In this issue:
- Trucking and toll-financed Interstates
- Managed lanes continue to grow
- Will private alternatives disrupt public transit?
- Restoring stability to the Highway Trust Fund
- Fresh thinking on inland waterways
- Upcoming Conferences
- News Notes
- Quotable Quotes
Trucking and Toll-Financed Interstate Reconstruction
The trucking industry is opposing current proposals to expand the use of toll financing to reconstruct and widen aging and inadequate Interstate highways. To some observers, this appears paradoxical, since the trucking industry depends critically on the Interstates as their most important infrastructure-yet this vital infrastructure is reaching the end of its 50-year design life and will soon need replacing.
But trucking’s opposition to current tolling proposals is rational. The American Trucking Associations (ATA) rightly fear that any new Interstate tolling will turn those highways into cash cows for state DOTs, as has happened with the Pennsylvania Turnpike, the Port Authority bridges and tunnels in New York City, and a number of other legacy toll roads (mostly in the Northeast). And observe the rhetoric in some of recent tolling discussions. A headline in Connecticut last month read, “Study: State Could Rake in $62 Billion in Highway Tolls.” Similar headlines have appeared in several other states that are looking into increased use of tolling. And at a Senate Finance Committee hearing last month, David Narevsky of Mayer Brown LLP urged Interstate tolling authority for states, so they could “use the toll revenue to pay for all this badly needed infrastructure that we’re told we can’t find a way to pay for.”
It’s against this background that Reason Foundation has just released a study I’ve been working on for the past six months, “Truck-Friendly Tolls for 21st Century Interstates.” In doing the research, I engaged in considerable discussion with trucking industry contacts. Their feedback pointed me to additional sources of information, while broadening my knowledge of the things that really concern them about tolling. My hope is that what’s proposed in the study will lead to further discussion and dialogue with this critically important goods-movement industry.
The first part of the study discusses the need to replace the 20th century Interstate system with completely new pavement, additional lanes in many corridors (including dedicated truck lanes in some corridors), and replacement of numerous interchanges that are major bottlenecks for goods movement. This draws on Reason’s 2013 Interstate 2.0 study that estimated the net present value of the cost of Interstate replacement at just under $1 trillion. Next, the study compares three alternative proposals for paying for Interstate reconstruction/replacement:
- A general increase in federal gas and diesel tax rates, like those currently advocated by an array of transportation and business groups, including ATA;
- A new diesel-only tax, whose proceeds would be used to create a freight corridor improvement fund, as proposed several years ago by ATA;
- A toll-finance program under which all lanes of each Interstate would be tolled only when each is rebuilt and modernized, with the tolls legally limited to paying only for the capital and operating cost of the replacement Interstates (i.e, as pure user fees).
The analysis faults the first two as falling far short of what is needed, leaving the user-fee toll plan as the best (or least-bad) alternative.
The study goes on from there to discuss how all-electronic tolling would work on the replacement facilities. The vision of each truck needing only a single transponder to operate nationwide, with the trucking company receiving a single monthly invoice no matter how many trucks it has or how many different Interstates they operated on-is already reality today in the 15 E-ZPass states, thanks to two ATA-endorsed service providers, Bestpass and PrePass Plus. And with national electronic tolling interoperability on the near-term horizon, the same kind of customer-friendly service will be available nationwide well before any aging Interstate is actually reconstructed via toll finance.
Further sections of the study address a number of other trucking industry concerns, such as the cost of all-electronic toll collection (far lower than they think), the need for confidentiality of routing and billing information (already available via Bestpass and PrePass Plus), predictable toll rates (standard practice in E-ZPass states), and several others.
The final section discusses what is probably the most important concern of all: how to guarantee that the 21st century tolls begin as-and remain-true user fees, rather than a cash cow for state DOTs. I have proposed that the value-added tolling principles Reason published last year be included as requirements in an expanded federal pilot program for toll-financed Interstate reconstruction. In addition, any participating state would be required to pass enabling legislation affirming its long-term compliance with those principles as a condition of using toll finance for its Interstate reconstruction and widening. I’m looking forward to serious discussions about these ideas with trucking industry leaders.
