Surface Transportation Innovations #98

When a toll becomes a tax, TIFIA expansion, transportation and GHGs, NTSB report on "curbside" buses, perspectives on "marine highways"

In this issue:

  • When does a toll become a tax?
  • Further thoughts on TIFIA expansion
  • Fresh thinking on transportation and GHGs
  • NTSB’s misleading report on “curbside” buses
  • New perspectives on “marine highways”
  • Upcoming Conferences
  • News Notes
  • Quotable Quotes

When Does a Toll Become a Tax?

On Nov. 23rd, Stateline.org’s top story was headlined “Motorists Face an ‘Avalanche’ of Higher Tolls.” The article reported a raft of large toll increases on toll roads and bridges in the Northeast, including quotes about the burden these increases place on motorists (from AAA) and truckers (from ATA). Among the cases getting the most coverage were the Port Authority of New York & New Jersey and the Metropolitan Washington Airports Authority.

The Port Authority was sued by AAA-New York and AAA-Northern New Jersey, who argue that the PA is violating federal law that tolls must be “just and reasonable” because it had justified the up-to-50% increase in part because of the cost of reconstructing the World Trade Center. (In response to the suit, the PA now claims that toll-increase monies will not be used for that project.) The suit is being heard in U.S. District Court in Manhattan.

In northern Virginia, the Airports Authority plans to fund much of its $6 billion, 23-mile Silver Line, an extension of the Metro heavy rail system to Tyson’s corner (Phase 1) and then to Dulles Airport (Phase 2) using highway toll revenues. Several years ago, the Legislature allowed the Airport Authority to take over from VDOT the 14-mile Dulles Toll Road and increase its tolls to help pay for the Silver Line. A series of large toll increases, beginning January 1st, is expected to raise enough money to pay for about 75% of Phase 2 (and 54% of the total rail project). The mainline (one-way) toll of $1.25 will increase to $2.75 by 2013, $4.00 by 2018, with additional $1.00 increases every five years thereafter.

These and a number of other cases raise the question of when a toll ceases to be a true user charge (like electricity and telephone bills) and becomes a kind of tax. Motorists and taxpayer groups are increasingly riled up about large toll increases, especially when they do not pay for roadway improvements. A survey of 800 New Jersey motorists sponsored by AAA Mid-Atlantic last spring found that a majority doubted that all toll and gas-tax revenues are actually spent on highways. In the Northeast, in particular, they are correct.

Diversion of toll revenues has been going on for a long time in the Northeast. Both the Port Authority of New York & New Jersey and MTA Bridges and Tunnels have a long history of using toll revenues to subsidize rail transit. So does the Delaware River Port Authority, which uses bridge tolls to subsidize PATCO commuter trains. It’s also been long-standing practice in the San Francisco Bay Area, with both the Golden Gate Bridge Authority and the Bay Area Toll Authority using bridge toll revenues for transit. More recently, the New Jersey Turnpike Authority had planned to use toll revenues to help fund the ARC rail tunnel under the Hudson River, a project that was cancelled by Gov. Chris Christie. And beginning in 2007, the Pennsylvania Turnpike Authority was required by the Legislature to become a funding source for roads and transit statewide, increasing toll rates enough to transfer nearly a billion dollars a year for that purpose.

It’s important to distinguish the above cases—in which a portion of the toll is clearly a transportation tax—from other recent toll increases which benefit solely those paying the tolls. Examples of the latter include the large recent increase in toll rates by the Illinois Tollway Authority, which will raise an additional $8 billion for a major expansion and modernization of Chicago-area toll roads; the forthcoming inflation-based increases in toll rates on the Florida Turnpike system; and large catch-up increases in Maryland toll rates (some of which have not been increased since the 1970s).

This country is at a turning point in highway finance. The fuel tax system is probably in its last remaining decades, as increased federal fuel-economy requirements and the gradual penetration of hybrids and other non-petroleum-based vehicles devastate fuel-tax revenues. The challenge we face is to build political support for a replacement system, and a direct user-fee approach (all-electronic tolling) is by far the best candidate. But the more that tolls morph into taxes, the harder it will be to generate that political support. Highway user groups like AAA, ATA, and AHUA will rightly object that, especially when the highway system is woefully short of investment, it is unjust to tax motorists to fund other kinds of projects.

