Surface Transportation News #159

Surface Transportation Innovations Newsletter

Surface Transportation News #159

Federal Barriers to Infrastructure

In this issue:

Removing Federal Barriers to P3 Infrastructure Investment

The Trump campaign proposed a $1 trillion program to foster private investment in aging public-sector infrastructure. According to a proposal by Wilbur Ross and Peter Navarro, eligible projects would be large-scale infrastructure that has, or could have, robust user-fee revenue streams. Revenue-based financing (equity and debt) would be used to raise the needed capital up-front, with investors being paid back over time via the dedicated revenue streams. Eligible projects could include airports, highways, seaports, water-supply, and wastewater treatment facilities.

For the past 15 years, infrastructure investment funds, infrastructure companies, and others have been eager to invest in U.S. P3 projects of this kind. But they have confronted a relatively small number of projects. According to a new Reason Foundation study, that problem stems from two causes: unfamiliarity with P3 models by state and local policymakers and federal barriers to private capital investment in state and local infrastructure. (Download the report here.)

The study identifies thousands of potential project opportunities, in the form of existing airports, highways, seaports, water systems, etc. It then shines a spotlight on an array of federal obstacles that make it difficult, financially disadvantageous, or impossible to do the kinds of P3 infrastructure renewal that takes place routinely in Canada, Europe, and Latin America. Among the largest barriers are the following:

  • A very restricted airport privatization pilot program that erects barriers not found in other countries;
  • A federal ban on using toll revenues to finance the reconstruction and modernization of aging Interstate highways (except for a tiny pilot program); and,
  • A rule from the Office of Management & Budget requiring that if a facility has received direct federal grants, the grant money must be repaid if the facility is leased or sold (which functions as a de-facto tax on such transactions).

But by far the greatest federal obstacle is the inability, in most cases, to use tax-exempt revenue bonds for P3 projects. Since state and local agencies can and do use such tax-exempt bonds for infrastructure, the result is a non-level financial playing field. This kind of disparity between taxable and tax-exempt revenue bonds for infrastructure is virtually unheard of in other developed countries. To the extent that a P3 project cannot obtain tax-exempt bond financing, its financing costs and user fees will be higher, and opponents will cite these as reasons not to use the P3 approach.

The Reason Foundation report proposes two policy changes that would create a level financial playing field for P3 infrastructure renewal. First, generalize the existing Private Activity Bond (PAB) program that now applies only to surface transportation projects to apply to P3 projects for all categories of public-purpose infrastructure. Second, allow the new PABs to be used to acquire and reconstruct existing infrastructure, not just to build new projects.

These two tax changes might find bipartisan support in Congress. First, construction unions generally favor P3 procurement, since this tends to expand the size of the pie by increasing the size and number of major infrastructure projects. Second, the Obama Administration in 2015 had proposed something similar: Qualified Public Infrastructure Bonds (QPIBs) whose purpose was to “extend the benefits of municipal bonds to public-private partnerships.” The White House fact sheet summarizing the proposal pointed out that, unlike the surface transportation PABs, the new QPIBs would:

  • Have no expiration date;
  • Have no volume cap; and,
  • Not be subject to the Alternative Minimum Tax (AMT).

These provisions should all be included in the reform.

Critics will likely claim that these tax changes would cost the U.S. Treasury a significant amount of revenue if they were widely used. But this would only be true if most of the projects to rebuild U.S. infrastructure would otherwise have been carried out with taxable bond financing. The fact that we have a huge backlog of such projects that are not being funded and carried out suggests that very little such investment is attractive with taxable bond financing. The overwhelming majority of U.S. infrastructure projects are financed with tax-exempt municipal bonds.

Secondly, any marginal loss of revenue that might result from allowing wide use of tax-exempt revenue bonds for P3 projects would likely be offset by increased federal tax revenues, of two kinds. To the extent that the new P3 concession companies were profitable, they would pay federal corporate income taxes on those profits. And a large increase in construction work over several decades would likely lead to more jobs for construction workers and more overtime—so their marginal increases in wages would increase personal income tax revenues.