“Truck-Friendly Tolls” is online at: https://reason.org/news/show/truck-friendly-tolls-interstates
“Value-Added Tolling” is online at: /wp-content/uploads/2014/03/value_added_tolling.pdf
Managed Lanes Are Increasing; So Is Their Traffic and Revenue
A June 3rd report from Fitch Ratings (“U.S. Managed Lanes: Sector Update”) provides new information on eight debt-financed managed lane (express toll lane) projects on which it maintains public ratings. The four that are in operation are doing well, while the other four are either under construction or close to being started. Based on its experience with the four operational projects, Fitch’s current thinking is that “ramp-up” (i.e., growth in use as people become familiar with the facility) happens more quickly with MLs than with other kinds of toll roads. But they also expect what they call “pricing power ramp-up” to take place over a much longer time-frame.
The two newest projects that Fitch rates-North Tarrant Express in Fort Worth and the I-95 express lanes in northern Virginia-are both doing well, with rapid ramp-up and healthy early toll revenues. Two other operational projects that Fitch uses for comparison-neither of which was financed by toll revenues because they are primarily low-cost conversions of existing HOV lanes-have experienced a significant growth in pricing power. That is true of the I-95 express lanes in Miami and the I-85 express lanes in Atlanta. On the latter, “growth has been explosive,” toll agency director Chris Tomlinson told his board in June. They project $9.1 million in revenue for this fiscal year, up 25% from the prior year.
Revenue is high on all four of the above projects because they do not give away most of their capacity to two-person carpools, as do the majority of ML projects developed by converting existing HOV lanes. Nobody would be able to finance the construction of new MLs with such a policy, which is why all the projects that add capacity are either charging all users or offering free or discounted passage only to HOV-3 or above.
But managed lanes of all types continue to produce benefits. The HOT-2 lanes on I-405 in Los Angeles’s Sepulveda Pass have increased the capacity of that highly congested freeway from 10,000 vehicles/hour to 11,700/hour, reduced the accident rate by 15%, and shortened the afternoon peak by two hours. The peak now runs from “only” 3 PM to 8 PM, compared with 2 PM to 9 PM.
Here is a brief recap of some of recent ML activities around the country.
Colorado: The first phase of the new express toll lanes on US 36 between Denver and Boulder will open July 22nd. While phase 2 is being constructed, Colorado DOT has begun the competition for a $1.2 billion concession to reconstruct I-70 East including the addition of express toll lanes; five teams have submitted qualifications.
Florida: Phase 2 of the I-95 Express project is nearing completion, adding 14 miles to the initial 7 to bring the lanes to Fort Lauderdale. A further extension northward is about to begin, planned for a 2019 opening. New MLs are under construction on both I-75 near Fort Lauderdale and SR 826 (Palmetto Expressway) in Miami. The $2.3 billion I-4 reconstruction project is under way in Orlando, which includes the addition of two express toll lanes each way. Florida DOT is also planning to add express toll lanes to two Orlando area toll roads that it operates-SR 417 and SR 528. The idea of premium-toll lanes on existing toll roads is encountering local resistance, even though such projects are already under way on Turnpike facilities in the southern part of Miami and north of Tampa. Also in Tampa, FDOT plans $2.5 billion worth of express toll lanes, including on I-275, parts of I-4, and to link SR 60 to the already tolled Veterans Expressway. Another project will create a new express toll lanes project-an elevated corridor to link US 19 to I-275 along the 118th Ave. corridor in Clearwater.
North Carolina: The state DOT and Cintra’s I-77 Mobility Partners achieved financial close recently on the $648 million project to add express toll lanes to congested I-77 in Charlotte. Fierce grass-roots opposition still continues, with an effort in the state legislature to somehow undo this deal, despite bonds having been issued and the detailed concession agreement signed.
