[Joint House and Senate Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 108-331
FINANCING OUR NATION'S ROADS
=======================================================================
HEARING
BEFORE THE
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
MAY 6, 2003
__________
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JOINT ECONOMIC COMMITTEE
[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]
SENATE HOUSE OF REPRESENTATIVES
Robert F. Bennett, Utah, Chairman Jim Saxton, New Jersey, Vice
Sam Brownback, Kansas Chairman
Jeff Sessions, Alabama Paul Ryan, Wisconsin
John Sununu, New Hampshire Jennifer Dunn, Washington
Lamar Alexander, Tennessee Phil English, Pennsylvania
Susan Collins, Maine Adam H. Putnam, Florida
Jack Reed, Rhode Island Ron Paul, Texas
Edward M. Kennedy, Massachusetts Pete Stark, California
Paul S. Sarbanes, Maryland Carolyn B. Maloney, New York
Jeff Bingaman, New Mexico Melvin L. Watt, North Carolina
Baron P. Hill, Indiana
Donald B. Marron, Executive Director and Chief Economist
Wendell Primus, Minority Staff Director
C O N T E N T S
----------
Opening Statement of Member
Senator Robert F. Bennett, Chairman.............................. 1
Witnesses
Panel I.
Representative Mark R. Kennedy................................... 3
Representative Marilyn N. Musgrave............................... 5
Panel II.
Statement of Robert W. Poole, Jr., Director of Transportation
Studies and Founder, Reason Foundation......................... 9
Statement of Robert Atkinson, Ph.D., Vice President, Progressive
Policy
Institute...................................................... 12
Statement of William R. Buechner, Ph.D., Vice President,
Economics and Research, American Road and Transportation
Builders Association........................................... 15
Statement of Michael Replogle, Transportation Director,
Environmental
Defense........................................................ 18
Submissions for the Record
Prepared Statement of Senator Robert F. Bennett, Chairman........ 31
Prepared Statement of Representative Mark R. Kennedy............. 32
Prepared Statement of Robert W. Poole, Jr., Director of
Transportation Studies and Founder, Reason Foundation.......... 33
Prepared Statement of Robert Atkinson, Ph.D., Vice President,
Progressive Policy Institute................................... 35
Prepared Statement of William R. Buechner, Ph.D., Vice President,
Economics and Research, American Road and Transportation
Builders Association........................................... 40
Prepared Statement of Michael Replogle, Transportation Director,
Environmental Defense.......................................... 48
FINANCING OUR NATION'S ROADS
----------
MONDAY, MAY 6, 2003,
Congress of the United States,
Joint Economic Committee,
Washington, DC
The Committee met, pursuant to notice, at 10:05 a.m., in
Room 628, Dirksen Senate Office Building, the Honorable Robert
F.
Bennett, Chairman of the Committee, presiding.
Present: Senator Bennett.
Staff Present: Donald Marron, Ike Brannon, Wesley Yeo,
Shaun Parkin, Colleen J. Healy, Trish Kent, Jeff Wrase, Brian
Jenn, Chad Stone, John McInerney, Wendell Primus and Rachel
Klastorin.
OPENING STATEMENT OF SENATOR ROBERT F. BENNETT,
CHAIRMAN
Senator Bennett. The hearing will come to order. I just
discovered a new piece of technology here. You have to push the
button to get the loudspeaker to work.
Congress is currently contemplating the renewal of the
Transportation Equity Act for the 21st Century or TEA-21. And
most of the debate that is going on in Congress has to do with
the details of that Act. But in the middle of that debate over
spending formulas and budget problems, I think we should take
some time to listen to innovative voices that can be heard
suggesting new and creative ideas. And the purpose of this
hearing this morning is to talk about those ideas. So those who
are coming here to rehash the TEA-21 arguments, you might want
to go someplace else, or you might want to open your minds to a
different subject and a different look here.
The first impact of what is going on in our highways hits
us all personally in the quality of life. Our roads are
becoming more and more congested every day. Getting stuck in
traffic has become a common experience of everyone, and it is
the all-purpose excuse whenever anyone doesn't keep an
appointment or shows up late. When a simple trip across town
becomes a logistical nightmare, then something is seriously
wrong.
Now there are those that will say this is beyond the
purview of Congress, and that's true. But Congress has to
address it because of the role that the Federal Government does
play in our nation's highways. The average driver spends 62
hours per year in traffic. So if we can cut that down,
everybody feels a little bit better. But let's put it into
economic terms. Because congestion isn't just a problem for our
families that keeps us away from the things we'd like to be
doing. It has a very significant economic impact.
The estimated cost of traffic jams due to wasted time and
fuel in 2000, the last year for which we have figures, was
$67.5 billion. If we want to put that in perspective, that's
enough to pay for the President's entire proposed tax cut. When
you stretch it over a ten-year period and then put compound
interest on it, that would give us enough money for the
economic stimulus package that the President is proposing. I
call this the ghost tax of congestion, and it is following us
around wherever we go.
Transportation makes up roughly 10 percent of the nation's
economy, but the importance of transportation far exceeds that
amount, because the transportation network makes it possible
for us to move the goods and services and people that are
essential for the economy's activity. In a world of just-in-
time delivery and customized production, if the transportation
arteries become sclerotic, why the whole body pays a price for
that. The old line is ``time is money.'' We're losing a lot of
time, and that means we're certainly losing a lot of money in
the congestion on the roads.
Since the automobile came into existence, we have typically
funded the roads through the gasoline tax. And since the
interstate highway system was created in the Eisenhower
Administration, the gasoline tax has meant that for interstate
highways, the Federal Government provides the huge share of
funding, tempting some people to shift everything over to the
interstate system because they get 90 cents out of every dollar
spent from the federal gas tax.
But the ability of the gas tax to finance the system of
interstate highways has deteriorated over the years for a
number of reasons. The cost of building roads has increased.
Inflation has eaten away the value of the gas tax. It is not
indexed for inflation, but was passed as a straight dollar
amount. And gas tax revenues have been diverted for other kinds
of transit.
We saw this dramatically in my own State of Utah. As we got
ready for the Olympics, we realized that we could not hold the
Olympics if we did not solve the transportation problem. And we
had a serious transportation problem in Utah. In order to get
it solved in time for the Olympics, we had to build it
primarily with State funds. There are those who accused the
Utah Olympics of taking $1.6 billion of pork barrel money in
order to solve this transportation problem and use the Olympics
as an excuse. Those who made that charge didn't realize that of
the $1.6 billion we spent on modernizing I-15, $1.4 billion
came from the State. We couldn't wait for the 90 percent in
federal dollars. We had a challenge that had to be solved
immediately.
The ironic thing about it is that I-15 was open and
marvelous for the Olympics. The world went away saying that
Utah had done a superlative job on its transportation, And as
soon as the Olympics were over, we discovered major, major
traffic delays at both ends of the amount of work that had been
done on I-15. We had taken the congestion out of downtown Salt
Lake, but re-created it 106 blocks away where the five-lane I-
15 went back down to the traditional three, and there was the
traffic jam all over again.
So not only has our ability to fund road construction by
gasoline taxes diminished, the roads themselves have
deteriorated, which means more expenditures are necessary.
Again, I-15 in Utah was ready for this kind of repair whether
we had the Olympics or not. We had to do it because the
previous design was for roughly 30 years. It had been over 40
years since anything had been done. And the population had more
than doubled in that period of time. So many of our interstate
highways have reached the end of their useful lives at the same
time that ridership has increased.
So we're faced with a very serious challenge that has
significant economic impacts, can slow down the entire economy
and that requires tremendous financial resources. So rebuilding
our interstates is going to involve much more than simply
putting new asphalt where the old asphalt used to be.
For many of my colleagues, raising the gas tax seems to be
the primary solution to the challenge of maintaining our
infrastructure. The last time we did that was under the
presidency of Ronald Reagan, and that remains an option to be
looked at, but there are other options that merit serious
consideration, and it is to hear those options that we are
holding this hearing today.
So we've gathered a host of experts to inform us about
innovative ways that communities all across the United States
and really throughout the world have been using to finance and
construct new roads and manage increasing traffic pressure. I'm
proud to say that our witnesses today are some of the nation's
leading experts on transportation issues. They publish widely
on the issues that we have before us.
Before we hear from this panel, we're going to hear from
Representative Mark Kennedy, who has introduced the FAST Act--
Freeing Alternatives for Speedier Transportation. Did I get
that title correct?
Representative Kennedy. Yes.
Senator Bennett. Good. He wants to amend toll restrictions
in TEA-21. I understand that Senator Wayne Allard is expected
to introduce a similar bill here in the Senate. Representative
Marilyn Musgrave, a co-sponsor of the bill, was scheduled to be
with us, and if her schedule allows her to come, we will hear
her as well. She recently chaired the Transportation Committee
in the Colorado State Legislature.
So, Congressman Kennedy, we will start with you. We welcome
your insights and appreciate your willingness to share your
testimony with us. We will also include in the Committee's
record testimony submitted by the Congressional Budget Office
and the General Accounting Office on these subjects.
Congressman Kennedy, you honor us with your presence.
[The prepared statement of Senator Robert F. Bennett
appears in the Submissions for the Record on page 31.]
PANEL I
OPENING STATEMENT OF REPRESENTATIVE MARK R.
KENNEDY, A MEMBER OF CONGRESS FROM MINNESOTA
Representative Kennedy. Well, Chairman Bennett, thank you
very much for holding this hearing on this very important issue
about how do we make sure we get the resources necessary to
unlock the congestion that's strangling our economy and our
cities, whether they be in Utah or Minnesota. And I would like
to thank you for inviting me to talk about the legislation that
I introduced with Representative Adam Smith of Washington
State. This legislation, as you mentioned, will soon be
introduced by Senator Allard here in the Senate, the Freeing
Alternatives for Speedy Transportation, or FAST Act.
Mr. Chairman, our nation is stuck in traffic, as you
clearly stated. We are badly in need of substantial investment
in our road system. That is something I think everyone
assembled in this room would agree on. The problem is, there's
a vast gulf between the investment we need to make and the
resources that we really have available. And even with a
radical increase in the gas tax, even the most radical one
proposed, there would still be this gulf. We have the solution
to this problem. We have solutions that we are ignoring, and
many of those are tried and true.
The user fee for many years was something that we used to
fund many of our roads with. In fact, up until the time when we
instituted the interstate highway system, this was a
significant source of revenue. But in modern times, it has
fallen into disfavor, at least at the Federal Government level.
But despite its lack of use or prohibition from use on federal
interstates, many states have been using this to provide
themselves with critically needed alternative revenue streams
and provide a free flow of people and commerce on their roads.
But we seem to be afraid to use what has been learned at the
states, at the federal level. We should not ignore the
successful experimentation from these laboratories of
democracies.
The bill that I introduced with Adam Smith, H.R. 1767, the
FAST Act, draws on the experience of the states and opens up
the federal system to the innovations they have used with great
success on their own road systems. It removes the outdated
prohibition in federal law that prohibits states from using new
lanes funded by fee revenue on interstate systems under certain
conditions. And I firmly believe that the people in the
trenches are by far the people best equipped to know how to
solve the problems. This really pushes a lot of that power back
to the states to help them solve much of the congestion that
they face.
And that is why this would provide them the maximum
flexibility possible in how they use these new revenue systems
but take steps to ensure the integrity of the interstate system
as well as the confidence of the road user. The states must
ensure that the driver has a choice to use the new FAST lane,
that it is a voluntary user decision to pay a fee to use the
new lanes based on the decision that the fee is worth the value
received. The fee can only be collected by means of an
electronic non-cash mechanism. No tolls, no toll booths to slow
down traffic. Revenues collected on the FAST lanes have to be
dedicated to the lanes on which they are collected. These fees
can only be collected under my bill on the new lanes so that
the user has the confidence that they are getting something for
the fee they are paying.
The final condition is that the fees go away when the cost
of the construction on the new lanes has been recouped. The
collection of FAST fees on FAST lanes is temporary. And right
now under our current system, there is nothing to assure that
if the market says a road should be there, that a road will be
there, whereas under this bill, we would empower not only the
states or private entities, but counties, as in the case of the
Katy Freeway down in Harris County in Texas, can step forward
and solve these critically needed needs.
Mr. Chairman, I have a prepared statement that goes into
more details on the problems we are facing and why I think FAST
Act is a big part of the solution, and I ask that it be
accepted into the record.
[The prepared statement of Representative Mark R. Kennedy
appears in the Submissions for the Record on page 32.]
Senator Bennett. Without objection, it will be put into the
record. Help me understand. Under your bill, then, fees would
accumulate until the cost of the lane or highway, if an entire
highway is built that way, is covered. Would you include
amortization of the money? That is, interest paid on the money
while it was in use?
Representative Kennedy. Yes, we would. In fact, we also
provide that in many cases, you may not just need to build the
lane, but the interchanges may need to be adjusted in order to
accommodate the lane. You may need to adjust some bridges.
Every time I drive under a bridge in my own State, I always say
``is there room here for an additional lane or are we going to
have to do something to accommodate an additional lane?'' Those
costs that can be directly attributable would be allowed to be
paid for by the fees, and clearly the amortization and interest
thereto.
Senator Bennett. So if it costs $20 million to build a lane
and it didn't get paid for ten years, the interest on $20
million would also be covered by the amount of fees collected?
Representative Kennedy. Yes it would. And I think that this
also opens up the opportunity for private firms to step forward
and help with this congestion relief. I think a number of
private firms would consider stepping in and paying for those
lanes in exchange for getting their money recouped with a
preset rate of return that would be approved by the states,
whether that be the MINDOT, their local department of
transportation or their public utility commission. I think the
idea of allowing for a return, whether it be interest or a
market return to a private firm, should be part of what we
incorporate into the FAST lanes.
Senator Bennett. Thank you very much.
Representative Kennedy. Thank you, Mr. Chairman. And I do
look forward to hearing the testimony of not only Congressman
Musgrave but Rob Atkinson and Bob Poole who are, as you stated,
very strong experts in this field, and we appreciate their
testimony here as well.
Thank you.
Senator Bennett. Very good.
Representative Musgrave, we welcome you and appreciate your
willingness to come share your thoughts with us. The floor is
yours.
OPENING STATEMENT OF REPRESENTATIVE MARILYN N. MUSGRAVE, A
MEMBER OF CONGRESS FROM COLORADO
Representative Musgrave. Thank you, Mr. Chairman. I
appreciate so much the opportunity to come before you today to
discuss transportation, one of the most important issues that
we face. Of course, this year Congress will create vital
transportation reauthorization policy in TLOU, and I am very
committed to working with my colleagues to ensure that we have
enough resources to match our transportation needs.
However, I have an equal desire to defend the hard-earned
dollars of taxpayers in Colorado and all around the Nation.
There are often simple solutions that are offered in regard to
our transportation funding deficits, indexing and increasing
the gas tax. And I'd just like to go on record and say I oppose
those things. While they appear to offer a quick and easy
solution, of course they would have long-range effects on our
economy, I believe effects that would be very detrimental.
Something that I'm very excited to be working on is the
FAST Act. That actually empowers state and local governments by
giving them the authority that they need to problem solve. The
FAST Act allows interstate users to pay a user fee, something
that makes sense to almost everyone, to drive on a newly
constructed interstate lane. And there wouldn't be any problem
with the onerous tolls, toll booths and something that would
make everyone slow down and impede the flow of traffic. The
fees are collected voluntarily, and they must be dedicated to
the road on which they were paid. Once the revenues are paid
off, then the fee collection ends. And people love that.
This is an innovative approach that gives states, local
government and citizens more options in solving our
transportation problems. I'm sure everyone in this room is
aware of how much people sit in their cars and wait to get to
where they need to go. On a national basis, congestion costs
more than $67 billion annually, more than 3.6 billion hours of
delay, and 5.7 billion gallons of excess fuel is used. The
average driver is losing more than a week-and-a-half of work--
that's over 62 hours a year--sitting in gridlock. The average
cost of congestion per peak road traveler is $1,160 a year. And
for every billion dollars invested in federal highway and
transit spending, we know that we have great job creation of
over 47,000 jobs that are created or sustained.
My concern about increasing the gas tax is reflected in
this fact right here. More than 64 percent of the nation's
freight moves on highways. So what's going to happen if we
increase the gas tax? What are those items that are hauled in
those trucks? What's going to happen to the cost of those? We
all know that it would go up.
Sadly, nearly a third of all fatal crashes each year are
caused by substandard road conditions and roadside hazards.
We're all concerned about saving lives on our roads. More than
42,000 Americans are killed and 3.3 million are seriously
injured each year on the nation's highways. So we have to make
some significant investment in the condition of our
transportation infrastructure. We don't want it to deteriorate
any further. We know that more and more people are in their
cars for longer times, and we need some solutions.
Currently, 2.5 cents of the per gallon tax on gasohol is
deposited into the general fund instead of into the HTF.
Depositing this revenue into the Highway Trust Fund where it
belongs would increase revenue by about $600 to $700 million
each year. We also know that under TEA-21, we lost revenue.
$800 million was transferred from the Highway Trust Fund into
the General Fund during final negotiations of TEA-21.
Absolutely, this money should be placed back into the Highway
Trust Fund. Since TEA-21 was authorized, the Highway Trust Fund
is the only federal trust fund that does not have the interest
credited to it. Balances in the HTF earn interest, but that is
credited to the General Fund. Between fiscal year 1999 and
2003, it's estimated that the HTF lost about $5.5 billion in
interest.
During my tenure in the State Legislature in Colorado, we
passed some very innovative programs under Governor Bill Owens.
I served as chairman of the Senate Transportation Committee,
and I believe that we have some solutions that we could offer
to the Federal Government respectfully offer those solutions.
Number one, public-private initiative. That allowed
Colorado Department of Transportation to leverage private
finances to fund transportation projects. It saved the state
time and money while allowing private industries to profit from
the toll user fees. We also created a tolling enterprise
authority. Colorado now has the ability to establish a tolling
authority to general funds for transportation projects.
During the debate in the state legislature, it was
suggested that taken together, the public-private initiative
and the tolling authority would generate approximately $4
billion for the state over a 20-year period. Also, we passed
TRANS, Transportation Revenue Anticipation Notes. Now this was
looked at very critically. We even had to get an opinion from
our Supreme Court as to whether or not we could do it in
Colorado. But it passed the muster of the Court, and it's been
a very successful, innovative approach to highway funding. It
allowed Colorado Department of Transportation to sell bonds to
generate money up front at a very important time for
construction projects. It saved time and inflation costs by
speeding up the projects. In our State, we have a list of very
high priority transportation projects, and we call those the
seventh pot. The TRANS bond program has accelerated the
completion of those projects in those critical areas.
We also have State Infrastructure Banks. Inspired by a
Federal Government pilot program, Colorado established this
bank which provides very low interest rate loans to private
companies and local governments for the purpose of funding
transportation projects. Separate accounts exist for highways,
rail, aviation and transit projects. Colorado took this federal
pilot program included in ISTEA, but limited to five states by
TEA-21 and made it successful and profitable. This would be an
easy program for us to duplicate at the federal level, and if
implemented, each state would have more flexibility and greater
opportunities to expand its infrastructure.
There are great needs in our nation for transportation
funding. Again, I oppose increasing the gas tax or indexing,
but I am certainly supportive and would like to compliment my
colleague on the FAST Act, and I believe that that affords us
some relief in this area.
Senator Bennett. Thank you very much.
Let me ask two quick questions before we go to our other
panel. I used to chair the Subcommittee on Legislative Branch
Appropriations, and discovered that the Taft Memorial, which
was built entirely with private funds as a memorial to the late
Senator Robert Taft, is now the responsibility of the Federal
Government to maintain. And the maintenance costs are now
higher than the original cost to build the thing, the Taft
Carillon which you hear pealing out on the Senate side from
time to time.
That caused me to think about the maintenance costs of
these lanes that would be built under the FAST Act. Is there a
possibility that at some point charges could be reinstituted to
maintain these lanes, or would they be maintained by the
general tax fund once they have been paid for? Or do you
address that? Do you leave that up to the states?
Representative Kennedy. Mr. Chairman, in my bill, we do
provide for the maintenance of those lanes to be paid for by
the fees as well. I think that's also an attractive reason why
having private participation up front means that if they're
going to have to pay for the maintenance, they maybe build the
road better from the very beginning. But we do provide for
that. And although it expires when it's paid for, there might
be a small charge that may or may not make sense for the
maintenance.
But I really think with the growing congestion that we
have, once you get to the end of the 10 or 15 years to pay for
the initial lane, that we're going to probably need to add
another lane alongside that, to expand that as well, to keep
the interstate system growing with the needs of the community,
and the incorporation of paying for maintenance could be
included with that expansion as well.
Senator Bennett. Once the lane is paid for, let's take the
theoretical assumption that it is paid for and there is a
sufficient endowment to cover maintenance and all charges
disappear. Does that mean it is then open to all traffic?
Representative Kennedy. It would be open to all traffic and
it would revert back to being a lane like any other lane today
on the interstate system that has no additional cost.
Senator Bennett. I see. That's a very innovative idea, and
we thank you very much for your participation here this
morning. Appreciate both of you coming over.
Representative Musgrave. Thank you, Mr. Chairman.
Representative Kennedy. Thank you for your interest.
Senator Bennett. Thank you. We'll now go to the next panel.
