Surface Transportation News: Louisiana’s decreasing fuel tax revenue
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Surface Transportation Innovations Newsletter

Surface Transportation News: Louisiana’s decreasing fuel tax revenue

Plus: Truckers and mileage fees, electric vehicle trends, and transportation sector impacted by trade wars.

In this issue:

Why Louisiana Should Replace Its Motor Fuel Taxes

Reason Foundation just released a policy study recommending that Louisiana begin planning to phase out its taxation of gasoline and diesel fuel and replace the taxes with charges based on miles driven. The change would apply to both personal and commercial vehicles.

The rationale for making this change begins with the same factors that are affecting all state highway systems: shrinking fuel tax revenues due to (1) ever-higher federal miles-per-gallon requirements for new vehicles, and (2) the growth of vehicles not powered by internal combustion engines (ICEs)—primarily battery-electric personal vehicles and battery or hydrogen fuel-cell commercial vehicles.

Graphs in the report project the decline in Louisiana fuel sales and fuel-tax revenue under three alternatives, depending on how fast electric vehicles (EVs) replace ICE vehicles. For the mid-range scenario, by 2030, revenue would be 17% less than if there were no change in average miles per gallon; 33% less by 2040, and 40% less by 2050. Those numbers would all be worse under the high-EV-adoption scenario.

While more than a dozen states have run one or more pilot projects to test possible per-mile charging, and four states have begun an actual long-term transition, Louisiana thus far has not addressed this problem. And while all state highway systems are facing this, Louisiana’s case in some ways is more dire, for two reasons. First, its population is stagnant, having declined slightly each year since 2016. Second, its highway system needs considerably more improvement than most states’ systems.

In Reason Foundation’s 27th Annual Highway Report (2023), Louisiana ranks 40th in highway performance and cost-effectiveness. Louisiana is next-to-last (49th place) in urban Interstate pavement condition, 47th in highway fatality rate, and is one of only eight states with more than 3% of its rural Interstates in poor condition. It is also in 45th place in structurally deficient bridges. These rankings are not due to Louisiana being a southern state. Compared with Louisiana’s overall ranking of 40th, North Carolina ranks second in the nation in overall highway performance and cost-effectiveness, Tennessee ranks third, Georgia ranks fourth, South Carolina is sixth, Kentucky ranks seventh and Florida is eighth. In addition, Arkansas is 13th, Alabama is 15th, Mississippi is 18th, and Louisiana’s neighbor, Texas, ranks 19th in performance and cost-effectiveness.

Louisiana will not be competitive with its regional and neighboring states unless it can invest robustly in its aging highways and bridges in the coming decades. Doing that will require replacing its fading fuel taxes with a more robust highway funding source. The emerging national consensus is that mileage-based user fees (MBUFs) will likely be the best replacement.

The Reason study goes on to acknowledge that the public in most states is not yet persuaded that the fuel tax is losing its effectiveness. And many people are concerned that:

  1. An MBUF system would add a new charge in addition to the gas tax;
  2. It would invade privacy regarding where and when people drive; and
  3. It would make things worse for rural residents who drive more each year than urban residents.

The Reason report suggests that the transition from fuel tax to per-mile charges be designed to demonstrate that concerns one and two will not materialize. On number one, the report suggests starting the transition with only the limited-access highways, with per-mile charging via today’s electronic tolling technology, which can also calculate state fuel-tax refunds for all miles driven on newly converted Interstates and freeways. Hence, no ‘double taxation.’

On the second concern, privacy, the initial phase should use only widely accepted collection methods, for which privacy concerns are not at issue. In a later phase, newer technology applications should become available, such as in-vehicle telematics for reporting miles-driven. There will also be a need for legislated privacy provisions, such as those Oregon has already adopted for its ongoing mileage-charging program.

Concern three, focused on rural drivers, this point has been refuted by data collected in state pilot projects. Because rural motorists generally drive older, more gas-guzzling vehicles than urban drivers, they would be slightly better off with per-mile charges, especially if rural roads had a lower per-mile charge than urban roads.

The Reason study makes two near-term recommendations for Louisiana. First, the state should design and implement a mileage-based user fees pilot project to acquaint vehicle operators with the problem and this potential solution. Second, the state’s Department of Transportation and Development should carry out a study of its entire limited-access highway system, documenting the age and condition of every corridor and estimating major investments needed over a 20-to-30-year period, once a more-robust user-charge revenue system is implemented. 

