Tag: "Transit"

Obama Announces $98.1 Billion More Transportation Spending Waste

A major portion of the Administration’s proposed new transportation spending21st Century Clean Transportation Plan — is a series of proposals to expand transit systems (31 rail, bus and streetcar systems in 18 states costing $3.5 billion), revive the failed high speed rail initiative, modernize freight systems and provide grants to regional authorities to implement innovative “clean” technologies and “green” transportation programs. This new transportation spending is expected to cost $98.1 billion in just FY 2017.

The President just recently signed a groundbreaking transportation bill — the Fixing America’s Surface Transportation Act or FAST Act — that gave a longer temporary partial solution for the nation’s transportation infrastructure. However, the Fast Act and the new transportation proposal both fail to address several key problems with the Highway Trust Fund and the federal gas tax.

The new administration budget for transportation is a 60% increase over the current annual spending level. To partly pay for the new spending, the Administration is calling for a $10 per barrel tax on oil or a 25 cent/gallon increase in the price of gasoline at the pump which is estimated to bring in $650 billion over a decade.

Despite this, the administration’s budget request was declared dead even before its arrival on Capitol Hill, just like most of Obama’s previous transportation budget proposals.

 

The Bargain Mass Transit Option

SkyTran is an aerial mass transit system with small cars that magnetically glides on elevated tracks 20 to 30 feet above the ground. The cars can hold up to four people and travel at 60mph.

SkyTran has been in development over the past five years and is just beginning to run a pilot program in Tel Aviv. Compared with most mass transit options, SkyTran is a bargain for cities planning mass transit or expanding their existing systems.

For instance, the city of Dallas has a large light rail system (DART) that was recently expanded to double in size to over 90 miles of track. The $2.5 billion expansion cost $56 million per mile ($35 million per kilometer). In addition, the $7.3 million cost for each rail car that holds 209 passengers gives a cost of $35,000 per passenger.

SkyTran, however, costs only $13 million per mile ($8 million per kilometer). The small cars only cost $30,000 at a price of $7,500 per passenger.

The city of Dallas could have saved almost $2 billion in light rail mass transit expansion if SkyTran had been an available choice in mass transit.

 

The Transportation Funding Fight

The fight over the future of transportation funding in the United States has once again pitted the House against the Senate and Republicans against Democrats. In June, the House of Representatives narrowly passed a bill to spend $55.3 billion on transportation and housing projects through December 18. 2015, with only three Democrats voting yes to the bill. The intention of the short-term bill was to give representatives more time to craft a longer term bill. The House bill, however, also included amendments restricting travel to Cuba, blocking funds for the transfer of Guantanamo Bay detainees, and attempted to undo recent trucking regulations, which angered House Democrats and the White House.

Senator Dick Durbin (D-IL) gave a grave warning of the current system of transportation and infrastructure funding.

“We cannot patch our way to prosperity with temporary, short-term answers to long-term problems. In just the past six years, there have been more than 30 extensions of surface transportation programs. This is not the way to run the federal highway and transit program.”

Now it’s the Senate’s turn to attempt to pass their own transportation bill. They have a tight deadline to meet since the last measure passed to finance infrastructure programs in the country expires July 31st.

The Senate Bill, which Senator Mitch McConnell (R-KY) brokered with Senator Barbara Boxer (D-CA) is a six-year authorization, although funding appropriations in the bill extend for only the first three years. The bill allocates $47 billion to fund the revenue gap between federal gas tax and other transportation revenue ($35 billion a year) and yearly expenditures ($50 billion a year).

Problems of funding have also divided the two sides but both sides have been firm in their desire to keep the gas tax at current levels, rather than raising it. The House proposed funding the gap between projected costs and expected revenues with a one-time tax on $2 trillion in business income brought back to the United States.

The Senate bill, on the other hand, includes revenue-increasing methods such as:

  • Selling oil from the Strategic Petroleum Reserve to raise $9 billion.
  • Reducing the dividends paid to certain banks by the Federal Reserve to raise $16.3 billion.
  • Indexing various custom fees to inflation to raise $4 billion.
  • Increasing Transportation Security Administration fees to raise $3.5 billion.
  • Extending certain guarantees on mortgage-backed securities to raise $1.9 billion.
  • Adjusting various tax compliance measures to raise an additional $7.7 billion.

