Surface Transportation Innovations Newsletter

Surface Transportation News #137

Anti-tolls backlash in Texas and Boston's MBTA meltdown

In this issue:

Texas Backlash Against Tolling

Ten years ago Texas was emerging as the nation’s leading venue for tolling and public-private partnership highway projects. With strong political support, Texas DOT was tapping the private sector to finance, build, and operate both all-new toll roads and express lanes added to congested freeways.

But the politics has recently changed. Last fall in his successful run for governor, Greg Abbott and running mate Dan Patrick campaigned for increased highway investment, but with no new toll roads. That position had popular support, according to survey results released last September. The Texas A&M Transportation Institute’s Texas Transportation Poll found that although 64% supported increased transportation funding, they also ranked “building more toll roads” as the least desirable of 15 alternative ways of helping “solve transportation issues” in the state.

In his State of the State speech last month, Gov. Abbott presented his plan to add $4 billion a year to transportation funding “without raising taxes, fees, tolls, or debt.” His three proposals were (1) use the new revenues from the voter-approved tax on oil and gas production (Proposition 1), (2) end some of the diversion of state highway funds to other uses (but not the constitutional diversion of 25% of fuel tax money to public education), and (3) enact a constitutional amendment to dedicate half the existing sales tax on motor vehicles to transportation. Only the first of these is already law; the other two depend on legislative action.

As March dawned, three North Texas legislators filed nine bills aimed at phasing out toll roads and toll lanes in Texas. Several of the bills would legislatively designate more sales tax revenues for the state highway fund and prohibit highway fund money to be spent on toll projects. Another would require tolls to be removed once the initial construction costs have been repaid (which would undercut both system financing as used by toll agencies like NTTA and the revenue stream for companies building projects under long-term concession agreements). Another would require TxDOT to give legislators a plan by next year for converting all existing toll roads into free roads within 30 years. Yet another one would prohibit TxDOT from adding tolled managed lanes to any existing highway. Finally, two of the bills would politicize decisions on toll projects, by requiring the approval of county governments for any new toll projects, including separate approvals of the study, design, and construction phases.

Both the governor’s position and this set of bills reflect right-wing populist agitation that has been building over the past decade. Ironically, what those people want to return to is socialized, politicized highways funded by taxes rather than user fees, preferably taxes paid by someone other than road users, such as oil and gas companies. They also want highway project selection to be done by politicians rather than by transportation professionals using benefit/cost analysis and value-for-money studies.

This agenda represents a threat to both toll concessions (P3s) and to government toll agencies. For toll concessions, prohibiting any state highway money from being part of a project’s financing package would mean that very few proposed concession projects would pencil out, given the enormous real-world costs of complying with myriad environmental and other regulations. And requiring tolls to be removed once initial construction debt is paid off leaves no room for a return on private-sector equity investment. For the growing array of local/regional toll agencies in Texas, prohibiting system financing would undercut long-established, sensible financial models used to build and operate an expanding system of toll roads.

More broadly, these proposed shifts away from the users-pay/users-benefit model are exactly the wrong direction to take in surface transportation. That principle is very sound, and is used for all our other infrastructure services, such as electricity, natural gas, water, cable, telephones, etc. You pay in proportion to the services you use, and the provider is able to cover its capital and operating costs from the ongoing stream of user fee revenue. Nobody would dream of saying that you should no longer have to pay an electric bill once the latest power plant’s construction bonds had been paid off!

Longer term, the shift away from the user-fee principle will make it that much harder to make the eventual transition from per-gallon taxes to per-mile charges as the basic highway funding source (generally referred to as mileage-based user fees). Increased use of tolling, especially on the limited-access portion of the highway system, is an important step in the larger transition to mileage-based user fees, as recognized by the Transportation Research Board (2006) and the National Surface Transportation Infrastructure Financing Commission (2009).

Because the stakes in this conflict are so great, I hope the P3 community and the public-sector toll agencies in Texas will realize their common interest in defending managed lanes, toll financing, and delegation of the details of project selection and management to transportation professionals, rather than their politicization.

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Boston’s MBTA Meltdown Offers Opportunity for Reform

Last June (in Issue No. 128) I wrote about economist David Levinson’s assessment that U.S. transit systems have been in a state of crisis for the past 40 years, and need fundamental restructuring. A dramatic example unfolded last month in Boston, as the MBTA, which operates the country’s oldest subway system, failed to cope with severe winter weather. Amidst growing public clamor, MBTA General Manager Beverly Scott abruptly resigned.