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“Transportation Equity” and “State of Good Repair”—In Conflict

Two key themes of the Biden administration’s Department of Transportation (DOT) are a focus on transportation equity (especially income and racial equity) and “fix-it-first,” also known as “state of good repair.” Early in this administration, the Federal Highway Administration (FHWA) got in trouble with Congress for an advisory memo that state transportation departments should focus on fixing backlogs of deferred maintenance before building new capacity—later withdrawn after blowback from highway groups and Congress.

In October, the Urban Institute released a report, “Is Federal Infrastructure Investment Advancing Equity Goals?” It reviewed Fiscal Year 2022 funds distributed by 66 grant programs funded via the Infrastructure Investment and Jobs Act (IIJA) and the Department of Housing and Urban Development (HUD). Jeff Davis of the Eno Center for Transportation produced a detailed critique of that report, “Is ‘Fix-It-First’ Compatible with Promoting ‘Equity’?” on which I am drawing for this article.

The Urban Institute report concluded that federal highway, broadband, and water grants “tend to disproportionately benefit states with lower shares of people of color because of their emphasis on providing minimum funding to states with low populations and providing substantial support to states with more roads.”

But Davis points out that the Biden DOT remains strongly committed to “fix it first” to the extent that it can implement its priorities—as he puts it in the vernacular, “the broad theme of fixing crumbling infrastructure before going on to build shiny new infrastructure.” But where is all that existing infrastructure? It’s right where Congress encouraged it to be—in Interstate highways through, rather than around, cities and across long stretches of states like Wyoming and Montana. Once you’ve paid for those assets, under fix-it-first you have to repair or rebuild them, “no matter how fairly or unfairly they were originally distributed, and no matter in whose community the assets are currently located.” Suppose a rockslide destroyed a big segment of I-70 near Vail, CO, rendering I-70 impassible, Davis posits. It doesn’t matter how rich or white Vail residents may be; I-70 is national infrastructure and needs to be made whole again.

Because Davis is a data nerd, he goes on to show that Wyoming has almost 25 times more Interstate lane-miles per capita than Delaware. North Dakota has 16.7 times as many federal-aid lane-miles per capita as New Jersey. Davis finds the top five areas in residents per Interstate lane-mile are the District of Columbia, Hawaii, Delaware, New Jersey, and Rhode Island. At the other end, the states with the least population per Interstate lane-mile are North Dakota, South Dakota, Alaska, Montana, and Wyoming. Long-established federal funding formulas negotiated by Congress determine how much of each type of federal highway aid each state gets.

What’s true for highways is also true for mass transit, which has an explicit State of Good Repair (SOGR) program. Davis notes that the transit SOGR formulas score even worse on Urban Institute’s high-need equity measures, which focus on the extent of poverty and racial minorities. The Federal Transit Administration’s SOGR formula is based on communities having fixed-guideway transit, which makes only 85 urban areas eligible. Therefore, 21 states receive less than $1 per capita, while New York gets $58.45 per capita.

The bottom line of Davis’s well-researched opinion piece is that while state of good repair and distributional equity may both be worthwhile policy goals, they are inherently in conflict, especially given the way highway and transit programs are structured.

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Trucking Conference Disses Mileage-Based User Fees

At the American Trucking Association’s (ATA’s) Management Conference in Austin in late October, several sessions discussed the future of highway user fees, such as replacing per-gallon fuel taxes with per-mile charges, generally called mileage-based user fees (MBUFs) or road user charges (RUCs). To ATA’s credit, one of the expert presenters was Trish Hendren from the Eastern Transportation Coalition, which has created and managed several truck-specific MBUF pilot projects that I’ve reported on in this newsletter, most recently in the Oct. 2023 issue. But as three articles in Fleetowner by Kevin Jones made clear, Hendren’s message did not seem to be well-received.

Jones’ articles referred to mileage-based user fees as a vehicle miles of travel (VMT) tax. Since the most recent international truck pilot made use of charges based in part on four categories based on a truck’s registered weight, other speakers (e.g. from the Oregon Trucking Association) denounced this as being just another cumbersome, error-prone “weight-distance tax.” Hendren pointed out that Oregon’s weight-distance tax is widely seen as the worst possible weight-distance tax.

