- From per-gallon taxes to per-mile charges: a new approach
- Report on autonomous urbanism is a mixed bag
- Countering attacks on public-private partnerships
- The United States lags on transportation P3s
- Growing interest in asset recycling
- The $7.6 billion “rescission” to highway funding
- Upcoming transportation events
- News notes
- Quotable quotes
Ever since serving on the Transportation Research Board special committee on the long-term viability of fuel taxes in 2005, I have been persuaded that per-gallon fuel taxes are not a sustainable source of funding for 21st-century roadways. A subsequent national commission in 2008 (on which my Reason colleague Adrian Moore served) concluded that charging per mile rather than per gallon of fuel would be the best replacement funding source. But can that difficult transition be made?
That’s the topic of a new Reason policy brief released last month. It begins with the major problem facing advocates of mileage-based-user-fees: unpopularity. The National Cooperative Highway Research Program’s NCHRP Synthesis 487 found that the average support for MBUFs in numerous polls was just 24 percent. This is partly because of public concerns and media portrayals of mileage-based user fees (MBUFs) as “Big Brother in your car.” It also reflects fears that this will end up being an additional tax, rather than a replacement for fuel taxes.
The thrust of the brief, “How a State Could Transition From Per-Gallon Gas Taxes to Per-Mile Charges,” is that to gain enough support, the change to MBUFs must represent a genuine value proposition for those expected to pay per mile instead of per gallon. To flesh that out, I suggest that any MBUF should be designed to remedy all the major shortcomings of fuel taxes, not simply their future decline in revenue. These include that the fuel tax is not transparent (people have no real idea how much or how little they are paying for roadways via fuel taxes); it is no longer a pure user fee (users-pay/users-benefit); and it is now seen by most Americans as just another tax.
By contrast, with other vital utilities (electricity, gas, water, telecom, etc.) people pay based on the amount of the service they use, they pay directly to the service provider, and they know whom to blame if the service is poor. This argues for making the MBUF a true user fee, paid to the relevant roadway provider, and clearly reported on usage-based bills.
I also argue that the most realistic way to phase in MBUFs is state-by-state rather than from the top down via a federal mandate and a federal MBUF. Americans have far more confidence in state and local government than they do of the federal government when it comes to transportation funding and many other things. Just compare the ability of states to get voter consent for increased fuel taxes versus Congress being unwilling to do likewise for federal fuel taxes ever since 1993. State and local governments own the roadways, and they have the primary responsibility for making sure they are modernized and operated properly. Moreover, a federal mandate when most of the public does not understand or accept MBUFs would likely not get through Congress—and a big defeat there could set back for many years the needed transition from per-gallon to per-mile.
Accordingly, the brief sets out a scenario in which Congress encourages pioneer states to come up with a critical mass of public and political support for making this transition. It suggests that a state wanting to begin the transition start with another big problem that needs solving, but which people can more readily understand: rebuilding and modernizing the aging Interstate highways in those pioneer states. And instead of asking people to accept some kind of new technology, start out using today’s well-accepted all-electronic tolling, configured to charge on a per-mile basis. If this were done for all of a state’s limited-access highways (Interstate and non-Interstate), over the years of reconstruction it would transition more than one-third of all that state’s vehicle miles of travel (VMT) to per-mile charging.
Once that program was well-established in a state, it would then be easier to move on to state highways and local roads, and the brief suggests a way to apply the same kinds of principles of transparency and accountability for those roads. In the average state, about 43 percent of VMT is on highways with state or U.S. numbers and 22 percent is on local streets and roads. Annual VMT totals for those roadways would be used by the state DOT to allocate the MBUF revenues to those providers each year.
I was honored to present this concept last month at the quarterly meeting of the Mileage-Based User Fee Alliance. I hope you will read the brief and let me have your feedback.
Last month, the National Association of City Transportation Officials (NACTO), the national trade group for large city transportation departments, released the second edition of its “Blueprint for Autonomous Urbanism.” The Blueprint is NATCO’s comprehensive vision for how cities should approach automated transportation. As a trade group vision, the blueprint focused on promoting the interests of large cities, with a mix of helpful and harmful suggestions.
One positive is the report’s recommendation to implement variable pricing as a way to manage congestion and fund transportation improvements. Many urban drivers have become familiar with peak-period pricing used for ride-hailing services and managed lanes. NACTO recommends cities add data management experts to conduct regional modeling on how pricing affects regional travel.