Texas: Austin. TxDOT and the Central Texas Regional Mobility Authority are tackling the metro area’s chronic congestion with a series of ML projects. The first CTRMA project, under construction since last year, is adding one express toll lane each way to the MoPac expressway. CTRMA has begun construction of toll lanes on US 183 South and is studying a similar project on US 183 North. And TxDOT has begun construction of express lanes on SH 71 between SH 130 and the airport.
Dallas/Fort Worth. Phases 1 and 2 of the North Tarrant Express toll lanes are in operation in Fort Worth, as are initial portions of the new express toll lanes on the LBJ Freeway (I-635) in Dallas. The North Texas Tollway Authority declined to take on the project to add reversible express toll lanes to I-35E, which TxDOT will now procure.
Houston. Under a toll concession agreement, a team headed by ACS Infrastructure development will add two express toll lanes each way on SH 288 in Houston, at an estimated $820 million. The Harris County Toll Road Authority this spring opened the Tomball Tollway, a 6.7-mile set of express toll lanes in the median of an existing freeway. It is the first phase of an eventual tolled corridor from Houston to College Station. HCTRA’s Katy Managed Lanes on I-10 generated $17 million in toll revenue in 2014.
San Antonio. The Alamo Regional Mobility Authority has received environmental clearance for its first managed lanes project, which would add express toll lanes to eight miles of US 281. Other ML projects are planned for I-10 and I-35.
Virginia: VDOT has yet to decide whether its $2.1 billion project to add express toll lanes to 25 miles of I-66 outside the Beltway will be procured as a toll concession or as a conventional design-build project. Meanwhile, the agency’s Potomac River Crossing study (July 15, 2015) recommended “extending HOT lanes [from the I-495 Beltway] across American Legion Bridge to I-270” in Maryland as “the top priority for addressing western Potomac River crossings.”
Will Private Alternatives Disrupt Public Transit?
I’ve been watching the development of investor-funded alternative transit services ever since the debut of start-up Bridj last year in Boston. Along with similar start-ups in Chicago, San Francisco, and Washington, DC, Bridj’s business model is to fill in gaps in a metro area’s transit market. They aim to offer a shared-ride service, using 15-passenger vans, that is intermediate in price and service quality between that of legacy transit agencies and personalized rides offered by taxis and companies like Lyft and Uber. This is essentially a 21st-century version of jitneys, enabled by algorithms drawing on big data to identify market niches and adjust service patterns based on demand.
A much-cited example from Bridj’s first year in Boston is an early market for service between Brookline and high-tech, jobs-rich Kendall Square in Cambridge. Bridj’s David Block-Schacter (a former MBTA employee) explained that “By traditional mass transit, it takes two transfers; on your best day that could take 40 minutes; on your worst day it could take upwards of an hour.” But Bridj’s direct route makes that trip in 15 to 20 minutes. So it’s no wonder people are prepared to pay $5-about three times the MBTA’s fare.
These start-ups vary somewhat in vehicles, from luxury buses to minibuses to shuttle vans. Chicago start-up Blackline offers trips from suburbs to the Loop in minibuses. In San Francisco, competitors Chariot (15-seat vans) and Leap (luxury buses) offer an array of in-city routes. And Bridj this year has expanded to a second location, Washington, DC. These services all offer a guaranteed seat and free wi-fi, and some offer refreshments en-route. Unlike transit agency bus routes, their trips involve few or no stops along the way between residential areas and job centers. And they offer predictable schedules, another selling point for customers. Together, this set of features creates a value proposition that many find superior to either driving and parking, using legacy transit, or paying for solo-ride service via taxi or Uber/Lyft.
