Toward a Strategic Focus

March 2, 2006

Passage of the Safe, Accountable, Flexible and Efficient Transportation Equity Act—A Legacy for Users (SAFETEA-LU) means that America can now begin looking ahead toward improving our outdated, rapidly deteriorating surface transportation system. Revolutionary changes in the financing, technology and management of the system must be implemented if the American economy isn’t to become bogged down by last-century inadequacies.

Passage of the Safe, Accountable, Flexible and Efficient Transportation Equity Act—A Legacy for Users (SAFETEA-LU) means that America can now begin looking ahead toward improving our outdated, rapidly deteriorating surface transportation system. Revolutionary changes in the financing, technology and management of the system must be implemented if the American economy isn’t to become bogged down by last-century inadequacies.

We need a strategic focus at the national level if our efforts to address the nation’s transportation problems are to be successful. This strategic effort should center on integrating what traditionally have been separate travel modes into a single, smoothly functioning system that concentrates on service to the customer rather than on mechanical processes. And we must fund surface transportation in a contemporary, integrated and sufficiently robust manner that recognizes the importance of having individual modes complement and support each other financially.

Two sides, one coin

Existing methods of funding highways and streets have broken down. The American Association of State Highway & Transportation Officials estimates that $5.3 trillion will be needed during the first quarter of the 21st century to prevent further deterioration of the nation’s highways and public transit systems to overcome the effects of past underinvestment and to keep pace with growing transportation demand. But the present federal motor vehicle fuel tax and appropriations from state and local government budgets are projected to meet less than two-thirds of these needs.

The transportation customer cares little about the intricacies of each transportation link or mode. He or she is only interested in getting from here to there as quickly, as inexpensively and in as hassle-free a manner as possible. That is why an integrated, “One System” transportation concept is so important.

Professional football provides a good example of what this means. To the casual Sunday afternoon TV viewer, each football team seems to consist of two entirely independent units: the offense and the defense. Each unit has its own group of highly specialized and entirely separate players. Each unit has its own coach and its own set of plays. Each unit has its own distinct goals, with the offense focusing on moving the ball down the field to score points while the defense concentrates on preventing the other team’s offense from doing the same. It is as if each unit were playing a different game in a different stadium.

But the head coach, striding restlessly up and down the sideline, knows that these differences are unimportant in the larger scheme of things. Like the legendary Russian Field Marshall Mikhail Kutuzov confronting Napoleon’s armies in 1812, he knows the one big thing that matters above all else. For a football coach, this one big thing is that the team with the most points on the scoreboard as the final seconds tick away at the end of the fourth quarter is the team that wins the game. Making his team the game winner depends on how successfully he integrates the activities of the offense with the very different activities of the defense. If he does this more effectively than his opposite number on the other side of the field, he achieves victory. If he doesn’t, everything else he does is meaningless.

The same realities apply in transportation. To purse this approach for transportation in the U.S., we need to zero in on and integrate at least four key policy areas:

  • Transportation finance: Transportation investments must be funded from a comprehensive set of revenue sources that are sustainable and reflective of consumer choice.
  • Technology deployment: The U.S. must advance the rapid deployment of technology in all aspects of its transportation system to achieve optimal safety, security and operational benefits into the future.
  • Mobility management: The U.S. must establish a transportation system where all modes operate as one in a mobility management environment.
  • Freight systems: The U.S. must establish freight systems, including highways, rail, ports, river and air, as critical interrelated components contributing to our nation’s role in the global economy.

Pay as you drive

For starters, we need to end the practice of regarding access to highways as free. Motorists should be charged reasonable tolls for using highways based on the miles they travel, the kind of vehicles they drive, the amount of pollution they generate and the levels of traffic demand in effect when they choose to travel.

New technology now makes it feasible to retrofit the nation’s existing highways to collect such tolls without affecting traffic flow. It eliminates the need for tollbooths, land-hungry toll plazas and long lines of motorists waiting to pay tolls. This makes it possible to deliver highway access to motorist customers through the same kind of marketplace mechanism that we traditionally have used to distribute access to a host of goods and services. Highway tolls should be accompanied by money-back performance guarantees so that each motorist can make meaningful trade-offs between travel-time savings and certainties and how much he or she pays to use highway lanes.

To fund what could be a lengthy transition to a fully user-supported highway network, Congress should enact an immediate (though temporary) increase in the federal motor vehicle fuel tax. This would be indexed to construction costs in order to attack the backlog of highway repairs and overdue capacity increases that too many decades of revenue-starved underinvestment have created. Revenue from the fuel tax should be lock-boxed to avoid any questions in the minds of motorists about any of it being “borrowed” by other branches of the federal government to fund nontransportation activities.

As increasing portions of the highway system become retrofitted to generate toll revenue, the fuel tax would be phased out, disappearing entirely when the system becomes completely user supported. But during the interim, the fuel tax would provide the funds needed to restore the highway system and public transportation network to a state of good repair. Yes, there are major political obstacles in persuading Congress and the administration to increase the federal fuel tax, but we should recall that under the same antitax environment Drew Lewis accomplished a 5-cent increase in the early 1980s. What is needed here is leadership.

