Surface Transportation Innovations # 44

Topics include: Bus Rapid Transit on inexpensive guideways; fragmentation of our highway system?; continuing battles over ports access; pension funds and transportation investment; ethanol and ozone; incentives work to repair California bridge; and other

In this issue:


BRT without Billion-Dollar Exclusive Guideways

The evidence keeps growing that Bus Rapid Transit can provide very high quality transit service at a lower capital cost than light rail or commuter rail transit. But many people believe that BRT can be fully competitive with rail only if it operates on an exclusive guideway (such as the relatively new Orange Line busway in Los Angeles). Providing such guideways is very expensive, cutting into the capital cost advantage of BRT. But the real problem isn't the cost, per se. Rather, it's the fact that so much of the capacity of an exclusive busway is wasted, because even in corridors where demand will support 60 buses/hour (the equivalent of 180 autos/hr.), that's less than 10% of the capacity of a highway lane at Level of Service C. The rest of that very expensive lane stays empty at rush hour, when more capacity is desperately needed.

In many freeway corridors in fast-growing metro areas today, right of way is being reserved for future rail systems. Here in Florida, that's true of at least two corridors where express toll lanes are also being planned: on I-75 in Collier and Lee Counties and on I-595 in Broward County. Most transportation planners (and public officials) still haven't grasped the synergy between priced lanes and BRT: if you build express toll lanes (ETLs) in a corridor, and use value (i.e. market) pricing, that gives you an uncongested guideway for BRT service. You don't also need light rail in the same corridor. You can even guarantee a fraction of the total lane capacity for BRT service, as is being done on the new managed lanes on the Katy Freeway (I-10) in Houston.

The usual objection to this is that a rail line will carry more people than a busway. Not necessarily. In a typical urban/suburban freeway setting, where transit demand is generally not high, the bus-on-busway offers greater flexibility, since the same vehicle can pick up people from various origins (bus stops), save a lot of time on the high-speed, non-stop busway portion of the trip, and at the other end make a number of stops at various destinations. Door-to-door, this can be time-competitive with driving in congested lanes, or with the multi-modal trip involving a car or bus to the rail station, waiting for the train, and then getting from the destination station to the actual destination.

But what about a high-demand corridor, such as from O'Hare airport to the downtown Chicago Loop? Peter Samuel provides a fascinating thought experiment on this corridor on his website (www.tollroadsnews.com/node/166). What if the Chicago Transit Blue Line train were converted to a BRT/ETL roadway? Before you recoil in horror, take a look at the numbers in Peter's discussion, which suggests that the roadway alternative could move far more people per hour than the current rail line. It looks as if the ridership of the Blue Line trains, if shifted to BRT, would use only 1/8 of the capacity of the lane in each direction, meaning the rest could be used for vans, express buses to/from hotels, and ordinary cars—anyone willing to pay a market price for uncongested service. (Among the other caveats in this calculation is Peter's assumption that the 14 current Blue Line stops would be relocated off-line for the replacement buses, so that nonstop express services to and from the airport would be possible.)

I don't know if actually replacing the Blue Line with a BRT/ETL route to O'Hare would be taken seriously. But there are some exclusive busways (e.g., in Miami and in Pittsburgh) that have lots of unused capacity; they are certainly candidates for possible conversion to BRT/ETL roadways. More important, in places where right of way in freeway corridors is being preserved for rail lines, transportation planners should be looking seriously at the BRT/ETL alternative instead. In some corridors where HOT lanes are being planned (e.g., the Beltway around Washington, DC, in northern Virginia), it looks as if the toll revenues can fully support the addition of these lanes. In other places, some combination of state and federal highway funds plus toll revenue finance will be needed. The important point is, at a time when there are far more applicants for Federal Transit Administration New Starts rail grants than there is funding (and when FTA is trying hard to get BRT taken seriously, and has funds available for buses and stations), those metro areas that shifted to BRT/ETL could get more transit improvement sooner—and important congestion relief for motorists, too.

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Will Toll Concessions "Fragment" Our Highway System?