While the Senate bill may not directly raise the gas tax, it increases revenues through various raises in fees (fees which are essentially very similar to taxes). This seems quite contrary to Senator McConnell assurances that the Senate bill “does not increase the deficit or raise taxes.”

Raise Airport Facility Charges and Give Up Improvement Program Funding

Currently, U.S. airports and airlines are fighting a public battle over Passenger Facility Charges (PFCs). PFCs are one of the main mechanisms to fund capital projects such as baggage systems, gates and international arrival facilities. Airports want to increase the fee, and argue that the current $4.50 passenger facility charge, which has not been increased/adjusted since 2000 and equates to $2.45 today, is insufficient. Airlines argues that the PFCs should be kept at $4.50 since over the past 25 years the number of taxes airlines pay has increased from six to 17 and the amount paid has increased from $3.7 billion to $20 billion.

While both sides raise some valid points, airports make the better argument and should be allowed to increase PFCs to whatever level they deem necessary.

First, our aviation system follows the same users-pay/users-benefit principle as our surface transportation system. And PFCs are the purest users-pay/users-benefit funding mechanism. A users pay system is fair since those who pay are the ones who benefit. A users-pay system is proportional since those who fly more pay more and vice versa. A users-pay system is self-limiting since the taxes will be used only on needed infrastructure. A users-pay system is predictable, since such a system, unlike airport improvement funds, will not disappear at Congress’ whim. Finally, a users-pay system provides guidance on the correct amount of investment to make.

Second, airports need continual improvement. With growing passenger traffic many airports need additional gates. Others need to modernize their badly aging security areas and baggage systems. While airports have other tools, principally bonding and airport improvement program (AIP) funds, both these tools are limited. PFCs are more versatile and can be used for a variety of projects including landside (terminal) projects, road access, noise-remediation projects, bond-interest and airside projects.

Third, airports as quasi-independent agencies should be able to raise their own funds. Airlines have added a bevy of tax-exempt fees, which incur no taxes because they are special services and not a part of standard fares. Passengers now pay to check bags, use internet service, reserve seats, purchase food, and purchase priority boarding services. Just as it is the airlines’ right to charge passengers for these optional services, it is the airport’s right to charge passengers for a better baggage system.

Fourth, just as passengers have some choice of airlines they also have some choice of airports. In most of the 20 largest aviation markets there are two or more airports. If an airport goes on a drunken spending spree as Miami International Airport did, airlines and passengers can choose the cheaper alternative of Fort Lauderdale International. Price is a powerful motivator that should keep airports from unreasonable PFC increases.

However, I understand the airline’s concerns of overcharging. And while the cheaper Fort Lauderdale provides an option to overpriced Miami, it would be preferable if such exorbitant costs were prevented in the first place. So in exchange for removing the limit on PFCs, large hub airports should give up AIP funds. Large hub airports rely less on AIP funds than other airports and with PFC funds uncapped, AIP funds become a nice-to-have product not a requirement.

 

Addressing Texas High Speed Rail Concerns

The proposed new high-speed rail (HSR) project in Texas has become a lightning rod for criticism. While the project is different from the now cancelled publicly funded HSR projects in Florida, Michigan, and Ohio and the ongoing project in California, critics remain concerned.

The Texas project supported by Texas Central Railway (TCR) is fundamentally different from the U.S. public government approach in several ways. First, it focuses on one specific corridor (TCR chose one out of 97 it had identified). HSR succeeded in France and Japan because both countries build their first HSR lines on the most optimal corridor, not the most shovel-ready. Contrast that with the Obama Administration’s plans to give money to nearly 40 states. The TCR project is focused on true 200 mile-per-hour high-speed rail while the government program has a multitude of aims:

  • build HSR
  • improve existing rail
  • build political bridges
  • develop passenger rail

Second, the Texas developers are seeking advice and parts from the Japanese, who operate the most successful HSR line in the world. TCR plans to use higher-speed Japanese Shinkansen trains which will travel fast enough to offer 90-minute trip times. Many of the government-funded rail lines are upgrades of existing lines with top speeds of 110 miles per hour.

Third, TCR’s line will link two of the quickest growing metro areas in the country. The metro area populations of Dallas and Houston are expected to double. Contrast that with Los Angeles and San Francisco that are seeing little if any growth in population.

