Commercializing HighwaysA New Paradigm for 21st Century Roadways: Commercializing Highways A New Paradigm for 21st Century Roadways By Robert W. Poole, Jr. Director of Transportation Studies Reason Public Policy Institute www.rppi.org


America’s Highways: A 20th Century Success Story: America’s Highways: A 20th Century Success Story Autos used for 86% of all individual surface trips Trucks carry 90% (by value) of all freight Overall road system (federal, state, local) is nearly self-supporting (85%) via user taxes.


But Major Problems Loom as We Begin the 21st Century: But Major Problems Loom as We Begin the 21st Century Traffic congestion Difficulties adding new capacity Funding shortfalls Anti-highway politics


Traffic Congestion: Traffic Congestion In our 75 largest metro areas, motorists waste $69.5 billion/year in fuel and time, stuck in traffic. This number has increased every year for the past 20 years. Long-range transportation plans in nearly every metro area project congestion getting worse, not better, over the next 20 years.


Congestion is Directly Related to Roadway Capacity vs. Demand.: Congestion is Directly Related to Roadway Capacity vs. Demand. Source: Texas Transportation Institute


Nationwide, We’ve Nearly Stopped Adding Capacity: Nationwide, We’ve Nearly Stopped Adding Capacity From 1980 to 2000: Vehicle miles traveled (VMT) increased 82% Lane-miles of highway increased 4%


One Reason We Aren’t Building Much: Major Funding Shortfall: One Reason We Aren’t Building Much: Major Funding Shortfall FHWA Conditions and Performance Report, every 2 years Latest one (2000) shows the following: Annual capital spending: $65 billion Investment needed to maintain asset value: $76 billion Investment needed to maintain performance: $107 billion


Historical and Projected California and Federal Fuel Tax Paid ($1997 per VMT): Historical and Projected California and Federal Fuel Tax Paid ($1997 per VMT)


Another Reason We Aren’t Building Highways is Anti-highway Politics: Another Reason We Aren’t Building Highways is Anti-highway Politics Three common beliefs: Adding capacity is futile; “we can’t build our way out of congestion.” Focus should be on transit to promote higher quality of life. Air pollution is largely due to autos and trucks, so we should reduce driving.


Is Capacity Expansion Actually Futile? : Is Capacity Expansion Actually Futile? Those metro areas with adequate freeway capacity, relative to demand, have very little congestion.


Is Transit Investment Working? : Is Transit Investment Working? Since 1964, more tax dollars have been spent on upgrading mass transit than the cost of the entire Interstate highway system. Today, up to 20% of federal surface transportation funding goes to transit. In many large metro areas, 50-70% of all capital spending is on transit rather than highways. What have been the results?


Commuting Trips by Mode of Travel: Commuting Trips by Mode of Travel


What About Air Quality?Despite huge increase in VMT, vehicle emissions are trending sharply downward.: What About Air Quality? Despite huge increase in VMT, vehicle emissions are trending sharply downward. Source: EPA VMT (trillions of miles) VOC and NOx (millions of tons) Vehicle miles traveled versus pollutant emissions, 1970-2030 VMT NOx VOC 0 1 2 3 4 5 6 1970 1980 1990 2000 2010 2020 2030


The Highway System is in Trouble: The Highway System is in Trouble Failing to satisfy its customers Seen as a bad neighbor (noise, emissions) Inadequately funded, even to maintain itself. Hence, time for a new paradigm


Key Insight from Former World Bank Transport Economist, Gabriel Roth:: Key Insight from Former World Bank Transport Economist, Gabriel Roth: It is centrally planned, from the top down; It makes investment decisions via politics, not economics; It fails to make use of pricing for its output. U.S. actually has a “Soviet-style” highway system, in that: Source: Gabriel Roth, Roads in a Market Economy


Telecoms vs. Highways:A Provocative Comparison: Telecoms vs. Highways: A Provocative Comparison


Possible New Paradigm: Highway Corporations as Investor-owned Utilities: Possible New Paradigm: Highway Corporations as Investor-owned Utilities Applicable to freeways and major highways Service-based business Value-added pricing Shifts DOT role to policy and regulation, not funding and operation Reallocates risk and reward Users pay 100% of costs. Suggested by former FHWA deputy secretary Steve Lockwood: Transcorps, franchised and regulated by state DOTs


Is Anybody Taking This Seriously?: Is Anybody Taking This Seriously? Australia Netherlands New Zealand United Kingdom National-level studies during the 1990s in: Divest all roadways to 3 to 6 government highway corporations Require them to operate as commercial, tax-paying businesses Require them to be self-supporting via user charges Permit private firms to compete, on a level playing field. New Zealand got as far as legislation that would: Proposal dropped when government changed hands.