Needless to say, the idea of anyone other than a mass transit agency providing such services rubs some people the wrong way. Some bristle at the idea of a two-tier market for getting to work-the same argument that dubs express toll lanes “Lexus Lanes.” I find it odd that these critics generally see nothing wrong with people having the choice between $1.00 coffee at a legacy coffee shop and a $2.50 coffee at Starbucks.
Another common objection is that these services will cream-skim the more affluent riders from transit agencies. But sensible transit agencies are figuring out that Bridj and Chariot are filling gaps that their agencies cannot fill. Tilly Chang of the San Francisco County Transportation Authority told the Los Angeles Times that “If we could, we would be meeting those needs,” but that in fact, “at the end of the day, we can’t meet the demand.” And in Boston, MBTA’s Joe Pesaturo says it does not see Bridj as a threat, given the specialized market niches it is targeting. “It’s like saying that Disney World competes with a traveling carnival.”
Another worry is whether people using the private services are worsening air quality and CO2 emissions. Susan Shaheen, co-director of the UC Berkeley Transportation Sustainability Research Center says this depends on how customers were commuting beforehand. If they were driving alone, or driving to a transit station, then the shift to a private shuttle is a net gain. And UCLA’s Matthew Kahn cites research showing that “People will substitute from car to bus if the bus is high quality and allows them to use their scarce time productively.”
One problem for these start-up companies is that in many cities, it is illegal for them to use designated bus stops-a legacy of cities’ ancient bans on jitney service. This problem was anticipated 18 years ago by Daniel Klein, Adrian Moore, and Binyam Reja. Their 1997 book Curb Rights (Brookings Institution) called for cities to create auctionable curb rights to enable jitney-like services to operate legally and efficiently in commercial areas. It looks like the time for this idea has now arrived.
Restoring Stability to the Highway Trust Fund
I could hardly contain myself after reading the list of 10-year “pay-fors” to offset the House’s adopted plan to shift $8.07 billion in general fund money to the Highway Trust Fund to cover the five-month shortfall between highway user tax revenue and planned spending from now to the end of the calendar year. It’s a pathetic exercise in let’s-pretend, and a further drift away from the very sound principle of users-pay/users-benefit. It also undermines the sanctity of the HTF, which is only exempted from across-the-board budget rules like the 10-year sequester to the extent that it is funded at least 90% by user taxes. Thus, in recent years it has only been via tradition, rather than the force of law, that the HTF itself has been exempted from the sequester.
I suggested a different course when I testified last month (June 17th) before the House Ways & Means Committee (which has come up with this new set of pay-fors, announced July 14th). Instead of continuing to bail out the Trust Fund with non-transportation funds, I urged Congress to first do no harm, by ceasing to undermine users-pay/users-benefit. And since an increase in fuel tax rates is not going to happen, the only way to restore the integrity of the Trust Fund and safeguard it from eventual budget cutbacks is to scale back the program to the level of funding provided by user-tax revenues. Since the Congressional Budget Office projects a fairly stable $40 billion a year in user-tax revenues for the next decade, the aim should be to scale back the program from the current $50 billion to just $40 billion.
And the way to do that, I suggested, is to prioritize. We simply cannot afford to have the HTF funding roads and highways of all kinds, along with ferry boats, sidewalks, bike trails, transportation safety regulatory agencies, etc. The federal program was created to take on things state and local governments could not-basically the creation of the Interstate Highway System. Refocusing the program primarily on the Interstates and the remainder of the officially designated National Highway System routes should be the goal of this prioritization process. During the Q&A before House Ways & Means, I suggested that instead of concocting increasingly arcane pay-fors, they could get back to the authorizing committee with the message that they (Ways & Means) could not come up with either defensible pay-fors or acceptable revenue increases, so the Transportation & Infrastructure Committee should do its job of scaling back the overgrown program to what is fundable by its user-tax revenues.