Fourth, both are privately funded. While TCR will not accept grants or subsidies, it will consider existing federal credit assistance such as Railroad Reinvestment and Financing (RRIF) or Transportation Infrastructure Finance and Innovation (TIFIA) loans. TIFIA financing requires an investment-grade rating while RRIF is being strengthened to include similar provisions. TCR might also seek DOT approval to issue tax-exempt private activity bonds (PABs), which are widely used on highway P3 concession projects. Such bonds are backed solely by project revenue. Taxpayers are not on the hook in case the project defaults; only the bond-buyers are.

Project opponents have raised legitimate concerns but none of them should delay the project. Some farmers and ranchers are concerned that their properties will be acquired through eminent domain. However, TRC only needs about 100 feet of eminent domain. Additionally, the agency plans to use eminent domain (as other private parties including pipelines companies and electric companies do) as a last resort and only after making market-value offers. Further, if there are abuses of the system, Texas has a detailed appeal system already used for the Keystone Pipeline.

Others are concerned that taxpayer subsidies will be required. Whether TCR can build its project within the budget estimated is an open question. Given the challenges of breaking even on HSR in a low-density state such as Texas, skepticism is appropriate. However, as long as taxpayer funds are not used, project sponsors should be allowed to try to build the train. If the project later requires taxpayer subsidies, Texas taxpayers should kill it. While the financial realities are a legitimate concern for those who invest equity in the program or buy bonds, the program should receive the same level of legal and regulatory scrutiny as any other private railroad project.

Double the Cap on Private Activity Bonds

Congress’ extension of U.S. surface transportation policy for another two months provides a little more time to improve current policies. With the added time, I want to offer a ninth recommendation for reforming U.S. surface transportation policy. Robert Poole and I recommend that Congress double the lifetime cap on private activity bonds (PABs).

State and local governments are embracing public-private partnerships (P3s) for large-scale transportation infrastructure projects. Because these projects leverage limited state funds with significant private capital, Congress, in SAFETEA-LU allowed state or local entities on behalf of P3 developer/operators to issue up to $15 billion in tax-exempt revenue bonds. The bonds are an obligation of the P3 project, not government. But with the increasing pace of P3 projects, two-thirds of the $15 billion has already been allocated. In a four- to six-year reauthorization, the remaining $5 billion worth of PABs will likely be far less than the demand for using this financing tool.

Increasing the $15 billion cap will likely match the flow of P3 deals suitable for PAB financing. This is consistent with the length of the reauthorization bill, for a six-year bill, the cap should be increased to $30 billion, for a four-year bill the cap should be increased to $25 billion and for a two-year bill the cap should be increased to $20 billion.

There are several reasons why increasing the cap it vital. The combination of tax-exempt PABs and supplemental Transportation Infrastructure Finance and Innovation Act (TIFIA) loans has generated considerable P3 investment in much-needed infrastructure. As of September 2014, these financing tools enabled states and other governments to obtain $23.4 billion worth of highway, transit and intermodal projects for total government outlays of $5.56 billion — more than four times the direct outlay of traditional tax funding. Both PABs and TIFIA are examples of “project finance,” in which dedicated project revenues (such as tolls) are the funding sources to pay off the Private Activity Bonds and repay the TIFIA loans. This kind of leverage is critically important at a time when Congress has difficulty increasing the amount of funding it can provide to the states under traditional highway and transit programs. But without an increase in the cap on PABs, that source of financing will likely dry up within the time frame of the 2015 reauthorization bill.

The principal benefit of an increase in the cap on PABs is the continued robust growth in P3 transportation infrastructure projects, which makes limited state highway and transit funds go much further. Federal taxpayers are not at risk, since the debt service on PABs comes from dedicated project revenues such as tolls. Some federal accountants view the tax exemption on these bonds as costing the Treasury tax revenue that bond-buyers would have paid if the bonds had been taxable. But in many cases, in the absence of tax-exempt bonds, the project might not pencil out as a P3 and would either be built by a tax-exempt government entity or not be constructed.