One of the main arguments raised by Reps. Jim Oberstar (D, MN) and Peter DeFazio (D, OR) in their recent letter warning state officials of the perils of toll concessions was the specter of "fragmenting" our national highway system. This is the same argument being put forth repeatedly by former Gov. Bill Graves, president of the American Trucking Associations. I address this concern at some length in my column in the May 2007 issue of Public Works Financing (www.pwfinance.net). Among the points I make there is that the Interstate highways are already owned and maintained by 50 different states, and that many of the most important eastern Interstates were funded with tolls and are operated by the feared "patchwork quilt" of numerous different toll agencies. But somehow the Interstate system works.

Here I want to address more specifically toll road systems developed and operated by the private sector under long-term concession agreements. The most sophisticated toll concession system in the western hemisphere is in Chile. Santiago now has a 97-mile urban tollway system, developed and operated by four different concessionaires (with a fifth project—a 2.6 mile tunnel—under development). While the government required them to use compatible transponders for electronic toll collection, the companies went the extra mile in terms of interoperability. In the process of setting up their joint system to manage transponder accounts (so that each company can bill the correct users for the use of its own system), they also set up an interoperable system for non-transponder users. The Santiago system is fully open-road, with no toll booths at all. As on the Melbourne, Australia CityLink toll road, non-account-holders can arrange for a day-pass, using video tolling, to use the road (as I did in my Avis car in Melbourne back in November 2000). According to a report on Tollroadsnews.com last December, consultant Salahdin Yacoubi helped them use traffic pattern analysis to devise common travel patterns by day pass users and develop a revenue sharing arrangement for the new Common Day Pass.

Spain's government worked with its toll concession companies to develop a single unified transponder tolling system, called ViaT. Italy's leading toll company, Autostrade, developed the standard system now used by all other Italian toll concessions. Fast-growing Ireland, which has mostly concessioned toll roads but also the city-run Dublin Port Tunnel, is this month introducing a new nationwide transponder system. Similar efforts are nearly completed in Australia, another leader in urban toll road concessions.

In short, it is both very feasible and in the interest of the various toll concession companies to cooperate with each other, and with government, to make their toll systems standardized and interoperable. The concern that concessions will lead to fragmentation of our Interstate highway system is unfounded.

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When Is a Port User Fee Not a User Fee?

The hugely successful ports of Long Beach and Los Angeles risk strangling on their own growth, if they don't come up with greater capacity for getting containers to and from the ports. As I noted in Issue No. 42, reducing diesel emissions has become a precondition for getting approval to make major transportation improvements for port-related goods-movement. But recently several alleged solutions have run into major opposition from shippers, who ultimately pay the bills for goods movement.

The solution du jour seems to be container fees. Everybody wants to impose them, but unlike tolls that are charged to use a specific road or bridge, the container fees proposed by legislators and the ports themselves would go into a large pot for generalized environmental and infrastructure projects related to goods movement—a politician's delight and a user's nightmare. But instead of just bitching about this, the shippers are coming up with sensible alternatives. Two years ago, the Waterfront Coalition (mostly shippers and other supply-chain firms) produced a white paper on a "National Marine Container Transportation System" (May 2005, available at www.portmod.org). It called for sensible changes in harbor trucking and rail operations, made specific suggestions for port-connector highway and intermodal rail improvements, argued for assisting drayage truckers in replacing polluting diesel rigs, and endorsed truck-only lanes and tolling.

More recently, on March 26, 2007, the Coalition joined forces with the Association of American Railroads, the National Retail Federation, the Pacific Merchant Shipping Association, and the Retail Industry Leaders Association to issue a white paper specifically on the California ports infrastructure problem. It endorsed true public-private partnerships for transportation projects, funded by project-specific user fees. And it proposed its own solution to the drayage-truck modernization, with a privately administered mitigation fee (that would add $100-150 to the cost of each drayed container operation). Unlike legislators' proposed fees, this one would be used solely to bring about the replacement of owner-operators' pre-2007 diesel trucks. Unlike the LA ports' own Clean Air Action Plan that would wipe out owner-operators in favor of Teamster-unionized fleet operations, the shippers' plan would allow the owner-operators to remain in business.