A major focus of several state trucking organization leaders was the cost of collection. The Oregon Trucking Association CEO claimed the cost of collecting fuel taxes is only 0.5% of the revenue collected, while the Nevada Trucking Association CEO put it at 3% of the revenue. Since all the pilot programs carried out thus far—for both passenger vehicles and trucks—used prototype equipment to report mileage, the cost of collection was far higher than a statewide or nationwide system with large economies of scale. One of Jones’ Fleetowner articles cited a report from the ATA research affiliate (ATRI) which estimated that collecting MBUFs from 272 million vehicles would cost $13.6 billion. Clearly, that level of collection cost would not fly, even if the estimate is accurate.

Hendren discussed the participation in the coalition’s international truck pilot of two trucking-specific clearinghouses: the International Fuel Tax Agreement (IFTA) and the International Registration Plan (IRP). Both IFTA and IRP cooperated with the pilot program, looking into changes that would be needed if IFTA were eventually to shift to coordinating mileage charges among states rather than fuel taxes. Managing interstate truck travel in an MBUF environment via such an organization would take advantage of IFTA’s economies of scale. Likewise, producing millions of telematics boxes to collect and record miles driven would also take advantage of large economies of scale.

Also apparently not discussed at the conference was the toll management services provided by Bestpass, which provides subscribing truck fleets with an interoperable toll transponder and manages all toll payments and accounting for each truck in each fleet, while taking advantage of all available toll discount programs. The company also takes care of refunds of some user taxes offered by the Massachusetts Turnpike and the New York Thruway. This is another example of economies of scale made available specifically to the trucking industry.

Too often ATRI and ATA make the opposite of the error Hendren pointed out, that when considering mileage-based user fees, “trucks are not large cars.” By the same token, the cost of collection problem for 272 million personal vehicles is not a good model for a trucking industry that consists mostly of fleets. To this point, let’s consider the cost of collection in tolling systems based on today’s all-electronic tolling technology. A 2012 study by a team of electronic tolling experts focused on the cost of collection of tolls for personal vehicles. In a system using transponders and prepaid accounts, the study estimated that with streamlined business rules, the cost of collection for personal vehicles can be as low as 5% of the revenue.

If we apply the same type of system to highway trucks, which generally pay four times as much per mile as personal vehicles, it would take no more equipment or procedures to collect a truck toll. So if the car toll is $5 and the truck toll for the same distance is $20, since the revenue is four times as much, but the cost of collection is the same, instead of consuming 5% of the revenue for a car toll collection, the cost of collection would be only 1.25% of the revenue. That is definitely in the ballpark of the 1%-2% of the revenue that it costs to collect fuel taxes. Unfortunately, this point never came up at the Austin ATA conference.

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What’s Behind the U.S. Electric Vehicle Slowdown?

Bad news on trends related to electric vehicles in the United States just keeps coming. Although Bloomberg NEF, a research organization, projects that while U.S. electric vehicle (EV) sales could top 1.2 million by the end of the year, the rate of sales growth has decreased. Last month, The Wall Street Journal reported that electric vehicle producers are resorting to discounts to deal with “waning demand.” On Nov. 28, ARS Technica reported that almost 4,000 car dealers have sent an open letter to President Joe Biden calling for the government to slow down its plans to reach 67% of new cars being EVs by 2032. Industry analyst Cox Auto has documented the growing inventory of unsold EVs on dealer lots.

Both Ford and General Motors (GM) have scaled back their aggressive EV expansion plans. In July, Ford pushed back its EV target by one year, disclosing that it lost $37,000 on each EV it sold in the third quarter of this year. Its new Model e division lost $1.4 billion in that quarter alone. Ford is also scaling back the size of a new battery production facility in Michigan. GM announced in October that it is abolishing a target of building 400,000 electric vehicles by mid-2024. It also said it would delay by a year the opening of an electric truck factory in Michigan. Both the Ford battery factory and the GM truck factory have received extensive state subsidies.

Start-up EV makers Fisker, Lucid, and Rivian are all making large losses. At the Berkshire Hathaway annual meeting, Warren Buffett remarked that “the auto industry is just too tough” for most start-ups. The Wall Street Journal reported in May that stocks of EV startups had crashed since their initial public offerings: Canoo was down 96%, Faraday Future was down 99%, Fisker down 81% Lucid down 87%, Nikola down 99%, and Rivian was down 90%.

Electric buses are not exempt. A leading EV-bus startup, Proterra, filed for bankruptcy in August.