Further Thoughts on TIFIA Expansion

My article last month giving qualified support for the Senate’s MAP-21 language expanding the TIFIA credit program brought a number of responses. Most of them agreed with my concern that increasing the allowable size of a TIFIA loan from 33% of a project’s budget to 49% would weaken the program in two ways. First, it would undermine a critical market-test requirement that project developers have significant “skin in the game” in the form of equity and private-sector (bank or bond) debt capital. Second, it would reduce the program’s leverage significantly, since the available federal dollars would support fewer project (albeit more lavishly per project).

Several readers focused attention on another provision in MAP-21 which would authorize an agency to apply for and receive conditional credit approval for a “program of projects” under a single credit agreement. One participant at an invitation-only Miller Center conference reported a Hill staffer’s explaining to the group that “if you had a project that was good you could bundle it with a few losers to ensure success in paying off the loan.” An infrastructure finance consultant pointed to the provision that would eliminate the “springing lien” provision (TIFIA loan becomes due and payable in the event of default) in cases where the borrower pledges the revenues of its entire toll system or the proceeds of a dedicated transportation tax to a program of projects. He suggested that this, along with the 49% factor in place, could lead to disaster: “Lots of transit agencies and toll authorities would be able to borrow truly subordinated from TIFIA, leading them to increase their own leverage and crowding out the muni debt market. . . . Then in the event of a sales tax decline or other, inevitable, recession cycle, they would all at once be clamoring for relaxed terms or forgiveness.” Voila—subordinated loans morph into grants.

Another infrastructure finance consultant disagreed about the waiver of the springing lien in the case of a program-of-projects, explaining that for those projects (only) the TIFIA loan could not exceed 33% and must receive at an A rating or higher; in addition, the loans would still be judged on a project-by-project basis. That eased my concerns on this aspect of the Senate TIFIA provision.

But I remain concerned about political pressures to dilute the market-test safeguards built into the current TIFIA program. Keeping the maximum loan size at 33% of the project budget makes good financial sense (increased project soundness) and good political sense (more worthwhile projects can be funded for a given budgetary amount). Likewise, retaining the current project-by-project approval process will reduce the risk to federal taxpayers, as will retaining the current springing lien provision.

I continue to support a large expansion of TIFIA budget authority, and streamlining the approval process to make it more of a “check all the required boxes” process rather than one depending on DOT discretion. But monkeying with the market-test provisions would be ill-advised. As Alan Pisarski has written, “Never underestimate the power of the feds to take a good idea and turn it into trash.”

Fresh Thinking about Transportation and Greenhouse Gases

The Reason Foundation has released two new policy studies dealing with CO2 emissions and surface transportation (cars, trucks, buses, trains, etc.) in the United States. The first examines an array of proposed transportation policy measures, estimating how much impact each would have on CO2 emission reduction and at what cost per ton. The second is a comparison of two sets of policies toward transportation greenhouse gases (GHGs)—technological and behavioral. Though researched and written separately, they come to broadly compatible conclusions.

“Impacts of Transportation Policies on Greenhouse Gas Emissions in U.S. Regions” was researched and written by David T. Hartgen, M. Gregory Fields, and Adrian Moore. Its focus is on 48 major urban regions containing 41% of the population, 60% of U.S. transit use, and 90% of congestion delay. For each region, the authors use 2005 CO2 emissions as a baseline and then assesses 11 proposed transportation measures for their impact and cost-effectiveness in reducing CO2 by 2030. One finding is that the results vary quite a bit by region, depending on factors such as each one’s likely growth rate, transport mode shares, etc., such that a one-size-fits-all policy would be poorly targeted.