The Boston Globe provided a detailed history of the T’s decline and fall in a story by David Scharfenberg (Feb. 15, 2015). Much of its financial crisis dates back to the notorious Big Dig project, during the approval process for which billions of dollars in transit expansions were agreed to as mitigations. Those projects were supposedly going to be paid for out of federal highway funds, but with nowhere near enough money to pay for them in cash, many were financed by bonds backed by future federal grant money (grant anticipation notes-GANs).

In 2000, the legislature passed a law called “forward funding,” under which MBTA was given 20% of state sales tax collections but required to take over the debt service on the GANs for the Big Dig’s transit projects. The next decade saw soaring costs of fuel and electricity, as well as continued payroll increases. By the end of last decade, a report from the state’s Transportation Finance Commission concluded that the state was short $15-19 billion over the next 20 years just to maintain the existing highway and transit infrastructure; MBTA’s share of that was $9 billion, including the Big Dig-related projects. Two years later, a special report on the T’s finances, commissioned by then-Gov. Deval Patrick, judged the situation to be critical, saying that “a private sector firm faced with this mountain of red ink would likely fold or seek bankruptcy.”

The day after Beverly Scott resigned last month, Boston-based think tank Pioneer Institute issued a report documenting the crisis with up-to-date numbers-and a call for the MBTA to be put into receivership. The agency’s board had mis-managed the T into its current untenable position via:

  • Over-expansion, adding new rail routes that have attracted hardly any net new riders;
  • Irresponsible oversight and management-in particular an egregious amount of deferred maintenance, leaving the system as a rolling wreck;
  • Adding staff without the means to afford them, with total compensation expense doubling between 2001 and 2012; and
  • Reckless oversight of the pension system, which went from being 94% funded in 2008 to only 63% funded in 2012.

The report called for the Legislature to put the T into receivership, following the model successfully employed to turn around the bankrupt cities of Chelsea and Springfield. The receivership board would halt nearly all planning and construction of new lines, restructure the bus service by cutting low-ridership routes, focus on working down the huge amount of deferred maintenance, and other needed reforms. In addition, since the Big Dig project debt was foisted upon the T, it called for the state to assume responsibility for a portion of that debt. It also called for a detailed independent audit of mission-critical transportation assets, and the cost to bring them up to a state of good repair, so that funds can be prioritized to where they will do the most good.

The Institute’s report has received significant media coverage in Boston, but in the past the Legislature has either ignored the T’s problems or ended up making them worse. It has now been given a blueprint to do the right thing. Let’s hope it seizes the opportunity to do so.

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Report Questions Economics of Florida’s Private Passenger Rail

Although construction is under way on the southern portion (Miami to West Palm Beach) of the new All Aboard Florida passenger rail system, opponents living to the north of there are gearing up to try to stop its second phase, from West Palm to Orlando. Activists operating as CARE FL (aka Care Florida, LLC) have persuaded county officials in Martin and Indian River Counties to commit up to $4.2 million in taxpayer money for legal fees and other activities in an effort to derail phase 2. Exactly what they plan to do, legally, is unclear. But their first product is a report released in February

“An Economic Analysis of All Aboard Florida” was produced for CARE FL by Prof. John N. Friedman of Brown University, a Harvard-educated economist who recently completed a year on the Obama White House National Economic Council. The headline conclusions of the 14-page report are the following:

  • It would take a ticket price as low as $34 one-way to attract 1.5 to 2 million annual passengers.
  • The company will generate annual losses exceeding $100 million, based on revenues barely in excess of operating costs, as well as large debt service costs.
  • It would take one-way fares of $273 to break even, assuming such high fares did not seriously reduce passenger numbers.
  • The company will nonetheless benefit from a claimed $50 million to $73 million of annual taxpayer subsidies.

That’s quite an indictment, so the question for reporters, transportation analysts, and legislators is whether those are believable numbers. Neither Friedman nor I have seen the investment-grade traffic and revenue study, on the basis of which All Aboard Florida is raising money and under way building stations and improving tracks and bridges on its southern right of way. But I did manage to find out who did that study: Louis Berger, a well-respected global engineering firm. I have reviewed a five-page critique of the Friedman study by a Louis Berger analyst who appears to have worked on their investment-grade study.