That, I’m sure, is not what the Ways & Means people wanted to hear, but it needed to be said. And so I was gratified two weeks later to receive Ken Orski’s latest (July 7th) Innovations Brief issue, titled “A Lasting Solution to the Transportation Funding Crisis.” Ken basically adopted a version of my proposal to restore Trust Fund self-sufficiency. He sets the stage by updating us on the growing efforts by state governments to increase their own transportation revenue sources, partly in response to the relatively flat federal funding they’ve been receiving in recent years; 16 states have increased transportation revenue sources (fuel taxes or dedicated sales taxes) in the past three years, and nearly 30 states have some sort of transportation revenue increase proposal in play this year.
Going further, he suggests now is the time for a “judicious rebalancing of federal-state responsibilities,” as he quotes a senior state Republican legislator. And as Ken points out, “An annual federal-aid transportation budget of $40 billion, extending over a period of six to ten years, would go a long way toward restoring and improving the nation’s core surface transportation infrastructure”-if it were properly targeted toward major infrastructure needs, leaving myriad “nice-to-have” things to be funded or not by state and local governments. He cites with approval a plan for a re-thought $40 billion program by Steve Lockwood, published in January 2015 by the Eno Center for Transportation (“A Constrained Federal-Aid Highway Program”).
The trade-off here pits short-term papering-over against a sustainable long-term solution. Setting serious federal priorities for the program is long overdue. And restoring it to 100% user funding will safeguard the HTF against the budgetary storms that are still to come as entitlement spending spins out of control in coming decades.
Fresh Thinking on Inland Waterways
We’ve all heard the sad stories of how the U.S. inland waterways system is deteriorating, with many of the locks more than 50 years old, numerous outages that impede barge transport, and an enormous backlog of unfunded projects. Advocates tell us that barge transportation is the lowest-cost way to move freight, yet its market share has been in a long decline over the years. Etc.
There are grains of truth in this tale of woe, but there is also a good deal of misrepresentation. First, the low “cost” refers only to what barge operators can charge and make a living. That’s pretty cheap, because only 8% of the capital and operating costs of the inland waterways system is paid for by barge user taxes; all the rest comes out of the federal general fund. I’m pretty sure freight rail transport would be a huge bargain if 92% of railroad capital and operating costs came out of the U.S. Treasury rather than being provided by shareholders and bondholders.
There have been signs the past decade that the barge industry itself is starting to have second thoughts about the status-quo system, in which the bulk of their infrastructure cost is derived from an increasingly questionable federal general fund. Ideas such as public-private partnerships to refurbish ailing locks and dams, lock tolls, and other forms of user fees have at least started to appear in discussions of the inland waterways’ future.
So I was very pleased to see that the Transportation Research Board’s Executive Committee had commissioned an expert panel to take a serious look at these problems. Their report was released this spring, titled “Funding and Managing the U.S. Inland Waterway System: What Policy Makers Need to Know.” (http://onlinepubs.trb.org/onlinepubs/sr/sr315.pdf)
The report begins by reviewing the facts about the waterways system, which carries 6 to 7% of all freight ton-miles-mostly coal, petroleum, chemicals, and farm products. Commercial freight operators are the principal beneficiaries of the system. The primary costs of this infrastructure are dredging channels to the required depths and maintaining the locks and dams. Age, they find, is not a useful indicator of the condition of locks, since many have been refurbished-so don’t over-react to the 50-year age figures. Also, the large backlog of capital projects “is not a reliable indicator of funding required for maintaining reliable freight service,” since (my words) many of these wish-list projects are boondoggles whose cost exceeds their benefits.
Not that there aren’t serious problems, as the report explains. Time delays at locks that are taken out of service for repairs impose real costs on shippers, and those outages are a problem that is increasing over time. And the current funding system incentivizes spending limited resources on construction projects (i.e., entailing ribbon cuttings) rather than on proper maintenance. That’s because the barge fuel tax (the system’s only user fee) can only be used for capital projects, and those projects are funded only 50% by users, with the other half coming from taxpayers. But with a limited annual Inland Waterways budget appropriated by Congress, and political pressures to do as many construction projects as possible, operations and maintenance (O&M) gets the short end of the stick. Yet these days, O&M now accounts for about 75% of requested annual budgets.
