Surface Transportation News #169

Surface Transportation Innovations Newsletter

Surface Transportation News #169

Interstate tolling prospects increase

In this issue:

Interstate Tolling Prospects Increase

On October 20th, the Federal Highway Administration posted a notice that it will accept Interstate tolling applications for the three vacant slots in the Interstate System Reconstruction and Rehabilitation Pilot Program. Applications are due no later than Feb. 20, 2018. States awarded slots will have up to three years to satisfy the program’s new criteria, per the FAST Act. Those criteria include having legal authority to charge and collect tolls, completing an environmental review of their chosen corridor, and executing a tolling agreement with FHWA.

Each state that applies must single out one Interstate for reconstruction financed by toll revenues, and the entire Interstate must be reconstructed and modernized, not just portions. The toll revenues must be used only for the Interstate facility named, “not to pursue other projects.” The notice also says “the initiation of new toll collection should not occur until it is evident to the traveling public that tolls will result in investment to the facility.” These provisions are intended to short-circuit any thought of imposing tolls as an overall state transportation funding source.

Which states are likely to apply? There is considerable tolling study and debate going on in various states, but as I wrote in the August issue of this newsletter, Indiana is far in the lead at this point. Its legislature last spring authorized a tolling feasibility study, which was awarded to HDR and released on October 31st. As requested, HDR assessed all six major Interstates, assumed electronic toll collection, and also assumed per-mile toll rates adjusted annually for inflation, with separate rates for cars, medium trucks, and heavy trucks. It modeled tolling that would begin in 2021 and estimated revenues through 2050. The study did not address the cost of widening and reconstruction of any of the corridors—only the potential toll revenues.

Among the other findings of the Indiana study are these:

  • More than half the heavy truck traffic on Indiana Interstates begins and ends in other states.
  • Indiana has P3 legislation in place that could be used for toll-financed reconstruction and widening of Interstates.
  • Indiana is considering three alternatives for toll-financed reconstruction: a bridge-replacement plan (discussed in the August newsletter), the three-state pilot program, and the federal Value Pricing Pilot Program.

Until recently, I had expected Wisconsin to be another applicant, given the $1 million Interstate tolling study done by HNTB in 2016, at the request of the state’s DOT and legislature. This year’s legislative session, after much discussion and debate, authorized $2.5 million for a more-detailed follow-up study—but Gov. Walker vetoed that provision in September. That probably leaves Wisconsin out of the running for a credible application to the three-state pilot program by the Feb. 20, 2018 deadline.

There is also interest in Interstate tolling in Illinois. The forthcoming strategic plan of the Chicago Metropolitan Agency for Planning (2020 to 2050) is expected to propose tolling all the Interstates that converge on Chicago. The aim is to generate funding to greatly improve freight movements in the region, which is a major U.S. freight hub, but whose Interstates are badly congested. While the need for investment is urgent, it’s not clear how soon any of this tolling and capacity expansion would occur under the plan. Illinois already has a state toll agency and P3 authority, so if it can obtain federal permission, it already has the needed tools.

Missouri held an original slot in the three-state pilot program, but lost it due to the failure to enact tolling legislation for the designated corridor to be reconstructed and widened: major truck route I-70. It also lacks P3 legislation. But it does have a new Transportation System Task Force, charged with assessing the state’s dismal transportation funding and recommending improvements. One state legislator, earlier this month, proposed charging Interstate tolls only at state borders, which is almost certainly unconstitutional.

Other states that have done research and/or held legislative debates on Interstate tolling in the past few years include Connecticut, Massachusetts, and Rhode Island in the Northeast—all three of which seem focused mostly on using tolled Interstates as cash cows for overall transportation needs.

And then, there’s I-80 in Wyoming. A consulting team has completed phase 1 of a two-part study for the Wyoming Transportation Commission on a master plan for the I-80 corridor. Its traffic volume—especially heavy truck traffic—is projected to grow considerably in coming years. The report also found that 80% of the traffic on I-80 is pass-through traffic. As the study continues, it will look into reconstruction, truck parking locations, interchange redesign—and yes, tolling.

