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Reason Foundation

Surface Transportation News #126

Value-Added Tolling: getting to "yes" on Interstate modernization, How to mislead with transit data, New developments in arterial underpasses

Robert Poole
March 31, 2014

In this issue:

Value-Added Tolling: Getting to "Yes" on Interstate Tolling

The Interstate highway system is wearing out. Over the next two decades, nearly all of its 47,000 miles will have to be rebuilt, to make it serviceable for another 50+ years. In addition, several hundred major interchanges are horrible bottlenecks and need to be replaced with more modern designs, and some corridors need additional lanes to cope with growth, especially in truck travel. A major Reason study last year estimated the cost of Interstate reconstruction and modernization at $1 trillion.

That sum is far beyond what current federal and state highway funding can provide. Congress some years ago created a pilot program to let states reconstruct three aging Interstates using toll finance. Those pilot projects would be exceptions to current federal law that bans tolling on existing non-tolled Interstates. Three states won slots in the pilot program, but so far none has gained political consensus to proceed with any toll-financed reconstruction.

Highway user groups have been leery of opening the door to Interstate tolling, despite the lack of alternatives to pay for Interstate reconstruction and modernization. They are afraid that state DOTs would jump at the chance to bail out all their highway and transit programs on the backs of Interstate highway toll-payers, rather than just rebuilding their Interstates. And Congress fears taking on the powerful trucking industry and its new anti-tolls coalition (Alliance for Toll-Free Interstates), even though many state DOTs are urging Congress to give them tolling flexibility.

Reason Foundation's new policy brief, "Value-Added Tolling," outlines a new way forward in this debate. It calls for tolling advocates to listen to highway users' concerns and take them seriously in crafting a set of safeguards that would make next-generation tolling a true (and pure) highway user fee, not a cash-cow to solve a state's overall transportation needs.

Two of the concerns still raised by the trucking coalition are being made obsolete by the technology of all-electronic tolling (AET). First is the legacy toll roads' problems of congestion, emissions, and collisions at toll plazas. But all new toll roads and bridges (including rebuilt and tolled Interstates) will have no toll plazas at all, being designed from the outset for AET. The second concern is the high cost of toll collection. On legacy toll roads with cash and early forms of electronic tolling, collection costs ate up 20-30% of toll revenue, compared with 2 to 5% of fuel tax revenue needed for collection. But brand new toll roads, designed from the outset for AET, and a using a streamlined business model built around what AET can do, are already achieving collection costs as low as 5% of toll revenue (see http://reason.org/news/show/myths-toll-and-gas-tax-collection).

Four legitimate concerns of highway users, based on their experiences with legacy toll roads, are as follows:

  1. No value added, with tolling simply becoming an additional cost of a highway. That was evident in a number of previous state proposals to toll Interstates.
  2. Diverting revenues to other uses. A number of high-profile toll agencies (mostly in the Northeast) fund other highways, mass transit, canals, public buildings, and economic development out of toll revenues.
  3. Double taxation. On all current toll roads, users continue to pay existing fuel taxes in addition to the tolls.
  4. Diverting traffic to parallel routes. This is always true to some extent, but is much worse when toll rates are high in order to pay for more things than the toll road.

The Value-Added Tolling concept calls for a new model that would apply to newly tolled highways such as rebuilt interstates. Its aim is to make such tolling a true highway user fee, not a hybrid of toll and tax, and to respond positively to long-standing concerns of highway user groups. The five policies are as follows:

These policies are explained in some detail in the Reason study, which was released last week. You can download it from http://reason.org/files/value_added_tolling.pdf.

The Value-Added Tolling study has already begun to stimulate serious discussion among highway user groups. It urges both sides in the debate over tolling—advocates such as state DOTs and tolling organizations as well as skeptical highway user groups—to consider whether these policies would provide a practical way forward to unleash needed investment in the trillion-dollar project of rebuilding and modernizing the Interstate highway system. Congress could make expansion or mainstreaming of the current pilot program to all 50 states conditional on the incorporation of Value-Added Tolling principles.

