Surface Transportation News #125

The make-believe transportation budget proposal, Good news on highways and bridges, More elevated express lanes in Tampa area

In this issue:

The Make-Believe Transportation Budget Proposal

The Administration has released a four-year, $302 billion bill to reauthorize the federal surface transportation program. I wish I could find something good to say about the proposal, but I fault it both on substance and on lack of realism.

Let's take the second point first. Because it calls for such a major increase in spending, the President had to propose some way to "pay for" a total cost that's more than twice what federal highway user taxes will bring in during the next four years. The rabbit out of the hat is $150 billion in one-time "transition revenues" from comprehensive business tax reform. But as a growing number of Washington observers have pointed out, no significant tax reform is at all likely this year. And that is especially true since the President has removed from the Senate the leading congressional advocate of comprehensive tax reform, Sen. Max Baucus (D, MT), and is sending him as Ambassador to China.

And there's a second reason why this bill is "the least relevant Presidential budget request since the creation of the congressional budget process in 1975, if not ever," as assessed by Jeff Davis of Transportation Weekly (Feb. 28, 2014). Davis points out that Congress just a few months ago enacted the Ryan-Murray Bipartisan Budget Act of 2013, which "effectively pre-enacted a congressional budget plan for fiscal year 2015." Under Ryan-Murray, the spending totals in the Congressional Budget Office spring baseline automatically take effect and are being assigned to the relevant committees to govern their spending for FY 2015. So what is the point of this budget document? I'll defer again to Davis's trenchant assessment: "The answer from the White House appears to focus [on] using the budget as a political document for the fall campaign. The more serious proposals in past budgets designed to garner bipartisan support and lower future deficits (like chained CPI reform, for example) have been jettisoned, while base-rallying spending programs are likely to be prioritized."

Let's move on to the substance of the proposal. Like previous Administration transportation budget proposals, it provides a small increase for basic highway programs (average annual increase of 6%) and huge increases for the Administration's favorite causes, such as mass transit (up 19% per year) and passenger rail (up 60% per year). It would also significantly increase discretionary programs: doubling the amount of TIGER grants, creating a new discretionary freight program, expanding the discretionary portion of FTA's budget, and creating a new program of "incentive grants." This is basically substituting administrative earmarking for the now-banned congressional earmarking. The alternative is to go back to objective formulas for highway and transit funding.

But even worse, from my perspective, is the intention, yet again, to put the passenger rail and transit New Starts programs into what is still called the Highway Trust Fund (and is still funded by only motorists and truck operators), turning it into a Transportation Trust Fund. That would further undermine the users-pay/users-benefit principle on which U.S. highway funding has been based since the invention of dedicated motor fuel taxes by state legislatures in the 1920s.

And while further expanding the role of the federal government in transportation—still without coming up with a sustainable funding source for this larger role—the proposal virtually ignores the desire of governors, state legislators, and state DOTs to use a growing array of innovative financing and procurement tools to take responsibility for a larger share of their transportation needs. There is not a word in the proposal about increased tolling flexibility for states, or about removing (or at least increasing) the $15 billion cap on tax-exempt private activity bonds used for public-private partnership projects. The only gesture in this direction at all is keeping the TIFIA program at the size it was increased to by MAP-21.

My only consolation is that nearly all of this grandiose proposal will likely be ignored by Congress.

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Some Good News on Highways and Bridges

A lot of the push for increased federal transportation funding has been generated over the years by projections from the Federal Highway Administration and two national commissions, based largely on numbers from FHWA's biennial Conditions & Performance report. The latest C&P report, 2013 Status of the Nation's Highways Bridges, and Transit Conditions and Performance, was released late in February and contains some welcome good news. Not only have highway and bridge conditions continued to improve, but total federal, state, and local highway and bridge capital spending has finally reached a level sufficient to maintain current conditions, if present spending levels are maintained. Improving both conditions and performance (i.e., eliminating the backlog of deficient bridges and achieving significantly reduced congestion) will still require increased investment—but not as much as estimated in previous reports.