The thrust of the Berger critique is that, lacking information about how the ridership and revenue projections were actually done, Friedman made top-down assumptions such as comparing ridership on Amtrak’s Northeast Corridor trains with his estimate of passenger-rail market share in Florida. Likewise for estimates of mode choice among driving, intercity bus, passenger rail, and flying. Berger’s Al Racciatti goes into some detail explaining their development of a detailed dataset based on the respective MPO regional travel models, supplemented by data on air, bus, and commuter rail markets. They also did original survey work , including an 8,000-person origin-destination survey and an 1,800-person stated preference survey regarding mode choice. All the analysis considered separately local/commuter service and long-distance service, as well as business versus leisure travel. The Berger study also explored more speculative prospects for markets not currently served, such as Miami-visiting international travelers who may wish a side trip to the Orlando resorts, university students, resort visitors, and others.

Another critical difference is fare estimation. Friedman’s paper seems to be based solely on value of travel time metrics. By contrast, the Berger analysis reflects a far more detailed assessment of demand for different types of trips by different types of passengers. This looks to me similar to how airlines price, sometimes called Value Pricing, as invented and implemented by American Airlines back in 1992. If that is what All Aboard Florida is planning, its pricing will be nothing like what Friedman has assumed, but will rather be fine-tuned based on a whole array of factors that have been shown to maximize airline revenue over more than two decades.

In fact, when I contrast the two ways of looking at AAF’s prospects, it strikes me that Friedman has analyzed the planned service as if it were Amtrak-i.e., as if run as a government enterprise. What has impressed me from day one about AAF is that it appears to be designed around an actual business model, not something cobbled together by politicians. That doesn’t guarantee it will be a profitable venture, but it is considerably different from all the government-run U.S. passenger rail projects currently planned or in operation.

Let me close with a comment about Friedman’s claims of taxpayer subsidy. The largest dollar amount is the federal government’s foregone tax revenue on the tax-exempt private activity bonds (PABs) that have been approved by U.S. DOT for this project. But PABs are available for surface transportation projects done via public-private partnerships (P3s) that serve the public, as opposed to only private clients. That’s why PABs have been issued since 2003 for 10 P3 toll roads and one P3 commuter rail project. The idea is that since government projects can issue tax-exempt bonds, the private sector risking its own money to provide comparable public-use projects should be able to get financing on the same terms. All 11 of those projects involve some degree of tax funding, in addition to the private financing. By contrast, AAF is getting no taxpayer money, so it seems to me its case for using PABs is even stronger.

Friedman’s other claim is that the $214 million inter-modal center at Orlando International Airport, paid for by grants from the FAA and Florida DOT, is a taxpayer subsidy to AAF, since it will use that location as its Orlando terminus. In fact, that center was planned long before AAF (and is similar to one that already exists at Miami International). It will serve commuter rail and light rail, in addition to AAF, plus rental cars and other ground transportation. Moreover, AAF will be paying rent at what it has said are “fair market rates.”

I have no particular horse in this race, but as a transportation policy researcher, I hate to see claims made about a project that are based on insufficient information, misleading interpretations, or are just plain wrong. All Aboard Florida is not taxpayer subsidized, and it appears to have a plausible business plan. Whether or not its market analysis is correct should be no concern to public policy. If the project fails, it is the investors of equity and purchasers of bonds that will be on the hook, not taxpayers.

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Devolution of U.S. Port Channels

The following is a guest commentary by Asaf Ashar, Professor Research (Emer.), National Ports & Waterways Initiative, University of New Orleans. An earlier version appeared in the Journal of Commerce‘s 2015 Annual Review & Outlook.

After 15 years of relentless struggle, the U.S. Army Corps of Engineers approved a 47-foot deep channel for the Port of Savannah. Two years later, the Army Corps approved a 52-foot channel for the Port of Charleston. Having a 52-foot channel, the deepest on the east coast, provides Charleston with an important competitive advantage: ability to serve a fully loaded 13,500-TEU, New-Panamax ship. The consecutive Army Corps decisions to deepen two adjacent ports serving the same ships to different depths was made by applying the same economic assessment methodology, based on the same criterion of national benefit/cost ratio. Why was Savannah, twice the size of Charleston, so harshly discriminated against relative to its archrival located just 104 nm to the north?