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Revenue-Risk or Availability Payment for Highway P3 Concessions?

It’s pretty clear that since 2009, there has been a trend toward greater use of the availability-payment model for long-term P3 concessions in the highway sector. Nine such projects have been financed since 2009, including the Port of Miami Tunnel, the Goethals Bridge, and the East End Bridge. During this same period, eight highway projects have been financed as revenue-risk P3 concessions, including the LBJ in Dallas, the North Tarrant Express in Fort Worth, and the Midtown Tunnel in Virginia—and just this month the $3.5 billion revenue-risk I-66 project in Virginia, making nine such projects. Prior to 2009, all such projects were done as revenue-risk concessions.

There has been debate about the relative pros and cons of the AP and RR models at transportation conferences in recent years. Some state DOTs (e.g., Florida) have done only AP concessions for tolled P3 projects, preferring for the state to keep control of toll rates and revenue, despite thereby retaining traffic and revenue risk. Several other states, including Texas and Virginia, do not permit AP concessions. For highway projects where tolling is not an option, AP concessions—based on a dedicated stream of existing transportation tax revenue—are the best choice, to obtain the benefits that long-term P3 concessions can bring.

Because many governors and legislators are not yet familiar with P3 concessions, a new Reason policy study aims to explain the overall benefits of procuring highway projects as long-term P3 concessions and to then explain the differences between the RR and AP models. As the author of this peer-reviewed study, I’m writing this article to provide an overview of it. (http://reason.org/files/infrastructure_availability_payment_revenue_risk_concessions.pdf)

Both forms of concession encompass design/build/finance/operate/maintain (DBFOM), which offers many benefits compared with traditional design/bid/build and design/build procurement models. These include:

  1. Financing the project, via debt and equity, so that needed infrastructure gets built or rebuilt now, rather than many years or decades from now;
  2. Better project selection, due to the need to demonstrate a return on the investment made;
  3. Reducing cost overruns and late completion, due to the incentives facing the concessionaire to get the project finished and generating revenues;
  4. Minimizing total life-cycle cost, rather than only initial construction cost; and,
  5. Guaranteeing maintenance over the entire long term of the agreement.

These are powerful reasons for embracing the long-term P3 concession model for large projects.

Revenue risk (RR) concessions offer several additional benefits. First, because they create a customer/provider relationship with highway users paying tolls directly to the concessionaire, the latter has a strong incentive to design the project to maximize easy access and to keep its lanes uncongested over the long term of the agreement. Second, because RR concessions often lead to tolls where they would otherwise not be used, this model increases total highway investment, compared with AP concessions that are financed based on allocating a stream of existing transportation revenues. And third, the bonds that partially finance RR concessions are not state debt. They are examples of pure “project finance,” in which only the concessionaire is responsible for the debt, not the taxpayers.

By contrast, while AP concessions do lead to designs that minimize life-cycle cost, there are no incentives for the concessionaire to design for increased traffic and revenue. And in cases where the state sets and collects tolls on an AP project, the concessionaire has no direct relationship with highway users: they are customers of the state, not the concessionaire. And in those cases, the state (i.e., taxpayers) carries the traffic and revenue risk. Both models shift the risks of construction cost overruns, late completion, and ongoing highway quality to private investors, but only the RR model shifts traffic and revenue risk to investors.

The study identifies six situations where the AP concession model is likely the better alternative than RR concessions—including cases like the Port of Miami Tunnel where tolling would have been counterproductive to the goal of diverting heavy trucks to use the new tunnel rather than city streets. Another section explains the emerging law and policy at the state level that recognizes AP obligations as a form of state debt that may be subject to existing limits on debt issuance.