First let's look at the numbers. Because of the time it takes to collect and analyze the data and run FHWA's models, there's a several-year lag between the data used in the C&P report and the year it comes out. This 2013 report relies on 2010 data. Total U.S. highway and bridge capital spending in 2010 was $88.3 billion in regular funding plus $11.9 billion in stimulus (Recovery Act) money. The report's new estimate of the annual amount needed to maintain current conditions and performance is $65.3 billion to $86.3 billion. As far as I know, this is the first time in the history of the C& P report that actual capital spending exceeded what FHWA estimates as needed to keep things from getting worse. That is very good news. (The reason for the range in the estimated annual investment is that two different projections of annual growth in vehicle miles of travel—VMT—were used). I discuss below why I think the lower estimate is the better one.

What accounts for this major change? First, highway construction costs have come down, FHWA reports, by 18% between 2008 and 2010, so each billion dollars goes further than it used to. Second, for the 30-year projection on which annual investment needs are based, the expected rate of growth in VMT is lower than what FHWA has used before, reflecting the apparent maxing out of VMT per capita, meaning that future VMT growth will be driven by some combination of population growth (personal travel) and economic growth (goods-movement).

And as noted in a Reason Foundation report by David Hartgen last year, U.S. highways and bridges are not "crumbling." As the C&P report documents, highway capital spending increased by 36.6% in real (inflation-adjusted) terms between 2000 and 2010. And that has led to significant improvements. For example, on the entire federal-aid highway system, the percentage of pavements with "good" ride quality increased from 42.8% in 2000 to 50.6% in 2010. And on the more important subset defined as the National Highway System, the fraction "good" went from 48% in 2000 to 60% in 2010. Structurally deficient bridges on the NHS decreased from 6% in 2000 to 5.1% in 2010. The report includes a lot more data along these lines, including a 21.6 decrease in the annual number of highway fatalities.

But the highway system still includes very serious congestion in urban areas and on some long-distance Interstates. What will it take to improve things? FHWA models a number of scenarios, but I will limit this discussion to the overall highway system, not the subsets like NHS. Two different "Improve" scenarios are employed: one based on implementing all improvements with a benefit/cost ratio of 1.0 or greater and the other requiring a higher B/C threshold of 1.5 or greater. Both were run for the two different estimates of annual VMT growth: 1.36% and 1.85%. Given political funding realities, the B/C of 1.5 is a more realistic threshold, and as I explain below, the lower VMT growth rate is far more defensible. So for that set of model runs, the average annual highway and bridge capital investment is estimated at $93.9 billion. That compares with the actual (not including stimulus funds) total in 2010 of $88.3 billion. That is an increase of just $5.6 billion. For once we have a projection of needed investment that is within the realm of actually being possible!

Now let's get back to the estimated VMT growth rate. The higher one is based on a set of forecasts provided to FHWA by state DOTs. The lower one is FHWA's own estimate, which FHWA says is "based on a continuation of regional trends over the last 15 years." Even that low estimate is being trashed by anti-highway groups like PIRG and Streetsblog USA. Their material routinely conflates the widely acknowledged peaking of VMT per capita with an alleged halt in total VMT growth. But there are good reasons to expect that continued economic and population growth will lead to continued growth in total VMT—albeit at a lower rate than in the 1960s through 1990s. A rigorous analysis by Starr McMullen and Nathan Eckstein of Oregon State University found a strong causal relationship between economic growth and VMT growth (Transportation Research Record No. 2297, 2012, pp. 21-28). A VMT forecasting model developed by DOT's Volpe Center in 2011estimated VMT growth rates state by state, for light vehicles and heavy vehicles. I used their approach in my 2013 Reason policy study "Interstate 2.0." My state numbers (unweighted by population) averaged 1.19% for light (personal) vehicles and 2.53% for heavy vehicles (trucks), and since light vehicles account for nearly 90% of total VMT, the weighted average was 1.33%—very close to the C&P report's 1.36%.

And contrary to PIRG and other anti-highway folks, total VMT has begun growing again, increasing 0.6% last year as the economy finally emerges from the worst recession since the Great Depression. And that increase has been showing up in data collected and reported by INRIX. Its 2013 "Traffic Scorecard Report," released March 5th, found that traffic congestion increased by 6% in 2013, with the largest increases in metro areas whose economies are doing the best (e.g., booming San Francisco up 13% and Austin up 9%). These congestion increases are a leading indicator that VMT growth is resuming.

