Surface Transportation Innovations #38

Topics include: reducing congestion in Atlanta; Urban Partnership Agreements boost pricing; the power of the concession model; AAA survey supports tolls over taxes; underutilized rail rights-of-way; refining the managed lanes concept; and other news.
In this issue:

How to Reduce Congestion in Atlanta

On November 15th, Reason released the latest policy study from our Galvin Mobility Project, "Reducing Congestion in Atlanta." This is the first of several case studies in which we'll be applying the principles and insights developed during the project to the specific circumstances of congested metro areas of various sizes, in different parts of the country.

Atlanta is already the nation's fifth most-congested metro area, with a travel time index of 1.46. The MPO's long-range plan projects that this will increase to 1.67 by 2030 if the plan is implemented as written. Just as we began the case study last December, the Governor's Congestion Mitigation Task Force announced that all four transportation agencies in the region had agreed to set an aggressive goal of reducing the 2030 index to 1.35�an actual reduction in congestion. This will obviously require major changes in the long-range plan, so we planned our case study to sketch out what kind of changes would be necessary.

Our report (www.reason.org/ps351.pdf) sets forth an integrated approach, going after both incident-related congestion (about 50% of the total) and recurrent congestion. Since a number of worthwhile initiatives on the former are already under way, we focused most of our attention on the latter. And building on David Hartgen's previous modeling work on the role of new capacity in reducing congestion (see Issue No. 34), we had the MPO's traffic modelers run an exercise to estimate the number of additional lane-miles needed by 2030 to eliminate all level of service F (LOS F) conditions on the system. Given limited time and resources, we then focused on where and how that number of lane-miles could be added to the freeway system.

The result, which garnered most of the media attention, was a set of four proposed mega-project additions: a 1,258 lane-mile Express Toll Lane network, two major tunnels to fill in missing links in the freeway system, and a separate toll truckway system. All of this new capacity would be value-priced, both to keep traffic flowing smoothly at LOS C during peak periods and to generate revenue to help pay for the enormous cost of these additions. Our preliminary estimates are that toll-financed concessions could pay for $20 billion of the $25 billion construction cost.

Needless to say, reactions to the study were mixed; the local toll agency welcomed the report, and director Rosa Rountree spoke at our launch event (as did Tyler Duvall from U.S. DOT). The Atlanta Regional Commission (the MPO) issued a five-page critique, which ended up mostly saying they are already looking into most of what we recommended as they begin rewriting the long-range plan to be consistent with the Congestion Mitigation Task Force's recommendations.

You can get an excellent overview/commentary on our report from Peter Samuel's toll roads site. Go to http://tollroadsnews.info/artman/publish/article_1640.shtml. And if you will be at the TRB Annual Meeting in Washington, DC next month, I'm presenting a paper based on this case study. We plan to stay involved and engaged with business and government leaders in Atlanta as they grapple with how best to reduce congestion.


Urban Partnerships: Apply Now

The U.S. Department of Transportation's Congestion Initiative has just posted a Federal Register announcement inviting metro areas to apply to become Urban Partners in aggressively reducing congestion. You can find it here.

DOT plans to select a handful of metro areas, based on applications they submit, to sign Urban Partnership Agreements to implement the "four Ts": Tolling (as congestion pricing), Transit (in the form of BRT), Telecommuting, and Technology (including electronic toll collection and various ITS technologies), all as part of a major effort to reduce traffic congestion. DOT plans to support the Partners via programs such as Value Pricing, ITS, Small Starts, Private Activity Bonds, and TIFIA loans as well as discretionary funding from FHWA and FTA. Applications are due April 30th, with the selection of up to 10 semi-finalists by June 8th and the finalists by August 8th.

Since federal law does not permit the use of pricing on general-purpose lanes on the federal-aid system, the "congestion pricing" emphasis in the program is on managed lanes (including conversion of existing HOV lanes) and area or cordon pricing of downtown surface streets (a la central London). From where I sit, the approach we recommended for Atlanta would be an ideal candidate for an Urban Partnership Agreement: a huge network of managed lanes with regionwide BRT service, enhanced by telecommuting commitments from major employers.


How Much Can Long-Term Concessions Pay For?

Everyone in transportation was stunned in January 2005 when the City of Chicago received a check for $1.8 billion for the 99-year lease of the Chicago Skyway. That was about double what city officials (and many transportation experts) had expected—and there was much speculation that winning bidder Cintra-Macquarie had overpaid. But then in the spring of 2006, the same winning bidder prevailed in leasing the Indiana Toll Road for 75 years—and paid $3.8 billion for the privilege. Again, this amount was about double what the state had figured the toll road would be worth. And it pretty much ended the talk about overpayment.

OK, I hear you thinking, those were easy cases: "mature" existing toll roads, with long traffic histories, etc. What about the much tougher, riskier cases of brand new toll roads�the so-called "greenfield" cases? Would concessions raise more funds than conventional toll finance in this kind of situation, as well? While these are still early days, emerging greenfield toll projects in Texas and Virginia are starting to give us the data to answer this question.

