Surface Transportation: Moving into the 21st Century (Staff Study,
05/01/99, GAO/RCED-99-176).
GAO provided information on the surface transportation challenges facing
the nation in the 21st century. To understand these challenges and
assess the potential direction surface transportation policy could take
to address them, GAO sponsored a conference that brought together
transportation experts to discuss the future of surface transportation
in the United States.
GAO noted that: (1) according to the conference participants, the
nation's surface transportation system faces significant demographic,
lifestyle, and economic challenges and demands; (2) in the future, busy
passengers and businesses will increasingly press for improved
transportation services that give them cost-effective means to move
themselves and their goods rapidly and reliably through the
transportation system; (3) for busy Americans, the car will remain the
dominant mode of travel and will continue to be viewed not as a problem
but as the solution to their transportation needs; (4) participants
characterized Americans' views of cars as faster, safer, more
comfortable and flexible, cheaper, and better able to link scattered
departure and destination points than other forms of transportation; (5)
for the nation's businesses, moving freight quickly through the
transportation system will be vital to their survival in a global market
that poses unrelenting productivity demands; (6) in addition, commuters,
leisure travellers, just-in-time freight shippers, and older travellers
all will have different trip patterns and travel needs, thereby placing
more complex demands on the transportation system; (7) conference
participants urged federal, state, and local policymakers and agencies
that are responsible for surface transportation to adopt a new
paradigm--one that focuses on the people who use the transportation
system, including their needs and expectations; (8) unlike the 20th
century mission of constructing the transportation system that exists
today, future transportation policies must shift transportation
agencies' focus to managing the system for greater efficiency and
delivering better services for the users; (9) such focus will require
transportation policymakers and agencies to rethink their strategies for
achieving transportation goals and to collaborate more extensively with
the private sector to meet travellers' complex transportation needs; and
(10) these challenges are especially important because transportation
and the ability to move goods and people will be vital to the nation's
economic survival in a global market.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: RCED-99-176
TITLE: Surface Transportation: Moving into the 21st Century
DATE: 05/01/99
SUBJECT: Ground transportation operations
Public roads or highways
Freight transportation operations
Highway planning
Transportation research
Mass transit operations
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Cover
================================================================ COVER
Staff Study
May 1999
SURFACE TRANSPORTATION - MOVING
INTO THE 21ST CENTURY
GAO/RCED-99-176
Surface Transportation
(348135)
Abbreviations
=============================================================== ABBREV
DOT - Department of Transportation
FHWA - Federal Highway Administration
GAO - General Accounting Office
I-95 - Interstate Route 95
ISTEA - Intermodal Transportation Efficiency Act of 1991
ITS - Intelligent Transportation Systems
PennDOT - Pennsylvania Department of Transportation
TEA-21 - Transportation Equity Act for the 21st Century
TIFIA - Transportation Infrastructure Finance and Innovation
SUMMARY
============================================================ Chapter 0
The nation's federal surface transportation policy has become
increasingly complex, changing from a narrow focus on completing the
nation's Interstate highway system to a broader emphasis on
maintaining our highways, supporting mass transit, protecting the
environment, and encouraging innovative technologies. Surface
transportation in the 21\st century will differ from transportation
today, and demographic changes will spark much of this change:
-- The nation's population will increase by 60 million through
2020, resulting in 60 to 70 million more vehicles using the
nation's surface transportation network.
-- The rapid suburbanization of population and employment will
continue. Since 1970, 86 percent of the U.S. population's
total growth and the majority of all retail space is now located
in suburban areas.
-- The population will age. From 1995 to 2005, the number of
Americans in their 50s will increase by 50 percent, presenting
different travel patterns and needs.
These changes will move surface transportation in new directions that
are likely to require new policies and approaches. According to a
leading transportation expert, failing to respond to these new trends
in the 21\st century could send a negative ripple through the whole
fabric of the American standard of living.
To understand these new challenges and assess the potential
directions that surface transportation policy could take to address
them, we sponsored a conference entitled �Moving Into the Future:
Surface Transportation in the 21\st Century� on January 26, 1999.
The conference brought together transportation experts from the
Congress, academia, state departments of transportation, local
planning agencies, research institutes, investment banks, other
private companies, and the federal government to discuss the future
of surface transportation in the United States. These experts
offered provocative thoughts on the wide-ranging challenges and
issues facing current policymakers. Their remarks also provided an
early look at surface transportation issues that the Congress might
debate when authorizing legislation succeeding the Transportation
Equity Act for the 21\st Century (TEA-21). This report summarizes
the future surface transportation issues based on the views
transportation experts presented at our conference.
CHALLENGES TO SURFACE
TRANSPORTATION
---------------------------------------------------------- Chapter 0:1
According to our conference participants, the nation's surface
transportation system faces significant demographic, lifestyle, and
economic challenges and demands. In the future, busy passengers and
businesses will increasingly press for improved transportation
services that give them cost-effective means to move themselves and
their goods rapidly and reliably through the transportation system.
For busy Americans, the car will remain the dominant mode of travel
and will continue to be viewed not as a problem but as the solution
to their transportation needs. Our participants characterized
Americans' views of cars as faster, safer, more comfortable and
flexible, cheaper, and better able to link scattered departure and
destination points than other forms of transportation. For the
nation's businesses, moving freight quickly through the
transportation system will be vital to their survival in a global
market that poses unrelenting productivity demands. In addition,
commuters, leisure travelers, just-in-time freight shippers, and
older travelers all will have different trip patterns and travel
needs, thereby placing more complex demands on the transportation
system.
Conference participants had the following observations regarding the
challenges that the traveling public and transportation policymakers
will face in the 21\st century.
-- The surface transportation network is aging, and the existing
infrastructure has not been adequately maintained. Traditional
responses, such as constructing new highways, are being
foreclosed by public and environmental pressures. In addition,
state and local governments appear slow in directing more
dollars to preserving the infrastructure. Without a significant
change of direction, there will be a growing mismatch between
the transportation system and travelers' needs.
-- Highway congestion�particularly in very large urban areas�will
be a continuing issue. Although average commuting times have
not changed substantially for years, several participants noted
that the public perceives congestion as worsening and producing
adverse economic impacts. Population growth and more households
with multiple vehicles are likely to outpace states' efforts to
expand highway capacity. One conference participant concluded
that congestion is not a problem that can be solved--it results
from the public's travel and lifestyle choices. Families'
desire for a wide range of housing and work choices�often in
low-density areas--and the ability to combine several different
purposes on a single trip will continue to generate considerable
traffic congestion.
-- Social and environmental concerns are becoming greater
constraints on the system's expansion than money. People
increasingly are concerned about how transportation investments
affect their quality of life and expect results that improve
both their mobility and their local community. The citizens who
attend local planning meetings are looking for results from
transportation investments that differ from those in the past
(such as more bike paths or green space). However, reconciling
transportation and environmental policies is increasingly
difficult�often producing gridlock at state and local levels and
delaying needed changes to the system.
-- Future mass transit policy may have to acknowledge that only a
few large urban areas contain the majority of transit users.
For example, the 10 largest mass transit systems carry 60
percent of all the nation's transit riders; the other 5,000
operators carry 40 percent. Federal transit funding does not
correlate with this ridership concentration; established transit
markets where ridership could be increased do not receive
proportional funding. Mass transit also will be called on to
address the needs of low-income households that cannot afford
cars as well as the needs of the disabled and elderly.
-- Freight shippers are major transportation users and vital to the
nation's economic competitiveness. Moving freight in and out of
U.S. seaports will grow about 6 percent annually and double or
triple in total volume by 2020. The current surface
transportation network does not allow freight to move easily
between highway, rail, air, and maritime transport. In
addition, the public sector often does not understand the needs
and problems of moving freight nationally or regionally.
Freight and intermodal problems will thus require considerably
more attention by transportation agencies in the future.
-- With few exceptions, the public cannot obtain information about
the quality and level of transportation services across states
and regions. Currently, states handle and report on highway
accidents and incidents in different ways that can have major
impacts on travelers. The public needs additional performance
information so that it can develop reasonable expectations about
how public assets are expected to perform.
A NEW PARADIGM FOR SURFACE
TRANSPORTATION
---------------------------------------------------------- Chapter 0:2
Our conference participants urged federal, state, and local
policymakers and agencies that are responsible for surface
transportation to adopt a new paradigm�one that focuses on the people
who use the transportation system, including their needs and
expectations. Unlike the 20\th century mission of constructing the
transportation system that exists today, future transportation
policies must shift transportation agencies' focus to managing the
system for greater efficiency and delivering better services for the
users. Such focus will require transportation policymakers and
agencies to rethink their strategies for achieving transportation
goals and to collaborate more extensively with the private sector to
meet travelers' complex transportation needs. These challenges are
especially important because transportation and the ability to move
goods and people will be vital to our economic survival in a global
market.
The conference participants provided several examples of how a focus
on users would shape future transportation policies and services.
-- Surface transportation policy must reflect Americans' heavy
reliance on cars to meet their mobility needs. Rather than
undertake complex, controversial programs to get people out of
their cars, policies should concentrate on local experiments,
such as greater ride sharing, new community designs, or enhanced
emphases on urban mass transit or passenger rail. A participant
observed that national mandates are unpopular and unproductive
approaches for reducing problems associated with the automobile.
-- By linking transportation policies and services to customers'
needs and preferences, the primary mission of transportation
agencies will change from building highways, bridges, and mass
transit systems to moving people and goods. The measurement of
performance success will also change. Instead of measuring the
amount of additional capacity built, policymakers will focus on
how transportation improves personal mobility, expedites
shipping, and speeds the transfer of information.
-- Developing new services based on customers' needs and input will
be a substantial departure from the largely bureaucratic
decision-making that characterizes transportation organizations
today. In addition, collaboration among federal, state, and
local transportation agencies will be important because no
single transportation agency or level of government will be able
to independently meet travelers' complex transportation needs in
the future.
-- Transportation managers will need to bring other public agencies
into the policy and decision-making process. Transportation
policy often involves other government entities�environmental,
housing, education, and energy. However, these entities may not
work together to meet common objectives. For example, local
agencies that provide water, sewer, and educational
infrastructure are seldom involved in transportation decisions.
As a result, infrastructure investments may not be coordinated
and could often duplicate each other.
-- Other nations are using public-private partnerships to put their
transportation systems in a better position to meet global
competition, according to a participant who surveyed
international practices. In several nations where the private
sector already delivers transportation services and maintains
facilities, public-private roles are being reassessed to provide
greater efficiency. These nations are experimenting with
increased private-sector involvement in transportation services.
They are using competition to make the transportation system
more efficient and cost-effective, reducing regulations to
encourage innovation, retaining transportation policy and
management as a government role and using the private sector for
maintenance and services, and seeking accountability through
performance measures. In contrast, the United States has made
modest moves to enhance the nation's global competitiveness by
overcoming barriers that limit public-private partnerships. A
participant characterized the public sector as superb at
creating procedures and process but poor at deployment--the
bottom line for private companies. Similarly, private companies
are action oriented and do not understand or appreciate a
funding process that requires 10 years to complete a surface
transportation project.
-- Freight stakeholders must become full partners in making
transportation policy so that surface transportation investments
are linked to freight needs. In 1994, business and industry
spent $421 billion to move 3.5 trillion tons of freight over
transportation networks totaling 2.3 million miles.
Facilitating freight users' and suppliers' involvement in
transportation policy will enhance the nation's ability to move
freight seamlessly across different transportation systems. In
addition, manufacturers and freight companies regard the
Department of Transportation's (DOT) �stovepipe� organization as
a major obstacle to working with the federal government, a
participant reported. They find it difficult to discuss
intermodal projects or emerging issues--such as how the new
megaships will access U.S. ports�with a single DOT agency that
is responsible only for highway or maritime issues.
-- The conference participants stated that innovation is essential
to the new transportation paradigm--its policy, management,
operations, and services. Currently, ideas and innovation are
generated at the state and local levels. Although bellwether
states are experimenting with funding, services, pricing, and
relationship innovations, this is not well known at the federal
level and virtually never mentioned in national discussions, a
participant indicated. Another participant proposed that the
federal government reward well-designed state and local
innovation with seed money and other incentives.
-- Federal policymakers need to renew their commitment to funding
nationally important research. While TEA-21 substantially
increased states' research funding, it considerably reduced
funds for federal research, one participant stressed. While
state research programs focus on short-term, practical problems,
federal research must focus on long-term and high-risk research,
intermodal problems, and transportation policies. For example,
federal research to produce a �post-petroleum� vehicle
propulsion system that would reduce pollution and energy
consumption is increasingly important, a participant observed.
-------------------------------------------------------- Chapter 0:2.1
Our conference participants provided considerably more comments and
suggestions for transforming surface transportation policies to a
user focus. Appendixes I through X provide summaries of their
remarks.
We would like to thank the staff of the National Academy of Sciences
Transportation Research Board�particularly Robert Skinner and Dr.
Suzanne Schneider�for their assistance in making our conference a
success. Furthermore, we are extremely appreciative to Les Sterman,
Director, East-West Gateway Coordinating Council, and Brian Taylor,
Associate Director, Institute of Transportation Studies, University
of California/Los Angeles, who served as expert discussion moderators
for our morning and afternoon conference sessions. Should you
require additional information on this report, please call me on
(202) 512-2834. The conference was planned and this report was
prepared under supervision of Phyllis F. Scheinberg, Associate
Director, Transportation Issues. Other major contributors to this
report are listed in Appendix XII.
John H. Anderson, Jr.
Director, Transportation Issues
PRESENTATION BY PETER �JACK�
BASSO, ASSISTANT SECRETARY FOR
BUDGET AND PROGRAMS, U.S.
DEPARTMENT OF TRANSPORTATION
=========================================================== Appendix I
(See figure in printed edition.)
"How we meet needs for transportation in the future is critical.
It needs to be intermodal, it needs to be international, it
needs to be inclusive, and it needs to be well financed."
"Even with record levels of investment at the federal and state
level, we still fall short of the projected need. The
consequences of failure are extremely clear. Reduced economic
growth, loss of productivity gains, loss of jobs. And a
negative ripple that passes through the whole fabric of the
American standard of living."
I would like to divide my presentation into three segments. First, I
would like to address the environmental factors that we're likely to
face in the future of the nation. Second, I would like to discuss
the needs, as we project them today, for at least the next 20 years
for the future of transportation. Third, I would like to suggest
some financing mechanisms that we might use to address those needs.
THE FUTURE TRANSPORTATION
ENVIRONMENT
------------------------------------------------------- Appendix I:0.1
As we come to the new millennium�enter the new century�we are faced
with economic trends that are global in nature. In the United
States, we also are enjoying an unparalleled economic expansion.
Transportation and effective logistics are vital to our economic
survival as we compete in the global market. Transportation today is
about 11 percent of the Gross Domestic Product. Therefore, how we
meet needs for transportation in the future is critical. It needs to
be intermodal, it needs to be international, it needs to be
inclusive, and it needs to be well financed. We also need to realize
that the population of the United States will grow by 60 million
people over the next 30 years, adding substantially to the stress on
the transportation system. I would allow that Americans are really
fed up with the congestion that currently exists. We cannot apply
the approach that we used in the past--simply to build our way to
transportation demand. We need to deal with more than system
expansion. We need to deal with the efficiencies of the total
system.
We are also faced with an aging population. That requires changes to
our transportation system, so that we can remain mobile and be well
served as a nation. Productivity demands are unrelenting, and we
must meet those demands to remain competitive in a global market. In
that vein, freight moving through our ports is expected to grow 6
percent annually, doubling or tripling in volume by 2020. One of the
points I want to make here--the reason I'm touching on ports�is that
there is �water surface,� and there is �land surface.� We tend to
think of highways. Highways are a part of the total system, a key
part. But there are other things we need to address from a federal
level. These ports can either be choke points in the future or they
can be systems that flow smoothly. To flow smoothly, they need much
more overall infrastructure.
FUTURE TRANSPORTATION NEEDS
------------------------------------------------------- Appendix I:0.2
To remain at the unprecedented level of economic growth and vitality
we enjoy today, we must expand our transportation system's capacity
to keep pace with that growth. We cannot do it by just building our
way out. We must rely heavily on technology and efficiency in our
systems in order to meet those needs. What are the needs? All forms
of transportation are growing. Passenger miles on domestic flights
have doubled since 1980. In the same period, vehicle miles of travel
have increased 60 percent, and ton-miles of freight, 25 percent.
With the economy expected to grow almost 30 percent by the year 2010,
we expect these growth trends in transportation to actually increase
exponentially. Against that growth are studies that show the need
for total public investment in airports, air traffic infrastructure
to be about $9 billion annually. The highway system will require an
investment of $46 billion by all levels of government just to remain
at current conditions and get the current performance out of the
system. Our maritime, transit, and rail infrastructure will require
even more billions.
Today, public investment in all transportation infrastructure totals
a little over $60 billion a year. Even with record levels of
investment at the federal and state levels, we still fall short of
the projected need. The consequences of failure are extremely clear.
Reduced economic growth, loss of productivity gains, loss of jobs,
and a negative ripple that passes through the whole fabric of the
American standard of living.
