In this issue:
- Congestion and Economic Growth
- How Much Would Reducing Driving Reduce Greenhouse Gases?
- Rail Access to Ports: When and Where
- New Features in State PPP Laws
- Cautions on Green Jobs
- Upcoming Conferences
- News Notes
- Quotable Quotes
Gridlock and Growth: Reducing Congestion Boosts Productivity
If you ask most transportation planners about the “cost” of traffic congestion, they will most likely cite the estimates from the Texas Transportation Institute’s Urban Mobility Reports, now issued every other year. But the $87 billion annual cost reported in the latest report, like its predecessors, counts only wasted time and fuel due to peak-period trips taking longer than uncongested trips. That is only a fraction of the total cost.
In the 1990s, researchers Rene Prud’homme and C. W. Lee reported on studies of French and Korean metro areas, relating output per worker in an urban region to its accessibility. More specifically, they found that a 10% reduction in travel time is correlated with a one percent increase in output per worker, presumably due to better matching of employee skills to employer needs. In 2001, Robert Cervero reported on comparable effects in the United States. More recently, the Eddington Transport study commissioned by the U.K. government and published in December 2006 went into some detail on the relationship between travel time and economic growth. For the U.K. as a whole, it estimated that a 5% reduction in business travel alone could generate a GDP increase of 0.2%.
Last month, Reason Foundation released a new study on this subject, by David Hartgen and Gregory Fields: “Gridlock and Growth: The Effect of Traffic Congestion on Regional Economic Performance.” (/wp-content/uploads/2009/08/ps371_growth_gridlock_cities_full_study.pdf)
They looked at eight large U.S. urban areas (Atlanta, Charlotte, Dallas, Denver, Detroit, Salt Lake City, San Francisco, and Seattle) and in each case studied current and future (2030) accessibility of five locations: downtown, a major mall, a large suburb, a university, and the major airport. Using the traffic network model from each region’s Metropolitan Planning Organization, they developed drive-time contours (how far you can drive in X minutes) around each location, for both congested and free-flow conditions in both the base year and 2030. They also calculated the population and jobs within each drive-time contour, as well as the gross regional product (GRP) of each metro area. Then, using a regression model similar to that used by Prud’homme and Lee, they estimated models relating GRP per worker with accessibility measures. Their most commonly cited results are based on 25-minute drive-time contours, though they also used 55-minute contours (which showed somewhat stronger relationships).
While the results vary among cities and among types of location, there were strong enough correlations to suggest a number of conclusions. In general, their results are similar to those of Prud’homme and Lee, finding that reducing congestion enough to increase access by 10% would increase GRP by about 1%. That may not sound like much, but it would mean tens of billions of dollars in increased output of goods and services, many thousands of jobs, and greater tax revenue for governments.
For transportation planners, Hartgen and Fields’ more detailed results are worth paying attention to. Although the central business district in most of these regions had more jobs than any of the other sites, growth in the rest of the region over the next 20 years is likely to be far greater in the suburbs. And since reducing congestion in the suburbs is generally less costly than in the center, there may be important benefits from directing more transportation investment there.
Compatible findings emerged from a 2008 study by Kent Hymel of UC Irvine, “Does Traffic Congestion Reduce Employment Growth?” (https://webfiles.uci.edu/khymel/www/files/hymel_job_market.pdf). His study used the Los Angeles metro area as its source of data, and found that a 50% reduction in the level of congestion in 1990 would have generated roughly 100,000 additional jobs by 2003, according to a summary in The Urban Transportation Monitor. Reducing congestion could be effected via either highway capacity expansion or congestion pricing, or some combination of the two.
These employment and productivity implications have not received the attention they deserve in transportation planning. There is a far stronger case for congestion reduction than most debates have recognized.
Is Reducing Vehicle Miles Traveled a Cost-Effective Greenhouse Gas Policy?
Last month I wrote rather critically about the Urban Land Institute report, “Moving Cooler,” which presented highly selective data in support of the smart-growth/transit/VMT-reduction approach to greenhouse gas (GHG) reduction. I faulted it for being a very high cost/ton approach (hence, wasting resources), for not counting many costs that this approach would impose (especially reduced housing choice and far more costly mobility), and for over-emphasizing what can be done via behavior change as opposed to technology change.