The new white paper also puts forth a sensible set of principles for private funding and public-private partnerships, noting that "tolls are an important part of the mix of funding solutions" and that "market mechanisms [must] be put in place to ensure that tolls on trucks are included in freight rates."

I've been saying for several years that there's a bizarre disconnect between truckers and shippers over the issue of tolling. Trucking groups continue to maintain that they cannot pass along tolls to shippers, while shippers repeatedly assert that they are ready, willing, and able to pay more to get better performance from the highway system, via tolls. It looks to me that this disconnect is in the process of being bridged, at least in the port-access segment of goods movement.

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Pension Funds: the Potential X Factor in Infrastructure Investment

The United States has a huge unfunded backlog of infrastructure investment needs: highways, bridges & tunnels, electricity transmission lines, port facilities, water and wastewater systems, etc. And U.S. public-sector pension funds possess over $2 trillion in assets. Is there a possibility of linking these two facts?

That has already been going on in Canada. At least three major public-employee pension funds there have been investing in infrastructure for at least five years now. The $41 billion Ontario Municipal Employees' Retirement System (OMERS) was one of the first. About 10% of its asset mix is now invested in infrastructure, including part ownership of the Detroit River Rail Tunnel. Borealis Infrastructure, which manages such investment for OMERS, says they are willing to take the risk of investing in new construction, not just acquiring existing infrastructure. The $84 billion Ontario Teachers' Pension Plan began such investments in 2002. Like OMERS, most of its investments thus far have been in Australia and Britain, where government policy favors long-term concessions. But last fall, Teachers announced its first Canadian acquisition: a $2.4 billion container terminal on the west coast. It is also buying the New York Container Terminal on Staten Island, its first U.S. infrastructure investment. The Canada Pension Plan Investment Board owns AWG, the parent company of Britain's privatized Anglian Water.

A recent report by Christina Currier of Texas DOT looked at the prospects for Canadian and U.S. pension funds to invest in U.S. transportation infrastructure. It's titled "Transportation Infrastructure Investment Opportunities for State Government Pension Plans" (www.dot.state.tx.us/publications/government.htm). Among its findings is that the two giant California funds—CalPERS and CalSTRS--are seriously considering investing about 5% of their assets (which would mean $15 billion) in California infrastructure projects, including water, toll bridges & tunnels, and energy transmission projects. CalPERS staff have recommended that infrastructure be included as a new asset class, and its chief investment officer, Russell Read, has mentioned toll roads as one type that might qualify. CalSTRS has a task force at work investigating infrastructure as a new asset class.

As Currier puts it, "Infrastructure investment, particularly in transportation, has the potential to provide strong, steady returns, and pension plan administrators should embrace this new asset class." If they do, this move will have more than just financial implications. It could also change the political dynamics of infrastructure "privatization." U.S. labor unions have been wary at best, and at times actively opposed to, increased private investment in infrastructure that has traditionally been government's domain. If U.S. public employee pension funds follow the lead of their Canadian counterparts, we can hope that union leadership will take a more objective look at public-private partnerships. Since most such deals will involve the rebuilding of worn-out existing infrastructure or developing new facilities to cope with growth, expanded investment means more jobs, both in building and operating/maintaining the expanded facilities. And that should be good for their members.

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Ethanol and Ozone

Much has been written about the inanity of the ethanol craze, with most research finding that corn-based ethanol offers no net energy or CO2 savings, when the whole production cycle is considered. But now comes news of possible negative environmental effects from using ethanol as a motor fuel.