The document details the difference between congestion pricing (used on I-66 inside the Beltway in Northern Virginia), cordon pricing (used in London and Stockholm), curb pricing (used in San Francisco and Washington D.C.), mileage-based user fees (used in Oregon), and managed lanes (used in many metro areas). Since congestion pricing has often been controversial, the document recommends cities develop pricing policies with the business community, civic leaders, and elected officials.
Unfortunately, the suggested uses of pricing are problematic. NACTO advocates pricing as an incentive for people to drive less instead of a way to manage demand. Pricing is effective at shifting demand but less effective at reducing travel entirely. NACTO proposes repurposing car lanes for cycling and walking. Yet most cities are already congested. It may be unrealistic for cities to add travel lanes, but eliminating them on major thoroughfares doesn’t make much sense either.
The blueprint explicitly suggests using pricing to force commuters to use transit, which seldom works. Finally, it implies that all pricing revenue should be dedicated to transit, walking and cycling. While some of the revenue should support these modes in major cities, the revenue needs to fund roadway improvements as well.
The automated transit section may be the best chapter in the report. It recommends creating a unified payment system, in which riders could pay for transit services from different providers, tolls, etc., using one account on an existing credit card. It endorses redesigning bus networks, by adding service on the weekends and off-peak hours. Commute trips are less than a third of all transit trips, yet service is peak-period focused. Houston redesigned its network to have fewer stops, slightly less service on weekdays and significantly more service on weekends. Off-peak ridership increased by 20-40 percent while peak ridership remained steady. That’s the model to follow. The report also explains how transit signal priority (TSP) has increased bus travel-time reliability in mixed traffic.
The report argues that automated transit systems will need more employees than today, even without drivers. However, the Transportation Research Board’s (TRB) transit committees have found that fewer employees will be needed. TRB research found that reduced labor costs are one of the biggest advantages of transit automation.
The report generally treats all public transit service as good and private contracting as bad. Yet bad public transit service should be cut, just as roadways with excess capacity can be narrowed. Many of the cities the report highlights—London, Stockholm, and Los Angeles—have or have had successful private transit service that provided better overall service (more frequent, more on-time and cleaner, with lower overall costs) than comparable public service.
NACTO may be trying to avoid a fight with organized labor, one of its biggest supporters. But a report on transportation automation should not ignore one of the biggest automation advantages or distort the advantages of private transit.
The report has some other weaknesses. It argues that car travel needs to be reduced because of climate change. Yet the ongoing growth in electric and hybrid vehicles promises to reduce transportation greenhouse gas emissions significantly over the next 20 years. Further, greenhouse gas emissions are a U-shaped curve with the most emissions at very low and high travel speeds. Making car travel slower and more difficult would decrease citywide travel speeds, thereby increasing emissions.
The report recommends prioritizing transit, walking and cycling over automobiles. It recommends eliminating the level of service (LOS) requirements for traffic flow that have guided policy for decades. It recommends setting speed limits at 25 miles per hour citywide, eliminating the 85th percentile rule. And it recommends restricting cars on local streets, connectors and major arterials. All of those recommendations are problematic.
Prioritizing non-automobile travel may make limited sense in New York City or on certain streets, but the automobile is still the dominant transportation mode in most American cities. For example, in the city of Atlanta auto mode share of is 75 percent, transit 10 percent, walking 4 percent, cycling less than 1 percent and work at home 7.5 percent. And the city of Atlanta makes up less than 10 percent of the Atlanta region’s population. Many residents work in Atlanta and live in a neighboring city and vice versa. Artificially slowing commutes limits economic growth and productivity. The value of a large metro area is the number of jobs that can be reached in a given time (also called the circle of opportunity). Slowing travel speeds shrinks that circle.
Additionally, setting speed limits at the 85th percentile reduces the variation in travel speeds, and reduces fatalities. On streets with high pedestrian and bicycle counts, speeds may need to be set lower. But throwing out the 85th percentile rule for major arterials would reduce safety. At a minimum, cities need to ensure that state roads and other major thoroughfares continue to prioritize movement for automobiles, buses and vanpools.
NACTO supports the existing framework in which the National Highway Traffic Safety Administration (NHTSA) regulates vehicle safety and the states regulate licensing. Yet it opposed the recent federal autonomous vehicles (AV) legislation, the Senate SELF DRIVE Act and the House AV START Act, because NHTSA regulated safety, which suggests NACTO wants to have it both ways. NACTO also wants city taxi commissions to regulate Uber and Lyft, arguing that states have eliminated certain regulations on ride-hailing services. Yet, most states have simply placed ride-hailing companies on an equal footing with taxis. From a political perspective, cities want more power to set regulations. And the taxi industry is one of the biggest supporters of having cities regulate transportation. But to convince the feds and states to grant them those powers, NACTO needs a more coherent argument.