The most dramatic case thus far is the new SH 130 segments 5 and 6, south of Austin, Texas. This is an extension of the conventionally funded Central Texas Turnpike project in Austin, portions of which have just opened to traffic. In June TxDOT announced that the 40-mile southward extension would be developed as a concession, by Cintra-Zachry. The $1.3 billion project would be entirely toll-funded, not requiring any state funding.

That news should already have called attention to the power of the concession model, since the earlier project (Central Texas Turnpike) was able to use toll finance for only about half its costs, despite having significantly higher (urban) traffic than the mostly rural segments 5 and 6. But it was not until last month that I learned what a dramatic difference the concession approach is making on this new project. At the ARTBA Public Private Ventures conference in Washington, this project won an award as a "project of the year." In accepting the award, TxDOT's Phil Russell explained that when the state analyzed segments 5 and 6, they found that conventional toll finance could cover, at best, $600 million of the project's $1.3 billion cost. So they decided to see what the private sector could do, using a long-term concession approach.

The resulting deal is a home run for Texas motorists and taxpayers. Not only is Cintra-Zachry coming up with the entire $1.35 billion project cost, it is also paying TxDOT an up-front concession fee of $25 million and has agreed to a profit-sharing deal over the 50-year term that Russell estimated would give TxDOT another $245 million. And the concessionaire is taking the risks of construction cost overruns, construction delays, and traffic and revenue shortfalls.

Clearly, concessions are going to play a big role in addressing America's need for additional highway capacity. And while it's too early to state that a concession approach can reliably raise double the amount of conventional toll finance, the fact that it can generally raise more for greenfield projects is welcome news. Reason is developing a new policy paper comparing concessions with conventional toll finance, to be published next year as part of the Galvin Mobility Project.


AAA Survey Finds Tolls Beat Taxes

Last month I reported on a detailed survey of California residents on how to pay for improved transportation infrastructure. The surprising (to some) conclusion was that using toll finance to pay for new capacity was the overwhelming top choice, ranking dramatically higher than increasing or indexing fuel taxes.

Now we have national data finding much the same thing. The American Automobile Association did a nationwide survey on transportation funding issues. Encouragingly, they found that 64% of motorists judged traffic congestion to have worsened over the past three years and over 70% think that more money is needed to maintain and improve the system, to keep pace with demands.

When asked specifically to rank various funding options, the top choice (52%) was tolling. And within that broad category, the most popular option (39%) was to toll only new capacity. By contrast, only 21% favored increasing the gas tax, and only 15% supported increasing other taxes (such as sales, income, or property taxes) for transportation.

I find these results to be very encouraging. They suggest that most Americans continue to support the user-pays principle of highway funding, which was once represented by "highway user taxes" on fuel, whose proceeds were dedicated to the highway system. As that connection has been weakened over the last several decades, support for increasing fuel taxes has waned. But now that tolling has evolved into a 21st-century technique that no longer requires toll booths or toll plazas, Americans are coming to see it as a more "pure" form of user-pays.

AAA also released a new "Bill of Rights for The Nation's Motorists on Transportation Funding," which supports tolling and public-private partnerships as long as the revenues are dedicated to transportation purposes and higher charges lead to improved service. (www.aaaexchange.com/Assets/Files/20061251134500.MotoristsBillofRights.doc)


Rail Rights of Way: An Underutilized Resource for Urban Transport

We commonly hear that it's not feasible to add highway capacity in urban areas because there is simply no room left�at least not without enormously costly and politically unacceptable bulldozing of neighborhoods as was done in the early urban Interstate era. Yet as Peter Samuel pointed out in our recent "Innovative Roadway Design" study (www.reason.org/ps348.pdf), the consolidation of railroads and the general shift from rail to truck have left numerous freight rail lines either abandoned or with very little traffic. And some of these rights of way (ROW) are in urban areas where they could be used for innovative roadways.

No, I'm not talking about eight-lane freeways. Rail ROW is typically 50 to 100 feet wide. That is plenty for a HOT/BRT roadway (up to four 11-foot lanes plus some shoulder and a central Jersey barrier) or a four-lane toll truckway. Yet I'm not aware of any metro area that is looking seriously at the potential of rail ROW for such purposes. Instead�incredibly�they are being studied only for light rail lines, bike paths, and urban hiking trails.

Here's a case in point. In Seattle, there's a 47-mile stretch of BNSF rail ROW that parallels congested I-405 up the east side of Lake Washington. A news story on Oct. 26th reported that the Port of Seattle is considering acquiring the ROW from the railroad and then trading it to King County in exchange for the latter's Boeing Field airport. (http://seattlepi.nwsource.com/local/290057_rail26.html) So far, so good�the Port certainly has major goods-movement problems, and the rail ROW could help address them. But the thrust of the story was that the Port would convert the ROW into a "multiuse trail."

