Surface Transportation Innovations # 41

Topics include: studies conclude HOT lanes best bet; rail versus truck: Amtrak as obstacle; what if a toll road concessionaire goes belly-up?; toll roads and land values; transportation innumeracy and its consequences; and other news.

In this issue:


HOT Lanes Seen as Best Freeway Improvement

Two new studies, one academic and one by a state DOT, have assessed ways of improving freeway performance and concluded that a HOT lanes approach is the best alternative.

The Arizona DOT last November produced a report on alternative "multimodal" improvements for congested freeways. ("Multimodal Optimization of Urban Freeway Corridors," by Brennan D. Kidd, Final Report 582, November 2006 (available at www.azdot.gov/TPD/ATRC/publications/project_reports/pdf/az582.pdf).

After a survey of what options are being explored or implemented around the country, the study then used data from an existing Phoenix-area freeway, SR 51, to model possible additions to a six-lane freeway based on data from SR 51. The alternatives were: adding a general-purpose (GP) lane each way, adding an HOV lane each way, adding a light rail transit line, adding a HOT lane each way (defined as one allowing HOV-2 to go free), and adding an exclusive bus lane each way. The study quantified changes in performance during peak periods and estimated the annualized costs to implement each one, subtracted any revenues generated, and thus came up with the net annual cost of each. The clear winner was the HOT lanes option, not just by virtue of the lowest net cost by far, but also the lowest net cost per additional person-mile in the corridor. To assuage your burning curiosity, here are those numbers:

    HOT lane: 1.2 to 2.7 cents/person-mile
    GP lane: 1.9 to 4.2 cents/person-mile
    HOV/BRT lane: 2.6 to 5.7 cents/person-mile
    Exclusive BRT lane: 6.6 to 14.7 cents/person-mile
    Light rail line: 16.1 to 35.8 cents/person-mile.

The second study is a continuation of the academic work that draws on the accumulating data on America's first HOT lanes project, the 91 Express Lanes in Orange County, California. I've reported previously on Prof. Kenneth Small's very important findings on the "heterogeneity" of value of time among commuters in that corridor, and this new paper expands on that work. It's "Differential Road Pricing, Express Lanes, and Carpools: Exploiting Heterogeneous Preferences in Policy Design," by Kenneth A. Small, Clifford Winston, and Jia Yan, 2006. (www.aei-brookings.org/admin/authorpdfs/page.php?id=1258)

First, the authors do some further work to quantify both value of time (VOT) and value of reliability (VOR) for people in the SR 91 corridor, as well as the range of these values (the heterogeneity). These are surprisingly large numbers, even for users of the regular freeway lanes but especially for those who choose the 91 Express Lanes. For the latter, the median VOT is $25.51 and the median VOR is $23.78. And the heterogeneity of both is larger than the median values, especially for VOR.

Next, they simulate a number of alternative policies for a freeway like SR 91—all the lanes with no toll, the express lanes as HOV only, as HOT only, as pure express toll (no HOV freebies), and several alternatives that would use high prices on the express lanes and lower prices on the general purpose lanes. Their modeling estimates who would choose which lanes under each scenario, what the travel times would be on the express and regular lanes, etc. Then they calculate the "consumer surplus" created by each option, and break that down by income quartile. In general, they find that the dual tolling model (all lanes tolled, but with premium and regular rates) provide the largest travel-time reductions, but (due to the heterogeneity of people's VOT and VOR) at the expense of big negatives for lower-income commuters.

So then they reason: OK, the first-best policy of dual tolling produced the best congestion reduction, but the impacts on the lower half of the income distribution are unacceptable. So what might a second-best policy look like? What they come up with is a dual-toll HOT policy, under which carpools would be allowed to go free in either set of lanes, with tolls of 19 cents/mile for regular lanes and 96.5 cents/mile for the premium lanes. This simulation shows much less impact on lower-income commuters while preserving most of the large travel-time savings.

One big caution they note in the concluding pages. The greater LA area has relatively high carpooling behavior. For more typical metro areas, with about half LA's rate of carpooling, all the alternatives perform worse on the consumer surplus measure. A pure HOT lanes policy performed best, with a pure express toll lane coming in a close second-best on consumer surplus.

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Rail versus Truck: Is Amtrak an Obstacle?