Moreover, the protectionist provisions in the current federal electric vehicle law will cut the extent of federal tax credits for EVs. Politico reported on Dec. 6 that Tesla will see the credits for its Model 3 cut in half. Ford’s Mustang Mach-E will likely lose its tax credit altogether next year, while GM and most other automakers are still trying to figure out which of their models will qualify for federal tax credits. Reduced or eliminated tax credits will further depress EV sales.

There’s a lot of speculation about what is causing electric vehicle supply to exceed demand. One hypothesis is that most EV buyers to date have been relatively affluent early adopters, such as the Silicon Valley tech crowd. If that market is now saturated, other potential buyers face significantly higher prices compared with comparable non-EV vehicles and concerns about the availability of charging stations.

S&P Global Mobility reported this month that in 2021 86% of respondents to their EV survey expressed interest in buying an EV, but that percentage declined to 67% in this year’s survey. A JD Power survey in June found that “the biggest friction point” holding back EV purchases is “the availability of public chargers.”

Industry analysts are starting to raise serious questions about the feasibility of the Biden administration’s very aggressive EV targets. At last month’s Motor & Equipment Managers Association annual conference, Brandon Boyle of consulting firm Roland Berger questioned the administration’s earlier goal of 50% of all vehicles sold in 2030 being EVs. He told the attendees:

“There are a lot of questions on whether or not this is really feasible. I keep getting asked these questions every time I meet with different clients. Do we think this forecast is real? Are the material supply chains going to be ready? Will there be enough charging infrastructure? Are the grids robust enough for EVs?”

These are all good questions, some of which have been addressed in previous issues of this newsletter.

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Does Reducing Vehicle Miles of Travel Make Sense?
By Baruch Feigenbaum

Recently, several states, including California, Oregon, and Washington, have proposed new policies aimed at reducing vehicle miles traveled (VMT). These policies seek to solve problems related to the environment, safety, and traffic congestion. This contrasts with the previous 70 years when elected officials and transportation agencies sought to increase or maintain vehicle miles traveled because it was deemed to increase access to jobs, leisure activities, and economic development. Today, it’s not clear what reducing VMT would accomplish for cities and states.

Washington provides a good case in point. Unlike California and some Northeastern states, Washington state has some population growth, although a smaller percentage than many others. In addition, Washington State Department of Transportation (WSDOT) Secretary Roger Millar is past president of the American Association of State Highway and Transportation Officials (AASHTO). Therefore, he is likely to have more sway and respect than some other state leaders.

In 2008, the Washington legislature passed a bill requiring cities to attempt to reduce per capita driving by 50% by 2050. As Randal O’Toole notes in a recent piece in his Antiplanner blog, major Puget Sound cities including Seattle and Bellevue since then have spent billions of dollars on transit, tens of millions of dollars on compact development, and millions of dollars on bicycle lanes.

What projects did these cities build? The region expanded Sound Transit’s light rail network to five lines stretching from Everett to Issaquah to Tacoma to West Seattle. The light rail lines replaced a high-quality bus system that carried a similar ridership at a fraction of the cost.

Bellevue created a plan to “road diet” major arterials in the downtown area, taking away regular traffic lanes. The idea was to increase bicycling in the region’s second-largest city to help create a “healthier” community. Despite having a bicycle share below 1%, many of these roadways are getting their own dedicated bike lanes. Traffic projections forecast gridlock once the improvements are made.

In addition, the state has declined to carry out any significant highway widening. I-405’s northern segment remains four lanes (two lanes each way). Most large metro area’s beltways are between 8-and-12 lanes wide, to encourage traffic to bypass downtown. Washington leaders also don’t seem to care about freight traffic that is not bound for Seattle, for example traveling from Bellingham to Olympia.

While the state is building two short new segments of highway (SR 167 and SR 509), WSDOT Secretary Millar is not a fan. He argued that “congestion is a problem we cannot solve,” and building more highways to solve congestion “isn’t the answer.” He trotted out the induced demand rationale, which argues more roadways lead to more congestion. In reality, some of Seattle’s congestion is due to growth. For the demand to be induced, we’d have to see the same number of people driving significantly more miles over a five-year period, something we have not seen anywhere in the United States post the COVID-19 pandemic. 

Washington does have options. It could build more variably-priced managed lanes. Pricing helps manage demand. The state could make greater use of intelligent transportation systems and operations management strategies by using hard shoulder running or comprehensive use of speed harmonization. But it’s not making large scale use of either.