We need to begin by realizing that we do, in fact, need financing for
the future. In order to meet those needs and be a player in the
world market, the United States has to come to a new paradigm for
transportation. That is, we must recognize that financial resources
for public and private infrastructure cannot come from these sectors
exclusively. In constructing the Interstate system, we had a unitary
purpose. And while it cost a lot more than it was understood to cost
at its conception, the accompanying growth of user fees provided the
revenues that were necessary to make and get the job done. All of
the need for transportation in the future cannot be simply carved out
of the fuel and other transportation taxes. The needs are too great,
and the range of needs too vast. They apply to all sectors of
transportation. That was then, and this is now.
WHAT FINANCING MECHANISMS
WILL ADDRESS OUR
TRANSPORTATION NEEDS?
------------------------------------------------------- Appendix I:0.3
So what are we going to do? We have already begun. So-called
innovative financing techniques came in the mid-1990s in surface
transportation. Steve Lockwood and others have talked about these
techniques having become a permanent feature of the surface
transportation programs. The Garvey bonds, as an example, are
clearly catching on all around the country in various places. Robert
Muller has talked about Garvey bonds and what they mean. Like him, I
never thought you could sell air, but I conclude you can. I differ a
little with him on state infrastructure banks--I think that they will
ultimately play a significant niche role. What we have now is a lack
of legislative authority to continue to capitalize those banks as
probably the larger issue. Extensions, credit assistance, and
expedited federal procedures have enabled over $12 billion worth of
infrastructure projects to move forward. The new Transportation
Finance Innovation Act�known as the Corbett Act, over here--will be
coming on line this spring. I'm happy to announce that we actually
have sprung the regulations loose from the Office of Management and
Budget and will be coming out with those for comment within the next
few days.
It's change that the federal agencies are primarily looking for and
the source of change that we want to make come about. Contrasting
with our focus on the Interstate system, federal agencies have to
change direction. We have to be a patient investor. We have to be a
junior investor, we have to be an enabler in the process, and we have
to understand where they apply and in what markets. This is not a
panacea for all needs, but it certainly fits substantial niches
across the country. This is clearly our time. This is the time of
public-private partnerships that will bring new capital to the table
and allow mega projects, such as the Alameda Corridor, that are
needed to be put in place to actually get off the ground and get
built. In fact, I noted yesterday that the Alameda Corridor has been
named the infrastructure-financing project of the year, which amazes
me. When we first financed it, I thought I was going be named the
infrastructure-financing fool of the year. But it didn't quite work
out that way, which is good. It's also about a realization that we
need new parties at the table. I share Brad Mallory's view that we
really do need to work on readjusting and reporting those
relationships. What this is really all about is being an �out of the
box� thinker. It's a clich��but it really is what it's about. It's
about what economic power can really do.
So what do we need to do? The needs I've discussed and what we have
done today expand upon and change the dynamics. Now we have to
return to adopting that new paradigm and making it work. We have to
ask ourselves three questions. Can we learn to give up the idea that
public infrastructure financing is the exclusive domain of public
agencies? Can we learn to speak the language of the private
financial community? Can we really continue to be players in a
global market?
To the first question, I submit we don't really have a choice. We
can either go the way of the dinosaur or we can adapt to a new
financial environment�change is healthy. It's also clear that we can
learn to speak a new language. Our innovative financing initiatives
over the past 6 years have begun to translate public-private
financing into a real world result. There are three major examples
that come to mind: the Alameda Corridor, the San Joaquin Foothills
Transportation Corridor, and the Eastern Foothills Corridor. I could
go on and on with intermodal projects, but I think you get the idea.
In the case of the global market, we must make changes if we're to
economically survive as a nation. We need to continue to take the
steps that are necessary. These include establishing new
partnerships, developing new legislation as appropriate and where
it's appropriate, and not developing that which is not appropriate or
necessary. They also include looking to how we can best make this
world grow and prosper the way we want it to.
In closing, we need to recognize the environment that we are in and
recognize that the players and their relationships are changing.
Think outside the box. Be ready to grapple with change and embrace
it and make it happen. Do not be afraid to find that things are
different, and they may be for the better.
Last, but not least, with GAO being a major player in all of this,
those of us who are in oversight roles or the national roles need to
do two things. First, we need to be advocates for those changes that
are changes for the good. Second, we need to be fair and substantial
critics of the things that don't work.
PRESENTATION BY ANNE P. CANBY,
SECRETARY, DELAWARE DEPARTMENT OF
TRANSPORTATION
========================================================== Appendix II
(See figure in printed edition.)
"The challenge is to bring together all the infrastructure
decisionmakers and identify vehicles for doing that. It's
insane to be putting the transportation investment in one place,
and the water and sewer investments some place else because
you're going to repeat both investments in the other location.
And that still happens."
"One of the tools that we clearly need is technology and
research--that's a critical federal role. It is absolutely
critical for us to continue technology and research in terms of
materials, systems, and the kind of analytic work that helps
frame problems for those of us in the states."
I've had my job for about 6 years--for transportation Secretaries,
somewhat of a long tenure. In our business, we deal with many
different things. Delaware's transportation department is a bit
unusual because we act, in essence, as a county transportation
agency. This is because the three counties in our state have no
transportation responsibility. So we deal with the Interstate Route
95s (I-95s) of the world but also the subdivision cul-de-sac. And
you can guess where I spend most of my time--it's not on I-95. In
addition, we operate all of the transit in the state. So we are
among the more integrated--along with Maryland, New Jersey, and
Connecticut--states in the aspect of jurisdiction. I will say that
this doesn't make it a whole lot easier, except that occasionally,
the Golden Rule does help out.
CHANGING TRANSPORTATION
ROLES
------------------------------------------------------ Appendix II:0.1
As I thought about my talk with you, it was clear that transportation
is changing very much. Our state transportation departments' roles
are in some real transformation. Part of it is driven by some of the
things that Tony Downs described. Part of it is driven by other
realities, particularly in the Northeast, where we have aging
infrastructures and mature systems that are forcing us to do
rethinking. As Les Sterman commented about reaching out to our
customers, this causes us to change as well.
Let me talk broadly about the roles in transportation because I think
we have some challenges. As we heard from David Luberoff, one of the
federal government's main roles is��where's the money?� We've all
just been through that, we know it all very well, and we look to the
federal level for funds. But I think we also look to the government
for a broader set of goals. At the state level, we certainly do
chase the money--we've just submitted our Access to Jobs and our
Livable Communities applications. So the federal programs can indeed
lead us in some directions that we might not go on our own. I think
there's a very important role there that needs to continue to be
played.
The need versus equity issue probably isn't going to go away. Since
we are the 49th largest state, as our Governor likes to remind
everybody, the need versus equity issue is very important for us.
One penny of our gas tax raises $4 million and everybody knows that
doesn't get you too much today, and our gas tax is 23 cents above the
norm for states. Money is always an issue as is the fact of our
geographic location. Frankly, if you want to get from Washington to
New York, you're going to go through Delaware--and you'd like to have
that experience be a good one. We hope it's just gotten better with
the introduction of Easy Pass.
At the federal level, there are other policies and goals that involve
transportation. We've heard about some of them this morning--trade,
welfare-to-work, energy, and a whole range of environmental issues.
These all intersect with transportation in one way or another. So I
think that at the federal level, there clearly needs to be influence
in those areas for those of us in the transportation field.
I would say that more change is occurring at the state level of
government. We've had a lot of conversations in the American
Association of State Highway and Transportation Organizations about
our role. With the selection of a new executive director, I think
that you will see much more state movement to try to provide a bigger
tent. We cannot do it all, but we are in a position to articulate
some issues both at the state and regional levels. In Delaware, we
have come together with the New Jersey Turnpike Authority, the Garden
State Parkway, the Highway Authority, Atlantic City Expressway, and
the Port Authority of New York and New Jersey on a single toll
system. This is amazing to me. When I was in New Jersey, we hardly
spoke to those independent authorities. The fact that we are now
talking to each other and have become business partners is an
indication of the changing direction that you're going to see states
moving at the institutional level.
Intelligent Transportation Systems (ITSs) are another area of state
change that relates to all of the Northeast's transportation agencies
in managing our transportation systems and their operation. It is
very much a change in terms of exchanging information. And it's not
just highway information--it's also customer transit and train
information. I think there will be a lot of change, and states are
really leading in that arena.
The local governments have a range of responsibilities, and we deal
with them differently in all of our states. In my state, we don't
have any money. But there are entities that have road, transit,
aviation, and port authority that the states don't all participate
in. We all have different structures in that arena, and I think
that's where one of our challenges lies as we move ahead.
On the private side, the Northeast presents some interesting examples
because of the sale of Conrail to Norfolk Southern and CSX. We have
two railroads now taking over. States' discussions when that whole
deal was put together were very much on an individual state basis,
but the impact is clearly regional for us. My Governor and I made it
very clear to both of those carriers that we wanted trucks off our
roads and that they'd better be organizing in a way to make sure that
that happened. We were talking about how you allocate limited
capacity: is a truck that's hauling orange juice from Florida to New
York better on I-95 or the railroad? We'd certainly like to see it
on the railroad, although there are some people in my department who
disagree with me because they see the toll revenues going down.
We need to be figuring out how to come together and make these
trade-offs. For example, we never think about pipelines because we
can't see them--they're out of sight, out of mind. They are very
much a part of our transportation system, but one that the public
sector has hardly thought about. Aviation, water, and truck issues
all have significant private components�the same for all of us who
own and operate automobiles. So there's a huge mix and Amtrak is
somewhere in between public and private.
Transportation has a mix of ownership and operating
responsibility�this makes for what I call the silos of the
transportation network. We do not yet have a totally integrated
system, which is why I think we've had so much conversation about
intermodal transportation over the last years. But users are not
thinking about all these pieces. They are just trying to get from
some place cold to some place warm--if they're trying to go to
Florida for a vacation. They don't care that there's 10 different
people operating the different pieces of the transportation system
that they're using; they just want to get there without a hassle.
It seems to me that those of us who are on the operating and the
providing side have got to start figuring out what trips mean from
the customer's standpoint. There are many different pieces to that.
In the transit business, we don't think enough about our customers.
One of my professors at the University of Delaware showed pictures of
some bus stops. I'd be embarrassed to ask anybody to get on my
service if the bus stops were the front door to my service�the bus
stops were pathetic, especially because the alternative was walking
20 feet and getting in your car. You might sit in traffic, but you'd
be by yourself, you would have whatever radio station you wanted on,
you could smoke a cigarette and nobody would scream at you or
whatever it is you wanted to do. It's a whole different travel
experience, and you probably don't have to go outside. When you ask
somebody to change their travel experience, they must go outside,
wait, sit with people they don't know, and go through an experience
that's totally different. So thinking about the whole trip and the
complications that our institutional structures pose make this a
challenge for us.
We need to find ways to think about the user's travel experience. Is
Delaware's the right way? I don't know. We're small and probably
not the best example because you couldn't pull off our institutional
structure in most other states, and it might not even make sense.
But, we may be showing a way--without destroying our institutional
structures--to bring together partnerships in new business ventures.
We've joined Pennsylvania on a submission to the Federal Transit
Administration on some new fare media. We've contracted with the
Southeast Pennsylvania Transit Authority to operate commuter service
along the Northeast (rail) Corridor. This means that travelers can
park their car, get on the train or transit service, and pay using
the same medium, making it easier for them. There are all kinds of
arrangements that will break down the jurisdictional issues and lead
us to some new places.
Metropolitan Planning Organizations also will be a place that will
see some transformation. Although I don't think we're ever going to
get anybody to give up their land-use authority, these organizations
are the table around which these issues can be brought together. In
most cases, land-use agencies are members of these organizations; if
not, they should be. Transportation providers are also there. The
people who provide other elements of infrastructure�water and
sewer�are missing. Schools are another critical piece, but they
don't tend to participate. The challenge is to bring together all
the infrastructure decisionmakers and identify vehicles for doing
that. It's insane to be putting the transportation investment in one
place and the water and sewer investments some place else because
you're going to repeat both investments in the other location. And
that still happens. It's a challenge that we have to address.
CHANGING STATE ROLES
------------------------------------------------------ Appendix II:0.2
In the transportation business, we are asset managers. Although we
don't always know it, I think we're getting much wiser to that.
State after state is coming forward with a �preserve it first, fix it
first� approach. We are recognizing that role, but it is clearly a
balancing act because you're never going to have preservation at the
exclusion of expansion. In Delaware, we are moving aggressively to
restore and repair the assets that we use every day. About 5 years
ago, a beam on I-95 cracked, and we had to take two lanes out of
service for a short period of time. It was chaos--a nice warning.
It gave us an opening to say that this is important--you absolutely
have to take care of what you've already built.
Coupled with that is figuring out ways to utilize what we already
have as efficiently and effectively as possible�hence, the ITS
initiative that all states are involved in. In our statewide
initiative, we just finished putting a new traffic signal system in
our university town of Newark. One state legislator commented to me
that the traffic works better today than it did 20 years ago. That
could mean that our signal systems have been so lousy in timing for
the last 20 years that we're making up for inadequacies of our own
operation. Although there are some real benefits, we are just buying
time�this is not going to fix the problem. But there are
opportunities to make the traffic flow better and to give our
customers better information. Kiosks and websites will allow you to
pull up a map in your car; with the Global Positioning System, you'll
know exactly where you are and you'll have someone telling you how to
get there. That's going to be a nice thing to look forward to, and
it will allow us to make better use of our whole system.
In Delaware, we are attempting to help our citizens understand their
transportation choices. It's a long, involved process, but in a
democracy it is the people who benefit by their own choices. By
taking time up-front to help people understand, we're going to come
up with projects that we can build and that help with some of our
livability issues.
Let me touch on a couple of other issues. Environmental issues
clearly are part of the transportation lexicon these days, and we
need to deal with them. The Transportation Equity Act for the 21\st
Century (TEA-21) is giving us the incentives to do that, by
streamlining. TEA-21 is not to get us away from addressing our
environmental responsibilities--quite the opposite. It is finding
better ways to do that.
Also, the lack of pricing mechanisms is somewhat unreal, both on the
transit and the automobile sides. It is similar to health insurance:
we have no idea how much it costs because the price is so well
hidden. Tolls, which are an anathema, are one way to help people
understand a little bit. Other ideas don't seem to get off the
ground�for example, paying for insurance at the pump. Finding ways
to directly associate the cost of trips, whatever the trip may be, is
very important as we move ahead. Tolls are not a very popular idea
in Delaware, so we need some help to convince people that tolls are
something that we should try. We're very good in the transportation
business at rolling out problems. When you get into term-limited
governorships, you begin to think--I've got 2 years, let whoever
comes next worry about it. So you cobble together ways to avoid
reality because people don't like to raise taxes.
It's very hard to get the total cost of transportation and other
infrastructure issues together in one place. This is an area where
we could use some help in understanding costs and helping our
customers understand what we're doing to ourselves. One of the tools
that we clearly need is technology and research--that's a critical
federal role. It is absolutely critical for us to continue
technology and research in terms of materials, systems, and the kind
of analytic work that helps frame problems for those of us in the
states.
Training is another area that needs attention--we absolutely have got
to teach our people differently about the transportation system. I
gave a presentation at the Transportation Research Board on
pedestrianization. If we're ever going to have legitimate
consideration of pedestrianization, the design standards have to be
integrated into books that our people use so that it becomes second
nature. It's not an amenity; it's part of what we do. Right now
it's a separate chapter, but it's got to be an integrated book. As
we improve a road, it's not just for automobiles. I've got kids
walking up and down the side of roads with no sidewalks--that's a
crime, and it shouldn't be that way. We need to be taught how to
integrate pedestrian considerations.
There are institutional challenges to integrating the modes and
enhance the roles of regional bodies--possibly, restructuring the
trust funds that support the transportation investment. We now have
modal trust funds, and in many, many states we have constitutional
limitations on their use. Delaware is not one of those, we're very
flexible, which is very good. Our future revenue sources are going
to be severely threatened if current automobile research is
successful at getting 60 miles to the gallon�and there is no reason
to think that the research won't be successful. That's something for
us to think about.
So, I think that there is very much a federal role. I also think the
states are in many ways in the catbird seat and beginning to
recognize the opportunities that we have and the need to make some
changes. Clearly, there are going to be changes at all government
levels, and the private sector also is going to change--fairly
dramatically. So, there certainly is a lot out there. I hope I've
given you at least a few thoughts and that we can get into a good
discussion. Thank you.
PRESENTATION BY ANTHONY DOWNS,
SENIOR FELLOW, THE BROOKINGS
INSTITUTION
========================================================= Appendix III
(See figure in printed edition.)
"The most important thing to understand about traffic congestion
is that it is a problem that cannot be solved. There is no
remedy for traffic congestion."
My assignment was to orate on the future of ground transportation
over the next few decades. I'm going to use the technique I call
proof by assertion. I will describe my 10 conclusions.
