Commentary

Toll Road Forecasts Come Under Scrutiny in Virginia

An important discussion is taking place in Northern Viriginia over the veracity of traffic and revenue forecasts for the Dulles Tollroad. The forecasts are critical for this corridor because higher toll rates have been justified based on their ability to finance a the extension of the Washington, DC Metro to the Dulles Airport (and beyond).

According to Tollroadsnews.com (Feb 24, 2012), the forecasting company, CDM Smith (formerly Wilbur Smith Associates), has made over 200 forecasts for 100 projects. In a response to criticism that the CDM Smith forecasts suffered from “optimism bias,” the company’s CEO writes (in a letter available at Tollroadsnews.com):

“The previous traffic and revenue studies undertaken for the DTR [Dulles Toll Road] highlight our continued success and reliability in effectively forecasting its traffic and revenue potential. Comparison of CDM Smith’s 15yr forecast for the DTR in 1989 with the actual performance indicates that actual 2003 transactions were 98.2% of forecast (the 2004 toll increase was not assumed in 1989).

“The 2009 study forecasts also compare favorably to the actual revenues following the 2010 and
2011 toll adjustments:

– 2009 Study 2 yr forecast: Actual 2010 revenue was 100.7% of forecast

– 2009 Study 3 yr forecast: Actual 2011 revenue is expected to be 97.5% of forecast

“The 2005 DTR Study cannot be tested against actual performance as none of the toll scenarios in that study were implemented.”

This is very important issue, and we’ve written about this elsewhere (see here). Given a few high-profile bankruptcies (e.g., the South Bay Expressway in San Diego, Southern Connector in South Carolina), and the rising important of public-private partnerships in financing these projects, the accuracy and reliability of these forecasts are critical, and I personally have worried that the forecasting track record hasn’t received enough public scrutiny.

The article at TollroadsNews does a good job of exploring the complexity of these forecasts. In many ways, it’s more art than science. Nevertheless, decisions about long-term infrastructure need to be bounded, and forecasts are an essential part of evaluating risk and uncertainty. But they also have to be subjected to independent scrutiny and the full range of uncertainties in these forecasts need to be part of the public decisionmaking process.

Thanks to TallroadsNews for helping to broker this public discussion.

Samuel R. Staley, Ph.D. is a senior research fellow at Reason Foundation and managing director of the DeVoe L. Moore Center at Florida State University in Tallahassee where he teaches graduate and undergraduate courses in urban planning, regulation, and urban economics. Prior to joining Florida State, Staley was director of urban growth and land-use policy for Reason Foundation where he helped establish its urban policy program in 1997.

Staley is the author of several books, most recently co-authoring Mobility First: A New Vision for Transportation in a Globally Competitive 21st Century (Rowman & Littlefield, 2008). Texas Gov. Rick Perry aid Staley and Moore "get it right" and world bank urban planner Alain Bartaud called it "a must read for urban managers of large cities in the United States and around the world."

He is also co-author, with Ted Balaker, of The Road More Traveled: Why The Congestion Crisis Matters More Than You Think, and What We Can Do About It (Rowman and Littlefield, September, 2006). Author Joel Kotkin said, "The Road More Traveled should be required reading not only for planners and their students, but anyone who loves cities and wants them to thrive as real places, not merely as museums, in the 21st Century." Former U.S. Secretary of Transportation Mary Peters said, "Balaker and Staley clearly debunk the myth that there is nothing we can do about congestion."

Staley's previous book, Smarter Growth: Market-based Strategies for Land-use Planning in the 21st Century (Greenwood Press, 2001), was called the "most thorough challenge yet to regional land-use plans" by Planning magazine.

In addition to these books, he is the author of Drug Policy and the Decline of American Cities (Transaction Publishers, 1992) and Planning Rules and Urban Economic Performance: The Case of Hong Kong (Chinese University Press, 1994).

His more than 100 professional articles, studies, and reports have appeared in publications such as The Wall Street Journal, The New York Times, Washington Post, Los Angeles Times, Investor's Business Daily, Journal of the American Planning Association, Planning magazine, Reason magazine, National Review and many others.

Staley's approach to urban development, transportation and public policy blends more than 20 years of experience as an economic development consultant, academic researcher, urban policy analyst, and community leader.

Staley is a former chair for his local planning board in his hometown of Bellbrook, Ohio. He is also a former member of its Board of Zoning Appeals and Property Review Commission, vice chair of his local park district's open space master plan committee, and chair of its Charter Review Commission.

Staley received his B.A. in Economics and Public Policy from Colby College, M.S. in Social and Applied Economics from Wright State University, and Ph.D. in Public Administration, with concentrations in urban planning and public finance from Ohio State University.