In the past month, I’ve come across additional material that reinforces my concerns about the “Moving Cooler” approach. The most important came out Sept. 1st, from the Transportation Research Board of the National Academy of Sciences. “Driving and the Built Environment: the Effects of Compact Development on Motorized Travel, Energy Use, and CO2 Emissions,” was requested by the Energy Policy Act of 2005 and was produced by a 12-member expert committee, chaired by Jose Gomez-Ibanez of Harvard. In contrast to the “Moving Cooler” report, this TRB study at least attempts to assess what is and is not known about the subject-and on some key points, there was evidently considerable disagreement among the committee members.
The bottom line, as MIT’s Technology Review headlined its article on the report, is “Forget Curbing Suburban Sprawl: Building denser cities would do little to reduce CO2 emissions.” (www.technologyreview.com/energy/23343/?nlid=2323). To be sure, the consensus-oriented TRB process would never lead to stating a result in such stark terms. But after all the qualifications are presented, the committee’s “moderate” scenario (which postulates 25% of all new and replacement housing being built at twice today’s densities and that residents of said housing will drive 12% less), leads to reductions in fuel use and GHGs of just 1% from the business-as-usual case by 2030, and 1.3 to 1.7% less by 2050. In engineering, that’s what we would call a rounding error.
The committee’s “upper bound” scenario, which calls for 75% of new and replacement housing to be high-density and assumes its residents would drive 25% less was not credible to committee member Anthony Downs of the Brookings Institution, who told Technology Review that “the 75% figure is completely unrealistic,” and went on to add of this whole approach, “It’s an enormous amount of effort to achieve a tiny amount of outcome. If your principal goal is to reduce fuel emissions, I don’t think future growth density is the way to do it.” MIT energy expert Henry Jacoby tells the magazine “The bigger bang will come from changing the emissions per mile of the fleet we will have in 2050.”
There also appears to be a serious error in the TRB report that none of commentaries on it have caught. It apparently assumes a one-to-one relationship between reduced vehicle miles traveled (VMT) and reduced CO2 emissions-i.e, that a 10% decrease in VMT leads to a 10% decrease in CO2. But that’s an unwarranted assumption. Wendell Cox alerted me to a submission by the UCLA Lewis Center for Regional Policy Studies to the California Air Resources Board, “Measuring Vehicle Greenhouse Gas Emissions for SB 375 Implementation.” (www.arb.ca.gov/cc/sb375/rtac/meetings/070709/commentaddendum.pdf) It makes the case that “VMT is not an ideal proxy for vehicle greenhouse gas emissions,” for several reasons. First, CO2 emissions are significantly greater in stop-and-go congestion than at steady-speed driving; in California, congestion accounts for nearly 6 million megatons of GHG emissions. Second, policies focused on reducing VMT could themselves increase congestion, thereby not only directly increasing CO2 emissions but also reducing economic activity. Moreover, a VMT metric does not account for differences in the carbon content of fuels or vehicle fuel efficiency, thereby unfairly targeting those who purchase and drive high-mileage or electric vehicles.
One of the five background papers prepared for the TRB study looked quantitatively at alternatives, and found that a 0.1% reduction in the weight of all U.S. vehicles would be 10 times more effective at GHG reduction than a 0.1% increase in housing density nationwide. Lead author Kara Kockelman (a member of the TRB committee) told Technology Review that expanding transit systems could lead to increased GHG emissions, due to the high energy consumption involved in construction. “If you could instead fill existing passenger vehicles or double the fuel economy of an SUV, you would get much greater CO2 reductions.” (http://onlinepubs.trb.org/Onlinepubs/sr/sr298kockelman.pdf)
Rail Access to Ports: When and Where
We all know that on either cost per ton-mile or energy use per ton-mile, rail is more efficient than truck. Hence, the desire of various public officials to increase rail’s share of goods movement and decrease the share hauled by trucks. Of course, it’s far more complicated than that. Shippers don’t choose a freight mode based only on out-of-pocket cost. Speed and reliability of delivery time are often critically important, and in many circumstances railroads can’t do what shippers need.
These issues come up when politicians discuss the future of major ports. In furtherance of their all-rail preference, some officials are now promoting on-dock rail as “the” answer, on the grounds that being able to shift containers directly from ship to rail car will eliminate the often somewhat scruffy “drayage” trucks from city streets and freeways. Here again, though, things are not as simple as they seem. In an article several months ago in the Journal of Commerce (April 13, 2009, pp. 28-31), Asaf Ashar, co-director of the Ports & Waterways Institute at the University of New Orleans, provided some very useful context on the current state of intermodal freight service.