Finally, the report focuses on potential problems that are many years away. For example, the report recommends regulating delivery bots so they don’t clog sidewalks. Sidewalks can be crowded in the biggest cities, but delivery bots are unlikely to take over in the near future.
Sometimes it’s important to correct the record when misinformation about important transportation topics is circulated. Last month, for example, a columnist in Maryland attacked Gov. Larry Hogan’s $9 billion plan to use long-term public-private partnership (P3) toll concessions to add express toll lanes to the Maryland side of the Capital Beltway (I-495) and I-270. But the piece by Frank DeFelippo was largely built on five incorrect statements about U.S. toll concessions, as follows:
- Claim #1: If a P3 delivers poor results, the private partners cannot be “booted out” (Fact: P3 concessions have “termination for cause” provisions.)
- Claim #2: When the original P3 company for the Indiana Toll Road went bankrupt, the state had to bail out the road. (Fact: There was no taxpayer bailout, and the new P3 company paid enough to make the original bondholders whole.)
- Claim #3: The cost of borrowing money is “much higher” for P3 investors. (Fact: tax-exempt private activity bonds and low-interest TIFIA loans make the cost of debt capital close to what states pay for municipal bonds.)
- Claim #4: If a P3 defaults, highway users end up paying higher tolls. (Fact: that did not happen in Texas or San Diego P3 toll road bankruptcies.)
- Claim #5: Privatized toll roads charge as much as $40 one-way. (Fact: this must refer to I-66 inside the Beltway, which is a Virginia DOT project, not a P3.)
Many readers of this newsletter could have answered these false claims. But state departments of transportation that are just beginning their P3 programs—and many state legislators—may not know what to make of such claims. And there are less-simplistic claims about P3s made by some academics that are also false or at least misleading. I address some of these in Chapter 7 of my book, Rethinking America’s Highways, which would be a good starting point for those needing to answer opponents’ claims about managed lanes, tolling, and P3s. But on highway P3s, specifically, there is an important new resource.
“Leveraging Private Capital for Infrastructure Renewal” is a recent product of the National Cooperative Highway Research Program, published as NCHRP Synthesis 540, and available at no charge from the TRB website. It was produced by seven co-authors, five from Sperry Capital and two from the Global Projects Center at Stanford University. It’s a sophisticated piece of work and would be an ideal primer for P3 units of state DOTs, full-time transportation staffers in legislative bodies, and planners at metropolitan planning organizations (MPOs)/transportation planning organizations (TPOs).
After explaining the differences between traditional design-bid-build procurement and newer processes such as design-build and design-build-finance-operate-maintain (DBFOM), it devotes the bulk of its attention to DBFOM as both the most-promising for major highway projects, as well as the newest and least-understood procurement model.
The most important contribution the report makes is Chapter 3, “The Role of Private Equity in Public-Private Partnerships.” While critics are wrong in claiming that the cost of debt is much higher in a P3 than in state-run bond financing, they are correct that the cost of equity (absent in 100 percent debt-financed state projects) in a DBFOM P3 is real, and leads to a blended cost of capital (equity plus debt) that is higher than in a state project. But this chapter goes on to explain in detail what the state gets in return for having that equity investment via the public-private partnership.
The primary benefit is risk transfer. In traditional projects, as the report explains, “the equity owners for that project are effectively the taxpayers.” Specifically, it is taxpayers who provide the de-facto insurance, who bear the cost overruns (which are common in mega-projects), and who in one way or another make up the revenue shortfalls if toll revenue is less than projected. In a typical revenue-risk DBFOM, all those risks (and often others) are taken on by the private equity providers. And as the report points out, “lenders and equity investors [in a revenue-risk DBFOM P3] generally have no guarantee or only a limited guarantee of some form from the government to make them whole.” Actually, while “minimum revenue guarantees” are fairly common in Europe and Latin America, I know of only one modest provision of this kind out of 14 U.S. highway revenue-risk P3s.
The report provides a lot more useful information, acknowledging that most of the public does not understand how DBFOM P3s work and can be easy prey for false and misleading claims like those I opened this article with. The only subsection that I found of limited relevance to U.S. practice is 4.2.1 “UK Studies of P3 Equity Returns.” It summarizes a report from the UK National Audit Office in 2012 which concluded that “the public may be paying more than necessary for the use of equity investment” in P3s. But virtually all such P3s in the UK are not of the revenue-risk kind which is the focus of NCHRP 540; they are based on availability payments, so there is, indeed, a draw on public-sector payments which might be excessive. That has nothing to do with U.S revenue-risk highway P3s.