POPULATION WILL CONTINUE TO
GROW
----------------------------------------------------- Appendix III:0.1
The first point is that a crucial consideration for the future of
ground transportation is the expected growth of the United States
population over the next 20 years. From 1995 until 2020, the Census
Bureau estimates that the population of the United States will go up
by 60 million people�about 12 million every 5 years. Somehow, U.S.
ground transportation systems must expand their capacity to cope with
this large increase in persons, households, and goods. If we examine
the ratio of increase in the number of automotive vehicles�cars,
trucks, and buses�to the population from 1980 to 1995, there was a
1.29-increase in vehicles for every 1 human being added to the
population. That ratio was a little lower from 1990 to 1995 than it
was from 1980 to 1990. So somewhere between 60 and 77 million more
automotive vehicles will be added to our roads by 2020. That is a
rise of 30 to 38 percent over the number that was here in 1995.
These data are based on car registrations, and registrations slightly
exaggerate the number of actual vehicles, but not by all that much.
Thus, the sentiments of many existing residents who want to limit
future growth in order to reduce congestion are total delusions.
There is no way to limit growth at the regional level because no
region can stop immigration from somewhere else. True, growth at the
local community level can be limited by simply pushing it into two
other places�peripheral sprawl and in-city overcrowded slums for
low-income households, as in much of southern California.
AUTOMOBILES WILL REMAIN
DOMINANT
----------------------------------------------------- Appendix III:0.2
My second point is that privately owned automotive vehicles will
remain the dominant form of ground transportation for the foreseeable
future in the United States. Attempts to cope with rising traffic
congestion by shifting more people to public transit are not going to
work. The automobile is, and will remain, a better form of movement
for most people in spite of congestion. It's faster, safer, more
comfortable, more flexible in timing and in linking scattered origins
and destinations, and often cheaper, especially if you get free
parking. It will not be possible to lure any significant portion of
auto-driving persons into using public transit by improving the
quality, quantity, or service frequency of public transit. One
reason is that such a low percentage of all trips is now taken by
public transit�only 3.5 percent of work trips in 1995 compared with
90.7 percent for private vehicles. Therefore, even if we could
triple the percentage of total commuters using public transit�which
is extremely unlikely�that would reduce the percentage of commuting
by automotive vehicles by only 11.6 percent. That reduction would be
offset by the increase in population, which is going to be much
larger than 11.6 percent.
The only way to substantially increase the percentage of trips made
on public transit would be to make the use of automotive vehicles far
less convenient or far more costly�such as by quadrupling the cost of
gasoline or placing heavy taxes on automobiles, as in such countries
as Denmark and Singapore. But these steps will be so strongly
opposed by a majority of Americans that there is absolutely zero
chance that they will happen. Apologists for public transit say
transit is necessary to cope with all this, and we need more
subsidies for transit, because the automobile is so heavily
subsidized. They should look at one number that I think is very
impressive. Transit now gets 25 percent of the public spending on
transportation in the United States at all levels and provides
between 1 and 2 percent of the trips. That's a fairly impressive
subsidy.
COMMUTES ARE NOT WORSENING
----------------------------------------------------- Appendix III:0.3
Traffic congestion is widely perceived as a worsening problem across
the nation, especially in fast-growth suburban areas. But the
perception is worse than the reality. I do think congestion is
getting worse in many parts of the country, particularly in very
large metropolitan areas. But the average length of time spent
commuting each day has not increased very much over the past 12
years, except in a few very large metropolitan areas. The average
commuting time across the country was 18.2 minutes in 1983, 19.7
minutes in 1990, and 20.7 minutes in 1995. That's an increase on the
average of only 2.5 minutes, or 13.7 percent in 12 years. The
average distance traveled rose a little more, from 8.5 miles in 1983
to 10.6 miles in 1990 and 11.6 miles in 1995. That means that
commuters are actually traveling faster than they were before,
although it takes them a little longer to get where they're going.
But in most parts of the country where residents think they have very
bad traffic congestion, they really don't. It may have gotten worse,
but it's really not all that bad.
CONGESTION CANNOT BE
ELIMINATED
----------------------------------------------------- Appendix III:0.4
The most important thing to understand about traffic congestion is
that it is a problem that cannot be solved. There is no remedy for
traffic congestion because traffic congestion is essentially a
balancing mechanism that enables people to pursue six objectives
other than minimizing their commuting time. Two of these objectives
are held by employers and the other four by households.
The first objective that employers seek is having most firms use
similar work periods during the day. Then when you call up somebody
at another firm, that other person is at work. Therefore, almost
everybody has to go to work and come home from work at about the same
time. There are some staggered working hours, but they don't really
have much effect, because they aren't staggered all that much.
Second, the owners of businesses want to operate mainly in
low-density work places, which means they are widely scattered across
each metropolitan area. Those are the key objectives that employers
want.
The first objective that households want is to have a wide range of
choices of where to work and where to live in different types of
communities, especially if they have more than one earner in the
household. Second, they want to be able to combine several different
purposes on each individual trip to be efficient. Third, they want
to live in a relatively low-density community. And fourth, most
households want to separate their own family dwellings spatially,
and, particularly, regarding public schools, from other families with
much lower incomes and social status and often from people who are in
different racial groups.
It is not possible to pursue all these objectives effectively without
generating a lot of traffic congestion. In reality, traffic
congestion is the balancing force in rationing road space that
emerges from pursuit of those objectives. Yet most Americans do not
want to give up any of these objectives enough to change their
behavior. They would rather endure a certain amount of traffic
congestion than change these objectives. It's true that the more
traffic congestion they encounter, the unhappier they are. So, the
amount of traffic congestion they are encountering is bad enough to
make them complain, but not bad enough to make them change their
behavior. If congestion becomes unacceptable, they can move closer
to where they work or work closer to where they live, which many of
them in fact do. But this means there is no such thing as a solution
to the traffic congestion problem. Traffic congestion is not a
disease that can be cured. It is an inherent connection in the
quality of life that embodies those objectives that I described.
LETTING EXISTING ROADS
DETERIORATE IS NOT
SUSTAINABLE
----------------------------------------------------- Appendix III:0.5
In the recent past, peripheral low-density growth in most
metropolitan areas has been accommodated by financing enough new
streets and roads to cause only moderate increases in traffic
congestion at the periphery. However, the maintenance of previously
existing streets and roads has not been kept up adequately. This
arrangement is not sustainable because too many older streets and
roads will deteriorate into very bad condition. It is a fact of life
that many of us getting on in years do not want to recognize, but
older things do deteriorate as time goes on.
Thus, we are allowing our existing infrastructure to deteriorate in
order to add more on the periphery to accommodate new growth. This
means we can't accommodate projected future peripheral growth without
either
-- underinvesting in maintaining existing systems to a dangerous
degree,
-- failing to service the new growth adequately with new streets
and roads,
-- increasing the densities of the new growth so we don't have to
build so many roads to service, or
-- hugely increasing the share of national production we devote to
building and maintaining streets and roads and other
transportation.
The first two alternatives are at least theoretically unacceptable.
However, in fact, places like Florida are engaging in both of those
as a means of accommodating their rapid growth. Hugely increasing
the allocation of resources to streets and roads seems unlikely in
light of competing budget pressures and the present diversion of so
many public resources to transit, even though it provides a very low
percentage of all trips and travel miles. So this leaves increasing
density in new growth areas as a theoretical way to accommodate
future transportation needs.
FORMS OF GROUND
TRANSPORTATION WILL NOT
CHANGE
----------------------------------------------------- Appendix III:0.6
But changing the land-use patterns embodied in future metropolitan
growth and development will not substantially alter the basic forms
of ground transportation now in use. After all, 85 percent of the
developed portions of the country that will exist in 2020 already
exist now. Even if radical changes in the form of the to-be-added 15
percent could be achieved, which I don't think is the case, that
would not substantially change the patterns already in place today.
They will necessarily dominate the overall picture of transportation
in 2020.
INCREASING NEW-GROWTH
DENSITIES MAY HELP ADDRESS
FUTURE INFRASTRUCTURE NEEDS
----------------------------------------------------- Appendix III:0.7
Raising average densities in new growth areas and emphasizing in-fill
development to a maximum degree might somewhat reduce the cost of
accommodating future population growth with adequate infrastructures.
New growth suburban densities might have to rise from about 2,500
persons per square mile, which is the density of the city of Phoenix,
to about 7,500 persons per square mile, which is the density of the
city of Los Angeles, to make any difference. But this will not
reduce traffic congestion much, because higher densities generate
more local congestion, since almost as many vehicles are concentrated
in a smaller space.
LOCAL GOVERNMENTS NOT
EQUIPPED TO HANDLE HIGHER
DENSITIES
----------------------------------------------------- Appendix III:0.8
Even if it were desirable to use higher-density land use for new
growth, existing governance arrangements in most metropolitan areas
are not capable of managing regional growth to achieve any rational
policy of any kind whatsoever, particularly higher densities in new
growth areas. In fact, existing governance structures tend to lower
densities in those areas to protect the environments of affluent
households who live there. This is explained and discussed at length
in one of my books called New Visions for Metropolitan America,\1
which was published by Brookings in 1994.
It is not politically likely that we can develop some type of
regional planning and authority over land use and transportation over
local governments. Doing so, however, is the only way to achieve
consistently higher densities in new growth areas, something like
what Portland, Oregon�and almost no place else�has done. Most states
will not do this because large majorities of citizens refuse to
reduce the authority of local governments or to accept even
moderate-density multifamily housing nearby in any significant
quantity.
--------------------
\1 Anthony Downs, New Visions for Metropolitan America (Washington,
D.C.: The Brookings Institution and Lincoln Institute of Land
Policy, 1994).
CONGESTION IS HERE TO STAY
----------------------------------------------------- Appendix III:0.9
Traffic congestion is not going to decline in the future. In fact,
it will probably increase as the total population rises and real
incomes rise enough to enable more people to afford private vehicles.
This is not a problem confined to the United States. In fact,
traffic congestion is much worse in many parts of the world. It is a
worldwide phenomenon of rising real income and the desire to use
private transportation. There is no such thing as a solution to the
traffic congestion problem because it's not really a problem. It is
the result of our pursuit of other objectives, which we do not want
to give up. True, some improvements can be made, but they will only
be marginal. They will likely be swamped by rising metropolitan
populations and the use of multiple vehicles by more households.
As I say in the final paragraph of my book, Stuck in Traffic,\2
congestion is here to stay. So you'd better learn to like it. Get
yourself an air-conditioned car with a stereo radio, a tape deck, a
portable computer, a television set, a microwave and commute with
somebody you're really attracted to. Regard commuting as part of
your leisure time. You might as well learn to enjoy it.
--------------------
\2 Anthony Downs, Stuck in Traffic (Washington, D.C.: The Brookings
Institution, 1992).
PRESENTATION BY JAMES A. DUNN,
JR., PROFESSOR OF POLITICAL
SCIENCE AND PUBLIC ADMINISTRATION,
RUTGERS UNIVERSITY/CAMDEN
========================================================== Appendix IV
(See figure in printed edition.)
"Certainly there are true problems associated with the
automobile. But for most Americans, it's a solution."
One of the themes in my recent book�Driving Forces: The Automobile,
Its Enemies, and the Politics of Mobility\3 --is the difference in
perception about the automobile and what it means in our society.
What I try to do in Driving Forces is to explore the great gulf in
perceptions and policy prescriptions between the mass of Americans,
for whom the automobile is the solution to their transportation
needs, and a group that is growing in importance in the
transportation policy community that I call the �antiauto vanguard,�
for whom the automobile is a problem�a big problem. They truly see
themselves as a vanguard of people who know where the masses need to
go and see themselves as leading the masses in the right direction,
in spite of the masses' false consciousness. They are increasingly
organized and self-conscious about their role of saving the masses
from themselves. They have a whole agenda of policy prescriptions
that are not designed to address the problems of the automobile but
to address the problem of the automobile itself. Basically, they say
that we need to somehow get rid of automobility as we understand it
today--not to get rid of all automobiles but to get people out of
their cars, to require drastic reductions in the amount of vehicle
miles traveled that the automobile produces. They want to get people
using more collective means of transportation, rather than individual
means of transportation. Certainly there are true problems
associated with the automobile. But for most Americans, it's a
solution.
In the book, I look in some detail at the kinds of policy proposals
that they have put forth. I conclude that essentially, it's not
going to work; they're promising much more than they can deliver. As
people like Anne Canby know, it's hard to get people out of their
cars and onto buses or trains. It's hard to get people to form car
pools and share rides. And given the kinds of policy incentives and
disincentives that are within the mainstream of American politics,
it's very, very difficult. And with that kind of parameter, it's
going to be a great disappointment to the vanguard that they're not
going to achieve their goals, even though they feel this so urgently.
But then, you say, why even bother looking at their prescriptions in
detail and debunking them because they're just not going to happen.
And here I have to refer to Anthony Downs and his concept of the
�issue-attention cycle.� There are times when �a window of
opportunity� opens up in a particular area. People then start
searching and grabbing off the shelf ideas that have been hanging
around for years, and trying them out: �Hey, we've got a
problem--all of a sudden, let's go get some policies, hook them up to
these problems and see if they'll solve the problems.� You can look
down the road in a few years and see that it's quite likely that
there will be this kind of a window of opportunity opening up in the
policy-making process toward the automobile and its problems.
What I'm saying is that now is the time to start examining the policy
proposals that are being put forth by the antiauto vanguard. They
are calling for dollar-a-gallon gas tax increases, bans on new
highway building, massive spending on new rail transit systems, and
federally mandated ride sharing. We need to look at them very, very
carefully, to make sure we don't make some rather expensive and
unpopular mistakes when the issue-attention cycle brings the
automobile to the fore again.
Obviously, I have a lot of colleagues and friends who are
card-carrying vanguard types, and I'm not very popular with them
right now. But for 30 years they have been criticizing the
establishment--criticizing the automobile. And turnabout is fair
play. If they have an agenda, then they have to be ready to take
some criticism in return. They'll say then, �well, you're just
defending the automobile and the status quo.� No, nobody in academia
certainly gets very far by just saying �keep the status quo.�
--------------------
\3 James A. Dunn, Jr., Driving Forces: The Automobile, Its Enemies,
and the Politics of Mobility (Washington, D.C.: The Brookings
Institution Press, 1998).
THE PARADIGM OF THE
AUTOMOBILE PLUS: IT'S
BETTER TO EXPERIMENT THAN
MANDATE
------------------------------------------------------ Appendix IV:0.1
I have my own paradigm, which I call the �automobile plus.� My
suggestion is you start with the automobile and you go on from there.
You don't try and attack the automobile head on. You don't try to
get people out of their cars when they don't want to get out of their
cars. You look at reality and you improve around the edges with
incrementalism. I don't really object to a lot of innovative ideas
and new thinking, as long as they are carefully vetted.
So it's the automobile plus: well thought-out initiatives in urban
transit or inter-city passenger rail, democratically chosen �new
urbanist�community designs, and car pools that people want--not ones
that are imposed by outside regulations, particularly federal
regulations.
The role for the federal government should be in the nature of
promoting experiments and letting States and local communities see
what works. Federal support for limited local experiments should
also have a built-in evaluation component so we can see whether an
experiment is working and if so, why, and if not, why not. Then the
federal government can disseminate this information. I suggest that
it's better to experiment than to mandate--to experiment with
well-thought-out, well-designed local-ride sharing programs, rather
than to mandate nationwide programs that are bound to be unpopular
and probably unsuccessful.
NOW IS THE TIME TO CONSIDER
POTENTIAL SOLUTIONS TO THE
PROBLEMS
------------------------------------------------------ Appendix IV:0.2
But the biggest part of �automobile plus� is not so much with
people's individual behavior but rather with the technology of the
automobile itself. Part of the problem with the automobile is
pollution and energy consumption--energy dependence. Rather than
trying to come up with various kinds of complex and controversial
programs to get people out of their cars, let's make the cars better.
Americans are pretty good at solving technology problems. Let's move
toward what I call the �post-petroleum propulsion system� for
automobiles. We're not going to do that overnight. We're not going
to be able to do that without some controversy. But it's time now to
start thinking about deploying incentives and perhaps, mandates--not
against the citizen voter but aimed at the auto manufacturers who are
producing a product that the citizen voter is, I think, going to
continue to demand far into the foreseeable future, unless a better
product comes along. We need not necessarily expect the return of
Ralph Nader in all his adversarial glory. I think both Washington
and Detroit have learned that adversarial confrontation is not
necessarily the way to go. We need to be thinking about new and
innovative ways of moving toward new automobile propulsion systems,
so we get cleaner, more fuel-efficient automobiles, not trying to get
people out of their automobiles.
Anne Canby mentioned vicious cycles in automobile dependence. If in
fact we move toward a 60- mile-per-gallon car or even toward a zero
emission vehicle that's not based on propulsion technology with
petroleum fuel, we may create a kind of a �virtuous cycle.� That is
to say, as cars need to burn less and less petroleum, it would be
possible to increase the rate of taxation on petroleum. People would
be paying roughly the same amount of taxes because they'd be burning
less petroleum. As that creates incentives for auto manufacturers to
have even more fuel-efficient vehicles or vehicles for which the fuel
is not petroleum, that then creates opportunities for new financing
mechanisms for roads and streets that are based perhaps on
electronic-toll-collection technology. This puts a tool in the hands
of traffic and transportation planners, who then can begin to address
some of the peak-hour congestion problems. It's a virtuous cycle,
not a vicious cycle.
