Public Works Financing

Time for a National Focus on Freeway Congestion

Convert HOV lanes to HOT lanes

If you live in one of America’s 20 largest urban areas, traffic congestion is very likely one of your biggest problems. According to the latest Urban Mobility Report from the Texas Transportation Institute, Americans in just those 20 cities wasted $56 billion in time and fuel, stuck in congested traffic, in 2002.

That an economic waste of this magnitude is simply accepted, in the world’s richest country, is outrageous. Were an equivalent market failure taking place in telecommunications, entrepreneurs and financiers would be falling all over each other offering people solutions. Yet for the most part, our public-sector road owners shrug their shoulders and tell us to put up with it. And for the most part, opinion leaders go along.

I can think of two reasons for this defeatist attitude. One is the growing acceptance of the environmentalists’ mantra that “We can’t build our way out of congestion.” The implication is that it’s therefore pointless to try even outside-the-box approaches, as opposed to simply laying down more ever more concrete and asphalt. The other reason is that the public sector simply doesn’t have the money; it’s all it can do to keep the existing highway system adequately maintained, let alone embark on multi-billion-dollar programs to add capacity.

But that pessimistic assessment is challenged by the emergence of successful forms of value pricing, as demonstrated by the private sector’s SR 91 Express Lanes and the public sector’s I-15 Express Lanes, both in California. Both showed that variable pricing can keep lanes free-flowing at the busiest rush hours, and that on any given day, significant numbers of people are willing to pay a premium price for much-improved mobility. And the SR 91 project demonstrated that the revenues from such pricing, at least in that case, could cover the cost of building and operating brand-new urban freeway lanes.

Two years ago, Ken Orski and I generalized the idea with our proposal for HOT Networks – a set of interconnected premium lanes, to be added to a congested freeway system by converting any existing HOV lanes to HOT and using toll revenue bonds to fill in all the missing links and flyover connectors. We pointed out that a seamless network of uncongested lanes would be a perfect match for regionwide express bus service, thereby marrying two relatively new transportation concepts: HOT lanes and BRT (bus rapid transit). We attempted to quantify what it would actually cost to build out such networks in eight of the most congested metro areas, and how much of that capital cost could be covered by toll revenues. We found that the costs ranged from $2.7 billion to $10.8 billion, and that toll revenue bonds could pay for between 43% and 93% of those costs.

Since our report was published, the metropolitan planning organizations in both San Diego and the San Francisco Bay Area have revised their long-range transportation plans to include such networks. And studies are under way on similar concepts in Dallas, Denver, Houston, Miami, Minneapolis/St. Paul, and the Washington, DC metro area. This has been a bottom-up effort, without any national goals about busting congestion (though important help has been provided by the FHWA’s tiny Value Pricing Pilot Program).

As Congress turns once more to completing its work on reauthorization of the federal program, could it help this grass-roots effort to succeed? It certainly could, not by diverting limited highway funds from other areas to some kind of new HOT Networks program, but simply by fine-tuning various provisions to be sure that they don’t preclude the development of such networks.

The first such requirement is to reject a provision in the 2004 House-passed bill (the FAST Lanes section) that would require tolls to be removed once the initial construction costs have been paid off. A HOT lane or HOT Network is sustainable on a long-term basis precisely because of the ability to use variable pricing at as high a level as necessary to manage traffic flow, indefinitely. Arbitrarily removing the pricing would destroy the functionality of such facilities.

The second requirement is to ensure that such networks can be financed, by rejecting mandates that would undercut their revenue potential. Among other things, that means:

  • Permit revenues from converted HOV lanes to become part of the toll revenue stream that pays for the new HOT lanes and connectors; this means not siphoning off those revenues to subsidize transit services.
  • Don’t mandate revenue-reducing measures like discounts for low-income users or free access for hybrids or ultra-low-emission vehicles.
  • Don’t require car-pools to get free passage; leave eligibility rules to be determined at the local level, as long as access for transit is assured.

The third requirement is to get transit’s role right. Despite the urging of environmentalists and transit advocates that “surplus revenues” be used to subsidize bus service on such networks, every study I’ve seen suggests that because the capital costs of building such networks is so high, there will be no surplus revenues. (If tolls only cover half or two-thirds of the capital costs, how could there be?) Indeed, the Federal Transit Administration should see HOT Networks as such a good deal for transit (the equivalent of an exclusive busway being provided to the transit agency to use at no charge!) that FTA’s New Starts program should make bus-related capital expenditures for a HOT Network eligible for New Starts “full funding grant agreements.” That way, FTA New Starts funds could pay for things like park & ride lots and direct-access ramps that will enable BRT service to take full advantage of the Network.

In last month’s column I cited Assistant DOT Secretary Emil Frankel’s dismay over the lack of vision in Congress’s reauthorization proposals. A serious attack on urban traffic congestion, by enabling HOT Networks, would give this reauthorization a serious dose of vision.

Robert W. Poole Jr. is director of transportation studies and founder of the Reason Foundation.

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





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