The big winner in terms of both magnitude of its impact and cost-effectiveness is the new CAFE standards requiring overall new-vehicle fuel-efficiency of 35 mpg by 2020. By 2030, that one measure will reduce U.S. surface transportation CO2 emissions by 31%, at a cost per ton of about $52. Nothing else comes close. Improved traffic signal synchronization would yield up to 2.3% more reductions, at an estimated cost of $112/ton. A 55 mph speed limit on freeways would offer a 3% reduction, at the very low cost of $0.13 per ton, but the economic costs of extra travel time, the authors note, would be very large. All the other measures examined would have four-figure cost/ton estimates—a 5% reduction in vehicle miles traveled (VMT) would save 4% of CO2 but cost $3,923 per ton. Expanding transit enough to enable a 50% increase in transit work-trip mode share would reduce transportation CO2 by 1.1% at a cost of $4,257 per ton. (http://reason.org/news/show/greenhouse-gas-policies-cost-transp)

The second study, “Reducing Greenhouse Gas Emissions from Automobiles,” looks more specifically at the behavioral strategy of compact development, which was a key theme of two major reports on transportation GHGs several years ago: Moving Cooler and Driving and the Built Environment. Wendell Cox and Adrian Moore review the arguments and data from those reports (and subsequent critiques of their findings) to conclude that the compact development approach is unlikely to achieve more than a 5% reduction in automobile CO2 emissions by 2050. (http://reason.org/news/show/reducing-greenhouse-gases-from-cars)

Like the first study, this one also uses the $50/ton benchmark as a line dividing cost-effective from non-cost-effective policies. Cox and Moore analyze and seek to quantify the effects of various aspects of compact development policies. For example, they note that higher densities would create greater local traffic congestion, leading to increased CO2 emissions compared with more smoothly-flowing traffic. They also find evidence that compact development increases housing prices, leading to economic impacts on the order of $20,000 per ton of CO2 reduced. They also challenge the conventional wisdom that says infrastructure costs (water, sewer, streets, etc.) are lower for compact development than in suburban areas, finding that there is little empirical support for this proposition.

By contrast with this behavioral strategy, the authors then assess technology approaches to CO2 reduction from automobiles, such as increased fuel efficiency of petroleum-powered cars and increased market penetration of alternative fuel vehicles. They estimate that if the trend line projected for the 35 mpg standard continues from 2030 to 2050, the reduction in CO2 emissions from the automobile fleet alone would be 18%. And if VMT increases at a lower rate than its historical average, as many now project, the reduction would increase to 33%. And if the average auto were to achieve the best current hybrid fuel economy by 2040, auto-related GHGs would be reduced by 55% by 2050.

These reports were researched before the most recent EPA/USDOT proposal for a new-vehicle CAFE requirement of 54.5 mpg by 2025. While there may be legal or congressional challenges to this requirement, if it is implemented (and the auto industry finds ways to comply), it is quite likely that Cox and Moore’s projections will be realized.

NTSB’s Misleading Report on “Curbside” Buses

This newsletter has carried several stories this year about the fastest-growing mode of inter-city passenger travel: so-called curbside buses. This phenomenon originated among immigrant communities (often Chinatowns) in the Northeast, with numerous small businesses operating one or a handful of buses from sidewalk locations in one city nonstop to a sidewalk location in another. The big change occurred about five years ago when major firms such as MegaBus, Bolt Bus, and Red Coach entered the market, offering luxury buses with free wi-fi, in many cases leather seats and extra leg-room, and online booking. Although these large newcomers also mostly avoid bus stations in favor of sidewalk locations, several have started serving train stations (e.g., Union Station in Washington, DC) and airports.

There have been some serious accidents involving “curbside buses,” including some with multiple fatalities. That prompted the National Transportation Safety Board to do a first-ever special report. Released on Oct. 12, 2011, NTSB’s “Report on Curbside Motorcoach Safety” received a lot of publicity. You can download it from the NTSB website (www.ntsb.gov/doclib/safetystudies/SR1101.pdf).

Sure enough, using data for the past six years, the report found a higher overall accident rate for curbside buses than for conventional inter-city buses (4.05 accidents per 100 vehicles per year versus 3.18). But as the report’s Executive Summary makes clear, “No formal definition of curbside carriers exists, and federal and state oversight authorities have no unique categorization and tracking mechanisms for these carriers.” So NTSB did the best it could with data available from the Federal Motor Carrier Safety Administration’s database on inter-city bus service. But it also admitted that “This investigation could not account for uncertainty associated with the identification of curbside carriers or for missing or inaccurate data from FMCSA data sources.” Moreover, it acknowledges that “Applying these results to different groups of motorcoach carriers”—such as professional fleets vs. mom & pop outfits—“would require additional categorization of the motorcoach carrier groups and new analysis.”