This is truly amazing. Two years ago Washington State DOT released a study of a possible north-south truck tollway to take some of the load off of hugely congested I-5, the state's principal north-south artery. It recommended an initial 102-mile route from Chehalis, on I-5 about 50 miles south of Tacoma, going north to I-90. That project would cost $4.6-$6 billion and could recover at best 60-80% of its costs from toll finance, according to the study. Critics pointed out that truck traffic is much higher in the greater Seattle area than on the southern portion, and suggested that a shorter alternative to I-5 on the eastern side of Lake Washington would be far more viable. That pretty much describes this BNSF right of way. That converting this irreplaceable ROW into a multiuse trail could be entertained suggests that at least some of the powers that be in the Seattle metro area can't be serious about reducing congestion in the region.

Don't get me wrong. Hiking trails and bikeways are nice things, and they can improve the quality of life of urban regions. But 100-foot rights of way are so scarce and so valuable for serious transportation that it's the height of irresponsibility not to consider them for roadway purposes in metro areas that are being strangled by congestion. When it comes to alternatives like this, it's inexcusable to let public officials claim that there is no room to add highway capacity. ROW is available. If it's used for trails or bike paths instead of congestion relief, that's a choice, and one that should be held up to full public scrutiny and debate.


Managed Lanes: What Should We Maximize?

In issue number 36, I wrote about a favorite subject of mine these days: the two very different models for priced managed lanes. Model 1 sees them as HOV lanes that incidentally sell any excess capacity to willing drivers (the San Diego I-15 approach). Model 2 sees them as congestion-relief-for-a-price lanes that incidentally give a break to certain types of high-occupancy vehicles (the 91 Express Lanes model). I argued that the difference between these two models is profound, and weighed in on the side of Model 2.

The most interesting response came from a government economist who disagreed. He wrote that "if demand is so high for car-pooling that the car-pools fill up the capacity of the managed lane, then you should give all the capacity to car-pools, because that maximizes the passenger throughput of the lane." He went on to define maximizing person throughput as maximizing the efficiency of the roadway.

This is a crucially important point for all of us in transportation to consider. The economist suggested that my preference for Model 2 is based solely on the need to maximize toll revenues, by charging most of the vehicles using the managed lane. But my point is broader than that. It relies in part on the extensive work of economist Ken Small at UC Irvine, who has spent a decade studying travel behavior on the California HOT lanes. What Ken has found is that highway consumers are not homogeneous. It's not just that different individuals in a corridor have different values of time. Even during rush hours, the same person will use the HOT lane one day and not use it on other days. This means that her value of time (and value of trip reliability) differs from trip to trip, even for trips that are ostensibly the same (e.g., the 7 AM Monday commute).

Therefore, a managed lane that charges all customers the market value of their trips (time plus reliability) maximizes the utility of those customers. The higher the total revenue such a lane produces, the greater the value of the transportation benefits it is providing. By contrast, the goal of maximizing the number of people per lane per hour implicitly values all those trips equally, and at a low value (the extra time and convenience of being in a carpool).

Now as a matter of policy and politics, I think we can come close to maximizing both, with the kind of Model 2 managed lanes I've been advocating. A complete network of value-priced lanes, overlaid on a congested metro area's freeway system, holds the potential to carry as many people/lane/hour as a comparable set of HOV-2 lanes. That would be the case if the existence of the priced network spurred the rebirth of company-sponsored vanpooling (which I think it would) and if the network were developed in conjunction with the region's transit providers as the guideway for regionwide bus rapid transit (BRT) service (as it should be). If even 10% of the vehicles using such a network during peak periods were vanpools and express buses�with all the others paying the value-priced toll and carrying, say, 1.2 people on average�it's quite plausible that persons/lane/hour would be higher than on a set of HOV-2 lanes, especially if there were no controls on the number of HOV-2s allowed onto the HOV lanes.

I welcome further thoughts on this very important issue.


Quotable Quotes

"We should begin by identifying important customer needs in the arena of transportation. We may think we already know what they are, but our ideas are really just guesses because we have such little factual information about what transportation customers themselves see their needs to be. We can't expect to develop a truly effective transportation system by relying on mere guesswork."

—Joseph M. Giglio, Northeastern University, in "Unanswered Questions: Developing a National Transportation Strategy," presentation to the National Surface Transportation Policy and Revenue Commission, Sept. 20, 2006.

"The transportation public-private partnerships taking shape in Texas today reflect a progressive and democratic tradition of pragmatic public works that have served working people well and driven the state's prosperity. . . . In a time when some industries are sending American dollars and jobs overseas, the Trans-Texas Corridor project achieves just the opposite — it attracts billions of foreign dollars to the state and creates thousands of jobs right here at home. It is, in a sense, reverse outsourcing."

—Former Congressman Dick Gephardt, San Antonio Express-News, Nov. 4, 2006.

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





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