Overall, my conclusion is that for highway projects where either model could work, RR concessions are the wiser choice, due to their greater likelihood of increasing total highway investment, better serving their paying customers, shifting more risk from taxpayers to investors, and not being subject to state debt limitations. For a more detailed explanation, I urge you to download and read the study.

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DOT Shifts Focus from Connected Vehicles to Automated Vehicles 
By Baruch Feigenbaum

The U.S. Department of Transportation has made a major change in the Automated/Connected vehicle space. After studying the issue, DOT has decided not to mandate vehicle-to-vehicle (V2V) technology in all new vehicles. This change is noteworthy because it’s contrary to what DOT has been doing for the past eight years.

Since the late 1990s when the 5.9 MHz channel was assigned to dedicated short range communications (DSRC), the federal government and many in the Intelligent Transportation Systems (ITS) community have been focused on connecting vehicles via DSRC.  Advocates argued that if all cars were connected to each other and to the roadside infrastructure, safety could be greatly improved. As a result, while the private sector was focused on building automated vehicles (AVs), the government was more concerned with connected vehicles (CVs).

From a free-market perspective, the idea of a government mandating every aspect of connectivity was Orwellian. It assumed a government with perfect information about future technology that always acts in the public interest.

But the bigger problem was the questionable cost/benefit rationale. U.S. fleet turnover—the time from when a new vehicle rolls off the lot until it is scrapped—averages 20 years. This means even after V2V became mandatory in all new vehicles, it would take decades for the technology to prevent many accidents. As Alain Kornhauser of Princeton notes, the technology does not improve safety unless both vehicles that are about to crash have it. At a 10% penetration level, there is only a 1% chance that both vehicles in a crash would have it. At a 50% penetration, there is only a 25% chance of both vehicles being equipped. It would take a 70% penetration level before 50% of vehicles in a crash would have the technology and that would take at least 10-15 years.

For awhile it looked as if the march off the DSRC cliff was inevitable. In 2013, at the 2nd Annual Automated Vehicle Conference, DOT was invited to present on automated vehicles but all they discussed was connected vehicles. In 2015, Transportation Secretary Anthony Foxx stated that DOT and NHTSA were planning to fast-track a rule requiring all new vehicles to speak to each other using DSRC. And in 2016, DOT issued a proposed rule, making V2V communications mandatory for new vehicles.

While DSRC was favored by many ITS experts and some automakers, Silicon Valley AV companies, particularly Google, never planned on using DSRC. Technology companies viewed it as a barrier to newer technology, such as 5G wireless. And many folks outside of the ITS Joint Program Office never saw the practical value in DSRC. In a laboratory setting, with all vehicles equipped, it works well. In the real world, that was questionable.

Over the past year there were signs that DOT was changing its tune. At the 6th AV conference in San Francisco this year, DOT focused 90% on AVs and only 10% on CVs. DOT also used the term CAV (Connected and Automated Vehicles), for the first time.

The election of a new President from a different party brought some fresh political faces into DOT. At an estimated $108 billion cost, DSRC would have been the second-most-costly regulation of the past decade, notes Marc Scribner of the Competitive Enterprise Institute. With the benefits far off in the future, the new Administration determined that the DSRC mandate’s costs exceeded its benefits.

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Jones Act Reform, If Not Repeal

Hurricane Maria’s devastation of Puerto Rico called attention to the highly protectionist 1920 Jones Act, which requires all shipping between U.S. ports to be carried out on ships (1) built in the USA, (2) owned and operated by U.S. companies, and (3) crewed by U.S. sailors. The Jones Act dramatically increases the cost of shipping (and hence the cost of living) for residents of Alaska, Guam, Hawaii, and Puerto Rico. After some hesitation, President Trump authorized a 10-day suspension of Jones Act provisions to provide a bit of emergency relief for Puerto Rico. But the law deserves to be repealed completely.

The rationale for the Jones Act was post-World War I angst over the availability of “loyal” shipping companies during times of war. The regulations it imposes were intended to ensure a large, capable “merchant marine” that could be called on to move troops and equipment overseas, when needed. But the law has not accomplished that aim.