Fortunately, as the report points out, the 2014 WRDA legislation called for a study of possible new user charges to those-primarily barge lines-that benefit from the system. The remainder of the report delves into that subject. It suggests that dedicating new user-fee revenues to O&M “would focus maintenance spending on the assets that users most value and result in a system that is more cost-effective and efficient.” Charging commercial users for the costs of their use of the waterways is feasible, the report finds. And more specifically, “Charging user fees on the basis of facility and segment usage would identify the parts of the waterways most valued by shippers and warranting maintenance.”
And it’s not as if these principles are unknown or untried. For about a century, both the Panama Canal and the Suez Canal have been funded by tolls. In Colombia, Odebrecht is the leading member of a consortium that won a $2.5 billion long-term concession to dredge and operate Rio Magdalena, a 908 km river corridor to the Pacific port at Puerto Salgar. And as I have reported previously in this newsletter, a number of waterway and lock projects are under way as long-term P3 concessions in northern Europe.
Upcoming Transportation Conferences
Automated Vehicles Symposium, July 21-23, 2015, Ann Arbor Marriott Ypsilanti, Ann Arbor, MI, (Baruch Feigenbaum speaking). Details at: www.automatedvehiclessymposium.org/home.
2015 Transportation Summit, Floridians for Better Transportation, July 22-24, 2015, Casa Monica Hotel, St. Augustine, FL. (Adrian Moore and Robert Poole speaking). Details at: www.bettertransportation.org
NCSL Legislative Summit, August 2-6, 2015, Washington State Convention Center, Seattle, WA. (Adrian Moore speaking). Details at www.ncsl.org/meetings-training/legislative-summit-15/events.aspx.
How Technology Will Transform Transportation (TRF-YPT-WTS Joint Event at Reason Foundation), Aug. 12, 2015, Reason Foundation DC Office, Washington, DC (Baruch Feigenbaum moderating). Details at: https://my.yptransportation.org/civicrm/event/info?reset=1&id=226
Senate Bill Punts on Interstate Tolling Reform. The $275 billion DRIVE bill released by the Senate Environment & Public Works Committee includes only a token reform of the three-state pilot program for toll-financed reconstruction/replacement of aging Interstate highways. While several highway and transportation groups had argued for mainstreaming the program’s provisions or at least increasing the number of states, as well as imposing protections for highway users to prevent the tolls from becoming cash cows for state DOTs, the bill’s language does neither. Its only substantive change is to add use-it-or-lose-it provisions for the existing three slot-holders (Missouri, North Carolina, and Virginia) as well as on any new applicants should one or more of the existing states fail to act within the new deadlines.
DOT Truck Study Disappoints. It’s been many years since the last U.S. DOT study on truck size and weight issues. So the technical reports from DOT’s latest efforts, released last month in response to a mandate in MAP-21, were disappointing. They did not reach any definitive conclusions regarding the economic, safety, environmental, and road maintenance impacts of heavier and more-productive truck configurations. Without more data and analysis, DOT Under Secretary Peter Rogoff told Congress, the agency could not recommend any changes in current truck size and weight regulations. That support for the status quo pleased only highway safety and railroad groups, while disappointing trucking and shipping organizations who are seeking higher-productivity trucking.
New P3 Law in New Jersey. A broadly based infrastructure public-private partnership (P3) enabling law was passed late last month by the New Jersey legislature. By delegating project selection and approval to the state’s economic development agency, projects would bypass what Public Works Financing terms “New Jersey’s byzantine procurement laws.” In transportation, one promising possibility is adding variably priced express toll lanes to major highways, a number of which are already conventionally tolled. Express toll lanes within existing toll roads are in operation in Puerto Rico and under development in both the Miami and Tampa, FL metro areas. A transportation P3 law is also under consideration in Connecticut.