That small (2 pages out of 57) aberration aside, this report is a major contribution and can give stakeholders a better understanding of U.S. P3 toll concessions. I hope it finds wide readership.
By Baruch Feigenbaum
Reason’s 2019 Annual Privatization Report on Surface Transportation has some promising news on state P3 legislation and concession activities. But, overall, compared to other countries, the U.S. continues to lag in public-private partnerships.
For 2018-19, of the 10 largest P3 deals, only one was in the U.S. (the 9th in value Michigan I-75 modernization project which rebuilds a section of I-75 south of Detroit.) This 30-year $710 million project is not even a full P3, as it lacks an operations component. While tolling existing travel lanes would have been politically challenging, adding new express toll lanes to the congested highway would have provided a congestion-free travel option and allowed transit agencies to add express bus service. Unfortunately, the Michigan Department of Transportation (MDOT) is forbidden from using tolls for any roads (and bridges) in the state. As a result, the project is financed based on availability payments, using Michigan’s limited gas tax revenue as the funding source.
Contrast that with the project second in value —the $2.9 billion tolled P3 Gordie Howe bridge project linking Detroit and Windsor, Ontario. Since Michigan was unable to partner with Ontario due to the tolling ban, the Windsor Detroit Bridge Authority (based in Canada) is building the bridge, customs inspections, and roadway connections in Michigan and Ontario by itself.
Turkey has the largest and third-largest projects, the Canakkale Bridge ($3.7B) and the Ankara-Nigde Motorway ($1.4B). The Netherlands, Italy, Germany and Colombia all had other toll road projects with a value of $670 million or higher. The Netherlands is building a tunnel using a P3 in the Rotterdam region.
Between January 2018 and August 2019, P3 projects in 52 different countries reached financial close. The U.S., with a population of 327 million, had only four such projects reach financial close. Contrast that with Canada with a population of 37 million and three projects closed, or Australia with a population of 25 million and five projects reaching financial close. China has a list of 159 projects that it would like to procure as P3s, though many will likely not be built or procured as P3s. India has three bundles of toll-operate-transfer projects the country is planning to offer.
Developing countries in Asia and Africa are also entering into P3s. In Asia, Bangladesh, Cambodia, Kazakhstan, Myanmar and Sri Lanka entered into P3s. In Africa, Burkina Faso, Ghana, Kenya, Reunion and Uganda made their first forays into P3s. Public-private partnership concessionaires would much rather do business in a developed country, such as the United States. The problems in the U.S. aren’t the potential projects, but inadequate state P3 laws and federal policies that limit public-private partnerships.
One significant obstacle is restrictions tied to federal grants. If a state or municipal facility has received direct federal grant funds, a change of use or ownership (such as a long-term lease/concession) triggers a grant repayment requirement. Since this is an Office of Management and Budget rule, it could be changed by the stroke of the president’s pen.
Another restriction is the Private Activity Bond (PAB) lifetime cap. Established in 2005 under the SAFETEA-LU reauthorization, tax-exempt bonds level the playing field between municipal bonds and private finance by providing equal tax treatment to both. Due to questions about effectiveness back in 2005, PABs were capped at $15 billion. But as of mid-2019 USDOT had awarded $11.1 billion, allocated an additional $1.4 billion and received applications for an additional $2.7 billion. This totals $15.2 billion, more than the department can award. Congressional committees have passed legislation raising the cap to $21 billion, but passage is not guaranteed.
Even absent formal obstacles, many highway funding programs are not P3 friendly. The Interstate highway system needs to be rebuilt, and tolling is the most realistic funding source. Yet the current Interstate System Reconstruction and Rehabilitation program allows only three states to rebuild one Interstate through tolling. The proposed America’s Transportation Infrastructure Act in the Senate includes a different limited tolling proposal but even combined the plans don’t provide the number of slots needed.