Washington state’s goal appears to be to make driving miserable so that commuters switch to some other transportation mode, any other mode. But that’s not what happened. Between 2008 and 2019 (ignoring the years during and immediately after the COVID pandemic), Washington state’s driving increased by 11.4%.

In 2019, according to the Texas A&M Transportation Institute, Seattle had the fifth-highest travel time index and eighth-worst congestion in the country, despite only being the 15th largest metropolitan statistical area according to the Census. This means despite worsening congestion and an ever-expanding light rail system, Seattle drivers were not choosing to abandon their automobiles.

There are a variety of reasons commuters prefer their automobiles, even with severe traffic congestion. Car commuters have the flexibility to live in areas not served by transit. Commuters have the flexibility to leave when they want to leave if they need to get somewhere unexpectedly, such as picking up a sick child. With many transit headways being greater than 15 minutes, patience is needed. Car commuters have a greater choice of routes. If a train breaks down on a light rail line it is not as if a train can go off that track. But if there is a traffic accident a driver can choose a different street. Finally, bicycling is far less pleasant in cold, rainy weather, which Seattle has six months of the year. 

Driving is not inherently bad. And driving more is not inherently worse. The problem is the externalities. Pricing highways correctly could ensure that there is sufficient money to pay for construction, maintenance, and operations while serving as a tool to manage congestion.

Meanwhile, tailpipe emissions have declined 95% over the past 40 years. While spiking over the last five years, the traffic fatality rate has also declined 50% over 40 years. It is worth asking, what problem is Washington trying to solve?

In Transportation Secretary Millar’s 2018 presentation, he argued, “I’ve been in this business for 40 years, and we need to acknowledge when something is not working and thus be willing to try something different.”

It’s a fair point, and many transportation-related policies should be reexamined and reformed. But Washington has been trying to decrease automobile use for 15 years by making drivers miserable and has actually increased vehicle travel instead. Fifteen years is not 40, but if what you are doing isn’t working, maybe you should question both your methods and your rationale.

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The U.S.-China Trade War Comes for Lidar
By Marc Scribner

U.S. trade policy in the last several years has increasingly turned towards protectionism. Nowhere is this more evident than in U.S. relations with China, especially with respect to high-tech industries deemed to be of strategic importance. While certain technologies raise legitimate national security concerns, it is also true that this political environment can be exploited to justify purely anti-competitive interventions. A recent example involves lidar, an important part of automated vehicles, where the available evidence suggests professed national security concerns are likely a pretext for restraining trade on economic grounds.

An acronym for “light detection and ranging,” lidar sensors emit rapid pulses of light to measure the distance to objects and surfaces in the surrounding environment. That laser pulse data is then assembled to generate 3D “point clouds” that represent those objects and surfaces at high resolution. This technology is widely used in automated vehicles (AVs), which rely on lidar to perceive, map, and navigate public roadways. Recently, a congressional committee has made strong national security claims against Chinese lidar developers.

On Nov. 28, members of the U.S. House Select Committee on Strategic Competition between the United States and the Chinese Communist Party (China Select Committee) sent a letter to the Secretaries of Commerce, Defense, and Treasury urging them to “investigate all People’s Republic of China (PRC) Light Detection and Ranging (LiDAR) technology companies on whether their activities justify inclusion on the Defense Department’s Chinese Military Companies List, Commerce’s Bureau of Industry and Security Entity List, and Treasury’s Non-SDN Chinese Military-Industrial Complex Companies List”—in other words, encouraging these three executive departments to impose trade and use restrictions on Chinese lidar sensors.

One of the Chinese companies named in the China Select Committee’s letter is Hesai. Hesai was founded in 2014 by three Chinese-born graduates of American engineering schools and has quickly become the global leader in automotive lidar manufacturing. According to the market research firm Yole Group, Hesai accounted for 47% of global automotive lidar sales revenue in 2022, up from 42% in 2021. In 2022, Yole estimates that Hesai accounted for 67% of lidar sales to AV developers, up from 58% in 2021.

Hesai’s double-digit market share was singled out in the China Select Committee letter as a cause for concern, but lawmakers left out some important context. While it has been growing rapidly, the size of the global automotive lidar market is small, with just $317 million in worldwide sales in 2022, nearly doubling 2021’s global sales figure of $163 million. Nearly half of global lidar sales in 2022 were to AV developers, none of which have ever turned a profit. In addition, leading AV developer Waymo (formerly the Google Self-Driving Car Project) uses its own proprietary lidar sensors. These facts suggest the lidar industry is highly fluid without a secure market niche and that any fears about market dominance are premature.