Political Versus Market Energy Economics

With news of a consensus on its financing structure, details of a proposed natural gas pipeline called the Turkish Stream are expected to be finalized as early as June 18th. The pipeline, which is estimated by internal sources to cost over $2 billion, will originate in Russia, pass through Turkey and end in Greece. The move seems very strategic of Russia — one of the largest exporters of gas in the world — which has shown interest in the financial backing of Greece’s new leadership under leftist hardliners. Ironically, amidst a very public distaste regarding the European Union’s stance on repayment of Greek debts, the ailing state has expedited approval of the project, which would bottleneck Russian gas through the country, forcing many European countries to pay them transit fees.

The U.S. Department of State (DOS) warned that expanding Europe’s dependence on Russian gas would only increase political instability in the region and could reduce price competitiveness of natural gas in Europe, however members of Greece’s ruling party, Syriza, quickly rebuked the observations and labeled them as attempted blackmail. The DOS also claimed that Russia did not build the pipeline out of benevolence or even a desire for financial gain, but purely to snub the Trans-Adriatic Pipeline, an alternative Western-backed project which was also forecasted to bring needed gas resources from Azerbaijan to Europe through Greece. Members of the DOS even went so far as to say that Turkish Stream in itself is not an economic investment, and there are perhaps a few reasons to believe so:

  • The offshore portion of Turkish Stream completely circumvents other European countries in almost a comical fashion given the alternative price of simply building land-based pipelines through Ukraine… this costly act of political angst immediately made the marine portion of the pipeline $600 million more expensive;
  • According to the Energy Information Administration (EIA) Russian gas has been losing market share with almost every passing year for over ten years, while European demand for gas has fallen and stagnated, no doubt due to Europe’s lethargic growth numbers:

Nat Gas Prod and Consumption

  • Perhaps in an effort to shift infrastructure costs onto the European Union (EU), Russia has announced a “build it yourself” policy for all potential client nations hoping to have pipelines connecting them to Greece… while such a proclamation may seem efficient for them and strategically savvy, consider that many European countries such as Sweden now acquire less than 48 percent of their energy consumption needs from fossil fuels. In the meantime, Italy, Romania, Germany, Estonia and Bulgaria among many others are in the process of phasing out much of their gas use, and are actually years ahead of their target schedules for implementation of nuclear and renewable energies.

At the aggregate level, natural gas is an extremely profitable energy resource which is seeing double-digit growth across many different countries, mainly in the developing world. However, mature economies such as those in Europe have not characterized themselves as extremely profitable or high-growth markets, meaning that they are among the least likely areas to see attractive returns on expensive fossil energy infrastructure projects like Turkish Stream.

 

Tunnels are a Solution to Relieving Traffic Congestion

Due to the policy of building freeways through communities and the resulting highway revolt, most U.S. metro areas now have unfinished freeway networks. With the economy and traffic congestion growing, it is time to consider filling the missing links in these freeways. Fortunately, with the advent of tunnel boring machines (TBMs), it is now possible to cost-effectively build tunnels under densely populated neighborhoods. These tunnels can help complete unfinished freeways. These tunnels can also encourage transit service by offering free usage of premium lanes at no charge. Most importantly, these tunnels will have no adverse impacts on the neighborhoods above them.

Tunnels have proven an effective alternative to surface freeways across the world. For example, to protect Versailles, the French built a highway tunnel under the historic estate. The tunnel keeps traffic flowing while protecting the national landmark. The Port of Miami built a tunnel, allowing trucks to access the Port of Miami and bypass city streets. This tunnel reduced cut-through traffic and helped rejuvenate city neighborhoods. In Washington State a tunnel is being constructed to replace the seismically deficient SR 99. In addition to providing a better travel alternative, the tunnel will allow better connections between Seattle’s neighborhoods and Puget Sound waterfront. While Seattle TBM broke last year delaying the project, the TBM has been fixed and construction is progressing.

Building tunnels is not cheap. Costs typically range from approximately $100-$500 million per lane mile. However, building surface roads in such areas can often reach $50 million or more per lane mile to build an elevated section if right of way is needed. Further, the lost economic costs of congestion are much higher than $500 million. In Chicago alone, reducing congestion by 10 percent would save business $1.3 billion per year in business-related expenses and $455 million in labor market expenses. This assumes a 10 percent improvement; 20 percent would double the benefits.

Which metro areas in the U.S. could benefit from tunnels? The largest metro areas such as Chicago and Los Angeles could benefit from multiple tunnels, between 2 and 7, depending on the cost-benefit analysis. Other large regions such as Atlanta, Dallas, Houston and Washington D.C. could benefit as well. Tunnels are not appropriate in all situations but they are an important key to reducing urban congestion.