To conclude, the way to the future is exploring innovations that
build on the automobile--that make the automobile better for the
environment but also better for the individual because the individual
is not going to want to give up the automobile. I suggest that the
vanguard types who want to roll back automobility haven't thought
through the consequences for the democracy and personal empowerment
of their extreme antiauto stance.
PRESENTATION BY STEPHEN C.
LOCKWOOD, VICE PRESIDENT, PARSONS
BRINCKERHOFF
=========================================================== Appendix V
(See figure in printed edition.)
"The tax-funded public monopoly was appropriate for the
mid-20\th century mission of building basic infrastructure. But
providing a variety of non-standard services to a range of
customers who have varying needs is not compatible with tax
based funding and bureaucratic decision-making. Highway finance
must evolve in new directions based on more direct customer
input, an increased role for private enterprise in service
provision, and the addition of markets and prices, technology
and capital."
"Certain important segments of the highway-using community
appear ready to pay more for better service; for example, just
in time freight shipments, time-short commuters, and business
travelers may be prepared to spend more for "guaranteed speed
limit" trips.... But, for the most part, premium service can't
be purchased anywhere at any price. And that is a curious
phenomenon in a free enterprise economy."
I'm going to discuss moving toward a financial system that supports
improved services by focusing on the financial implications of some
institutional issues that have been raised during the conference. My
particular perspective is the relationship between finance and
transportation service and how the two interact.
A FINANCING SYSTEM LINKED TO
USER NEEDS
------------------------------------------------------- Appendix V:0.1
In a mixed economy like ours, the financial mechanisms supporting
infrastructural services for surface transportation have to perform
two functions. One is raising capital--generating funds. But an
effective financing system should do more than simply raise revenues.
It should also incentivize service providers and their
customers/users to evolve a transportation system that meets
contemporary needs. My central thesis is that the existing system of
transportation finance does the former job quite well but tends to
inhibit evolution toward a more performance-based customer-driven,
service-oriented approach to transportation infrastructural services.
THE CHANGING MISSION OF
SURFACE TRANSPORTATION
INSTITUTIONS
------------------------------------------------------- Appendix V:0.2
The basic mission of highway owners (states and local governments) is
changing. We have a largely mature network and significant
constraints to significant additions (funding, environmental and
community considerations, etc.). At the same time, we are faced with
increasing congestion and customer demand for improved service
levels. As a result, today's surface transportation mission
increasingly is to provide the best possible service through the most
efficient use of the available capacity.
Exploiting the existing infrastructure more effectively requires
actively managing the facilities and networks in response to demand
variations so that service levels are maintained and travelers are
supplied with maximum information to make travel decisions with full
knowledge of the transportation systems' conditions. Such an
aggressive approach to management and operations has been conceived
within the transportation profession around both new technology and
new institutional concepts. ITS represents a systematic approach to
managing transportation facilities and services in real time both for
maximum efficiency and to provide services appropriate to congested
systems. To improve reliability and offer knowledge of existing
conditions, ITS builds on the applications of advanced technology in
sensing, communications, computation, controls, and information
dissemination. First-generation communication and control systems
are new being deployed for advanced traffic operations, and a range
of new information dissemination approaches is being developed to
provide travelers with a new level of information about conditions
and options. Capitalizing on the promise of these systems will
require not only new concepts and technology but also additional
capital and new operating arrangements.
At the same time, new institutional concepts are emerging that
capitalize more directly on the private sector to access technology,
capital, and innovation. New public-private partnership arrangements
include those that can provide capital for private toll roads;
introduce new technology, such as improved construction material and
techniques, and new services, such as the premium toll roads; and
advanced traveler information.
These new technical and institutional approaches share in common that
they are service-oriented, performance based, and focused on real
time, active exploitation of the existing infrastructure. In
addition, they address the needs of special market segments and
introduce service and technology innovations. Fundamentally, they
are driven by an increased focus on performance and markets.
THE CURRENT SYSTEM AND ITS
CONSTRAINTS
------------------------------------------------------- Appendix V:0.3
The existing financial framework was designed for an earlier era of
basic infrastructure construction. Monopoly ownership and
legislatively determined tax-based funding with bureaucratic
decision-making are not well suited to capitalize on private
enterprise nor tuned to expressions of customer demand. I'm not
going to describe the key characteristics of our current financing
system--they are well known to this audience. I would point out that
with a substantial preservation backlog burden, the sector is
chronically underfunded and is ill equipped to embark on the
development of a new generation of transportation system
improvements. You may not be aware that, as a nation, we spend less
than 3 cents per vehicle mile on infrastructure--out of an average of
40 cents for full operating cost (less than the operating cost of car
air-conditioning). With these institutional and financial
constraints, there is very little focus on what a first-class road
operation might actually require.
THE CHALLENGE OF EVOLVING
THE FINANCING SYSTEM
------------------------------------------------------- Appendix V:0.4
The emerging context for transportation and the need for a greater
focus on management, operations, and the installation of new
technology suggest a need for evolution to a new financial mix.
There are two principal challenges. First, there is the 20\th
-century legacy financial agenda, namely making the existing
financing system more efficient than it is today and sustaining the
revenues that are part of that system. There's also another agenda,
which I think of as the 21\st -century challenge: evolving new
mechanisms that contribute to the effectiveness of the transportation
service itself.
The first challenge tends to dominate discussions of innovation in
transportation finance. I'm going to conveniently ignore a lot of
very thorny issues, including the revenue erosion due to inflation
and vehicle efficiency as well as tax evasion and diversion. Nor
will I discuss several exciting innovations to maximize the leverage
of the existing revenue stream, such as commingling private
investment, innovative finance, public-private partnerships, et
cetera. I'm going to concentrate on the second
challenge�effectiveness. This is based on the thesis that a
competitive high-tech service economy has different needs from its
transportation infrastructure from those for which the inherited
financial arrangements were intended--and that this inheritance must
be modified if it is to support significant improvements to
transportation service in a new era.
Needed modifications to the existing financial/institutional
arrangements would include approaches that would generate new revenue
sources, new project and service sponsors, and new mechanisms that
will encourage more customer-specific and customer-responsive service
innovation. Three examples illustrate some of the relationships
between customers, services, costs, prices, and revenues that need to
be addressed.
Congestion continues to grow, which, in most sectors, is a clear
signal that service improvements are needed. Yet, the necessary
capital facility preservation preoccupation of our state departments
of transportation, together with inherited conventions and the lack
of customers' voice, limits incentives to shift to very intensive
congestion management and enhanced operations orientation for state
and local transportation agencies. There is simply not enough money,
not enough resources, and not enough attention to have this entire
agenda under the current system.
The increasing prevalence of incidents, breakdowns, and crashes now
cause about 50 percent of the delay we experience in metropolitan
areas. There is no way for the inconvenienced traveler �market� to
express its demand (through willingness to pay) that priority be
given to the kind of investment in operations in technology and
systems that can more effectively minimize that kind of a problem.
Certain important segments of the highway-using community appear
ready to pay more for better service; for example, just-in-time
freight shipments, time-short commuters and business travelers may be
prepared to spend more for �guaranteed speed limit� trips. This
seems to be the lesson learned in the so-called High Occupancy Toll
lanes in California where users are paying up to 40 cents a mile to
bypass peak period congestion. Reliability is as important as time
savings in the kind of economy that we have today. But for the most
part, premium service can't be purchased anywhere at any price. And
that is a curious phenomenon in a free enterprise economy.
WHAT CHANGES ARE NEEDED?
------------------------------------------------------- Appendix V:0.5
We are at a point in the evolution of our surface transportation
systems where we need to shift from a financial system that is
oriented to construction to one that fosters effective,
customer-responsive, innovative service. This must include financial
arrangements/mechanisms that will detect, support, and promote
customer-related service improvements. This is not a new issue for a
private enterprise economy. Other networked infrastructure sectors
(power, telecommunication, and water) exhibit dramatic changes in
organization and financing that are fostering substantial
improvements in service quality. These sectors are increasingly
deregulated, competitive, and investor owned. They have
private-sector style management that focuses on customer service (as
well as constructing and maintaining physical plant) and offering
priced services with premium options. Dramatic changes in
organization and finance have brought with them substantial
improvements in service quality.
The United States is the international model on
institutional/financial structure for progressive public
infrastructural services. Yet, the transport sector remains uniquely
on the static fringe of the spectrum with regard to the provision of
public infrastructural services. Perhaps the 21\st -century agenda
for surface transportation finance needs to focus on introducing
elements of the financial mechanisms that characterize the norm in
other networked services. The same types of transition may be
necessary
-- from a revenue-constrained priority on the preservation of basic
infrastructure to increased resources focused on real-time
service,
-- from public monopoly ownership and operations to an increased
role of the private sector through outsourcing public-private
partnerships franchises,
-- from �one size fits all� services and facilities to
market-related price-based premium and discount options,
-- from arms-length relationships with customers/users to
market-related relationship through prices,
-- from tax dependency to a new mix--with commercialized
self-supporting service components, and
-- from public agency bureaucracy to an enterprise-style management
of transportation agencies with performance incentives.
It is obvious that major institutional changes would be involved:
political, professional, and even cultural. Therefore, any change
must be evolutionary and politically practical: a transitional
approach incrementally adding enterprise features where and as
appropriate, and retaining existing systems appropriate to the
components of networks.
CHANGES TAKING PLACE TODAY
------------------------------------------------------- Appendix V:0.6
Some of these changes are already visible. The American Association
of State Highway and Transportation Officials recently completed a
survey of the 50 state departments of transportation, called �The
Changing State DOT.� This report describes a wide range of
innovations that are going on in many state departments. Some of the
innovations are financial--such as increased reliance on nonfederal
funds, leveraging and commingling State Infrastructure Banks,
increased tolling, private finance, and so on. There is also some
experimentation with new services for different markets. I'm sure
you all know about providing single-occupant vehicles the opportunity
to pay a premium for the space left over in high-occupancy vehicle
facilities. There are a few experiments with pricing, and a few
state departments are beginning to think in an asset-management
perspective--focusing not only on the capital assets but also on
operating the assets they have to maximum customer-related
effectiveness. And there are a variety of experiments with new
institutional relationships--vertically and horizontally--between the
public and private sector and among levels of government.
But these changes are not widely known or discussed. There's very
little dialogue among states and local governments on these issues.
At the national level, the discussion of these issues is virtually
invisible�no think tank white papers of professional conferences.
The consciousness level is low and inertia�as we have remarked in
several contexts today�is high. Yet, there is an opportunity to
begin to connect some of these innovations that are going on to give
them visibility and to give the pioneers and champions some cover,
some support, and some incentives. The changes taking place need to
be focused and consolidated with debate and encouragement.
These developments suggest some elements in a tentative agenda that
links institutional to finance and supports progress in service
terms. Some of these elements include the following:
-- Continued programmatic devolution to state and local levels
(some suggest partial tax devolution as well).
-- An increased focus on system performance in customers'
terms--including support for real-time active systems
operations.
-- Additional incentives to state and local governments to form
public-private partnerships in the development of technology and
the delivery of service.
-- Shifting to direct charges to finance service upgrades (tolling
interstate highways).
-- Incentives for increased commercialization of premium and
special services and enterprise-style approaches.
-- Credit support for private investment (including securitization
of debt).
BRING THE FUTURE FORWARD
FASTER
------------------------------------------------------- Appendix V:0.7
As the role of highway finance moves beyond simply constructing and
preserving capital facilities, key financial arrangement issues move
beyond �how much� the legislatures�federal and state--will grant.
The tax-funded public monopoly was appropriate for the mid-20\th
century mission of building the basic infrastructure. But providing
a variety of nonstandard services to a range of customers who have
varying needs is not compatible with tax-based funding and
bureaucratic decision-making. Highway finance must evolve in new
directions on the basis of more direct customer input, more private
enterprise in service provision, and adding markets and prices,
technology, and capital. Other infrastructure sectors have evolved
ways that incorporate such free enterprise arrangements. We must
find a parallel path suitable to surface transportation.
PRESENTATION BY MR. DAVID
LUBEROFF, ASSOCIATE DIRECTOR,
TAUBMAN CENTER FOR STATE AND LOCAL
GOVERNMENT, KENNEDY SCHOOL OF
GOVERNMENT, HARVARD UNIVERSITY
========================================================== Appendix VI
(See figure in printed edition.)
"Transportation policy centers on four challenging
issues--mobility, environment and community enhancement, and
benefiting the economy."
"Although we've made some historic decisions about what's a
public responsibility and what is a private responsibility,
those lines are not fixed; they move. One of the great
underlying debates of U.S. economic and political history has
been the question of what is a federal responsibility, what is a
state responsibility, and what is a local responsibility.... We
need to remember that the policies have changed dramatically
over the years at varying points in time."
The purpose of this conference is to think broadly about new
directions in transportation policy for the 21\st century. I'd like
to begin this conference by providing a framework for the
conversations and discussions that will follow. Whenever we think
about transportation policy, we should think about the following
three questions:
-- What are the problems we're trying to solve?
-- What norms govern the choices that we can make?
-- Which solutions are political decisionmakers, particularly
elected officials, most likely to support?
WHAT ARE THE TRANSPORTATION
PROBLEMS WE'RE TRYING TO
SOLVE?
------------------------------------------------------ Appendix VI:0.1
MEETING THE CHALLENGE OF
MOBILITY
---------------------------------------------------- Appendix VI:0.1.1
Transportation policy centers on three challenging issues�mobility,
environment and community enhancement, and benefiting the economy.
In thinking about these issues, we should remember three trends.
-- As Tim Lomax and his colleagues have shown,\4 there is growing
congestion in urban areas and an astonishing rate of congestion
growth in smaller areas. The congestion is getting worse in big
cities, such as Los Angeles and New York, but it's also getting
worse in small cities, such as Buffalo and Las Vegas.
Congestion also is getting much worse in suburban areas as they
become major commercial centers.
-- As Alan Pisarski has shown,\5 transit's market share has been
declining, particularly as the nature of those who drive changes
and because of the introduction of women into the workforce in
the 1980s, the growth of link trips, and the increased
decentralization of businesses and residences.
-- Many key transportation facilities are nearing the end of their
useful life, and we're faced with the challenge of rebuilding
facilities that are already badly congested. Fixing a central
artery for a major city, such as the Gowanis Expressway in New
York City, generally requires closing it for awhile, but that
wreaks complete havoc on the city's transportation system.
To meet this challenge of mobility, we should recall that the average
length of commuting times has not changed substantially for decades.
People somehow make adjustments between work and home to accommodate
the time consumed by their commutes. While some people commute 3
hours a day in order to live in far-off rural areas, the average
commuting time, according to all the surveys, has not changed
dramatically.
It will be very interesting to look at the next census to see if this
changes. If decentralization continues, the length of commutes will
probably stay about the same. However, if travel times use up all
the excess capacity that was built through the 1960s and 1970s,
commuting times might get much longer. If that happens, the
political pressure to deal with congestion will rise significantly.
--------------------
\4 Tim Lomax and David Schrank, Urban Roadway Congestion Annual
Report--1998 (College Station, Tex.: Texas Transportation Institute,
The Texas A&M University System, 1998).
\5 Alan Pisarski. Commuting In America II : The Second National
Report on Commuting Patterns and Trends. (Lansdowne, Va: Eno
Foundation for Transportation, 1996).
ENHANCING AND PRESERVING
THE LOCAL COMMUNITY AND
ENVIRONMENT
---------------------------------------------------- Appendix VI:0.1.2
The second major policy issue is environmental and community
enhancement and preservation. To what extent can we allow
transportation to disrupt neighborhoods and natural environments? Is
it okay for a highway to go through a local park? Should we think
about the relationship between transportation policy and the reality
or threat of global warming? If we conclude that such disruption is
necessary, decisionmakers need to determine to what extent mitigation
(e.g., design modifications) help make it politically,
environmentally, and morally acceptable. Are there some forms of
transportation projects that actually enhance and protect communities
and natural environments instead of destroying or harming the
environment? To what extent should we encourage them?
BENEFITING THE ECONOMY
---------------------------------------------------- Appendix VI:0.1.3
Decisions on transportation policy need to consider their economic
impacts, which I group into three types according to their different
political dynamics. The first impact is the direct economic benefits
that public works projects provide for the people and the companies
that build them as well as the companies that supply them. Public
choice theory suggests that such groups may, in fact, dominate the
transportation policy-making process. The second is the regional
impacts of highways and transit systems, particularly on real estate
values. Urban political theory suggests that local decision-makers
tend to give this issue great weight. The third is the long-standing
debate about transportation's impact on the national economy. About
10 years ago, David Aschauer asserted the thesis that investment in
transportation generally benefits the national economy.\6 Many
economists--including Edward Gramlich, Henry Aaron, and, most
recently, the Congressional Budget Office--have criticized such
assertions,\7 and the conventional wisdom now seems to be that
well-designed projects can have positive economic impacts while the
impacts of general highway on the economy are either mildly positive
or have no discernable impact at all.
--------------------
\6 David Aschauer, "Is Public Expenditure Productive?" Journal of
Monetary Economics, Vol. 23 (1989) pp. 177-200.
