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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.

Tolling is a Critical Funding Tool for Texas

Over the last two years, a groundswell of opposition has arisen to tolling in Texas. A number of groups including Toll Free Texas and Texans Uniting for Reform and Freedom have been lobbying to eliminate all tollroads in the state. Several Texas State Representatives and Senators have filed multiple bills to prioritize non-tolled roads and make building tolled roads much more challenging. Certain bills such as HB 856 that requires MPOs to stream, record and publish meetings are not anti-tolling. Other provisions such as one in HB/SB 1834 that ensures tolls are used to repay the cost of the road are a positive. But as a whole, the package of bills that requires elected officials to affirm support for a toll project multiple times and requires the conversion of tolled roads to non-tolled roads within 20 years is troubling.

The frustration with tolling is understandable. Nobody wants to pay any more than they have to. But everybody agrees having a quality roadway network is critical. Surface transportation policy in Texas and across the country has long been based on a users-pay/users-benefit principle. The users payment system has several advantages. First, it is fair. Those who pay the users fees receive the benefits. Second, it is proportional. Those who driver farther pay more. Third, it is self-limiting. A user tax that can only be spent on a certain purpose prevents officials from increasing taxes. Fourth, it is predictable. A user fee does not have to worry about economic downturns or political whims. Fifth, it is an investment signal. It answers the question of how much infrastructure to build.

Historically, the best user fee was the gasoline tax. People traveling longer distances used more fuel; heavier vehicles that damaged the road consumed more gasoline than light duty cars. However, the gas tax is no longer a good proxy for highway use. The emergence of electric and hybrid vehicles means some people pay dramatically more to drive than others. Now, the folks who pay the most are very often rural drivers despite the fact that rural roads are some of the cheapest to maintain.

And if that is not bad enough, there is the question of diversions. The federal government diverts about 30% of its gas tax funding to transit, biking, walking and invasive species removal. Certain environmental groups got all bent out of shape when the latest surface transportation bill, Moving Ahead for Progress in the 21st Century (MAP 21), outlawed the use of gas tax revenue for transportation museums. Oh the horror! But the policy changes fixed a fraction of the problems. The changes said “no” to gas tax funding for a transportation museum in Illinois but allowed funding to continue for recreational trails in Oregon.

Texas also has a statewide gas tax. But similar to the federal gas tax, it diverts money to projects that have nothing to do with roadways. By law, 25% of motor fuel tax proceeds are diverted to education. Education is clearly important, but using gas taxes to fund education is a clear violation of the users-pay/users-benefit principle. Some in the Texas legislature hope to end the education diversion but such a change is extremely unlikely to pass. So neither the federal nor state gas taxes are true user fees.

Texas policy makers have floated a number of other transportation funding ideas, none of which is a good user fee. With sales taxes there is no link between how much someone buys and how far they travel. Throughout the country there has been tremendous pressure to charge more in sales tax than is needed for a specific program and then use the excess taxpayer revenue to support non-transportation improvements.

Last year, Texas voters approved spending 50% of the royalties from oil and gas drilling on highways. While voters and policy makers were understandably looking for a good political solution, there are several reasons why this is not the best long-term option. The link between transportation and increased drilling is weak. More troubling, with the price of oil lower, hydraulic fracking no longer makes economic sense in some Texas communities. Any decline in fracking will lead to less revenue.

So while it might not be popular tolling is the most realistic solution for funding large parts of Texas’ transportation system. Unlike the gas tax, it is 100% dedicated to roadways. Unlike the gas tax, an increase in electric and hybrid vehicles will not affect its viability as a funding source. Unlike the gas tax, it can be increased during peak hours and decreased during off-hours to improve mobility. Unlike fracking it provides a stable revenue source. Unlike a sales tax it is a good proxy for road usage and can serve as a signal to investors when it is time to invest in a facility. Put simply, tolling has to be part of the solution.