PANEL II
Senator Bennett. We appreciate all of you being here. We
have with us Robert W. Poole, Jr., who is the Director of
Transportation Studies at the Reason Foundation in Los Angeles.
We have Dr. Robert Atkinson, who is Vice President and Director
of Technology and the New Economy Project at the Progressive
Policy Institute.
We have Dr. William Buechner, who is Vice President of the
American Road and Transportation Builders Association. He's
Vice President for Economics and Research and their chief
economist. And then we have Michael A. Replogle, who is
Transportation Director of Environmental Defense.
Gentlemen, we appreciate your taking the morning with us.
We'll hear from you in the order in which I have introduced
you.
Mr. Poole.
OPENING STATEMENT OF ROBERT W. POOLE, JR., DIRECTOR OF
TRANSPORTATION STUDIES, REASON FOUNDATION
Mr. Poole. Thank you, Senator Bennett. I appreciate very
much the opportunity to be here this morning. My focus today is
on a potential breakthrough idea in urban transportation. As
you mentioned in your opening statement, our major cities, our
major urban areas are just plagued by traffic congestion. $67.5
billion per year in lost time and wasted fuel. And that number
has grown larger every single year that the Texas
Transportation Institute has produced those reports, which
suggests to me that what we've been doing about congestion is
simply inadequate, and we need to look for better approaches.
We have been investing as a nation mostly in two forms of
urban transportation in the last two decades, HOV (high
occupancy vehicle) lanes and mass transit. Unfortunately, the
2000 census revealed that in most cities, a smaller fraction of
people car-pooled to work in 2000 than used that mode in 1990.
Likewise, a smaller fraction used transit to get to work in
most cities, despite all that we've been investing in improving
those modes. And since population has continued to increase, we
have even more people trying to use pretty much the same amount
of freeway capacity to get to work. So it's no wonder
congestion has no reached record levels.
I'd like to suggest a fresh approach. Let's not abandon HOV
lanes, but let's figure out a way to use them more
productively. Let's not retreat from mass transit, but
likewise, let's develop a form of mass transit that competes
better with the automobile. And let's face the fact that we do
need, just as you needed it in Salt Lake City, we need more
highway capacity and figure out a way to build more. All three
of these come together in an approach we call HOT (high
occupancy toll) Networks.
The basic idea is as follows. We shift the operating
principle from HOV lanes to HOT lanes, High Occupancy Toll
lanes, convert them to high-speed premium lanes that drivers
can use by paying a market price, but which truly high-
occupancy vehicles like buses and van pools can use for free.
Use the toll revenue stream to support large-scale issues of
revenue bonds to generate the billions of dollars needed to
build out the existing HOV facilities into a complete, seamless
network, and then encourage transit agencies to run large-scale
regional express bus service on that seamless, uncongested
high-speed network.
Now this HOT Network idea of ours combines two recent
innovations. One is HOT lanes and the other is Bus Rapid
Transit, or BRT. Currently there are four HOT lane projects in
operation, two in California and two in Texas, but another
dozen are in the planning stages, including a proposal here in
Washington to add them to part of the Beltway in Virginia.
The basic idea is to sell the unused capacity to paying
motorists. HOT lanes use fully electronic toll collection.
There's no toll booths anywhere on them. And the two in
California use variable pricing to match supply and demand and
control access and thereby control congestion, to keep them
free-flowing at the speed limit at the busiest rush hour, which
is a pretty amazing achievement.
Bus Rapid Transit refers to high quality express bus
service usually on special lanes, and it's been proven in
cities like Ottawa, Bogota and Curitiba. BRT provides service
quality equivalent to most rail transit, but at a significantly
lower cost. The Federal Transit Administration is now a big
supporter of BRT based on busway operations in places like
Miami and Pittsburgh.
Now our HOT Networks concept would provide an uncongested
right-of-way throughout the metro area for BRT service without
any cost of that to the transit agency, because it would be
paid for by the tolls voluntarily paid by drivers.
Last year my colleague Ken Orski and I did a detailed study
of the potential of HOT Networks. We defined a network of this
sort as an interconnected set of limited access lanes on an
urban freeway system which buses and van pools could use at no
charge and everybody else would pay an electronic variable
toll. You'd begin such a network by converting the existing HOV
lanes to HOT lanes, then issue toll revenue bonds based on the
entire proposed future network to pay for the capital costs of
building out all the missing links and connectors to make it a
true network.
There would be four main benefits from such a network in an
urban area like Washington, DC. or Salt Lake City. First of
all, every driver in the region would have congestion
insurance. In other words, they would know that whenever they
really needed to get somewhere on time, they could opt to use
these pay lanes and get there quickly and on time in a reliable
fashion. And that's something that's simply not available today
on our freeways at any price to anybody.
The second benefit is there would be much greater
productivity than today's underutilized HOV lanes, because we'd
have a lot more people and vehicles per hour going through
them.
Third would be we'd be generating a large new funding
source for urban transportation over and above what's coming in
today with gas taxes, and that's very, very important at this
juncture.
And finally, there would be much simplified enforcement
compared to today's HOV or HOT lanes, because every valid
vehicle would have to have an electronic transponder, and you
can do all the enforcement electronically.
So the main question that Ken and I looked at in our study
was how feasible is the idea that these things could be
actually funded by toll revenues? Could they be largely self-
supporting? To answer that question, we had to model actual
networks or proposed networks in real cities and figure out
what they would cost to build and how much revenue they might
be able to generate.
We selected eight of the most congested areas in America:
Los Angeles, San Francisco, Washington, DC., Seattle, Houston,
Dallas, Atlanta and Miami. In each case we contacted the local
metropolitan planning organization (MPO), got their long-range
plan, looked at what they planned to build in HOV lanes over
the next 25 years, what they already have, and then we filled
in missing links and figured how much would it cost to build
everything either that they plan or that we said in addition
would be needed. And that gave us a basic estimate of the cost
to build eight of these networks in eight large cities, and it
turned out to be $43 billion. That's a lot of money, and it's
not going to happen unless we come up with a new source of
funding.
That was the easy part, though. The complicated part was
estimating how much revenue might be generated by people
voluntarily paying a premium toll to bypass congestion. And
fortunately, here we had a lot of data from the operating HOT
lanes in California. We had access to a lot of experts. We
developed a pricing model and tailored it to each network, and
we ended up with baseline estimated revenues of $2.9 billion
per year over the eight metro areas.
And we talked to investment banking people who fund toll
roads, and they said, well, you could probably issue about ten
times that annual dollar revenue stream in revenue bonds up
front. So that would be $29 billion in toll revenue bonds,
which would fund about two-thirds of the $43 billion in costs
to build out all of these networks. The balance of the money
would come from the existing highway trust fund monies that the
MPOs already plan to spend adding HOV facilities over the next
25 years. But with the up-front toll revenue bonds, these
networks could be built in the next ten years, not spread out
over 25 or 30 years, and we could build more because we'd have
that revenue source available.
Now to us, that looks like a win-win proposition. It shows
the power of market pricing to address the problem of traffic
congestion. But unlike attempts from the top down to mandate a
price being charged on every lane on a freeway system, our
approach would be strictly voluntary. The only people who pay
would be those who choose to use the lanes to bypass congestion
on the days and times of their choosing. Yet those paying
drivers would be making a significant financial contribution to
make possible the new infrastructure that could be used for
high quality Bus Rapid Transit.
Now my organization doesn't lobby, so I'm not here to
advocate legislation, but I'd point out that if Congress wants
to take an idea like this seriously, it would only take a few
simple changes to make this possible. As Congressman Kennedy
mentioned, there's a current problem with the federal ban on
putting tolls on interstates, so that would need to be adjusted
for these new lanes and for HOV lanes that become part of a
network like this. And local officials would need the
permission to exempt only buses and van pools from the pricing
on these networks.
It would also be helpful if there were a joint FTA/FHWA
program to actually help MPOs and state DOTS that wanted to
develop these networks and get assurances of long-term
stability and so forth.
But to sum up, the idea of congestion pricing or road
pricing has been floating around in transportation circles for
more than 25 years. It's always had a lot of promise in theory,
but it's usually been considered just politically impossible or
infeasible to do. Very few elected officials are willing to
impose a charge on something that people have gotten used to
getting for free, and motorist organizations don't want to pay
twice for using existing freeways. That's why we really need to
create true value pricing where people only pay if they get
something better. And that's what our proposal offers, we
believe. We'd get $43 billion worth of new urban transportation
infrastructure, giving every driver in the region congestion
insurance on the entire freeway system. At the same the people
who use transit or who might use transit if it were faster and
more reliable gain a whole new kind of express bus service that
operates throughout the region on uncongested lanes, and
without having to pay for the cost of creating those lanes
through the transit system. That appears to me to be a win-win
proposition, and I certainly commend it to your attention and
to the attention of those who will be reauthorizing TEA-21 this
year. And I'd be happy to answer any questions that you have.
Thanks very much.
[The prepared statement of Mr. Poole appears in the
Submissions for the Record on page 33.]
Senator Bennett. Thank you very much.
Congressman Kennedy, if you'd like to come up and sit here
so that you can ask questions, we'd be delighted to have you be
an honorary Member of the Joint Committee. That's Congressman
Stark's seat, and I'm delighted to have you fill it.
[Laughter.]
Dr. Atkinson.
OPENING STATEMENT OF ROBERT D. ATKINSON, VICE PRESIDENT AND
DIRECTOR, TECHNOLOGY AND NEW ECONOMY PROJECT, PROGRESSIVE
POLICY INSTITUTE
Dr. Atkinson. Thank you, Senator Bennett. I appreciate the
opportunity to appear before the Committee. I won't go into the
details on how bad the problem is. You and the other speakers
have attested to that. But I do want to start with why is the
problem so bad. The problem is so bad largely because we have a
highway shortfall in this country. Up until the mid-1980s,
early 1980s, we were able to keep pace with population growth
and demand growth for transportation with our highway system.
Since then, we've fallen behind. Between 1987 and 1997, our
highway capacity expanded just 9 percent in our major
metropolitan areas while VMT, Vehicle Miles Traveled, expanded
42 percent. And I think it's pretty obvious to anyone who has
taken microeconomics that when that happens, the result is
congestion.
Why did that happen? Well, part of it is because we just
had a bigger economy. We've grown. Half of the growth in VMT
was simply due to the fact that there are more workers
commuting to work every day. So why didn't we build more roads?
There are many different reasons. One of them is opposition
from people who don't want a road in their neighborhood.
But there's a more compelling reason, and that's the myth
that's been perpetuated over the last 15 years that essentially
says road building isn't the answer and doesn't solve
congestion. This is the myth of induced demand. If you build a
road, it just gets crowded again. But the reality is, when you
look at the careful studies that have been done, induced demand
is a factor, but only a small factor, and places that expand
their highway capacity faster than their population grows
actually find that they reduce congestion. We're never going to
get rid of congestion. We'll never get zero congestion, but we
can certainly make progress.
The other reason we haven't really dealt with this problem
of expanding our highway capacity is a lack of funding. As a
share of miles traveled, highway expenditures by all levels of
government fell from about 8.7 cents per mile in the early
1960s to just 3.9 cents in 1997. At the same time, our system
needs have gone up as we've gotten a bigger population and more
roads, and in addition, our infrastructure has aged.
Senator Bennett. If I could interrupt you. Are those
constant dollar figures or are they adjusted for----
Dr. Atkinson. They are adjusted for inflation.
Senator Bennett. So what year figures are we talking about?
Dr. Atkinson. Early 1960s, with the average was about 8.7,
and 1997. So these are in 1997 dollars.
Senator Bennett. In 1997 dollars. Thank you very much. I
apologize for the interruption.
Dr. Atkinson. One of the reasons for that shortfall is that
on a per-mile driven basis, gas taxes that the average American
pays to drive their car, are about half of what they were 40
years ago. Part of that is because the gas tax hasn't kept up
with inflation. The other part of it is, because our cars are
just more fuel efficient even with the rise of SUVs and other
cars, we have a more fuel efficient fleet, so people pay less.
Well, it's pretty clear when you look at the evidence that
if we expanded our highway capacity, we could reduce
congestion. To do it, it's going to cost a fair amount of
money, though. DOT estimates that just to keep our highway
system in the current condition is going to require a 16
percent increase in funding from $48 billion to $56 billion in
1997 dollars. Cutting congestion would require significantly
more. They estimate up to $94 billion per year. Well, we can't
get there from here unless we do a couple of things.
PPI supports increasing the gas tax. We feel that's an
important step to take, particularly at minimum to index it to
inflation, which it hasn't been. We need to get more revenues
there. One idea we have proposed is a temporary increase in the
gas tax for ten years where Congress would phase in a three-
cent-a-year increase in the tax for five years, and then keep
it at that level for ten years and then take it down to where
it was after adjusting for. This would raise $25 billion a
year. It would allow us to catch up and make up for this
shortfall we've had for the last 20 years, but not provide a
long-term burden on drivers.
Having said that, though, we also strongly support the view
that we have to use other means in addition to the gas tax; in
this case, tolls. In 1997, tolls accounted for less than 5
percent of current highway revenues. And so we're strong
supporters of a wide variety of measures, and I commend Bob
Poole and the Reason Foundation for their innovative ideas on
tolls, which we fully support. The whole idea of HOT lanes and
HOT Networks and other types of tolling can be used to expand
capacity.
Let me just respond to some of the complaints or possible
objections that people might have about road pricing. Opponents
tend to make three or four different objections: they're
inefficient, they're unfair, and they represent double
taxation. With regard to inefficiency, we've heard from a
number of speakers this morning, that may have been true 20
years ago. I still get frustrated when I drive to New York and
have to stop every five miles on the New Jersey Turnpike and
pay my quarter. New tolling systems employ on the fly,
transponder-based tollings, so they're not inefficient.
The issue of double taxation and isn't this a new tax? Gas
taxes and tolls only cover about 88 percent of highway costs.
If you include the cost of maintaining other roads, including
local streets, the share is significantly lower. So it's not as
if the gas tax already pays its fair share. It doesn't pay
enough. And as a result, other people who don't use the roads
are actually subsidizing drivers.
It's even worse when you consider that the cost of adding
lanes in urban areas is significant. A DOT study showed that
the cost of adding an average lane in an urban area is about 30
cents per mile driven. And yet gas taxes would account for just
2 cents. So again, you can't really get there from here. If you
want to expand capacity in these high-cost areas, you have to
ask drivers to contribute, ask users to contribute.
Lastly, on the issue of a tax increase. I think if Congress
decided this year that they were going to toll all the
interstates, one might make a reasonable case that that would
be a tax increase. On the other hand, a proposal like
Congressman Kennedy's is not a tax increase, because it's
essentially a way for consumers to buy a service that they
might otherwise not have the choice to buy. As long as we're
giving consumers a choice between driving on the free lane and
buying a new service, just as they might want to go out and buy
a plane ticket to New York. That's not a tax. It's something
they've voluntarily chosen. I don't really see that as an
additional tax.
And finally, there are people who would argue that these
are unfair. Some people have called these Lexus lanes as a
derogatory term, essentially that only people with Lexus cars
and high incomes would drive on these lanes. Most of the
studies, in fact all the studies, have shown that's not true.
Certainly there's a mix of income of people who drive on these
lanes. Although to be fair, use of the lanes are more highly
correlated with higher incomes.
Now is that a problem? I would argue as someone who is
affiliated with the Democratic Leadership Council and being a
Democrat and being concerned with equity, that that's not a
problem. I see it as just the opposite. This is a way to get
higher income people to pay for infrastructure so lower income
people don't have to pay for it. So I see it in some ways as a
very progressive idea. Now the problem is, well, what if lower
income people don't benefit? Well, I think they would benefit.
All the studies have shown that by adding new capacity on
existing lanes, the free lanes flow more freely, and as a
result, everyone benefits.
Finally, if people are concerned about that, there are
measures you can take to directly address the equity issues.
For example, you could use revenues from HOT lanes to support
transit. I think it's going to be a little more problematic to
divert toll revenue from new construction. I think you have to
use that for new construction. But on HOT lanes where you're
really just tolling an existing highway, you could certainly
divert some of that to transit and address some of these
issues.
So in closing, let me say I think this is an idea whose
time has come. There are several things that Congress can do to
support this and help advance it. Clearly, H.R. 1767 is an
important step forward. It would give states the ability to do
this. But I would go one step further.
While I commend Congressman Kennedy on the bill, and I
think we need to do it, I would also say we might want to take
one additional step, and that is to give states some incentive
to move more towards tolls. One of the reasons states haven't
done it, they can toll their own roads and they haven't done it
that much, is largely because of political opposition and
bureaucratic inertia in state DOTS. It's just something that
they haven't done, and so they're not going to do it
automatically. Our idea is for a limited period of time of six-
year reauthorization, we tell states that they can, if they
build a toll road, get a 90 percent match from the Federal
Government instead of the typical 80/20 split. We believe this
would give states a real incentive, because they'd be getting
more money, have to spend less of their money to use to build
toll roads.
Once you build a system of toll roads in states essentially
people get used to them, elected officials get used to them,
state DOTs get used to them, and it would just become the new
way of doing business in the 21st Century.
So with that, let me close and say I think we can talk for
a long time about the purity of the gas tax and why we ought to
fund roads with the gas tax. At the end of the day, it's not
going to get us where we need to go, even if we increase it,
which we advocate. We have to have other revenue sources, and
tolls are a critical source.
Thank you very much.
[The prepared statement of Dr. Atkinson appears in
Submissions for the Record on page 35.]
Senator Bennett. Thank you.
Dr. Buechner, I understand you were a senior economist for
the JEC for 20 years.
Dr. Buechner. I was here for a long time.
Senator Bennett. Welcome home.
Dr. Buechner. And it's nice to be back. Thank you.
OPENING STATEMENT OF WILLIAM R. BUECHNER, Ph.D., VICE
PRESIDENT, ECONOMICS AND RESEARCH, AMERICAN ROAD AND
TRANSPORTATION BUILDERS ASSOCIATION
Dr. Buechner. Senator Bennett, thank you very much for
inviting the American Road and Transportation Builders
Association (ARTBA) to testify this morning on financing our
nation's roads. As you mentioned, I was a senior economist here
for a long time, and I'm very happy to be back to testify on
this very important subject.
ARTBA is an 100-year-old association representing the
transportation construction industry. Its core mission is to
aggressively advocate federal capital investments to meet the
public and business communities' demand for safe and efficient
transportation. We have more than 5,000 members from all
sectors of this industry, and so we have a consensus view on
our recommendations.
Let me begin by saying that we're very heartened that the
Joint Economic Committee is exploring how to generate
additional revenue to meet our substantial investment shortfall
in highways and public transit facilities. Of all the many
policy areas that are covered by this Committee, few have as
direct an impact on the nation's economy as the government's
investment in transportation.
While ARTBA's focus is on financing for the core federal
transportation programs, we've long been a leader in the area
of public-private partnerships and leveraged financing for
transportation projects. More than 60 major companies are
represented in our Public-Private Ventures Division.
The Transportation Equity Act for the 21st Century, or TEA-
21, established a number of financing mechanisms that were
designed to foster public-private partnerships. Among them are
the Transportation Infrastructure Finance and Innovation Act,
or TIFIA; State Infrastructure Banks, which was carried over
from ISTEA; toll road programs, provisions like that. After
five years of experience under TEA-21, the results have been
somewhat mixed, though. There have been a number of good
projects delivered at substantial cost savings to the public,
but not as much interest or private equity as had been hoped.
The TIFIA program offers federal credit assistance for up
to one-third of the cost of transportation projects of national
or regional significance. For the 11 projects that have been
approved so far, TIFIA has provided $3.6 billion of the total
project cost of $15.4 billion, but at a projected U.S. budget
cost of only $190 million. So that's been a terrific leverage
from this particular program.
The total, however, is far below the authorization for this
program. We have a number of suggestions that we would make
when this program is reauthorized after TEA-21, including
lowering the threshold for the project size, permitting
intermodal projects, and somehow or other getting the TIFIA
office over at the Federal Highway Administration to be more
enthusiastic about approving these projects.
For State Infrastructure Banks, 32 states now have them.
They provide revolving funds for transportation projects. There
are about 310 loans outstanding, worth about $4 billion. But
only four of these State Infrastructure Banks are eligible for
a TEA-21 pilot program which allows them to use federal highway
funds for bank capital. We recommend that this pilot program be
extended to all 50 States.
For a public-private partnership to work, though, as a
source of funding, there has to be a stream of income from the
project back to the private investor. Traditionally, this has
meant tolling, and tolling is gaining acceptance as a source of
highway funding. Congressman Kennedy's proposal, Bob Poole's
proposals for HOT lane corridors, and the concept of truck-only
toll lanes, which ARTBA has endorsed, are creative variations
on this tolling approach that can generate new revenue sources
for highway improvements. Our major caveat is that the funds
should be used for further investment in transportation and not
go into general funds.
There are, of course, other ways of generating a revenue
stream for private investors, like development districts where
businesses and developers benefitting from a highway investment
will finance it through higher property or sales taxes, or
programs where project investors would be compensated with land
and development rights near a project, like we did with the
railroads back in the 19th Century.