 

Lawmakers Should not Speed-Up Positive Train Control Deadline

Trains are among the safest form of transportation but on rare occasions when crashes occur, the death toll is often high. The crash earlier this week of a Northeast Regional train en route from Washington D.C. to New York City has brought Positive Train Control (PTC) back into the news.

First mandated in the resultant Railroad Safety Improvement Act of 2008 (RSIA 2008) as a result of a tragic train crash in California in 2008 that killed 25 people, PTC remains an expensive, unnecessary government mandate. Cheaper technology that is just as effective is a better way to increase safety. Legislators cannot let the emotion of the moment sway them into adding unnecessary mandates or spending more taxpayer funds on passenger rail.

Railroads are one of the safest forms of transportation. The National Safety Council compared four modes of transport: airlines, passenger trains, buses, and light duty vehicles (includes passenger cars, light trucks, vans, and sports utility vehicles). In 2009 the passenger death rate in light duty vehicles was 0.53 per 100 million passenger-miles. The bus fatality rate was 0.04; the rate for trains is 0.02. Only airlines were safer at 0.01.

In the California train crash, a Metrolink commuter train collided with a Union Pacific freight locomotive killing 25 people. The crash was the worst U.S. train accident in 15 years. Federal investigators revealed that the train driver was sending and receiving text messages just before his commute train skipped a red light and hit the freight locomotive. Even before the final safety report was released, Sen. Dianne Feinstein (D-Calif.) began pushing to mandate automated safety equipment for all large railway systems. According to Feinstein the accident occurred because of “resistance in the railroad community.” Kitty Higgins of the National Transportation Safety Board (NTSB) also began lobbying for positive train control less than 24 hours after the collision and before the full safety investigation began. Swept up in the emotion, Congress in 2008 failed to seriously consider any solution except PTC. The PTC bill passed October 16, 2008 with limited debate only a month after the crash.

Positive train control is one of several methods to improve railroad safety. While PTC can prevent accidents by using GPS, sensors, and other technology to stop trains remotely, the costs are astronomical. The Federal Railroad Administration (FRA) places the cost at more than $13 billion to install and maintain a nationwide class I PTC system. Consulting firm Oliver Wyden estimated that PTC has a 20 year benefit of $0-$400 million. Even if all $400 million in benefits are realized, the cost/benefit ratio range is $1 in benefits for every $20 spent on the system.

Although Congress failed to consider an alternative, there are several technologies that could prevent the most serious train crashes. The most obvious solution would be to expand Amtrak’s existing automatic train control system that regulates speed. Automatic train control systems can be programmed to send information to a train about the speed limit for a section of track. Equipment inside the locomotive senses when a train is exceeding the limit and sets off an alarm. If the engineer fails to slow the train, the system triggers the train’s emergency brakes. Amtrak installed this technology on the southbound track but not the northbound track, because among other trains it slows trains too much. If the technology was installed on the northbound track, the train likely would have gone around the curve at 80 miles per hour and not come off the track.

Other options include rerouting freight trains, reducing the speeds of trains to minimize the impact of collisions or implementing schedule changes to increase headways between trains. These solutions can be implemented with no direct costs and only the indirect time costs of slower trains and longer commutes.

There are several other PTC complications that leaders have not taken into account. Immediate implementation of PTC could impair safety. PTC is forecast to prevent only 4 percent of railway accidents and the $13 billion spent enacting the technology is money that cannot be spent on infrastructure upgrades and other safety improvements. Further, despite claims to the contrary PTC by itself will not improve track efficiency. Increasing the train frequency requires precision dispatching. While precision dispatching can be implemented, it is a separate technology and different issue than positive train control. Additionally, Current PTC systems will make train tracks less efficient. Today’s systems do not estimate braking times accurately. As a result, these systems slow a train prematurely when compared with human control, reducing the number of trains that can fit on a section of track.

The Federal Railroad Administration (FRA) has studied PTC repeatedly. In 2005 the agency noted that a regulatory mandate for PTC system implementation [can] not be justified based on cost-benefit principals and direct safety benefits.