The Reason report does not directly address the alleged need for a federal tax credit to provide an incentive for equity investors in P3 infrastructure projects. That feature of the Ross and Navarro proposal has been a lightning rod for opposition, as a “give-away to Wall Street,” etc. But there is no lack of incentive for infrastructure funds, pension funds, investment banks, etc. to invest equity in U.S. infrastructure. What these would-be investors lament is the lack of a pipeline of large-scale P3 projects. That lack is due to explicit federal barriers of the kind documented in our new report, and especially the non-level financial playing field. The new Administration and Congress could readily address those barriers—and drop the tax credit for equity as not needed.

Download the report here.

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Toll-Financed P3s for Interstate Highway Reconstruction?

Early in January I did an interview with The Bond Buyer, making the case that toll-financed reconstruction of the aging Interstate highway system would be an excellent fit for the $1 trillion Ross/Navarro/Trump P3 infrastructure proposal. Based on a 2013 Reason Foundation study, reconstruction and selective widening of the entire U.S. Interstate system over the next two decades would cost (net present value) just under $1 trillion. Moreover, modest (but inflation-adjusted) tolls would fully cover the capital and operating costs of the rebuilt and modernized systems of about 30 states, with another 15 or so high-cost states needing somewhat higher tolls, and only about 5 not really having enough traffic volume for toll feasibility.

Shortly after that interview appeared, The Washington Post headlined a Post-ABC poll that asked respondents if they would support a proposal to “offer nearly 140 billion dollars in tax cuts for private companies if they pay to build new roads, bridges, and transportation projects” that would be tolled. Only 29% offered support, compared with 44% strongly opposed and 22% somewhat opposed. But were they reacting against tolls or against “tax cuts for Wall Street”?

Two days later a Reuters poll produced somewhat different results. Asked what a new federal infrastructure program should stress, most focused on rebuilding aging roads and bridges—as opposed to either new roads, transit, or new technology. Asked how rebuilding aging highways should be paid for, 51% opposed higher taxes, and 56% opposed government borrowing. But 50% said motorists should pay tolls and user fees, with 44% opposed to tolls. Numerous other polls in the past 15 years generally find that for costly highway improvements, tolls are considered the least-bad alternative when current funding sources are clearly inadequate.

Unless and until Congress removes the federal ban on toll-financed Interstate reconstruction, only three states may each rebuild a single Interstate highway using toll finance (with or without P3 procurement). Under the use-it-or-lose-it provision of the FAST Act, if a state holding a slot in the three-state pilot program failed to take definite steps toward using its slot by Dec. 4, 2016 (one year from the date President Obama signed the FAST Act), they were to lose their slots. FHWA tells me they are about to issue a Federal Register Notice about this, which should mean that Missouri, North Carolina, and Virginia will no longer hold such slots.

And that opens the door to other states aiming to get a head start on Interstate reconstruction. As of now, the leading candidates appear to be (in this order) Wisconsin, Indiana, and Connecticut.

Wisconsin is clearly in the lead, with its Legislature having commissioned a $1 million feasibility study by HNTB, the results of which were released on December 30, 2016. In addition to one volume assessing the solvency of the state’s transportation fund (which found that current resources could not conceivably address reconstructing and modernizing the Wisconsin’s Interstates), the other volumes provided a comprehensive primer on 21st century tolling and a preliminary traffic and revenue study covering reconstruction over the period 2020-2050. While I differ with the latter report on some of its assumptions (especially its not assuming CPI-indexed toll rates), it’s a solid piece of work which I hope the Legislature takes seriously. The study has prompted media discussion, and a number of legislators seem interested in pursuing this approach, though without the support of Gov. Scott Walker thus far.

The push for toll-financed Interstates has several champions in the Indiana legislature, and its new governor, Eric Holcomb, called for a 20-year funding fix for the state’s highways and bridges in his State of the State address, saying that he’s open to a menu of revenue options. Republican legislators, led by Rep. Ed Soliday, have proposed Interstate tolling, but there is not yet an agreement on a specific plan. Much of the focus is on I-65 and I-70, both important truck routes and potential candidate for dedicated truck lanes. Some business leaders have also spoken out in favor of toll-financed modernization. So far Indiana DOT has not called for a professional traffic and revenue study like the one carried out in Wisconsin.

Such studies have been carried out in Connecticut (by CDM Smith), and its state DOT has used grants from FHWA’s Value Pricing Pilot Program to consider variable tolling of I-84 in Hartford (which needs major reconstruction, especially in the downtown area) and another project on variable pricing for much of I-95. Options include pricing only for express toll lanes or on all lanes, with the proceeds dedicated to transportation improvements (which should include widening as well as tolling the congested portion of I-95 between the New York border and New Haven).