There is a new bipartisan bill in the Senate, the Highway Innovation Act of 2014, to give states increased tolling flexibility. Introduced by Sen. Mark Kirk (R, IL) and Mark Warner (D, VA), it would expand the three-state tolled reconstruction pilot program to ten states and allow all 50 states to participate in the Value Pricing Pilot Program. But the safeguards in the current reconstruction pilot program are far less robust than those proposed under Value-Added Tolling.

How to Mislead with Transit Data

Nearly all major newpapers around the country on March 10th proclaimed this news: the use of public transit last year reached its highest level since 1956. The somewhat breathless New York Times story read like a news release from the American Public Transportation Association (APTA), including the claim from APTA president Michael Melaniphy that "We're seeing a fundamental shift in how people are moving about their communities." As far as I could tell, the only transportation reporter who did some independent homework on this story was USA Today's Larry Copeland, who got some very useful context from commuting expert Alan Pisarski.

So what's the real story here? First, as academics David King, Michael Manville, and Michael Smart pointed out in an op-ed in the Washington Post 10 days later, although total transit trips have risen since their nadir in 1972, so has population. Even just between 2008 and 2012 they pointed out, average transit trips per capita have declined from 35 to 34. And transit consultant Thomas Rubin noted that since 1956, the population has increased by 85%. So if 2013's 10.65 billion trips now equal those of 1956, the annual average trips per capita has shrunk by nearly half, from 62.5 to 34.

But it gets worse. Cato's Randal O'Toole looked into the 2013 transit trip numbers and found that the increase in transit trips in New York City was 123 million. But the total national increase, as reported by APTA, was just 115 million. In other words, apart from New York City, there was no increase at all, on average, across the country. APTA quickly responded that some other individual cities did have increases, but in fact most experienced decreases.

And there's more, undercutting the idea that a "fundamental shift in how people are moving about" is taking place. In a March 20th piece at NewGeography.com, demographer Wendell Cox analyzed commuting data from the Census Bureau's American Community Survey. Here are the actual increases and decreases in daily one-way commuting trips from 2007 to 2012:

In 42 of the 52 major urban areas, the increase in working at home exceeded the increase (if any) in transit use.

In short, there is no meaningful shift to transit evident in the data. What we have here is a case of what statisticians call "torturing the data until it confesses" to the desired answer.

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New Developments in Arterial Underpasses

Last month's article on the case against converting arterial lanes to bus-only use generated several responses and gives me an opportunity for an update on the alternative of adding underpasses at signalized intersections. Chris Swenson and I dubbed an arterial modified in this way a Managed Arterial, offering congestion-relief benefits similar to Managed Lanes on expressways.

First I heard from consulting engineer Dennis Eyler, who told me about his project in the 1980s designing a reversible express lane for HOVs and buses in the median of US 12 in Minneapolis, during that highway's reconstruction to become I-394. At signalized intersections, there was a separate green light for the express lane, and no turns for its vehicles were permitted at those intersections. After reading about the Managed Arterial concept, he suggested that one way to gradually convert an arterial would be a combination of signal preference at some intersections and underpasses at others. He also noted that if only cars and buses were to use the underpasses, the clearance height could be less than the standard 16', 4", which would reduce the construction cost somewhat.

Shortly after that I heard from Colin MacGillivary, a consultant in Malaysia who is working to implement low-clearance underpasses at a number of signalized intersections on a major arterial, with the pilot project to be an underpass at a large roundabout. I asked him if he'd heard of the 2003 paper by Gregory Dehnert and Panos Prevedouros of the University of Hawaii on this subject (about which I wrote in Issue No. 40, February 2007). It turns out he had, but pointed out that as far as he knows, no such underpass has been implemented anywhere, to date. In that paper, published in the ITE Journal in March 2004, Dehnert and Prevedouros proposed a clearance height of just 8', making it a truly autos-only underpass. They estimated that would cut the overall construction cost by 38%. But a 12' clearance height would permit both transit buses and most over-the-road buses, and might save half of that, or 19%.