Committee for Responsible Budget Highway Plan has Issues

Recently, the Committee for a Responsible Federal Budget, released a report titled, “The Road to Sustainable Highway Funding.” The committee, which includes Erskine Bowles and Alan Simpson, builds on many of the transportation recommendations included in the Bowles-Simpson report. It recommends passage of comprehensive tax reform while ensuring the Highway Trust Fund remains adequately funded. It includes three steps:

  • Getting the Trust Fund Up to Speed ($25 billion) by paying the “legacy costs” of pre-2015 obligations with savings elsewhere in the budget;
  • Bridging the Funding Gap ($150 billion) with a policy of raising the gas tax by 9 cents and limiting annual spending to income; and
  • Creating a Fast Lane to Tax Reform to help Congress identify alternative funding and financing.

The report is a great attempt at creating a sensible national transportation policy which is something that seems to elude Congress. Many of its suggestions are excellent. These include reducing funds for the Congestion Mitigation and Air Quality program (CMAQ), eliminating Davis-Bacon requirements and killing the transportation alternatives program. Keeping federal transportation funding constant is an excellent goal. Limiting future spending to income is a great idea that seems obvious everywhere but Washington, D.C. Encouraging future highway bills to make tax and spending decisions together would be great policy, although I am not sure how this occurs without the Ways and Means Committee losing power, which would never happen politically.

However, some of the bill components are troubling. First, to get the Highway Trust Fund up to speed, the plan spends $15 billion reducing and reforming agricultural subsidies and $10 billion extending the mandatory sequester. While reforming farm policy is a great idea, since paying farmers not to plant certain crops has always been one of our most curious policies, such funding should not be directed to the highway trust fund. Rather, it should pay down general fund debt. There is no real link between farming and transportation.

Second, a two-year highway bill is better than a series of extensions but does not provide the needed long-term certainty. It takes 10 years or longer to complete many highway projects. Securing sufficient funding requires a mix of public and private funding that requires complex deals. DOTs need long-term certainty, and two years is not long-term enough. The traditional six-year bills are also a little short. Ten years would be ideal.

Third, the group proposes to schedule a 9-cent increase after one year. Such an increase is reasonable but only with significant program reforms. Policy makers should also eliminate Buy America. Federal caps on financing tools including Private Activity Bonds need to be increased. And while a 9-cent increase would be a short-medium term solution, increasing fuel efficiency and the presence of electric and hybrid cars, makes the gas tax a poor long-term solution.

Finally, the report’s acceptance of the blanket spending cuts in the sequester (as a baseline) is poor policy. The sequester cut discretionary programs such as Next-Gen which is a core national priority for aviation while not touching formula programs such as streetcars which are neither a national nor a core transportation program. The sequester cuts should be examined to ensure that areas cut do not serve a vital national function.

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.

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.


Grant User-Friendly Tolling Flexibility for Highways

Today I want to offer the eighth and final recommendation for reforming U.S. surface transportation policy. Robert Poole and I implore Congress to grant user-friendly tolling flexibility for Interstate highway construction.

America’s Interstate highways are reaching the end of their 50-year design life, and will all need to be reconstructed over the next several decades. Many corridors — especially those that are primary truck routes — will need additional lanes. The estimated cost of reconstruction and prudent widening is nearly $1 trillion — and no funding source exists for this purpose. Urban Interstates experience chronic congestion that is not being systematically addressed.

The U.S. has a tolling pilot program, but all the slots are currently used. To allow other states to rebuild their Interstates through tolling, expand the three-state Interstate System Reconstruction and Rehabilitation Pilot Program to all 50 states and allow participating states to use it to reconstruct all Interstate highways in their states, not just one. To ensure the support of highway users, provide stronger protections to ensure that the tolls are pure user fees that can be used only for the capital and operating costs of the rebuilt rural and urban Interstates. These protections should include:

  • statutory limitation on use of the toll revenues to the rural and urban Interstates only
  • beginning tolling only after an Interstate segment has been rebuilt
  • requiring that tolling be all-electronic and interoperable nationwide
  • granting rebates of state fuel taxes to Interstate toll-payers for the miles driven on the newly tolled and rebuilt Interstates