One question still unresolved in all three states is how to make toll-financed reconstruction politically acceptable—to motorists and truckers. In my view, the key is to make the tolling a genuine value proposition: much better mobility in exchange for paying tolls. And that should include taking seriously the trucking industry’s concern about double taxation (paying both tolls and fuel taxes on the same stretch of highway). Providing rebates for the fuel taxes otherwise owed on newly tolled lanes is easy to do with today’s all-electronic toll collection. Doing this would not only be more fair to tolled Interstate users; it would also be the first step in a state’s conversion from per-gallon taxes to per-mile charges. And since the Interstates handle 25% of all vehicle miles of travel, if all states eventually made this shift, the country would be well on the way toward replacing obsolescent fuel taxes.

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Treasury Report on Infrastructure Raises Questions

A little-noticed report was issued by the U.S. Treasury just before the New Year’s weekend. Prepared for U.S DOT’s Build America Investment Initiative, it provides a benefit/cost assessment of 40 major transportation and water infrastructure projects. I was pleased by the idea of such a project, which contrasts sharply the engineering-based needs studies (such as the American Society of Civil Engineers’ well-known “report cards” identifying trillion-dollar shortfalls). Benefit/cost analysis is not used very much today to decide which projects are worth doing, except in the case of revenue-risk P3 projects, where this is part of the feasibility analysis. (Download report here.)

When I downloaded and read the Treasury report, however, I began to have second thoughts. For among the array of high-scoring projects was the infamous California High-Speed Rail project, with an estimated benefit/cost ratio of 4.0 to 7.0. Several waterways projects (a sector known for pork-barrel projects) had B/C ratios between 2.0 and 10.0. How could this be, I wondered.

Eno Transportation Weekly was one of the few media that covered the report. Its summary noted that the 40 megaprojects, costing $334 billion, could produce as much as $1.3 trillion in benefits, using the high end of the B/C ranges. ETW also pointed out the eight projects with the highest estimated B/C ratios, which included capacity additions to I-10 in the Southeast, the I-70 East reconstruction in Denver, and a national project to upgrade traffic signal coordination. But editor Jeff Davis did not raise any question about the credibility of the B/C ratios presented in the report.

To get a handle on that question, I contacted two of the four authors (whom I know) to find out how the assessment was done. They explained a key point: the study team evaluated the projects “as presented by their sponsors and did not develop independent estimates of costs, ridership, traffic volumes, service plans, or other inputs.” They did not have detailed data about each project “or the resources to review and modify the data, methodologies, or specific assumptions made by the project sponsors and their consultants.” What they did do was to adjust the sponsor-provided cost and benefits data to a common base year, use a consistent discount rate for all projects to compute net present values, remove projected operations & maintenance costs (since O&M projections were not available for all the projects), and used the length of the analysis period provided by each project sponsor, “since these could not be adjusted to a common base.” As for removing questionable projects from the lists, one of the authors told me that “it would look odd if we started picking winners and losers on our own,” but added that, in hindsight, he had second thoughts about the California HSR project having been included.

My bottom-line assessment is that I’m glad the Treasury and the Build America office saw fit to highlight the use of benefit/cost analysis to support the positive case for improving U.S. infrastructure. This is definitely better than relying solely on engineering “needs analysis” that don’t directly consider whether a project’s benefits exceed its costs. But credible B/C analysis requires rigorous scrutiny of the assumptions and data used, and should always be reported in a transparent way. Because of limited time and funding for this report, it does not meet that test. Hence, it’s not possible to take its benefit/cost ratios seriously.

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Intercity Buses Still Going Strong

One of the least-appreciated modes of U.S. passenger travel has been the rebirth of intercity bus service over the last decade or so. Paying for their infrastructure via federal and state fuel taxes, and covering all or nearly all of their costs from the fare-box, they offer a viable alternative to driving, taking Amtrak, or flying for short-haul and medium-haul routes. Yet except for modest federal and state subsidies to link rural communities to nearby population centers, they are self-supporting businesses.

In recent years the primary source of information has been the annual report on this industry produced by Joseph Schwieterman of the Chaddick Institute at DePaul University. I’m drawing on their 2017 report, “Running Express: 2017 Outlook for the Intercity Bus Industry in the United States,” for this article.