Some ports are, in fact, developing into pure rail ports, handling only intermodal containers destined for distant cities. Examples include the new west coast Canadian port at Prince Rupert, the Mexican west coast port of Lazaro Cardenas, and a new east coast port being developed in Nova Scotia, aimed at Suez Canal traffic. But various other trends conflict with that vision.
One is trans-loading, in which 40-foot intermodal ocean containers are unpacked and their contents redistributed into 53-foot domestic (usually truck) containers, which have 50% more capacity. Goods from various manufacturing sources (different incoming ocean containers) can thereby be organized into a single delivery for a major company such as Target or Best Buy. A lot of what takes place in the Inland Empire, about 60 miles from the ports of Los Angeles and Long Beach, is this type of value-added activity. Since there is no space at ports for large trans-loading facilities, this business requires drayage.
Then there’s the question of on-dock versus near-dock rail. Because land at ports is almost always scarce, on-dock yards tend to be much smaller than near-dock yards. The latter require drayage, but as Ashar notes, “For [ports] with small rail share, the drayage is less costly than switching long trains to smaller-on-dock yards. The latter requires breaking the trains into short strings, pushing them in and out of the on-dock yards, assembling those strings into trains and then switching them back, blocking the traffic to and from the marine terminals and the surrounding areas.” Near-dock yards also operate more efficiently, make for better railcar utilization, offer more frequent service to more destinations, and have less-restrictive labor rules than port labor. Ashar refers to a study of his which concluded that on-dock rail yards are viable only when the rail share of port traffic reaches 50% or more.
Sound goods-movement policy needs to be based on solid analysis, not feel-good ideas like “rail is better than truck.” It’s good to see people like Ashar getting serious attention.
Innovations in State Transportation PPP Laws
When the Arizona legislature passed a sweeping new transportation PPP bill last spring, the measure included two innovative provisions which I haven’t seen in other enabling legislation in this area. One exempts PPP toll roads from property taxes, while the other will provide rebates of motor vehicle taxes, on a per mile basis, for all miles traveled on new toll roads. Not everyone agrees with these measures, but I think both are worthwhile.
Let’s take the property tax exemption first. In principle, if limited-access highways were all investor-owned, like other network utilities (e.g., electricity, pipeline, telecommunications), it would make sense for them to pay property taxes just as those utilities do. However, the actual situation today is that government has dominated the U.S. toll road market for most of the past century, which means the private sector must compete on a very unlevel playing field. Public sector toll agencies, of course, pay no property taxes, and they have always been able to borrow (by issuing revenue bonds) at tax-exempt rates. Congress addressed the latter problem in SAFETEA-LU by allowing the U.S. DOT to approve the issuance, by state entities, of tax-exempt “private activity bonds” on behalf of private-sector partners in PPP deals. But until now-with the exception of the Chicago Skyway and Midway Airport, for which Chicago’s Mayor Daley proposed and got special state legislation to exempt those assets from property taxes-most PPP toll roads have had to pay up.
And it turned out that issue was holding back the first potential toll-financed PPP toll road in Florida, the proposed First Coast Outer Beltway in Jacksonville. Because of uncertainty over whether the project would be subject to property taxes, Florida DOT took proposed legislation clearly exempting such facilities from property taxes, and it was enacted May 1st and signed into law by the governor. It will apply to all PPP transportation projects in Florida, both greenfield and brownfield.
As far as I know, Arizona is also the first and only state that will offer rebates on motor vehicle and fuel taxes to customers of PPP toll roads. (Peter Samuel of tollroadsnews.com has noted that several states have quietly offered rebates on fuel taxes to patrons of their state-operated toll roads, but these provisions appear to be little-known and little-used.) State DOTs tend to react negatively to any reduction in their fuel tax revenues, but an attorney friend of mine pointed out that by reducing the “paying twice” argument against new toll roads, this provision will expand the size of the pie. “By my math, if you have a 10-mile toll facility, traveling it will use less than half a gallon for the average vehicle, which would mean 9 cents credit back in gas tax . . . I will take a dollar toll over that any day.” And it does address the “paying twice” argument.
I agree, and I can’t help but wonder whether the furor over tolls in Texas would have been so furious had the paying-twice argument been addressed by a comparable provision in that state’s now-suspended PPP legislation.