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Two More Elevated Managed Lane Projects in Tampa Area

The "freeway revolt" in the 1970s and '80s left an incomplete network of expressways in many urban areas. And with today's urban development and very high land values, condemning enough right of way to fill in the missing links seems both economically and politically infeasible. But that's not the only alternative. Creative transportation planners in recent years have proposed either elevated or tunneled alternatives as (admittedly costly) alternatives for these missing links.

Far less costly than tunneling is elevated construction using state-of-the art techniques (such as precasting segments of roadway and erecting them outward in both directions from pillars). That method was used in 2006 for the elevated reversible express toll lanes on the Selmon Expressway in Tampa. Developed and operated by the Tampa Hillsborough Expressway Authority (THEA), the project was nicknamed "six lanes on six feet." That's because the three reversible lanes (inbound to Tampa in the morning, outbound in the afternoon) would otherwise have required a six-lane expressway. And the entire facility rests on pillars just six feet wide, installed in the median of the Selmon Expressway.

After driving on those new express toll lanes just after they opened, I wrote about this project as a prototype for adding express toll lanes to numerous congested freeways, as well as for filling in missing links where there is only a surface street in a corridor where an expressway is warranted by traffic demand. And I'm pleased to report that two more elevated express toll lane projects are now in prospect for the Tampa Bay Area. Both would be built above congested surface arterials, but they differ considerably in specifics.

The first has been proposed as Florida's first toll concession project by a team led by a local developer and Spanish toll road company OHL Infrastructure. It would extend 33 miles east-west above SR 54 in Pasco County north of Tampa, linking coastal highway US 19 with the north-south Suncoast Parkway toll road, then further east to I-75, and a bit further to U.S. 301. When no competing proposal was submitted to Florida DOT, the agency accepted the team's proposal and has begun discussing a 45-year lease along the SR 54 right of way. The plan has considerable support from transportation planners, but NIMBY opposition has been organized, calling the project the "Pasco Fiasco." No official cost estimate has been released, but one newspaper account put it at $2 billion (about $15 million per lane-mile for the four-lane facility, quite reasonable for elevated lanes).

The other elevated tollway is much shorter. South of Tampa, it would link coastal US 19 with I-275, elevated above 118th Avenue in Pinellas County, with an extension to the St. Petersburg-Clearwater Airport. This one would be an FDOT project, and though the initial $338 million construction cost would come mostly from federal and state sources, the new lanes would be operated as express toll lanes to keep them uncongested. The Tampa Bay Times, while acknowledging the benefits of the improved mobility the project would provide, has come out against tolling, and favors "at least" including a dedicated bus lane as part of the project.

That illustrates a complete misunderstanding of variable pricing as a congestion-control tool. The elevated express toll lanes will function as virtual exclusive bus lanes, since the pricing will keep the lanes uncongested. As far as bus service is concerned, it will be just as good as having an empty lane just for buses. Clearly, FDOT has an educational task ahead of it in St. Petersburg, but it can point to the huge success of express bus service on its I-95 Express Lanes on I-95 in Miami.

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What About Bus-Only Lanes on Arterials?

Over the last five years or so, there has been increasing support within the transportation community for bus rapid transit (BRT) as a more cost-effective alternative to light rail or streetcars. BRT does not require costly new right of way, track, overhead electric power, or specialized maintenance facilities, all of which add up to light rail cost that is increasingly well over $100 million per mile. But having made this point, many planners go on from there to decide that those efficient buses would work so much better if they had their own lanes, rather than being stuck in the same stop-and-go traffic as the cars they are trying to get people out of. And it's true that an express bus service would be faster if it had its own lane on an arterial, rather than just having limited stops and traffic signal priority that have made the "BRT-lite" Metro Rapid service such a success in Los Angeles.

Bus-only-lane BRT proposals are under consideration in a growing number of cities. Montgomery County, MD plans bus-only lanes on MD 355/Rockville Pike, and Chicago plans this kind of service on an initial five miles of busy Ashland Avenue. A five-mile stretch of bus-only lane on a highway between Braddock Road and Crystal City in northern Virginia is scheduled to open this spring, and the DC Department of Transportation is considering bus-only lanes on H and I Streets, NW, in Washington. Indianapolis is studying BRT, possibly on bus-only lanes, in its downtown. And long-range transportation plans in the greater Miami area depict bus-only lanes on a number of congested arterials in Miami, Fort Lauderdale, and other cities.