First, the number of U.S.-flagged merchant ships has declined drastically, from nearly 3,000 in 1960 to just 180 today. Second, because ships produced in the three remaining U.S. shipyards cost five times as much as ships produced on much larger scale in China, Japan, and South Korea, Jones Act fleet operators delay replacing them. In 2016, the average age of U.S. ships was 33 years, compared to 13 years for foreign-flagged ships (per World Maritime News). And recent studies by the International Union of Marine Insurance and by Southampton University found that older ships have more frequent accidents. The decrepit, 40-year-old El Faro that sank losing all 33 aboard in 2015 was a Jones Act ship en-route from Jacksonville, FL to San Juan. So the Jones Act is failing to ensure a large, capable merchant marine while it endangers the lives of its unionized American crew members.

And it also imposes economic harm on the residents of the affected states and territories. A recent New York Times op-ed piece cited an economic study estimating that Puerto Rico alone lost $17 billion in GDP over 20 years due to the Jones Act. Business leaders in Hawaii have tried for years to get reforms or outright repeal of this pernicious law. See this 4-minute video from Reason TV (http://reason.com/reasontv/2013/05/02/how-protectionism-hurts-hawaii-why-its-t).

Sen. John McCain (R, AZ) has long called for outright repeal of the Jones Act. And after this year’s hurricanes, Sen Mike Lee (R, UT) joined McCain in proposing legislation to permanently exempt Puerto Rico from the Jones Act. But there remains considerable bipartisan support for keeping the Act intact and in force. The three shipyards that produce Jones Act ships, the handful of U.S. companies that operate them, and maritime unions lobby effectively and make campaign contributions to members of both parties.

But although outright repeal seems unlikely, there is a useful precedent in aviation that could be the model for Jones Act reform. For wartime airlift, the Defense Department many years ago created the Civil Reserve Air Fleet (CRAF) program. Under its provisions, passenger and cargo airlines (including charter lines) can volunteer to designate portions of their fleet to be available for call-up to transport soldiers and cargo overseas in times of war. DoD pays CRAF members annually for this availability, and when aircraft are called up, DoD also pays a negotiated rate for the carriers to operate the planes. CRAF aircraft have been called up only twice: during the 1990-91 Persian Gulf war and the 2003 invasion of Iraq.

An adaptation for maritime transport could offer all U.S.-flagged ships (about half of which are not U.S. built and therefore excluded from Jones Act trade) the opportunity to be called up in wartime, just as CRAF aircraft are. The ships would still be U.S. flagged and operated by U.S. companies, but they could purchase modern ships from overseas at one-fifth the cost of Jones Act ships. The analogy with CRAF holds, in that U.S. airlines can enroll both Airbus (foreign-made) and Boeing (U.S.-made) planes.

Politically, this approach would disadvantage only the three U.S. shipyards that build a handful of Jones Act ships—meaning Senators from only a handful of states. There would no longer be a “national security” excuse for this protectionist law that has failed to serve its original purpose while imposing economic harm on Alaska, Guam, Hawaii, and Puerto Rico.

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Eno Report Lauds Transit Contracting
By Baruch Feigenbaum

In late September, the Eno Center for Transportation released “Bid for Better Transit,” a report focused on improving transit service via contracted operations. I recommend reading this well-written report, which provides a snapshot of contracting throughout the world.

U.S. transit service has long been among the worst in the developed world. One of the biggest differences between U.S. and European agencies is the prevalence of contracting for services. In Europe contracting out is a normal procedure. But in this country, contracting is bitterly fought by unions, urban Democrats and some transit rider groups as inherently inferior to directly operated service.

The Eno report starts by providing a history of U.S. transit operations. It reminds us that originally, all U.S. transit service was privately operated. Once the public sector took over in the 1960s, costs grew rapidly. To reduce the costs, the Reagan Administration developed policies to encourage contracting. The hope was that competition would force transit agencies to improve. Despite these efforts, opposition to contracting grew. The fact that several initial contracts were poorly written and structured did not help.