The Mirage of “Green Jobs”
When the House passed the Waxman-Markey cap-and-trade bill, which would dramatically increase energy prices, President Obama praised it on the basis of the “millions of new green jobs” it would create. The California Air Resources Board (CARB) uses similar rhetoric to justify the $23 billion of new taxpayer costs of its global warming agenda, essentially arguing that it will actually cost nothing due to all the new green jobs it will create. Californians should have been alarmed that, as Stephen Moore reported in the Wall Street Journal (Feb. 1, 2009), all five economists that CARB commissioned to independently review this logic found it seriously flawed.
MIT’s Technology Review published a thoughtful article in its May/June 2009 issue by editor David Rottman. In “Can Technology Save the Economy?” Rottman interviewed a number of leading economists and energy experts on the efforts of the stimulus bill to jump-start the economy via creating, among other things, green jobs. Harvard economist Dale Jorgensen told Rottman that “A lot of these [energy] technologies that are going to be subsidized are not commercially viable without a subsidy. These things have been around for quite awhile, and have never gotten to the stage of being financially viable without a subsidy. What does a subsidy mean? It means it’s not good for the economy.” It would be more effective, and far less risky, he said, to let carbon pricing determine which energy technologies are viable and which are not.
Two egregious examples of subsidizing energy technologies are solar panels in Germany and alternative energy in Spain. Both were touted as green-jobs bonanzas. As The Economist noted last fall, “Germany’s generous solar subsidies covered the roofs of one of the world’s most sunless countries with solar cells, thus pushing up the price of silicon and reducing the cost-effectiveness of solar power in countries where it actually makes sense.” And Spain’s green-energy subsidy program subsidized creation of new wind and solar industries, creating many jobs in the process. But according to a detailed study by Gabriel Calzada Alvarez of King Juan Carlos University, will end up costing taxpayers €29 billion. With 50,200 new jobs created, that works out to be in excess of €570,000 per green job. In Spain’s private sector, a new job averages €260,000 to create. Thus, had these funds been left in the private sector, they could have created 2.2 times as many ordinary jobs as these new green ones. More recently, we’ve seen headlines such as “Spanish Despair Rises as Jobs Shrink” (July) and “Spain’s Solar-Power Collapse Dims Subsidy Model” (September).
There is a term for such artificial industries. After the demise of the Soviet Union, when economists got access to detailed data on that country’s state-owned industries, the term “value-subtracting enterprise” came into use. A VSE is an entity that takes a given set of inputs (of materials, labor, procedures, etc.) and produces some kind of output. But when you do the sums, the value of the outputs is less than the total of the inputs. Policies that create artificial industries create value-subtracting enterprises-even though they do create visible new jobs. In fact, they are a way to make an economy poorer.
I’ve taken space in this transportation newsletter to write about this issue because we have already heard the same green jobs mantra with regard to subsidized ethanol, subsidized batteries, and even the ridiculous “hydrogen highway” concept. Governments have always been able to create value-subtracting enterprises by pouring in lots of tax money. But that hardly justifies them as sound public policy-whether in energy or in transportation.
Note: I don’t have space to list all the transportation conferences going on; below are only those that I or a Reason colleague are speaking at.
77th Annual IBTTA Meeting & Exhibition, Chicago, IL, Sept. 13-16, 2009, The Hyatt Regency. Details at www.ibtta.org/events.
Toward a Customer-Driven Transportation Reauthorization, Washington, DC, Sept. 17, Rayburn House Office Building (B-340). Details at www.cato.org.
David R. Goode National Transportation Policy Conference, Charlottesville, VA , Sept. 9-11, 2009, University of Virginia Miller Center on Public Affairs. Details at: http://millercenter.org/policy/transportation.
ARTBA Public-Private Ventures Conference, Washington, DC, Sept. 24-25, 2009, Loew’s L’Enfant Plaza Hotel. Details at www.artba.org.
The Future for Interurban Passenger Transport, Madrid, Nov. 16-18, 2009, Joint OECD/International Transport Forum conference, Palacio de Coingressos. Details at http://istep2009.cedex.es.
IBTTA Transportation Policy & Finance Summit, Washington, DC, Dec. 13-15, 2009, Grand Hyatt Hotel. Details at: www.ibtta.org/Events/eventdetail.cfm?ItemNumber=3855.
Seattle HOT Lanes Are Not “Lexus Lanes.”