Bus-only lane enthusiasts acknowledge that taking away lanes from cars ("repurposing lanes") will not be easy. But they tend to dismiss the opposition with verbiage such as "Of course, the problem is that people who drive cars won't like it" (Matthew Iglesias in a widely distributed Slate column) or "Displacing the amount of cars needed to create a 1st class guideway would likely create way too much political static for any politician to handle" (Curt Ailes of Urban Indy, cited by Streetsblog). But is car drivers' dislike or political static the only downside to taking away traffic lanes on a busy arterial?

Tom Rubin, Chris Swenson, and I took a quantitative look at this question in the 2012 Reason policy study, "Increasing Mobility in Southeast Florida" (http://reason.org/studies/show/mobility-in-southeast-florida). In a corridor with huge transit demand, such as the approach to the Lincoln Tunnel from New Jersey, demand for 730 buses per hour (peak direction, peak hour) clearly justifies using such a lane for buses only. But that is hardly typical of most metro areas. The question we sought to answer was what would be the impact on traffic congestion of converting one lane each way to bus-only on a six-lane arterial that is congested during peak periods. We found that in order for Level of Service (LOS) E congestion not to get significantly worse, a full 34% of those previously driving during the peak period would have to shift to bus travel. Anything less than that would shift the corridor into severe LOS F congestion.

But that wasn't the end of the story. Since by now most of the transportation world understands that priced lanes on freeways can provide the equivalent of an exclusive bus lane while sharing that capacity with a limited number of cars (consistent with LOS C), we came up with a way to do something similar with a congested arterial. Since the limiting factor on arterials is the delays caused by signalized intersections, we proposed tolled grade separations at key intersections. This would enable express buses (and paying cars) to bypass the traffic signals. We called the revamped arterial a "managed arterial." And in the Southeast Florida study, we took the analysis one step further, comparing two different improvements to the six-lane arterial: either add a bus-only lane in each direction or add grade separations to convert it into a six-lane managed arterial. Our quantitative assessment found that for all percentages of transit use, the six-lane managed arterial has a significantly higher person throughput than the eight-lane arterial with two bus-only lanes. Swenson and I did a paper for the Transportation Research Board on this, and it appeared in 2012 in Transportation Research Record No. 2297, pp. 66-72.

Postscript: Two projects incorporating the managed arterial concept are under way today. In Austin, SH 71 near Austin-Bergstrom Airport has been redesigned with grade separations at key intersections, and is expected to start construction late this year. And in Miami, a project development and environmental study is nearing completion on converting the South Miami-Dade Busway into an express toll facility with grade separations at many intersections.

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Further Thoughts on Positive Train Control

In Issue #119 last September, I wrote a fairly skeptical article about Positive Train Control, a costly upgrade of railroads' signaling systems aimed at preventing collisions. The inauguration of the first operational PTC system, on Los Angeles' Metrolink commuter rail system last month, reminded me that I have learned a great deal more about PTC since then, thanks in no small part to Steve Ditmeyer, a long-time railroader, fellow MIT graduate, and now an adjunct professor in the Railway Management Program at Michigan State University.

Among other things, knowing of my work in air traffic control, Ditmeyer pointed out the many similarities between the transformation of railroad traffic control envisaged by several decades of railroad work on PTC (long before there was a federal mandate to implement it) and the efforts under way worldwide to transform 20th century air traffic control into 21st century air traffic management. Both employ GPS to keep better track, in real time, of where the moving vehicles are, and switch from voice-only to mostly digital communications. And PTC is an attempt to bring to railroads a collision-avoidance capability that airlines have had since the early 1990s (called TCAS).