There is a lot of wishful thinking, as well as some serious research, on the potential of shifting some of the projected growth in goods-movement from truck to rail, to help ease highway congestion. There were sessions on this topic at the TRB Annual Meeting in January, and one paper summarized the forthcoming report of National Cooperative Highway Research Project 8-42. That report evidently provides an overview of the issues and some examples of situations where such shifts might be feasible, but unfortunately for transportation planners, does not attempt to quantify how much of projected, say, container traffic it might be feasible to shift. (The TRB paper is "Rail Freight as a Means of Reducing roadway Congestion: Feasibility Considerations for Transportation Planning," by Joseph Bryan, Glen Weisbrod, and Carl Martland, Nov. 9, 2006. It's on the TRB 2007 Annual Meeting CD-ROM.)

One thing is pretty clear even now: the greatest potential for such cargo shifting is on long-haul routes, generally 700 miles or more. And that's where the need to expand freight rail capacity bumps right up against a serious obstacle: Amtrak. The law creating Amtrak requires that freight railroads accommodate whatever passenger trains Amtrak chooses to operate. Thus, Amtrak's long-distance trains compete for increasingly limited space on long-distance rail routes—the very place where truck-to-rail shifts are most needed.

And lest you think it's just me raising this previously unmentionable subject, I'll refer you to the January testimony of JayEtta Hecker, director of the Government Accountability Office's physical infrastructure team. Appearing before the National Surface Transportation Policy and Revenue Study Commission, Hecker pointed out that rail freight traffic is often caught up in delays caused by the priority given to Amtrak trains at peak times. Congress should give freight railroads, not Amtrak, a bigger say in the future of the nation's rail system. (I'm relying here on Earle Eldrige's article, "A Voice for Freight," in Traffic World, Jan. 29, 2007). Hecker urged the Commission to recommend a new body (like the Base Closing commissions) to look into which Amtrak routes to eliminate to ensure continued expansion of the vitally important rail freight network. "A commission could do what the politicians won't do," she said.

Backing up her position, a recent GAO report on intercity passenger rail found that Amtrak routes of 750 miles or more account for just 15% of its riders but 80% of its financial losses. ("Intercity Passenger Rail: National Policy and Strategies Needed to Maximize Public Benefits from Federal Expenditures," GAO-07-15, November 12, 2006.)

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What If Your Private Toll Road Developer Goes Bankrupt?

One of the virtues of the long-term concession model is the ability to shift risks that are inherent in developing new toll facilities to the private-sector partner. Commonly transferred risks include that of construction cost over-runs, schedule slippage, and traffic & revenue risk. When you consider the awful track record of transportation mega-projects for both cost overruns and inaccurate traffic forecasts (see, for example, Bent Flyvbjerg, et al, Megaprojects and Risk, Cambridge University Press, 2003), such risk transfer can be a huge boon to taxpayers.

A good pre-qualification process that ensures that bids are submitted only from the best-qualified teams gives you pretty solid assurance that the project will get built properly and be opened on schedule. After all, the incentives all steer the firm in that direction: they don't get any revenues until paying traffic starts rolling, yet since they will be in charge of operating and maintaining the project for 35 or 50 or 75 years, they have strong incentives not to cut corners on the design and construction.

But what if, after the new road or bridge or tunnel opens, too few paying customers show up? Early-year traffic shortfalls are not uncommon on new toll projects, but real fiascos—where traffic is only one-third to one-half of projections—do occasionally happen. In such a case, what happens to the public-sector and private-sector partners? Just such a case is unfolding in Sydney, Australia. The Cross City Tunnel, which opened to great acclaim in 2005, has been attracting only 30,000 vehicles per day, compared with projections of 89,000. So its toll revenue is grossly inadequate. As a result, by the end of 2006 the concession company—Cross City Motorway (CCM)—had filed for bankruptcy, unable to make interest payments on its construction debt.

But that's not the end of the world for the New South Wales government (which negotiated the concession) or for Sydney motorists. As Peter Samuel recounts in a January 2, 2007 story at www.tollroadsnews.info, a syndicate of creditors on Dec. 27th appointed a receiver, which has taken control of the tunnel and is keeping it in operation. The receiver posted a statement on the Cross City Tunnel website announcing: "It will be business as usual. Our job is to ensure [the tunnel's] continued smooth operations, including its ongoing maintenance, to ensure continuity of employment, and ensure the business is adequately funded in the long term." A spokesman for the NSW government emphasized that, in accordance with the terms of the concession agreement, there will be no government bail-out or subsidies. Toll rate ceilings and the term of the 35-year concession will not be changed.