Some federal regulations, such as the Americans with Disabilities Act, that require service to the elderly and disabled in areas where fixed-route service is provided, encourage contracting. Since demand-response is typically 3% of an agency’s service but can amount to 18% of its costs, contracting is an attractive alternative. Other laws, such as labor protection provision 13c, make contracting challenging. The provision protects the jobs and rights of transit workers transitioning from the public to private sector and vice versa, making contracting less appealing.

The Eno report examines the transit systems in three European cities and three U.S. cities. European cities are far more open to contracting.

London has experimented with different types of contracts, largely to reduce costs. At first, London used gross-cost contracts, which paid operators to run routes at a fixed fee. The contracting reduced operating costs by an impressive 16%. However, since the contracts did not have financial incentives for performance, service quality fell. When London Transport was reorganized as Transport for London, the agency started using quality-incentive contracts. These contracts rely on detailed metrics such as excess wait times and on-time performance. This approach improved contractor performance, reducing excess wait time by 50%. However, it also increased operating costs faster than inflation.

Stockholm contracts almost every aspect of its public transit system including route planning. The city wanted to reduce costs and improve customer satisfaction (which was only around 50%). Stockholm made some significant changes before it contracted out service. It shifted more than 90% of its operating employees into the private sector. Instead of focusing on running day-to-day operations, the agency now focuses on setting standards and overseeing contractor service. Originally, the city compensated the contractor based on the number of bus-kilometers operated. However, this increased costs so Stockholm switched to performance metrics such as vehicle cleanliness and service delays. Stockholm also allows private firms to design the service in their service area. Contractors get bonuses for increasing passengers, and ridership is up 70% since contracting began.

Oslo shifted to competitive contracting and created a new provider, Ruter, which was owned by the government. Both Ruter and private companies bid for service, and both have won contracts. The early contracts focused on cost savings, which averaged 10-20%. Today Ruter focuses on price, service performance, bus quality, planned efficiencies and environmental effects. As in London and Stockholm, the transit agency refocused on managing service rather than operating it.

U.S. contracting has not gone as well. New Orleans contracted much of its transit service after Hurricane Katrina. However, its in-house staff (one person) was too small to accurately manage the contracts. In 2009, the city added staff but leaders were unhappy that the transit system lacked an operations plan. The most recent 2014 contract with transit operators gives the public sector oversight and management responsibilities.

Due to political opposition, Vancouver has never been able to successfully contract its transit operations. Its only contract has been a design-build-operate-maintain P3 to operate one rail line.

Los Angeles County has a mix of transit agencies that either contract all of their services or very few of them. The DASH buses run by the city of L.A. are completely contracted. Over time the city has developed an experienced team for overseeing and evaluating contracts. Foothill Transit, which serves part of the San Gabriel Valley, initially contracted both its service and its management. In 2013 it brought its management in-house but hired staff from its former contractor. Foothill can penalize the contractor on any of 41 metrics but can provide a bonus on 6 of them. Metrolink, the regional rail network, also contracts its service but L.A. Metro, the biggest transit agency in the county, contracts very little service.

Contracting can save money by reducing labor expenses, increasing vehicle usage, employing fewer middle managers, and creating efficiencies. While service contracting (operating the rail or bus service) is the most common type of contract, infrastructure maintenance, ancillary services such as security, and service planning can all be performed by the private sector. However, not all contracting saves money.  When U.S. agencies contract it is typically for bus routes with low ridership and paratransit. Yet these agencies would get better overall value from contracting out a mix of different types of routes.

The Eno study found three important takeaways. First, government has a vital role in protecting taxpayers. Similar to public-private partnerships, the government must provide the contractor with a set of specific goals and employ a transit and contracting expert to make sure taxpayers are getting a good deal from the private entity.