Initiatives such as these can be important new sources of
transportation investment, but our view is that they are a
supplement to and not a substitute for the core investment that
is financed by the federal-aid highway and mass transit
programs. Providing and maintaining the nation's transportation
infrastructure is and always has been a core function of
government. More than two years ago, ARTBA began urging that
the successor to TEA-21 create a presidential commission which
would evaluate alternatives for financing transportation
improvements in the future. It's clear that as alternative
fuels and other technology developments reduce dependence on
petroleum, the Congress will have to develop alternatives to
the traditional transportation revenue sources.
For the past half century, though, most federal
transportation investment has been user-fee financed. Revenues,
for example, from the federal motor fuels taxes and taxes on
heavy trucks are credited to the Federal Highway Trust Fund and
are supposed to be used to finance capital investments in the
nation's highways and mass transit systems.
Prior to TEA-21, this relationship was often breached,
however. Congress would provide whatever amount could be carved
out of the domestic discretionary budget cap for highways and
transit in competition with everything else. The result would
have no formal link to either Highway Trust Fund revenues or
the nation's transportation investment requirements.
TEA-21 addressed half of this problem by linking highway
program funding directly to Highway Account receipts. But the
annual investment in highways still had no relationship to the
nation's surface transportation needs. The 2002 Report to
Congress by the USDOT on the Conditions and Performance of the
Nation's Highways, Bridges and Transit concluded that under
TEA-21, ``capital investment by all levels of government . . .
remained below the `Cost to Maintain' level.'' And I'm quoting
directly. ``Consequently, the overall performance of the system
declined.'' And that's the end of the quote.
For TEA-21 reauthorization, our organization has for more
than two years urged that Congress take the next step up to a
performance-based funding mechanism for highways and mass
transit. What this means is financing the federal highway and
mass transit programs at the level necessary, at minimum, to
maintain current physical and performance conditions, and then
hopefully begin improving conditions.
Based on this USDOT report, the House Transportation and
Infrastructure Committee found that this minimum level of
investment would total $320 billion over the next six years, or
an average of $54 billion per year. That would include about
$270 billion, at least $270 billion at minimum for highways and
another $50 billion for transit. We've supplied a copy of the
Committee's findings with our prepared statement.
The only current reauthorization proposal that will meet
these investment needs is the program proposed by the
bipartisan leadership of the House Committee on Transportation
and Infrastructure. This proposal would provide $375 billion
for the highway, transit and safety programs over the next six
years, including $300 billion for highways and the rest for
transit and safety. This level of investment would not only
maintain current highway and transit conditions, it would begin
to make some improvements.
The problem of course is that projected revenues into the
Highway Trust Fund are not sufficient to finance the level of
federal highway and transit investment required to meet the
nation's needs. A meaningful increase in highway and transit
investment will require a substantial infusion of new revenues
into the Highway Trust Fund.
There are a number of proposals for this. A year ago we
proposed an increase in the federal gas tax of about 2 cents a
year, which would make it possible to meet our nation's needs.
The bipartisan leadership of the T&I Committee is
considering a number of revenue options, including spending
down the Highway Trust Fund balance, compensating the Highway
Trust Fund for revenues lost to the gasohol tax incentives,
reinstating interest on the Trust Fund balance and reducing
motor fuel tax evasion. These would all be helpful, but when
you look at the numbers, it's not much money. The revenue
impact may be $3 or $4 billion a year, but it doesn't get
anywhere near up to what we need to invest.
To bridge this gap, the Committee is also considering
recommending a one-time 5.5 cent/gallon adjustment to the motor
fuel excise tax to restore purchasing power lost since the rate
was last adjusted in 1993, plus subsequent indexing of the rate
to the CPI. We wholeheartedly support this approach or pretty
much any other approach that comes up with new user-fee
supported revenues into the Highway Trust Fund.
Our prepared statement provides a lot of details on the
economic and safety benefits of increasing surface
transportation investment as well as details on the cost to the
economy of failing to increase federal investment in
transportation infrastructure.
In summary, Mr. Chairman, there are many ways in which the
private sector can help finance investment in transportation
infrastructure. ARTBA has been a leader over the years in
supporting public-private partnerships. The federal
responsibility for supporting investment in highways and
transit, however, cannot be ignored. A minimum federal
investment of at least $270 billion will be needed during the
next six years just to maintain current conditions on the
nation's highways. An investment of $50 billion is necessary in
the transit systems.
The bipartisan leadership of the House Committee on
Transportation and Infrastructure has developed a bold proposal
to meet these goals, and we urge Congress to enact it. We also
urge the Congress to include the TIFIA, SIB and toll road
revisions that we propose in the TEA-21 reauthorization
legislation.
Thank you.
[The prepared statement of Dr. Buechner appears in the
Submissions for the Record on page 40.]
Senator Bennett. Thank you very much.
Mr. Replogle, you get the last word.
OPENING STATEMENT OF MICHAEL REPLOGLE, TRANSPORTATION DIRECTOR,
ENVIRONMENTAL DEFENSE
Mr. Replogle. Thank you, Chairman Bennett. Good morning.
I'm speaking on behalf of Environmental Defense. We're an
organization with 300,000 members that links science, economics
and law to try and help protect the environment.
The central point I'd like to make this morning is that
when we finance, tax and price transportation in ways that
favor driving and roads over transit and other travel choices,
as was the case for much of the last century, it skews
investment and consumption decisions, and that harms the
efficiency of our transportation system, public welfare and the
environment.
As we reauthorize TEA-21 and seek new means of innovative
financing for surface transportation, Congress should assure a
level playing field for competition between travel modes to
encourage wise stewardship decisions by both consumers and
officials.
The ISTEA and TEA-21 laws began to level the playing field
between highways and other means of transportation after
decades of overwhelmingly pro-highway policies. This slowed the
long, rapid rise of vehicle miles of travel and the decline of
transit ridership. In fact, in the last seven years, transit
ridership grew by almost 20 percent, and vehicle miles traveled
grew by only 11 percent. Yet financing problems are now
dampening this recent trend. Disastrous local and state
finances have prompted transit service cutbacks and increased
fares with nine out of ten large transit agencies raising their
fares, and a third of all transit agencies providing less
service. Together with rising unemployment, this has caused
transit ridership to fall slightly last year, breaking the
recent trends of rising ridership, while vehicle miles
traveled, which had been declining or flat, rose last year
about 1.7 percent, fueled in large part by Americans driving
more between cities instead of taking planes.
But Americans want more and not less transit service and
travel choices. A recent poll showed eight out of ten Americans
agree that increased public investment in public transportation
would strengthen the economy, create jobs, reduce traffic
congestion and air pollution, and save energy. I must disagree
with my colleague Rob Atkinson about whether we can actually
build our way out of traffic congestion. There are a whole set
of studies that in fact show that we really can't. If you build
roads, they fill up. Recent studies show that a 10 percent
increase in lane miles of road capacity typically spurs about
an 8 percent increase in vehicle miles of travel, leaving
congestion in the long run little changed, but boosting
traffic, sprawl and pollution.
Now this can be offset if we increase the price of driving
and thereby manage rather than give away scarce and expensive
road space and parking. Arid the proposals that we've heard
about this morning could help to do just that. But if toll
revenues go just to building more roads, we're caught in a
vicious circle that harms the environment and reduces access to
opportunities for those without cars.
On the other hand, if toll revenues are dedicated to
expanding travel choices, like paying for better transit, then
road pricing actually increases equity, reduces demand for road
expansion, and enhances environmental performance.
Now there are notable examples of this. In San Diego,
underused HOV lanes have been turned into high occupancy toll
lanes which allow solo drivers to use those lanes if they're
willing to pay a fee with an electronic toll. This finances new
express bus services, providing access to jobs for those who
otherwise wouldn't have it, and it trims traffic congestion.
In New York/New Jersey, the Port Authority a couple of
years ago instituted higher tolls for solo drivers in the rush
hour and offpeak discounts for those using electronic
transponders on the Hudson River bridges and tunnels. And that
experiment has cut traffic congestion in the peak hours by
about 7 percent. And about 40 percent of the toll revenues from
the Port Authority bridges and tunnels there that are priced
like that are going to pay for PATH rail service that connects
New York and New Jersey, which further expands travel choices,
and trims traffic congestion in those same tolled corridors.
So as Congress considers financing, new means of financing
roads, we urge you to look at such innovative approaches as a
model. We urge you to reject proposals like the ones from
Senators Grassley and Baucus that would raid the transit
account to fund roads, leaving transit short by about $4
billion a year, destroying TEA-21's guaranteed and firewalled
transit funding. This would undermine public support for the
whole transportation program.
Now new proposals for toll financing, like Congressman
Kennedy's proposed bill, unless modified, could further tilt an
unlevel playing field by restricting billions of dollars in
potential new revenues solely for the use of building more
roads. This could fuel more sprawl and more traffic while
inadvertently plunging our transit programs back into decline.
We need to stop financing and subsidizing roads and driving
with non-user fee sources. As you've heard from earlier
witnesses, these non-user fees, like local property taxes,
sales taxes and other general fund revenues already bear close
to 40 percent of the cost of building and operating our
highways.
This is an inequitable use of money and exacerbates sprawl
and environmental degradation while drawing down resources that
might better be spent addressing education, health care and
homeland security needs at the local level.
We urge you to assure a more level playing field through
the following actions in reauthorizing TEA-21:
First, assure parity of both funding match requirements and
project approval requirements for new transit and highway
projects. If new transit projects only get a 50 percent federal
match, the same should apply to new highways.
End the restrictions that limit tolls on interstate roads,
as we've heard others support.
Ensure that toll road revenues are available for transit
and traffic reduction strategies as well as paying off bonds to
build roads, and ensure that toll roads are managed with public
oversight to meet environmental and equity performance
standards. With those significant changes, we could support
Congressman Kennedy's bill.
Encourage bus rapid transit services on managed lanes to
expand travel choices and boost efficiency. The posterboard
that you see here to my left shows the TransMileneo Bus Rapid
Transit System in Bogota, Colombia which was built in less than
three years at a cost of under $8 million a mile. This is a
notable and adaptable model with prefabricated stations, as you
see there, that fit into the median of the highways. It
efficiently separates fare collection, which you pay when you
go into the station, from boarding the buses. And the buses
operate on very fast reserved lanes that are free of delay.
We also need to look at creating a new flexibility
incentive grant program in TEA-21 to reward states that change
their constitutions or statutes to assure both transit and
highway revenues are funded from state transportation revenues.
More than 30 states have constitutional or statutory
restrictions that limit the ability to use state gas taxes for
anything other than building highways.
We need to reauthorize the value pricing program at $25
million a year for grants, technical assistance and pilot
projects to evaluate innovative strategies that manage traffic
or reduce driving and related pollution and other problems
through pricing. This is a successful program.
We need to double funding for the Congestion Mitigation Air
Quality program, expanding its eligibility to include pay-as-
you-drive insurance, and dedicating about $15 million a year
for a new pay-as-you-drive insurance grant program to
demonstrate how motorists can save on their premiums if they
drive fewer miles. This is the equivalent of having a vehicle
mile of travel fee. It's like a road toll, but it's actually
saying you can save on your car insurance if you drive less
rather than paying basically a fixed price no matter how many
miles you now drive, which is the way our insurance system
typically sets rates.
We need to provide equal tax treatment of commuter benefits
for transit users, drivers, cyclists and car poolers, as Senate
bill 667 and House bill 1052 would provide.
And finally, we need to increase funding for metropolitan
and state planning to expand routine consideration of pricing,
smart growth and transportation strategies in planning and
project reviews, and to support timely implementation of the
new air quality standards.
We need to fund research and complete the rapid deployment
of advance travel models similar to the TRANSIMS model at Los
Alamos National Lab, in order to help local agencies have the
tools they need to effectively consider and evaluate such
strategies in a wide array of potential implementation locales.
In conclusion, innovative pricing strategies like HOT lanes
could play a vital role in making TEA-21 reauthorization work.
They could provide critical revenue and new approaches to
enhance efficient system management and performance. We look
forward to working with you and your colleagues to build
support for that agenda, assuring sound accountability for
equity and environmental stewardship.
I'd be happy to answer any questions.
[The prepared statement of Mr. Replogle appears in the
Submissions for the Record on page 48.]
Senator Bennett. Thank you very much. Thank you all for
your testimony. I need to accept for submission a letter from
the National Taxpayers Union laying out their attitude on some
of these issues. As one might expect, they are opposed to an
increase in the gas tax.
Let me ask a few mechanical questions here. How much would
it cost per car to put a transponder on each car? Who would pay
that, and how would it be monitored? What happens if a non-
transponder car wanders into a HOT lane?
These are just mechanical questions that occurred to me as
you describe how this is going to work.
Mr. Poole. These are relatively straightforward matters
that we now have experience in half a dozen cities with. The
transponders today cost about $20, $25 apiece. And in some
systems, people pay a deposit and essentially lease them from
the system. They pay the one-time fee and then they get it back
if they move or turn it in. In other cases, they're made
available at no charge simply because the desire is to spread
them as widely as possible so that as many people in the metro
area as possible already have them so that they don't have to
use toll booths. This is for systems that are phasing in the
electronic tolling in parallel with existing toll booths.
And the enforcement is very straightforward. All the toll
road systems now that use the transponders are going to video
license plate recognition system, so that if you drive under a
gantry and there's a signal that either there is no transponder
on the vehicle or there is an expired account, then
automatically a video camera photographs the license plate, and
that becomes a violation that is actionable with a fine or
denial of registration if it's repeated offenses, that sort of
thing.
It's becoming very straightforward. Generally there needs
to be a state law amendment to permit enforcement by means of
the video camera, but that has seemed to be no problem in most
states.
Senator Bennett. Is it the front license plate or the back?
Because many states don't require a front license plate.
Mr. Poole. Right. In the states like Florida where it's
only the back license plate, it seems to still be workable
using only the back license plate.
Mr. Replogle. Mr. Chairman, if I could just follow up on
that question?
Senator Bennett. Sure.
Mr. Replogle. In Toronto, I think we see the most effective
system for automated enforcement. They don't treat the customer
who uses one of these toll facilities without the transponder
as a criminal violator and send him a ticket with a big fine,
which is what many states in the United States do. On this
private toll road, a beltway around Toronto, a fully automated
expressway with 40 entrances and exits, anyone who doesn't have
a transponder tag simply gets a bill a month later by mail
through the license plate identification, and there's a one
dollar Canadian surcharge added to each toll transaction to
cover the cost of having to track the person down. And the toll
road company that's providing the service is making a nice
profit at about 70 cents American per transaction, simply
treating those people as new customers who then have an
incentive to get the toll tag.
Senator Bennett. They want people to?
Mr. Replogle. It's a smart way to do it, I think.
Senator Bennett. I see. Okay.
Mr. Replogle. It's customer friendly.
Senator Bennett. I heard you say that the current user is
being subsidized 40 percent out of the general fund. I think
you said it was 20 percent, or someone said it was 20 percent,
Dr. Atkinson. Which is it?
Mr. Replogle. I think it depends on how you account for the
costs. The 40 percent covers the costs that are attributable to
police, fire and emergency services related to serving
motorists on the highways and other ancillary costs and comes
out of a study that was done for the Congress about half a
dozen years ago.
Senator Bennett. Okay.
Dr. Atkinson.
Dr. Atkinson. 1 would agree with that. I'm basing my
comments on an OTA study that was I think in 1995 that
documented all of this, and it depends whether it's direct
costs or indirect costs. The costs would actually be even
higher if you include what are called externalities--air
pollution, noise pollution--the share of gas tax would be even
lower if you include those, and Michael or I did not include
those. So if you just include pure costs, it's about 40 percent
shortfall.
Mr. Replogle. Yes. In my testimony I go into more detail on
that. There was a cost allocation study done for the Federal
Highway Administration in 1999 that estimated that the health
costs from traffic-related air pollution alone, not counting
the cost related to air toxics, amounts to $40 to $65 billion a
year, which represents a hidden cost on the average American
household of about $600 per household.
Senator Bennett. Of course, if you keep traffic moving,
that goes down, because a very large percent of the pollution
comes from cars that idle as they're sitting at stop lights or
sitting in traffic.
Mr. Replogle. The pollution level per mile driven tends to
be lowest in between around 20 and 45 miles an hour. High speed
driving and very low speed driving are both big pollution
generators.
Senator Bennett. Do you agree with that? I had not heard
that with respect to high speed driving.
Mr. Poole. I think this depends on which pollutant you're
looking at. I believe nitrogen oxides do increase with speed,
but I believe the other pollutants don't.
Mr. Replogle. The Volatile Organic Compounds (VOCs) also go
up, but not quite as sharply as the NOX. But both
are precursors of smog. And the particulate pollution, which
also comes in part from NOX, is really the place
where the biggest health care costs and impacts are found.
Dr. Atkinson. The other issue is stop-and-go traffic, which
is more polluting than free-flowing.
Senator Bennett. Right. I drive a Honda Insight that turns
the engine off when you're under 19 miles an hour. It drives my
wife nuts.
[Laughter.]
Senator Bennett. It takes a little getting used to.
Dr. Buechner. Which I think makes a point, which is that a
lot of this can be addressed by improving the technology of the
automobiles. It's not the highways that cause the pollution.
Senator Bennett. Well, the congestion. And of course we
know that the older cars pollute a whole lot more than the
newer cars do, simply because the technology has improved all
along, so that if you are driving a classic 1963 Ford, you may
get admiring glances from your neighbors, but you're really
doing terrible things to the atmosphere at almost at any speed.
Isn't that correct?
Dr. Atkinson. That's correct.
Mr. Replogle. Yes. New cars are much cleaner than older
cars, and as we bring in the new Tier II standards, it will
reduce pollution significantly further and the heavy duty
diesel standard. We're making a lot of progress on the
technology, but the science also shows that we still have a
long way to go to protecting public health to meet the new
national ambient air quality standards for fine particulates
and ozone.
And even with all of those cleaner technologies that we're
bringing on line with the new laws and regulations, EPA studies
just in the last year are still showing that by 2015, we can
still expect 20 or more of our largest metropolitan areas to
face serious health threats from air pollution.
Transportation emissions will continue to be a major source
of those pollution problems even 15 years from now. And so we
can't ignore the growth in miles driven, even as we go out 15
and 20 years. It's still a place where we can make cost
effective pollution reduction. So we do have to pay attention
to the effect of building more roads on increasing the amount
of driving.
Senator Bennett. Yes, Dr. Atkinson.
Dr. Atkinson. I'd just like to respond, because I think
that's an important point, that there are some in the
environmental community who would like us to address our air
quality problems by essentially constraining demand for
driving, and in large part by not building any more roads.
I don't believe that's an effective strategy, because
there's no evidence that Americans will drive less. They will
continue to drive because they have to drive and they choose to
drive. So I don't think a strategy of constraining highway
capacity is really a viable air quality improvement measure. We
are much better off with measures that are more oriented
towards building cleaner cars than somehow trying to make
Americans' lives more miserable and hoping that there are some
ancillary air quality benefits.
Senator Bennett. Just to comment on that. Of course, the
effort to make cars cleaner is undoubtedly what's behind
President Bush's initiative with respect to fuel cells,
hydrogen fuel cells in cars. That requires an enormous amount
of electricity. And so you then talk about how you deal with
the emissions that come if we generate that electricity with
fossil fuels. And I'll let Senator Domenici talk about nuclear
power and how that solves some of those problems. We probably
shouldn't go any farther than that in this hearing.
But I would note, having lived for a dozen years in Los
Angeles and having lived through the alerts that used to be
routine in Los Angeles, and now going back to Los Angeles to
visit our grandchildren, six of whom live there with their
parents, how the freeways have gotten substantially more
congested than they were when we lived there, and yet Los
Angeles has not had a clean air alert for several years now,
that there has been a substantial decrease in the Los Angeles
area, once the nation's number one poster child for smog, a
substantial decrease in the air alert situation even as the
number of people driving and the number of cars on the road
have gone up.
So I think there is hope. I'm not suggesting, Mr. Replogle,
that we should not continue to go in that direction. But I
think as we view some of these issues, we should not refuse to
recognize success that we have had in the environmental cleanup
that we've been under for the last 20, 25 years. We've done
frankly a remarkable job. And the only other comment and then
I'll yield to my colleagues, Americans want convenience. And
the one convenience you get out of driving your own car is that
you can come and go whenever you like. And one of the reasons
why inner city trips are predominately by automobile is that if
you drive your own car, you don't have to rent one when you get
there.
Now if I am going to New York City, I will take public
transportation to New York City. It's quicker. It's not
cheaper, but it is quicker. And when I get there, I don't have
to park my car. Parking my car in New York City, the cost
literally to park it is more than the cost to buy it. A monthly
parking fee is higher than the monthly payment on the
automobile. So I can take a cab. I can take the subway, or I
can walk, and I have absolutely no desire to have a car in New
York City.
But if I am driving to--if I am traveling to, let us say,
St. George, Utah, I'm tempted to take my car even though it's a
four-and-a-half hour drive because I have it there and there
are no taxis. I would have to rent a car and then turn it in,
so you make the decision on the basis of a series of
circumstances. I think as we examine this issue, we shouldn't
demonize people who make inner city trips by car as saying,
well, they're just wasteful gas hogs. They're making rational
economic decisions in terms of what it costs in both money and
time.