\7 See Henry Aaron, "Discussion of Why Is Infrastructure Important,"
in A. Munnell, ed., Is There a Shortfall in Public Capital
Investment? (Boston, Mass.: Federal Reserve Bank of Boston, 1990),
pp. 51-63; Edward Gramlich, "Infrastructure Investment: A Review
Essay," Journal of Economic Literature,Vol. 23, No. 3 (Sept.
1994), pp. 1176-1196; and The Economic Effects of Federal Spending
on Infrastructure and Other Investments, Congressional Budget Office
(Washington, D.C.: Government Printing Office, June 1998).
WHAT NORMS GOVERN THE
CHOICES THAT WE CAN MAKE?
------------------------------------------------------ Appendix VI:0.2
My second thematic question has three major components. The first is
a very fundamental political question about whose responsibility it
is to make transportation decisions.
WHO IS RESPONSIBLE?
---------------------------------------------------- Appendix VI:0.2.1
Although we've made some historic decisions about what's a public
responsibility and what is a private responsibility, those lines are
not fixed; they move. One of the great underlying debates of U.S.
economic and political history has been the question of what is a
federal responsibility, what is a state responsibility, and what is a
local responsibility. Although we have a surface transportation
system that dates back to some 40 years�in some respect an anomaly in
American history�we need to remember that the policies have changed
dramatically over the years at varying points in time.
TO WHAT EXTENT SHOULD
TRANSPORTATION POLICY
EXPLICITLY SEEK TO SHAPE
BEHAVIOR?
---------------------------------------------------- Appendix VI:0.2.2
The second question of political norms is to what extent should
policy explicitly seek to shape behavior. Is it an explicit goal,
for example, to encourage the use of transit? Is it an explicit goal
to discourage the use of the automobile through mechanisms such as
pricing? This question about the use of incentives and disincentives
is very important. The underlying politics change depending on
whether you're merely trying to encourage somebody to do something or
you're actually making their life miserable if they do something that
you don't want them to do.
HOW DO WE BALANCE
SOCIETAL VERSUS
INDIVIDUAL NEEDS?
---------------------------------------------------- Appendix VI:0.2.3
The question of how to balance societal versus individual needs is
the old question, �Can we make omelets without breaking eggs?� While
policymakers were able to balance the competing needs of society and
individuals through the 1950s and 1960s, through the 1970s and the
1980s, this challenge became increasingly difficult. I actually
think that this is an area that may be in flux. I see some
interesting trends that say that we may be interested in making some
more omelets, albeit trying to make the egg whole again.
WHAT OPTIONS/CHOICES DO
POLICY MAKERS HAVE?
------------------------------------------------------ Appendix VI:0.3
There are eight general approaches to addressing transportation
problems that policymakers have before them. The first three reflect
historical patterns of action over the last 20 or 30 years. The
fourth reflects the current regime, and the last three are the most
interesting or important alternative courses of action.
DIMINISHING THE FEDERAL
ROLE
---------------------------------------------------- Appendix VI:0.3.1
The first is that we can imagine a world in which the federal role
greatly diminishes. It is important to recall that as late as 1956,
the federal share of transit spending was virtually nothing, and the
federal share of highway spending was only about 12 percent of total
spending. At the height of the interstate movement in the 1960s and
1970s, this percentage peaked in the high 20s. Then, with the
passage of the Intermodal Transportation Efficiency Act of 1991
(ISTEA), it started to slowly decline around 1991 or 1992. Those
percentages are creeping back up as the federal share of
transportation spending increases.
Moreover, total spending on transportation in constant dollars (that
is, dollars adjusted for inflation) has been increasing since the
early 1980s--which means that until ISTEA, the bulk of the increase
in spending was at the state and local level. My point here is that
you can imagine a world in which the federal government decided that
it should not have a significant role in surface transportation but
highway spending did not fall significantly because highways are
critical to local and regional economies.
A NEW FEDERAL ROLE
---------------------------------------------------- Appendix VI:0.3.2
In contrast, imagine if the federal government were to decide to
return to the heyday of the highway policies from around the 1950s
and 1960s. There was a clear delineation of a federal role�there was
a policy decision that we wanted a national system of Interstate
highways to link major urban areas and to alleviate traffic problems
in cities (as well as sometimes also providing money for slum
clearance and downtown revitalization plans). Two features of the
Interstate era are particularly significant. The first is that very
little account was taken of the disruption caused by highways. The
second, and perhaps most important, is that the Interstate system was
an entitlement program. If a road was eligible for Interstate
funding, the federal government was going to pay 90 percent of the
cost, regardless of the total cost. At first, the national highway
program had rigidly defined standards about what was and was not
eligible. However, as the program emerged and the political process
worked in the way that the political processes work, the definition
of what became eligible for federal highway expenditures expanded,
and expanded, and expanded. Eventually, projects that happened to
have a transportation component evolved, such as the Central Artery
in Boston or the Westway in New York, which were actually projects
about park land and urban revitalization that happened to have a
transportation component.
ENTITLEMENT PLUS
---------------------------------------------------- Appendix VI:0.3.3
The third general policy area is related to the second. I might call
this �Entitlement Plus.� In the 1970s, the federal government began
to give regions some flexibility in deciding whether or not they
wanted to build a highway or trade some of the funds to improve mass
transit. Although the local government had some choice, the funding
mechanism essentially remained an entitlement program. And that, as
you can imagine, encouraged a certain form of decision-making.
BLOCK GRANTS
---------------------------------------------------- Appendix VI:0.3.4
That brings me to what the world looks like right now in ISTEA and
TEA-21. Both ISTEA and TEA-21 made an important shift away from
categorical grants toward more state flexibility. Essentially, the
national highway program is turning into a block-grant-funded
program. There's more than a modicum of formula tweaking, and
there's always some pot of money that generally is distributed to
Members of Congress, usually on the basis of their position on the
authorizing committee and their general influence over transportation
legislation in Congress. What is critical is that the national
highway program has evolved from an entitlement program to a block
grant because we're giving the states a fixed pot of money and
telling them to distribute it among the projects on their list. This
approach radically changes the nature of the transportation planning
process because it forces the states to make important tradeoffs.
DISCOURAGING AUTOMOBILE
USE
---------------------------------------------------- Appendix VI:0.3.5
The fifth policy refers to the varying proposals put forward by what
one might broadly call the environmentalist community. In his
important new book,\8 James Dunn calls this the vanguard strategy,
and it has two components. One is a fairly heavy investment in
transit and other forms of nonhighway transportation. The other is
significant restrictions on the investment in new capacity and
possibly even disincentives on automobile use and stringent controls
on land use. The policy implies that the car is a major problem for
society and the land use patterns that it engenders�and we have to
stop it. Depending on the year or month, the reason we have to do
that is, global warming, suburban sprawl, wildlife habitat protection
and urban revitalization. This has captured both an investment
strategy and a strategy that says we may need to constrain people's
ability to use their automobile. This is an important point, which I
will come back to in a moment.
--------------------
\8 James A. Dunn, Jr., Driving Forces: The Automobile, Its Enemies,
and the Politics of Mobility (Washington, D.C. : Brookings
Institution Press, 1998).
GREATER USE OF
INFORMATION TECHNOLOGY
---------------------------------------------------- Appendix VI:0.3.6
The sixth idea concerns the greater use information technology to
improve our nation's transportation system. Some people believe that
various forms of information technology�from its simplest traveler
information systems to its most imaginative and far-reaching
electronic highways�can expand the system's effective capacity.
There is, however, some interesting controversy about whether or not
expanding capacity will encourage or discourage sprawl.
RATIONALIST STRATEGIES
---------------------------------------------------- Appendix VI:0.3.7
Next, there is the rationalist strategy, which is the economists'
continued fascination with road-pricing schemes and their continued
antitransit, particularly federally subsidized rail transit, position
in favor of market mechanisms. In his new book, Clifford Winston,\9
one of the most astute writers in this field, estimates that a policy
of efficient pricing and services could generate $10 billion in
annual net benefits over current practices. Winston--and his
coauthor, Chad Shirley --believe that if transportation's
inefficiencies are recognized, we could construct a political dynamic
that would address the inefficiencies.
--------------------
\9 Clifford Winston and Chad Shirley, Alternate Route : Toward
Efficient Urban Transportation (Washington, D.C. : Brookings
Institution Press, 1998).
MARKETIZATION
---------------------------------------------------- Appendix VI:0.3.8
Related to this idea of rationalization is the question of whether or
not we should be looking at more marketization of the transportation
system. This decision turns on the question of whether or not you
believe that state departments of transportation are monopolies�are
they capable of engaging in the market-based schemes and undergoing
the innovations that we expect in markets? This situation is
analogous to the deregulation of most forms of infrastructure in the
United States, such as telecommunication, electricity, aviation, and
trucking. I commend the Pennsylvania Department of Transportation
for attempting to become a more customer-oriented agency and I
imagine that Brad Mallory will tell you some of the things that they
are doing. The intellectual critique, however, is that this scenario
is unlikely without some form of competition.
HOW WILL POLICY OPTIONS
AFFECT THE FUTURE?
------------------------------------------------------ Appendix VI:0.4
I've given you a framework of the major transportation policies and
three major issues that we're concerned about�mobility, community and
environmental protection and economic impacts�and discussed the norms
that govern our choices�whether or not we should encourage or
discourage behavior, whether or not we allow disruption, and who we
think ought to be responsible for making the decisions. Now I'd like
to share with you my thoughts on how different policy options might
play out over the next 5 to 10 years.
I don't think we'll see a major diminishment of the federal role.
Why? As George Peterson has written about over the years, people
generally support more spending on transportation.\10 So for
politicians, supporting a major federal transportation program is
something that their constituents favor. In addition, the groups
with a large economic stake in the current funding structure
�primarily road builders and those who build transit systems, but
also governors and officials from state departments of
transportation�are going to lobby assiduously against any effort to
reduce federal highway and mass transit spending. In contrast, no
one is lobbying that hard on the other side, except for a couple of
states that may be particularly upset by current formulas.
Second, I don't see any return to any entitlement program, such as
the Interstate system. Such programs only emerge with the
development of fundamentally new technology�such as those that Bob
Skinner touched on briefly�even then, generally only after the
general policy approach has been tested at the local and regional
levels. The Interstate program, for example, built on state and
local experimentation with limited-access roads. In addition, it
took almost 20 years for the idea of a national system of such roads
to move from a general idea to something the federal government would
actively support.
Since we're not going to diminish the federal role or have an
entitlement program, we are going to have a large program of block
grants. With block grants, the spread between the donor and donee
states generally narrows. With some variations, we're basically
going to see the states get back roughly what they put into the
system. This trend toward narrowing the spread of grants is going to
be interesting for transit policy over the next 10 to 15 years
because the bulk of federal transit money historically has gone to
the relatively small number of locales with transit systems that
carry significant numbers of people. In the most recent debates over
TEA-21, the states that had been getting very little in transit funds
compared with the amount they had been paying in gas taxes grumbled
about that. Transit advocates were basically able to rebuff the
attacks partly by making alliances with environmentalists and partly
because the Chair of the Senate Committee that oversees transit came
from New York. However, as we in Massachusetts know all too well, if
generous federal funding for a program relies on having one
politician in a particularly powerful position, that system is
probably unsustainable over a long period of time.
In addition, despite GAO's criticisms, some form of pork barrel
politics will continue. I don't mean that pejoratively; I mean that
descriptively. As long as there's going to be a federal program, we
should not be shocked or surprised by this because Members of
Congress are supposed to bring something back to their districts;
it's how they demonstrate their success. Moreover, as others
understand that surface transportation programs have money, they are
going to try and make other endeavors eligible for transportation
money--through programs such as the ISTEA and TEA-21's transportation
enhancement programs, which are basically ways of tapping the highway
and transit programs to fund things such as bicycle paths, parks, and
historic preservation.
--------------------
\10 George Peterson, "Is Public Infrastructure Undersupplied?" in A.
Munnell, ed., Is There A Shortfall In Public Capital Investment?
(Boston, Mass.: Federal Reserve Bank of Boston, 1990), pp. 113-130.
POLICY IMPACTS ON
BEHAVIOR
---------------------------------------------------- Appendix VI:0.4.1
The likelihood of serious constraints on behavior as advocated by the
environmental community seems quite slim. As a country, we generally
don't respond well to serious constraints. I say this in full
awareness of the most recent suburban antisprawl programs. If you
look closely at the most successful of these efforts they either
involve the purchase of open space or efforts to limit the provision
of infrastructure in rural areas. In contrast, recent efforts to
constrain behavior, such as using the automobile, are either on the
ropes or have died. For example, the transportation demand command
measures in ISTEA, which would have required some employers to
discourage single-occupant commuting, were repealed. Thus, it seems
likely that transportation programs will continue to support
environmental agendas with such measures as preserving open space and
greater investment in mass transit (even though most of the data
suggest that the new transit lines are accomplishing neither their
mobility nor their air-quality goals) but are not likely to try to
constrain driving.
While highway capacity will continue to expand at a modest rate,
we'll never see a building boom as great as the 1950s and 1960s. In
most growing urban areas, there is some pressure�sometimes coming
from congestion and sometimes coming from land development forces�to
do new construction. People are also trying to develop a strategy
for getting around the reconstruction question. The strategy for
doing so has been less disruptive but more expensive highway
construction strategies plus expensive mitigation.
To date, information technology has been driven much more by its
producers than its consumers. Most significantly, in the wake of the
1990s Defense cutbacks, many industries were essentially looking to
adapt their products for new customers. Many of them, therefore,
became part of the surface transportation coalition to get access to
some of the federal funds. To date, however, it's not clear that
such efforts have produced noticeable changes for drivers.
A couple of questions remain on the table. Why are we still
investing in mass transit despite 20 years of data showing that rail
transit generally does not have significant impacts on either
mobility or air quality? Locally, such projects are often driven by
land use considerations. Certain property owners will organize at
the local level because they perceive that proximity to mass transit
will increase the value of their holdings. Producers of transit want
funding to build more transit lines. At some point, however, the
rest of the country either says to the few areas that are getting the
bulk of transit money, "That's enough" or "We want to build transit
lines too." It looks like it's the latter.
I'm not sanguine about the future of marketization because I don't
see who's pushing it. In contrast, such industries as
telecommunication, electricity, and airlines had active groups of
producers and consumers who said that these markets were so
inefficient that they could provide those services at much lower
costs. In the early 1980s, alternative forms of long-distance
service began, particularly for businesses. If you recall, in the
airline industry, those great anomalies of places not subject to
airline deregulation because they were in-state flights were
beginning to demonstrate that the system might be flawed.
Nor can I figure out how you get to Cliff Winston's large-scale
prescriptions for change. However, there are four areas where market
pressures could produce change over the next few years. One is urban
transit, which is notoriously inefficient. In places like New York,
some private-sector and often-illegal minivan programs are providing
services at a profit, and perhaps they are going to slowly undermine
the local transit monopoly. In response, the pressure to redo some
of the transit laws, particularly the labor provisions, might
increase. The current urban transit system seems somehow untenable.
I'm not antitransit, but I'm trying to sort of predict its future,
which seems an unsustainable trend.
My second prediction concerns freight movement between ports. The
Jones Act prohibits the passage of freight between U.S. ports unless
it's on U.S.-flag and U.S.-built vessels. However, the freight
industry is changing with the emergence of mega-ports just outside
the United States in the Bahamas, in Halifax (Nova Scotia), and in
Vancouver (British Columbia). These ports could lead to
circumventing the Jones Act by barging cargo to a variety of feeder
ports up and down either the West Coast or the East Coast.
Why is this a surface transportation issue? The increased use of
barges might affect surface transportation by taking freight off of
highways. The numbers are potentially significant because there are
enormous efficiencies that could be achieved. In its Conrail merger,
CSX estimated that the merger alone would allow it to take about a
million trucks off the East Coast highways each year. There are
enormous efficiencies to be gained here. Again, if the major U.S.
ports begin to see a significant slippage of business because someone
has found a notch or a hole in the system (like the airlines), there
will be increased pressure to address the issue.
The third area where marketization might increase is in private toll
roads, which are often tied to congestion pricing in fast-growing
areas. California's S.R. 91 and a new road in New Mexico are
interesting examples. As state highway departments have to focus on
the core business of maintaining what they've got, they may be
attracted to such projects as a way to provide new capacity without
having to seek additional funds. However, while such projects are
interesting, they will make up only a small portion of total highway
spending.
The last is some basic maintenance functions, which pass what
Indianapolis Mayor Steve Goldsmith calls the "Yellow Pages test.� If
five entries in the Yellow Pages are doing what some state employees
are doing, you ought to at least put that service out to bid and let
the public employees compete against the private employees. In
Indianapolis, public employees have actually won many of those
contracts because they often know the business better than anyone
else does. I can foresee more of this, particularly if and when
budget pressures get too great. In general, the academic analysis of
transportation policy has underestimated the importance of producers
and consumers as compared with water policy or regulatory policy.
Thus, as you listen to the remarks that follow, think not only about
whether the policies are efficient but also whether they can be
crafted so they are within the norms of American politics. It's our
challenge to craft policies that somehow meet these twin tests.
PRESENTATION BY BRADLEY L.
MALLORY, SECRETARY, PENNSYLVANIA
DEPARTMENT OF TRANSPORTATION
========================================================= Appendix VII
(See figure in printed edition.)