Why despite FRA’s advice is positive train control mandatory? Advocates who had been pushing for the technology for 20 years saw an opening. At the same time, many members of the House and Senate were swept up in the emotion of the situation and failed to consider the cost/benefit ratio or alternative technologies.

Fortunately, Congress has a chance to learn from its mistake. No action should be taken until a preliminary investigation is completed. FRA should study other technologies including Amtrak’s existing automatic train control to determine if there is a long-term solution that is just as effective at a more reasonable price. Safety policy is too important to be decided in the emotional aftermath of a tragic accident.

Special Interests Use Amtrak Accident to Push for Unneeded Solutions

After a tragedy, the knee-jerk reaction is to take some action. It does not matter if that action actually fixes the problem, as long as something is done. As a result of the Amtrak train derailment in Philadelphia, Amtrak boosters are screaming for more funding and Positive Train Control (PTC) advocates are beating the drum for mandatory installation of PTC. Yet facts reveal an older, cheaper technology with minimal costs could have prevented this accident.

While the National Transportation Safety Board is investigating the crash, several facts have been confirmed. The train accelerated from 70 miles per hour (its normal operating speed over this section of track) to 106 miles per hour in the last minute before the crash. When the train reached a curve the speed caused the train to derail. The train’s engineer, who suffered a concussion, cannot recall much information about the crash. But records show that that he engaged the train’s emergency braking section before the wreck.

The most likely scenario involves the engineer mistakenly accelerating the train (either because he fell asleep or because of error) and then realizing his mistake and applying the emergency brake too late to stop the derailment. However, there are other possibilities. One theory is that the train experienced some kind of mechanical failure preventing the brakes from working. Another theory is the track was warped, split or otherwise defective. Until we know the cause, we won’t know how to prevent it from happening again. Whatever the cause, the full investigation is likely to take a year.

Yet that lack of information has not stopped interest groups from releasing breathless press releases. According to the Amalgamated Transit Union:

While early reports say excessive speed was a factor in this tragic accident, the lack of positive train control that would have automatically slowed the engine down and the well-documented poor condition of our nation’s rail system is just the latest example of the way in which Congress refuses to adequately fund transportation.

According to the Midwest High Speed Rail Association:

The fact that the crash happened on a 50 mph turn on a high-speed line, shows how outdated our infrastructure is. On high-speed lines across the world, curves like this would have been straightened out to allow for continuous high-speed travel. Hazards like this curve need to be removed to prevent accidents of this nature and allow for much better service on the line.

Some groups are using this accident and the tragic loss of life to advance their agenda. Their statements suggest that if Amtrak had received more government funding, than this problem would not have happened. Yet the bigger problem is how Amtrak spends its revenue. Amtrak makes a profit on this line–the Northeast Regional Service. In contrast, Amtrak’s long-distance routes such as the California Zephyr that has just 376,000 riders, lost $600 million in 2012. If Amtrak had used the money it made on the northeast corridor to improve safety on the corridor, instead of diverting it to all its money-losing routes, this accident likely would not have occurred.

Other groups suggest that if only positive train control was implemented, this and most every accident would be prevented. Yet PTC is only forecast to prevent 4 percent of railway accidents. While the cost to install a nationwide class I PTC system is $13 billion, consulting firm Oliver Wyden estimates PTC has a 20-year benefit of between $0 and $400 million. Even if all $400 million in benefits are realized the cost/benefit ratio range is $1 in benefits for every $20 spent on the system. In 2005 the Federal Railroad Administration (FRA) noted that a regulatory mandate for PTC system implementation [can] not be justified based on cost-benefit principals and direct safety benefits.

Most analysts are ignoring a far simpler cheaper technology that could have prevented this crash, Amtrak’s existing automatic train control system that regulates speed. Automatic train control systems can be programmed to send information to a train about the speed limit for a section of track. Equipment inside the locomotive senses when a train is exceeding the limit and sets off an alarm. If the engineer fails to slow the train, the system triggers the train’s emergency brakes. Amtrak installed this technology on the southbound track but not the northbound track, because among other trains it slows trains too much. If the technology was installed on the northbound track, the train likely would have gone around the curve at 80 miles per hour and not come off the track.

So even though cheaper technologies are available, advocates appear to be taking advantage of an accident to lobby for more money or unnecessary safety systems. Pushing for unnecessary solutions is a disturbing way to commemorate those who lost their lives.