The 1.3-mile, four-lane tunnel was designed to allow through traffic to bypass nearly two dozen traffic signals on surface arterials in downtown Sydney, making for a trip time of 2 to 3 minutes instead of between 10 and 20 minutes. It cost $585 million to build, of which $420 million is debt (owed to those creditors) and $165 million was equity put in by the three sponsoring companies. That money is probably down the drain, since debt providers have first priority on the proceeds of whatever refinancing the creditor syndicate can work out. That's the kind of risk that concession deals transfer, so when critics think this business is all about super-profits for investors, they need to remember that in exchange for the possibility of strong returns, those investors take on risks like this case.

Samuel's article points out that of 10 major toll road concessions in Sydney and Melbourne thus far, this is the only one to fail. Several others had below-forecast traffic in their early years but have done well later on. There's a decent chance that with a lower cost structure and a stretched-out debt-repayment schedule, the Cross City Tunnel will prove viable in its second incarnation.

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Do Toll Roads Increase Land Values?

Several times in the past year, state DOT officials have asked me whether there is any proven connection between toll roads and economic development. We have anecdotal experience suggesting that there may be—for example, the opening up of the Dulles Corridor first by VDOT's Dulles Toll Road and later on by the private sector's Dulles Greenway. But I was not aware of any technical papers addressing this issue, until attending the 2007 annual meeting of the Transportation Research Board (TRB) in January. Two such papers provided case studies of the effects of new toll road capacity on land values, one in Dallas and the other in San Diego.

In the San Diego paper, Janusz Supernak and Kathleen Youngberg (San Diego State University) review data collected in two studies of home buyers in the I-15 corridor, site of the country's first conversion of HOV lanes into HOT lanes. The first was carried out in 1999, only one year after the value pricing project went into effect. The second took place in spring 2006. The studies looked to see if faster and more reliable trips on the I-15 HOT lanes had influenced housing choices, making the lower-priced homes near I-15 more attractive than the higher-priced homes near the coast, along the parallel I-5 route. In the 1999 study, the transportation aspect proved to be only a minor factor in housing choice. But by 2006, although still not a major factor, its ranking had increased a statistically significant amount (whereas most other factors were little changed). In that year 43% of respondents rated the existence of the Express Lanes to be either very high, high, or medium in importance in choosing a residence, compared with 29% in 1999.

The other paper, by Sharada Vadali of Texas A&M, reviews 20 years of toll road development in the northern Dallas suburbs. Its literature review found only two prior studies on the economic impact of toll roads, one dealing with Kentucky (1971) and the other from 2001 in Orange County, California. That study, by Marlon Boarnet, et al, found that the new toll roads "created an accessibility premium; home buyers are willing to pay for the increased access that the new roads provide."

Vadali's Dallas findings are similar to those of Boarnet. In Dallas neighborhoods served by the new toll roads (Dallas North Tollway and President George Bush Turnpike), property values are higher than in comparable neighborhoods without that access. The optimal distance from the tollway is between one-quarter mile and one mile. The results applied consistently to detached housing, and sometimes to attached housing as well.

These results are not too surprising, and now at least we have something quantitative instead of just anecdotal.

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Innumeracy About Transportation Leads to Problems

I think it was Will Rogers who lamented that the problem is not so much what people don't know as what they know that just ain't so. That problem plagues discussion of urban transportation, as well-meaning people believe things about transportation costs and performance that just aren't so. And journalists, whom most people rely on for information on transportation, don't seem to know enough to question spurious numbers.

One recent example crossed my screen just the other day. A story from the Houston Chronicle (March 6, 2007) was a long, favorable article about local company Aerobus that is installing its first elevated people-mover in China—and hoping to sell them to cities in the United States. The reporter led off the article with a table, helpfully provided by Aerobus, comparing the cost per mile of heavy rail, light rail, monorail, and Aerobus rail. The latter was shown as $10 to $15 million. The second paragraph of text mentioned the company's initial system, being installed in Weihai, China, for $116 million. The third paragraph noted that the system is 2.7 miles long. I pulled out my calculator and multiplied $15 million/mile times 2.7 miles, getting $40.5 million—about one-third the actual cost of the Weihai system. Yet the reporter never made this calculation or questioned the company's figures.