And I think what you're all calling for is an examination
of the overall transportation system taking those rational
individuals' decisions into account and making the best system
possible so that those who want to purchase congestion
insurance--I love that term--can. I think that's a great
selling point. Those who want to purchase congestion insurance
can do it and make a rational decision. And, yes, Dr. Atkinson,
the people who are at the lower economic level can decide
getting to this appointment on time is worth this kind of an
expenditure, and it is available to me even though most of the
time I will make the decision to stay in the free lanes. And
the people who say, I don't care. I'm going to pay it all the
time, the public gets the benefit of their money to help pay
for the free lanes.
All right. I apologize. I filibustered so that Congressman
Hill has left. I had no intention to do that. I wanted to
recognize him as a Member of the Committee.
Congressman Kennedy.
Representative Kennedy. Thank you, Mr. Chairman, and thank
you, panel for your great testimony. Many of you inspired our
proposal. I'd like to first talk with you, Mr. Poole, about the
HOT Networks. And as I proposed through the FAST Act, if there
is a corner of a beltway that's congested, we can move in
there, add additional lanes and free up that.
Now in your HOT Networks example, you're I think implying a
HOT lane that surrounds the whole beltway.
Mr. Poole. Yes, that's correct.
Representative Kennedy. And my question is couple-fold.
Number one, if you dealt with the congestion spots with FAST
lanes or HOT lanes, whatever you want to call them, isn't there
a lot of parts of a beltway that if the congestion spots were
dealt with would move freely without an incremental lane, and
has there been any study of that?
Mr. Poole. There really hasn't been, but I think you raise
a good point. We looked at really highly congested metro areas,
and we didn't attempt to apply this whole network model to
smaller scale and less congested cities. I'm not sure that the
complete network is necessary or appropriate for metro areas of
any size. It may only be something that's tailored to the most
severely impacted large metro areas.
Removing bottlenecks by selective applications of pay lanes
might be sufficient in many metro areas.
Representative Kennedy. So it's quite possible by using a
FAST lane implementation on a phase-in basis that we may be
able to achieve the same sort of goals inspired by the----
Mr. Poole. Yes. If most of the rest of the network remains
largely uncongested, then you could still have a regional
express bus service, for example, by letting it speed through
the bottlenecks but then still operate on regular lanes
elsewhere on the system, yes.
Representative Kennedy. And our FAST lanes proposal is
meant to try to embrace those options, whether it be authorized
car pools or bus rapid transit, because I think a lot of the
reasons that make bus rapid transit less attractive to people
is they think they're going to be stuck in the same congestion
that the other roads are.
Mr. Poole. Exactly.
Representative Kennedy. And if they know that through those
congested areas that they have sort of a free ticket at a near
guaranteed speed based on variable congestion pricing, I think
it can be a powerful tool and I think what bus rapid transit
provides is a flexibility. The needs of transit within a
community aren't always predictably to the center city and back
and sometimes change over time, and bus rapid transit does
provide it and clearly is part of what we're looking for.
A key concern, though, I have is I think we have to listen,
and I'm a little concerned by what you said, Dr. Buechner, and
that you said $320 billion is our need which, let's take that.
That's about $70 billion short of what the Administration has
said. But you made the comment that the only proposal that
would address that need is what was put forth by the Committee
as stated.
And if we looked at that difference between $320 billion
and the $250 billion or so of the Administration, that $70
billion gap over six years, you know, Dr. Poole, you had
mentioned that in just ten areas alone, ten metropolitan areas
alone, that that was about forty-some billion dollars.
Mr. Poole. Right.
Representative Kennedy. And my question is, is not the FAST
lane an alternative way to plug the gap between 320 and 247 or
250 in the Administration? Is there not really two alternatives
to approach this very significant need?
Mr. Poole. I think very clearly so. I mean, there is the
potential, on a project-by-project basis around the country, to
plug that gap with toll-supported projects like your FAST
lanes.
Dr. Buechner. These are alternative ways of providing
additional funds. And ARTBA has supported the idea of tolling,
public-private partnerships and ideas like that. In TEA-21,
there was a pilot program provision that would have let the
state DOTS test out tolling for expanding interstate
construction, permitting three possible projects. In the six
years, no state took them up on that.
Tolling is an excellent idea and it would be a new source
of funds, but in reality, it is a very difficult decision for
the political process to make to apply tolls to a highway.
Connecticut a few years ago did away with their tolls on the
Connecticut turnpike. So again, if that would work out, yes,
that would be a terrific alternative. But, again, there are
tremendous needs out there, and these needs are not just a wish
list. The needs figure is based on an economic evaluation of
over 100,000 highway segments and the improvements that they
need. This is where these needs investment figures have come
from. If we don't do something to start addressing them, our
transportation system will move from something that facilitates
economic growth to (where I think we already are getting to)
the point where it's impeding economic growth in a lot of our
major metropolitan areas.
So if this can be made to work, it would be certainly a
help.
Representative Kennedy. And I agree with you that we still
need the gas tax, that the gas tax, you know, you can't fund
everything with a FAST lane, HOT lane, whatever, and that we
are facing significant congestion.
But my concern is, is have we put too many restrictions on
the ability to make these projects work? And I'm very
interested in how we embrace the private industry. Because as I
look around the world as much of the research put out by Dr.
Atkinson and Mr. Poole would suggest, that many other countries
are embracing public-private partnerships, a fee-based revenue
in a much stronger way than we are. And the examples of the
states around the country has shown that this can be done. So
I'd be very interested in what further we need to do to
facilitate public-private partnerships stepping forward to help
us achieve the reality of being able to do this gap in a
market-based way.
Mr. Poole. Since you asked, Congressman, one thing that I
think you had mentioned in other contexts is the idea of Chafee
bonds, of creating a level playing field for toll revenue bonds
that private partners in a public-private partnership could
issue tax-exempt toll revenue bonds on the very same basis as a
public agency. That would be an enormous boost to making more
projects feasible to be done as true public-private
partnerships.
Representative Kennedy. And we do intend to bring out a
second bill to complement the FAST bill to help facilitate
public-private partnerships of what a Chafee bond would be an
example. But I would invite all the participants if there are
other restrictions that are preventing the full embrace of
other entities to participate in this, to let us know so that
we can incorporate those, because I think unlocking this
potential at the state and local areas for them to address
problems as they see fit with creativity and new innovations
and embracing the private sector is a way that we can really
solve the congestion that's been bedeviling us for a long time.
Mr. Replogle. The political challenges of implementing time
of day pricing and road pricing in many communities have been
rather formidable. We need to assure continued support for
investment in programs like the Value Pricing Program which
have funded public education and research efforts to help
communities develop local leadership coalitions to look at all
of the issues around implementing things like HOT lanes or FAST
lanes, and to put together a broad-based consensus to support
those initiatives.
Representative Kennedy. And I agree. And I appreciate the
fact that back in Minnesota, our governor and lieutenant
governor, who is also the head of the Department of
Transportation, as well as those that are fighting over the gas
tax, I have both the transportation alliance and the chamber,
as well as the taxpayers league, supporting this back in
Minnesota, and they are thinking, as you mentioned, Dr.
Atkinson, that this can apply to state roads as well, that
there aren't restrictions, and that ought to be considered.
And I think embracing things like congestion pricing, like
Bus Rapid Transit, and potentially also certain forms of HOV,
is a great way to build that community support around something
that I think needs to really happen.
Thank you, Mr. Chairman, for your time.
Senator Bennett. Thank you. We appreciate your testimony
and your questions.
In conclusion, I have a few observations that I'll simply
get on the record. I was in the Department of Transportation
when ground was broken for the Metro here in Washington, and
one of the things that we considered and were unable ultimately
to deal with but that I think has a place in this discussion,
was the possibility of taxing the increased property value of
those buildings that were close to Metro stops. Because there
was a tremendous boost in property values if you have access to
a Metro stop. And I remember saying to the then-Undersecretary,
``Why don't we get them to pay for it? Because they're going to
get the value.'' And he was intrigued with that idea, but we
ultimately couldn't really make that happen.
In a way, however, that justifies some of the subsidy for
mass transit that comes out of general funds. The money going
into general funds is property tax based on increased property
tax value, and the mass transit system that created that
increased value is getting some of the value of that, getting
the benefit of that.
But we have to recognize, and you've made this point I
think, Dr. Buechner, you've made it most specifically, the
economic cost of clogged arteries of transportation is very
high. And when the economy becomes less efficient, everything
else suffers. I am one who believes very strongly in the
importance of getting the most efficient use of the economy
that we possibly can.
Just pick a subject that's very much in the debate right
now, capital gains tax acts as a barrier to prevent capital
from flowing from mature investments to entrepreneurial
investments. Now if it's so high a barrier that no money flows,
which it would be if it were 100 percent, you would clearly
lower it. Alan Greenspan, every time I ask him about the
capital gains tax rate, he says the best capital gains tax rate
is zero. I don't think we're going to get there. You test the
water the same way businessmen do when they raise prices on a
pair of shoes. Is this price sensitive? Can I go from $50 to
$55 and see any dropoff in sales? And if I don't see any
dropoff in sales, I'll take the extra five bucks. And you
should experiment I think with capital gains tax.
Okay. I used that as an example because to make the economy
efficient, you want capital to flow to where it produces the
greatest return. You want labor mobility, that labor can flow
where it can produce the best benefit, and you want goods and
services and people to flow. We've been talking about primarily
trucks, but we are also talking about people getting to work.
And at some point in this whole debate, we've got to talk about
our highest level talent spending a lot of time sitting in high
mileage crown rooms or ambassador rooms at airports, because we
haven't built a new airport in this country, other than the
Denver Airport, for maybe half a century. And the inefficiency
that comes with keeping that high quality talent sitting around
waiting for better schedules is something that the economy pays
for.
So the more we can do to grease and make efficient the flow
of goods and people going to work, the more economic benefit
overall that we get. And we come back to the fundamental
question, which is I keep saying to my colleagues, money does
not come from the budget. Money comes from the economy. And the
more efficient the economy is, the more likely we are at the
federal level to get revenues coming in in a way that then
makes it possible for us to do the kinds of social requirements
that as a modern society we all have.
So I think you've made a contribution with your testimony
here this morning. We will do our best to spread the word to
our colleagues who were not wise enough to join us and see what
we can do to move down this road.
Thank you, all of you, for your preparation and your
presentation here today.
The hearing is adjourned.
[Whereupon, at 11:50 a.m. the hearing was adjourned.]
Submissions for the Record
=======================================================================
Prepared Statement of Senator Robert F. Bennett,
Chairman
Good morning and welcome to today's hearing. Congress is currently
contemplating the renewal of the Transportation Equity Act for the 21st
Century (TEA-21), the federal surface transportation program. Amidst
the routine debate over the program's budget and spending formulas,
some voices can be heard suggesting innovative and creative ideas. They
suggest an approach that could eventually lead to a seismic change in
how we fund our nation's roads. The purpose of this hearing is to
examine some of these ideas.
Our roads are becoming more and more congested every day, and
getting stuck in traffic has become a primary quality of life issue in
many communities. When a simple trip across town becomes a logistical
nightmare that chews up a good portion of a person's day, something has
gone seriously wrong.
Many of the problems that challenge families today fall beyond the
purview of Congress. But something as mundane as roads has real life
consequences. One study found the average driver spends 62 hours each
year in traffic. If we can alleviate traffic congestion so people can
spend more time at home, we could go home at the end of the day having
strengthened American families.
Congestion isn't a problem just for our families, it wreaks havoc
with our economy. The estimated cost of traffic jams due to wasted time
and fuel in 2000 was $67.5 billion. This cost is what I call ``the
ghost tax of congestion,'' always following us around where ever we go.
Transportation makes up roughly ten percent of our nation's
economy, but the importance of the transportation sector far exceeds
its share of output. In a world of ``just-in-time'' delivery and
customized production, companies cannot afford to wait for their parts
to arrive or for their finished products to be delivered. Despite the
heralded information revolution, businessmen still need to come
together to do work. If time is money, we are certainly losing a great
deal of money due to congestion on our roads.
Since the invention of the automobile our roads have been typically
funded by the gasoline tax, with the federal government providing the
lion's share of the money needed to build and maintain interstate
highways. The ability of the gas tax to finance our network of
interstate highways has deteriorated in recent years for a number of
reasons. The cost of building roads has increased, inflation has eaten
away the value of the tax, and gas tax revenues are not always used for
roads.
Not only has our ability to fund road construction via gasoline
taxes diminished, the roads themselves have deteriorated. Many of our
interstate highways are nearing the end of their functional life and
need to be replaced. This process will not be cheap; since the advent
of the interstate highway system our understanding of how to build safe
roads has increased greatly. Rebuilding our interstates will involve
much more than simply putting the new road where the old one used to
be.
For many of my colleagues, raising the gas tax seems to be the only
solution to the challenge of maintaining our infrastructure and dealing
with the problem of congestion. However, other options merit further
exploration. Today we have gathered here before us a host of experts to
inform us about innovative ways that communities all across the United
States and the world have used to finance and construct new roads and
manage the increasing traffic pressure on them. Our witnesses today are
some of the nation's leading experts in transportation issues and have
published widely on the issues facing our transportation system today.
Before we hear from them, a few of our colleagues have joined us to
explain their legislative approach to solving this problem.
Representative Mark Kennedy has introduced the FAST Act, Freeing
Alternatives for Speedier Transportation, to amend toll restrictions in
TEA-21. I understand Senator Wayne Allard is expected to soon introduce
a similar bill here in the Senate. Representative Marilyn Musgrave, a
cosponsor of the bill, can give us a state perspective as she recently
chaired a transportation committee in Colorado's state legislature. We
welcome your insights and we will be sure to share your testimony with
the committees of jurisdiction. To our distinguished panelists,
welcome, and I look forward to your testimony.
__________
Prepared Statement of Representative Mark R. Kennedy,
A Member of Congress From Minnesota
We are spending too much time stuck in traffic, away from our
families. Federal transportation statistics put numbers to some of the
more tangible costs of our congestion crisis. Traffic congestion costs
the United States more than $67 billion annually. We waste almost 6
billion gallons of fuel and 3.6 billion hours idling, while polluting
the environment, in traffic jams. For the average person, this means
$1,160 and 62 hours wasted by congestion every year.
In my own home state of Minnesota, our problems are getting worse
by the day. According to the 2000 Census, Minnesota, and the
Minneapolis/St. Cloud Mega-Corridor in my own sixth congressional
district, are experiencing one of the highest rates of increase of
traffic congestion in the country.
The latest 10-year plan out of the Minnesota Department of
Transportation does not offer much room for hope that we will be able
to wake-up from our traffic jam nightmare any time soon. Approved road
construction does not come anywhere near to meeting demand.
This is not to criticize MnDOT. They are doing as much as they can
with what they have. The problem is one of resources. There is simply
not enough money available to build the roads we need. Even the most
radical calls for a gas tax increase will not provide the money we
need. We need new ideas.
We do not have to look far to find them. In this country, our
laboratories of democracy, the states, have been highly innovative
about solving traffic problems. Over the last few years, states like
Virginia, Texas, California, and Colorado, to name a few, have done
admirable work to solve the congestion problems facing their driving
public. And we should also be mindful of work being done overseas. In
countries like Japan, China, Australia, Canada, and Italy, leaders have
not relied on obsolete thinking in transportation policy as we have in
America. We take much pride in this country on being the embodiment of
freedom, and allowing the individual room to thrive in this country.
Yet, at least in transportation, we are falling behind.
That's why I introduced the bipartisan Freeing Alternatives to
Speedy Transportation--FAST--Act (H.R. 1767) in the House of
Representatives. This legislation, which I have introduced with
Democratic Representative Adam Smith of Washington State, and its
companion bill in the Senate soon-to-be introduced by Senator Wayne
Allard of Colorado, will help relieve congestion on the nation's
interstate highway system.
The FAST Act facilitates the construction of desperately needed new
lanes. It does so by eliminating an outdated federal prohibition that
prevents states from implementing a user fee-based revenue stream to
provide the resources they need to expand their congested interstate
systems. At the time of its inception, this prohibition in Section 301
of Title 23 of the United States Code may have made sense. But in the
21st century, with modern technologies, the only thing it does is to
stand in the way of proven solutions to the congestion that is
threatening to bring our economy to a standstill.
The FAST Act includes three important conditions to promote fiscal
responsibility and driver confidence. First, fees will only be
collected using non-cash electronic technology. No tolls and no
tollbooths. Second, the voluntary fee is for new lanes only, and the
revenue collected is dedicated only to those new FAST lanes. This leads
to the third point, when the revenues collected from FAST lane users
have repaid the costs of the FAST lanes, the fees expire.
The FAST Act will provide states and users numerous benefits. The
FAST Act empowers states with a new revenue stream they can use to
solve their own problems so that they do not have to come to Washington
D.C. every time they need to build a road. FAST lanes also will free up
critical dollars for other state priorities, so that high-dollar
projects on congested metropolitan roads do not absorb all of the
resources of a state. Projects get completed FASTer using FAST lanes;
and when roads get built quicker, they cost less and get people moving
sooner.
Every driver will benefit when FAST lanes are constructed. Drivers
will have the choice to determine if FAST lanes make sense for them.
Those who choose to use them will be able to to get where they are
going a little quicker for a small fee. Those who choose not to use the
FAST lanes will benefit from having fewer cars in the existing lanes at
no additional expense.
The FAST Act's benefits are not limited to drivers and states.
States have the flexibility to allow Bus Transit systems and carpools
to use the FAST lanes free of charge, providing more alternatives to
commuters. Even the environment will benefit from having fewer cars
stuck on congested roads, burning six billion gallons of gasoline each
year just by idling in traffic.
In my home state of Minnesota I have been gratified that this idea
has received a groundswell of support. Leaders like Governor Tim
Pawlenty and Lt. Governor/MnDOT Commissioner Carol Molnau recognized
the benefits of FAST and heartily endorsed this legislation. Likewise,
the Minnesota Chamber of Commerce, the Minnesota Associated General
Contractors, Minnesota Taxpayers League and the Minnesota
Transportation Alliance also support the bill.
The FAST Act is a new approach to solving our critical federal
transportation needs based on state-proven programs. It is time to get
our country moving FAST again.
__________
Prepared Statement of Robert W. Poole, Jr., Director of Transportation
Studies and Founder, Reason Foundation
Mr. Chairman and members of the Committee: My name is Robert Poole.
I am the Director of Transportation Studies at the Reason Foundation, a
nonprofit research and educational organization based in Los Angeles.
We've been researching market-oriented transportation policies for the
past 15 years, and several of our policy proposals have been
implemented in a number of states.
The focus of my comments today is a potential breakthrough idea for
addressing the transportation needs of America's large urban areas.
These areas are plagued by traffic congestion. The latest report from
the Texas Transportation Institute estimated that the cost of
congestion in the largest 75 urban areas is $68 billion per year in
lost time and wasted fuel. That number has grown larger every year for
the past two decades. That suggests to me that what we've been doing to
address congestion is inadequate.
As a nation, we have been making major investments in two forms of
urban transportation: HOV lanes and mass transit. Unfortunately, the
2000 census figures revealed that in most cities, a smaller fraction of
people carpooled to work in 2000 than in 1990. Likewise, a smaller
fraction used transit to get to work in 2000 than in 1990. And since
population has continued to increase, we have even more people trying
to use pretty much the same amount of freeway capacity to get to work.
No wonder congestion is at record high levels.
I would like to suggest a fresh approach to urban transportation.
Let's not abandon HOV lanes, but let's use them in a more productive
way. Let's not retreat from mass transit, but let's develop a form that
competes better with the automobile. And let's face the fact that we
need more urban highway capacity and build more. All three of these
changes are part of our new approach called HOT Networks.
The basic idea is as follows. Shift the operating principle of HOV
lanes to HOT lanes--that's high-occupancy toll lanes. Convert them to
high-speed premium lanes which drivers can use by paying a market price
and which truly high-occupant vehicles--buses and vanpools--can use for
free. Use the toll revenue stream to support large-scale toll revenue
bond issues, to generate the billions of dollars needed to build out
the existing HOV facilities into a complete, seamless network spanning
most of the metro area's freeway system. Encourage the transit agency
to operate large-scale regional express bus service on this seamless,
high-speed network.
The HOT Network idea combines two recent innovations: HOT lanes and
Bus Rapid Transit (BRT). Currently four HOT lanes are in operation, two
in California and two in Texas. Another dozen or so are in the planning
stages, including here in Washington for a portion of the Beltway. The
basic idea is to sell the unused capacity to paying motorists. They use
fully electronic automated toll collection, and the two in California
use variable pricing. We now have solid evidence that variable pricing
is a powerful tool to match demand with supply on such lanes, to keep
them flowing at the speed limit even at the busiest rush hours.
Bus Rapid Transit refers to high-quality express bus service,
usually offered on special lanes. In cities like Ottawa, Bogota, and
Curitiba (Brazil), large-scale BRT systems provide transit service
quality equivalent to far more costly rail transit systems. The Federal
Transit Administration has become a big booster of BRT, based in part
on studies of very promising busway operations in U.S. cities,
including Miami and Pittsburgh. Our HOT Networks concept would provide
an uncongested right-of-way for BRT service spanning the entire metro
area without cost to the transit system.
Last year, my colleague Ken Orski and I carried out a detailed
study of the potential of HOT Networks. We defined such a network as an
interconnected set of limited-access lanes on an urban freeway system.