The apparent explanation is that the Army Corps’ methodology is based on speculative and, in some areas, flawed assumptions, especially on the benefit side. The benefit assessment mandates developing a highly detailed, 50-year (!) forecast of the ports’ traffic by trade lane, service pattern, and vessel size, a speculative undertaking in the notoriously volatile shipping market. Strangely, the forecast disregards port competition and therefore contains an unavoidable internal contradiction: it is reasonable to expect that Charleston’s much deeper channel will increase its market share and respective national benefits at the expense of Savannah’s. Should the Army Corps redo Savannah’s study resulting in reduced benefits and, accordingly, reduce Savannah’s recommended depth?

The benefits are derived from the differential in shipping cost between two hypothetical scenarios, with and without deeper channel which, at least in the case of Savannah, I found flawed (see: www.asafashar.com), along with other Army Corps assumptions on tide delays and ship’s load factors. The cost-side calculation also is flawed; it only includes the channel cost, but excludes the much higher costs of deeper docks, taller cranes and other landside infrastructure required for the bigger ships.

But the real problem is with the concept of national channels and respective national benefits. Access channels are integral parts of port facilities, and port facilities essentially are regional infrastructure which, because of inter-modalism, also can serve a nation-wide market. Most of the investments in ports are made by regional governments: port authorities, cities, counties and states. Recently, the states’ share has been on the rise as was demonstrated in the decision by Florida’s governor to invest heavily in his state’s ports in attempt to “repatriate” cargo presently handled by ports in other states – as well as to capture the cargo of other states. Why should the federal government intervene in the evolving competition among the states of Florida, Georgia, South Carolina and California for handling Florida’s cargo? How can one determine which states’ ports are more “nationally beneficial”?

It is time to end the fiasco around our ports’ channels. The federal government should transfer the economic responsibility for channel deepening and maintenance to regional port authorities, along with the right to collect user fees (Harbor Maintenance Tax included) to cover their channel cost-as ports already do with all other port-related infrastructure. Provided that it complies with environmental and safety regulations, Savannah should be allowed to deepen this port channel to the depth it considers economical and necessary to compete with Charleston and other ports, without going through another 15 years of federal approval ordeal.

It is time to liberate our ports and allow them to compete freely-to the benefit of our nation.

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Indiana Questions Availability-Payment Concessions

As I’ve written here previously, there are two types of design-build-finance-operate-maintain (DBFOM) concessions. The traditional kind, pioneered in France and Italy in the 1960s, is a toll concession, in which the primary or total revenue source is tolls paid by the highway’s customers. The financing to build the project is based on a projected toll revenue stream sufficient to cover operating and maintenance costs and make debt service payments. The other DBFOM model, pioneered in the U.K. (which has been unfriendly to tolls, except for major bridges) uses a revenue stream from the government (taxpayers) to compensate the concession company. That may sound like six of one, half a dozen of the other, but the differences are profound.

A toll concession brings a new source of funding-the toll revenues-into the transportation system, adding to the total amount of investment. An availability-payment (AP) concession is paid for out of existing transportation revenues: highway user taxes in the case of toll roads and typically dedicated transportation sales taxes in the case of rail transit projects. So an AP concession is purely a financing tool; it does not add new investment into the transportation system. But it does allow a needed project to get built many years (or decades) sooner than would otherwise be possible.

In December the head of Indiana DOT, Karl Browning, told the Indiana Chamber of Commerce that the agency may not enter into any further P3 deals based on the AP concession model. His reasoning? “It’s a lot like borrowing.” In fact, signing an AP concession agreement creates a liability on the state’s balance sheet comparable to a bond issue. Most states have either a statutory or constitutional limit on bonded indebtedness. Both Florida and North Carolina already count AP concession liabilities against their bond cap-and Browning seems to be leaning toward doing the same. He noted that INDOT currently spends 10% of its $1.6 billion budget on debt payments, and that by 2018 that number will increase to 17%. That will cover its AP commitments for a section of I-69 done as a pure AP concession and the East End Bridge project across the Ohio River, which is a toll bridge but financed based on INDOT taking the traffic and revenue risk, paying the concession company via availability payments. Browning told the Chamber that he considers 17% as “a manageable number,” but “If we let it get higher, we’re going to be mortgaging our grandchildren.”