But the most serious accusation in the China Select Committee’s lidar letter is that Hesai and other Chinese lidar firms could be directed by the Chinese Communist Party to gather sensitive data on critical infrastructure and introduce malware to U.S. military systems. This would certainly be a more legitimate public policy concern than foreign firms outcompeting U.S. domestic lidar companies, but strong allegations demand strong evidence. And so far, the available technical evidence fails to support any of these conspiratorial claims.

Hesai has submitted two of its automotive lidar products to independent testing, inspection, and certification (TIC). TÜV Rheinland, a global TIC leader based in Germany, examined the technical specifications of Hesai’s Pandar128 lidar sensor, which is designed for use by AVs, and concluded the device “does not have the capability to store point cloud data or send any point cloud data out of the vehicle.” TÜV Rheinland also certified the Pardar128 as the first lidar sensor to meet the ISO/SAE 21434 automotive cybersecurity certification consensus technical standard.

Another top global TIC organization, DEKRA, went even further in examining Hesai’s AT128 lidar sensor, which is designed for advanced driver assistance systems in passenger cars. DEKRA engineers pulled a random AT128 unit from the production line in Shanghai and disassembled it to conduct a full product teardown. Similar to TÜV Rheinland’s conclusions about the Pandar128, DEKRA concluded that the Hesai AT128 lidar sensor “has no wireless point cloud data transmission capabilities” and “is not capable of storing point cloud images.”

If lidar point cloud data cannot be stored or transmitted, the lidar spyware threat alleged by the China Select Committee cannot be true. These findings shouldn’t surprise anyone who knows how lidar or sensors in general work as input devices, so how did these allegations end up the in the China Select Committee’s letter? The most likely explanation is they came from a U.S.-based competitor of Hesai, Ouster, which disclosure filings show has hired half a dozen lobbyists to execute a broad campaign against the free trade in lidar sensors.

Since 2022, Ouster’s lobbyists have been directed to lobby the U.S. House and Senate; Departments of Commerce, Defense, Homeland Security, and Treasury; and the White House offices of the U.S. Trade Representative and National Security Council on “[i]ssues pertaining to the import and export of light detection and ranging (LIDAR) sensors)” and explicitly “issues related to the national security and homeland security of LIDAR sensors,” including the “FY 2024 National Defense Authorization Act.”

Lidar sensors are central to emerging auto safety applications, and a trade war that limits product availability and raises prices will ultimately have negative safety consequences. Until proponents of a lidar trade war can provide any evidence that Chinese automotive lidar sensors pose a plausible threat to national security or safety, responsible policymakers should take these self-serving claims with a grain of salt.

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News Notes

The Louisiana P3 Bridge Gets Reprieve
The $2.1 billion I-10 Calcasieu River Bridge has a temporary, at least, new lease on life, at least until Feb. 1, 2024. The public-private partnership (P3) consortium led by Plenary Americas has extended the deadline for completing the contract for 60 days, to give the state transportation agency and the legislature more time to consider the trade-offs between the partly toll-financed bridge replacement and the not-very-attractive alternatives. Louisiana DOTD Secretary Eric Kalivoda says replacing the obsolete bridge is a crucial transportation priority for the state.

A Tale of Two High-Speed Railroads
The Biden administration on Dec. 5 announced two $3 billion high-speed rail project grants for California. One is for the largely privately financed $10 billion Brightline West project between Las Vegas and Rancho Cucamonga, structured as a public-private partnership. The other $3 billion is for the first segment of the $128 billion California High-Speed Rail Project. The grant is limited to the 119-mile stretch between Bakersfield and Merced, helping to close a $10 billion gap in that project alone.

Bidders Seek Melbourne, Australia Motorway P3
The 39 kilometer EastLink toll road in Melbourne is on the market, as current concession-holder Horizon Roads seeks to sell some or all of its shares, according to Infralogic (Nov. 2). Potential bidders include Abertis, DIF Capital Partners, IFM Investors, and KKR. The EastLink concession has 20 years remaining, and an estimated value of $2.75 billion.