Arguments Favoring Mileage-Based User Fees. Citylab‘s Eric Jaffe has provided a useful overview of the merits of shifting from per-gallon taxes to per-mile charges as the primary way to pay for highways. “18 Reasons America Should Adopt a Per-Mile Driving Fee” makes a number of good points, and even cites my recent testimony before the House Ways & Means Committee. The piece includes some useful charts and graphs. Go to: www.citylab.com/cityfixer/2015/07/18-reasons-america-should-adopt-a-per-mile-driving-fee/397331.
New York Should Allow Design-Build-NYU. A new study from the Rudin Center at New York University makes the case for New York State to authorize the design-build method for all large-scale infrastructure development. D-B has currently been used only on a pilot-program basis, thanks to a cautious 2011 law, whose largest beneficiary has been the $3.1 billion Tappan Zee Bridge replacement project, which is under way for about 30% less than it was projected to cost under conventional procurement. The study reports FHWA findings that D-B generally reduces both construction time and project cost.
Toll Road Traffic Up More than Non-Tolled Traffic. During the first quarter of 2015, vehicle miles of travel on North American toll roads increased by 5.7%, according to recent data released by the Federal Highway Administration. That compares with VMT growth of 3.9% on all roadways during that quarter. Public Works Financing notes that toll traffic is rebounding from a sharper decline than non-tolled traffic due to the Great Recession, and that toll rate increases have been modest since 2012, compared with 2008-12 when rates were increased to maintain revenues in the face of lower traffic.
Virginia Settles Flawed P3 Deal for Route 460. An ill-considered P3 project to develop a tolled alternative to Route 460 between the Hampton Roads area and I-95 has been scrapped. Gov. Terry McAuliffe on July 2nd announced the settlement with US 460 Mobility Partners. The developer will return $46 million in already spent funds and will cancel a claim for another $103 million. The project had been approved as a P3 concession by the previous administration, despite it being not toll-feasible and not having received environmental clearance.
Perspective on Surface Transportation Reauthorization. Marc Scribner of the Competitive Enterprise Institute has produced a Web Memo outlining a “pro-market” approach to reauthorizing the federal surface transportation program. After a rhetorical nod to conservative advocates of devolving the federal program to the states, Scribner instead proposes to fix the federal program’s long-standing problems by (1) cutting spending to match projected highway user tax revenues and (2) empowering states to generate increased user-fee revenues of their own. The latter would be primarily by mainstreaming the existing three-state pilot program for toll-financed Interstate reconstruction-but with strong highway user protections along the lines of Reason Foundation’s “value-added tolling” principles. “Reimagining Surface Transportation Reauthorization” is Web Memo No. 30 on the think tank’s website, www.cei.org.
Chicago Skyway Concession Offered for Sale. Ferrovial and Macquarie announced late in June that they would consider offers for the remaining years of their 99-year concession to operate and manage the Chicago Skyway. Since they won the bidding for the Skyway in 2005 paying $1.8 billion, the concession runs until 2104, so there are 89 years to go. The bankrupt Indiana Toll Road Concession Company changed hands earlier this year for $5.7 billion, a 48% premium over its acquisition price of $3.85 billion. The new concessionaire, Industry Funds Management, offered a far more conservative financing structure. One wonders what such a structure might yield in the case of the Skyway.
Miami Expressway Offering Toll Rebates. Facing considerable opposition from those who used to get mostly-free rides on its tollways, the Miami-Dade Expressway Authority (MDX), is offering rebates to members of its frequent driver club, the MDX Advantage Program. Over the last several years, MDX shifted from barrier tolls at a few plazas to all-electronic tolling of its entire system. That means commuters who used to be able to drive long distances without paying are finally having to pay tolls-and they are protesting. Legislation that would have wrested control of MDX from its board and made it an arm of the county government failed to pass.
