Regrouping on the run

March 12, 2008

Reminiscent of the cartoon about what a person says and what a dog hears, the National Surface Transportation Policy and Revenue Study Commission said, to paraphrase, “The transportation program needs to be completely overhauled to instill a fresh sense of purpose.

Reminiscent of the cartoon about what a person says and what a dog hears, the National Surface Transportation Policy and Revenue Study Commission said, to paraphrase, “The transportation program needs to be completely overhauled to instill a fresh sense of purpose. All programs should be replaced with 10 new ones incorporating performance standards; project-delivery reforms to speed up projects without diminishing environmental protections; and an independent commission to oversee the program and ensure that it meets the country’s transportation infrastructure needs.” What the lawmakers and the public heard: “Jack up the gas tax.”

Transportation Secretary Mary Peters immediately hit the road to campaign against any increase in the gas tax.

Peters announced the Express Lanes Demonstration program in early February, calling it yet another program that will permit electronic tolling on all U.S. highways, including interstates. The program allows states to finance infrastructure improvements by assessing tolls but requires the use of high-speed electronic toll collection to prevent a traffic slowdown while drivers pay the toll. The program, whose requirements are detailed in a Feb. 5 Federal Register notice, allows toll collection on highways, including new and existing interstate lanes, to relieve congestion and finance road improvements.

Express Lanes Demonstration will authorize up to 15 projects.

“Electronic tolling interest is growing in every corner of the U.S.,” Peters said, “thanks to new technologies, growing congestion and the recognition that traditional approaches cannot solve our transportation challenges.”

Tolling is central to building the Capital Beltway high-occupancy toll (HOT) lanes along I-495 in Virginia. The Virginia DOT is partnering with a joint venture of Fluor and Transurban to build 14 miles of HOT lanes along the existing I-495. Construction is supposed to begin this spring and last about five years.

Fluor-Transurban is expecting to invest about $1.4 billion in the project in exchange for an 80-year operating license that allows Fluor-Transurban to start collecting tolls on their investment after the lanes are constructed.

Virginia has built protections for the public interest into its agreement with the private partner.

“There are aspects of the agreement that are new and show that the public sector can have a fair and reasonable voice,” Barbara Reese, deputy secretary of transportation for VDOT, told Roads & Bridges. “We’re not selling anything. This is a lease agreement. This is an operating agreement, with some construction on the front end.”

“We always ultimately are the responsible entity for the highway system in Virginia, no matter what the road is,” Reese added, “and we take that very seriously, and we’re not going to turn that over to anybody.”

Ironically, privately operated highways may be better cared for than public roads, according to Robert Poole, director of communications at the Reason Foundation, Los Angeles.

“Maintenance is the neglected stepchild in America’s highways,” Poole told Roads & Bridges.

Legislators like to cut ribbons on new projects, he said. “So there’s a pressure to devote as much as possible of the available money to building new projects. That often leaves maintenance getting the short end of the stick.

“The people that put up the funds to build a toll road or a toll bridge insist on a lot of conditions in exchange for providing the money, and one of the things that they virtually always insist on is proper maintenance, a well-funded maintenance account that comes right off the top of the revenue, before they even pay debt service to the investors.”

The motivation is to keep drivers choosing the toll road over the free roads.

“In order to make sure that people choose to use the toll road and pay the tolls,” Poole said, “it has to provide a high quality of service.”

Fluor-Transurban brings more to the party than just financing:

“The reality is Transurban, in this case, is a much better toll-road operator and knows more about running a toll road than the commonwealth of Virginia,” said Reese. “Transurban operates some of the largest toll roads in the country with some of the most innovative technology and approaches to congestion and traffic management. We’re looking forward to learning from them.”

The biggest projects are the most likely to attract private investment involving tolling.

“There’s lots of billion-dollar-scale projects out there that are very unlikely to get funded if we simply rely on the existing federal and state gas taxes, which would have a good shot at funding in part or in whole with tolling,” Poole said.