On the subject of underpasses, several months ago I came across a paper from the Transportation Research Board 2013 Annual Meeting on using a new kind of tunnel boring machine (TBM) to develop shallow underpasses in urban areas where there is no room to dig a pit on each end of a tunnel, into which a normal TBM would be lowered. Instead, the URUP (ultra rapid underpass) method developed by Obayashi Corporation in Japan launches the TBM at ground level, where it creates the downward approach and the level section under the crossing roadway, then angles upward creating the upward departure roadway back to the surface. The paper describes a pilot test in Japan, followed by the successful creation of two such underpasses below heavily traveled roadways. In an exchange of emails, the authors were not able to provide a cost comparison with conventional excavation, which suggests to me that for a single underpass, the cost of going URUP would likely exceed conventional excavation costs. But if the same TBM could be used to create a whole set of underpasses along a Managed Arterial corridor, economies of scale might make this a less-costly way to go. The paper, TRB 13-1080, is "URUP (Ultra Rapid Underpass): TBM Excavation in Soft Ground from Surface Elevation without Shaft or Large-Scale Open Cut Pit" by Paul Zick, et al.

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Fifth Amendment Deals Setback to Rails-to-Trails

The Constitution's Fifth Amendment includes these powerful words: "nor shall private property be taken for public use without due process of law." Two centuries of legal precedent make clear that when a government agency takes property for a public use such as a right of way, it must pay "just compensation" to the property owner. And on March 10th, the Supreme Court upheld this principle yet again, in a case involving the proposed conversion of an abandoned railroad line on private property in Wyoming to a recreational trail. The ruling was 8 to 1 in favor of the property owners.

The case in question stems from the General Railroad Right-of-Way Act of 1875, which set out provisions under which railroads could acquire easements across both government-owned and private land. An easement is not a purchase; it is a temporary right of access, good as long as the public use continues. The Supreme Court has a long history of upholding this understanding of easements, including a 1942 case relating specifically to the 1875 act. In 1988 Congress enacted a "railbanking" statute that lets a railroad planning to abandon a right of way transfer it to a qualified public or private entity for use as a trail until the railroad may need it back for railroad use. The Supreme Court upheld part of that act in 1990, and noted that "only some rail-to-trail conversions will amount to takings," depending on an array of factors.

Federally granted rights of way, such as those in the west covered by the 1875 act, did not reach the Supreme Court until this year's Wyoming case. And in this case, the Court clearly found that what the railroad had was only an easement, so the right of way reverted to the property owner when the railroad abandoned it in 2003. Correctly, the court found that the government's assertion of ownership constituted a taking, requiring just compensation under the Fifth Amendment.

How wide the reach of this decision will be remains unclear. Many observers think it will apply only to easements granted under the 1875 act. But there may well be new litigation over other proposed conversions and possibly even over rights of way that now have established trails on them, acquired by governments without compensation of the land owners. A recent National Law Journal article found that last year governments paid out $49 million to compensate land owners in such cases and estimated that total liabilities of this kind might exceed $500 million.

Rails-to-trails conversion sounded like a nice idea, a kind of free lunch government could give to hikers and bikers. But the Supreme Court has reminded us that the protections of the Constitution trump legislative enactments. The highways and transit communities have long understood that they must pay just compensation when they acquire land from private owners to create public-use rights of way. It's time hikers and bikers came to terms with this.

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Continuing Debates Over Mileage-Based User Fees

Last month's Washington, DC workshop of the Mileage Based User Fee Alliance illustrated the divisions within the growing mileage-based user fee (MBUF) community over what the purpose of this endeavor really is. One strain, represented by most state DOTs and researchers working with them, sees the goal as replacing a gradually decaying fuel-tax system with a more sustainable long-term highway funding source. Another strain, which includes congestion pricing advocates, some economists, and many environmentalists, is more diverse, with some emphasizing the potential of a new MBUF system to implement congestion pricing and others seeing it as a way to load on charges for every conceivable negative externality related to motor vehicles and highways. Most of the latter group are more comfortable with the term vehicle mileage tax (VMT)—and they really mean tax, in the punitive sense of high taxes reducing driving—and providing a funding windfall for their preferred alternatives to driving. They also strongly favor high-tech solutions such as a mandatory GPS box in every vehicle, to "track" when and where every mile is driven.

While I disagree profoundly with the Taxers and see the problem to be addressed as mostly one of ensuring adequate funding, as a founding member of the Transportation Research Board's Congestion Pricing Committee, I cannot ignore the potential congestion-reduction benefits that a switch to MBUFs could bring about. So for the purposes of this article, let's divide the above community into three parts, rather than two: the Funders, the Pricers, and the Taxers. Is there a way to accomplish the objectives of the Funders and Pricers, without ending up in the world envisioned by the Taxers?