Last month INDOT announced that it had suspended work on the Illiana Expressway, a planned toll/AP concession to produce a new highway between Indiana and Illinois. The latter’s larger portion has been put on hold by new governor Bruce Rauner, pending a review of all major planned IDOT projects. In October 2013 Peter Samuel posted at Tollroadsnews.com a highly critical assessment of the case for Illiana, referring to initial studies by Cambridge Systematics suggesting that a toll concession structure might be able to support only 60% of the project’s estimated cost. The east-west corridor selected is too far south to provide much traffic relief to congested I-80, and traffic would appear to be dependent on how much growth occurs in that largely undeveloped region well south of Chicago. A long-proposed third Chicago airport at Peotone and several possible logistics centers might be developed near the corridor in future years.

The decision to develop the Illiana as a tolled highway with the two state governments taking the traffic and revenue risk illustrates another function of the toll concession model: to sort proposed projects into stronger and weaker ones, in meeting genuine transportation demands. Illiana cannot be financed based on projected toll revenue, raising the question of whether its benefits are large enough to justify Indiana and Illinois putting substantial highway monies into that project compared with others.

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Anti-Mobility Policies from OECD

In December the OECD’s International Transport Forum put out a media release headlined “New transport scenarios for China, India, Latin America highlight role of cities in combating climate change.” It described metro areas of 500,000 population or more as “major battlegrounds for combatting climate change.” It went on to proudly describe new modeling tools to help their governments evaluate the impacts of alternative urban transportation futures. The primary recommendations were to craft and implement policies that “focus on avoiding unnecessary mobility,” basically by spending heavily on mass transit instead of on highways. It included graphs showing different emission outcomes for Latin American, Chinese, and Indian cities with either “sustained private transport” or “sustained public transport” policies.

Nowhere in the release were any cost estimates or benefit/cost analysis results presented. Nor was there any apparent consideration of other ways to reduce transportation emissions. Yet shortly after I read the OECD announcement, The Economist informed me that according to the International Energy Agency, worldwide subsidies for fossil fuels consume $550 billion per year. In the developing world, a huge portion of that total is spent on subsidizing the price of gasoline. The subsidized prices are lowest in oil-rich countries-18 cents/gallon in Venezuela, 48 cents/gal. in Saudi Arabia, and $1.14 cents/gal. in Egypt. Fuel subsidies consume over 7% of GDP in Saudi Arabia, 6.8% in Egypt, and over 6% in Ecuador, according to the World Bank. But the total amount of the subsidies is larger in very large countries such as China, India, and Indonesia. Until a very recent reform, fuel subsidies accounted for 2.8% of Indonesia’s GDP and still consume over 1% of GDP in even-larger India.

So the first step in a sensible transport emission-reduction policy is to end the $550 billion subsidy that artificially reduces the price of-and hence increases demand for-fossil fuels. Next comes the problem of highly polluting motor fuel. The Economist describes petrol in India as “filthy and sulphurous.” Most developing countries have no fuel-quality standards and no meaningful vehicle emission standards or fuel-economy standards. Implementing those is not rocket science: producing gasoline and motor vehicles is done in a handful of major plants, not in people’s backyards.

I find it incredibly elitist and presumptuous for the OECD-a rich-country club where just about everyone who wants one can afford an automobile-to be pushing hard for developing countries to deny this kind of personal mobility to their emerging middle classes. The technology exists and is in widespread use in OECD countries for dramatically cleaner fuels and far less-polluting cars and trucks. OECD and its ITF should be advising developing countries how to catch up in those areas, not urging them to deny their citizens the benefits of personal mobility.

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Two More Recommendations for Congress

Last month I wrote brief summaries of two of the Reason Foundation’s policy recommendations for Congress, as they consider reauthorizing the federal surface transportation program. Four others were posted to our website last month, written by Reason colleagues. You can find them at http://reason.org/news/show/transportation-reauthorization-reco. I have recently written two more, which should be online by the time you receive this issue of the newsletter.