Second, the contract must be aligned with the private sector’s profit potential. For example, London uses bus wait time as a performance measure. If the contractor’s time is above a certain threshold, it gets a smaller payment. If the wait time is reduced, it gets a bonus. As a result, the contractor has a financial interest in finding ways to reduce wait time.

Third, agencies and contractors must work together. Contractors have advantages transit agencies do not have, such as the ability to think outside the box. A contractor could bring a new scheduling system from London to Stockholm. Working together also means changing the make-up of agency staff from transit operators to policy and management experts.

The report encourages agencies to contract service. While there is no one-size all solution, saving money and enhancing service should be every transit agency’s goal.

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Addressing the Truck Driver Shortage

Business media such as The Wall Street Journal and specialized media such as Fleet Owner continue to sound the alarm about the shortage of truck drivers, epitomized by very high turnover rates. As the WSJ story notes, “Long-haul truck drivers hop from one fleet to the next in search of better pay or other benefits, such as schedules that permit them to spend more nights at home.”

Long-haul fleets use one driver for the entire round trip. Due to federal Hours of Service regulations, those drivers cannot operate more than 10 hours without taking an 8-hour break, presumably to sleep. And thanks to new Electronic Logging Devices (ELDs) that will be mandatory next year, drivers who cheat in order to drive further without taking a break will no longer be able to do so.

I’ve often wondered why long-haul trucking companies didn’t take a lesson from the 19th-century Pony Express—a private company that delivered mail long-distance in the sparsely-settled West. Over the total length of a route, one rider (using several replacement horses along the way) rode for a grueling shift, and was then replaced by another rider who completed the next segment of the route, and so on. The mail got delivered faster than if the entire route had to be completed by one rider, and each rider was away from home a lot less time that way.

Thanks to the September 30th issue of The Economist, I discovered that a trucking company in India has adopted a model like this. The article, “The Indian Pony Express,” profiles startup trucking company Rivigo, based in a suburb of Delhi. It has established a network of 70 “pit-stops” across the country where drivers are based. When a truck arrives, its driver exits and a new driver takes over to complete the leg to the next pit-stop. Trips between pit-stops average four to five hours, and after making a return truck journey to his home base, the driver can be home in time for dinner—and to sleep in his own bed.

Rivigo had to develop sophisticated routing and scheduling software to manage all this, but the system—in operation since 2014—seems to be working. Rivigo currently operates 2,500 trucks and says it has no trouble hiring drivers at about 60% of the average wage conventional long-haul trucking companies must pay. And this relay system gives customers much faster service. The eight-leg trip between Bangalore and Delhi requires 96 hours with conventional companies, but Rivigo’s system does this in 44 hours.

If I were a venture capitalist, I’d fund a start-up trucking company intending to implement this proven model in the United States.

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Upcoming Transportation Conferences

Note: We don’t have the time or space to list all transportation events that might be of interest to readers of this newsletter. Listed here are events at which a Reason Foundation transportation researcher is speaking or moderating.

NCSL Capitol Forum, Hotel Del Coronado, Dec. 9-13, 2017, San Diego, CA (Adrian Moore and Robert Poole speaking). Details at: http://www.ncsl.org

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News Notes

Organizations Oppose House Ban on Transportation PABs. Twenty-two national organizations involved with transportation infrastructure sent a joint letter to the House Ways & Means Committee on Nov. 3rd, opposing the provision in the House tax bill that would eliminate the tax exemption for interest on Private Activity Bonds. Authorized by the SAFETEA-LU act in 2005, PABs have been used to help finance over 75% of transportation P3 projects since 2008. The current Senate tax bill retains tax exemption for PABs. For perspective on this, see my colleague Baruch Feigenbaum’s op-ed in The Hill (Nov. 14th), “How the House Tax Plan Could Kill Trump’s Infrastructure Plan.”