Schwieterman and co-author Brian Antolin identify six short-term trends in this industry, including a pause in growth in 2016, likely due to dramatically lower gasoline prices leading some people deciding to drive rather than take the bus. The Northeast continues to be the strongest market, with a fifth carrier (Go Buses) entering that market last year. The report also notes a gradual expansion of rural subsidies, via the Federal Transit Administration’s Section 5311 program. (Parenthetically, this kind of subsidy is far less costly than the FAA’s subsidies of rural airline service, which often costs taxpayers several hundred dollars for each one-way passenger trip.) Another trend is the emergence of “crowd-sourced bus service,” with companies such as RallyBus and Skedaddle offering trips based on expressed passenger demand.

What I found most interesting in this year’s report is Part II, on city-to-city (C2C) express bus lines, such as Go Buses, BoltBus, Vamoose, and Megabus. BoltBus and Megabus now serve 247 city pairs, with market leader (in this category) Megabus operating 41 million bus miles per year as of 2016. That is more than Amtrak’s 38 million train miles, though obviously far fewer passenger miles. According to the report’s findings, Amtrak today faces competition on nearly 75% of its short-haul and medium-haul routes. Three maps in this section show (1) which Amtrak corridors have competition from C2C bus lines, (2) the many routes with C2C service that are not served by Amtrak (e.g., Los Angeles to Las Vegas, Houston to Baton Rouge, Atlanta to Jacksonville, and many more), and (3) which short-haul routes have neither Amtrak nor C2C bus service.

As Congress considers how much to spend on federal subsidies for Amtrak routes outside the Northeast corridor, it should take into account the steady enlargement of unsubsidized C2C express bus service. Why spend taxpayers’ money to duplicate service already being provided by non-subsidized, taxpaying providers?

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How Will Autonomous Vehicles Affect Public Transportation?

There is a great deal of speculation, some of it utopian, about the potential of autonomous vehicles to radically change urban transportation. The most thoughtful discussion I’ve seen thus far is Steven Polzin’s report from the National Center for Transit Research, “Implications to Public Transportation of Emerging Technologies,” November 2016.

Polzin begins by pointing out that new technologies will not be the only changes taking place; demographics and the economy will also be changing, partially as a result of non-transportation developments in automation. The point is that the future context for urban transport, and consumer reactions to new developments, are both highly uncertain.

One key factor will be the perceived costs of various transportation alternatives. Polzin points out that today the average transit fare is 26 cents/passenger mile, while the out-of-pocket cost of driving is 19 cents/mi. Fares of services like Uber and Lyft range from 65 cents to $2.00 per mile, which is why those hoping for much wider use of these alternatives generally assume shared use (which may or may not be widely preferred by customers). Of course, if and when completely driverless robo-taxis are in widespread use, the cost per mile will be significantly lower.

Polzin raises a number of points about customer acceptance of shared-ride and robo-taxi services, including acceptable wait times, concern over vehicle cleanliness, security (in driverless vehicles), and privacy of travel information. Models of mobility-as-a-service make numerous assumptions about trade-offs between fleet size and wait times, as well as fleet efficiency—none of which can, as yet, be empirically tested.

Polzin also offers some sobering thoughts for transportation planners and transit system management. First, the widely accepted assumption that lower-cost travel will result in more travel taking place may increase competition between personally owned vehicles and public transit. Also, lower price points made possible by autonomous vehicles “may cannibalize marginal transit services and further polarize public transportation ridership by siphoning off higher-income travelers.” Transit agencies are beginning to contract with companies like Lyft and Uber for “first-mile/last-mile” service, but Polzin wonders “what contexts enable first-mile/last-mile services to be complementary and in which environments they are competitive.” However, since bus driver compensation constitutes 42% of bus operating expenses, self-driving buses could be significantly less costly to operate.

A final point for transportation planners and transit managers to consider is the impact of these technologies on long-range planning for infrastructure. Here is the most relevant paragraph:

“Numerous communities across the country are planning for or evaluating major capital fixed-guideway public transit investments whose success may be impacted by the presence of alternative mobility options. The criticality of reflecting on these issues relates to both the magnitude of the cost of these commitments and the fact that these assets are very long-lived. These fixed-guideway commitments may well have extensive economic life remaining at points in time when new travel options compete with them, potentially cannibalizing their markets and rendering the investments less productive than envisioned in the planning stages.”