The first concerns the looming problem of reconstructing and modernizing America’s aging Interstate highways, which our 2013 Interstate 2.0 study estimated as costing just under $1 trillion. There is no identified funding source for this enormous set of mega-projects, so our study analyzed the possibility of using 21st century (all-electronic) tolling as a way to generate a revenue stream to finance such projects. The results showed this to be feasible for all but a handful of states. But it is not legally possible for a state DOT to do this, due to a 1956 ban on tolling any Interstate that was not grandfathered in by the original legislation creating the program.

My brief proposes that Congress “mainstream” an existing pilot program that allows three states to each reconstruct one Interstate highway using toll finance. None of the three states holding those slots has reached political consensus on doing so, though Missouri seems to be getting close (for replacing its aging I-70). All 50 states should have this option, and it should apply to all their Interstates, so that a responsible state DOT could develop a 20-year plan to rebuild and modernize all its Interstates via toll financing. But because highway user groups have seen states try to charge tolls much higher than needed just for a highway being built or rebuilt, this federal permission must come with safeguards for highway users. The tolls would be limited, by law, to only paying for the capital and operating costs of the state’s set of Interstate highways-period. In other words, as a pure user fee. And to avoid “double taxation,” they would give their new toll-payers on the rebuilt highways a rebate on their state gas taxes, based on the miles they drove on the new tolled Interstate (possibly handled via their vehicle registration fees).

The second proposal is aimed at encouraging large metro areas to implement seamless networks of priced express lanes (HOT lanes) serving both express buses and toll-paying motorists. It would tweak Federal Transit Administration policy in two ways. First, it would equalize FTA’s treatment of HOT lanes produced by converting HOV lanes (which today count as “fixed guideway miles” for transit funding purposes as long as transit buses use them) and HOT lanes produced by new construction (which FTA refuses to count). That’s nuts, especially if both the state DOT and the transit agency understand the benefit of a seamless network of such lanes. Hardly any metro area has HOV lanes on all its freeways that could be converted to HOT; to build a network will have to include many segments that are new construction-and FTA should get with the program.

The other part of this proposal, consistent with all HOT lanes being defined as “fixed guideway miles,” would be to open up FTA’s New Starts and Small Starts grants to virtual exclusive busways (i.e., HOT lanes), not just physically exclusive bus lanes. From the standpoint of fast, reliable express bus service, a variably priced HOT lane is the functional equivalent of a bus-only lane. Yet unlike a bus-only lane, a HOT lane comes with its own, ongoing revenue stream. (Who knew?) If this provision were adopted, transit agencies could partner with either the state DOT or a local toll agency, with each providing “equity” investments in a new-capacity HOT lane in addition to a revenue bond issue for the majority of the capital. The transit agency could use an FTA grant as its part of the equity. If and when the HOT lane generates revenue in excess of debt service and O&M costs, the transit agency and the DOT could share the net revenue in proportion to their equity investments.

These may sound like arcane changes, but they could do a lot of good.

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Upcoming Transportation Events

56th Annual Transportation Research Forum, March 12-14, 2015, Georgia Tech Hotel & Conference Center, Atlanta, GA (Baruch Feigenbaum speaking). Details at: www.trforum.org/forum/2015.

Federal Surface Transportation Reauthorization Briefing, March 27, 2015, Cato Institute, Washington, DC (Baruch Feigenbaum speaking). Details at: www.cato.org/events.

2015 IBTTA Washington Briefing, March 29-31, Washington Marriott Hotel, Washington, DC (Robert Poole speaking). Details at: http://ibtta.org/events/washington-briefing.

Construction Industry Round Table Spring Meeting, April 27-29, 2015, Park Hyatt, Washington, DC (Robert Poole speaking). Details at: www.cirt.org/event-1840715

International Conference on Public-Private Partnerships 2015, May 26-29, 2015, University of Texas, Austin, TX. Details at: www.icppp2015.org/index.php.

27th Annual ARTBA PPPs in Transportation Conference, July 15-17, 2015, Hyatt Regency Washington, Washington, DC. Details at: www.artbap3.org

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News Notes

FDOT Design-Build Cost and Time Savings. Conventional two-stage (design-bid-build) is still the prevailing model at many state DOTs, but more and more states are finding benefits from using design-build. Nossaman’s February Infra Insight summarizes a new study from Florida DOT that finds significant cost and time savings in a comparison of recent projects done by D-B rather than traditional design-bid-build. Just Google the article’s title, “FDOT Study Finds Significant Cost and Time Savings with Design-Build Project Delivery.”

