Surface Transportation Innovations Newsletter

Surface Transportation Innovations #15

Special Focus on Federal reauthorization bills

Special Focus in this issue on Federal Reauthorization Bills:

Truck Lanes Provision Misses the Mark

With both House and Senate bills facing a veto threat over spending more than the White House estimates will be available from fuel tax revenues over the next 6 years, you would have thought that House Transportation & Infrastructure Committee members would be especially eager to expand opportunities for using tolls to increase the amount of highway investment. Unfortunately, one of the best such opportunities – adding toll truckways to congested Interstate routes – has been nearly ignored, despite Chairman Don Young’s oft-expressed enthusiasm for the concept.

Sec. 1305 of HR 3550 is called “Dedicated Truck Lanes,” but you will search in vain for any mention of tolling in its provisions. It’s just a conventional highway expansion proposal, with standard 80% federal funding and subject, of course, to Davis-Bacon regulations. Yes, there is coy language about priority being given to projects that use “innovative funding” (hint, hint), but that’s it. And there is also no provision for the crucial feature that would make it worth it to trucking companies to pay tolls: permission to operate so-called Longer Combination Vehicles like turnpike doubles and triples on the new lanes.

This is a serious missed opportunity. Unless it is corrected on the House floor, I don’t think it can be fixed at the conference committee stage, since there is no comparable provision in the already passed Senate bill, S 1072.

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Un-Mainstreaming Variable Pricing?

Until the House bill came along, proponents of road pricing were ecstatic. After the small Congestion Pricing Pilot Program of the 1991 ISTEA legislation, and the larger Value Pricing Pilot Program of the subsequent TEA-21 law, the Bush administration’s SAFETEA bill proposed to mainstream the program. Instead of pricing being limited to 15 project partner agencies, all states and metro areas would henceforth be free to make use of variable pricing to manage traffic anywhere in the United States. The Senate bill, with a few unique twists, goes along with this approach. But HR 3550 would take several large steps backwards. Sec. 1209 reverts back to the earliest name (Congestion Pricing Pilot Program) and sets a limit of 25 projects, including the existing projects created under the previous pilot programs. Since the previous program had already used up all 15 of its available slots, Sec. 1209 would appear to permit only 10 more pricing projects in the entire country. And this at a time when HOT lanes projects have finally reached critical mass in metro areas nationwide!

Both House and Senate bills do include modest funding to help do the initial studies needed to get pricing projects off the ground, and to evaluate them once they are in operation. That’s welcome, since these non-traditional projects still have to overcome considerable knowledge barriers in each new community where they are proposed. But after 13 years of “pilot” status, it really is time for such projects to be able to graduate to mainstream status. As the Administration wisely set forth in its proposal, it’s time to remove federal barriers to making full use of pricing wherever states and metro areas see fit. Doling out federal permissions in dribs and drabs is not the way to go.

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Worrisome Social Engineering

Surprisingly for a bill that emerged from a Republican-majority committee, HR 3550 is full of social engineering provisions, a few of which also appear in S 1072. Both bills make it easier to convert car-pool (HOV) lanes to priced, high-occupancy toll (HOT) lanes. But both also would allow states to let “low emission and energy-efficient vehicles” into HOV lanes. Given the likely increase in such vehicles over the next decade, that well-meaning provision would very possibly fill HOV lanes with so many vehicles that there would be little room for paying customers and hence no point in converting them to HOT lanes. Thus, at precisely the time when Atlanta, Dallas, Denver, Houston, Miami, Minneapolis, San Diego, San Francisco, Seattle, and Washington, DC are all looking seriously at whole systems of HOT lanes, this provision could undercut their plans. Moreover, it would make enforcement (only eligible vehicles in these lanes) even more complicated than for today’s HOT lanes.

And there’s more. Folded into just about every pricing or toll-related provision of HR 3550 is a requirement that “low-income vehicles” pay reduced toll rates. The first question is WHY? Do low-income people get discounts on Amtrak? From the US Postal Service? From airlines? Then why should such discounts be provided on highways? The second question is how this would be carried out in practice. I suppose people eligible for food stamps could produce evidence that they are eligible when they sign up for their transponder, and the transponder would then be coded to charge lower rates. But seriously, folks – why gum up a sensible and workable set of techniques for managing traffic and raising money for better transportation with this kind of stuff? I know, this is supposed to be an answer to those worried about “Lexus Lanes.” But the data from real projects on SR 91 and I-15 in California show that people of all income levels are glad to have the opportunity to pay for a faster trip when they really need it. And we can also use HOT lanes as fast, reliable Bus Rapid Transit corridors, providing superior transit options for lower-income people. Surely that’s the better way to go.

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Deal-Killers for Private Investment

The 1990s saw a great burst of enthusiasm for private capital to be invested in America’s highway system. Thus far 20 states have enacted public-private partnership laws to encourage private investment. However, as a recent GAO report noted, only a half dozen such projects have materialized over the past decade. (“Highways and Transit: Private Sector Sponsorship of and Investment in Major Projects Has Been Limited,” GAO-04-419, March 2004). One reason is that the financial playing field is tilted against the private sector. A private developer-operator under a state-awarded franchise can issue only taxable toll revenue bonds, whereas a state toll authority can issue tax-exempt bonds. A measure to permit tax-exempt Private Activity Bonds for transportation projects passed both Houses in 1999, but it was part of a comprehensive tax bill vetoed by President Clinton.

This time around, the Administration’s SAFETEA bill included provisions for up to $15 billion in Private Activity Bonds for this purpose, and S 1072 adopted this provision. And until a few weeks ago, things were looking good for comparable provisions in the House. But they foundered over demands from union quarters that Davis-Bacon provisions be applied to any project funded with such bonds. While that battle may not yet be over, my sources are not optimistic.

If that weren’t bad enough, HR 3550 proposes another deal-killer for private (and public) toll projects. It would have the federal government, in its wisdom, override the judgments of state DOTs and regional transportation agencies by flat-out prohibiting “non-compete agreements” for toll projects. This is yet another over-reaction to lessons learned from California’s 91 Express Lanes, where a too-rigid non-compete clause prohibited much-needed capacity additions on SR 91. But as the above GAO report points out, nearly all toll projects make use of some kind of protection of this sort. Would you buy a toll revenue bond for a new toll road if the state could create unlimited free competition alongside it during the life of the bonds? Second-generation provisions generally provide that state and local officials agree not to build more than the set of projects included in their long-range transportation plan, but that if circumstances change and they need to add some competing capacity, they provide compensation for lost revenue to the toll road’s investors. In other words, this problem is being solved at the state and local level without any needs for the feds to butt in.

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Expanded Interstate Tolling

With so much of the above being negative about the House bill, I’m glad to be able to give it a thumbs up in one area. Both S 1072 and SAFETEA included provisions to continue a pilot program under which three states could use tolls to rebuild major Interstates, a welcome expansion of funding options at a time of great fiscal stress. HR 3550 includes this provision, but then adds a companion pilot program under which three more Interstate toll projects could take place, to construct new capacity on the Interstate system. Presumably, this could include both all-new projects like the extension of I-69 from Indiana to Texas as well as large-scale lane additions on routes such as I-70 in Missouri or I-80 in Pennsylvania.

That’s all to the good, though I will note that the FAST Lanes Program in S 1072 is much broader, allowing all states to add lanes to Interstates. And S 1072 is not burdened with requirements for low-income discounts or bans on non-compete agreements. Incidentally, the Senate’s FAST Lanes Program no longer requires that tolls be removed once the initial bonds are paid off.

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