I asked Prof. Joseph Schwieterman of DePaul University, who has specialized recently in studying this emerging industry, what he thought about the NTSB findings. He agreed to my assessment that the study’s results are misleading, and that “Defining the term ‘curbside bus’ to refer to mom-and-pop charter operators is unusual and has led to a flurry of misleading media coverage questioning the safety of brand-name bus operators. That could have been avoided by categorizing operators in a more systematic way.”

Given recent calls for a safety crackdown on vaguely described “curbside” operators by members of Congress from New York, I imagine NTSB felt pressured to produce some kind of report quickly, despite the serious limitations of the FMCSA database. It will be unfortunate if name-brand companies end up getting penalized for the shortcomings of fly-by-night operators.

A New Perspective on “Marine Highways”

The idea that there is an untapped demand for shifting goods from trucks and trains to barges or small freighters has been around for several decades. It used to be called “short-sea shipping,” but has recently been renamed “marine highways.” My skepticism was confirmed recently by an analysis in The Journal of Commerce (Nov. 21, 2011) by Prof. Asaf Ashar, who is co-director of the National Ports & Waterways Institute at the University of New Orleans. He wrote the piece after attending a recent two-day conference on marine highways at George Mason University.

Ashar reminds us that there are two principal types of domestic waterborne shipping: inland waterways and coastal. Most of the marine highways discussion focuses on the latter, which is the focus of his article. He identifies three categories of possible coastal service, as follows:

  • Feedering: 200 to 500 miles, using small lift-on/lift-off (lo-lo) ships doing 15-18 knots. Cargo would be containers being distributed from large ports to smaller ones.
  • Short Range: 200 to 500 miles using smaller and faster roll-on/roll-off (ro-ro) ships doing 18-20 knots. Cargo would be trailers and containers on chassis bypassing congested highways and or high-toll bridges.
  • Long Range: 500 to 1,000 miles, using mid-size ro-ro ships doing 22-24 knots. They would also carry trailers and containers on chassis on routes like Tampa-Houston or Los Angeles-Oakland.

Ashar then reviews the capital and operating costs of ships for each type of service, estimating that none come close to being self-supporting from likely cargo revenues, especially given the large up-front capital costs for ships and docking/loading facilities. He also notes that competition from rail service is often left out of marine highway studies, and finds it “unlikely that private investors will develop it” or that it could “survive competition from truck and rail services.”

What then, of the routinely advanced rationale for taxpayer subsidy—reduced highway congestion and air pollution by diverting containers and trailers from road to ship? His conclusion is that “the impact of fully implemented marine highway services on road traffic would be negligible.”

The only rationale Ashar thinks marine highway advocates could resort to is a military one. The Navy needs modern ro-ro ships and might be open to subsidizing such services under its “dual-use” program, somewhat like the Air Force’s long-standing program of paying airlines modest sums to modify large jet airliners to carry troops and/or cargo in the event of military need. He doubts that Navy support would be enough to make coastal marine highway services competitive, but suggests something like this be explored instead for shipping between the mainland and Alaska, Hawaii, and Puerto Rico. I’d need to see more numbers and military justification before considering such a program. But we should all be grateful to Ashar for throwing cold water on a bunch of marine highway fantasies.

Upcoming Conferences

Note: I don’t have space to list all the transportation conferences going on; below are those that I am (or a Reason colleague is) participating in.