Build-Operate-Transfer (BOT) Model Adopted Widely Overseas: Build-Operate-Transfer (BOT) Model Adopted Widely Overseas Long-term franchise awarded competitively for major highway, bridge, or tunnel project. Winning team must design, finance, build, and operate the project, transferring it back in good condition at end of franchise (typ. 30-50 years). First pioneered for toll motorway systems of France, Italy, Spain, Portugal (1960s, 1970s) Used for major new projects (1990s) in Australia, southern Asia, Greece, UK, Israel. Used to modernize major highways in South America and South Africa (1990s).


Four Major Sales of Existing Toll Highway Systems: Four Major Sales of Existing Toll Highway Systems Italy—sold 1999, $6.7 billion, 38-year franchise Portugal—sold 1999, $2 billion, 33-year franchise Canada—sold 1999, $2.1 billion, 99-year franchise Spain—sold 2003, $1.8 billion, 34-75-yr franchises


How the New Paradigm Addresses Highway Problems: How the New Paradigm Addresses Highway Problems Congestion New capacity Funding Politics


Congestion: Pricing is a Powerful Tool to Balance Demand and Supply: Congestion: Pricing is a Powerful Tool to Balance Demand and Supply Cordon/area pricing Variable rates on existing toll roads & bridges Value pricing on specialized lanes Evidence from three types of application:


Cordon/Area Pricing: Cordon/Area Pricing Singapore CBD: 40% reduction in AM traffic Norway (Bergen, Oslo Trondheim) toll rings: 10% reduction in rush-hr. traffic Rome CBD (4.6 sq. km.): 20% reduction in daytime traffic London CBD ( 8 sq. mi.): 20% reduction in daytime traffic


Variable Rates on Existing Toll Roads: Variable Rates on Existing Toll Roads French toll roads near Paris/weekends: 13% peak traffic reduction Seoul, two toll tunnels: 24% traffic reduction Lee County, FL: shoulder traffic up 19%, peak down 7% Port Authority of NY/NJ bridges & tunnels: 4-7% peak traffic reduction


Value Pricing: Charge to Use Specialized Express Lanes (HOT Lanes): Value Pricing: Charge to Use Specialized Express Lanes (HOT Lanes) Rates vary by hour, on pre-set schedule With 33% of lane capacity, handles 40-45% of traffic at rush hour 91 Express Lanes, Orange County, CA Rates adjusted every 6 minutes Both paid use and HOV use significantly increased I-15 Express Lanes, San Diego Lets HOV-2 buy into HOV-3 lane Only 35-45 users per day Being replaced by larger HOT lanes project I-10/US 290 Houston QuickRide


Slide26: 91 Express Lanes, Orange County, California


Lessons Learned from Road Pricing: Lessons Learned from Road Pricing Fewer choose to drive on priced facility, in proportion to price Can keep traffic moving on “managed lanes” at high speed and capacity Move 45% of traffic with 33% of lane capacity Pricing does work


Politics of Pricing: Politics of Pricing Most difficult is to put pricing on existing “free” roadways Easier to shift from flat to variable rates on existing toll roadways Also easier to put pricing on new lanes that add value for users Specialized truck lanes for heavier rigs Congestion-relief lanes for commuters General term for this is “Managed Lanes.”


Fresh Thinking on Capacity Expansion: Fresh Thinking on Capacity Expansion Dilemma: major metro areas need more highway capacity—but there is fierce opposition to taking more land; also concerns over noise and emissions. Commercial solutions: Go under—urban toll tunnels Go up—elevated lanes within existing fight of way Contain noise with new approaches Charge highway providers for emissions


Paris Toll Tunnel: A86 Ring Road: Paris Toll Tunnel: A86 Ring Road


Paris Toll Tunnel: A86 Ring Road - Detail: Paris Toll Tunnel: A86 Ring Road - Detail


Other New Urban Toll Tunnels: Other New Urban Toll Tunnels Melbourne CityLink—operational Marseilles Tunnel de Carenaga—operational Lyon Blvd. Peripherique tunnels—operational Sydney Airport Motorway tunnel--operational Sydney Cross-City Tunnel—under construction Prague Mrazovka Tunnel—under construction Dublin Port Tunnelway—under construction Dallas LBJ (I-635) HOT lane tunnels—design stage I-710 missing link, S. Pasadena--proposed Riverside-Orange County Tunnel—proposed


