Author Archive

Simplify USDOT Regulations for Transportation Planning

Today, I want to offer the sixth of my recommendations to reform U.S. surface transportation policy. My colleague David Hartgen and I suggest simplifying Department of Transportation (DOT) regulations regarding transportation planning.

Since 1964, federal laws and amendments (23 USC 134 and 49 USC 5303) have required that states and urbanized areas exceeding 50,000 population carry out a short-term and long-range “continuing, cooperative and comprehensive multimodal transportation planning process” as a condition for federal aid. Sensible at first, the “3C” process now mandates a wide range of required assessments, including air quality, environmental justice, congestion management, safety, maintenance, efficiency, freight, pedestrian-bike, economic growth, fuel consumption, and other requirements. Although some requirements have been eased for smaller regions, recent regulations call for expanded time horizons and new “planning factors.” More rules for climate change, international trade, active transportation and sustainability are likely. These requirements and frequent updates have a negative impact on smaller regions with fewer staff.

For regions with fewer than 200,000 people, eliminate all long-range transportation planning mandates and require 10-year TIP (Transportation Incentive Program) updates. For regions greater than 200,000 population, eliminate or reduce regulations for air quality monitoring and conformity, environmental justice, congestion management, economic impact, safety, fuel consumption, and 40-year planning horizons. For the TIP, remove the option that projects come from a long-range transportation plan. Review other requirements for possible reduction or elimination.

Recent reviews of metropolitan transportation plans find that many are dense documents full of feel-good unachievable goals only marginally related to transportation. Frequent update cycles mean “planning never stops.” Worse, they generally ignore rising congestion and infrastructure maintenance, and depend heavily on federal/state resources for implementation. But the federal role is declining as local, state and private roles increase. After completion, most plans are ignored and shelved until the next update. The cost of this wasted and inefficient planning is substantial — about $500M annually. In short, transportation planning has become a convenient catch-all for pushing other local goals, and a hurdle for self-certification and funding continuation, not a sensible effort to establish future transportation visions.

These changes would bring federal requirements into line with the declining federal role in local transportation issues. Most projects are local in impact, not national. The cost of current planning, about $1B annually, could probably be halved, leaving more resources for implementation, which would speed project development and create jobs. Localities would have more control over essentially local transportation decisions.

Eliminate Air Quality Standards for Regions that Meet Standard

Today, I want to offer the fifth of my recommendations to reform U.S. surface transportation policy. My colleague David Hartgen and I recommend that the Clean Air Act of 1990 be amended in two ways. First, eliminate the conformity requirement for regions meeting clean air standards. Second, review regions not in conformity every 10 years, after new census data has been released.

The Clean Air Act of 1990 (CAA) requires each region currently in non-attainment with air quality standards to submit plans demonstrating that it will be in compliance in the future. For transportation, each region must show that its’ Transportation Improvement Plan (TIP) “conforms” to the State Implementation Plan for air quality improvement. In the DOT Rules (40 CFR 93), this means that the region’s TIP projects will, as a whole, not increase future emissions above the no-build level or above budgeted emissions.

The present rule requires even very small regions to conduct extensive forecasting of air pollution if they were ever in non-attainment of air quality standards. But virtually all of the future reduction in regional air pollution will be caused by cleaner vehicles, not by local transportation actions. Recent reviews of the air quality plans of 48 regions found that every region predicted a 30-50% reduction in vehicle emissions over 20 years even as travel increased, and that the TIP would reduce emissions by only 0.25-0.5% — way too small to be significant. Further, the conformity rule requires reduction of emissions (measured in tons of pollutant) but the CAA standards are for concentrations (measured in parts per billion in air). Therefore, there is no direct connection between the rule’s emissions analysis and the CAA’s concentration requirements.

Very few regions have been cited for non-conforming plans from among the literally hundreds submitted. A 2003 GAO analysis found that only five regions out of 200+ revised their plans based on conformity, and that frequent updating was administratively burdensome. No region has actually lost federal funds as a result of non-conformity. For major projects environmental impact statement analysis already requires additional air quality analysis, so requiring regions to do it twice is duplicative and burdensome. In this way the rule has become an administrative hurdle that duplicates later needed work, does not improve local air quality, and requires huge administrative effort to ensure certification for federal funds.