Nevada DOT Focusing on Life-Cycle Cost. Engineering News Record (Feb. 23, 2015) reports that for the first time Nevada DOT has based a new-highway construction contract selection on the lowest life-cycle cost, rather than the lowest construction cost. The project in question is the first phase (2.5 miles) of the 15-mile Boulder City Bypass along Interstate 11. The winning bidder proposed concrete instead of asphalt, given the option to use either and to be judged based on lowest life-cycle cost.

New Approach for Upgrading America’s Waterway Infrastructure. In a recent Reason Foundation brief, William Newman suggests what amounts to a toll concession P3 approach to refurbishing or replacing aging locks on America’s 12,000-mile inland waterway system. The current approach relies largely on federal general funds, augmented by a miniscule fuel tax on barge operators that covers only a small fraction of the system’s capital costs and none of its operating costs. Newman is a former Conrail executive, who worked on its successful privatization by the Reagan Administration. (http://reason.org/news/show/private-cure-waterway-infrastructur)

London Mayor Wants Major Roads Underground. Boris Johnson, the mayor of London, has proposed putting some of the capital’s major highways in tunnels, freeing up the surface for other uses, including housing, office space and parks. A Feb. 9 news release from the mayor’s office announced more than 70 locations where “tunnels, fly-unders, and decking could deliver benefits.” Only five have been identified as suitable for more detailed work thus far. One hopes that if any of these plans proceeds, London will use a smarter procurement method than the traditional D-B-B used for Boston’s notorious Big Dig project.

Peak Tolls on Miami Express Lanes May Reach $2/Mile. Last year the Florida government increased the top rate that can be charged on Miami’s I-95 Express Lanes to $10.50, since the previous cap of $7.50 was too often inadequate to maintain uncongested traffic flow. But in late February came news that the $10.50 maximum had been charged during peaks on 45 days in the second six months of 2014, a threshold intended to lead to raising the cap so as to restore uncongested peak-period flows. The new cap is likely to be $14, amounting to $2 per mile. Some of the northbound congestion is due to the Express Lanes’ phase 1 terminating at the congested Golden Glades interchange. A 14-mile phase 2 northward extension is due to open later this year, and may reduce or eliminate that bottleneck. (Note: most drivers don’t pay the peak toll. In December the average toll was $4.29 northbound and $2.67 southbound.)

Seattle Tunnel Boring Machine Nears Rescue. Seattle Tunnel Partners announced in February that they have completed the 120-foot deep excavation that will enable them to repair or replace the damaged cutting head on Bertha, the 57-foot diameter tunnel boring machine that hit an obstacle and has been stuck for more than a year. Bertha’s task is to bore the two-mile tunnel to replace the aging elevated viaduct for SR 99 along Seattle’s waterfront-but she is stuck only a small way into the two miles.

Houston Bus System Redesign Approved. A major revamp of Houston’s bus system, to provide a lot more service at no increase in cost, was approved last month by Houston Metro. It will cut low-ridership service by about 50% in order to increase frequencies and improve service on more popular routes. I wrote favorably last year about this proposal, spearheaded by consultant Jarrett Walker of Human Transit. Kudos to the transit agency for withstanding political pressures to maintain the inefficient status quo.

Bill to Increase Private Activity Bonds Introduced. Rep. Sam Johnson (R, TX) has introduced a House bill to double the current federal cap on tax-exempt surface transportation Private Activity Bonds (PABs). With the ongoing demand for such financing for P3 projects, the existing $15 billion cap will likely be used up within the next few years. Doubling the cap will enable the P3 pipeline to remain open. Johnson’s proposal contrasts with the Administration’s proposal of a $4 billion increase; on the other hand, its far larger proposal for Qualified Public Infrastructure Bonds (QPIBs) has no cap.

Illinois Tollway Investing $1.63 Billion This Year. In contrast to cash-strapped state DOTs, the Illinois Tollway is embarked on a $12 billion capital program to reconstruct some of its existing toll roads and add a number of new ones in the Chicagoland metro area. The 2015 program targets $1.63 billion for major projects that include the new Elgin O’Hare Western Access, rebuilding and widening of the Jane Addams Memorial Tollway (I-90), and upgrades and improvements to interchanges and bridges systemwide.