The U.S. has had some P3 successes over the past two years. Between October 2017 and December 2018, four major U.S. P3 projects reached financial close. The $1.3B DBFOM Colorado I-70 East project encompasses improvements to the 10-mile stretch of I-70 between I-25 and Tower Road, a stretch that also connects I-270 and I-225, intersects several railway lines, and features replacement of an aging elevated viaduct that divides several neighborhoods. The $3.5B DBFOM Transform 66 (outside the Beltway I-66) project in Northern Virginia will develop HOT lanes on a 22-mile stretch between Route 29 near Gainesville in Prince William County and I-495 in Fairfax County. The $5.7B refinancing of the Indiana Toll Road—which runs east/west for 157 miles between the Illinois and Ohio state lines—reached financial close on a new deal. And the Dallas Police and Fire Pension System sold its 10 percent stake in the North Tarrant Expressway project and its 6.6 percent stake in the LBJ Freeway Managed Lanes project, generating a cash windfall of $180 million, which the pension fund plans to use for future acquisitions and liquidity purposes.
In P3 legislative activity, Louisiana passed a joint resolution recommending that the USDOT seriously consider undertaking a P3 with tolling to build the new I-10 Calcasieu River Bridge. New Jersey enacted P3 authority for transportation infrastructure. Several legislators have recommended using a P3 to build express toll lanes in the state.
Several other deals neared financial close. The Jefferson Parkway Public Highway Authority located in Colorado shortlisted three consortia for the Jefferson Parkway P3. LaDODT identified Plenary Infrastructure Belle Chasse as the winning bid for the $162 million DBFOM Belle Chasse Bridge and Tunnel Replacement P3. Finally, Maryland is planning to move forward with a P3 to add two managed toll lanes to I-270 between the Capital Beltway and I-370 in suburban Montgomery County, to be followed by a larger P3 to add managed lanes to its portion of the Capital Beltway, I-495.
Yet, given the country’s size and infrastructure needs, this activity is a drop in the bucket. To modernize our infrastructure, we need to streamline federal policies to allow states to enter into many more P3 agreements each year.
As has been fairly widely reported, Australia several years ago had great success using a small federal government financial incentive to encourage state governments to sell or lease existing infrastructure assets, as long as the net proceeds were invested in new infrastructure. The assets to be “recycled” needed to be revenue-generating businesses that are generally worth a lot more if operated commercially than politically.
Last month, the Committee for Sydney—an Australian think tank representing a wide range of business, academic, government, and cultural entities—called for further asset recycling in that state. It urged, for example, the New South Wales state government to divest the 49 percent stake it holds in the massive WestConnex tollway project, after previously having raised $9.2 billion from a 42-year concession for a 51 percent stake.
Here at home, there is still not much interest in recycling existing revenue-generating transportation assets, such as airports and toll roads. But in the utilities sector, a recent report from Inframation News identified a new recycling trend that includes the Jacksonville (FL) Electric Authority, the South Carolina Public Service Authority (also known as Santee Cooper), and the Puerto Rico Power Authority. All three have received bond rating downgrades from the major credit rating agencies. The report also listed a number of other utilities it considers potential candidates, including four with at least one negative outlook from either Moody’s or S&P Rating. Those included two in California: the Los Angeles Department of Water & Power and the Sacramento Municipal Utility District.
State and local governments interested in asset recycling should review a well-done 2014 report from the Mowat Centre, a public policy think tank in Ontario, Canada: “Recycling Ontario’s Assets: A New Framework for Managing Public Finances.” Author Michael Fenn is a management consultant who is also on the board of one of Canada’s leading public pension funds, OMERS. He lays out an overall framework for a province or municipal government to better manage its assets. These include:
- Inventory all government assets;
- Assess assets to figure out how to enhance the public value of each;
- For those that can best be managed commercially, create a formal asset recycling framework;
- Create an infrastructure trust to manage the proceeds of asset recycling for new infrastructure investment; and,
- Change accounting rules, as necessary, to ensure that all asset transactions take place in the balance sheet portion of the budget, not the operating budget.
There is a lot more useful information in this report’s 40 pages, including a bibliography. It would serve as a good introduction to the subject for any government interested in considering asset recycling.
Back in 2015, in enacting the FAST Act, Congress struggled with how to pay for the large difference between the projected revenue coming into the Highway Trust Fund over the next five years and the amount of spending they were determined to allow. Taking advantage of every provision in the budget scoring rules, they decided that in the last year of the law’s operation, $7.6 billion would not be spent after all. That would help “pay for” the over-spending, and would also mean that the baseline of spending for the next five years would be a bit lower. That would also reduce the challenge a future Congress would face in devising the successor to the FAST Act, by reducing the amount of pay-fors they would have to come up with in 2020.