Regions — particularly the 400+ smaller ones — will have significant relief of administrative burden. Assuming that the conformity analysis costs $20,000 per certification, administrative time, and administration costs, this change would save nearly $8M that could be better spent on effective transportation planning. Air quality would not degrade as a result of this change.

Eliminate Federal Gas Tax Funding for Non-Highway Uses

Today, I want to offer the fourth of my recommendations to reform U.S. surface transportation policy. I advise eliminating federal-aid gas tax funding for all non-highway uses.

The federal highway transportation program is structured as a users-pay/users-benefit system with fuel taxes funding construction and maintenance of the Interstate and national highway system. Over the last 30 years, the program has diverted an increasing percentage of its funds to transit, bicycling, walking, smart growth, transportation museums, weed removal and other non-federal transportation purposes. While these programs have value, they also reduce the funding available for federal aid to highways; this has jeopardized interstate commerce. Eliminating federal aid funding for all non-highway uses will return the federal highway program to a users-pay/users-benefit program that spends limited resources on the most critical infrastructure.

U.S. government policy is based on the principle of federalism where the federal and state government share legislative responsibilities. In transportation, the federal government funds interstate passenger and goods movement using federal aid highways, aviation, inland waterways, and ports. Traditionally, other transportation modes have been funded by state and local governments. While transit and active transportation are important in certain states and regions, such systems are not federal in nature and should not be funded by the federal government. Most local governments and some states provide substantial funding for transit. Federal government funding makes up less than 30% of the revenue for the most important transit agencies such as the New York Metropolitan Transportation Authority. The funding of these modes from federal aid amounts to a cross-subsidy from highway users to other modes.

Federal transportation funding is limited. With little bipartisan interest in increasing the gas tax or embracing an alternate funding mechanism coupled with increasing vehicle fuel efficiency, federal gas tax receipts must be targeted as effectively as possible. Fuel tax diversions significantly reduce funding for highways.

While transit is important in many communities, it should be funded by farebox revenue and with supplementary local funding that does not come from federal roadway funding. U.S. transportation policy is predicated on a users-pay/users-benefit system. Potential funding sources for transit include local general tax revenue and value capture. (Value capture uses increases in land values resulting from highway and transit projects to finance infrastructure improvements.)

This change could devote more revenue to highways. Assuming all non-roadway funds are dedicated back to roadways, under Moving Ahead for Progress in the 21st Century (MAP-21) transit receives approximately $11 billion per year. Additionally, there is approximately $5 billion per year in highway funding that is flexed to transit, bicycling, walking or non-transportation purposes. This totals $16 billion in additional highway funding per year, or about 1/3 of federal gasoline taxes.

Privately Built High Speed Rail in Texas

Ever since Japan built the first high-speed rail line in the world linking Tokyo to Osaka in 1964, U.S. train advocates have been lobbying for true high-speed rail in the U.S. While France, Germany, Spain and recently China have built high-speed rail systems, the U.S. has resisted for many reasons. High-speed rail works most effectively transporting customers between dense city centers with robust transit systems and low rates of car ownership. A popular existing passenger rail system and higher costs of car ownership are important factors as well.

The U.S. has never fared particularly well in these categories for a number of reasons. First of all, car ownership in U.S. cities was far higher in the 1970’s than in Europe or Japan due to a more robust roadway network. In addition, U.S. cities are generally less dense than European cities. And U.S. city transit networks are much more skeletal making them less effective. Also U.S. taxes on gasoline are much lower making car travel cheaper than in Europe and Japan. Furthermore, U.S. rail tracks are dedicated to freight, creating the most efficient freight rail network in the world but limiting options for passenger rail.