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Transportation at the Ballot Box

Thirty-four states had state or local transportation spending measures on their November ballots. Eno Transportation Weekly provided a statistical recap, finding that 70.4% of these 436 measures passed. But ETW‘s further analysis allows us to get a better idea of what works and doesn’t work, as of late 2016.

One factor is the transportation mode for which the funding would be dedicated. Though there has been a trend in recent years to multi-modal efforts (aiming to attain majority support by offering something to several different constituencies), only 13 of the 436 November measures were of this kind. Most were focused on a single mode, as follows:

Transport Mode Number of Ballot Measures Pass Rate
Bike/ped 59 73%
Transit 58 71%
Multiple modes 13 69%
Roads & bridges 353 69%

I was also interested to see which types of funding garnered the most and least support. Four major categories predominated, as follows:

Type of Funding Number of Ballot Measures Pass Rate
Bond 50 86%
Property tax 245 77%
Sales tax 75 68%
Gasoline tax 27   7%

As ETW pointed out, the results were skewed somewhat by a plethora of ballot measures in Ohio (160) and Michigan (79), most of which dealt with property tax increases. I’m struck by the very high approval rate for bond issues, which I suspect many voters regard as a kind of free money. And that only 7% of ballot measures calling for a gas tax increase passed should be a sobering reminder that what was once considered a quintessential user fee is now seen as just another tax—and a very unpopular one. That further strengthens the case for shifting to mileage-based user fees that are true users-pay/users-benefit fees, like utility bills.

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Upcoming Transportation Conferences

Note: We don’t have the time or space to list all transportation events that might be of interest to readers of this newsletter. Listed here are events at which a Reason Foundation transportation researcher is speaking or moderating.

By Ground and By Air, February 8, 2017, James Madison Institute, Tallahassee, FL (Adrian Moore speaking). Details here.

Bond Buyer’s Texas Public Finance Conference, February 8-10, 2017, Hyatt Regency, Austin (Robert Poole speaking). Details here.

USC Real Estate Law & Business Forum, March 7, 2017, Jonathan Club, Los Angeles (Baruch Feigenbaum speaking). Details here.

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News Notes

Florida Adding Express Toll Lanes to Toll Roads. Early this month, Florida DOT announced that 29 more miles of existing toll roads in Southeast Florida will be widened by adding variably priced express lanes, rather than general-purpose toll lanes. The projects include 29 route-miles of Florida’s Turnpike in Miami-Dade, Broward, and Palm Beach Counties, and 23 miles on the Sawgrass Expressway in Broward. The Turnpike is already under way developing previously announced express toll lane projects in the Miami, Orlando, and Tampa metro areas. The only such express toll lanes currently in operation on a toll road are on PR-22 in San Juan, Puerto Rico.

Michigan Law Authorizes Truck Platooning. Gov. Rick Snyder signed into law last month SB 995, which authorizes electronically coordinated truck platooning via an exception to the standard minimum following distance of 500 feet for commercial vehicles. Fewer than half the states have commercial vehicle following distance minimums, which range from 100 to 500 feet, according to technology company Peloton, a pioneer in truck platooning systems.

Hampton Roads Bridge-Tunnel to Be Expanded. Virginia’s Commonwealth Transportation Board voted unanimously in December to approve a $4 billion project to add a third tunnel and expand 12 miles of I-64 from four lanes to six. The new capacity will likely operate as HOT lanes (with a 3-person minimum for free passage); the existing lanes will remain non-tolled. The expansion project was selected as the “preferred alternative,” but must still go through the usual environmental and other approval stages.

Bestpass Has Record Tolling Year. One of the two national providers of electronic toll collection and weigh-station bypass, Bestpass, Inc., announced a new annual record of handling more than $450 million in toll payments for its 3,700 trucking industry customers in 2016. It introduced a nationally interoperable transponder, and expanded its coverage to Oklahoma and to the new Ohio River Bridges at Louisville which opened at the end of the year.

Colorado I-70 Reconstruction Gets Record of Decision. Colorado DOT’s $1.2 billion reconstruction of I-70 through northeast Denver received federal approval this month: a Record of Decision approving the environmental impact study. The innovative project will be carried out via a long-term P3 concession. It includes replacing a 1.8 mile elevated section with a below-grade configuration, part of which will be covered by a four-acre park, reuniting neighborhoods long separated by the freeway. The new configuration will also include two express toll lanes each way.