It is now four years later, and that $7.6 billion rescission looms over highway spending in 2020, when it is scheduled to take effect next July. Despite the fact that everyone knew this had been built into the FAST Act and had four years to plan for it, there is now a concerted effort among highway stakeholders to undo the rescission. Last month 41 transportation groups signed a letter to leaders in Congress urging them to cancel the rescission. “If allowed to take place, this provision will virtually wipe out all remaining contract authority available to states nationwide in the core highway formula programs,” the letter writers declared. And my friend Joung Lee of AASHTO told Politico that this was a “budgetary gimmick,” and that bringing down the baseline (to at least be a bit closer to the available revenue) is “irresponsible.”
As someone who agrees that we are under-investing in aging highway infrastructure, I sympathize with the plight of the state DOTs represented by AASHTO. But over the past four or five decades, the states have increasingly tied their highway futures to money from Washington that, for the past decade, has significantly exceeded the money generated in the states by federal highway user taxes, thereby contributing to annual federal budget deficits that are now in the $1 trillion per year range. Deficits of this magnitude cannot continue without causing severe harm to this country. The FAST Act rescission was a small step toward reducing the irresponsibility of spending more on the federal highway program than the incoming user-tax revenue. A congressional majority agreed to this provision, and every single state DOT knew it was there and had a responsibility to plan for it. Evidently, most did not. And that, in my view, is where the irresponsibility lies.
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.
Massachusetts Transportation Spending, Oct. 22, 2019, Boston, MA: The Hampshire House (Baruch Feigenbaum speaking). Details here.
Spending Federal Transportation Dollars Effectively, Oct. 24, 2019, Washington, DC: Rayburn House Office Building (Baruch Feigenbaum speaking). Details here.
Bond Buyer Finance/P3 Conference, Nov. 14-15, 2019, Denver, CO: Grand Hyatt Denver (Baruch Feigenbaum speaking). Details here.
NCSL Fall Forum, Dec. 10-13, 2019, Phoenix, AZ: JW Marriott Phoenix Desert Ridge (Baruch Feigenbaum speaking). Details here.
42nd Annual Kentucky Transportation Conference, Jan. 15-17, 2020, Lexington, KY: Lexington Convention Center (Robert Poole speaking). Details here.
UK’s High Speed 2 Doubles in Cost
The long-planned high-speed rail line between London and northern cities has doubled in projected cost, to $128 billion, prior to the start of serious construction. And the opening date for Phase 1 is now estimated at 2028-2031 and for Phase 2 at 2035-2040. These findings come from an official review released (in redacted form) last month by HS2 Chairman Allan Cook. HS2 is now looking into private finance options, while others are calling for the project to be scrapped.
Elevated Tollway Proposed in Manila
San Miguel Corporation has made an unsolicited proposal to the Philippines DOT for an elevated tollway above the existing EDSA expressway in Manila. It would have five lanes each way and would likely include bus rapid transit (BRT) service. The elevated route would run from Pasay City to Quezon City in the Manila metro area.
Major Highway P3 Program Proposed in India
The National Highways Authority of India has identified 950 km of highway projects in eight states that it plans to offer as long-term public-private partnerships (P3s). The total estimated cost is $329 billion, with most of the highways being four or six lanes wide. The concept is to offer these toll roads to private bidders under a build-operate-transfer (BOT) model, commonly known in the United States and Europe as design-build-finance-operate-maintain (DBFOM) P3s.
Poole Commentary on Tolling and Conservatives
Alabama’s lieutenant governor, who opposes the toll-financed Mobile River Bridge on I-10, recently stated that tolling “violates every conservative belief and principle that I hold.” That contention is challenged in a new commentary by the editor of this newsletter, posted online at Reason.org. Go here.
GM Strike Due to Electric Vehicles?
Wired posted a story on September 17th headlined “The Shift to Electric Vehicles Propels a Strike Against GM.” The basis for the claim is that the company’s ongoing shift to electric vehicles—which have far fewer parts and hence require less labor—means the company will need fewer assembly workers in coming years, while the union (UAW) opposes any job reductions and is fighting for increased compensation.
Reports Focus Attention on Highway Cost Escalation
Less bang for the highway buck was the dismal finding of two recent studies. A Brookings Institution study by Leah Brooks and Zachary Liscow found that the inflation-adjusted cost of building a mile of Interstate highway tripled between the 1950s and the 1990s. They attributed this to higher design standards and the costs of changing projects in response to environmental and NIMBY demands. And a study by the Garden State Initiative found that New Jersey spends far more per highway mile than nearby states, and recommends a highway project prioritization system like that of Virginia. Another factor is that other studies have found essentially zero increase in the productivity of public works construction over the past four decades.