Despite these challenges, in 2009, President Obama promised a national high-speed rail network. However, six years later that promise is nothing but a dream. The Obama administration strategy was flawed from the start. Instead of focusing on the most fiscally realistic place to build HSR, such as the northeast corridor, President Obama disbursed money to 38 states to build new rail but also to upgrade existing rail. The only high-speed rail project to begin construction is the California line from Los Angeles to San Francisco by way of the Central Valley. However, this project has a more than $50 billion funding hole, takes a circuitous route through the Central Valley making it physically impossible for the train to meet its travel time obligations, and is causing politicians to bend environmental review and ballot question intent laws. The project has no Republican support and is rapidly losing support from Democrats including the Lieutenant Governor. Most expect the project to be cancelled as soon as its major supporter, Jerry Brown, leaves office. High-speed rail’s track record in the U.S. has been one of almost complete failure.

All of these factors make potential high-speed rail success in the U.S. look doubtful at best.

However, there are several potential bright spots. The higher-speed Acela train operated by Amtrak on the northeast corridor has been a modest success. Train farebox revenue covers the full operating costs of the line. Many experts have speculated that a true 200-mile per hour high speed rail line would be even more successful financially. If this train could be operated by the private sector with competent management, which Amtrak has seldom provided, and be free of government restrictions such as Buy America, it might work. And if the private operator sought advice from successful rail operators in Japan instead of from the bungling bureaucrats advising the California and national rail lines, significant profits could be possible.

Two such lines are on the drawing boards. One is proposed for Florida linking Miami with Orlando International Airport. The other is proposed for Texas linking Dallas and Houston.

Let’s examine the Texas route from Dallas to Houston in a little more detail. The Texas line shares several characteristics with successful European and Japanese lines. Dallas to Houston is a popular air route, flown by three of the four largest airlines. Instead of trying to position the line in the middle of the highway or use existing tracks, the company is planning to build the line along a utility corridor. In addition to providing a dedicated right of way, such an alignment limits the number of folks living in the train’s path as people do not live in utility right of ways. The 250-mile flat distance between the two cities is perfect for high-speed rail. Finally, the metro areas each having more than 6 million folks are plenty big enough to serve as the endpoints.

However, there are several obstacles to the route as well. Neither metro area has an extensive transit system, nor the density to create such a system, so the train stations would have to feature many parking spaces. This is different from European or Japanese HSR. And whether folks living in the expansive suburbs especially near an airport would drive to the center city to take the train, versus drive to the airport is an open question. In both metro areas there are folks living in the train’s path. Living next to an Interstate highway is unpleasant; living next to a train would be unfeasible. The full cost of relocation would have to be offered to many homeowners, increasing the cost and opposition.

The biggest challenge is whether or not the system would need government funding. Texas Central Railway insists it does not. Regardless, since competitor modes, namely aviation and intercity bus are not subsidized, we should not be subsidizing HSR either.

The Texas high-speed rail proposal is intriguing. Proposed as a private operation with funding and guidance from Central Japan Railway Company the proposal is already far more promising than any of the Obama Administration’s previous lines. Nobody knows if such a private line can succeed, but Texas Central Railway certainly deserves a chance to try.



Metro Transportation Plans Lack Transparency

Today, I want to offer the third of my recommendations to reform U.S. surface transportation policy. I request that Metropolitan Planning Organizations (MPOs) analyze their long-range transportation plans’ ability to reduce congestion.

Under federal law, MPOs are required to create Long Range Transportation Plans every four years (if deemed in non-attainment) or every five years otherwise, outlining their planned transportation investments and their reasons for making those investments. Some plans forecast that horizon-year congestion will be less if the plan is implemented compared with the no-build case, but in nearly all cases, future congestion (with the plan) will be greater — often significantly greater — than in the baseline year (today). Yet that fact is seldom made clear to citizens and taxpayers.

Requiring Long Range Transportation Plans to directly compare congestion levels in the horizon year with congestion levels in the baseline year, will allow citizens and taxpayers to judge whether or not the plan focuses enough effort on congestion reduction to ameliorate the situation.

