlined “Privately Run Infrastructure Deals Dry Up” crossed my screen, I received the annual Public Works Financing “2009 International Major Projects Survey” which tells quite a different story. While the credit crunch has certainly affected public-private partnership financing, it has hardly killed it. PWF’s database includes 25 PPP transport projects outside the USA that were financed in the past 12 months with $22 billion in private capital, in 15 countries. Two such projects reached financial close in the United States during this period, both in Florida: the $1.7 billion I-595 project and the $900 million Port of Miami Tunnel.

Financial markets are gradually opening up again in the United States. Dealogic reported that U.S. companies raised $39 billion in new stock and convertible debt in the third quarter alone, along with selling $156 billion in bonds. And investors are once again putting money into infrastructure investment funds. InfrastructureInvestor’s “Week in Review” for October 8th reported that while only eight such funds reached their funding goal in the first six months of 2009, nine more did so in the third quarter alone. Their InfrastructureConnect database estimates that $8.9 billion has been raised by such funds between January and September. That compares with $66.4 billion in 2008, to be sure, but the trend is definitely upward. The newsletter also reported that about 60 fund managers responded to the Pension Consulting Alliance’s request for information on infrastructure funds, on behalf of U.S. pension funds interesting in moving into this area.

That’s encouraging, since a number of U.S. PPP transportation deals hope to reach financial close in 2010. PWF tallies them up as follows:

North Tarrant Express, phase 1 (TX)        $2.0 billion
North Tarrant Express, phase 2 (TX)          2.0 billion
LBJ I-635 (TX)                                        2.7 billion
Mid-Curritick Bridge (NC)                          0.9 billion
Midtown Tunnel, Norfolk (VA)                    2.0 billion
Jordan Bridge (VA)                                  0.1 billion
Total:                                                  $9.7 billion

Two Studies Propose Next Steps on VMT Charging


Several years ago I served on the Transportation Research Board committee that produced Special Report 285, which made a pretty solid case that per-gallon fuel taxes are not a sustainable long-term funding source for transportation infrastructure. So I was pleased when the Surface Transportation Infrastructure Financing Commission early this year recommended that the nation begin the transition from fuel taxes to mileage-based road-use charges. TRB sponsored two follow-up studies this year, and both have been released in the last several months.

The first was requested by the American Association of State Highway & Transportation Officials (AASHTO) and was released by TRB as part of the National Cooperative Highway Research Program (NCHRP). Since three of the six authors are from RAND Corporation, the report is informally referred to as the RAND/AASHTO report, but officially it is NCHRP web-only Document 143, “Implementable Strategies for Shifting to Direct Usage-Based Charges for Transportation Funding.”

It briefly evaluated nine VMT-fee mechanisms which the authors considered potentially feasible to be implemented in the near-term. After subjecting them to five screening criteria, they ended up with three that they considered the most promising:


This report has come under criticism from some advocates of other approaches, and lead author Paul Sorensen of RAND defended it in an online discussion group as having been produced under considerable time pressure.

The other report, commissioned by the TRB Executive Committee more than a year ago, looks to me to be more comprehensive and more policy-focused. It was researched and written by Jim Whitty and John Svadlenak of the Oregon DOT, both of whom were heavily involved in that state’s pioneering demonstration project of a pay-at-the-pump version of a VMT charging system. It’s called “Discerning the Pathway to Implementation of a National Mileage-Based Charging System,” with an October 2009 release date.

This report is less focused on technology options and more focused on a next-reauthorization research program aimed at working out a lot more of the policy and governance issues needed to devise a transition from fuel taxes to VMT charges. I think they ask all the right questions, and they go on from there to propose a sensible six-year program to both define what a nationally interoperable system should do and how it should operate, and (very importantly) engage the public during the process in hopes of developing something of a national consensus on the best way forward.

Both reports have decent executive summaries, and if they whet your appetite for more detail, it’s easy to download the remaining hundred or so pages of each.