Out-of-Control Subway Costs? An editorial in the Wall Street Journal (“New York’s Second Coming,” Jan. 4, 2017) includes startling figures on the cost of the new Second Avenue Subway, whose first phase opened over New Year’s weekend. Drawing on global data compiled by Alon Levy (of PedestrianObservations), the Second Ave. line cost $1.7 billion per km. That compares with Barcelona’s $170 million per km, Berlin’s $250 million per km, Tokyo’s $350 million per km, and London’s $450 million per km. These are all major, dense urban areas; something is clearly wrong with subway-building in New York City.

Virginia Express Toll Lanes P3 Has Major Equity Investment. The winning bid for the $2.3 billion I-66 (outside the Beltway) express toll lanes project was submitted by the team of Cintra and Meridiam. Of the total investment, 40% would be equity and the rest debt, all financed based on the projected toll revenues. That contrasts with an average of 25% equity in recent revenue-risk concessions for new highway capacity over the past decade. This very conservative financing provides a cushion in case early-years’ toll revenue is below projections, since that revenue must support only the debt service in the early years.

Good Reading on Smart Growth and Smart Cities. Transportation analyst David Levinson (University of Minnesota) posted an insightful critique of “smart growth” and “smart cities” on his Transportist blog last month. He zeroes in on the assumption that central planners know best, citing seminal essays and books by economist F. A. Hayek to the contrary. Very much worth reading. (Download it here.)

Rapidly Obsolete In-Car Technology? Maryann Keller posted an interesting piece last month on LinkedIn, “Is In-Car Electronic Technology Depreciating Faster than the Car Itself?” She points out that the average age of personal vehicles in the fleet today is 12 years, since today’s cars last far longer than those of previous eras. But the useful life of telematics systems tends to be only a few years before it is made obsolete by something better. This is also true of battery-electric cars like the Nissan Leaf, where technological progress is rapidly making older models obsolete. She points out that a 3-year-old Leaf going off-lease sells for only $6-7K at a wholesale auction (about 18% of its original retail price), while comparable non-electric cars of the same age go for 45-65% of their original price.

Another Booming New Toll Road. Contrary to the claim of anti-toll-road people that “most new toll roads are failures,” most such “greenfield” toll roads do have difficult “ramp-up” periods as drivers figure out whether the value of time savings and trip quality exceeds the cost of the toll—but do fine over the longer term. But some do even better. A recent case in point is the Triangle Expressway in North Carolina. NCDOT had projected toll revenue in its first four years at $77 million, but the actual total is nearly $95 million. Revenue has exceeded projections in each of the first four years.

Streetcars vs. Bicycles? An unexpected glitch has developed with the planned downtown streetcar system in Fort Lauderdale, FL. Biking advocates have pointed out that “bikes and streetcar tracks don’t mix well. The track grooves, called flangeways, can trap narrow bike tires, bringing a bike to an abrupt halt and sending its rider flying,” according to a Dec. 18th article in the South Florida Sun Sentinel. While the city has not yet decided on a solution to this problem, it has already ruled that there will be no designated bike lanes on roads with streetcar tracks.

California P3 Law Sunset December 31st. The hard-won law that enabled a limited version of public-private partnerships for transportation projects expired at year-end, since the Legislature failed to either extend it or replace it with a more-workable measure. That represented a win for PECG, the militant union of Caltrans engineers, which has fought design-build and P3s for decades. Public Works Financing points out that any future P3 projects affecting the state highway system will require project-specific enabling legislation—which PECG will lobby hard to defeat.

Editorial Calls for Repeal of Pennsylvania Act 44. One of the most egregious examples of turning a toll road into a cash cow for other purposes is Act 44, a 2007 law that forces the Pennsylvania Turnpike to divert $450 million a year in toll revenue to the state DOT to fund transit services around the state. This mandate required the Turnpike to issue new bonds and enact large annual toll rate increases. An editorial in the Pittsburgh Post-Gazette (Dec. 18th) called on the Legislature to repeal Act 44, which threatens to bankrupt the Turnpike. The editorial also noted a successful lawsuit by the American Trucking Associations that found unconstitutional a New York law forcing the New York Thruway to subsidize the Erie Canal.