According to the latest Urban Mobility Report from the Texas A&M Transportation Institute, traffic congestion in America’s 101 urbanized areas costs motorists $121 billion per year in wasted time and fuel. Most MPOs’ Long Range Plans give lip service to reducing congestion, but very few actually target their investments in such a way as to credibly project that 20 years of investment will yield less congestion than in the initial (baseline) year of the plan. If they make any comparison at all, most plans compare congestion after the plan’s implementation with what it would be under the no-build alternative. The models used to produce these plans do generate the information needed to compare horizon-year congestion with baseline-year congestion, but this comparison is almost never included. Citizens and taxpayers are led to believe that because congestion with the plan is marginally better than congestion under the no-build alternative, the plan is the best that can be accomplished. Yet most plans could do far more to reduce congestion if they focused their resources on the problem. The Urban Mobility Report shows that urbanized areas that have this focus can actually achieve significant reductions.

This requirement could provide substantial mobility improvements at a very small cost. To the extent that this motivates MPOs to focus more resources on actual congestion reduction, there will be traffic flow improvements, time-savings, reduced fuel use and reduced emissions. The cost of making this change in the planning process will be very low, since most MPOs already generate the needed information as part of their transportation modeling.

Eliminate Transportation (TIGER) Grants

Approximately every six years, Congress reauthorizes U.S. surface transportation policy. One of these reauthorizations is overdue, providing an opportunity to make U.S. transportation policy more free-market oriented. I have chosen six programs or policies that badly need to be changed. Over the next two weeks, I will summarize each of these programs.

My first recommendation is to eliminate the Transportation Investments Generating Economic Recovery (TIGER) grants. The TIGER program is an executive agency discretionary funding program that supports road, rail, transit and port projects. Started in 2009, as part of the American Recovery and Reinvestment Act (ARRA) also known as the Stimulus, TIGER is supposed to award funding based on merit. Unlike most federal programs, which appropriate money based on a formula set by Congress, the TIGER program is administered and audited by the executive branch.

Unfortunately, the executive branch’s administration of the TIGER program has failed to follow the rules and expectations of the program.

The program is supposed to achieve critical national objectives, yet more than 60 percent of the grants have supported local transit, pedestrian or bicycling projects. While such projects have a role, they are not national projects and should not be funded by a national-oriented program. Several of the road, rail and port projects are also locally oriented.

Projects are supposed to be selected based on “rigorous” criteria, but DOT uses vague metrics. For “livability,” the department’s definition is “Significantly enhance the creation of more convenient transportation options for the traveler,” which could mean almost anything project sponsors want it to mean.

Lower ranked projects are frequently funded while higher ranked projects are not. In the first round of TIGER grants, the agency funded almost as many “recommended” projects as “highly recommended” projects. In the fifth round of TIGER grants, DOT changed the ratings of some projects from “not recommended” and “recommended” to “highly recommended” in order to justify funding them.

The program provides limited information to applicants and the public. Despite three requests from the Government Accountability Office to provide better documentation of the review process and to release more information to applicants who fail to win grants and to taxpayers, USDOT has failed to provide more information as requested about the program.

Democratic districts have received a disproportionate share of the grants. In the third round of grants Democratic districts received 61% of the grants and 69% of the funding, despite comprising 49% of the total congressional districts. Democratic districts were overrepresented as award winners in all six rounds of TIGER Grants.

Since funds would be allocated by Congress we don’t expect eliminating the program will cost taxpayers anything. In fact, staff reductions could follow permitting executive branch employees to engage in other activities.


Add Taxpayer Protections to Railroad (RRIF) Program

Over the next few weeks, I will be highlighting six national transportation policies that need to be changed. 2015 provides a great opportunity to seek these changes because the federal bill that governs surface transportation policy is up for renewal. Republican majorities in the House and the Senate should create a more free-market oriented transportation policy.