In April, the peer-reviewed online journal, Environmental Science & Technology, published a paper by Mark Jacobson of Stanford University. He modeled a scenario in which all U.S. vehicles ran on the mostly ethanol E85 blend by 2020, and found that one of the unexpected results would be increases in smog-forming ozone in urban areas, especially in the Northeast and Los Angeles. His computer models of air flow and emissions found that the worst impacts would occur where smog is already the most severe, such as L.A. The underlying reason is that ethanol produces more hydrocarbon emissions than gasoline, and it's the interaction of hydrocarbons and nitrogen oxides that leads to ozone formation. Jacobson estimated that about 200 more people would die each year due to the increased ozone levels, a modest increase from the 4,700 current annual deaths. But that's hardly consistent with ethanol's reputation as a "green" fuel.

Corn-based ethanol was already a loser of an idea. These additional findings provide an additional reason for government to stop subsidizing its production.

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Incentives Fix Bay Area Freeway

Kudos to the California Department of Transportation (Caltrans) for once again bypassing normal procedures and providing strong financial incentives to fast-track repairs to a critically important portion of a freeway.

On April 29, a tanker truck accident led to a spectacular fire that collapsed a freeway connector on I-580 near the San Francisco/Oakland Bay Bridge—an interchange area known as the MacArthur Maze. Local media expected massive traffic snarls for months (or maybe even years), as the state went through the normal process of design-bid-build to get the connector replaced. Instead, Caltrans went into emergency mode, with bids in hand 9 days later. The low bid came from C. C. Myers, Inc.—the same firm that won the bidding to fix the earthquake-damaged section of the Santa Monica Freeway (I-10) in Los Angeles, after the 1994 Northridge earthquake.

Caltrans estimated the cost at $5.2 million—and offered up to $5 million ($200,000/day) in incentives for getting the I-580 connector in place ahead of schedule. Meyers' winning bid came in at just $867,075. The goal was to complete the work on or before June 3. As it turned out, the job was done, and the ramp opened to traffic, by May 25—beating the target date by 10 days (equal to $2 million in bonus pay).

Well-done, Myers, and well-done, Caltrans.

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News Notes

Double the Interstates. In a new report on future surface transportation needs, the American Association of State Highway and Transportation Officials (AASHTO) set eight major goals, which it is passing along to the National Surface Transportation Policy and Revenue study Commission. Among the eight recommendations I was pleased to see adding nearly as much capacity to the Interstate Highway System as it already has, over the next 50 years. Given the expected growth in population, goods-movement, and affluence, we must expand the capacity of our most important transportation network to keep pace.

Earning Interest for Transportation. Unlike the City of Chicago, which used the up-front lease proceeds from the Chicago Skyway for general government purposes, Indiana Gov. Mitch Daniels made a point of using all the lease proceeds from the Indiana Toll Road for highway investment. Specifically, those monies were dedicated to fully funding a 10-year highway modernization program called Major Moves. At the end of May, the state treasurer announced that the bulk of the $3.8 billion proceeds are steadily earning interest of around 7%. Only about $750 million is in short-term accounts, available for near-term Major Moves projects, and that money is earning about 5.3% per year. Indiana's approach has inspired Pennsylvania Gov. Ed Rendell, who is aiming to use the proceeds from leasing the Pennsylvania Turnpike to create a permanent transportation endowment fund, the earnings of which would be in the vicinity of $1 billion per year.

New Reports of Note

  • "Cost to the Taxpayers of Obtaining Architectural and Engineering Services: State Employees vs. Private Consulting Firms," a useful new report prepared by former California Legislative Analyst William G. Hamm, for CELSOC (Consulting Engineers and Land Surveyors of California), April 9, 2007. (www.celsoc.org)
  • "A Solution for Highway Woes? Consider Road Tolls," Robin Lindsay, C.D. Howe Institute, Toronto (www.cdhowe.org/pdf/commentary_248.pdf)

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Quotable Quote

"I'm not willing to take anything off the table [re highway funding sources]. Once you start seeing the price tag of what we're going to have to spend over the next 20 years, having private equity money for certain projects may look pretty good if you can maintain some control. So I don't think we should rule out toll roads, user fees, and private investment until we have some idea of the magnitude of the investments we're going to have to make."
--Doug Duncan, CEO, Fedex Freight, in Traffic World, May 14, 2007.

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





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