Motorists Are Paying Tolls for New Ohio River Bridges
Despite widely expressed opinion that people would avoid paying tolls to use the new bridges across the Ohio River between Louisville and Ohio, the RiverLink toll system reported in August that for the fiscal year ending June 30, 2019, toll revenues of $112 million exceeded original projections of $97 million. The project included construction of two toll bridges, at a total cost of $2.6 billion.
More States Charge EVs, but Some Object
As of now, 26 states have imposed some kind of annual charge for owners of electric vehicles, since they impose the same impacts on roadways (wear and tear, congestion) as non-EVs. The EV fees range from $75 to $140 per year, and the upper end of that range is well above what average motorists driving conventional vehicles pay in state fuel taxes. Pro-EV groups such as the Sierra Club oppose EV charges, claiming that “gasoline-powered cars [that are] polluting the climate are not charged for doing that.” On the other hand, those cars are subject to increasingly stringent mpg regulations, which increases those vehicles’ initial cost.
Legislators Still Debating Tolls for First Louisiana P3 Bridge
The planned $162 million project to replace the aging Belle Chasse Bridge & Tunnel has already selected its preferred bidder (a consortium led by Plenary) and won a $45 million INFRA grant from the U.S. DOT. But a legislative committee last month directed Louisiana DOT Director Shawn Wilson to find out if the project could keep its INFRA grant if tolls were removed from the project finance plan. Wilson cautioned that removing a key funding source could jeopardize future P3 projects, such as two much larger projects to replace aging bridges on I-10.
Cash-Based Electronic Tolling on Offer in Kansas
The Kansas Turnpike Authority has teamed with BancPass to offer a toll sticker tag that can be replenished with cash at retail locations or online via the BancPass website or its smartphone app. The aim is to serve customers who either lack credit cards or bank accounts or just prefer to pay cash. A similar project was implemented more than a decade ago for the toll roads in Puerto Rico, where a large fraction of the population was non-banked. Avoiding the use of cash and the need to send bills should significantly reduce the Turnpike’s toll collection costs.
Canadian Pension Plan Invests in Malaysian Toll Road
The Canada Pension Plan Investment Board (CPPIB) is buying a 45 percent stake in Malaysia’s Cipali toll road. The price was not disclosed, but Bloomberg estimated it as in the $500 million range. The original concession company, LMS, sold an additional 10 percent stake to Astra Infra’s subsidiary PT Baskhara Utama Sedaya (BUS). CPPIB is Canada’s largest public pension fund, and is part of the current concession company for the Chicago Skyway.
A Better Approach to Pedestrian Safety
Increased concern over recent increases in accidents involving motor vehicles and pedestrians sometimes leads to knee-jerk acceptance that “the answer” is some kind of “complete streets” make-over. Another approach is to focus improvements on known “hot spots” where such accidents have occurred before. But a new report from the National Cooperative Highway Research Program suggests systematic safety analysis as a better approach. By identifying locations where car/pedestrian accidents tend to occur in general (based on national research findings), a transportation agency can identify needed fixes even if there is little local data on such crashes. The report is on the TRB website as NCHRP Research Report 893.
Amazon Plans Purchase of 100,000 Electric Delivery Trucks
CEO Jeff Bezos announced last month that Amazon plans to be carbon-neutral by 2040. And one key element, as it expands its own delivery services, is an order for 100,000 electric delivery trucks. The order has been placed with Detroit-area startup Rivian Automotive, and the first EV trucks are to begin deliveries in 2021. Amazon has previously invested in the company, which is now valued at $3.5 billion, the Wall Street Journal reports.
Opposition to Nevada DMV Plan for Odometer Readings
One of the easiest ways to enable charging vehicle owners for miles driven is to have them report their odometer reading each year when renewing their vehicle registration. Nevada’s Department of Motor Vehicles in August announced plans to start doing this as of October (now). Legislators approved the plan, as a precursor to future implementation of mileage-based user fees (MBUFs), as Oregon has already done. But some legislators and motorists oppose the idea as an unnecessary infringement on driving freedom. Opponents include state Senate minority leader James Settelmeyer (R, Minden) who has said that “how many miles you drive in a year . . . is your own personal business.”
Virgin Trains Gets Initial OK for California Project Private Activity Bonds
The revived Xpress West project, to link Victorville, CA (in the high desert) with Las Vegas, last month received initial approval from the California Debt Limit Allocation Committee to issue $300 million in tax-exempt private activity bonds (PABs) for the project. Virgin Trains USA bought the rights to the project from its initial developer, which was unable to finance it. Virgin, already operating higher-speed passenger service in South Florida and under way extending that line to Orlando, expects to privately finance the $4.8 billion Xpress West line, which would be built largely along the I-15 corridor.