Today’s recommendation is to add taxpayer safeguards to the Railroad Rehabilitation and Improvement Financing (RRIF) program. RRIF was created by 1998’s TEA-21 legislation. Under its provisions, the Federal Railroad Administration (FRA) can devote up to $35 billion to loans and loan guarantees for freight and passenger railroad infrastructure. Unlike DOT’s Transportation Infrastructure Finance and Innovation Act (TIFIA) loan program, there are few taxpayer safeguards in RRIF, other than a requirement for recipients to pay a credit risk premium. Loans may be extended for 100% of a project’s estimated cost with no explicit requirement for a dedicated revenue repayment stream.

We recommend adding four taxpayer safeguards similar to those in TIFIA. First, restrict RRIF loans to 33% of the project’s budget. Second, require that senior debt of the project carry an investment-grade rating. Third, require that the loan recipient document the existence of a revenue stream dedicated to retiring the RRIF and other loans. And fourth, require that in the event of project bankruptcy, the RRIF loan moves to equal status with the primary debt (called the “springing lien” provision in TIFIA).

Why are these safeguards needed? The current RRIF program in effect invites applicants to apply for loans for risky, speculative projects. RRIF should be reconceived as providing supplemental, gap-closure financing, like TIFIA, rather than being the primary or sole source of a project’s financing. The speculative XpressWest high-speed rail project was ultimately rejected by the FRA, but only after strong objections were raised by Members of Congress. That project had requested a RRIF loan of $5.5 billion, which was between 80 and 100% of the estimated project budget. Limiting RRIF loans to a maximum of 33% (as in the original TIFIA legislation) would make it clear that projects must demonstrate their economic and financial feasibility by being able to attract primary financing (investment-grade senior debt) from the capital markets, with RRIF providing supplemental, gap-closure financing. Together with the requirement for the applicant to document the existence of a dedicated revenue stream, these reforms would provide significant protections for federal taxpayers, akin to those of the successful TIFIA program.

This change could save taxpayers billions. The taxpayer protection provisions would reduce the number of risky, speculative loan applications, thereby saving FRA time and money in processing them, resulting in modest FRA budgetary savings. More broadly, the provisions would protect taxpayers from future defaults that could result in billions of dollars in unpaid RRIF loans.


Transportation Budget from the White House – Deja Vu All Over Again

It is that time of year for a President Obama transportation tradition. Each of the past six years, the President has sent a transportation proposal, concept, or list of guidelines to Congress. And each year Congress, in a bipartisan manner, has rejected the President’s proposals as being completely unreasonable. Some hoped, with the prospect of corporate tax reform, that this year’s budget would be different. But while somewhat better than past years, this year’s budget is still an unrealistic document that is more focused on politics than policy.

The White House submitted a $95 billion budget request for USDOT for fiscal year 2016. The budget is a $22 billion or 31% increase, over 2015. And the Administration proposes to achieve this increase by removing Amtrak, transit new starts grants, TIGER grants, high speed rail funding, and a few other items controlled by the Appropriations committee. If this sounds familiar it is because the White House has submitted a variation of this proposal for the last several year; it has been rejected on all occasions in a bipartisan manner.

The first problem with this approach is it takes power out of the Appropriations committee and gives it to the White House. Appropriations committee members like the power of the purse and are unlikely to give it up even if they and the President agree on transportation policy.

The second problem is this proposal changes the fundamental users-pay/users-benefit nature of the highway trust fund. Both roadway and transit interests have dedicated funding in the current system. While transit might receive more funding under the President’s proposal, the funding is not guaranteed so it is unclear they would support this change. Other than passenger rail interests, it is unclear who would support this change.

The final and biggest problem is finding the money to pay for this proposal. The President is proposing a 14% tax on repatriated profits. However, there is bipartisan consensus that 14% is too high. Senators Boxer and Paul have introduced a 6% rate which is far more likely to pass. But the 6% does not provide enough money to fund the proposal. And both taxes are short-term fixes that do not provide the long-term certainty the transportation community is seeking.

For the seventh year in a row, the White House has proposed an overtly political budget which has no chance of passing. It is déjà vu all over again.