Here's a second, more complicated example. An article last fall (Oct. 23, 2006) in the St. Petersburg Times (Florida) was a long love affair with Portland as a rail transit model for the Tampa Bay area. Evidently someone in Portland told the reporter to check out GO Transit in Toronto, so she did. And she ended up quoting GO's director of customer service forthrightly explaining that rail transit will not recover any of its capital costs, but is still, he maintained, a good investment. He cited their rail transit ridership (boardings) of 160,000 a day, which he said serves the equivalent of 48 lanes of traffic.

That seemed wildly improbable, so I called GO Transit and spoke with their very helpful people. The calculation was based on the following. Their busiest AM peak hour (7:30 to 8:30) serves 36,000 inbound riders. Their Ministry of Transport told them a freeway lane serves 1500 cars/lane/hour, so dividing the former by the latter gave them 24 lanes. But since you need outbound lanes as well as inbound lanes, double that to get 48.

All right class: what's wrong with this picture? First, a freeway can move at least 2000 vehicles/lane/hour, not 1500. Second, with average vehicle occupancy of 1.2, that's 2400 people/lane/hour. So right away, that's 15 lanes, not 24. Third, the way the comparison was worded implies that one rail line handles as much as 24 freeway lanes. When I asked GO how many rail lines were involved, they told me there were seven, all radial routes from suburbs into Toronto's traditional central business district. So the comparison is now 15 freeway lanes vs. 7 rail lines, quite a different situation. (The rail lines, incidentally, each handle 10-car trains with 160 seats per car.)

Misleading comparisons in the popular media matter, because they shape the views of elected officials who, though they are not transportation professionals, end up making key decisions on policy and spending. For example, in a recent interview (Traffic World, Feb. 19, 2007), Rep. James Oberstar (D, MN), the new chairman of the House Transportation & Infrastructure Committee, declared that rail transit is "where you get the biggest bang for the buck in urban areas in terms of moving people." He went on to say that "A mile of freeway in urban settings costs on average $46 million." [Presumably, four lanes at a bit over $11 million per lane-mile—a realistic figure these days.] By contrast, he said, "A mile of light rail costs on average $26 million and moves three times as many people." Oh really? Federal Transit Administration data that I got from their website in 2005 provided capital cost data on nine recent light rail projects, in places like Charlotte, San Diego, Pittsburgh, and Los Angeles. The average cost per mile was $123.8 million—five times what Oberstar thinks they cost.

So even if a light rail system moved as many people per hour as a four-lane freeway, it would still be vastly more expensive. And that performance is unlikely, at least based on recent projects. For example, LA's new Gold Line (cost: $152 million/mile) last year carried 18,700 people per weekday. If we're generous and assume that 20% of that occurs in its single busiest peak hour, that would be 3,740 per hour. A four-lane freeway in LA would carry over 8,800 people per hour.

Ideas, as philosopher Richard Weaver famously said, have consequences. So do imaginary or greatly misleading numbers about urban transportation. It would a great help if transportation reporters did a little background research so they could question misleading numbers instead of just putting them into print.

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News Notes

More on Edgeless Cities. Wendell Cox provided a couple of useful comments on last issue's article on the "edgeless city" phenomenon. First, he pointed out that Lang's work on this subject uses a very large definition of "downtown" and "edge city" areas, which are far larger than the portions of land used for high-density office development. These large areas are not walkable, and hence would require transit on the scale of New York City's in order to minimize reliance on automobile commuting. Secondly, he notes that the minimum density for rail transit cited in the Pushkarev book I mentioned was based on traditional central business districts that can be served by radial rail transit lines. To comparably serve an edge city or edgeless city via rail would require a similar network of radial lines, which would likely be far beyond the ability of realistic transit budgets to provide.

EPA Diesel Standards for Locomotives and Ships. A major impediment to needed goods-movement capacity investments is environmental concerns over diesel particulate emissions—one of the most health-threatening of all vehicular emissions. With cars and diesel trucks now subject to stringent emission limits, locomotives and ships have become the glaring exception—and hence obstacle to port-related transportation infrastructure improvements. The Environmental Protection Agency last month announced its new particulates standards for ships and locomotives, which EPA hopes will take effect by the end of this year. New locomotive overhaul standards would apply to existing engines from next year, with all new locomotives having to meet tougher standards in 2009. And as of 2014, diesel powered ships would need catalytic converters, as would new locomotives as of 2015.

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