My previous article focused only on quantified safety benefits from PTC, which appear to be less than their costs. But Ditmeyer acquainted me with considerable research showing that—depending on how PTC is implemented—it could produce the kinds of efficiency gains promised by aviation's NextGen transformation. Specifically, if PTC is implemented independent of the legacy wayside signaling systems but integrated with precision dispatching systems, train-consist information systems, locomotive health reporting systems, etc., it could generate very significant business benefits. Among these could be running trains closer together safely, which could avoid thousands of miles of planned double-tracking. One business-case study commissioned by the Federal Railroad Administration (carried out by Zeta-Tech Associates in 2004) showed annual business benefits for the major railroads of between $1 billion and $4 billion per year, depending on how PTC was implemented. Using the one-time cost estimates available at the time (lower than today's estimates) produced internal rate of return estimates of between 24% and 79%.

Alas, the major railroads are implementing PTC by linking it with their legacy wayside signaling systems, which reduces the business-case benefits because, as Ditmeyer explains, "it maintains the block-occupancy, relay-based logic of the traditional wayside signals" instead of taking full advantage of augmented GPS location information, etc. to enable trains to operate closer together.

It's possible that once all the hardware and software for PTC are in place (probably several years later than the current 2015 deadline), and after railroads are comfortable using it, that they will see the logic in using it as the basis to revamp their business models to take better advantage of it.

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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.

Road User Fees: Is There Really Another Option for Achieving Financial Sustainability? March 12, Pew Charitable Trusts DC Conference Center, Washington, DC (Adrian Moore speaking). Details from: info@mbufa.org

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)

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News Notes

GARVEE Bonds Downgraded by Moody's. Moody's Investors Service announced last month that it has downgraded 17 "standalone" GARVEE bonds (backed solely by future federal highway and transit grants). Most were cut from Aa3 to A1. Moody's said the downgrades reflect changes in federal budgeting that "increase the risk of interruptions of timely payments of federal transportation aid due to states and transit entities." Affected states include California, Georgia, North Carolina, Washington State, and New Jersey.

Toll Cap Increased for Miami's Express Lanes. The politically imposed maximum of $7.00 to use the I-95 Express toll lanes in Miami has been increased to $10.50 as of March 1st. The Express Lanes are so popular that the variable rate hit the maximum 172 times during 2013, indicating traffic flow in excess of the level consistent with uncongested Level of Service C performance.

INRIX Helps RE/MAX Buyers Find Optimal-Commute Housing. A new search tool developed by INRIX called INRIX Drive Time enables potential home-buyers to compare possible homes based on typical travel times during rush hours and at other times of day. The buyer provides work locations, schools, and other relevant destinations and the tool provides the travel times to each, drawing on the INRIX Traffic Intelligence Platform. It is now in use by Berkshire Hathaway Home Services in addition to RE/MAX. The INRIX traffic database is updated every six weeks, based on data derived from nearly 100 million drivers.

Beltway Express Lanes Project Refinanced. Transurban and Fluor, the developers/operators of the express toll lanes on the Capital Beltway (I-495) outside Washington, DC, have refinanced the project, after its first-year traffic and revenues came in well below projections. New equity of $280 million and a drawdown of $150 million in liquidity reserves will be used to pay down $430 million in variable-rate private activity bonds, significantly reducing annual debt-service payments, reports Public Works Financing in its February 2014 issue.

Huge Deferred Maintenance in California Highways. Gov. Jerry Brown has been touting the state's first balanced budget in many years, but the state's first-ever long-term capital budget reveals that the California's infrastructure (highways, schools, prisons, etc.) has accumulated $65 billion in deferred maintenance over the years—and $59 billion of that is Caltrans highway and bridge infrastructure. This year's capital budget proposes to spend $337 million, which will address 0.6% of the Caltrans total.

Road Pricing Explained by New DC Think Tank. A relatively new Washington, DC think tank—the R Street Institute—in December released a short report called "Why Road Pricing Matters," by analyst Reihan Salam. It's a good introduction to the subject. You can download it from www.rstreet.org/policy-study/why-road-pricing-matters.

Canadian P3s Have 83% On-Time Completion. A new study by the Conference Board of Canada released last month found that 83% of public-private partnership (P3) projects have been completed early or on time. The study could not find reliable completion-rate data on comparable non-P3 projects, but expects future improvements in reporting on traditionally delivered projects will enable such comparisons. The report, "Canada as a Global Leader: Delivering Value through Public-Private Partnerships at Home and Abroad," is available at www.conferenceboard.ca/e-library/abstract.aspx?did=5724.