"What we do need to do, however, is to radically change the set
of relationships that transportation agencies have with their
customers and virtually everyone else."
"Once you get those sets of relationships right, the financing
mechanisms and other mechanisms will follow."
I tinker at the margin of a large state transportation department
which some of its detractors would still call a highway department.
We had one great good fortune--that was to go financially and morally
bankrupt in the mid-1970s. I say that's the best thing that can
happen to a public agency because then you get to start over again.
You generate the political will to set in motion a set of changes and
events that can ultimately result in real positive change. I think I
can say with accuracy that many people refer to our department today
in bellwether terms from time to time, almost to the exclusion of
other state transportation departments. I must tell you, I find that
to be inaccurate. I find the general level of play among the state
transportation departments to be quite high. I would commend it to
many of you within the (Washington, D.C.) Beltway as an example,
frankly, of what can be done. It is a little understood secret, to
use one of Steve Lockwood's terms. I think there are some good
reasons for that. One of the main reasons is that most state
transportation departments have lived with a checkbook just like you
have, and just like most businesses do. Most people in government
don't live with a checkbook. They have a budget, but it's not really
theirs. If they save a dollar, the state budget secretary or the
legislature takes it back and spends it on something they wanted to
spend it on. Because of the existence of trust funds and historical
practice, state departments of transportation traditionally, if they
saved a dollar, got to put it somewhere else. So typically, I find
them to be relatively responsive in governmental terms to what the
customer is talking about because they've got a checkbook. I think
this is little understood--very little understood, in most quarters.
But I think it's vitally important.
FINANCE IS NOT THE ANSWER
----------------------------------------------------- Appendix VII:0.1
When I first saw that I was going to be on this panel, I sort of
recoiled and I said, �Oh, my God, they put me on the wrong panel. I
should have been on the relationship panel.� Finance isn't the issue.
Then it dawned on me that I am on the right panel because I ought to
stand up and say that. Finance is not the issue, in my judgment.
That's easy to say right now. Two years ago, we got a $400 million
state revenue increase. Reflect on that for a moment. Our Governor
raised the state gasoline tax 3.5 cents and increased our state
registration fees by 50 percent. Two years later, he got 56 percent
of the vote. His opponent didn't even show. The political
consequences of investment in infrastructure are almost always
positive, not negative. It's relatively easy for me to sit here with
an additional $400 million of state revenue in one pocket and thanks,
to Chairman Shuster and Mr. Oberstar, $400 million a year in
additional federal revenue in the other pocket and talk about finance
not being the issue. I concede that point. However, I believe that
even when the eventual downturn comes, finance will still not be the
issue. The reason I believe that is because our real problems are
not capable of being solved by vast infusions of additional capital.
We've heard a great deal about them today.
We have talked a great deal about traffic congestion. I would offer
an observation to you and that is that it is perfectly acceptable and
polite to talk about traffic congestion on an elevator. What things
can you talk about on the elevator? The weather and traffic
congestion. They are the only two safe subjects. Why? Because no
one is responsible for them. You stand little chance of offending
anyone. People widely perceive traffic congestion essentially to be
an act of God and somewhat inevitable. I think that Mr. Downs'
comments were right on the money. It is essentially the price of not
walking. It is largely inevitable, and I know of no one who has
proposed anything remotely approaching much of a solution to it. I'm
tinkering at the margins of it, as many are. ITSs offer some relief.
They principally offer the relief of giving the person sitting there
enough knowledge so that they won't be furious. That's the principal
benefit. That is a significant benefit. There is the potential, of
course, to provide people with alternative information or give them
the information necessary to choose an alternative. But that is no
small benefit. And, yes, we can increase throughput.
I think we all accept the notion that we cannot build ourselves out
of traffic congestion. The reason we cannot build ourselves out of
congestion is not due to money--not at all due to money. It's due to
the social and environmental constraints. There is no place to put
those roads, for the most part. People would not put up with what we
would have to do if we tried to build those roads. We would not
build the Interstate system today. I think we all know that. We
will not build our way out of congestion. So we do not need a great
deal of money to do that.
IMPROVING RELATIONSHIPS IS
THE ANSWER
----------------------------------------------------- Appendix VII:0.2
What we do need to do, however, is to radically change the set of
relationships that transportation agencies have with their customers
and virtually everyone else. Much is said about the differences
between the public and private sectors. I think most of it is
overstated. I've been in both. The truth of the matter is, the
public sector is actually quite a bit better at some things than the
private sector is; of course, the opposite being true as well.
They're each good at different things. One of the things, however,
that the private sector is exceedingly good at is managing the set of
relationships--all the relationships--between supplier, customers,
and contractors. They set up these seamless webs, if you will, of
customer, organization, contractor, suppliers. They're very good at
it. We have none of that in the government. In fact, we have a vast
body of law and regulation that's been created to prevent it from
happening. If one of my employees set up a seamless web with a
supplier, he'd go to jail--seriously. We need to find ways to get
those relationships right. Steve Lockwood was touching on that a
bit. We need to find ways to enhance this set of relationships to
remove the obstacles�legal, and even more importantly, perceived
obstacles between people cooperating with each other in new and
unusual ways. Once you get those sets of relationships right, the
financing mechanisms and other mechanisms will follow because the
market that you set in motion will demand that they be generated. To
try to do that in the abstract is impossible.
We've heard several times here today people talking about the
inefficiency in the system. Quite frankly, the inefficiency in the
system is its salvation. The redundancy in the system is the
salvation. That's why the system can respond so well to
unanticipated events. That's why the nation's inventories moved from
its warehouses to its roads and rails in a very short period of time
and no one noticed. It happened rather seamlessly. That's why we've
been able to respond as we have because of that built-in redundancy.
Yes, it's messy. It's not pretty. It's not intellectually
satisfying in any way, shape or form. But it makes a great deal of
sense in a very real, messy world, where you've got to be able to
respond.
The critics of demonstration projects view them as inefficient. I
don't think that anyone has more demonstration projects than
Pennsylvania. The cynic among you may say that I'm about to say this
because of Chairman Shuster. That's a very good reason to say it.
But I'll say it for a second reason: it's the truth--demonstration
projects are not a problem. They're not even a little problem.
First of all, most of them are in line with the long-term needs and
wants of the people. Our Congressmen are rational human beings, who
are elected by their constituents for a purpose. And they express
themselves well and accurately. They have directed some of our
programs in certain directions. But the truth of the matter is that
in Pennsylvania, the vast amount of our resources is spent on the
preservation of our existing system. The split between maintenance
and new construction I find is almost always incorrectly stated
because people, I think, misunderstand the difference between new
construction and reconstruction�heavy maintenance, if you will.
A MODEST, INCREMENTAL
APPROACH IS THE ANSWER
----------------------------------------------------- Appendix VII:0.3
Our program is almost exclusively maintenance oriented, as it should
be. There isn't a need to build a great deal of highway capacity,
and we couldn't anyway, as I've already described. What we need to
do is move beyond--we need to secure that maintenance philosophy and
then move on to Steve Lockwood's point of an operational concern.
That's where the interaction with the customer will generate a new
set of relationships. When we get those relationships right, the
rest will follow.
This may sound relatively modest to you. I don't know how many of
you heard Frank Francois' speech at the Transportation Research Board
awards luncheon. He gave 10 predictions. I won't go into them now,
but I think many people from outside the community would have sat
there and thought to themselves--that's sort of modest forecasting.
There's nothing too exciting there or earthshattering or new. And
that's exactly right, there wasn't. He was, to my way of thinking,
entirely correct. It is a modest incremental evolutionary approach,
and I think that's what's required here. I don't think we need to do
massive surgery on the system we have. I think it's going to produce
reasonably good results. I think the environmental issues are a
thorny problem for us. I particularly enjoyed Mr. Dunn's
presentation this morning because I think he has hit on a very
important point. This isn't about bad cars. If cars are bad, we're
bad because they're part and parcel of what we are all about in this
country. We may not like that. Apparently some people don't like
it. But it is reality.
We've got to find ways to get that set of relationships right with
the environmental community so that we gain their trust and respect,
so that we can continue to provide our customers--our people--what
they want. What they want is to be able to get around. I think we
have enough money to do the job right if we're very, very smart. I
don't think that we have the relationships right yet. I don't think
that we're quite clever enough about how we marshal our
arguments�marshal our assets and then apply them.
That's why I make the proof by assertion that finance is not the
issue. In fact, what we need to be about is enhancing the set of
relationships. I would encourage those of you working on the
Washington scene at every turn to take the path that provides more
flexibility. When the Governors come and say they want more
flexibility, people's eyes glaze over�just give us the money and run.
I know that's what you think. In part they mean that too�of course
they do. But on their better days, what they mean is, �Give us more
tools and options.� We live in a very messy world where circumstances
change four times a day. The more tools and options we have, the
more redundancy within the system--and yes, even some
inefficiencies--the better off we're going to be, once that new thing
comes flying out of the blue at us. We'll be able to scramble, pick
one tool up, find it's got a whole new application, and use it to
solve the problem.
PRESENTATION BY ROBERT H. MULLER,
MANAGING DIRECTOR, J.P. MORGAN
SECURITIES
======================================================== Appendix VIII
(See figure in printed edition.)
"With all the talk about innovations in finance, not much as
changed in the last 10 or 15 years. We are still financing
transportation in about the same way we did in the past--at
least at the state and local level--for state highways."
About 3 years ago, I published a study on the accuracy of toll-road
feasibility studies, which has permanently endeared me to feasibility
consultants. The conclusion of my study was that, on average, about
one of four toll-road deals will probably default if the accuracy of
the studies do not improve--most studies are done to about a
50-percent rate of accuracy. The problem is that you don't have a
bell-shaped curve with regard to accuracy--you have a curve that has
almost no upside. There is very, very little upside if you do a toll
road, but a lot of downside. The question is, how much downside?
TRANSPORTATION FINANCING IS
LITTLE CHANGED
---------------------------------------------------- Appendix VIII:0.1
The flip side of what Steve Lockwood said about user charges is
interesting--with all the talk about innovations in finance, not much
has changed in the last 10 or 15 years. We are still financing
transportation in about the same way we did in the past�at least at
the state and local level�for state highways. Taxes and bonds are
only 7 percent of all the money, and user charges are the rest. We
are still in that world, and I don't think that it's going to change
for the foreseeable future.
The only part of the whole transportation world where there is
private funding is in railroads. I noticed in conversations at this
conference that a lot of people are asking, �What's going on in
freight railroads?� I think the reason that we do not know is because
we have nothing to do with it--the equity analysts follow the
railroads. We almost never talk about that piece of the equation,
but that may change as time goes on.
MAINTENANCE FUNDING IS
LAGGING
---------------------------------------------------- Appendix VIII:0.2
We currently have $70 billion of outstanding debt at the state and
local levels for highway purposes, of which, about one third is
supported by tolls. Virtually all the increase in toll bonds sold by
local governments have come in the 1990s--this is where we've seen
innovations on the financing side. In addition, we have had a lot of
financing. In the last 2 years, on the basis of taxes and debt sold,
there has been a big increase in state and local government dollars
going into highway construction. Have the methods that we've used so
far worked? I think we have to give a pretty good grade--at least a
�B.� Capital outlays on a real basis have gone up dramatically in
every year except from 1992 to 1996. The converse is that we have
not done a very good job on maintenance. Maintenance outlays are
virtually flat on a real basis. My answer is that maintenance is an
awfully unsexy business. If you can figure out a way to get all the
financing types to work on maintenance, that may solve some of the
problem. With an aging highway system�like an aging
house--maintenance should have been going up on a real basis over the
last 15 years. So--pretty good grades on financing the sexy part of
it--new roads and added capacity--and not so good grades on
maintenance.
FLEXIBILITY AND INNOVATION
IN FINANCING
---------------------------------------------------- Appendix VIII:0.3
There has been real change in financing flexibility in the last
couple of years. State and local governments are permitting
innovation, and Congress has finally allowed some new uses of federal
money. The San Joaquin Foothills Transportation Corridor and the
Eastern Foothills Corridor are examples. I know the Eastern
Foothills Corridor intimately because we were senior managers of that
financing in 1995. I'm pleased to say that as it has opened over the
last 2 months, its forecast has proven reasonably accurate. There
was a federal line of credit on both projects--only $120 million,
accessible to $12 million a year. They used the federal line of
credit actively to restructure the bonds in 1997. Although San
Joaquin's forecast was well short of projections, it would not have
gotten bond insurance that enabled it to avoid even more significant
shortfalls in forecast without the federal line of credit. One of
the things that has not come up today is taking advantage of new
transportation construction--taking some of that gain from
development and using it to build roads and transit.
Zero coupon bonds are a wild innovation, compared to the way toll
roads were financed in the 1950s. At that time, you did them, you
restructured them, and you restructured them again. Thanks to
Congress, you cannot restructure taxes and debt very often because
you can only advance or fund one time. Unless you want to go into
bankruptcy, that means you've got one opportunity. Zero coupon bonds
magnificently allow toll-road increases in usage to match up with the
maturity of the debt. The disadvantage is it leads to an
extraordinary amount of debt on the future value basis.
Allowing the states to pay maintenance expenses really was a
significant innovation. We don't really think about that as
innovative, but it was�it was a partnership with the state. I-470
uses zero coupon bonds--local license fees mixed with toll usage.
Dallas North Tollway, heavily touting how much money was put in at
the state level, had bond insurance at the beginning because it had
not established a basic draw. In the last year, the Connector 2000
project in South Carolina came out with a public-private venture that
effectively provides that a private firm will be responsible for
future operations. It is, probably, in many people's mind, the
weakest of the projects. The state accepts subordinated payment for
a period of time for maintenance. We have not built a lot of miles
with this innovation, but we have issued a lot of debt.
The final development is the Garvey bond that comes directly from
TEA-21. Garvey bonds are the sexy products in the tax-exempt market
right now, and I've been talking to some state departments of
transportation about them. For the first time, the marketplace has
shown the willingness to have long-term debt secured by an
appropriation process that is shorter than the maturity of the bond.
Ten years ago, if you told me that you could sell grant anticipation
notes, I would not have accepted it. If you told me you could sell a
grant anticipation bond, I would have said you were crazy. Well,
Massachusetts did that to finance the Boston Central Artery. I
expect to see many states using these bonds as a way to jump-start
all the new money that's coming out.
POTENTIAL ADVANTAGES OF THE
EXISTING REGIME
---------------------------------------------------- Appendix VIII:0.4
Many people do not realize how unique the U.S. financing market has
been for public infrastructure. The previous European model was
strictly a government-financed model at the sovereign level. There
was some subsovereign involvement, but it was basically a sovereign
financing model. Europeans went directly through the quasi-public
model that we have in the United States to a private model. It is
being developed around airport funding, but we've seen it certainly
on the highway side as well.
In the United States, an obstacle to innovation is that we have
created a favored market for financing infrastructure through the
existence of tax-exempt bonds. We have a revenue bond concept. It
effectively is a model not dependent on national government largesse,
but with some degree of market discipline--a kind of a
quasi-corporate financing model. Tax-exempt bonds themselves provide
specific benefits. They are the lowest cost of capital, without
question. They also give access to an investor base and do not have
to compete against equity financing or Internet stocks. Tax-exempt
bonds are investor based and focus only on government finance, with
the small exception of the nonprofit sector. Tax-exempt debt also
has structuring advantages such as the selling of zero coupon bonds,
one of the innovations in the San Joaquin project. However, talk to
a taxable trading desk about selling zero coupon bonds, and their
eyes glaze over. This is because you have to pay taxes every year on
the accretion. With tax-exempt financing, you get no accretion.
There are all sorts of advantages in terms of how the market works.
Finally, I think government has the time and money to tolerate long
development periods for new assets. When Steve Lockwood and I first
met each other about 4 1/2 years ago, we worked on S.R. 125 for
about a year and realized that it was going to take a long time to
get finished, so we dropped out of the process. I don't know if they
now have the second, third, or fourth banker involved in it, but only
government has patience for that long-term time frame.
WHAT ARE THE LIMITATIONS?
---------------------------------------------------- Appendix VIII:0.5
The federal grant system is still the easiest method of financing,
even though there are strings attached. It is money and there's
nothing I'm going to tell you that beats having dollars from the
federal government. Governments are neither risk-takers nor
innovators at heart--that really is not the focus of government. As
we know in the municipal market, the goal of financing these days
seems to be creating a commoditized product so bond insurers can slap
on insurance. The creation of commoditization doesn't necessarily
create innovation. There are certainly some reasons to question
whether we will have enough innovation. The municipal bond business
itself is also very isolated. It's amazing how isolated those of us
are in the tax-exempt business from the rest of our firms. The truth
of the matter is that we are not necessarily attached to the best
ideas, and that will become an issue over time. Tax-exempt bonds
also have a very limited investor base, courtesy of the Congress.
The only people who buy municipal bonds are individuals with mutual
funds, although there is limited insurance company purchasing. But
infrastructure financing in the United States is almost fully
financed by private individuals. I'm not sure that's a good
long-term situation.
Finally, state infrastructure banks seem to be going nowhere. So
that innovation hasn't done very well. Also, people hate tolls. I
keep trying to come up with a way to do innovation that does not
involve tolls, but they have to come into play in some way. The
fight, as I see it, is going to be between the increasing use of
tolls and new technology that is phenomenally different. As people
begin to forget the current system of finance, tolls are likely to be
more acceptable. That will bring great change.