Hassle-free toll collection is only one of the benefits that new technology offers the surface transportation system. It also enables us to finance, manage and integrate highways, public transportation and goods movement in new ways that promote safety, economic efficiency, environmental friendliness and social benefits that we couldn’t even dream about just a few years ago. Equally important are the many ways that technology can help smooth the flow of people and goods. Technology can produce savings in travel time and cost, which are becoming increasingly vital components of economic prosperity.

For example, technology already available or in development can greatly reduce the incidence of motor vehicle accidents on crowded highways and limit personal injuries and property loss in accidents that cannot be avoided. Reducing accidents would reduce the increasing financial burden that such events impose on American society and minimize the travel delays they cause.

More effective technology will help break down artificial barriers between surface transportation modes so that people and goods move expeditiously through a properly integrated system.

Customer mobility

However, superior technology alone is not enough to make a difference. More important is how that technology is managed. Transportation managers must change their focus from engineering-oriented performance measures, like vehicle miles of travel, to customer-oriented measures that emphasize reduced door-to-door travel time, greater reliability and smoother interfaces between transportation modes.

Most importantly—and most radically—we must convert what is now a disconnected group of separate surface transportation modes into a fully integrated “mobility” system that travel customers perceive as virtually seamless. A key element is to have the national toll-supported highway network be a major funding source for all surface transportation modes, not just for roadways. New emerging technology enables a state or region to manage transportation modes as a portfolio of assets, allocating resources to individual modes. This use of cross-subsidies is consistent with the business-portfolio management concept in multiproduct corporations where various product lines reinforce each other.

As to freight systems, in March 2004 aggressively intermodal United Parcel Service (UPS) had to shift its hot-package transcontinental goods movement containers back to trucks from the high-speed daily train service it had worked out with the Union Pacific railroad company. The shift became necessary when increases in the volume of Union Pacific’s low-speed commodity freight business saturated its track capacity to a point where it no longer had room for special UPS trains.

Since the Staggers Rail Act of 1980, the total miles of rail has fallen by 41% between 1980 and 2000. This has led to a rising incidence of irrational consequences, like the UPS example, where freight that should logically move by rail ends up in trucks that further congest traffic on American highways. For certain, funding rail network expansion is a more complex problem since there is no dedicated federal rail-funding mechanism similar to the Highway Trust Fund. Such a mechanism should be established by Congress without delay. Here again, a long-term approach may be to make available for rail expansion a portion of the revenues generated by highway tolls so that a balanced strategy of “transportation network expansion” covering both highways and rail lines can be implemented.

The transportation challenges posed by the growing replacement of goods warehousing by goods movement are plain enough. This is the essence of the just-in-time supply concept that has revolutionized so much of manufacturing because of the cost savings it makes possible. Together with the outsourcing of labor-intensive manufacturing to developing countries, the result has been longer and more complex supply chains through which goods must travel in ever-shorter periods of time.

In effect, increasing numbers of manufactured goods have become as time-sensitive as fresh fruit whose market value to consumers quickly declines unless travel times are kept short. We need more capacity on highways and rail lines to avoid costly delays, plus smoother interfaces between trucks and trains so that the growing reliance on intermodal supply chains become the norm rather than the exception.

Time to go

Smoothing the interface between trucks and trains is part of the larger issue of creating a truly intermodal transportation system for goods movement. An intermodal system needs to embrace ocean shipping ports, airports and inland waterways as well as highways and rail lines in an integrated system that concentrates on coordinated service to the freight customer rather than the operating technicalities of the individual modes. Here again, accomplishing this will require important changes in both institutional constraints and the mindsets of transportation managers, with the latter being at least as important as the former.

Not everyone may agree with these recommendations. But they provide the ideas needed to begin a serious debate on the issues involved. This visionary approach to creating an integrated surface transportation system poses major new financial, technological and management challenges. But an efficient, well-maintained surface transportation system is a vital element of maintaining national economic competitiveness in a world where the value of saving time and money grows by leaps and bounds. Because these radical changes are likely to take a generation to work their way fully through the surface transportation system, the time to begin is now.

We need to start the debate and lay the groundwork for discussions about the content of the next round of legislation. Discussions of the successor to SAFETEA-LU are expected to begin two years from now to avoid the embarrassing stalemate in Congress that occurred when TEA-21 expired in September 2003. So we need to start now.

About The Author: Giglio is co-author of Mobility: America’s Transportation Mess and How to Fix It, published last year by the Hudson Institute. He is executive professor for strategic management at the Northeastern University College of Business Administration, Boston, an

Sponsored Recommendations

The Science Behind Sustainable Concrete Sealing Solutions

Extend the lifespan and durability of any concrete. PoreShield is a USDA BioPreferred product and is approved for residential, commercial, and industrial use. It works great above...

Proven Concrete Protection That’s Safe & Sustainable

Real-life DOT field tests and university researchers have found that PoreShieldTM lasts for 10+ years and extends the life of concrete.

Revolutionizing Concrete Protection - A Sustainable Solution for Lasting Durability

The concrete at the Indiana State Fairgrounds & Event Center is subject to several potential sources of damage including livestock biowaste, food/beverage waste, and freeze/thaw...

The Future of Concrete Preservation

PoreShield is a cost-effective, nontoxic alternative to traditional concrete sealers. It works differently, absorbing deep into the concrete pores to block damage from salt ions...