California High Speed Rail Advocates Want to Ignore Law

The California high-speed rail project is an out-of-control train careening down the tracks. Everybody knows the project is a disaster in the making. But Governor Jerry Brown and California’s political elite are so enamored with being remembered, they are less concerned with whether it is in a good or a bad way. Earlier this month, the authority broke ground on the first planned section between Madera and Fresno.

For those keeping track, the proposed high speed rail line has no realistic funding plan and uses wildly optimistic and unrealistic ridership forecasts. It has violated the language of its 2008 bonds by providing far slower service than initially proposed. It plans to use gas tax funding from an environmental protection plan to help build the train even though the California Air Resources Board found that high speed rail will increase greenhouse gas emissions for the near term.

The past few months have brought one more twist. Since its inception, the rail authority has promised that the project would comply with the California Environmental Quality Act (CEQA). But after plaintiffs filed seven different lawsuits, the California High Speed Rail Authority asked the Surface Transportation Board (STB) to invalidate these lawsuits arguing that the project only has to comply with federal guidelines that they say have been cleared because of regulatory approvals of the 114-mile Fresno to Bakersfield segment. In late December, the STB agreed with this dubious logic. However, the plaintiffs have promised to appeal and most experts doubt the Supreme Court will side with the STB.

A previous attempt by state lawyers to argue that CEQA was negated by federal approvals was rejected by a Sacramento appeals court. Further, the state Supreme Court declined to hear an appeal of a bullet train case in a similar case.

The authority’s spokesman says this isn’t an attempt to get around CEQA just an attempt to “clarify” matters. But it is clear the only reason the authority does not want to go through CEQA is because it will slow down of potentially cancel construction of the rail line.

The federal Surface Transportation Board consists of three appointees of President Obama who has strongly supported rail with earmarked high-speed rail funding and Transportation Investment Generating Economic Recovery (TIGER) grants. So the authority is making an end-run around the law which they ideologically support to get the train built. And they are turning to their political friends in the federal bureaucracy to ensure they can get away with ignoring the law. How many laws and rules will California politicians ignore to get this train built?


Increasing Transportation Funding Without Raising Taxes

Many state departments of transportation are facing a perfect storm. As parts of their Interstate systems reach the end of their design life, the gas taxes which make up most of their funding stream are declining in real value due to inflation and increased fuel efficiency.

There are two solutions to this problem. The first is to go on a public crusade convincing citizens that roads are crumbling and stress the need for a major tax increase is urgent. The second is to acknowledge the problem but try to work with the existing revenue to solve the problem. The second solution is better from a policy standpoint, because states typically need small increases in funding which can often be found in the existing budget. But it is also better from a political standpoint. Everyday, taxpayers drive on roads, most of which are not falling apart. When politicians and transportation officials start claiming the sky is falling, people don’t believe them. When taxpayers think politicians are lying, they are less likely to support giving any new funding for transportation, even if it from resources which are being inefficiently used.

The Georgia Legislature is working on a package to increase transportation funding without increasing taxes. Currently, only approximately 52 percent of the gas tax revenue in Georgia supports transportation. The other 48 percent supports items in scope ranging from construction of school buildings to homestead exemptions, mostly good projects but irrelevant to transportation. By pushing to dedicate all revenue to transportation, both one-percent of a four percent gasoline sales tax, and gasoline sales for special purposes around the state, the state can generate almost a billion dollars in additional revenue a year. The legislation includes additional bonding and an electric vehicle fee but it is mostly revenue neutral. In fact, for many people, it will be a tax decrease. The gas tax assumes a sales tax on gasoline of 6 percent. But the average sales tax in Georgia is actually 7.2 percent with many counties paying 8 percent.

Of course not everybody in Georgia get the message on choosing option two over option one. Special interests want an additional $5 billion per year which would represent a 250 percent funding increase. Some of these interests suggest that Georgia would cease to be competitive if transportation does not receive all of this $5 billion.

The plan still needs to pass both state houses and be signed by the Governor. And some tweaks would make it even stronger. But it is good to see a state that realizes it does not need a massive tax increase to fund its transportation system and a government that actually takes that advice to heart.