Hong Kong Society for Transportation Studies Annual Meeting, Dec. 18-20, Hong Kong, Intercontinental Grand Stanford Hotel. Details at: http://home.netvigator.com/~hksts/conf.htm.  (Sam Staley speaking)

Broward Transportation Day, January 19, Ft. Lauderdale, FL, Broward Metropolitan Planning Organization. Details to come at www.leadershipbroward.org (Robert Poole speaking)

Transportation Research Board 91st Annual Meeting, Jan. 22-26, Washington, DC.
Details at www.trb.org/annualmeeting2012/annualmeeting2012.aspx. (Robert Poole and Shirley Ybarra speaking)

News Notes

Support for Tolling in Senate
Last month I lamented the lack of any tolling provisions in the Senate EPW reauthorization bill. But there is bipartisan support for amending the bill to correct that. Sen. Tom Carper (D, DE) has drafted an amendment that would remove the numerical limits from all the existing tolling and pricing pilot programs. That is very similar to a separate bill introduced in September by Rep. Mark Kirk (R, IL). Sources tell me that Carper and Kirk have conferred on this subject, and may decide to work together on it. Bipartisan support for increased tolling flexibility would be a very welcome development.

More Managed Lane/BRT Projects
Several more state DOTs are moving ahead with priced Managed Lanes projects that work closely with transit agencies to use the MLs as an uncongested guideway for express-bus/BRT projects. Already under way is a project by Colorado DOT to add such lanes to U.S. 36 between I-25 north of Denver and Boulder. In the Chicago area, the Illinois Tollway is reconstructing I-90 from O’Hare to Rockford with a bus toll lane included; opening date is 2016. Virginia DOT just announced that agreement has been reached with the Fluor/Transurban team for the I-95 HOT lanes project; it will convert the two-lane reversible HOV lanes into three HOT lanes (14 miles) and add two new HOT lanes for another 29 miles south of there. Construction is expected to begin in Spring 2012. VDOT plans to spend $200 million on expanded bus service in the corridor, including 3,000 more park & ride lot spaces. Finally, FDOT is beginning work on Phase 2 of its I-95 Express Lanes project, extending the existing lanes north to Ft. Lauderdale. Bus service on Phase 1 has been growing rapidly.

Defeated in Seattle: an Anti-Toll Initiative
A ballot measure that would have severely restricted tolling in the Seattle metro area went down to defeat by nearly 2 to 1 last month. I-1125 would have enforced the 20th-century tolling model that tolls be used only to finance the initial capital costs of a highway project and would not be allowed to be variable, in the form of congestion pricing. Had the measure passed, it would have forbidden the variable tolling about to begin on the SR 520 floating bridge and current and future Managed Lanes projects.

Las Vegas Monorail Plan Rejected by Judge
On Nov. 18th, U.S. Bankruptcy Court Judge Bruce Markell rejected as unworkable the plan proposed by the Las Vegas monorail to emerge from Chapter 11 bankruptcy. The reorganization plan proposed replacing $658 million in outstanding bonds on which debt service has not been paid with three IOUs totaling $40.4 million. Markell said that the plans “doom it to failure, if not in the next few years then certainly by 2019,” and therefore did not meet the standards for judicial approval.

California High-Speed Rail Hits New Obstacles
The California Legislative Analyst’s Office issued a report late last month concluding that the funding plan for the $98 billion project does not comply with provisions in the 2008 ballot measure. That means the $9 billion worth of HSR bonds authorized by that measure could not be issued, because HSR trains would not be able to operate on the initial stretch of track in the Central Valley. Shortly thereafter, the Field Poll found that if Californians had a chance to vote on the measure today, it would attract only 31% yes votes, with 59% opposed and 10% undecided.

New Interstates Moving Forward
A colleague in Arizona has informed me that the proposed Interstate 11, linking Phoenix and Las Vegas, is designated as a new Interstate in the Senate EPW Committee’s MAP-21 reauthorization bill. And the first segment of I-69 in Texas has been officially designated, encompassing 6.2 miles from Robstown to I-37 near Corpus Christi. Portions of I-69 exist in Michigan, Indiana, Kentucky, Tennessee, and Mississippi. The eventual route will link Brownsville, TX with Port Huron, MI.

Toll Industry Working Toward Nationwide Interoperability
The E-ZPass Interagency Group (IAG), the Alliance for Toll Interoperability (ATI), and the International Bridge, Tunnel & Turnpike Association (IBTTA) have signed a two-page memorandum of understanding to work together to enable customers anywhere in the United States to have a single transponder and toll account, usable anywhere in the country. Such interoperability already exists among 14 northeastern and midwestern states within IAG, as well as statewide in California and Florida. (See www.tollroadsnews.com/node/5602 for details.)