Cincinnati Voters Approve Railroad Sale
A measure on Cincinnati’s November ballot was approved by 52% of the city’s voters, so the city government will go ahead with the planned sale of its Cincinnati Southern Railway to Norfolk Southern, at the agreed price of $1.6 billion. The city plans to use the proceeds to create an infrastructure fund, making this an example of infrastructure asset recycling. The 337-mile freight railroad has been operated for many years by Norfolk Southern, under a long-term lease.

Auckland Plans P3 Lease of its Port
Based on 71% citizen approval of the plan, Auckland, NZ will lease its seaport for up to 35 years, with an expected up-front payment of $1.2 billion. The same poll also found that 61% support selling the city’s remaining shares in Auckland International Airport, valued at $800 million. The proceeds from both asset recyclings will capitalize a new Auckland Future Fund dedicated to improved infrastructure.

Electric Utility Upgrades for Electric Vehicle Transition
In a Nov. 27 article, the Hartford Business Journal published an assessment of the needed EV-charging upgrades to the electric utility grid in Connecticut. Utility company Eversource estimates it will need to build 14 new substations and upgrade eight existing substations, at an estimated cost of $2.3 billion. Connecticut has 1% of the nation’s population, so a ballpark estimate of national upgrades could exceed $200 billion. That is only to upgrade the electricity grid; not included is the need to expand electricity generation by 30 to 40%, likely costing a comparable amount.

Another Study Validates Equity of Express Toll Lanes
I have several times cited a path-breaking 2019 University of Washington study which found that the lowest-income users of the I-405 express toll lanes in metro Seattle received the greatest net benefit from using those variably priced lanes (with net benefit defined as the value of time saved minus the amount of the toll). These results have been independently verified by two Stanford University graduate students, Cody Cook and Pearl Z. Li. Their paper is “Value Pricing or Lexus Lanes? The Distributional Effects of Dynamic Tolling.” They selected the same I-405 corridor and obtained data from WSDOT to build a model comparing the status quo with an alternative in which the same number of lanes existed but with no pricing. They conclude that compared to that alternative, the “status-quo tolling increases aggregate welfare and benefits drivers in all income quartiles,” and that “drivers in the bottom income quartile gain the most.”

Highway Construction Cost Index Still Increasing
The Federal Highway Administration (FHWA) last month released an update of its National Highway Construction Cost Index. From the fourth quarter of 2020 to the first quarter of 2023, the cost of highway projects increased by 53.8%. That’s a smaller rate of increase than in previous years; the first quarter of 2023 cost figure was up only 2.7% from the previous quarter. By contrast, the increase in the second quarter of 2022 was 11.9%, the highest quarterly increase since the Index began.

Miami’s New BRT More Cost-Effective than Heavy Rail
Miami-Dade County officials in 2018 rejected a proposed $1 billion expansion of the heavy-rail Metrorail system to the southern part of the county. They opted instead for a $386 million upgrade of the South Dade Busway, which operates on its own right of way. The upgrade includes major station improvements and traffic signal priority (enforced by crossing gates) during peak periods at the many places where roads cross the Busway. Metrorail advocates are still griping, most recently complaining that the upgraded Busway will reduce a rush-hour end-to-end trip from 70 minutes to 47 minutes but only save 4 minutes during off-peak periods (whose ridership is much lower). The revamped Busway is due to be completed by the end of 2024.

No EV Chargers Installed Yet in Federal Programs
Although Congress agreed in 2021 to spend $7.5 billion to install tens of thousands of electric vehicle chargers nationwide, not a single one has been installed thus far, reports James Bikales for Politico. Fewer than half the states have started to take bids from contractors, let alone begun construction. He reported that Republican House members in November offered amendments to spending bills that would eliminate funding for the two programs; one was defeated but the program for rural charging remains in play.

Some States Reject California EV Mandates
State legislatures in Connecticut, Maine, and North Carolina have rejected proposals to adopt bans on the sale of combustion-engine vehicles by 2035. The American Trucking Associations (ATA) issued a news release on Nov. 28 commending those states and describing California’s approach as “sure to fail.” ATA pledged to work with the Environmental Protection Agency on uniform national standards for electric vehicles, especially trucks.

Missing Link in Riverside County Express Toll Lanes Opened
Last month saw the opening of flyover ramps enabling commuters in the SR 91 express toll lanes to transition to the express toll lanes on northbound I-15, and for southbound travelers on the I-15 express lanes to shift to the westbound SR 91 express lanes. The 2,400-foot flyover cost $270 million and took two years to construct.