WHERE GLOBAL FINANCE IS
HEADING
---------------------------------------------------- Appendix VIII:0.6
In discussing where global finance may be heading, I do not want to
defend tax-exempt bonds because it's an endless argument in
Washington. Tax-exempt bonds continue to have a very real place in
the process because of their positive factors. There are many
reasons to believe that the value of tax exemption outweighs any
question of inefficiency in market allocations.
A more viable model requires the use of tolls for several reasons.
First, stand-alone project finance is not the best way for us to
finance capacity. There seems little question that existing state
toll-road authorities will have to step up to the plate and be
willing to use their existing capacity. It is a lot cheaper to
finance off of an existing revenue base than it is with new projects.
You get higher ratings, much lower financing costs, and you don't
have to buy bonds.
What if we didn't have tax-exempt bonds? What if Congress finally
decided that tax-exempt bonds are gone? We would have very rapid
innovation in financing highways in this country. Tax-exempts are
really a crutch in many ways because they're so easy to use. One of
two things may happen. States will continue to issue taxable
securities at interest rates that will be 30 or 40 percent higher
than tax-exempt debt. That necessarily reduces impact. Coverage
numbers go down and the amount of roads that you can build under that
model goes down. Basically, the elimination of tax-exempt financing
will require state and local governments to raise taxes to finance
higher cost debt. The alternative, if you have tolls, is a
private-sector version of financing and a sure revenue stream that
will allow private companies to come into this business and begin a
lot more financing. Equity is not cheap. A lot of people think that
private company financing is a much cheaper way of doing the
tax-exempt model. That is not true. It's an alternative model. It
is a model that by its nature provides more innovation, more
creativity, and perhaps more efficiency. But it isn't absolutely a
better model than what we have today.
PRIVATIZATION
---------------------------------------------------- Appendix VIII:0.7
I did an exercise of turning some of our state toll-road authorities
into private companies and creating initial public offerings for
these companies. Right now, state and local governments are as flush
as can be. If we get into a recessionary environment, my guess is
that they are going to feel really pressed for money, and change will
come in that environment. When they seek more private involvement,
the question will be making better use of the assets to meet needs.
States might consider their turnpikes as a source of money. For
example, the Massachusetts Turnpike in 1996 would have fetched, under
my model, about $200 million to $250 million. Its outstanding net
debt was $390 million�before the Boston Central Artery. Using some
standard ratios from other types of privatization, I found that there
was not enough money at the existing toll level to pay off their
taxes and debt. That implies a large subsidy and certain policy
issues. The New Jersey Turnpike was even more interesting. I came
up with about $1 billion off the turnpike against $2.1 billion of
debt. The answer is that you would not have been able to sell the
New Jersey Turnpike. By contrast, when I did the same exercise for
airports, the very interesting result was that you can clearly sell
airports in the United States. Aside from the federal grant issue,
they generate a substantial positive net benefit for the community
that owns the airport. I think that's the reason why we're seeing
some European airports becoming viable private companies. The bottom
line is that a corporate financing model for highway finance will
require very dramatic changes in the willingness of consumers to pay
for services.
As Steve Lockwood said, there are niche opportunities for the private
sector to pick off pieces of this market. But, for the foreseeable
future, I see little likelihood of a major alternative model to the
way we finance highways today. We should continue the innovations
that we have talked about during the conference. We should continue
to defend taxes and debt because of the advantages that they provide,
and where possible, privatize a lot of the services.
PRESENTATION BY JAMES L.
OBERSTAR,
RANKING DEMOCRATIC MEMBER,
COMMITTEE ON TRANSPORTATION AND
INFRASTRUCTURE, HOUSE OF
REPRESENTATIVES
========================================================== Appendix IX
(See figure in printed edition.)
"We can't solve problems by using the same kind of thinking that
we used when we created the problems in the first place."
(Albert Einstein)
Those who have heard me either in Committee or in forums like this
know that I love history and like to reach back into history. It's
important to know, as Lincoln said, where we have been so that we may
better understand whither we are tending. If we had had a conference
like this at the turn of the last century, it would have been when
the first prototype automobile by Henry Ford was just being built.
It was only 5 years old.
The beginnings of transportation as we know it today were stimulated
by a group of bicyclists, which is one of my passions. A group of
cyclists in 1894 petitioned the U.S. House of Representatives for an
appropriation of $10,000 for the then-predecessor of the Bureau of
Public Roads--the Office of Road Inquiry, a small agency in the
Department of Agriculture--to study the possibility of developing a
system of paved surfaces, to get those new-fangled horseless
carriages off the routes that the bicyclists were using. Because
those predecessors of automobiles were causing ruts in the pathways,
they were causing, consequentially, bicyclists to take what they then
called �face plants.� The bike would hit the ruts, they'd go over the
handlebars, and go smack face first into the mud. Congress
accommodated the request and appropriated $10,000; the study was
undertaken. A few years later, the Bureau of Public Roads was
established, elevating the Office of Road Inquiry to a higher level
in the Department of Agriculture. That began what we know today as
the Federal Highway System.
The study built on an initiative by the Office of Road Inquiry, which
developed what we call today a map of paved surfaces; those that were
gravel crust and those that had macadam. It found that only 7
percent of the 2.1 million miles of roadway had any kind of surface
at all. Usually, they were just formed by a cow who had trampled
down the grass, and that became a roadway. Those that were more
sophisticated used some kind of compression means to pack down the
surface�a very few had macadam surface--7 percent of the 2.1 million
miles.
That conference, had we convened it then, would have been 4 years
prior to the first transcontinental road trip. You can imagine a
group like this gathering around and thinking about what surfaced
roadways might look like�questioning the need for them. Simon
Newcomb, a noted American astronomer of the time, confidently
predicted that, of course, it is folly to think that man can fly long
distances in heavier-than-air craft. In 1893, a prominent newspaper
editorialized that the horseless carriage movement will of course
come to naught. A decade plus later, the 1 millionth Ford rolled off
the assembly lines. This leads me to conclude that futurists are
often wrong, often make judgments based on inaccurate, incomplete, or
insufficient information, and probably ought not to be dabbling in
the future. But if we don't, we'll never get there.
Twenty years after that first transcontinental trip, a young U.S.
Army officer fresh out of West Point by the name of Eisenhower
accompanied and led a convoy across the United States. He noted the
shortcomings of this network of gravel, stone, and mud surfaces. He
wondered how the United States could defend itself adequately if
called upon in a time of emergency. He didn't forget that
experience. Later, as President, he asked the Congress to reawaken a
study done in 1944 by Congress or commissioned by Congress in 1944,
just as World War II was coming to an end. He directed a study of a
44,000-mile interconnected network of highways across the United
States. Eisenhower, remembering his own trip, asked the Congress to
develop what became known as the National System of Interstate and
Defense Highways, which he signed into law in June 1956. It also
included an innovative financing scheme.
My predecessor in Congress, John Blatnik, was one of the five
co-authors of the Interstate Highway System and the Highway Trust
Fund. They thought they had accomplished a work for all time. Of
course, nothing needed to be done except to watch over the
development of a 42,500-mile network of highways that theoretically
crossed the United States from coast to coast and border to border
without a traffic light. Well, that was before population growth.
That was before transportation began driving the development of
everything in our economy, expanding growth and exploding population.
It is a far cry today from 1956, when that legislation was enacted,
with over 565 million vehicles traveling the nation's roadways and a
trillion passenger miles every year. It's the most extraordinary
development. But not so extraordinary when you come to think that
Americans own three-fourths of all the trucks and half of all the
cars in the entire world. They need some place for them to drive.
But it certainly wouldn't have been envisioned in the imaginary
conference that I mentioned at the turn of the last century. So
let's hope that here at the turn of this century we do a little bit
better in thinking ahead to where we need to go. Oliver Wendell
Holmes observed, �I find the great thing in this world is not so much
where we stand, as in which direction we are moving.� We must sail
sometimes with the wind and sometimes against it. But sail we must,
not drift, and not lie at anchor.
That certainly should be the challenge of this conference. Where
will America sail in the 21st century? What will be the legacy of
the post-Interstate era? That was the question I began asking as
Chair of the Oversight Subcommittee in the 1980s, what will the
post-Interstate era look like. Where are we headed? In the course
of the hearings that I conducted, we had a number of tantalizing
thoughts. Demographics were changing. Predictions in 1986 and 1987
were that by the end of this decade, which we are approaching, half
of all drivers would be 50 years of age and older. Well, that
suggests some new ideas about road surface, markings, reflective
surfaces, driving habits, and driving conditions. It also suggests
some new ideas about the kind of driving that people would do--more
leisure miles driven and more people taking vacations (maybe longer
duration), using the Interstate to get to the point of their vacation
travel, and then using the non-Interstate roadways of this country
for the balance of their travel.
Something that emerged along with those hearings was a demand for a
change in the quality of peoples' driving experience. Drivers want
more than the neat, separated grade-crossing controlled Interstate
highway system--something that shows more of America's scenic,
cultural, and historic treasures. Out of that arose my idea for a
Scenic Byways Program, which I crafted and with the help of numerous
groups, tourism and environmental organizations, put together and
made it part of ISTEA in 1991. Millions of miles are driven on the
scenic byways of this country. We have 14 national scenic byways, 11
all-American roads and hundreds of state-designated scenic byways.
In addition, these roads are a powerful driving force behind
America's $92 billion in-bound international travel and tourism, with
a $22 billion positive balance-of-payments benefit to the United
States.
The other ideas that emerged were that people wanted something more
than just more road surface--a better quality of life in their
communities. They wanted an enhancing rural and urban life, and out
of that came what we know today as the Enhancements (contained in
ISTEA and TEA-21). In the 20 years prior to ISTEA, only $40 million
had been spent on bicycle provisions and converting railroad grade
beds to bicycling paths and pedestrian walkways. Providing (in
ISTEA) a 10-percent set-aside of enhancements program for bicycling
facilities, converting railroad grade beds to bicycling paths, and
mandating the establishment of a bicycling coordinator in every state
Department of Transportation led to the development of a state
bicycling road plan. A billion dollars has been spent in the
lifetime of ISTEA compared with $40 million in the previous 20 years.
Three thousand two hundred forty bicycling projects are all across
America--10 million more Americans bicycling than 7 years earlier
because of a massive change in our lifestyle--a more aerobic
lifestyle--people are going to be living longer and healthier.
That was the framework for ISTEA. Add to it congestion mitigation
and air quality improvement provisions that said we should use some
of our Highway Trust Fund dollars to improve the quality of air and
quality of our driving experience in America's urban centers. To
reduce congestion or to mitigate choke points in urban areas, states
and localities have used that flexibility to transfer $4 billion from
highway construction to transit projects. These innovations led to
real changes in the way we think about transportation in
America--something more than just pouring more asphalt and concrete.
But we really broke through some preconceived notions about our
federal highway program with ISTEA. We carried that forward in
TEA-21, the Transportation Equity Act for the 21st Century. The most
important initiative in TEA-21 was to take the trust fund off budget
and reestablish it as it was originally conceived in 1956 and as it
operated until 1968. It's off budget within the budget, but it's
guaranteed spending that increases as revenues increase and, of
course, would decrease if revenues dropped, but not below a certain
threshold. The trust fund is indeed secure. Spending is
guaranteed--it cannot be withheld by the Appropriations Committee.
In addition, there's a 40-percent overall increase in outlays for the
states; guaranteeing that 90.5 percent of every state's gas tax
dollar be returned to the state.
In addition, we agreed on an 80-20 split of the Highway Trust Fund;
80 percent for highways and 20 percent for transit. I won't walk you
back through the age-old controversy. But I can remember as a Hill
staffer in the 1960s, when the idea was first surfaced of using
Highway Trust Fund dollars for transit projects, the hew and cry and
screams of, �This is our money and you can't use it for transit.�
People would rather choke in traffic, sit behind the wheel of their
car, and breathe in those exhaust fumes from the guys ahead of them
than get their fellow motorists off the road into mass transit.
We've changed that, $173 billion for highway and $41 billion for
transit. If you had looked at the program in 1963, when I first
started my work as a Legislative Assistant on the Hill, you would
have said, �No way, never.� But it's there. It's also guaranteed
spending. In addition to that, we've included provisions in TEA-21
to designate funding for rebuilding existing transit systems and
expanding and constructing new ones. We also provide funds for
magnetic levitation (MAGLEV) and other high-speed rail development,
loans and guarantee programs for freight rail rehabilitation, and
reconstruction and improvement.
We also provided funds for a rather innovative idea--to coordinate
land use and transportation planning. Planning has all too often
been a bad word, an evil term. I remember up along the North Shore
of Lake Superior in my district going to a town meeting when the
Coastal Zone Management program was being planned. One after another
suspicious citizen got up and said they're going to do it again;
they're going to take our land away from us; they're going to plan it
out of our hands. I told them that this is your opportunity. Either
you make the plans�either you take this money and you design how the
future is going to look along the North Shore�or it will just happen
without your input at all. Developers will come and you'll be
screaming at me 20 years from now saying, �Why didn't you stop this?�
The county boards and local governments voted against coastal zone
management. Five years later, they asked me to come back. They
wanted to know how to get some of that money and take charge of their
destiny. After a time, planning--the reasonableness of it--settles
in with people. When they understand that it's a grass roots
initiative, they take hold and do it well, with substantial amounts
of funding, in this case, $120 million to coordinate land use and
transportation planning. When dedicated to the simple purpose that
transportation does not have to destroy the environment, it does not
have to destroy quality of life, and citizens can be entrusted with
the decision-making that affects their own life. We're going to give
that to them.
TEA-21 addresses safety. The $540 million incentive program is for
states that enact a 0.08 blood alcohol standard for drunk driving,
punishment of repeat offenders and for open alcohol containers, and
the enhancement of the national driver register, which tracks
dangerous drivers--those who lost their license in one state and try
to get a license in another state. This is an initiative that former
Republican leader John Rhodes and I crafted. We catch something like
500,000 of those drivers and get them off the roads every year.
Those are all good initiatives. But it's still not enough. Einstein
said that we can't solve problems by using the same kind of thinking
that we used when we created those problems in the first place. Some
of our old thinking about highway programs got us there. In ISTEA,
and continued and enhanced in TEA-21, are three tools that help us
avoid the kinds of thinking that got us into the problems that we
confront in our current transportation system: the use of advanced
technology, smart growth concepts, and innovative financing.
ADVANCED TECHNOLOGY
------------------------------------------------------ Appendix IX:0.1
I have taken the train a grande vitesse (TGV) from Paris to Lyons in
2 hours and 1 minute. In 20 years time, they had cut the travel time
in half. There were 3 million air passengers between those two
cities and 500,000 rail passengers. Today, there are 500,000 air
passengers and 5 million TGV passengers at 178 miles an hour between
those two cities. The five segments of the TGV are running
profitably and are paying for the rest of the rail system. I've been
to Tours in the southeastern part of the Loire Valley where business
people commute daily 220 miles to Paris in an hour and 15 minutes at
180 to 190 miles an hour. The Inter City Express (ICE) in Germany is
achieving speeds of 180 miles an hour. The MAGLEV that Germany is
developing between Hamburg and Berlin at a $1 billion cost will move
15 million people a year at speeds of 300 miles an hour. I rode the
Shinkansen in Japan from Tokyo to Osaka at 180 miles an hour. They
expect to have high-speed MAGLEV operating in Japan in the next five
years.
Meanwhile, our highest speed on our passenger rail in the United
States is 110 miles an hour. Most of the time it's much less than
that. We have similar corridors, Minneapolis-St. Paul-Chicago,
where high-speed rail would be vastly superior to air travel between
those two cities. There's also enough population density to make it
attractive. Why do we have high-speed rail in Europe, Germany,
France? England is improving its speed, and the Italians have done
the same. Spain has taken the TGV with a few adaptations. The
Japanese are doing it. China is moving in that direction. But
we--the leaders in transportation in the world--don't. Why? Because
we're not thinking right.
We will have high-speed rail here in the East Coast with the
electrification of the Northeast Coast Corridor. You'll be able to
travel using the new [Acela] high-speed trainsets up to 150 to 166
miles an hour. That's high speed for us. But it's because we are
still thinking about transportation with the same mind set that got
us into these problems in the first place. We have to get beyond
that way of thinking.
TEA-21 provides some funding for us to take advantage of the MAGLEV,
TGV, and other high-speed rail technologies and develop high-speed
rail corridors, which we designate in the act as 10-10 corridors and
specifically authorize out of appropriated funds--but not out of
trust fund moneys--$1 billion for the development of the MAGLEV idea
over the next 5 years. Thanks to Senator John Chafee's vision and
determination, we have the innovative finance program of TEA-21
available to finance the high-speed rail, including MAGLEV
developments, over the next few years.
Unfortunately, high-speed rail took a little setback just about a
week or 10 days ago when the new Governor of Florida decided to
cancel the state's participation in the FOX Overland TGV Corridor
between Orlando and Miami. I don't have a complete statement of the
Governor's decision. But I have worked with the FOX promoters, we
have put authorization in TEA-21 to enhance that initiative. I think
it made perfectly good sense. It was a good investment for the state
and its future. The failure to proceed with it will just mean more
cars, more drain on the resources and more congestion. In a real
sense, high-speed rail is a �Field of Dreams� idea. If we don't
build it, they won't come.
