Surface Transportation Innovations Newsletter

Surface Transportation Innovations #8

Topics include: outsourcing highway maintenance, PPI's report on reauthorization, a first look at DOT's draft reauthorization bill, and HOT networks speaking engagements.

In this issue:

Outsourcing Highway Maintenance

Adequate highway maintenance is critical to maintaining the asset value of this vital infrastructure. Doing so is more important than ever, now that states have to account for such assets under the provisions of GASB 34. But in times of great fiscal stress like 2003, highway maintenance is often one of the items that gets squeezed.

But what if it were possible to do the desired amount of highway maintenance for 15-20 percent less money? That’s what some states and other countries have learned is possible by making use of competition-i.e., seeking competitive bids from companies that specialize in highway maintenance. But since this is quite a departure for states that have always done their maintenance in-house, many DOTs have been hesitant to take this step.

That’s where a new guidebook, produced by my Reason Foundation colleagues, could come in handy. “Contracting for Road and Highway Maintenance,” by Geoffrey F. Segal, Adrian T. Moore, and Samuel McCarthy, was published last month. You can find it on the Reason website at: This is the 21st how-to-guide Reason has produced over the past decade, and it’s one of the best. It provides a whole raft of reasons why outsourcing could make sense, describes the three principal types of contract arrangements, and then goes into some detail about the elements needed to ensure a contract that genuinely serves the interest of both parties.

Outsourcing maintenance is still a relatively new approach in the highway field, in contrast with many other areas of state and local government. But I think it has a bright future.

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Progressive Policy Institute Talks Sense on Reauthorization

I want to offer somewhat belated kudos to Rob Atkinson, author of an excellent set of ideas for TEA-21 reauthorization, published in December by the Progressive Policy Institute. It’s called “Getting Unstuck: Three Big Ideas to Get Americans Moving Again,” and you can download it from PPI’s website here.

The three big ideas, with which I largely agree, are (1) invest more in mobility, (2) pay for performance, and (3) harness market forces to cut congestion and manage roads. In setting the stage, Rob debunks the idea that it’s futile to add capacity, noting that the failure to expand capacity over the past two decades has led directly to the enormous problem of congestion plaguing our larger urban areas. But unlike those who would go back to the pave-over-everything approach of the ’50s and ’60s, Rob and his PPI colleagues favor both supply-side and demand-side approaches-i.e., build more but also use market pricing to limit demand and manage traffic flow. Citing the success of HOT lanes in California, the report goes on to commend Reason’s proposals for HOT Networks and Toll Truckways as examples of the recommended approach.

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DOT’s Pricing/HOT Proposals Get a B-Minus

The U.S. Department of Transportation’s draft bill for surface transportation reauthorization began circulating several weeks ago. For those who favor market mechanisms, it’s something of a mixed bag. There are more pluses than minuses, even though the bill does not go as far as some of us had hoped it would (e.g., there are no provisions specifically calling for HOT Networks or Toll Truckways).

Of particular concern, for those of us who see pricing as both a powerful tool for traffic management and a vitally needed additional source of highway funding for expansion and modernization, is the fate of the tolling provisions of TEA-21. That measure included a pilot program for using tolls to rebuild Interstate facilities in those cases where states could not find sufficient resources from traditional (fuel-tax) sources. Although no state took advantage of this provision during TEA-21’s six years, the draft bill retains it with some streamlining designed to make it a bit easier for projects to qualify. While the trucking industry had targeted this pilot program for repeal in the reauthorization, the growing interest in toll truck lanes among some segments of the industry may cause them to back off and allow this promising idea more time to be tested.

The other major pricing provision is what TEA-21 termed the Value Pricing Pilot Program, which has been fairly extensively used during TEA-21’s life. Here the DOT basically proposes to mainstream the program, removing its “pilot” status and renaming it the Variable Toll Pricing Program. There would no longer be any limit on the number of states that can participate, and the emphasis would change from studies to implementation of variable tolling projects. That will disappoint advocates of things like distance-based insurance and parking pricing, who have gotten some funding under the previous pilot program. It also will make it harder to get pricing projects off the ground, by eliminating the modest start-up grants that have been available, as well as the educational functions provided by having a formal program office (if that is not continued). On the other hand, the overall change from experiment to implementation is a very positive development. The draft also clearly permits single-occupant vehicles to be allowed into HOV lanes on payment of a toll, as part of a Variable Toll Pricing Program project-which would appear to give a green light to HOT Lanes projects.

My biggest concern is with the section on HOV lanes. While again permitting SOVs to use HOV lanes on payment of a toll, the bill would also open up HOV lanes to “low emission and energy-efficient vehicles.” Sounds nice-we would all like to encourage vehicles that are less-polluting and more efficient. But it’s precisely the wrong direction to go if we want to move toward sustainable managed lanes (such as HOT Networks) over the next decade. The dilemma facing metro-area transportation agencies is that as more vehicles qualify to use HOV-2 lanes, they get so crowded that they lose their speed and time advantage. Opening them up to an ever-increasing number of hybrids and ULEVs will make this problem much worse. The only sustainable course is to manage these lanes via market pricing. That’s why in our HOT Networks proposal, Ken Orski and I bit the bullet and recommended that only super-HOVs be allowed at no charge—meaning vanpools and buses. The remaining capacity, however large or small, should be reserved for whatever number of paying vehicles is consistent with maintaining free-flow conditions. That number will change over time (and throughout the day) and should be controlled by variable pricing. Opening up HOV lanes to new categories of politically correct vehicles is a mortal threat to the promise of HOT Networks.

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HOT Networks Speaking Appearances

Interest in HOT Networks keeps getting stronger. My colleague and co-author Ken Orski has done briefings for staffers of both the House Highways & Transit Subcommittee and the Senate Environment & Public Works Committee, as well as Rep. Mark Kennedy (R, MN) and his staff. Last month I spoke at a California transportation finance conference and at a monthly breakfast forum sponsored by the Humphrey Institute in Minnesota. And upcoming HOT Networks presentations by me will include San Francisco (May 1), Atlanta (May 29), Washington, DC (IBTTA, June 9 and 10), Miami (June 12), and a second time in San Francisco (June 14). Ken has also briefed Maryland Gov. Robert Erlich, Maryland legislators, and Maryland DOT staff.

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Quotable Quote

I’ll leave you with this quote from a Washington Post editorial from last November 4th, pointed out to me by Peter Samuel of Toll Roads Newsletter:

“Arguing against more road capacity because it attracts more traffic is like arguing against more schools because they attract more children.”

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