One approach to doing that was set forth in a paper from the 2013 TRB's 2013 Annual Meeting. Chris Swenson and David Ungemah propose what they call a business model that uses more than one way to implement MBUFs. Specifically, they embrace both the Funding and the Pricing goals, but suggest that separate mechanisms be employed to achieve them. To pay for most of the roadway network, they suggest a basic charge based on annual odometer readings, with higher-tech options available to meet individual needs (e.g., for a driver who accumulates significant miles in another state and whose system therefore needs to separate in-state from out-of-state miles). And to address congestion, which in America is mostly on urban freeways, they suggest making use of existing all-electronic tolling technology (transponders and license-plate imaging). They also suggest that even where there is no real congestion problem, per-mile rates should be higher on "premium" limited-access highways than on ordinary roads. (The citation for the paper is provided below under Quotable Quotes.)

Let me stress several very attractive features of what Swenson and Ungemah have laid out here. First, we don't need to focus on one best way of implementing MBUFs, for all vehicles and all roads. Second, we don't need entirely new technologies, when familiar payment mechanisms such as annual vehicle registration fees (for the basic charge) and all-electronic tolling already exist and can do the job. Third, this approach would avoid all the feared Big Brother concerns about mandatory GPS in every vehicle (even though most of us carry GPS-equipped smart phones and have cars equipped with GPS navigation systems). Fourth, as Oregon and Minnesota have concluded via their pilot testing with ordinary drivers, people welcome a choice of methods, depending on their circumstances. Some might prefer a flat annual charge based on a high assumed mileage, others who drive much less would be happy with a plain-vanilla annual odometer reading. Someone with multiple-state driving will want and need a system that can distinguish miles driven on either side of a state line (which cell-tower data can do).

These points about starting with a simple system based on odometer readings and offering higher-tech options where desired are embraced by a growing number of transportation researchers, for example Paul Sorensen and colleagues at RAND Corporation—see their "Emerging Strategies in Mileage-Based User Fees: Reducing Costs and Increasing Public Acceptance," Transportation Research Record No. 2345, 2013, pp. 31-38.

And the Swenson/Ungemah idea about different fee levels for different categories of roadway is also gaining acceptance in the research community. Mark Burris and colleagues at Texas A&M and its Transportation Institute have evaluated a number of different MBUF fee systems to assess their equity, compared with each other and with the existing fuel-tax system. The pricing approach that produced the best "horizontal equity" was one with higher rates on urban highways than rural ones. (Lisa Larsen, Mark Burris, et al., "Equity Evaluation of Fees for Vehicle Miles Traveled in Texas," Transportation Research Record No. 2297, 2012, pp. 11-20)

Finally, I would be remiss in not reminding you that my Reason Foundation policy study "Interstate 2.0," September 2013, envisioned a system of premium charges for limited- access highways (Interstates and expressways) and a basic per-mile charge for all other roadways. The premium charges would be collected via existing all-electronic tolling technology, with congestion-related variable rates on urban expressways. I assumed a low-tech basic system would be implemented for all other roadways.

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First Truck Toll Lanes Open in Tampa

For many years, Tampa suffered from a truck-related problem. Heavy trucks going between Tampa's growing port and I-4—the main route to Orlando to the east and to I-75 going north—trundled along the surface streets of Ybor City, a historic neighborhood of small shops and restaurants that Tampa had worked hard to revive. But thanks to a joint project of the Tampa Hillsborough Expressway Authority (THEA) and Florida DOT, January saw the opening of the Interstate 4/Selmon Expressway Connector, aimed in part at giving trucks a faster and safer alternative.

The new elevated structure links I-4 to THEA's east-west Selmon Expressway, as well, closing a long-missing link in the metro area's expressway system. Because it is elevated and up to 12 lanes wide (to make all the needed connections), the project cost $420 million. All lanes are tolled, consistent with FDOT's general policy that all additions to the limited-access highway system will be tolled. And consistent with THEA's policy of all-electronic tolling, there are no toll booths. Trucks can actually use any of the lanes, but their primary use is expected to be the lanes that connect directly to the short road to the Port of Tampa, one mile to the south. Trucks taking those lanes will pay just $1 (transponder) or $1.25 (pay-by-plate), regardless of the number of axles. That is expected to make it an easy choice, compared to the much slower surface route through Ybor City. By contrast, trucks using the other parts of the connector—to eastbound or westbound I-4 from the Selmon Expressway, will pay normal truck tolls that increase with the number of axles.