The clever folks at Washington State DOT have gone the extra mile in collecting and reporting data on their first HOT lanes project, on SR 167. In addition to all the usual statistics, they have reported statistics on the brands of toll-paying vehicles using the lanes. By far the most common were Chevy/GMC and Ford, with Dodge, Toyota, and Honda in 3rd through 5th place. How many Lexus vehicles were recorded as users? Just 1.6% of the total. All four luxury brands (Acura, BMW, Lexus, Mercedes) added up to just 6.9% of the total. (Source: WSDOT Powerpoint presented at TRB Summer Meeting, August 2009)
Value Pricing Program Grants Available
The FHWA’s Value Pricing Program has been a critically important factor in jump-starting HOT lanes and other applications of transportation pricing. Its new solicitation for FY 2010 grant proposals was published last month in the Federal Register. Go to: http://edocket.access.gpo.gov/2009/pdf?E9-18699.pdf.
RAND Says Address Equity Issues Early On
A recent report from the RAND Corporation tackles the issue of equity in congestion pricing projects, primarily HOT lanes. It finds that such issues should be addressed in the design stage of such projects and also that well-designed projects can deliver both cleaner air and reduced congestion. “Equity and Congestion Pricing: A Review of the Evidence,” was supported by a grant from the Environmental Defense Fund. Go to: www.rand.org/pubs/technical_reports/TR680.
Citizens Guide to Transportation Reauthorization
Randal O’Toole and the American Dream Coalition have produced a fact-filled (and graph-filled) overview of key issues that should be considered in the forthcoming reauthorization of the federal surface transportation program. Go to:
New Version of Bus Rapid Transit Guidebook
The Center for Urban Transportation Research has released an updated edition of its excellent 2004 handbook “Characteristics of Bus Rapid Transit for Decision-Making.” It includes new information on systems implemented since 2004, both in the United States and overseas, as well as new case studies and information on several additional aspects of BRT systems. Go to: www.nbrti.org.
IMF Advice on PPPs and the Global Credit Crisis
Some useful perspective on the impact of the credit crunch on PPPs, along with guidelines on managing crisis risks, are found in an IMF Working Paper, “The Effecs of the Financial Crisis on Public-Private Partnerships,” by Philippe Burger, et al. Go to: www.imf.org/external/pubs/ft/wp/2009/wp09144.pdf.
“The good news, in your editor’s judgment, is that despite these recent reversals, the longer-term prospects for PPPs and private investment in infrastructure appear surprisingly good. A favorable policy climate at both the state and federal level is one contributing factor. The Mississippi, North Carolina, and California legislatures have passed PPP-enabling legislation, suggesting that the sentiments among state legislators are running in favor of private investment in roads and other infrastructure. On Capitol Hill, the earlier signs of suspicion toward PPPs by certain influential legislators have been replaced by modulated expressions of support. This suggests that PPPs, the Infrastructure Bank, TIFIA, Private Activity Bonds, and other supportive private financing measures will receive favorable treatment in the upcoming surface transportation legislation.”
–C. Kenneth Orski, “Some Further Reflections on the Future of PPPs,” Innovation NewsBriefs, May 20, 2009. (Available from email@example.com.)
“We have been here before. In the struggle to improve air quality, it turned out that the solution was not so much changing people’s behavior as it was technological-largely the improvement of fuel and vehicle technology. In the 1970s we were told that we could not have cleaner air and automobiles; yet in fact, that’s exactly what happened, without having to heed a sermon about our need to repent and change our suburban, car-driving ways. Some people just have a penchant for telling others how to live.”
“The application of tolling and road pricing provides the opportunity to solve transportation problems without federal or state funding. It could mean that further gas tax, sales tax, or motor vehicle registration fee increases are not necessary now or in the future. Congestion pricing is not a complete plan of action. It has to be coordinated with other policy measures to maximize success.”
–“Economics: Pricing, Demand, and Economic Efficiency: A Primer”, U.S. Department of Transportation, 2009. (www.ops.fhwa.dot.gov/publications/fhwahop08041/fhwahop08041.pdf.)
“The weakening of this bill illustrates one of the central problems with cap-and-trade-systems. They are complex, obscure, and therefore susceptible to horse-trading. A chunk of allowances can be handed to one lobby, a sliver to another, and soon the system’s effectiveness has been sliced away. The corresponding attraction of a carbon tax, which this newspaper has always supported, is its simplicity. The government sets the rate. Everybody can see what it is. Voters get transparency. Businesses get certainty. And the government gets a large chunk of revenue.”
–“Weak Medicine,” The Economist, May 23, 2009.