VMT Fees Less Regressive than Fuel Taxes
RAND Graduate School researcher Brian Weatherford has analyzed the “Distributional Implications of Replacing the Federal Fuel Tax with Per Mile User Fees.” We already know that fuel taxes are regressive, but Weatherford’s number-crunching finds that replacing fuel taxes with VMT fees would shift the burden from lower-income households to higher-income ones. In addition, contrary to popular fears, it would also shift the burden from rural households to urban households. The paper appears in TRB’s Transportation Research Record No. 2221, 2011, available on the TRB website.

New Equity Fund for North American PPP Infrastructure
Public Works Financing reports that Meridiam Infrastructure is nearing its goal of raising $1 billion for a 25-year fund to invest in PPP infrastructure projects. This is one of the first such funds to focus exclusively on North America. Another new fund, InfraRed Infrastructure Fund III, has announced commitments of $1.2 billion for PPP projects in North America, Europe, Singapore, Hong Kong, and Australia. According to Reason Foundation’s 2011 Annual Privatization Report, $19 billion was raised for such funds in 2010, and the 30 largest funds as of the end of 2010 had raised $183 billion.

Quotable Quotes

“Another example of this [anti-BRT] deck-stacking technique is the 2002 Dulles Corridor (West Falls Church to Dulles Airport) Environmental Impact Statement, which considered fewer stations for BRT alternatives than for the Metro-rail alternatives and envisioned BRT as a closed system, running only on the new alignment. The analysis thus failed to consider the most obvious potential strength of a BRT option in the Dulles corridor—the ability for buses to operate off-corridor at one or both ends of their trip, picking up and delivering passengers at locations off the BRT corridor, while gaining travel time advantages from the use of dedicated bus lanes [or value-priced lanes, adds Poole] in the corridor. Indeed, it is this ability of open-system BRT to deliver many more one-seat rides that can accrue significant environmental benefits by making mass transit attractive to a larger share of the potential travel market.”
--Annie Weinstock, Michael Replogle, and Ramon Cruz, Recapturing Global Leadership in Bus Rapid Transit, Institute for Transportation & Development Policy. (www.itdp.org/documents/20110526ITDP_USBRT_Report-HR.pdf)

“Most of the [CO2 reduction] strategies being widely discussed in transportation plans—transit increases, VMT reductions, carpooling, pricing, making cities denser and more walk-friendly—would have little measurable effect on regional, national, or certainly global CO2 emissions, even if implemented widely at very high cost. Several other policies—improving CAFE standards even further than presently mandated, encouraging small-car purchasing—are beginning to be discussed. Still others—signalization improvements, telecommuting—are being largely ignored, even though they have proven effective.”
--David T. Hartgen, M. Gregory Fields, and Adrian Moore, “Impacts of Transportation Policies on Greenhouse Gas Emissions in U.S. Regions,” Reason Foundation Policy Study No. 387, November 2011. (http://reason.org/news/show/greenhouse-gas-policies-cost-transp)

“The Administration’s first misstep, in my judgment, has been to misleadingly represent its program as ‘high-speed rail,’ thus conjuring up an image of bullet trains cruising at 200 mph, just as they do in Western Europe and the Far East. It further raised false expectations by claiming that ‘within 25 years 80% of Americans will have access to high speed rail.’  In reality, the Administration’s high-speed rail program will do no such thing. . . . [W]ith one exception, the program consists of a collection of planning, engineering, and construction grants that seek incremental improvements in the existing facilities of Class One freight railroads in selected corridors used by Amtrak trains. . . . The Administration’s second mistake, in my opinion, has been to fail to pursue its objective in a focused manner. Instead of identifying a corridor that would offer the best chance of successfully deploying the technology of high-speed rail and concentrating resources on that project, the Administration has scattered $9 billion on 145 projects in 32 states and in all regions of the country.”
--C. Kenneth Orski, testimony before the Railroads Subcommittee, House Transportation & Infrastructure Committee, Dec. 6, 2011

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





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