Estimating Demand for Express Toll Lanes. A research paper by Robert Campbell of Cambridge Systematics presents a novel approach to estimating the fraction of drivers that would choose to use express toll lanes. Based on data from the original ETL project (on SR 91 in Orange County, California), Campbell finds that just three variables—expected travel time savings, the toll rate, and the speed difference between ETLs and GP lanes—can predict the ETL usage with an R2Value of 0.869. The paper is “Estimating Drivers’ Willingness to Pay by Using Empirical Data from a Variably Priced Freeway Facility.” It appears in Transportation Research Record No. 2554, 2016.

Rhode Island to Unclog Congested Interchange. Although Rhode Island policymakers have received justified criticism for their plan to charge tolls only to heavy trucks to generate needed new revenue for highway improvements, one project announced last month looks very well justified. It would rebuild the northbound portion of I-95 in downtown Providence, which is currently a major bottleneck. The problem appears to stem from an on-ramp and off-ramp that are much too close together for the level of peak-period traffic, causing miles-long traffic jams. The $226 million project will add parallel lanes and separate these ramps.

Guidelines for Implementing Managed Lanes. The National Cooperative Highway Research Program has released a valuable new report Guidelines for Implementing [Priced] Managed Lanes. Full details are available on the Transportation Research Board website. The report is NCHRP 835. You can download it here.

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Quotable Quotes

“As we’ve come to appreciate the breadth of impacts from transportation, there’s been a tendency to rationalize virtually any investment as offering some positive benefits. While these positive benefits may be meritorious, they will not necessarily stimulate economic activity. Offering choices, providing geographic equity in spending, creating signature projects for community pride, or attempting to redistribute land development patterns or attract development from other areas may all be nice objectives, but not necessarily objectives that have a proven history of net economic growth at the national scale. When we measure dollars invested, we need some denominator that relates to providing mobility if we want to enhance economic productivity.”
—Steven Polzin, “All I Want for Christmas Is a Transportation Infrastructure Plan That Helps,” Planetizen, Dec. 7, 2016

“Tell the Congress of the United States to lift the prohibition on tolling Interstate highways for the purposes of reconstruction. Give the states the ability to toll their Interstate highways specifically for rebuilding those Interstate highways. Let them have access to one more tool in the toolbox. This is not a mandate; no state would be required to toll their Interstates. This simply gives states the flexibility to choose the option to use tolls if it makes sense to the individual state.”
—Patrick D. Jones, remarks to the TRB Future Interstate Study Committee, Dec. 20, 2016

“The gridlock that has prevented us from addressing the nation’s infrastructure problems is not the result of the private sector’s unwillingness to fund infrastructure projects. It is the fault of federal, state, and local governments that either cannot or simply don’t want to tap into capital markets and public-private partnership opportunities to upgrade their systems and improve productivity. As Poole writes in the industry newsletter Public Works Financing, what infrastructure-fund investors and the private companies that implement infrastructure projects “lament is the lack of a pipeline of U.S. projects,” not the lack of incentive to invest. The U.S. has a target-rich environment for private capital, but the targets don’t necessarily want to play, often preferring to wait for taxpayer-funded grants to shore up dilapidated or outmoded facilities.”
—Samuel R. Staley, “The Infrastructure Bank We Need,” National Review, Dec. 31, 2016

“While the future is full of promise, the bad news is that the public sector seems unable to govern in the face of a flood of innovations, or plan for future changes that we know are on the way. Even maintaining existing transportation infrastructure needed for a functional society is a challenge. . . . In the past, we thought of revenue only as a way to raise money by which to build and maintain infrastructure. Demand and flow were thought of as externally determined or fixed. Now, we can influence travel patterns and use infrastructure more efficiently by using pricing, along with real-time information, to manage demand and travel flow. . . .  By experimenting over two decades, we have learned about niche markets in which private investments excel in delivering value for money. Private investments in toll roads and contracted private transit operations have grown dramatically in recent years. . . . The current financial crisis is serious, frustrating, and painful, but it is not unprecedented and is already leading toward innovations that will be emulated on a grand scale.”
—Martin Wachs, “Transportation Finance: An Unexpected Source of Innovation,” Access Special Issue, Winter 2016

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Robert Poole is director of transportation policy and Searle Freedom Trust Transportation Fellow at Reason Foundation.