The Connector is the second elevated toll facility in Tampa, with two more in the development stage, as I reported last month. Other congestion-plagued metro areas should take note.

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Upcoming Conferences

Note: I don't have space to list all transportation conferences that might be of interest. Below are those that I or a Reason Foundation colleague are taking part in.

Guest Lecture on Transportation Pricing and Privatization, April 15, Texas State University, San Marcos, TX (Robert Poole speaking). Details from: Sherri Mora, Dept. of Political Science (sm43@txstate.edu)

The High Cost of Highways in NY, April 30, Legislative Office Building, Albany, NY (Baruch Feigenbaum speaking). Details at: www.empirecenter.org.

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News Notes

2014 Annual Privatization/P3 Report Released. Reason Foundation has released the transportation-related chapters of its 2014 Annual Privatization Report, of which I am the author. The chapter on Transportation Finance provides an overview on the growth of infrastructure investment funds, the growing role of pension funds, and the emergence of debt funds. And the chapter on surface transportation covers recent developments in transportation P3 megaprojects in North America, P3 enabling legislation and related issues, major P3 highway projects by state, and progress of managed lanes and ML networks. Go to:

2013 Motorcoach Census Released. The American Bus Association's ABA Foundation has released a report on the size and activity of the motorcoach (aka over-the-road bus) industry in the United States and Canada as of 2013. Among the interesting facts and figures are the overall energy-efficiency of this industry, with the average motorcoach achieving 222.7 passenger miles per gallon of fuel. Much of this industry is charter and tourism service, but 31% is scheduled (intercity) service and another 6% is commuter service. With the industry delivering 75.7 billion passenger miles, the intercity part of that is 23.5 billion—which is about three and a half times as much as Amtrak's 6.8 billion passenger miles. Overall, this is an impressive industry that does not get enough visibility from transportation researchers.

Barone Likes Per-Mile Charges. In an excellent piece on March 7th, syndicated columnist Michael Barone assesses the non-sustainability of the per-gallon fuel tax and concludes that replacing it with per-mile electronic tolling on expressways and Interstates would solve a big chunk of the problem. I first read the column here: http://washingtonexaminer.com/article/2545306.

Business Coalition for Infrastructure Investment. The Alliance for American Competitiveness has been launched by major companies to urge increased investment in U.S. transportation infrastructure. According to Politico (March 24), the founding members are BNSF, Caterpillar, Dow Chemical, Honeywell, and UPS. The group is thus far not focusing on a specific funding approach for increased investment, but calls for "a long-term and sustainable revenue solution."

"Buy America" Makes Transit More Costly. In a recent blog post from "Smart Growth for Conservatives," James A. Bacon cites several factors in urban transit's financial difficulties, including below-market fares for everyone (not just low-income people) and political pressures to keep money-losing routes in operation. But the main focus of the piece is that federal Buy America regulations (as well as local-preference requirements) force many transit agencies to purchase only U.S.-made buses. Bacon cites a recent study finding that these regulations both increase the cost of buying buses and prevent the use of more-efficient (higher mpg) buses from overseas producers. Bacon's post is at: www.smartgrowthforconservatives.com/2014/03/21/how-the-buy-america-mandate-hurts-us-transit. It includes a link to the NBER paper "Public Transit Bus Procurement: The Role of Energy Prices, Regulation, and Federal Subsidies."

New Managed Lanes in San Antonio and SF Bay Area. The growth of priced managed lanes continues its geographic expansion. January saw the announcement of the first such lanes in San Antonio: two MLs each way on I-10 north of Loop 1604 and conversion of US 281 to an expressway with one ML each way. The projects are a joint effort of TxDOT, Alamo RMA, and VIA Metropolitan Transit. In the San Francisco Bay Area, the first priced MLs in Contra Costa County will be conversion of existing HOV lanes on I-680 between Walnut Creek and San Ramon, with one such lane each way. These lanes will form part of the planned express toll lane network in the Bay Area.