“Misunderstanding the Millennials” That’s the title of an insightful article by demographer Joel Kotkin in the Feb. 20th issue of the Orange County Register. Kotkin provides data from an array of sources suggesting that most Millennials are similar in their housing and transportation preferences to previous generations; they are just younger and poorer, on average, but still aspire to much the same surburban and urban-mobility lifestyles of their forebears. Well worth reading.

Detroit-Windsor Toll Bridge Getting Closer to Reality. February saw two key milestones for the planned $2 billion new toll bridge linking Detroit and Windsor, Ontario. First, the Canadian Transport Minister agreed to fund the $200 million U.S. Customs facility for the project, whose cost is to be recovered from toll revenue. And the U.S. Supreme Court declined to hear an appeal of a Circuit Court decision that rejected an environmental challenge to the bridge project. A Request for Qualifications for the DBFOM concession is expected by mid-2015. This border crossing, now served by an aging 4-lane bridge, is the most important international land crossing in North America, handling 30% of U.S.-Canada trade carried by truck.

Survey on Signage for Managed Lanes. A federally sponsored pooled-fund study to develop best practices for the signs needed to inform motorists about using priced managed lanes has just posted an online survey. It offers various possible sign types and messages and asks for your interpretation of each. The best of these will subsequently be tested via a driving simulator. To take the survey go to: http://www.expresslanessignagestudy.com.

P3 Bill Passed by Kentucky House. On February 25th the Kentucky House passed by 84-13 a P3 enabling act that would allow tolling as a funding source. If also passed by the Senate, it will permit the long-awaited Brent Spence Bridge replacement project to move forward. One amendment to the House bill would require tolls to be removed after the initial construction debt is paid off, ignoring the need for ongoing operating and maintenance costs.

Two Indiana Counties May Seek Toll Road Concession. Officials in Lake and LaPorte Counties are seeking approval from their respective county commissions this month to pursue a bid to take over the remaining years of the 75-year concession to operate and manage the Indiana Toll Road. They propose creating a Northern Indiana Toll Road Authority that would issue non-recourse bonds secured only by the toll revenues. They are hoping other county governments along the toll road’s right of way will join this effort.

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Quotable Quotes

“With no other sources of funds in sight, the most pragmatic and timely approach might be to shift a larger share of funding responsibility to the state and local level. It’s a solution that has been gaining traction, not just among conservative Republicans but also with the transportation advocacy group Transportation for America. . . . The movement toward more fiscal autonomy resonates in state capitals. Governors and state legislatures deem the prospect for future federal funding as highly uncertain and are seeking to place their transportation programs on a more-independent fiscal footing. . . . In the past two years twelve states have enacted new revenue sources for transportation, and at least 20 more states are currently considering transportation funding legislation, according to the Council of State Governments.”
-Ken Orski, “Needed: A Fresh Approach to Funding America’s Infrastructure,” Innovation NewsBriefs, Feb. 13, 2015

“[W]e needn’t accept that the first thing to do is spend more money. Rather, start with getting more bang for the bucks already being spent. The federal highway program places little emphasis on this. Indeed, Texas, Maryland, Rhode Island, Connecticut, New Jersey, and the District of Columbia spend less than half of their state fuel taxes on transportation, and many other states spend substantial portions on non-transportation programs. Nor does the federal highway program do a good job of driving funding to the most valuable and high-performing projects, or emphasizing use of public-private projects to leverage public funds with private investments, which would make the most use of the dollars it has.”
-Adrian Moore, “Saving the Highway Trust Fund: Is a Mileage-Based User Fee the Answer?” The Ripon Forum, Vol. 49, No. 1, February 2015

“On July 1, everything will hit rock bottom. There will be no money for road and bridge improvements, and with no matching funds available, New Jersey will have to forfeit millions more in federal aid. The state’s Transportation Trust Fund certainly does not have any trouble coming up with the money. It generates $1.2 billion annually, but [Gov.] Christie has no problem getting his fingers on that money clip. Almost all the funds generated by the gas tax and tolls are being used to pay off New Jersey’s $18.2 billion debt.”
-Bill Wilson, Editorial Director, “Feeling It Out,” Roads & Bridges, February 2015

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