The current three-state pilot program is deficient in that it allows a state to hold onto its slot without using it, precluding other states from going forward. And by limiting toll-financed reconstruction to a single corridor, it creates geographic inequity among highway users and precludes a responsible state DOT from offering a 20-year plan under which all of its Interstates will be reconstructed using toll financing. The highway user protections are critically important, given the well-justified skepticism of highway user groups based on a history of some states using toll road revenues for other transportation purposes and even “economic development.” All highway user groups endorse the users-pay/users-benefit principle, but they will only support toll-financed reconstruction if the tolls are guaranteed to be pure user fees, not a combination of user-fee and general transportation tax.

Since there is no identified source of funding for the $1 trillion cost of Interstate reconstruction, a major benefit of this change is to provide such a funding source, available to states that comply with the user-friendly provisions. Since a per-mile toll is a mileage-based user fee, if all 50 states opted in, that would convert 25% of all vehicle-miles of travel to mileage-based user fees, an important first step toward replacing per-gallon fuel taxes. If the toll rates were limited to covering the capital and operating costs of the rebuilt system, highway users would pay somewhat more than they do now to use the Interstates, but would receive much better services.

Recognize All HOT Lanes as Fixed Guideways for Transit

Our recommendations for reforming surface transportation policy have been so well received that we want to offer two more ideas. Our latest recommendation focuses on high occupancy toll (HOT) lanes that reduce congestion and provide a virtual guideway for express bus service. My colleague Robert Poole and I recommend that the federal statute be changed so that the Federal Transit Administration (FTA) counts all high occupancy toll (HOT) lanes count as “fixed guideway miles.”

Federal transit policy recognizes that an HOV lane converted to a variably tolled HOT lane provides buses with a “virtually exclusive guideway,” since variable pricing permits buses and cars to travel uncongested even during peak periods. Such HOT lane miles are counted toward a metro area’s total of “fixed guideway miles” for funding purposes, if used by transit buses. But the Federal Transit Administration withholds this designation for HOT lanes added as new capacity, even though such lanes function identically to those converted from HOV lanes. Region-wide BRT/express bus service will be fostered by creating seamless HOT networks. But a large fraction of such networks will be new capacity, since most freeways do not have HOV lanes to convert.

Changing the policy will require two modifications. First, revise the definition of “fixed guideway miles” to include all HOT lanes, whether HOV conversions or new capacity. This would acknowledge the functional identity of priced lanes as virtual fixed guideways, regardless of how they came about. Second, permit transit agencies to use New Starts and Small Starts grant funds to pay for a portion of new-capacity HOT lanes, based on the projected share of passenger miles of travel that will be generated by bus service on the new-capacity HOT lane.

This change would provide travel options and improve express bus service in the U.S. Very few state DOTs or transit agencies can afford to develop bus-only lanes on freeways, since the vast majority of their capacity would be unused even during peak periods. HOV lanes are frequently over-used, providing little or no time-saving advantage for express-bus service. HOT lanes are a proven way to use all the capacity of a specialized lane, with buses and paying vehicles both benefiting from congestion management via variable pricing. Current FTA policy artificially distinguishes between HOT lanes based on how they came about, thereby discouraging creation of seamless networks that require construction of new lanes. Under the second part of this policy, transit agencies could partner with a toll agency or state DOT to jointly develop new HOT/BRT lanes, sharing in any net toll revenues (after covering capital/debt-service and operating costs) in proportion to the agency’s contribution to the capital costs of the project. Thus, in addition to helping create the network of virtually exclusive bus lanes, the transit agency would receive part of any net toll revenue as an additional ongoing source of revenue.

This change would not cost taxpayers a dime, since it would merely create new options to encourage HOT/BRT lanes and networks. It would give transit agencies and highway agencies a new incentive to work together creating HOT/BRT networks, a highly cost-effective way to increase transit infrastructure.