Upcoming Conferences

Note: I don’t have space to list all the transportation conferences going on; below are only those that I or a Reason colleague are speaking at.

Council of State Governments Annual Meeting, Palm Springs, CA, Nov. 12-15, 2009. Details at: www.csg.org/meetings/conferencecalendar.aspx.

The Future for Interurban Passenger Transport, Madrid, Nov. 16-18, 2009, Joint OECD/International Transport Forum conference, Palacio de Congressos. Details at http://istep2009.cedex.es.

IBTTA Transportation Policy & Finance Summit, Washington, DC, Dec. 13-15, 2009, Grand Hyatt Hotel. Details at: www.ibtta.org/Events/eventdetail.cfm?ItemNumber=3855.

Transportation Research Board Annual Meeting, Washington, DC, Jan. 10-13, 2010, several hotels. Details at: www.trb.org/AnnualMeeting2010/Public/AnnualMeeting2010.aspx.

News Notes

TRB on Research Needed re Transportation and Climate Change
A special committee has produced an excellent report on research that’s needed in order that we can make sensible decisions about both mitigating and adapting to climate change. The executive summary notes that by 2030, total transportation greenhouse gas (GHG) emissions will not increase despite large increases in population, economic growth, and travel—thanks to energy-efficiency improvements already under way. It reminds us that transportation “contributes to economic and social sell-being” in addition to producing GHGs, so we need to figure out the effectiveness, costs, feasibility, and acceptability of various policy alternatives in order to avoid doing harm. We also need a lot more work on possible ways of adapting the transportation system to possible effects of climate change. The whole report is well worth reading. “A Transportation Research Program for Mitigating and Adapting to Climate Change and Conserving Energy,” TRB Special Report 299. (http://onlinepubs.trb.org/onlinepubs/sr/sr299.pdf)

Stop Subsidizing Fossil Fuel Use, Says IEA
The old ethical principle of “First, do no harm” needs to be applied to energy conservation, especially in developing countries which are objecting to measures such as carbon taxes. A study by the International Energy Agency estimates that non-OECD countries subsidize energy use to the tune of $310 billion a year—compared with $20-30 billion a year in OECD countries. The IEA estimates that simply eliminating those subsidies (which go mostly to oil, gas, and coal use) would cut global GHG emissions 10% by 2050.
--“Fossilized Policy,” The Economist, Oct. 3, 2009, p. 74.

Healthier Babies, Thanks to Electronic Toll Collection
A research paper by Janet Currie and Reed Walker for the National Bureau of Economic Research looked into whether the introduction of electronic open-road tolling at toll plazas led to significant reductions in harm due to vehicular air pollution. They analyzed data on the health of infants born to mothers living close to toll plazas and others close to heavy traffic but far from toll plazas, controlling for other variables. They found significantly lower incidence of prematurity and low birth weight among those near toll plazas where congestion had been largely alleviated thanks to E-ZPass. (http://papers.nber.org/papers/w15413)

Subsidyscope on Amtrak Subsidies
Fresh from a study of subsidies to small-town airports, the Pew Charitable Trusts’ Subsidyscope project in late October released a new report on Amtrak subsidies. Across its entire system, federal taxpayers spend $32/passenger trip. That number is about four times what Amtrak itself estimates, because Subsidyscope used generally accepted accounting principles to define costs and therefore included depreciation. Needless to say, the per-passenger subsidy varies greatly depending on the route, from the largest subsidy of $462/passenger (Sunset Limited, Los Angeles to San Antonio) to Acela Express (which generates a net of $41/passenger). (www.subsidyscope.com/transportation/amtrak)

Self-Healing Concrete?
A story in the Nov. 2, 2009 issue of Forbes profiles civil engineer Victor Li of the University of Michigan. Li has spent 15 years developing first bendable and now “self-healing” concrete. In August, the University of Michigan received a U.S. patent for the material, which cracks only in narrow hairlines which, when exposed to moisture, absorb enough of it to “grow” new concrete that fills in the cracks. Li estimates that bridges built from the material would have 50% lower life-cycle costs. The university is currently in licensing talks with several companies, according to Forbes. (www.engin.umich.edu/newscenter/feature/selfhealconcrete)