Pension Funds Acquire OHL Concessions’ Infrastructure. IFM Investors, which invests in infrastructure worldwide on behalf of public pension funds, has acquired all the P3 concessions of Spanish company OHL for $3.3 billion. The assets include 14 toll roads, three seaports, one airport, and one light rail line. IFM’s infrastructure portfolio now totals $41 billion, and includes the Indiana Toll Road in this country.

Annual Privatization Report 2017 Released. The chapter of Reason Foundation’s 2017 Annual Privatization Report dealing with surface transportation was released last month. It covers the use of privatization and P3s in surface transportation worldwide and in the United States. It is available for download at no charge from: http://reason.org/files/annual_privatization_report_2017_surface_transportation.pdf.

Carpool Occupancy Increase in San Francisco Bay Area? As in most of the United States, the Bay Area’s HOV and HOT lanes require only two persons per vehicle (except on I-80). But thanks in part to “fam-pooling,” the majority of the region’s HOV and HOT lanes are very congested during peak periods. The region’s Metropolitan Transportation Commission is seriously discussing an increase to three persons per vehicle, which would significantly reduce HOV and HOT lane congestion.

Rhode Island Truck Tolling Delayed. RIDOT announced this month that toll collection at the first two gantries on I-95 will be delayed until February or March, rather than starting by the end of the year. The delay is due to extra time taken with the environmental assessment plus additional time being provided for testing the electronic toll collection system. The overall plan includes tolling at 14 locations on major highways.

Commercial Rest Stops Proposed for Arizona Interstates. Arizona Gov. Doug Ducey has requested federal permission for the state to partner with private businesses to add gas stations and fast-food outlets to “lonely roadside rest stops” on the state’s Interstates. A federal law, enacted in 1960 at the behest of the National Association of Truck Stop Operators, prohibits all commercial services at rest stops on the vast majority of Interstate highways that were developed using federal funds rather than being toll-financed.

Panama Canal’s Toll-Financed Expansion Paying Off. It cost $5 billion to add wider locks to the Panama Canal, but the Wall Street Journal reported (Sept. 9, 2017) that the investment is already paying off. Tonnage through the Canal in the first year since the new locks opened has increased from 300 million tons to nearly 400 million. And toll revenue is up to an estimated $2.2 billion this year, from around $2 billion in recent years. The increased traffic is also benefitting U.S. ports on the East and Gulf coasts.

Germany Plans $318 Billion in Transport Infrastructure. Inspiratia Infrastructure reported (Oct. 23, 2017) that Germany’s $318 billion 2030 transportation infrastructure plan includes new-generation P3 projects to modernize a number of aging autobahns. The first two of these projects are reconstruction and widening of a 79 km stretch of the A3 ($1.09 billion) and a similar project for the A10/S24 ($434.7 million). These projects will be financed based on availability payments rather than tolls.

Gwinnett County, GA Plans New Toll Road. A suburban Atlanta county government will build the second phase of the Sugar Loaf Parkway as a toll-supported limited-access road. Funding will be a mix of state and local transportation funds plus toll revenue, according to county officials. And the state is transferring the right of way to the county, to facilitate the project.

Arizona DOT Seeking Traffic & Revenue Consultant. Last month AzDOT’s P3 office issued an RFP for a traffic and revenue consultant. The state legislature enacted state-of-the-art P3 legislation in 2009, but so far no tolled projects have seen the light of day. That could be changing. The RFP calls for the T&R advisor to provide guidance on both solicited and unsolicited P3 proposals. The contract would be for one year with potential extensions for up to four more years.

Austria Litigates Over Planned German Road Toll. The Austrian government has filed suit in the European Court of Justice over the new German law which imposes a toll on all those using the country’s highways. The Austrian claim is that a provision offsetting the toll against German car taxes (paid only by German residents) is “indirect discrimination on the basis of nationality.” Although the toll law was approved in March 2017, it is not expected to go into effect before 2019, by which time the Court is expected to issue its ruling.

P3s Returning to Georgia. Georgia DOT is seeking a general engineering consultant to assist with two highway P3 projects, one on I-75 and the other on I-285. The projects are part of an overall $10 billion agenda, announced in May, that includes seven design/build/finance projects and four DBFOM concessions.