Major Highway Concessions Agreed in Colombia. As part of its $25 billion Fourth Generation (4G) road improvement plan, Colombia’s government has announced two additional toll concession project awards. Strabag and Sacyr won the bidding for the $1.4 billion Autopista al Mar 1 project, whose 176 km will include 41 bridges and 17 tunnels. And a Cintra-led consortium won the bidding for the 152 km concession for the Bucaramanga-Barrancabermaja-Yondo toll road, whose estimated cost is $595 million. Both concessions are for 25 years.
Brazil’s $64 billion P3 Concessions Program. This recession-plagued government at the end of June announced a major P3 concessions program, aimed at providing 7,000 km of highways, four new airports, and a number of railroads and ports. In the highway sector, concessions for 15 federal highways, worth $21 billion, will be offered between now and 2018. The Brazilian government placed a two-page ad in the Wall Street Journal on June 29th, detailing the projects in each sector.
Rails and Reauthorization. Always-interesting Randal O’Toole, this time with co-author Michelangelo Landgrave, has published a new analysis that finds that the Federal Transit Administration’s New Starts program provides incentives for transit agencies to build light-rail projects that are far less cost-effective than other forms of transit. As is typical of O’Toole reports, his argument is buttressed by tables of facts and figures. “Rails and Reauthorization: The Inequity of Federal Transit Funding” is Policy Analysis No. 772 from the Cato Institute, www.cato.org.
Car Dashboards and Distracted Driving. Sarah McBride and Paul Lienert have written a provocative commentary for Reuters, “Car Dashboards That Act Like Smart Phones Raise Safety Issues.” They argue that the complexity of driver interaction with increasingly complex displays diverts far too much driver attention from the roadway, analogous to interacting with a smartphone while driving. There is a serious conflict between U.S. DOT’s rhetoric about “distracted driving” and its actual position on dashboard displays. (www.reuters.com/article/2015/07/07/us-autos-displays-safety-insight-idUSKCN0PH0BO20150707)
Correction re Denmark-Germany Tunnel. Alert reader Erich Zimmerman emailed after last month’s issue about the News Note on the proposed $10 billion tunnel between Denmark and Germany. Lolland Island is actually in Denmark, he noted, while Fehmarn is in Germany. I had inadvertently switched these two.
“Some argue that the gas tax is good policy because it rewards the drivers of fuel-efficient cars. While the use of electric and hybrid vehicles may be worth encouraging (although this is not often the case), highway user fees should not serve as a means to nudge drivers toward environmentalism. The gas tax subsidizes the cost of driving on highways for rich individuals who are able to afford the newest and most fuel-efficient cars, and leaves the poor footing the bill for the nation’s infrastructure.”
-Patrick Holland, “How to Save the Highway Trust Fund,” Economics 21.org, June 30, 2015
“The past five years have seen a steady rise in the number of institutional investors allocating assets to infrastructure, as well as the establishment of infrastructure as an asset class in its own right. . . . The pool of capital available is deep. Across infrastructure funds, institutional investors, public treasuries, development banks, commercial banks, corporations, and even retail investors, we estimate that more than $5 trillion a year is available for infrastructure investment. While capital is, of course, necessary, it is not sufficient to ensure success. The money has to be focused on the right projects and then spent judiciously.”
-Tyler Duvall, Alastair Green, and Mike Kerlin, “Making the Most of a Wealth of Infrastructure Finance,” McKinsey.com, June 2015
“Put simply, the public believes it is more equitable for taxpayers to pay for infrastructure based on what they use, not on what they earn, or what they own or drive. If there is one advantage the transportation sector holds over other government programs that depend on income, property, or sales taxes to fund their services, it is the ability for roadways to be self-funding through direct user fees. It is a fairer, more equitable, and sustainable system-the more you use, the more you pay.”
-Jack Opiola, quoted in “Funding: A Global Issue,” World Highways, May 2015, p. 49