Buses and organized vanpools would use these lanes at no charge; all
others would pay a variable toll, collected electronically. Such a
network would begin by converting the area's existing HOV lanes to HOT
lanes. Toll revenue bonds based on the entire network would be used to
pay the capital costs of filling in missing links and building costly
flyover connectors at freeway interchanges, to make the network truly
seamless.
If such networks could be created, they would offer many benefits:
1. ``Congestion insurance'' for all drivers in the metro area, ensuring
that when they really needed to bypass congestion and get
somewhere on time, they would have the option to do so--
something simply not available today at any price.
2. Much greater productivity than today's underutilized HOV lanes, as
measured by people and vehicle throughput per hour, thanks to
extensive express bus service as well as paying vehicles.
3. A major new funding source for urban transportation infrastructure,
to supplement the declining real value of today's fuel taxes.
4. Greatly simplified enforcement compared with HOV or HOT lanes, since
every valid vehicle would be required to have a transponder,
and this can be detected electronically. Enforcement would be
via video recording of the license plate number, just as on
most toll roads today.
The main question we addressed in our study was: How feasible is the
idea that HOT Networks could be largely self-supporting from toll
revenues? To answer that question, we needed to model hypothetical
networks in real urban areas and estimate what it would cost to build
them out. And we also needed to get a handle on how much revenue they
might generate.
We used TTI data to select eight metro areas with the highest
intensity of congestion: Los Angeles, San Francisco, Washington,
Seattle, Houston, Dallas, Atlanta, and Miami. In each case, we obtained
the long-range transportation plan of the local metropolitan planning
organization (MPO) and reviewed their plans for adding HOV facilities
over the next 20-25 years. We put these on a map showing already
existing HOV lanes and then filled in missing links that were not in
the plans, usually for reasons of cost. We also checked for missing
flyover connectors--and there were many of those, because they tend to
be very costly. We then conferred with federal and state DOT experts,
as well as engineering firms, to develop current cost estimates for at-
grade lane additions, elevated lane additions, and flyover ramps. That
enabled us to estimate the cost of building out each network. That
total was $43 billion for the eight metro areas.
That was the easy part. More complicated was estimating the revenue
that might be generated by people voluntarily paying premium tolls to
bypass congestion. Fortunately, we had access to extensive data from
the two California HOT lanes that use variable pricing. We also had
access to one of the leading traffic and toll revenue forecasting
firms, which has done many studies of existing and proposed HOT lanes.
We developed a pricing model and applied it to the eight metro areas,
taking into account the length of rush hour in each one, the extent of
the HOT Network (in lane-miles), and a set of assumptions about the
variable pricing structure. Overall, we came up with baseline revenues
of $2.9 billion per year over the eight metro areas.
We then used a simple rule of thumb that says you can probably
issue toll revenue bonds in the amount of approximately 10 times that
annual revenue stream. Hence, we estimated that $29 billion in revenue
bonds could be issued in support of these HOT Networks. That would fund
two-thirds of their capital costs. The rest would come from
conventional state and federal highway trust fund monies--the same
funds the MPOs would be using anyway as they added more HOV lanes over
the next 25 years. Except that building out the system as a HOT
Network, with the bonds issued up front, would mean building it out 10
to 15 years sooner than would otherwise be possible. And more of the
trust fund monies would be available for other needed transportation
projects.
To us, that looks like a truly win-win proposition. It illustrates
the power of market pricing to address what has been considered an
intractable problem: traffic congestion. Unlike attempts to mandate
``congestion pricing'' from the top down on all freeway lanes, our
approach would be strictly voluntary. The only ones who paid would be
those who freely chose to do so, on those days and at those times when
it was worth it to them to bypass congestion and get somewhere on time.
Yet those paying drivers, in making their individual choices to pay,
would be making possible the creation of a vast new infrastructure for
high-quality bus rapid transit.
My organization does not lobby, so I am not here to advocate
legislation. But I will simply point out that if members of Congress
like this idea, only a few simple changes in TEA-21 would make it
possible. There would need to be some further easing of the general
federal ban on putting tolls on currently free Interstates, for the new
and existing lanes in urban areas that become part of a HOT Network.
There should be clear federal permission to permit paying vehicles to
make use of former HOV lanes that get incorporated into a HOT Network.
And local officials should be free to exempt only buses and vanpools
from the pricing on the HOT Network.
It would be even more helpful if there were to be a joint FTA/FHWA
program to help MPOs and state DOTS that wanted to develop HOT
Networks. Investors in large-scale HOT Network bond issues would want
assurances that the whole network would actually get built, and that
variable pricing would be used, as planned, for a very long time.
Mechanisms like a Full Funding Grant Agreement could be helpful in that
regard.
To sum up, let me remind you that ``road pricing'' or ``congestion
pricing'' has been floating around in transportation policy for more
than 25 years. It has always had great promise in theory, but has
usually foundered on the shoals of political reality. Very few elected
officials are willing to impose a charge for using what people have
traditionally used without paying. And motorist organizations have an
understandable negative reaction to being asked to ``pay twice'' for
existing freeways.
That's why it's essential to create true value pricing, in which
people pay only if they get something much better in exchange for
paying. That's what HOT Networks offer drivers: $43 billion worth of
new urban transportation infrastructure, giving them congestion
insurance across the entire freeway system. And at the same time, those
who use transit or who might want to use transit if it were faster and
more convenient, will get the benefits of high-speed regional express
bus service operating over this entire network. And those responsible
for urban transportation gain a major new funding source, at a time
when funding constraints threaten to put off many needed projects for a
long time.
I believe HOT Networks to be one of those rare opportunities: a
truly win-win proposition. Thanks you for the opportunity to explain
this concept, and I look forward to any questions you may have.
Note: The complete HOT Networks policy study is available online at
the Reason Public Policy Institute website. The URL is www.rppi.org /
ps3O5.pdf. Robert Poole may be reached by email at [email protected].
__________
Prepared Statement of Robert Atkinson, Ph.D., Vice President,
Progressive Policy Institute
Mr. Chairman, members of Subcommittee, I am Rob Atkinson, Vice
President and Director of the Technology and New Economy Project of the
Progressive Policy Institute. PPI is a think tank whose mission is to
define and promote a new progressive politics for America in the 21st
century. It is a pleasure to testify before you on the issue of the
role of road pricing in solving America's surface transportation
challenges. PPI has been keenly interested in promoting public policies
to help address the central problem facing our nation's transportation
system-high levels of congestion. We strongly advocate the increased
use of road pricing as a way to meet that goal. While technologies
enabling no-hassle road pricing have advanced dramatically, federal and
state laws and resistance by transportation agencies hold back this
promising innovation.
How Bad Is Congestion?
Once upon a time, cars and highways represented freedom. Now, for
most Americans, they represent constraint, as drivers crawl along in
stop-and-go traffic hoping to get home at a reasonable hour. Traffic
congestion just keeps getting worse. According to the 2000 census,
commuters spent an average of 25.5 minutes to get to work, more than
two-and-one-half minutes longer than they did in 1990, and more than
double the 40-second rise of the 1980s. While this may not sound like a
lot, the increase alone adds up to an additional 10 hours a year stuck
in traffic. The problem is even worse in large and mid-sized
metropolitan areas. According to Texas A&M's Texas Transportation
Institute (TTI), the average commute time during rush hour is almost 40
percent longer in the nation's 75 largest metro areas than during non-
rush periods.\i\ This is up from about 15 percent longer in 1982.
Drivers now waste an average of 62 hours per year stuck in traffic, the
equivalent of more than one-and-one-half weeks of work.
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\i\ Schrank, David and Tim Lomax, ``2002 Urban Mobility Study,''
Texas Transportation Institute, June 2002, http: // mobility.tamu.edu/
ums/.
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Why Is Congestion So Bad?
Traffic congestion has gotten worse for two reasons: The demand
(vehicle miles traveled) has increased while the supply (miles of
roads) has stagnated.
Why are people driving more? Unlike what some opponents of
expanding roads claim, the main big contributor is the growth of the
economy. The 15 percent increase in employment in the 1990s accounts
for more than half of the increase in vehicle miles traveled (VMT).
Moreover, because incomes went up so much during the 1990s (and cars
are lasting longer), driving has become more affordable. As a result,
for the first time m our history over 90 percent of households own a
car. Moreover, because more people face increased time pressures and
fewer work standard 9-to-5 hours, car-pooling has declined. Put it all
together and you get a 28 percent increase in VMT in the last
decade.\ii\
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\ii\ Bureau of Transportation Statistics: http://
WWW.transtats.bts.gov.
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Even with an increase in VMT, congestion should not get worse if
roads are expanded by an equivalent amount. Unfortunately, between 1987
and 1998, while VMT on freeways or principal arterials in urban areas
increased 42 percent, lane miles increased only about 9 percent.\iii\
This is why even though we added 40 percent fewer drivers in the 1990s
than we did in the 1980s, travel times increased three times
faster.\iv\ Confirming what the average American would see as common
sense, the bottom line is best stated by TTI: ``Road construction has
been shown to play a key role in holding the line against urban
mobility decline.''
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\iii\ The actual increase was 13.1 percent expansion, but over 30
percent of this is due to reclassifying rural counties as urban.
\iv\ Source: Alan Pisarski, personal communication.
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One of the main reasons for this infrastructure shortfall is that
while highway funding has increased in the last several years, as a
share of miles traveled, highway expenditures by all levels of
government fell from a high of 8.7 cents in the early 1960s to 4.6
cents in 1985, to 3.9 cents in 1997 (in constant dollars).\v\ At the
same time the systems needs have increased as population has grown and
much of the infrastructure has aged.
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\v\ ``Highway, Bridge and Transit Finance,'' Chapter 6 in ``1999
Status of the Nation's Highways, Bridges, and Transit Conditions and
Performance Report,'' U.S. Department of Transportation: Federal
Highway Administration, http: // www.jhwa. dot.gov/policy/1999cpr/
index.htm.
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In 2000, DOT estimated that overall highway funding would need to
increase 16 percent from $48.7 billion to $56 billion per year (1997
dollars) just to maintain the physical conditions of existing highways
and bridges over the next 20 years.\vi\ Expanding and improving the
highway system so that road congestion won't get worse will cost $76
billion per year, a 56 percent increase.\vii\ Cutting travel time by 1
percent per year will require annual surface transportation investments
of $94 billion per year. However, projected amounts of transportation
funding will fall significantly short of these levels. As a result, if
we want to make significant progress in improving the performance of
our surface transportation system, we will need to invest more.
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\vi\ Preliminary data from the 2002 Conditions and Performance
Report indicate that a 17 percent increase in highway spending, from
$64.6 billion to $75.9 billion per year (2000 dollars), will be needed
just to maintain the physical conditions of existing highways and
bridges over the next 20 years. Source: Statement of Mary E. Peters,
Administrator, Federal Highway Administration, Department of
Transportation, before the Committee on Transportation and
Infrastructure Subcommittee on Highways and Transit, House of
Representatives, Hearing; on the Status of the Nation's Highway and
Transit Systems, September 26, 2002.
\vii\ Preliminary data from the 2002 Conditions and Performance
Report indicate that a 65 percent increase in highway spending, from
$64.6 billion to $106.9 billion per year (2000 dollars), will be needed
to improve the system. Ibid.
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Tolls Will Have to Play an Increased Role In Financing our
Transportation
Infrastructure in the 21st Century
Even if it were raised a modest amount--a necessary, but
politically difficult task--the gas tax simply will not provide enough
revenue to make the investments needed to reduce congestion. The
problem may get even more acute as cars become more fuel-efficient and
gas tax revenues decline. Moreover, many regions spend most of their
limited transportation dollars on maintenance; they have little
remaining to fund system expansion. As a result, toll roads will be the
only way for many regions to finance lane and highway expansions. Tolls
accounted for less than 5 percent of total highway revenues in 1997.
Expansion of toll systems, including high-occupancy toll (HOT) lanes,
value express lanes, truck-only lanes, and congestion pricing of
existing lanes, could significantly increase revenues to offset the
costs of new construction.\viii\
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\viii\ Other nations are further ahead than the United States. For
example, the Netherlands recently instituted a comprehensive mobility
plan to keep traffic moving in the areas of Amsterdam, Rotterdam, The
Hague, and Utrecht. They plan to institute a two-year road pricing test
period and construct new toll roads with express toll lanes. Several
cities in Norway, including Trondhiem, Oslo, and Bergen, instituted
tolls to build new roads and widening existing ones.
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One promising approach to implementing road pricing would be to
convert existing high-occupancy vehicle (HOV) lanes to HOT lanes. The
development of HOT lanes can bring new revenues and pricing incentives
to road use by essentially auctioning off space on existing HOV lanes.
HOV lanes spread throughout most of America's largest metro areas in
the 1980s and 1990s as an effort to encourage commuting by carpool and
bus. But years later, the common spectacle of little-used HOV lanes
adjoining jamned ``regular'' lanes is creating a backlash, with lane
restrictions being loosened or eliminated in five states. A number of
regions have come up with a better idea: HOT lanes currently operate in
two parts of California (San Diego and Orange Counties) and in Houston,
Texas, and additional projects are currently in development in eight
other states.\ix\ The concept is simply to open up existing
underutilized HOV lanes to voluntary toll traffic, resulting in a
reduction of traffic congestion in the ``regular'' lanes, generation of
revenue for other transportation projects, and an option for commuters
who are willing to pay-or who urgently need-to get down the road. HOT
lane tolls can and should also be used for the broader purpose of
reducing traffic congestion and pollution, while making transportation
more affordable. In San Diego, tolls are used to subsidize express bus
service in the corridor, which promotes all three purposes.
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\ix\ These include Arizona, Colorado, Florida, Georgia, Minnesota,
Oregon, Virginia, and Washington. Prior to Governor Glendening's veto
of the idea, Maryland was also on the list.
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The concept of road pricing can go beyond HOT lanes to value
express lanes, whereby new roads or lanes are built and supported in
all or part through the use of tolls.\x\ These new roads and/or lanes
would offer reliable, free-flowing travel throughout metropolitan areas
for a fee. As roads continue to get more congested, there is an
increasing number of people who would gladly pay extra to drive on un-
congested roads. By adjusting the fee in real time, a free flow of
traffic could be maintained. Robert Poole of the Reason Institute has
proposed value express lanes throughout entire metro areas.
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\x\ Orski, Ken, ``Financing Future Transportation Needs, Part III:
Long Term Alternatives-New Funding Concepts,'' Innovation Briefs, vol.
13, no. 5., September/October 2002, http: // www.innobriefs.com/
abstracts/2002/sepO2. html#2.
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The Orange County, Calif., 91 Express Lane is an example of such a
value express lane project. Opened in late 1995, it is one of four
private toll road ventures permitted by legislation passed in 1989.
Project development and operating procedures are delineated in a
franchise agreement signed by the state and the facility's operator,
the California Private Transportation Company. Four lanes (two in each
direction) were built in the median of State Route 91, an extremely
congested, six-lane highway. The amount of the toll varies by time of
day to ensure that traffic flows smoothly. To keep the lanes free of
congestion at rush hour, express lane tolls have been raised more than
once a year since 1995. The current cost of traveling the entire 10-
mile span of HOT lanes ranges from $1.00 to $4.75, and it is estimated
that drivers save an average of 12 minutes in commuting time.
Finally, with the recent implementation of congestion pricing in
central London there has been renewed interest in using pricing to
manage congestion. Economists have long argued that drivers do not pay
the full social cost of driving when they drive during peak periods and
that because of this that drivers over-consume peak period travel. The
notion is that if drivers traveling at peak periods were charged a fee
(or a higher fee than at other times of the day), that travelers who
had other choices (e.g., transit, time shifting) would not drive then.
The experience so far in London has proven this point, as traffic is
down approximately 20 percent and average speeds are up considerably.
It's important to note, however, that in this case the congestion tolls
are used not to raise revenue to pay for new capacity to alleviate
congestion, but rather to induce people to not drive. It's unlikely
that a similar scheme will be introduced in the U.S., nor is such an
approach needed except perhaps in the few most congested urban cores.
However, tolls easily could and should be varied on roads (and bridges)
to adjust to demand conditions in order to not only maximize the
efficient utilization of our limited transportation infrastructure but
also pay for infrastructure expansion.
Objections to Road Pricing
Opponents of road pricing make a number of objections, charging
that it is inefficient, unfair, and represents double taxation.
It is true that paying tolls at staffed tollbooths is inefficient
and costly. However, electronic toll collection systems that use
vehicle-mounted electronic transponders to automatically debit funds
from drivers' pre-paid accounts enable road pricing without slowing
traffic or requiring toll collectors. This technology also enables
governments to easily institute a variety of road pricing approaches,
including pricing based on time of day, level of congestion, number of
passengers, and type of car (e.g., electric-gas hybrid cars ride for
free).
Some oppose tolls because they believe that drivers have already
paid for roads through gas taxes and that tolls represent a form of
double taxation. However, gas taxes do not cover the full costs of
driving. Gas taxes (and tolls) cover only about 88 percent of the cost
of highways. If the costs of maintaining other roads and local streets
are factored in, the share of road costs paid by gas taxes is even
lower. In short, gas taxes do not come close to paying for the costs of
the nation's surface transportation system. Moreover, gas taxes do not
cover the costs of adding lanes or expanding roads. One study found
that the average construction costs for adding lanes in urban areas is
over 30 cents per mile driven during peak periods, yet gas taxes amount
to only about 2 cents per lane mile.\xi\ Likewise, drivers pay nowhere
near the total cost of driving when they use, roads during peak
congestion periods.\xii\
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\xi\ DeCorla-Souza, Patrick and Anthony Kane, ``Peak Period Tolls:
Precepts and Prospects,'' Transportation, vol. 19, no. 293, p. 311,
1992, Kluwer Academic Publishers.
\xii\ While the cost to each additional driver on a congested road
increases, the cost to the rest of the drivers from the incremental
addition of more cars increases even more. As a result, drivers on
congested roads do not pay the full social costs.
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Some conservatives oppose road pricing because they see it as a tax
increase. While this could be true if existing roads were tolled, it's
not true if tolls are used to finance new road capacity and if current
gas tax revenues continue to be spent on transportation and not
diverted to the general fund. Tolls are simply a way to charge the user
for their use of a service. Clearly when a consumer pays to buy a
service, neither they nor we see that as a tax. The same holds true for
transportation. If used to support new capacity expansion, tolls would
simply be the price people would voluntarily pay for a new service. If
consumers did not want to ``buy'' this increased mobility, they could
remain on ``free'' lanes.
Finally, road pricing is opposed by some, particularly on the left,
who believe that roads are a public good which should be provided
equally to all. For example, some liberal groups have criticized HOT
lanes as unfair, calling them ``Lexus lanes.'' They argue that all
Americans should be treated equally and that charging some for premium
service creates a two-tiered society with the privileged getting to
cruise along at 65 mph while everyone else sits in traffic. There are
several problems with this view.
First, as a representative of an organization affiliated with the
Democratic Leadership Council, I am sympathetic to concerns about
equity. However, I believe that in this case, well-intentioned equity
concerns are misplaced. Studies have shown that HOT lanes are used by a
representative mix of commuters, not just the wealthy.\xiii\ But even
taking into account the fact that higher income travelers do use the
lanes more than lower income travelers, one can make a compelling case
that using tolls to expand infrastructure is in fact highly
progressive--since higher earners are actually paying more for public
infrastructure. But opponents will argue that unless you pay, you don't
benefit. In reality, everyone benefits from charging those willing to
pay for additional lanes or using underutilized lanes, since this means
there will be fewer drivers in the free lanes. Second, road pricing can
be explicitly designed to address these equity concerns. For example,
some of the revenue generated can support transit, and people who take
transit could get credits (through smart cards) that let them use toll
lanes on days they need it most.\xiv\ Finally, it's one thing to raise
equity concerns, it's another to propose realistic alternative
solutions. We can ask Americans to wait a very long time until the gas
tax is finally increased on all drivers so it raises enough revenues to
add new capacity, or we can just move ahead now and expand capacity,
drawing revenues from those that are willing to pay. In most cases,
arguing that roads should be funded solely by the gas tax means that
new roads will simply not be built.
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\xiii\ Analysis by Edward Sullivan and Joe El Harake of the 91
express lanes in southern California found that while upper-income
drivers use lanes more, the difference; is not too pronounced. Fifty
percent of households with incomes of higher than $100,000 stated that
they rarely or never use the lanes, while 25 percent of individuals
with incomes below $25,000 use them frequently.
\xiv\ DeCorla-Souza, Patrick: and Anthony Kane, ``Peak Period
Tolls: Precepts and Prospects,'' Transportation, vol. 19, no. 293, p.
311, 1992, Kluwer Academic Publishers.
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How the Federal Government Can Boost Road Pricing
While a number of new road pricing projects have emerged in the
last decade, overall progress is slow. In 1997, Congress created an
Interstate Toll pilot project and a road pricing pilot program within
DOT. No funds were devoted to the former project and the road pricing
program received just $11 million per year for FY2000 to FY2003 to
support up to 15 new state and local value pricing programs. In spite
of energetic efforts by the DOT program managers, the results have been
disappointing largely because the incentives for states to try a new
and potentially controversial proposal were minimal. Moreover, DOT
itself has been ambiguous about road pricing. As a result, if Congress
wants to kick-start new road pricing projects it will have to provide
much stronger incentives.