Alain Bertaud Interview on Cities and Transportation Planning
NYU researcher Alain Bertaud, author of the superb book Order Without Design (MIT Press), was interviewed by EconTalk host Russ Roberts, to discuss the themes of the book. To listen, go here.
GM Delays Driverless Ride-Hailing Service
In late July General Motors announced that it will not begin offering autonomous ride-hailing in San Francisco in 2019, as previously planned. GM Cruise CEO Dan Ammann said that Cruise needs more time to accumulate and analyze test miles on these vehicles, operated now with a safety driver on board, before being able to offer the service without such a driver. He gave no new date for launching driverless service. GM acquired start-up Cruise in 2016 for around $1 billion. Cruise has also received $1 billion from Japan’s SoftBank Group.
“Gov. Ned Lamont is expected to call Connecticut legislators into special session this fall to discuss the toll issue. History tells us that removing tolls in the 1980s was a mistake, as was lowering the gas tax in the 1990s. An effective transportation system is a must for growth, and tolls are the most equitable way to pay for such a system. We must not direct frustration over the ongoing budget crisis against tolls. We need highway tolls to build the projects in Let’s Go CT and bring transportation (and economic growth) in the state back up to speed.”
—Richard DeLuca (historian), “Why We Need Tolls: The Money Has to Come from Somewhere,” CTPost.com, Sept. 21, 2019
“The federal government now engages in more direct intervention, through spending and regulation, in the daily lives of Americans than it ever has in peacetime. . . . This pattern has left America’s system of federalism in disarray. For half a century and more, federal programs have been defined in ways that abuse the relationship between the federal government and the states—offering large sums of money to state governments in return for effectively deputizing them as enforcers of policy decisions. From Medicaid to the Highway Trust Fund to primary and secondary education programs, the federal government has used its resources to turn the 50 sovereign states into something more like federal accessories. State budgets have long since become dependent on this style of federalism, and the capacity of state and local policymakers, and even of civil society, to truly experiment with new approaches to social policy has been badly diminished as a consequence.”
—Yuval Levin, The Fractured Republic (Basic Books, 2016), p. 195
“There are opportunities across the country where governments could put new P3s in place on existing toll roads that would result in substantially lower tolls, reduced congestion, and improved travel for customers. These partnerships could also accelerate and guarantee future revenue to deliver billions of dollars for the construction of new infrastructure. Transurban estimates that the top 10 U.S. toll road networks alone could generate $180 billion in funding for new construction through such partnerships.”
—Jennifer Aument, “Q&A, Jennifer Aument,” Transportation Builder, March/April 2019
“Common sense is really what we need. No amount of virtue-signaling by governments, celebrities, royalty, or the media can make up for the fact that virtually all growth in greenhouse gases comes not from the West but from China, easily the world’s champion emitter, India, and a host of poorer countries. Driving a Tesla or Prius is not going to change much, and many green-backed policies, such as in Germany and California, have done little, if anything, for the climate, but have succeeded in hurting middle- and working-class people far more than the affluent. Given these realities, the logical course is to focus an intelligent, economically sensible transition to a lower-carbon economy while pushing for resiliency measures to deal with the possible results of higher GHG emissions. Rather than seek to turn people into insect eaters and permanent apartment dwellers, perhaps we should push for measures in [any] new infrastructure bill before Congress to bolster coastal defenses, underground power lines, and improve dams and water systems.”
—Joel Kotkin, “Common Sense vs. Climate Hysteria,” NewGeography.com, Sept. 8, 2019
“Most of the [San Diego] local transportation dollars are spent to build public transit infrastructure and to subsidize the fare of every transit rider. On average, each transit fare purchased covers only 25 percent of the cost to operate the transit system. In 2017, for example, the MTS total passenger revenues were $93 million while total operating expenditures were $408 million. Taxpayers are left to pick up the rest of the tab through taxpayer subsidies. During the fiscal years from 2014 through 2017, taxpayers paid over $1 billion to subsidize local transit fares. The bigger the transit system grows through new rail and bus lines the bigger transit operating deficits grow, and the more taxpayer money is required to sustain the system. So have these projects increased transit ridership or relieved traffic congestion? By nearly every objective measure, the answer is no.”
—Jesse Marx (Mayor of Coronado), “It’s Time to Put Roads Over Transit,” Voice of San Diego, Oct. 9, 2018