Illinois Legislators Approve Unsolicited P3 Transportation Proposals
Legislators responded to Illinois Gov. J.B. Pritzker’s suggested alternative to a previously passed measure to allow state and local agencies to accept unsolicited proposals for P3 projects. The agreed revision will limit this to Illinois DOT and the Illinois Tollway system. Upon receipt of such a proposal, if it is judged feasible, the agency would have 120 days to solicit competing proposals. The bill will become effective Jan. 1, 2024.

Express Toll Lanes Proposed Near Sacramento
Caltrans is seeking public input on a proposed $465 million project to add express toll lanes on I-80 and U.S. 50 between Davis and Sacramento. If approved, construction would begin in Oct. 2024 and would take three years.

Two States Considering Major Highway Upgrades
In New Mexico, I-40 between Albuquerque and the Arizona border has 38 miles of deteriorating pavement, 118 miles of curve deficiencies, and a worsening record of fatalities and serious-injury crashes. The state DOT is proposing only selective third-laning, while many legislators think a third lane is needed each way over the entire 150 miles. That is estimated to cost $4.8 billion. Meanwhile, in Georgia’s fast-growing Savannah area, at least $1.4 billion of highway improvements are needed, according to a Georgia DOT study released on Nov. 15. Upgrades are needed on I-16 and I-95, US 80, and Georgia 21.

Express Toll Lane Megaproject Opens in Orange County, CA
The county where the world’s first express toll lanes (on SR 91) opened in Dec. 1995, opened its $2.16 billion I-405 express lanes project on Dec. 1. The new lanes extend 16 miles from Costa Mesa to the Los Angeles County line. The Orange County Transportation Authority converted an existing HOV lane to express toll and added both a new express toll lane and a new general-purpose lane each way, aiming to reduce peak-period congestion. The project also replaced 18 bridges, due to the widening of the highway.

Georgia Toll Roads Now Compatible with E-ZPass in Eight States
Georgia’s State Road & Tollway Authority announced last month that its Peach Pass electronic tolling system is now compatible with E-ZPass electronic toll systems in eight states: Florida, Illinois, Indiana, Kentucky, Maine, Maryland, North Carolina, and Rhode Island. With 17 states in the E-ZPass system, Peach Pass still has a ways to go.

Transurban May Be Considering Bid for Northwest Parkway
Infralogic (Nov. 20) cited an article in the Australian Financial Review saying that Australian toll road company Transurban is considering a bid on the Northwest Parkway, a nine-mile toll road in the western Denver suburbs. The current owners, under a long-term P3 concession, are DIF Capital, Northleaf Capital Partners, and HICL. They bought the toll road from BRISA in 2017. HICL (owned by InfraRed Capital Partners) sold 30% of its shares last spring and said it would retain a 23.3% stake. DIF recently announced plans to sell its stake in the toll road.

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Quotable Quotes

“[W]ith much of America’s rail-transit infrastructure underused, Congress, for now, must rethink its decades-old practice of lavishing monies on transit agencies for new infrastructure rather than try to maintain basic service. The federal government, with its financing, “says to build stuff, [Beth] Osborne observes. Until ridership returns to something resembling normal, Congress should provide targeted operating aid, but only in return for measurable cost improvements.”
—Nicole Gelinas, “Transit and the American City,” City Journal, Spring 2023

“Driving shrinks distance. One fashionable concept among urban planners these days is the ‘15-minute city,’ the goal of building neighborhoods that let people get to work, school, and recreation within 15 minutes by foot or bike. Many Americans may simply fail to see the need for this innovation, for they already live in 15-minute cities, so long as they get around by car. Most of the essentials—groceries, school, restaurants, parks, doctors, and more—are a quick drive away for suburbanites.”
­­Free Exchange, “Room to Vroom: How America’s Car Addiction Makes the Country Fairer and More Efficient,” The Economist, Nov. 11, 2023

“[T]he green transition requires a massive shift of investment away from creating new goods and services toward replacing our existing energy and transport systems with systems that duplicate capabilities we already have. If we replace a coal-fired plant with solar panels and wind farms, we haven’t spent money to make more power. We’ve spent money to replace power we already had. If we build a massive electric-vehicle charging infrastructure across the country—as well as the much larger electric grid needed to support it—we will have simply replaced the current system of gasoline distribution that performs the same function.”
—Walter Russell Mead, “The Global Toll of Biden’s Green Enthusiasm,” The Wall Street Journal, Nov. 14, 2023

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