Moody's Issues Report on TIFIA. Moody's Investors Service last month issued a short report on the federal TIFIA loan program for transportation infrastructure. While pointing out that such loans are credit-positive for toll roads because they offer lower-cost debt financing, they do add some credit risks for bondholders, since TIFIA's legal covenants are weaker than those typically found in bond financings. The report is "U.S. Toll Roads: Federal TIFIA Loans Provide Low-Cost Capital but Not Without Risks."

Brookings Video on Transportation System Performance. A well-done short video, "Caution Ahead: A Look at the Performance of the U.S. Transportation System" presents a brief, entertaining summary of several decades of policy research by Brookings Searle Freedom Trust Senior Fellow Cliff Winston. Go to www.brookings.edu/cautionahead.

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Quotable Quotes

"The previous reauthorization proposal from the Obama Administration proposed to break down and restructure existing surface transportation programs. The new proposal largely maintains existing programs and adds new programs on top of them in order to achieve the Administration's policy goals, instead of eliminating and replacing current programs. The Administration wants a vast increase in programs where USDOT gets to select which projects get funded. The 2012 MAP-21 law largely eliminated those programs within the Federal Highway Administration. The financing of the proposal is still largely imaginary and is completely inadequate in the long term."
—Jeff Davis, "Surface Reauthorization: A Deeper Look," Transportation Weekly, March 12, 2014

"[M]unicipal bond issuers are not able to take advantage of large global pools of capital looking to make infrastructure investments, due to lack of bond liquidity, bond issue size, and return for investors who do not benefit from the tax exemption. . . . Pension fund, insurance fund, and sovereign wealth fund managers would like to invest in projects—like infrastructure—that guarantee stable, long-term returns. Their money can be channeled into infrastructure projects through innovative financing structures, including collaborative public-private partnerships. In addition to using private funds, PPPs often come together with private expertise that uses creative ways to stretch infrastructure dollars further. PPPs are not always the best option. But when they are a good fit, well-designed PPPs have a better track record internationally than do publicly run projects of being completed on time and under budget. Ultimately, PPPs and other innovative financing structures that use private capital can help governments meet public needs with fewer public dollars. Yet in the United States, too few of these projects get off the ground."
—Heidi Crebo-Rediker, "Infrastructure Finance in America—How We Get Smarter," Council on Foreign Relations, March 20, 2014 (www.cfr.org/united-states/infrastructure-finance-america-we-get-smarter/p32597)

"If [mileage based user fees] represents a complete replacement of a well-known, well understood, and cost-efficient mechanism for collection of transportation revenues, concern and opposition to MBUF from the general public as well as elected officials is easy to understand. If this type of major funding system overhaul were absolutely necessary to encourage more efficient use of roadway infrastructure as well as to develop a sustainable revenue stream, working to overcome this opposition would be warranted. However, whether such a complete overhaul is truly necessary is debatable. Existing methodologies with some refinement, such as registration fees and tolling, allow revenue sources to be targeted to revenue needs while also allowing transportation demand management through pricing to be brought into play . . . . Further, while privacy issues are likely solvable, the need for tracking every mile driven is questionable. Unlike major roadways, time of travel and specific route on local streets and rural roadways is usually not a major factor in determining the impact of that trip on the roadway infrastructure. Therefore, determining all the characteristics of every trip made on any part of the roadway network is not a prudent use of resources."
—Chris Swenson and David Ungemah, "Mileage-Based User Fees: A Proposed Business Model Incorporating a System of Solutions," Paper No. 13-4217, Transportation Research Board 2013 Annual Meeting, January 2013

"Unfortunately, when we cling to the 'transit solves congestion' message, we are aiming at a problem we probably don't want to solve. At the same time, we've proposed a solution that, even though it solves the right problem, ends up underappreciated because we promoted the wrong expectations. And that—worst of all—breaks trust with communities we serve. The problem with a downtown street with more cars than it can handle is that more people can't come. So as planners, let's stop proposing transit as the answer to the question of how we relieve traffic congestion and start recognizing it as the answer to how we support great places."
—David Fields, AICP, "Right Answer to the Wrong Question," Planning, February 2014 (www.planning.org/planning/2014/feb/viewpoint.htm)

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


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