1. Repeal the limitation on tolls on interstate highways, as long
as toll collection is electronic and the tolls are used to support road
or lane expansion or major rebuilding.\xv\ To enable states to generate
more revenues for road expansion, Washington needs to remove the
regulatory barriers to road pricing. In order to ensure that states do
not simply slap tolls on sections of interstates that carry large
numbers of out-of-state drivers, any new tolls should be allowed only
on new roads or expanded lanes. The Freeing Alternatives for Speeding
Transportation (FAST) Act, H.R.1767, introduced by Mark Kennedy (R-MI)
and Adam Smith (D-WA) would do this.
---------------------------------------------------------------------------
\xv\ Section 1216 of Transportation Equity Act for the 21 st
Century (TEA-21) says that with the exception of a limited pilot
program, states cannot put new tolls on interstate highways. States
should be able to add new lanes to interstates and charge all
electronic tolls on them.
---------------------------------------------------------------------------
2. For a limited period of time, raise the required federal share
on road projects involving pricing by at least 10 percent. While
reducing restrictions on tolling federally funded highways is an
important step, it may be not be enough to convince states to take the
somewhat politically risky step of using tolls to add capacity.
However, if the federal government provided states with incentives to
use tolls to fund new capacity, this would help states overcome their
inertia and political caution. One way to do this is to raise the
federal share of funding for toll roads. Currently, the federal
government provides 80 percent of funds for most road projects. To
jump-start road pricing projects, Congress should provide a 90 percent
match on these projects. While this will not provide additional funds
to states, it will let them stretch their own state funds further. Some
will argue that since road-pricing projects raise revenue, federal
funds should be used instead for maintenance and construction of roads
that are not priced. However, the revenues from the road can be used to
support other transportation projects in the state. Until toll roads
become more widespread, it makes sense for the federal government to
provide incentives for their creation.
3. Change the tax laws to allow private corporations to issue tax-
exempt bonds for toll roads as long as they get approval from the state
DOT. Under current law, certain types of privately funded projects,
such as public transportation facilities, airports, waste disposal
facilities, and water and sewage facilities, are eligible for tax
exempt financing with private activity bonds.\xvi\ However, privately
built toll roads are not eligible. In contrast, publicly funded and
operated road projects can obtain tax-exempt bonds. Additionally, the
fact that a private operator cannot own a publicly funded project
reduces the incentive for private companies to operate roads. Moreover,
private toll roads compete against publicly provided roads. Changing
the tax laws to enable private toll roads to be eligible and raising
the state cap on private revenue bonds to reflect this change would
enlist new innovative public-private partnerships.
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\xvi\ ``Issue Brief: Private Activity Bond Volume Caps,'' June
2002, http: // WWW.gfoa.org/flc/briefs/062702/volcaps.06.02.pdf.
---------------------------------------------------------------------------
4. Make the receipt of federal highway funding contingent upon the
states adopting an interoperable national toll system so that any toll
transponder can be used anywhere. Allow states to use federal highway
funds to offer free transponders to all drivers when they register
their vehicles.\xvii\ Toll roads will expand if it is easier to use
electronic toll transponders. While a number of East Coast states
adopted a shared E-ZPass standard, other states use different
systems.\xviii\ But even for states with the same standard, unless they
are linked to the same system, drivers cannot use one state's
transponder in another state. For example, a commuter in Washington,
DC. would have to get a ``Smart Tag'' to drive on the Dulles Toll Road
in Virginia and an E-ZPass for the Chesapeake Bay Bridge in Maryland,
not because the transponders are different, but because Virginia is not
linked into the E-ZPass system. As a result, transponder
interoperability is needed. In addition, to encourage the use of toll
transponders, it needs to be much easier for Americans to get low-cost
transponders.\xix\
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\xvii\ Transponders cost anywhere between $15 and $35, and are
often free since they save the toll road authority money by avoiding
the use of expensive human toll collectors.
\xviii\ For example, Florida, South Carolina, Texas, and Kansas use
a different standard.
\xix\ Most likely, the next generation of transponders for which
there is an agreed North American standard will be built into vehicles
by the manufacturers. In addition to permitting automatic tolling, they
could support a wide range of new applications, such as allowing police
to download license and registration data if they pull a car over, give
the driver a dashboard display of the fog warning one-half mile ahead,
and download a movie at the gas station for the kids in the backseat.
(Source: interview with Peter Samuel, editor, Toll Roads Newsletter).
---------------------------------------------------------------------------
Conclusion
If we do not want to see even higher levels of congestion when
Congress revisits the TEA-21 Act in 2009, moving forward this year to
remove restrictions and provide incentives for the greater use of tolls
to expand our nation's infrastructure will be critical.
__________
Prepared Statement of William R. Buechner, Ph.D., Vice President,
Economics and Research, American Road and Transportation Builders
Association
Mr. Chairman, Congressman Stark, and Members of the Committee,
thank you very much for inviting the American Road and Transportation
Builders Association to testify this morning on ``Financing Our
Nation's Roads''.
I am Dr. William Buechner, ARTBA's Vice President for Economics and
Research and chief economist. Prior to joining ARTBA in 1996, 1 served
22 years as a senior economist for the Joint Economic Committee, and I
have a doctorate in economics from Harvard University. I am very
pleased to be here this morning to present ARTBA's views on this
important subject.
ARTBA marked its 100th anniversary last year. Over the past
century, its core mission has remained focused on aggressively
advocating federal capital investments to meet the public and business
community's demand for safe and efficient transportation. The
transportation construction industry ARTBA represents generates more
than $200 billion annually to the nation's Gross Domestic Product and
sustains more than 2.5 million American jobs. ARTBA's more than 5,000
members come from all sectors of the transportation construction
industry. Thus, its policy recommendations provide a consensus view.
Importance of Transportation Investment. This committee deals with
issues that directly relate to the development and management of
material wealth of the federal government and the nation. Few issue
areas have a bigger impact on the U.S. economy than transportation
investment.
Transportation infrastructure is the catalyst for new development.
It provides the platform necessary to perform virtually all of the
activities of both government and the private business sector.
Without transportation infrastructure, people cannot get to and
from work. Raw materials cannot be sent to manufacturing facilities . .
. products and food stuff cannot be sent to market. The travel and
tourism industry that so many of our states depend on would not exist.
Emergency response is a meaningless term without uncongested
transportation infrastructure. While usually overlooked in federal
budget and policy discussions, transportation investment--or the lack
thereof--impacts public health and insurance costs borne by government
and society.
Without our complex transportation infrastructure system, our
military would still be mustering for an action in Iraq . . . and
literally hundreds of thousands of Americans would have died over the
years in hurricanes, floods and other natural disasters.
Clearly, providing and maintaining the nation's transportation
infrastructure is--and always has been in most civilized and
progressive societies--a core function of government. We are heartened
that the Joint Economic Committee is exploring this issue area with the
intention of providing recommendations to the Congress on how to
generate additional revenue to meet the very substantial investment
shortfall in highway and public transit facilities that the U.S.
Department of Transportation outlined in its 2002 report to Congress.
Significant new investment in transportation improvements is
critical to job creation and future economic growth in America. We need
not only to maintain the transportation infrastructure we have, but
also to build more capacity into the system to ensure that the system
is not retarding economic growth.
This year, traffic congestion in America will cost our economy
nearly $70 billion in lost productivity and wasted motor fuel costs,
according to the Texas Transportation Institute. Motor vehicle crashes
will cost the American economy $230 billion this year, according to the
National Highway Traffic Safety Administration. Poor road conditions or
outdated alignments are a factor in a third of those incidents.
That $300 billion drain on the American economy is 10 times what
the federal government is investing in capital improvements to the
nation's surface transportation system during 2003.
With the federal highway, transit, airport and rail investment
programs all due for reauthorization by the Congress this year, a
window of opportunity exists to take the bold financial actions that
are necessary to ensure the nation has the safe and efficient
transportation network we need for the new century.
As detailed in our testimony, the investment shortfall we face will
need more than ``innovative'' financing. There is no ``silver bullet.''
There is no easy answer or way out. The inescapable fact is that it
will be necessary to increase federal highway user fee rates to meet
the challenge that the federal government itself has quantified.
Public-Private Partnerships and Innovative Financing. While ARTBA's
core focus is on the federal programs that finance investment in
highways, mass transit, airports, rail and water transportation, we
have long been a leader in the area of public-private partnerships and
leveraged financing for transportation projects. More than 60 major
companies in the industry are represented in our Public-Private
Ventures Division, which has developed a set of recommendations for
increasing the ability of private companies to build and operate
transportation facilities in the United States. To further this effort,
we conduct an annual conference each fall in Washington where hundreds
of participants meet to discuss public policy and business
opportunities in the public-private partnership area.
We are very encouraged that this committee is taking a lead role in
bringing ideas for additional mechanisms for financing investment in
the nation's infrastructure, to the Congress.
Let me summarize some of our ideas for increasing the role of the
private sector in financing transportation investment.
First, public-private partnerships can supplement the core federal
transportation investment programs, but not replace them. The core
programs are funded through what in essence are user fees. While not
perfect, this method has proven effective in financing transportation
projects aimed at meeting general public needs and facilitating
economic growth, defense and emergency response activities and
environmental objectives for almost half a century. Public-private
partnerships are best suited for ``mega'' projects that, due to
expense, could not otherwise be financed in a timely manner through
normal user fee revenue streams without either very large increases in
those fees or curtailing investment in the overall core maintenance,
rehabilitation and new construction programs.
The Transportation Equity Act for the 21st Century (TEA-21)
established a handful of financing mechanisms--the Transportation
Infrastructure Finance and Innovation Act (TIFIA), State Infrastructure
Banks (SIBs), and toll road provisions--that were designed to foster
public-private partnerships. After five years experience, the results
have been mixed. There have been a number of good projects delivered at
substantial cost savings to the public. But these mechanisms have not
attracted as much interest and private equity as had been hoped.
There are a number of ways TIFIA, SIBs, and toll funding could be
improved to make them more attractive to potential private-sector
investors.
TIFIA Program. Under the TIFIA program, which offers federal credit
assistance for up to one-third of the cost of transportation projects
of national or regional significance, 11 projects have been approved so
far worth a total of $15.4 billion. Federal TIFIA loan commitments have
totaled $3.6 billion and the projected U.S. budget cost is $190
million. But certain provisions of the program have erected barriers to
project submissions.
We would suggest the following changes to the TIFIA program in TEA-
21 reauthorization legislation:
1. Lower project eligibility to $50 million from the current $100
million;
2. Permit intermodal projects;
3. Eliminate the ``springing lien'' provision, under which junior
federal debt becomes senior debt under a default, because it raises the
perceived risk and cost of private financing and discourages private
equity; and
4. Require the TIFIA office at FHWA to become more active in
encouraging project applications.
State Infrastructure Banks. Currently, 32 states have established
State Infrastructure Banks, which provide revolving funds for
transportation projects. Currently, SIBs have 310 loans outstanding
worth $4.1 billion. Only four of these SIBS, however, are eligible for
a TEA-21 pilot program allowing them to use federal highway funds for
bank capital.
ARTBA recommends that the pilot program be extended to permit all
50 states to use some federal funds to capitalize the SIB revolving
funds.
Toll Roads. For a public private partnership to work as a source of
funding for a highway project, there has to be a stream of income from
the project back to the private investor.
The traditional option for generating a revenue stream has been
tolling, and tolling is gaining acceptance as a source of highway
funding. The HOT lane corridor proposal that Bob Poole has developed
and the proposal for truck only toll lanes, which ARTBA has endorsed,
are two creative variations on the tolling approach that can generate
new revenue sources for highway improvements that would provide needed
additional capacity and higher levels of safety.
But there are other ways to generate a revenue stream for private
investors. For example, development districts can be established where
businesses and developers who would benefit from a highway investment
would finance it through higher property or sales taxes. Investors
could also be compensated with land and development rights near a
project, similar to what was done to foster development of land-grant
railroads in the 19th century.
Financing the Federal Highway Program. As I said earlier,
initiatives such as those discussed earlier in our testimony or
suggested by other witnesses this morning are important potential new
sources of highway investment, but they are a supplement to and not a
substitute for the core investment financed by the federal-aid highway
program and the federal mass transit program.
For the past half century, most federal transportation investment
has been user-fee financed. Revenues from the federal motor fuels taxes
and certain taxes on heavy trucks are credited to the federal Highway
Trust Fund. These revenues are supposed to be used to finance capital
investments in the nation's core highways and mass transit systems.
Prior to the enactment of TEA-21 in 1998, this relationship was
often breached. Congress would provide whatever amount could be carved
out of the domestic discretionary budget cap for highways and transit,
with no formal link to Highway Trust Fund user fee revenues or the
nation's surface transportation investment requirements.
TEA-21 addressed half this problem by linking highway program
funding directly to Highway Account receipts and using Mass Transit
Account receipts to finance 80 percent of federal transit investment.
But the annual investment still had no relationship to the nation's
surface transportation investment needs. The 2002 Report to Congress on
the Conditions and Performance of the Nation's Highways, Bridges and
Transit by the U.S. Department of Transportation states bluntly:
``Capital investment by all levels of government between 1997 and 2000
remained below the `Cost to Maintain' level. Consequently, the overall
performance of the system declined.''
For TEA-21 reauthorization, ARTBA has for more than two years urged
that Congress fund the federal highway and mass transit programs at the
level necessary to meet our nation's highway and transit investment
requirements. At minimum, this should be the amount required to
maintain current physical and performance conditions and, hopefully,
begin improving conditions.
Highway and Transit Investment Needs. There are a number of ways to
determine highway and transit investment needs, but the only
methodology that is actually based on economic principles is the method
used by the U.S. Department of Transportation for its biannual
Conditions and Performance Report.
The U.S. DOT's report is based on a sample of 113,000 highway
segments from around the country. For each of these segments, the state
DOTS provide details on physical conditions and traffic volume, as well
as traffic projections. The U.S. DOT model then projects forward
physical and performance conditions and examines up to 28 alternatives
for addressing any problems identified. For each alternative
improvement, the model computes the sum of the economic benefits,
including the impact on travel times, crash costs, and vehicle
maintenance costs, and compares the benefits to the cost of the
improvement. It then ranks potential projects according to the benefit/
cost ratio. Similar models are applied to bridge and transit investment
needs.
Based on this model, the 2002 Conditions and Performance Report
found that an annual investment of $82.6 billion in constant 2000
dollars will be required by all levels of government during the 20-year
period from 2000-2019 just to maintain current physical and performance
conditions on the nation's highways and bridges.
When the Transportation and Infrastructure Committee factored in
projected inflation of about 2.2 percent per year for the next six
years and assumed that the federal government should continue providing
the approximately 43 percent share of total public highway capital
investment that it has assumed over the past decade, the Committee
found that the minimum federal surface transportation investment needed
for the next six years just to maintain current highway and transit
conditions totals over $320 billion or an average of almost $54 billion
per year. Highway investment by the federal government would have to
total more than $270 billion or $45 billion per year, while transit
investment would have to total more than $48 billion. To improve
highway and transit conditions by making all economically justified
investment would require more than $400 billion, or $72 billion per
year. A copy of the Committee's findings is attached at the end of my
statement.
I should note that these are conservative estimates because they
assume a significant slowdown in travel growth over the next two
decades. Similar forecasts have been made in the past but have always
been wrong.
The following table shows the number of highway miles in each state
with pavement surfaces that are rated ``unacceptable'' by the Federal
Highway Administration and need resurfacing or reconstruction. The
table also shows the number of bridges in each state that U.S. DOT has
determined are either structurally deficient or functionally obsolete.
The bottom line is that almost 18 percent of core highway pavements
currently need resurfacing or reconstruction, and 27 percent of all
bridges need to be replaced. These percentages will continue to grow in
the years ahead if Congress funds the highway program in
reauthorization below the level needed to maintain current conditions.
Reauthorization Proposals. Three weeks ago, Congress finalized a FY
2004 budget resolution that would provide a total $218 billion for the
federal highway program over the next six years and $49 billion for
transit. Not only are both figures far short of the minimum investment
needed to maintain current conditions, the highway figure is barely
sufficient to accommodate projected inflation and it is well below the
amount needed to increase the return to donor states to the proposed 95
percent.
The only current reauthorization proposal that will meet the
nation's highway and mass transit investment needs for the next six
years is the program proposed by the bipartisan leadership of the House
Committee on Transportation and Infrastructure.
This proposal would provide $375 billion for the highway, transit
and highway safety programs over FY 2004-2009. The modal split would
likely be approximately $300 billion for highways, about $65 billion
for transit and the remainder for the highway safety programs. This
investment level would not only maintain current highway and transit
conditions, it would begin to make some improvements.
The problem, of course, is that projected revenues into the Highway
Trust Fund are not sufficient to finance the level of federal highway
and transit investment required to meet the nation's needs. With
current revenues, there would be virtually no growth.
It is clear that a meaningful increase in highway and transit
investment will require a substantial infusion of new revenues into the
Highway Trust Fund.
[GRAPHIC] [TIFF OMITTED] T1928.001
Last year, in our ``Two Cents Makes Sense'' proposal, ARTBA showed
how the nation's highway and transit needs could be met with an annual
two cent-per-gallon increase in the federal motor fuels user fee over
the next six years, even if no other new revenues sources were adopted.
An annual rate adjustment of less than two cents per gallon would be
sufficient if other revenue enhancements were enacted.
To achieve the same goal, the bipartisan T&I Committee leadership
is considering a number ofrevenue options, including spending down the
Highway Trust Fund balance, compensating the Highway Trust Fund for
revenues lost to the gasohol tax incentive, reinstating interest on the
trust fund balance, and reducing motor fuel tax evasion. These would be
helpful but the revenue amounts are small. To bridge the gap, the
Committee is also considering a 5.5 cent/gallon adjustment to the motor
fuels excise to restore purchasing power lost since the rate was last
adjusted in 1993, plus subsequent indexing of the rate to the CPI.
ARTBA wholeheartedly supports this approach.
There have been suggestions that, in lieu of an increase in user
fees, revenues to increase federal investment in highways and mass
transit be raised by issuing bonds--that is, by borrowing the money.
Some find this an attractive idea. But before Congress considers such a
sweeping change in the financing of surface transportation investment,
it should pay attention to the observations presented in an excellent
article by Dr. Martin Wachs, Carlson Distinguished Professor of Civil &
Environmental Engineering at the University of California, Berkeley,
titled ``A Dozen Reasons for Raising Gasoline Taxes.'' Dr. Wachs
writes:
``In the end, borrowed money is not really revenue at all, because
it must later be repaid using revenues from taxes or user fees. In
addition to repaying the borrowed funds, the state must bear the cost
of interest, which, if funds are held for 20 or 30 years, often exceeds
the value of the principal.''
A copy of Dr. Wachs article is attached to my statement.
Consequences of Inadequate Investment. Let me turn to another
issue, the economic consequences of failing to meet our highway and
transit needs.
Highway and Bridge Conditions. The 2002 Conditions and Performance
Report is very clear about the consequences of failing to increase
highway investment--highway conditions will deteriorate substantially.
The average quality of highway pavements will deteriorate by 26 percent
by 2019 at the current level of highway investment, while the backlog
of structurally deficient or functionally obsolete bridges--currently
over 160,000 bridges--will likely grow by a similar amount.
Safety. Safety conditions will also deteriorate. The National
Highway Traffic Safety Administration projects that traffic fatalities
will increase from 42,000 per year currently to more than 50,000 per
year by the end of the decade without further increases in highway
safety investment. Increasing the use of safety belts and reducing the
incidence of drunk driving will help reduce fatalities, but highway
conditions are implicated in one-third of all highway fatalities each
year, which can only be cut by investing in highway improvements.
According to a recent report from the National Highway Traffic
Safety Administration, highway crashes cost $230 billion each year,
including hospital costs, lost productivity and wages, legal costs,
property damage and a host of related costs. One-third of this is $75
to $80 billion, or more than double the annual federal investment in
highway improvements. Highway crashes are one of the most serious
public health issues in the United States. Highway crashes are the
number one killer of young people under the age of 25. Congress should
not ignore the safety consequences of highway investment when setting
funding levels in TEA-21 reauthorization.
Congestion and Mobility. Finally, at the current level of highway
investment, congestion will inevitably get worse. The U.S. DOT report
calculates that failure to increase highway investment will reduce
average highway speeds by 2 miles per hour by 2019, raise the amount of
travel under congested conditions from 33 percent today to 36.4 percent
and increase annual delay from 31 hours per capita to 36 hours.
Congestion is already having a serious economic impact. According
to the Texas Transportation Institute's 2002 Urban Mobility Report,
traffic congestion in the nation's 75 largest cities costs an annual
average of $67.5 billion, including the cost of 3.6 billion hours of
delay and 5.7 billion gallons of wasted fuel.
A recent study by ARTBA based on data from the Census Bureau's
latest Commodity Flow Survey showed that more than three-quarters of
the value of all freight traffic in the U.S. is transported by truck.
During the 1980s and 1990s, many U.S. businesses adopted the ``just-in-
time'' delivery system, which freed up billions of dollars of warehouse
and inventory funds for more productive investments. Congestion
threatens to undo these gains to the detriment of our economic growth.