Discount on New Megaprojects Book. The editor of the new Oxford Handbook of Megaproject Management—Bent Flyvbjerg—has offered readers of this newsletter a 30% discount on purchases. The code for this discount is ASFLYQ6; use the code at the shopping basket stage at www.oup.com/academic/business when you order the book.

Rethinking CAFE and ZEV Standards. In a new policy brief from Reason Foundation, Julian Morris and Arthur Wardle review and critique the federal CAFE fuel-economy standards and the California zero-emission vehicle (ZEV) standards (also followed by nine additional states). The authors compile quantitative estimates of the costs and benefits to argue that these programs reduce fuel consumption and GHG emissions at a very high cost, compared with alternative measures. The report is online at: http://reason.org/files/cafe_zev_standards_environment_alternatives.pdf.

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Quotable Quotes

“Transit, biking, and walking are not thriving. While various initiatives might be benefiting targeted persons and locations, the collective initiatives are not moving the dial in terms of overall travel behavior. . . . The intransigence of behavior would suggest that either the tactics need to change and/or the merits and value of various initiatives need to be carefully scrutinized in the context of their effectiveness and the collective public will of travelers. Transportation is a declining share of household expenditures in dollars. Expenditures in time seem to be ticking up, with increased congestion, and the cost in accidents and fatalities increased in the past few years. Travel behavior was affected by the economy, with a spike in zero-car households, increased fuel expenditures, slowing car sales, and increased transit use during the recession—but these trends reversed when the recovery took hold.”
—Steven Polzin, “Travel Trends: Are They Changing?” Planetizen, October 4, 2017

“Another claim is that the Jones Act protects the U.S. shipbuilding industry and a workforce of trained mariners who might be needed in wartime. But if the Jones Act is crucial to victory at sea, the U.S. needs a new Navy. And in that case, why not make the subsidy explicit, nationalize shipping, and make all U.S. taxpayers pay for ships and seamen, rather than enrich a few companies and foist the bill for higher costs on Puerto Ricans, Hawaiians, and Alaskans?”
—Editorial, “A Jones Act Head Fake on Puerto Rico,” The Wall Street Journal, October 7, 2017

“Once robocars got public attention, a certain faction promoted the view that we should be giving much more attention to the idea of the ‘connected car.’ The connected car was coming sooner, would have a big effect, and some said it was silly to talk about robocars at all without first thinking of them as connected cars. Many even pushed for the vocabulary around robocars to always include connectivity, pushing names like ‘connected autonomous vehicle’ as the primary term for the technology. Robocars will be connected, but not nearly as much as some people in the ‘connected car’ world would imagine. And the connection won’t be essential. Some cars will work with only a connection when they are parked, or with intermittent connectivity during the day. But most of all, they won’t connect out to the world. The robocar probably will connect only to servers at its HQ—the company that made it or which runs the fleet it’s in. It won’t talk directly to infrastructure and other cars, and may not even talk two-way with the rider’s phone. . . . I call this partially connected car the ‘disconnected car’ because, while not fully disconnected, compared to the typical vision of a ‘connected car,’ it is effectively disconnected. The primary reason for this is security.”
—Brad Templeton, “The ‘Disconnected Car’ Is the Right Security Plan for Robocars,” Brad Ideas, November 6, 2017, ideas.4brad.com

“Significant reform is necessary to ensure that highway funds are well spent. A reduction in the federal fuel tax would make it easier for states to set their fuel tax rates at levels that could fund their particular highway needs. To strengthen planners’ incentives to choose high-return projects, states must foot a larger share of the bill for highway construction costs.”
—Robert Krol, “Federal Highway Funding Needs to Change,” Mercatus Center, George Mason University, August 2017

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Robert Poole is director of transportation policy and Searle Freedom Trust Transportation Fellow at Reason Foundation.