Elevated LanesAdding Capacity within Existing Footprint: Elevated Lanes Adding Capacity within Existing Footprint


Toll Truckways: A Win-Win Proposition: Toll Truckways: A Win-Win Proposition Heavy-duty lanes designed for LCVs Built in existing right of way on long-distance Interstate routes Open (voluntarily) to all trucks; mandatory for LCVs in non-LCV states Self-funding from tolls, charged electronically


What Are LCVs?: What Are LCVs?


Existing LCV Routes: Existing LCV Routes


Proposed Toll Truckway Pilot Corridors: Proposed Toll Truckway Pilot Corridors


Noise Solutions: Noise Solutions New kinds of noise barriers Possible noise-canceling technology


Emissions Mitigation: Emissions Mitigation Tunnels—route exhaust to scrubbers in vent stacks Enclosed elevated lanes—likewise Other new capacity—charge emission fees to roadway company


How to pay for all this? Users should pay the full, real cost of new capacity.: How to pay for all this? Users should pay the full, real cost of new capacity. Paris A-86 toll tunnels: $2 billion, all privately financed, to be covered by tolls Melbourne CityLink: $1.4 billion, likewise Cross-Israel Hwy: $1.1 billion, likewise Toronto 407: $2.1 billion, likewise Evidence from recent BOT projects


Other Advantages of Tolls and Private Capital: Other Advantages of Tolls and Private Capital Channel Tunnel vs. Big Dig Weeding out of pork-barrel projects ROI, not political gain, key to project selection Risk transfer from taxpayers to investors


Risk Transfer to Private Sector: Risk Transfer to Private Sector


Politics of Highway Commercialization: Politics of Highway Commercialization Anti-toll sentiment Equity issues Auto-mobility—cars vs. transit


Addressing Concerns Over Paying Tolls: Addressing Concerns Over Paying Tolls ETC can eliminate all toll booths within the next decade—if we choose. Double-taxation argument: easy to provide rebates of gas taxes Privacy is a non-issue Anonymous transponder accounts Stored-value cards report only transaction amount


Equity is also a Non-issue: Equity is also a Non-issue First point: compared to what? Current transportation funding is regressive (fuel and sales taxes) We accept price/quality choices in airlines, electricity, telecom, restaurants, etc.—but also in government-provided Amtrak and Postal Service. Why not in highways? All income levels appreciate having choices when traveling Single mom with child in day care Plumber getting in one more call The poor use transit (most of which is bus) which will be improved via pricing.


Auto-mobility: Cars vs. Transit: Auto-mobility: Cars vs. Transit Philosophical choice: suburbs vs. “smart growth” Highways generally follow, rather than leading, suburban growth Transit a bad fit for low-density suburbs New urbanism probably a niche market—but let the market decide Investment alternatives: Highways are 85-100% user funded (capital + operations/maint.) Transit is 100% taxpayer funded (capital) and only 20-40% user funded (O&M)


Highway commercialization will lead to a more level playing field between highways and transit: Highway commercialization will lead to a more level playing field between highways and transit With real costs of new highways presented to users, we’ll only build what users will pay for—but that’s probably more than they are getting now. With freeways priced, more will opt for transit. Congestion-free managed lanes can be made available to buses at no charge, as a condition of the franchise. Hence, they become busways.


HOT Networks: marriage of HOT lanes and Bus Rapid Transit: HOT Networks: marriage of HOT lanes and Bus Rapid Transit Seamless network of priced, congestion-free lanes overlaid on existing freeway system. Incorporates/converts existing HOV lanes; adds new lanes and interchange connectors Buses and vanpools go free; all others pay market price. Modeled for eight major metro areas Total capital cost = $43 billion Toll revenue bonds would cover 2/3 of that cost.


Examples of HOT Networks: Examples of HOT Networks Atlanta San Francisco


Steps toward the new paradigm: Steps toward the new paradigm 18 states now have public-private partnership laws for transportation 12 metro areas considering or planning new HOT lane projects Possible FAST lanes and variable pricing provisions in next federal surface transportation bill New TRB special committee studying replacement of fuel taxes for highway funding.


What’s Now Pending in Congress (House and Senate bills): What’s Now Pending in Congress (House and Senate bills)