Peters was one of three commissioners to refuse to sign the Policy Commission’s final report, released Jan. 15, even though she was the chair of the commission. Instead, Peters and commissioners Maria Cino and Rick Geddes released their own statement.

Both the majority and the minority on the Policy Commission wanted to see the elimination of earmarks, special legislative clauses that set aside money for a legislator’s favorite project regardless of merit. The majority said under their new regime, “Money will be spent through outcome-based, performance-driven programs supported by cost-benefit evaluations rather than political ‘earmarking.’”

The commission thought it was necessary to significantly increase investment in surface transportation over the next 50 years to at least $225 billion annually from federal, state, local and private sources.

To get to that funding level, the commission recommended increasing the federal fuel tax while expanding other user-based fees, such as tolling, congestion pricing, freight fees and ticket taxes for passenger rail improvements. The commission also would encourage public-private partnerships to attract private investment into the surface transportation system, provided there are adequate protections for the public interest and interstate commerce.

Peters argued vehemently against increasing the federal fuel tax. She opposed the fuel tax as an indirect pricing mechanism that bears little or no relation to system costs. The result of this indirect tax is an imbalance between supply of and demand for transportation infrastructure, she said. Users pay the same per-gallon fuel tax on a high-value facility at a peak time as they pay on a lesser-value facility at an off-peak hour, so overconsumption occurs in some locations and times, and underconsumption occurs in other locations and times.

She also criticized the fuel tax as wasteful, because the “transportation infrastructure system is neither performance-driven nor accountable.” For instance, only a handful of states use benefit-cost analysis.

She gave the commission credit for advancing one alternative investment scenario involving directly pricing highways.

The Oregon DOT recently conducted an experiment in direct pricing of highway use. Oregon charged a fee for each mile traveled regardless of time of day, congestion or type of road.

“They, Oregon DOT themselves, don’t think this is something that could be implemented anytime soon, like in the next decade or so,” said Poole.

“This is a complicated thing to design in a way that people will accept,” Poole added. One popular misconception is that the government will be tracking vehicles through the mileage-fee unit. Actually, the unit only receives information about the vehicle’s location, processes the information and reports it to the gas pump at the next fill-up. “This is not a practical alternative for this next reauthorization, but I think it has a lot of long-term potential.”

A mileage-based user fee is integral to the Critical Commerce Corridors plan of the American Road & Transportation Builders Association (ARTBA), Washington, D.C. ARTBA thinks a transition timeline should be incorporated into the next transportation authorization bill next year.

ARTBA recommended refocusing the federal transportation program on a core program and a Critical Commerce Corridors program. The core program would be dedicated to asset preservation and modernization, safety, and environmental mitigation. It would require dramatically increased federal investment, according to ARTBA. Critical Commerce Corridors, a 25-year strategic plan, would identify projects for development on a regional basis, setting completion priorities and establishing cost estimates.

In addition to its endorsement of a mileage fee, ARTBA also recommends using new revenue streams, freight-related federal user fees, public-private investments and bonding to finance its commerce corridors initiative.

In spite of all their objections to the federal fuel tax, Peters and her colleagues would maintain the indirect, wasteful tax at its current level to fund the Highway Trust Fund. The tax is now 18.4 cents per gallon and has remained at the same amount for the past 15 years while inflation has eaten away its buying power.

The minority would refocus the U.S. DOT’s efforts on what they see as the federal government’s proper role, which is maintaining the Interstate Highway System; alleviating freight-related bottlenecks, which impede the flow of commerce and goods; and facilitating the adoption by the states of market-based reforms to their highway systems.


The majority of the Policy Commission took a somewhat more expansive view of the federal government’s proper role in transportation infrastructure.

The majority would increase the federal fuel tax but only as an interim measure. Their main recommendation for generating revenue for future transportation investment is a vehicle miles of travel (VMT) tax, essentially a tax for each mile of roadway used. The VMT tax should be flexible enough to be adjusted for multiple parameters, they said, such as time of day and congestion at the time of travel.