And there is growing evidence that congestion is impairing small
business growth. Many small businesses in urban areas have cut growth
plans because they can't work around the congestion, while management
time is being absorbed by logistical problems at the cost of growth.
Tax cuts will not stimulate growth in areas where highway congestion is
the limiting factor.
There are social and health consequences to congestion as well,
including the impact on family life, the amount and quality of time
parents get to spend with their children, and the impact on health of
the stress of driving under congested conditions.
The proposal by the bipartisan leadership of the House
Transportation and Infrastructure Committee will address these
problems. It will also have a powerful stimulative impact on the
economy. A study of the Committee proposal by Global Insight, Inc.
(formerly DRI-WEFA) found that the highway and transit investment and
fuel tax increase would together generate $290 billion of Gross
Domestic Product over the next six years, for a return of more than
$2.80 of additional output for every federal dollar invested. It would
generate a net gain of over $800 per household of disposable income
after paying the increased motor fuels tax, as well as more than $100
billion of federal income and payroll tax revenues.
Conclusion. With an ever-growing U.S. population and, hopefully, an
ever-growing U.S. economy to sustain and improve American quality of
life, saying as we enter the 21st Century that ``our priority now
should be just maintaining the transportation infrastructure that we
already have'' or ``we can't afford to invest more in new
transportation capital assets'' is like saying ``America can't afford
to defend itself anymore--the planes and tanks we used in World Wars I
and II can serve all our needs if just maintain them.''
Those people are wrong. Transportation investments, like defense
investments, are what ensure America will be strong now . . . and in
the future. It's an investment for our children and grandchildren.
In summary, Mr. Chairman, there are many ways in which the private
sector can help finance investment in transportation infrastructure,
and ARTBA has been a leader in supporting public-private partnerships.
The federal responsibility for supporting investment in highways and
transit, however, cannot be ignored. A minimum federal investment of at
least $270 billion will be needed during the next six years just to
maintain current conditions on our nation's highways. An additional
federal investment of about $50 billion is necessary to maintain the
nation's mass transit systems. The bipartisan leadership of the House
Committee on Transportation and Infrastructure has developed a bold
proposal to meet those goals. We urge the Congress to enact that plan.
We also encourage the Congress to include the TIFIA, SIB, and toll road
revisions we propose in the TEA-21 reauthorization legislation.
That concludes my remarks. Again, ARTBA appreciates your invitation
to testify this morning. I would be happy to answer any questions.
[GRAPHIC] [TIFF OMITTED] T1928.002
Prepared Statement of Michael Replogle, M.S.E., Transportation
Director, Environmental Defense
Good morning Mr. Chairman and members of the committee. I am
speaking on behalf of Environmental Defense, an organization with
300,000 members that seeks to integrate law, science, and economics to
find practical solutions to environmental problems.
Wise stewardship of our transportation system, economy,
environment, and communities demands a level playing field between
highways and other transportation choices. When financing, taxation,
and pricing systems favor driving and roads over transit, walking,
biking, and other choices, it skews consumer and agency investment and
consumption decisions, harming efficiency and public welfare. We urge
your action in the reauthorization of America's key federal
transportation law, TEA-21, to make the playing field more, not less
level, so Americans can be wise stewards of transportation.
How we finance our nation's transportation has a powerful influence
on our travel choices, communities, public health, equity of access to
opportunities, transportation system performance, and quality of life.
For much of the last century, government funding for transportation,
tax policy, and transportation pricing policies have strongly favored
private motor vehicle use. While spurring unprecedented mobility, this
also led to sprawl, induced traffic, degraded air and water quality,
reduced access to opportunities for the millions of Americans who don't
drive. It diminished transportation choices and made it harder to walk
safely where we live and work, diminishing routine physical activity.
Scientists now link our dependence on cars with asthma and other
respiratory diseases, cancer, obesity, and impaired mental health.
The great progress we've made in producing cleaner cars has been
significantly offset by growth in driving. The growing supply of
``free'' roads and highways, especially high-speed motorways with
little local access function, supported by deep subsidies to motorists
from general revenues, is a key factor in rising traffic and
congestion. From 1970 to 1998, vehicle miles traveled (VMT) increased
by 136 percent, or more than three times the rate of population growth.
Other indicators of driving activity--vehicle trips per person, average
vehicle trip length, and number of motor vehicles per person--have also
risen sharply, in no small part due to the major expansion of highways
in the past half century.
Over 160 million Americans still live in areas with poor air
quality. Fourteen million with asthma gasp for air when ozone levels
rise. Those living near high volume roads face cancer risks of 1 in 500
from air toxics. Emissions from cars and trucks are increasingly linked
to cancer, childhood asthma and other respiratory illnesses. And
transportation greenhouse gas emissions--up 9 percent since 1990--bring
new threats to our health and environment. Indeed, U.S. DOT estimates
the health effects of air pollution from motor vehicles costs us $40 to
$65 billion annually, dwarfing the $27 billion in federal
transportation spending, and this doesn't consider the effects of air
toxics. This is a hidden tax of over $600 a year on each U.S.
household, and is disproportionately borne by our children, elders, and
the infirm. TEA-21 reauthorization represents an opportunity to improve
our accounting for these hidden costs and to align the strategies we
use to finance transportation with the goals of minimizing these
burdens while maximizing the efficiency of our mobility system.
A LEVEL PLAYING FIELD BETWEEN ROADS AND OTHER TRAVEL CHOICES?
The 1991 ISTEA reforms--reaffirmed and extended in the 1998 TEA-21
law--began to level the playing field between highways and other means
of transportation after more than a half century of overwhelmingly pro-
highway policies. Uneven local match requirements to get federal
transportation funding, which once favored Interstate highway
construction over transit and local street improvements, were leveled
at an 80:20 federal-local match. The door opened for state and local
governments to begin exploring new transportation financing and
management strategies, such as High Occupancy Toll (HOT) lanes and
electronic time-of-day road pricing. Federal transportation funds were
made more flexible to support transit, pedestrian safety, and market
incentive programs, such as promoting employer-paid transit benefits.
Accountability was expanded for states and regions to consider the
short and long term effects of transportation decisions on air quality
and transportation system performance.
Thanks in no small part to these reforms, the long rapid rise of
vehicle miles of travel began to slow and more Americans began choosing
alternatives to driving. From 1996-2002, transit ridership grew 19
percent, compared to an 11 percent increase in vehicle miles of travel.
Yet transportation finance problems now dampen this recent positive
trend. Disastrous local and state finances caused by the recession and
rising homeland security costs have prompted transit agencies to cut
back service, increase fares, or both to compensate for funding
shortfalls. Nine in ten large transit agencies have implemented or are
planning to implement fare increases and one-third of all agencies are
providing less frequent service. Rising unemployment--now at more than
8.4 million Americans--combined with these transit fare increases and
service cutbacks caused transit ridership to fall slightly last year,
while vehicle miles driven rose 1.7 percent over 2001 levels as more
Americans drove to avoid air travel for many intercity trips.
A shortage of funding in the federal Transit New Starts program--a
primary source of financing for new rail transit--has led to sharp
reductions in the federal snatch provided for transit expansions sought
by dozens of cities across America. Now there are proposals to write
into law a requirement for local sponsors of new transit projects to
come up with $5 for every $5 US DOT provides (a 50:50 match), while
highway project sponsors still only need to come up with $1 for each $5
from the US DOT for new roads (an 80:20 match). Such an unlevel playing
field is a recipe for unwise investment choices. The Progressive Policy
Institute proposes a 70:30 match for both highways and transit, a fair
and sensible suggestion, given that all transportation dollars are
scarce. But new proposals for road toll financing threaten to restrict
billions of additional dollars for building new roads, cutting out
transit, which may be thus cast into another spiral of decline.
A transit proposal floated by Senators Grassley and Baucus would
reallocate federal gas tax funding, which now is divided so 15.44 cents
goes to the ``highway'' account and 2.86 cents goes to the ``mass
transit'' account. Under the Grassley-Baucus proposal, the mass transit
account revenue would be reduced to 0.50 cents, thereby raising the
highway share to 17.9 cents. This would leave the transit program short
by nearly $4 billion a year, to be made up by some sort of borrowing,
modeled on the AASHTO proposed Transportation Financing Corporation.
Large scale borrowing through a new class of federally sponsored debt
would substitute expensive tax credits for direct appropriations and
leave transit funding in a highly precarious indebted position entering
the next funding authorization cycle. As a means around the budget
caps, it falls short of the AASHTO proposal, which relied on a tax
increase through indexing to generate revenues to offset the tax credit
revenue losses. With no revenues, the transit program could not
generate these offsets. In short, this proposal would destroy TEA-21's
guaranteed and firewalled transit funding support, putting roads first
at the expense of travel choices and wise system stewardship. Americans
want more, not less transit service and travel choices. According to a
recent poll conducted for the American Public Transit Association, 81
percent of Americans agree that increased public investment in public
transportation would strengthen the economy, create jobs, reduce
traffic congestion and air pollution, and save energy. Nearly three-
quarters of Americans support the use of public funds for the expansion
and improvement of public transportation. Unfortunately, according to
the 1995 Nationwide Person Transportation Survey, only 49 percent of
all Americans have easy access to public transportation, living within
one-quarter mile of a transit stop. If we are to avoid repeating the
mistakes of the past, highway financing innovations need to recognize
these broader public demands for transportation choices and ensure that
increases in transportation funding benefit all travelers and
transportation stakeholders, rather than reinforcing our already
overwhelming dependence on driving.
STATES TRANSPORTATION FINANCING: A VERY UNLEVEL PLAYING FIELD
While the federal government has invested more in transportation
since 1991 under ISTEA and TEA-21, states have lagged behind, both in
the amount of financing they have provided and in the flexibility of
the funds made available to meet diverse transportation needs. Since
1991, only six states increased their gasoline taxes faster than the
rate of inflation--most didn't increase gas taxes and five states
actually decreased them. At the same time, the growth in non-user fee
revenues outpaced even the growth in state motor fuel tax revenues.
Contrary to popular impression, America's roads and highways are
only partially funded by ``user fees''--taxes on fuels, tires, vehicle
sales, registrations, and the like. Sales taxes, property taxes, and
general revenues provide a major share of the funding to build and
operate highways and roads--as much as 4 out of 10 dollars of the
costs, according to some studies. And of the 41 transportation funding
measures on the ballot in 2002, only four attempted to increase state
gasoline taxes on users, with all of the other measures proposing to
increase general taxes directly or indirectly in support of future
transportation improvements.
Since state governments have been reluctant to pursue increases in
traditional transportation user fees, local governments have been
forced to turn to the general taxpayer--and often the voter--to support
transportation infrastructure. Historically, most local governments and
transit agencies have not been given access by their states or road
tolling agencies to user fees, such as motor fuel taxes, to finance
transportation improvements. In addition to the difficulty local areas
confront in gaining access to user fees, in more than 30 states
constitutions or statutes limit the expenditure of transportation user
fees for anything other than highway improvements (see Table 1). This
skews transportation decisions in favor of road construction, rather
than balanced transportation investments and pursuit of strategies that
lead to more efficient system management and expanded travel choices.
It particularly hurts transit agencies because they thus often end up
relying on appropriations from the state's shrinking general fund.
In light of this development many local officials, transit
agencies, environmental and labor groups are asking state governments
to open up state gasoline tax revenues, transportation trust funds, and
toll revenue streams for public transit and other local transportation.
There is an increasing belief that states and road toll agencies should
not continue to sequester state transportation trust funds or toll
revenues for their own uses, excluding the legitimate transportation
needs of local governments and transit users, while asking local
governments and transit users for additional project funding; and
general tax revenues to support the state highway system.
Table 1
------------------------------------------------------------------------
States with Statutory
States with Constitutional Provisions Provisions Restricting
Restricting Expenditure of Gasoline Tax Expenditure of Gasoline Tax
Revenues to Highways Revenues to Highways
------------------------------------------------------------------------
Alakama................................... Alaska
Arizona................................... Arkansas
Colorado.................................. Florida
Georgia................................... Hawaii
Idaho..................................... Indiana
Iowa...................................... Mississippi
Kansas.................................... Montana
Kentucky.................................. Nebraska
Maine..................................... New Mexico
Minnesota................................. South Carolina
Missouri.................................. Tennessee
Nevada....................................
New Hampshire.............................
North Dakota..............................
Ohio......................................
Oklahoma..................................
Oregon....................................
Pennsylvania..............................
South Dakota..............................
Utah......................................
Washington................................
West Virginia.............................
Wyoming...................................
------------------------------------------------------------------------
Towards this end, Congress should support the creation of a new
Flexibility Incentive Grant Program that would allocate flexible
federal transportation funds to those states that amend their state
constitutions or statutes to (1) create a transportation trust fund
that distributes transportation dollars for both highways and transit;
or (2) unlock their existing highway trust fund by distribution
transportation dollars for both highways, and transit; or (3) increase
the percentage or level of spending dedicated towards alternative
transportation such as the dedication of new state gas tax revenues,
interest on existing highway funds, motor vehicle excise taxes, tolls,
loans to be made out of highway funds, or other resources, for transit
use--to encourage states to unlock their own transportation resources
for transit use and efficient total transportation system management.
FOSTERING EFFICIENT TRANSPORTATION AND FINANCING WITH NEW
PRICING STRATEGIES
Some automobile manufacturers are beginning to offer more fuel
efficient vehicle options for motorists, including new higher
efficiency hybrid gasoline-electric vehicles like the Honda Impact,
Toyota Prius, Honda Civic, and Ford RAV-4. Efforts to develop natural
gas, electric, and fuel cell vehicles offer some promise for a
reduction in petroleum dependence before the end of the 20-year
transportation plans adopted by regions under TEA-21. While these will
not immediately impact federal and state revenues from gasoline taxes,
which comprise the major source of transportation funding, it would be
prudent for Congress to support efforts by states and regions to
develop transportation user fees other than the gas tax to assure
stable future financing of transportation systems.
An array of pricing innovations could play a valuable role in
helping America meet financing, system management, and environmental
goals, but most face regulatory or market entry barriers. ISTEA and
TEA-21 both provided support for the Federal Highway Administration to
support pilot projects and research in pricing innovations through what
has most recently been known as the Value Pricing Program. This program
merits reauthorization at a level of at least $25 million a year.
BENEFITS OF ALTERNATIVE PRICING STRATEGIES
Congestion pricing and road tolls, mileage or emission based
registration fees, VMT fees, Pay-AsYou-Drive (PAYD) auto insurance or
other use-based auto insurance, and gasoline tax increases could all
produce significant revenues as well as traffic and pollution
reduction. Expert analysis of likely impacts of such strategies in many
other metropolitan areas have found substantial traffic and
corresponding emission reductions possible as a result of any one of
these strategies.
For example, a study by the California Air Resources Board found
that congestion pricing fees of $0.10 a mile would yield a NOX
reduction of 2.5 percent in the South Coast region of California under
1991 conditions, increasing to 3.6 percent with a $0.19 per mile fee
under 2010 conditions. They found that a $0.50/gallon fuel increase
would yield NOX reductions of 3.33.8 percent in various
California metro areas under 1991 or 2010 conditions. They found a
$.02/mile VMT fee would reduce NOX emissions by 3.64.3
percent in various California metro areas under 1991 or 2010
conditions. They found emission fees reducing NOX emissions
by 4.2-17.3 percent depending on assumptions in various California
metro areas. Combining congestion pricing of $0.09/mile in peak, a $1 a
day employee parking charge, a $0.50/gallon fuel tax increase paid at
the pump, and a mileage and emissions based fee of $40-400/year, with
current transit service, they found NOX emissions reduced by
9.9-12.1 percent in San Francisco, Sacramento, San Diego, and Los
Angeles under 1991 or 2010 conditions.
Combining the same congestion pricing with a $3/day employee
parking charge, a $2/gallon gas increase paid at the pump, and mileage
and emission fees of $10-1000/year, with extensive transit investment
would cut NOX emissions in these same cities by 32.0-34.9
percent under 1991 or 2010 conditions. The EPA states that ``VMT fees
of $0.01 to $0.05 a mile alone would reduce gaseous emissions and VMT
by about 4 to 11 percent, while a VMT fee weighted for emissions was
estimated to have a significantly greater impact on emissions,
particularly for VOC and NOX.'' EPA summarizes various
studies to conclude that added fuel taxes of $0.40 to $2 a gallon
usually reduce NOX emissions 1.2-6.9 percent. At the pump
VMT fees of $0.01 to $0.05 per mile usually reduce emissions 5-8.6
percent. Traffic reductions correspond closely to these reported
NOX reductions, and generate proportionally greater
congestion reduction benefits.
PAYD INSURANCE
A recent study by the Federal Highway Administration showed that by
converting fixed motorist costs of car insurance, taxes, and fees to
variable costs that allow motorists to save money if they drive less,
consumers would save billions of dollars a year and experience
substantially less traffic delay. A element in this, Pay-As-You-Drive
(PAYD) car insurance, could cut air pollution and traffic congestion by
10 percent to 12 percent or more. Under current term-based insurance
pricing, motorists who drive less than the average pay much higher
costs per mile for car insurance than those who drive more than
average, which encourages more driving and pollution. For example, for
an intermediate size car, insurance premiums typically represent a cost
even greater than fuel and oil costs, about one-fifth of the typical
total financial costs of owning a car. When insurance premiums are
converted to distance-based charges, motorists can save money by
driving less and combining trips.
Newly available data indicate that distance-based insurance pricing
is more actuarially accurate, and therefore more equitable and
economically efficient than current pricing. Distance-based insurance
provides specific benefits including reduced accidents, traffic
congestion, and pollution, facility cost savings, insurance
affordability, and increased consumer welfare. Vehicle travel foregone
consists of low-value trips that consumers willingly give up in
exchange for financial savings. Distance-based premiums would use
``odometer audits'' to provide accurate mileage data, which is
estimated to have incremental costs averaging $7.50 per vehicle year.
Research suggests total benefits of distance-based insurance to be many
times greater than costs, with a benefit:cost ratio of 50:1 estimated
for the case of British Columbia. Motorists are expected to reduce
their average mileage by about 10 percent under distance-based pricing,
providing net savings to the vast majority of consumers. Even high
mileage drivers experience virtually no increase in total vehicle costs
if they reduce their mileage as predicted. Higher-mileage drivers would
also benefit most from reduced traffic congestion, accident risk, and
pollution.
The state of Texas enacted in May 2000 HB 45, which authorizes
insurance companies to offer distance-based motor vehicle insurance
policies. The Oregon House has passed a bill to offer a $100 state tax
credit for insurance companies writing distance-based motorist
policies. US EPA and the Federal Highway Administration have in recent
years cooperated in promoting, use-based car insurance strategies,
including PAYD insurance. FHWA's Value Pricing program supported
important research and pilot projects for use-based insurance in
Georgia and Massachusetts, but unfortunately cut off funding for these
in 2002.
Market incentives like PAYD insurance face significant state and
local regulatory and institutional costs and barriers. Insurers express
a strong desire for additional actuarial data to support PAYD policies.
Government support is needed to foster public-private partnerships,
share risks, collect and evaluate data, educate and inform consumers
and service providers, and incubate and demonstrate alternative
marketing, pricing, and business models.
Congress should also provide $15 million a year for a PAYDAYS (Pay-
As-You-Drive-And-You-Save) Grant Program to support expanded research
and pilot testing of this market based strategy, including risk sharing
with insurance companies pilot testing this approach to policy pricing,
paying for expanded actuarial research, marketing, partnership
development, evaluation, and promotion. This would allow a designated
university or non-profit entity to act as a research clearinghouse,
capacity-building center, and catalyst for public-private partnerships,
supporting efforts by governments, non-profit entities, and companies
to design, test, and evaluate innovative mileage and parking pricing
strategies. The potential payoff--a reduction of 10 percent in traffic
while saving consumers money and reducing accidents and casualty losses
to insurers--is well worth such up-front investment to help jump start
this market innovation.
Another important potential source of funding for developing,
evaluating, and mainstreaming these activities is the Congestion
Mitigation and Air Quality Improvement (CMAQ) Program. This program
should be reauthorized at twice its current funding level to account
for anticipated growth in air quality non-attainment areas and for an
expanded program targeted to deal with air toxics problems. Sub-
allocating CMAQ funds to local areas and assuring air agencies a
greater role in project selection will foster fuller and more effective
use of these funds. Congress should explicitly authorize use of CMAQ
funds for promotion and demonstration of PAYD insurance, permitting use
of funds for pilot project start-up, marketing, risk-sharing, mileage-
based rebates, other related incentives, and evaluation activities
serving both attainment and non-attainment area motorists, provided
that pilot projects focus on producing substantial emissions reduction
benefits in air quality nonattainment or maintenance areas. Congress
should encourage of the use of CMAQ funds for ``parking cash-out''
pilot programs as well, including start-up program incentive, payments
to commuters and risk guarantees for developers who reduce parking and
instead establish dedicated transportation incentive programs for site
access.
Congress should support initiatives to expand the use of automated
time-of-day road pricing on existing tolled facilities and when such
systems are managed to reduce the need for added roads and direct new
revenues substantially to support expanded means of access to jobs and
public facilities for people without cars. Accountability for
environmental, community, and equity impacts must not be weakened
through increased reliance on bond and private road financing.