World's Most Advanced Express Lanes Open in Dallas. The first four miles of the 16-mile LBJ Express toll lanes project on the LBJ Freeway (I-635) in Dallas opened to traffic in December. The overall $2.7 billion project, when completed in 2016, will have 11 entry and 14 exit ramps. Much of it will provide three lanes in each direction, with the balance being two lanes each way. Toll rates will be variable, but are starting off using a pre-set schedule. Registered carpools will get a 50% discount on tolls during peak hours. Toll collection uses multi-protocol readers that can read four different kinds of transponders. The project is a long-term toll concession by Cintra and Meridiam.

Panama Canal Tolls Financing Its Rebuild. While the Panama Canal has always been financed via the revenues from the tolls it charges, the massive $5.5 billion reconstruction project now under way to expand it to handle new post-Panamax ships was beyond the scope of existing toll levels. The Economist (Feb. 8, 2014) reports that those mega-ships, which can carry about three times the cargo of previous freighters, will pay tolls that are about three times the previous rate for the largest ships able to use the old canal. There may be a lesson here for U.S. barge lines frustrated by the obsolete locks on the U.S. inland waterways system. Something like "You get what you pay for."

Model Toll Concession Contract Guide Available for Comment. The Federal Highway Administration's Office of Innovative Program Delivery has developed a guide to developing agreements for long-term toll concession projects. It covers all the key issues that such a contract must address, and provides sample provisions drawn from existing concession agreements. I read the whole document and am impressed with the quality of the work. It is posted online and comments will be accepted through March 10th. Go to: www.federalregister.gov/articles/2014/02/06/2014-02589/draft-core-toll-concession-public-private-partnership-model-contract-guide.

P3 Group Boosts Membership. The Association for the Improvement of American Infrastructure, organized last year to educate policymakers and opinion leaders on public-private partnerships for U.S. infrastructure, is up to 26 members. That's a large increase from the seven founders (ACS Infrastructure, Cintra US, Fluor, Kiewit, Parsons Brinckerhoff, Skanska, and Star America). The others are listed in AIAI's full-page ads that are appearing in various industry publications. For more details go to: www.aiai-infra.org.

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Quotable Quotes

"This cash shortfall [in the Highway Trust Fund] was exacerbated by SAFETEA-LU's structure, which intentionally set in motion a path to deplete the Trust Fund by setting investment levels that required the use of both incoming trust fund revenues and liquidation of the Trust Fund's then multi-billion dollar surplus."
—Dave Bauer, Senior VP, Government Relations, ARTBA, "Mapping a Road to Reauthorization," Transportation Builder, Jan.-Feb. 2014

"While rightly applicable for certain projects, Availability Payment (AP) projects don't yield the full value proposition of true, market-risk PPPs. This could lead to PPPs becoming commoditized, and further, could leave more long-term funding and other project risks with public clients and, ultimately, on taxpayers. That defeats the entire concept of PPP. Eventually, this could also impact the attractiveness of private investment in AP-structured PPPs."
—Karl Reichelt, Executive VP, Skanska Infrastructure Development, quoted in Bill Reinhardt, "P3 Megaproject Deal Flow Heads for a Record," Public Works Financing, February 2014

"Research finds that car-ownership is positively correlated with job opportunities, while no such relationship exists with access to transit stations. Furthermore, increased transit mobility has been proven to have no effect on employment outcomes for welfare recipients. The notion that newer and nearer public transit creates benefits for all is inaccurate; it only creates opportunities for those who live near the transit stations, and those opportunities are limited. A study by the Brookings Institution finds that, among the 10 leading metropolitan areas in the US, less than 10% of the jobs in the metro area are within 45 minutes of travel by transit modes. Moreover, 36% of the entry-level jobs are completely inaccessible by public transit. This is not surprising given the fact that suburbia houses two-thirds of all new jobs."
—Jeff Khau, University of Southern California, "Mobility for the Poor: Car-Sharing, Car Loans, and the Limits of Public Transit," www.newgeography.com/content/003888-mobility-poor-car-sharing-car-loans-and-limits-public-transit

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





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