The problem with the VMT tax is that it is not yet ready to take over as the federal government’s primary transportation funding mechanism, they said. Many technical details still must be worked out, such as how to track each vehicle on the country’s roadways and how to collect the VMT money.

So as an immediate measure to ward off a multibillion-dollar deficit in the Highway Trust Fund in 2009, the Policy Commission recommended increasing the fuel tax by 5-8 cents per gallon per year over the next five years. After that, they said, the fuel tax should be indexed to inflation to prevent a further erosion of the highway fund’s buying power.

Another factor eroding the buying power of highway funding is the time it takes for a major transportation project to get from conception to completion. The commission said that many federally funded projects take 10-13 years to complete, “largely due to lengthy approval processes.”

“To reduce overall project delivery times for major transportation projects, the time to complete environmental reviews must be shortened.”

The heart of the majority recommendation is a list of 10 programs replacing the current 108 or more transportation programs. The programs would focus on the national interest, according to the commission.

The first of the recommended programs, and one that underlies all the others, concerns asset management. It would maintain in good repair the parts of the surface transportation network in which, according to the commission, there is a strong federal interest: federal-aid highways, including the Eisenhower System of Interstate and Defense Highways and the National Highway System, major transit assets, intercity passenger and freight rail lines and network connectors between the nodes that complete the overall system.

In response to a growing lack of adequate freight capacity, the commission would create a national freight transportation program. The commission said a freight program would return the federal government to its historical role of meeting the flow of interstate commerce.

A program dedicated to relieving congestion in the largest metropolitan areas would be critical to the economic productivity of the country, according to the commission.

The commission recommended national safety standards as part of a transportation safety program with the goal of cutting surface transportation fatalities in half from the current level by 2025.

To provide efficient transportation outside of the major urban areas, the commission recommended an access program for smaller cities and rural areas.

The commission saw intercity passenger rail as an essential mode to compete with and take pressure off of the air and highway transportation systems. A program to serve high-growth corridors by rail could compete effectively in congested passenger travel markets.

Environmental stewardship warrants national interest, the commission said, because roads and the vehicles that use them affect national and even global communities. The commission would establish an environmental stewardship program with 7% of the total federal surface transportation program funding, about a 2% increase over the current share.

The commission recommended a program into energy research and development of initiatives that cost-effectively reduce the nation’s dependence on petroleum for transportation.

The federal government should continue to be responsible, said the commission, for providing transportation access—and improve public access—to the 650 million acres of the U.S. land the federal government has title to.

Finally, too much federal transportation research is undertaken without clearly defined anticipated payoffs, is redundant, or is motivated by politics instead of transportation, according to the commission. The panel recommended establishing a research program working with the research community to establish performance measures and goals for the national research program.

Back on TRAC

To oversee the whole effort, the Policy Commission recommended creating a permanent National Surface Transportation Commission (NASTRAC) to develop national strategic plans for each of the program areas. The NASTRAC also would establish the cost to finance the plan and recommend a federal fuel tax or other mechanism sufficient to provide revenue to match the cost.

The commission conceived of NASTRAC as analogous to a public utility rate commission, the postal rate commission or the Base Closure and Realignment Commission.

The Policy Commission and its sister panel, the National Surface Transportation Infrastructure Financing Commission, were authorized in the 2005 Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU). They were set up to investigate possible alternatives to the current organization and financing of the federal transportation program. The current Highway Trust Fund, financed by the federal fuels tax, is heading for big deficits beginning next year.

The Financing Commission is scheduled to release its final report by the end of this year.

Congress also is scheduled to reauthorize the federal-aid highway program next year. The lawmakers will consider the recommendations of the two SAFETEA-LU commissions as they craft their transportation reauthorization bill. SAFETEA-LU expires on Sept. 30, 2009.

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