MANAGED TOLL LANES: A ROAD TO GREATER SYSTEM EFFICIENCY AND
EXPANDED CHOICES
A promising option for unclogging roads, especially in more
congested metropolitan areas, is automated time-of-day tolls and High
Occupancy Toll (HOT) lanes, which allow solo drivers to pay to use High
Occupancy Vehicle (HOV) lanes, while giving a free ride to buses, vans,
and sometimes carpools. These can put to work unused capacity in HOV
lanes and low efficiency general purpose lanes, helping to pay for
expanded transportation choices. A network of HOT lanes on existing
highways is likely to provide more effective congestion relief than
building new roads, especially if revenues are used to expand travel
choices for all. But new outer beltway roads--even if built as toll
roads--are likely to exacerbate sprawl and put more jobs out of reach
for those without cars, hurting the poor and the environment. Wise
policy will avoid the latter, instead giving time-stressed travelers a
way to buy relief from growing congestion delays in existing freeway
and travel corridors.
New non-stop electronic toll technology means motorists don't need
to slow down to pay tolls. And HOT lane fees--higher in rush hour and
discounted at other times--can keep traffic flowing without wasting
scarce road capacity like some HOV lanes do. This makes it possible to
contemplate future conversion of some existing general-purpose lanes to
HOT lanes, particularly where new capacity is being added to existing
roads. But HOT lanes should not be created at the expense of effective
HOV or bus lanes, where these provide efficient services, as in the
Shirley Highway Corridor of Washington, DC, or the approaches to the
Lincoln and Holland Tunnels connecting New York and New Jersey, or some
Seattle HOV lanes.
HOT lane experience indicates this strategy can garner popular
support. In the most recent survey of the I-15 Express Lane corridor in
San Diego, 91 percent of I-15 commuters agreed with the statement,
``it's a good idea to have a time saving option on the I-15 always
available.''
On California's Route 91, diversion of traffic onto HOT lanes has
reduced congestion on the entire road and increased the number of
passengers per car to 1.6, compared to the average of 1.2. Similar road
toll related incentives have been implemented or are being considered
in Texas, Florida, Colorado, Georgia, New Jersey, New York, and other
states.
The Port Authority of NY-NJ in March 2001 introduced time-of-day
tolls on Hudson River bridges and tunnels and Staten Island bridges,
giving discounts for electronic toll payers who avoid rush hours and
charging a premium in the time of most concentrated demand, just like
movie theaters and many other services. This helps reduce congestion by
shifting the time of day of traffic. Regional agency officials have
estimated the Port Authority's modest time-of-day toll system has cut
traffic in the peak hours by 7 percent, saving tens of thousands of
hours of travel delay. Toll revenues support better PATH rail transit
and regional transportation infrastructure and services. The NJ
Turnpike, NY Thruway Authority, and other tolling agencies have
implemented time-of-day tolls to manage traffic.
HOT lanes in existing road corridors--if developed appropriately--
can expand both travel choices and equity, but if revenues are
dedicated solely to road construction, these benefits can disappear.
HOT lane critics often unfairly bash them as ``Lexus Lanes,'' serving
only the rich. Several real-world HOT lanes look more like ``Lumina
Lanes,'' used by people of widely varying incomes who occasionally need
to bypass traffic delays that disrupt their social, family, or work
life. A working class mom who is facing a $1 a minute penalty for
picking her kids up late at daycare is happy to pay $4 to save 20
minutes by using the HOT lane on those several days a month when she
needs it. The typical users of California HOT lanes spend less than $20
a month on HOT tolls, using them on days they are in a real rush.
The real issue is what happens to the toll revenue? If HOT lane
revenues fund new transit, as on San Diego's I-15 HOT lane, everyone
wins. Lower income transit users and carpoolers can get access to
otherwise inaccessible suburban jobs. Drivers benefit from reduced road
congestion and better services and choices. If a portion of HOT lane
revenues help pay for the road, then those who drive most are paying
more of their fair share, helping all taxpayers win, since road user
fees don't cover the cost of building and operating America's roads.
And with new accounting rules forcing fuller disclosure of deferred
maintenance, transportation providers need new sources of revenue to
maintain systems, expand choices, and cope with growing travel demand.
But if HOT lane revenues, or other road tolls and motorist user
fees are dedicated solely to building more highways, or if the tolls
are dismantled once the bonds used to pay for the road capacity have
been retired, then the net impact of this financing system is likely to
be increased traffic, pollution, sprawl, and unequal access to
opportunities and public facilities that hurt those without cars,
especially people of low incomes, minorities, the disabled, the very
young, and the very old. If HOT lanes and toll-supported road
privatization and bond financing schemes are used to evade
environmental and public accountability laws, these impacts are not
likely to even be recognized until it is too late to do anything about
it. The externality costs of imprudent investment choices will accrue
to those least able to afford it, while the profits from road
construction, sprawl development, and subsidized motor vehicle use
accrue to a narrower set of private interests. The result would be an
unlevel playing field for roads vs. transit, fostering imprudent
stewardship of transportation resources, the environment, and
communities.
Reauthorization of TEA-21 offers new opportunities to remove
barriers and provide new support for more widespread development of
equitable value pricing strategies and market incentives. Clearly,
Congress should support proposals to eliminate restrictions that have
limited the ability of agencies to impose tolls on federal-aid
Interstate highways but it should look closely at what restrictions and
performance measures are placed on the system and how toll revenues may
be used.
H.R.1767. Rep. Mark Kennedy recently introduced a FAST Lane bill
(H.R. 1767) which would allow the use of tolls on the Interstate System
to finance the construction and subsequent improvement of designated
FAST (Freeing Alternatives for Speedy Transportation) lanes. Many
environmentalists would support this bill if it is changed to:
Drop the provision that lane fees expire when costs have
been recouped;
Provide for the authorization of such fees to be collected
on existing as well as new lanes, at local option, if this provides for
improved traffic flow or maintenance of capacity in the corridor;
Permit the use of revenues not just for new lane
construction, but also to support transit, vanpool, walk and bike
transit access, and other transportation capital and transportation
operating expenses in the affected travel corridor; and
Require establishment of local performance goals for
maintenance of capacity, efficient traffic flow, and fair access to
jobs and public facilities for low income and minority residents in the
travel corridor, with periodic evaluation and consideration of
adjustments to toll levels and apportionments of net toll revenues to
meet these performance goals.
Without these changes, H.R. 1767 would facilitate rapid expansion
of sprawl, traffic, and pollution--increasing highways, exacerbating
inequity of access to jobs and public facilities for people without
cars and benefiting higher income travelers while discriminating
against low-income people. With the changes above, however, it could
result in improved equity of access and net environmental benefits.
REASON FOUNDATION HOT NETWORKS PROPOSAL
The Reason Foundation's recent report, HOT Networks: A New Plan for
Congestion Relief and Better Transit, offers a somewhat broader vision
than H.R. 1767 as it links HOT lane development to substantial
expansion of Bus Rapid Transit (BRT). While this report has been
valuable in spurring discussion of the concepts it advocates, it falls
short of presenting a balanced proposal. It would create new sprawl and
traffic inducing outer beltways, such as the Inter-County Connector
around Washington, DC, using a combination of HOT revenues and Highway
Trust Fund resources. It would dedicate HOT lane revenues to paying off
bonds for the new road capacity and rely on the severely oversubscribed
and under-funded Federal Transit Administration New Starts Program to
finance purchase of transit vehicles to operate on the HOT/BRT lanes,
diminishing federal support for locally-supported new rail transit
investments across America. It does not include the costs of BRT
stations, access, or maintenance facilities in the cost estimation for
the HOT/BRT system. And nowhere does the report address the critical
limitation on BRT and transit systems across America today--a steady
funding source for operating assistance. With this set of ingredients,
the Reason Foundation's proposal would, if adopted wholesale,
contribute to significant sprawl and traffic growth, while failing to
address the transit funding crisis that is causing transit service
cutbacks and fare increases across America.
If these shortcomings were addressed, however, the proposal could
garner support from many in the environmental community. BRT does
constitute a more viable and cost-effective strategy than rail for many
communities where transit services are now severely limited, but to be
effective, it must be adequately financed and supported with land use
plans for transit-oriented development, improvements to pedestrian and
bicycle access, and a dedicated source of operating assistance. But BRT
should not be regarded as a simple add-on to a HOT network.
To be effective, as in the outstanding example provided by Bogota's
TransMileneo system, BRT needs to encompass reforms in transit fare
collection systems, transit route structures, and transit access
systems, with well designed stations, high-level boarding, separation
of fare collection from boarding, and a high level of priority in
traffic. BRT is probably best operated in the environments created by
high level urban arterial streets. But BRT is adaptable to suburban
environments and freeway medians when supported by appropriate access
and land use coordination strategies.
DRAFT ADMINISTRATION SAFETEA BILL
The February 2003 draft of the Administration's SAFETEA bill, still
undergoing interagency review and modification, proposes a number
ofpositive steps in the pricing arena:
Variable tolling projects for roads, bridges, and tunnels,
would be ``mainstreamed'' as a part of the regular Federal-aid program.
The numerical limit on the number of variable pricing
projects would be eliminated, ending a major barrier to wider
consideration and adoption of road pricing.
The purpose for variable road pricing would be broadened
to include air quality improvement in addition to congestion
mitigation.
Revenues from variable pricing projects could be used for
any purpose authorized under Title 23, which could include support for
transit capital and at least some operating expenses of transit,
vanpool, and other projects.
On the other hand, the bill would eliminate important elements of
the Value Pricing program:
1. The legislative mandate for active Federal support for State and
local pricing initiatives would be significantly diminished.
2. Specific federal funds to support State and local pricing
initiatives, including pre-implementation and operational activities,
would be eliminated.
3. The scope of project activity supported would be significantly
narrowed from what was included under the TEA-21 program.
4. The reauthorization proposal focuses exclusively on toll pricing
initiatives, with other non-toll market-based congestion reduction
initiatives, such as parking pricing and pay-as-you-drive insurance,
not included in the scope of the proposed legislative language.
What other elements need to be part of a sound and balanced TEA-21
reauthorization value pricing program?
Congress should encourage automated time-of-day tolls as a
promising tool for transportation facility management and financing.
States and transportation facility operators should be
encouraged to replace obsolete toll booths that cause congestion and
pollution with new barrier-free customer-friendly tolling systems using
toll transponders and image processing and billing systems.
Congress should encourage state motor vehicle agencies to
issue toll transponders with motor vehicle registrations to encourage
their widespread availability in states where tolls are used.
Congress should eliminate restrictions on tolling highways
that were constructed with federal aid, which can now only be tolled
under limited pilot projects authorized by TEA-21.
Congress should reauthorize the Federal Highway
Administration's Value Pricing Program at a level of at least $25
million a year and assure a well funded broad-based program to
encourage state and local research and pilot testing of transportation
user fee incentive strategies and other voluntary market incentive
strategies. This should explicitly authorize support for initiatives
such as Pay-As-You-Drive (PAYD) car insurance.
FEDERAL TAX TREATMENT OF COMMUTER BENEFITS: STILL NOT A LEVEL PLAYING
FIELD
Federal and state tax policies are a part of the recent story of
transit resurgence and part of the story of the unlevel playing field.
For the vast majority of working Americans, a free parking space at
work has for decades been the sole commuter benefit offered by
employers because that was until recently the only tax-free commute
benefit worth speaking of.
So if you drive alone to work you gain the benefit. If you take
transit, carpool, walk, or bike, you lose the benefit and likely pay
your own daily transit fare. With this kind of incentive, it's no
surprise that on any given day nine out of ten American commuters drive
to work and nine out of ten of the cars driven to work have one
occupant. Yet the 85 million ``free'' or subsidized employer parking
spaces actually cost American business more than $36 billion per year.
By spurring more driving, these subsidies exacerbate traffic congestion
and air pollution. A 1995 congressional study found that ``free''
parking of all kinds costs our society over $250 billion per year.
In 1998, Congress took steps to make tax policies more equal for
all commuters, allowing employers to offer tax-free transit and vanpool
benefits of up to $100 a month, with taxable cash-in-lieu-of-parking
benefits allowable for the first time. Tax-free benefit limits for
employerprovided parking were set; at $175 per month--a practice which
still leaves solo drivers at an advantage. Allowing employee-paid pre-
tax transit benefits saves transit-using employees over $400 a year
while saving employers a smaller amount on withholding. Having
employers pay for transit is a bigger incentive for employees. Offering
such a benefit to federal executive agency employees in the national
capital region induced 11 percent of employees who used to drive to
work to switch to transit, taking 12,500 cars off the region's crowded
roads every workday. At firms in California and Minnesota offering a $2
a day incentive instead of free parking, one out of eight who used to
drive are finding another way to get to work. Such benefits help
employers attract and retain employees and provide the greatest help to
low and moderate wage workers who spend the largest share of their
incomes commuting and often ride transit, carpool, bike, or walk to
work.
The cost of such employer provided transit benefit programs to
employers is very small and can easily be fit within the scope of
ordinary cost-of-living increases offered by most employers to their
employees on a periodic basis. State tax credits can make this cost
even smaller. For example, in Maryland, if an employer offers an
employee a cost of living increase, for each $1 in after-tax cost to
the employer, the employee typically receives $0.53 in after-tax
income. If that same $1 in after-tax employer expense is instead
devoted to an employer-paid qualified transit benefit of $60 a month,
the typical Maryland employee who receives it ends up gaining $1.76 in
after-tax benefits, thanks to the leveraging effect of federal and
state tax provisions.
The savings for employees offered by the federal tax law changes
are significant and make a high level of employer and employee
participation in the next several years realistic across America. For
example, an employee earning $50,000 per year who spends $780 annually
on transit ($65/month) could realize a tax savings (at 42 percent) of
$328 as a result of paying their transit cost using pre-tax dollars,
exercising one of the new Commuter Choice options, while their employer
would gain payroll tax savings (at 7.65 percent) of $60 per employee.
Even if the cost to set up and administer the program equals 2 percent
of the transit benefit, the employer will still enjoy payroll savings
of $44. Employers are likely to face new costs to offer transit passes
or added cash income in lieu of parking, but these can also translate
into substantial cost savings of several types. It is much cheaper for
an employer to boost non-taxable employee benefits than to offer added
taxable income or cost-of-living increases to retain or attract
workers. If the employer is able to expand employment without adding
more parking spaces or to otherwise avoid the cost of building,
leasing, or maintaining parking spaces for workers, capital cost
savings can amount to $5,000 to $20,000 per avoided space and operating
costs can amount to $750 to $3,000 or more per year per avoided space.
Such savings are often significant enough to more than pay for a cash-
in-lieu-of-parking or transit pass benefit. But additional financial
incentives and support by transportation agencies and other government
bodies are essential to rapid adoption of Commuter Choice voluntary
incentives. These can be highly cost-effective in reducing congestion
and pollution.
DOT and EPA are promoting Commuter Choice, but Congressional action
is needed to further expand efforts to foster widespread adoption of
these voluntary incentives. EPA estimates that if half of all U.S.
employees were covered under these commuter benefits, traffic and air
pollution could be cut by the equivalent of taking 15 million cars off
the road every year, saving American workers about $12 billion in fuel
costs. For every 10 percent of U.S. employees participating, commute
VMT would be cut by 3.2 percent, or 20 billion miles, with emission
reductions of 54,000 tons VOC, 480,000 tons CO, 33,600 tons
NOX, and 2.36 million tons C02. EPA estimates
reductions of 26-30 percent in commute vehicle trips for a full
Commuter Choice program. Los Angeles research shows that those who
receive free parking at work drive 72 cars per 100 employees, while
those who paid for parking at work drove 53 cars per 100 employees, or
26 percent less.
Congress should take further steps to encourage employer support
for such ``Commuter Choice'' initiatives by adopting:
The Commuter Benefits Equity Act (S.667) would provide
equal tax-treatment for parking and transit benefits with $190 per
month in qualified tax-exempt benefits.
The Bike Commuter Act (H.R.1052) would allow employees who
bike to work the same financial incentives as transit users.
The Mass Transit Tax Credit Act of 2001 (H.R. 906) would
provide a 25 percent tax credit to employers for the cost of providing
transit: benefits to their employees. This is modeled after measures
adopted by several states--including Maryland, Minnesota, Oregon,
Washington, Georgia, New Jersey--that have begun offering tax credits
of up to 50 percent and up to $50 per employee per month for employer-
paid non-driving commuter benefits.
REFORMING TRANSPORTATION PLANNING AND PROJECT REVIEWS TO CONSIDER
PRICING AND SYSTEM MANAGEMENT OPTIONS FOR EFFICIENT TRANSPORTATION
Increased reliance on motor vehicle user fees could provide a
powerful means of meeting the rising demand for transportation
investment and services and for matching that demand with
transportation supply. But metropolitan and statewide transportation
planning in most places currently gives only cursory attention to this
capacity. Few areas consider the effects of different pricing schemes
on travel demand and consider the effects of various transportation
investment options on travel behavior, land use, and transportation
system efficiency and operations.
Such evaluation typically requires use of metropolitan computer
travel simulation models as used for project planning studies, regional
and state transportation and air quality planning and programming, and
environmental permitting decisions. Unfortunately, many of the analysis
tools in widespread use fail to reflect current scientific knowledge
and best practice methods. This can lead to serious errors in
forecasts, in performance evaluation measurement, and poor investments
that fail to meet their objectives. When road tolls are relied upon to
service bonds, poor analysis can lead to failure to meet debt
obligations, and taxpayers can be left holding the bag, as has happened
with projects such as the Dulles Greenway in Northern Virginia.
Congress should assure adequate funding for improving these computer
models across America, funding the TRANSIMS model development and
research effort at $25 million a year and funding a $35 million annual
program to support timely deployment of best practice travel and
emission models at metropolitan planning organizations and state
agencies.
A number of scientific studies in recent years have documented the
common sense adage: ``If you build it they will come,'' that building
more roads generates more traffic, often to a degree that the increased
highway capacity does little or nothing in the longer run to abate
congestion. A recent paper by two former EPA scientists, attached by
reference, summarizes the literature, and shows that for every 10
percent increase in road lane miles, it is typical to find a 3 to 11
percent increase in vehicle miles traveled, with 8 percent being a
typical median value.
A 2002 analysis by the Metropolitan Washington Transportation
Planning Board showed that by deferring 100 lane miles of highway
expansion projects--a 0.5 percent reduction in lane-miles of road
capacity--Virginia saved $800 million in capital costs while cutting
NOX emissions by more than 1 percent, or nearly 2 tons per
day, and reducing vehicle miles of traffic by 0.6 percent. This
illustrates how expansion of new highways often produces a growth in
air pollution emissions and congestion by spurring more traffic, rather
than a reduction in emissions and congestion as often claimed by the
road lobby. This illustrates how reducing expenditures on new roads is
often the most cost-effective emission and congestion reduction
strategy, because it avoids generating costs, traffic, and air
pollution. This also illustrates why it is imprudent for motorist user
fees to be dedicated solely to investments in highways, rather than to
make these revenues available for what are often more efficient and
effective forms of public investment that accomplish transportation-
related purposes, whether for transit, the revitalization of walkable
neighborhoods where people can live without generating so many car
trips, affordable housing close to jobs, or public health services that
help offset the hidden costs of our transportation system.
Considering those costs and choices will require improvements to
the metropolitan transportation planning process which today expends
little effort to consider transportation pricing and growth management
strategies that could provide attractive alternatives to the current
plan of business-as-usual deeply subsidized road system expansions that
accommodate and support sprawl and driving while neglecting the needs
of pedestrians, bicyclists, and those without cars. Improved data
collection and impact analysis tools and planning requirements are
needed to help state and local agencies evaluate and advance effective
pricing and management strategies. These will also help address demands
to streamline the project review process in a manner that delivers
better projects that also protect the environment, public health, and
the ability of the public and local officials to know about the effects
of major decisions before they are final, a core principal of the
National Environmental Policy Act of 1969.
TEA-21 reauthorization should strengthen accountability,
transparency, and performance-oriented planning requirements, assuring
consideration of transportation pricing reforms. State and metropolitan
areas should be required to develop and periodically update integrated
transportation, natural resource protection, and growth management
plans that consider at least one alternative scenario that considerably
reduces traffic growth through better system management. Agencies
should regularly report on the current and projected performance of
their transportation system management, investment, and proposed
programs and plans, accounting for cumulative and secondary impacts on
growth patterns, public health, greenhouse gas emissions, the
achievement of natural resource planning; goals for air, water, and
habitat protection, and the provision of equal access to jobs and
public facilities for all residents, including those without cars,
without undue time and cost burdens.
CONCLUSION
Across America, we are on a crash course with worsening traffic
congestion, crumbling roads and bridges, and investment levels that
can't even keep up with maintaining the infrastructure we've got.
Throwing more money into road building and streamlining project reviews
to curtail consideration of environmental factors in transportation
decisions won't solve congestion. But better accountability, planning,
consideration of pricing and system management alternatives, and
support for new smart incentive strategies can help local and state
agencies, business, and citizens cut their way through our traffic mess
and boost transportation equity. Congress has a key role in helping
state and local governments and their private partners make this
transformation from trying to build our way out of congestion and into
the new information era, where we manage congestion and expand choices
and smart incentives.