FHWA Final Rule on Interoperability in Electronic Toll Collection
As required by the SAFETEA-LU legislation, the Federal Highway Administration in October published its final rule on interoperability requirements for automated toll collection. It applies only to toll facilities whose toll authority is granted under Sec. 1604 of the legislation: the Value Pricing Pilot Program, the Express Lanes Demonstration Program, and the Interstate Construction Pilot Program. (http://ops.fhwa.dot.gov/resources/news/news_detail.asp?ID=584)

Quotable Quotes

“Why such [opposition to London’s congestion pricing]? . . . First, people may not be appreciating their time savings. . . . Second, there are admitted distributional concerns. Pricing detractors are right to suppose that this policy will disproportionately benefit the well-off. This is due to the smaller burden the tolls place on the wealthy’s finances and the higher monetary value of their time. . . . For these reasons, it may be premature to think about tolling entire downtowns or freeways. A better plan is to concede that we won’t get the most economically efficient, toll-everything outcome. Instead, we should settle for tolling only portions of facilities while leaving the remainder of them au natural. Were, say, two lanes of a four-lane freeway tolled and flowing, the other lanes free but congested, the time savings your money buys you would be very visible to drivers. Equity concerns would be blunted since the poor have a free option. In fact, low-income folks would be better off than before, thanks to the chance to use the toll lanes when really necessary, express bus service in the toll lanes, and increased throughput there.”
--Eric A. Morris, “Cordon Blues?” New York Times, Oct. 13, 2009.

“Governors urge the development of flexible, innovative, accountable, and alternative financing mechanisms that support the mobility goals of the states, and oppose any federal restrictions on states’ ability to pursue public-private partnership agreements to address their own infrastructure needs. Governors support the removal of federal restrictions on states’ authority to toll federally-aided highways. State and local authorities, as the owners and operators of the surface transportation system, must determine the appropriate level of private sector participation in their surface transportation programs. Governors oppose any efforts to condition federal financial investment in state surface transportation programs to any mandate for a particular level of private sector participation.”
--“Policy Statement on Surface Transportation,” National Governors Association, July 20, 2009.

“Why do politicians love trains? Because they can tell where the tracks go. They know where everybody’s going. It’s all about control. It is all about power. Politics itself is nothing but an attempt to achieve power and prestige without merit. That is the definition of politics. Politicians hate cars. They have always hated cars, because cars make people free. Not only free in the sense that they can go anywhere they want, which bugs politicians in the first place, but they can move out of the political district that the politician represents.”
--P. J. O’Rourke, “Driven Crazy,” Reason, November 2009, p. 15.

“More power plants burning coal to produce cheap electricity can also mean less natural gas used to generate electricity--and less used for industrial, commercial, and residential heating, welding, and chemical processing, as these users switch to electrically powered alternatives. The gas that’s freed up in this way can then substitute for diesel fuel in heavy trucks, delivery vehicles, and buses. And coal-fired electricity will eventually begin displacing gasoline, too, as soon as plug-in hybrid cars start recharging their batteries directly from the grid. To top it all, using electricity generated in large part by coal to power our passenger cars would lower carbon emissions—even in Indiana, which generates 75% of its electricity with coal. Big power plants are so much more efficient than the gasoline engines in our cars that a plug-in hybrid car running on electricity supplied by Indiana’s current grid still ends up more carbon-frugal than comparable cars burning gasoline in a conventional engine under the hood. Old-guard energy types have been saying this for decades. In a major report released last March, the World Wildlife Fund finally concluded that they were right all along.”
--Peter J. Huber, “Bound to Burn,” City Journal, Spring 2009.


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


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