The other initiative that I mentioned is Intelligent Transportation
Systems. We invested a lot of money in ISTEA and continued those
investments in TEA-21 to the tune of about $2.5 billion over the next
6 years in intelligent transportation system concepts. If all the
funds are used wisely, I think we'll approach the no-hands, no-feet
idea of ITS driving with the automated highway in which cars
literally can drive themselves. In fact, I-15 in San Diego, an
8-mile segment, is a no-hands, no-feet driving demonstration project.
If we carry this concept through, we'll enable highway managers to
double or triple the capacity of highways by increasing speeds and
shortening distances between vehicles with greater control
mechanisms. We've got to test them out. That's what this is all
about.
SMART GROWTH CONCEPTS
------------------------------------------------------ Appendix IX:0.2
What we need is smart growth, not unbridled growth. We need to look
very carefully at the idea of induced travel. There was a very
thoughtful piece in The Washington Post just a few weeks ago about
the I-270 corridor. Those of you who are from the Washington, D.C.,
area and have driven up Rockville Pike and beyond, going up toward
Frederick, Maryland, know what that's all about. That was a nice
four-lane road a few years ago. Traffic grew and eventually
congestion grew along with it. So the highway folks said, "well,
let's do what we do best�add more lanes." So they got 12 lanes. You
know what happens when they have all those lanes? Someone says,
"well, I don't have to car pool any more. I can drive my own car. I
don't have to use that HOV lane now, I don't have to be stuck with my
neighbor and listen to his silly conversation. I can drive myself."
So now you have congestion. It's a big story every morning, you look
to see what's happening on I-270, because more lanes beget more
travel, which begets more growth. One-and-a-half-million drivers a
day are stuck in traffic somewhere in America. The Los Angeles
Chamber of Commerce did a study a few years ago that showed that the
cost of congestion is $3.5 billion a year to drivers stuck in traffic
in Los Angeles. It costs $40 million each year to the United Parcel
Service and Federal Express just to have delays. That's a look at
business news. If you like spending time in traffic with yourself
only, then support the continued plan that we have of adding lanes
and opposing HOV lanes and schemes to get some cars off the roadway
and make travel more expeditious, more convenient, and affordable.
The President has, as part of his State of the Union message,
announced an initiative for sustainable cities, or livable cities,
which includes a $6 billion increase in funding for public transit.
It also includes $2.2 billion for community-based programs with
innovative transportation strategies and regional transportation
strategies to improve existing roads and transit and invite ideas for
alternative transportation. I think that's a good idea. I want to
see the specific legislation they send forth. It's in the right
direction. This is the kind of thinking that we need to embrace.
INNOVATIVE FINANCING
------------------------------------------------------ Appendix IX:0.3
Coming to the third point that we dealt with in ISTEA�finance--the
Highway Trust Fund has spent $372 billion building our Interstate
highway system and its accompaniments. That's a lot of money. It
built the greatest road system in the world. But it's not enough.
There isn't enough money to address all the roadway needs in this
country, even with the 40-percent increase that we provided--even
with the guaranteed spending. What that�the guarantee--will do is
assure from year to year that highway planners, highway engineers,
and design people can count on the money they need for the projects
they've designed.
I was in California last summer for the meeting of the Mineta
Institute for Intelligent Transportation Systems. The Director of
CalTrans talked about the impact of TEA-21 on his department. The
increase in funding is so great they're going to hire 2,000 engineers
to carry out the planning, design, and engineering of the new
roadways they're going to build and existing ones they're going to
improve. When it came my turn, I said I would have felt a whole lot
better about the future of transportation if you had added 200
planners to design strategies for dealing with the growth of
transportation in California, instead of just plowing ahead to build.
You have to have some thought going into this as well.
A good example of what is needed is additional funding for sources or
using the available Highway Trust Fund dollars to leverage other
investments to make those improvements in traditional as well as
alternative transportation concepts. The Transportation
Infrastructure Finance and Innovation (TIFIA) provision of TEA-21,
also an idea of Senator Chafee's, to whom I give great credit for
this initiative, is authorized at $530 million to cover the risk of
loans, loan guarantees, and credit enhancements up to an additional
$10.5 billion over the amount guaranteed in TEA-21. TIFIA will make
it possible to finance projects of national or regional importance.
Projects costing more than $100 million are beyond the means of a
state to finance from its highway apportionment. With the TIFIA
money, a state could use these leveraging dollars to fund transit,
passenger rail, and even freight rail projects.
The Alameda Corridor in California is really the forerunner and guide
for this idea. The Corridor provides access to the ports of Los
Angeles and Long Beach. Why is that important? One-fourth of all of
our imports and exports by water go through those two ports. So
before you can move goods by truck or by rail, before you can get
them on the boat, you have to move them by truck or by rail to that
port and get them on board to move by water some place. The tangle
of local rail lines and highways and grade crossings created gridlock
that made it impossible to move at a competitive basis. DOT provided
$59 million to finance a loan for the additional $400 million that
California needed to complete a $2.4 billion project. Their
allocations out of the Highway Trust Fund were nowhere near the
amount that they could foresee to complete this project. With the
project financing that makes a $2.5 billion initiative possible to
untangle those rail lines and improve the truck and rail access,
trade is expected to jump from $116 billion to $253 billion over the
next 10 years, creating an additional 700,000 jobs locally. Those
are the kinds of initiatives that we can undertake with TIFIA and
with State Infrastructure Banks, four of which are authorized in
TEA-21.
A new initiative, one I particularly championed and advocated
vigorously, is the railroad loan and guarantee program for the
short-line railroads of this country--those that have picked up the
slack from the abandonments and consolidations of our nation's
freight rails into four national rail lines. With the funds from the
Title V program, as we call it, we will be able to leverage some $3.5
billion of railroad infrastructure improvement for the nation's
short-line rails and revitalize small towns and small communities.
Those are the kinds of initiatives that I think we need to undertake.
Those are the three principal areas of innovation of TEA-21. We
should have had a lot more in the way of innovation and new ideas and
out-of-the box thinking in TEA-21. What we did, I think, was about
as good as you can expect of the legislative process in the short
run.
If conferences of this nature can stimulate new ideas and new
thinking, that's good--we have a mid-term correction coming up in a
couple of years, and we need to assess where we are with TEA-21 and
make some adjustments. That's the place for new ideas. It may not
necessarily require new financing but new ways to leverage dollars,
like those that I suggested. Help us to move our transportation
agenda forward.
There were a few cartographers in the Office of Road Inquiry at the
turn of the century who developed a set of maps that laid the
foundation for what became the Interstate system. What we need today
are innovative mapmakers on the threshold of the 21st century to help
us chart the map to take transportation forward from here.
PRESENTATION BY C. MICHAEL
WALTON, CHAIRMAN, DEPARTMENT OF
CIVIL ENGINEERING, UNIVERSITY OF
TEXAS/AUSTIN
=========================================================== Appendix X
(See figure in printed edition.)
"A major attribute of international reform initiatives has been
to redefine the role of government by separating policy and
management responsibilities from program and service delivery."
My remarks will center on the trends of international institutional
reform in delivering transportation programs and services and the
implications for domestic policy and delivery. I recently led a
committee that visited New Zealand, Australia, Sweden, and the United
Kingdom�countries identified as having innovative programs for
transportation agency reforms�to investigate how other countries are
coping with budget constraints and using new tools to manage their
transportation programs.
INTERNATIONAL TRENDS IN
INSTITUTIONAL REFORM
------------------------------------------------------- Appendix X:0.1
Many transportation agencies in countries throughout the world,
including the United States, are feeling the pressures of
privatization in wake of current government restructuring and
downsizing. In short, transportation agencies are being required to
do more with fewer resources. This trend is part of a larger
redefinition of government and business functions and is by no means
confined to the transportation sector. A number of countries have
already implemented the comprehensive restructuring of their
transportation departments, and their experiences present useful
input to the formation of similar issues in the United States.
The road-sector reforms reviewed in several countries are part of an
effort to make government more responsive; to treat the public more
as a customer. It is taken as a given that making the distribution
of resources and contracts more competitive will improve the
efficiency and cost-effectiveness of providers, transportation
authorities, and the transportation network itself. Regulation
methods are being redefined in relation to the private
sector--generally becoming more "light-handed" and results-oriented,
to allow for innovative approaches--although there has been concern
that privatization will require more careful monitoring. There is a
move toward greater accountability of government agencies and to the
use of more objective, careful, and inclusive real-cost accounting as
a means of allocating scarcer resources through the use of
cost-benefit ratios and performance measures. A concern of note is
the issue of public trust.
REDEFINED PUBLIC AND PRIVATE
ROLES
------------------------------------------------------- Appendix X:0.2
The transportation reforms in the countries surveyed were found to be
part of an overall reevaluation of the appropriate nature and extent
of government activity in response to a government mandate or some
degree of financial crisis. In the reorganization of government,
there has been a greater distinction drawn between policy formation
and management and the delivery of services and facilities. The
decision that has been made, to a greater or lesser extent, is that
service delivery is best provided by the private sector, partly in
response to the process of governmental reforms and demands for
greater cost-effectiveness. In all of the countries reviewed, reform
began with reevaluating and clarifying their transportation agencies'
core functions and responsibilities and roles within the organization
and identifying those functions best transferred to the private
sector. As an alternative to total outsourcing, public policy in
some countries allows--if not requires-- providers to operate as
profit centers or publicly owned enterprises, which compete directly
with private companies, collect a profit, and pay taxes. Sweden has
adopted this approach, at least in principle, as a means to maintain
quality standards and prevent the very few major private roadworks
contractors from behaving as an oligopoly. One of the most important
and successful changes in structure adopted by all the countries
surveyed was an explicit separation of buying and selling roles
within the agency, forcing project decisions to be made more
carefully and reducing conflicts of interest.
There is also an effort to transfer some of the public risk in
transportation infrastructure development to the private sector, as
evidenced in several trends: a variety of turnkey programs are being
used successfully in the United Kingdom and Australia, variously
referred to as design-build-finance-operate (DBFO),
build-operate-transfer, build-own-operate-transfer, and
design-construct-maintain according to their specified contractual
obligations. So far, the United Kingdom particularly has seen
significant cost savings with its first eight DBFO contracts in
comparison with its standard system, which routinely ran over budget.
In principle, these contracts are deliberately made rather long-term
(up to 30 years of operations) and comprehensive in scope to apply
the same incentives and responsibilities to the private company that
a public authority would have to operate under.
All countries are also beginning to outsource maintenance work under
similar contracts (3-5 years) that are more �performance-based� than
�specification-based.� The United Kingdom also uses �lane rental
contract� clauses to keep as many lanes open as possible during
maintenance and construction activities. Other than through the DBFO
projects, the idea of transferring design activities to the private
sector is treated very cautiously out of concern for maintaining
consistent safety and quality standards and because there may not be
enough highway design work in the smaller countries to support more
than a limited number of private companies; however, most do express
interest in having foreign firms compete in this area as well. With
the transfer of responsibility for service delivery to the private
sector comes a certain degree of authority as well.
TRANSPORTATION INITIATIVES
AND LINKS TO ECONOMIC
VIABILITY
------------------------------------------------------- Appendix X:0.3
Transportation departments in the countries surveyed were under great
pressure for financial accountability. Tolls, except for bridges,
were generally disliked, although they were being reconsidered and
there was some warmth toward electronically assessed tolls, which
might also be used to distribute traffic by encouraging the use of
alternate routes. It was observed that only New Zealand had
dedicated funding sources comprising of user fees for transportation
(although Australia's transportation funding at the federal level is
intended to correspond to income from fuel taxes and registration
fees, strictly speaking, the moneys come from general revenue) and,
instead, must compete for funding with other government agencies
during each budgeting period. While fees from highway users are
collected in all countries, the fees typically accrue to the account
of the general fund for allocation during the normal budget cycle.
Even in New Zealand, highway user fees are used for nonhighway or
transport-related purposes. Generally, there seemed to be only
little, though growing, acknowledgment of the importance of
transportation infrastructure to economic growth, especially by
national governments (other than Australia, which considered it
instrumental and invested heavily in its highway system through the
1980s). Sweden explicitly considers transportation investment as an
important means to equalize regional development. Wales, which
recently decided to double its transportation investment, saw greatly
increased economic growth compared with the rest of the United
Kingdom.
Cost-benefit analysis has been one of the major ways in which this
business-like approach has been expressed. Such analysis systems are
increasingly being used to prioritize projects and allocate resources
more objectively. The costs included in this analysis vary, however:
some include costs related to noise, environmental degradation,
aesthetics, and delays, and some do not. Some include a comparison
with the costs of a do-nothing option. Mostly all include items
related to safety. There is interest in making these analyses very
generic to facilitate a comparison between regions and
internationally. These analyses are very much works-in-progress but
are being pursued enthusiastically.
This new businesslike approach has allowed the public sector to level
the playing field with the private sector in certain circumstances.
In some cases, the public sector has been allowed to compete with
private-sector firms, most notably in Sweden and Australia, and the
public sector has been able to hold its own and gain a number of
contracts on its own merits. In both of these countries, the
public-sector firms must allow for certain rates of profit and pay
taxes in a manner that makes them operate with many of the same
constraints as their private-sector competitors. Although there have
been discussions about the lack of equality between private- and
public-sector firms in Australia, VicRoads has let its in-house teams
compete and has seen them compete well. The experiences of each
country suggests that there have been mixed results to date; however,
most officials agreed that overall direction has yielded short-term
benefits. Some agencies have set goals for their units in competing
with the private sector, which has proven to be both successful and
viable.
One concern was retaining core competencies within the transportation
agencies, many of which had been drastically downsized. All placed a
high priority on retaining their experts for a variety of reasons,
including contract writing (especially important to be done carefully
when contract arrangements and types are changing) or a sense that
privatizing necessitates more careful monitoring. There is concern
for the training of future transportation professionals. Research
efforts have generally suffered under privatization, except in
Sweden, where transportation research is supported by the SNRA, which
also collects statistics related to road use, and through grants
distributed by the KFB (Communications Research Board).
The major component to operating in a businesslike atmosphere is the
effect of competition. It is a common perception in all the
countries surveyed that making the provision of service subject to
competitive tendering is the most significant means to increase
efficiency and encourage innovation. It therefore is important that
there be enough firms to provide sufficient competition to offset
tendencies toward oligopoly, which is a significant concern for some
of the smaller countries.
Since this current businesslike state is evolving, it is impossible
to foresee what it will lead to in the future. However, some trends
have begun to emerge. The overreliance of a cost-benefit analysis
can lead to encourage short-term or suboptimal decisions unless some
mechanism is in place to allow for long-term implications to be more
readily factored into the process. With the changing roles of the
public units, the training of personnel has become a concern. In
general, the public agencies have been a source of human capital for
the private firms. In addition, they have traditionally provided
formal instruction and training coupled with on-the-job experience.
The reform and its impact on the traditional public agency has
altered this process both in the quantity of technically and
professionally qualified people with skills desired by the expanding
private companies but in the training activities. The result has
been that the private companies have recognized their mandate to
include training in their annual budget process. Similar trends are
occurring in research where the private sector recognizes that it
must include research and development in its activities as the public
agencies scale down their involvement. With the shift of emphasis
from the public to private sector, the public sector has dropped its
lead role in both of these areas. It is now up to the private sector
to fill the void left by the public sector and increase their
emphasis in these two crucial areas.
Because of the increasing influence of the private sector, a check is
needed to ensure that the job that they are doing is meeting
requisite quality and is as efficient as possible. The governments
of the selected countries reviewed are moving toward a system of
performance measures that would allow them to oversee the areas of
the road system, which they view as being important, while using the
fewest number of employees. The performance-based approach is
intended to ensure receiving the quality of work for which they had
contracted. These countries still find themselves in the
developmental stages of creating such a performance-based system and
also an accurate transportation database. It is believed that such a
system will allow internal comparisons to be made, thus ensuring a
quality return on public investment.
IMPLICATIONS OF
INTERNATIONAL TRANSPORTATION
TRENDS
------------------------------------------------------- Appendix X:0.4
All of the countries surveyed were and are in significant
transitional periods, all to varying degrees moving toward lighter
regulation and adoption of the business strategies of the private
sector. Change in all agencies was initiated either by crisis or
government mandate, as part of a policy of some branch/authority in
the national government, rather than internally from the transport
authority itself. While their experiences offer some valuable
lessons, it is important to remember that these reforms would be
considered works in progress; their long-term implications have not
yet played out. The implication of these international trends on
domestic policies governing the delivery of transportation programs
and services is intriguing. Several key observations are summarized
for discussion purposes.
In considering the implications of these valuable experiences for our
situation, it is useful to keep several factors in mind.
Essentially, it was a top-down reform, and these governments are
going through major change. To a certain extent, they started at a
position that was much different from ours and have gone now beyond
us in many cases. One example would be in the selling off assets
that have traditionally been in the public domain. In their case,
railroads are one of those assets�unlike the United States--as are
airlines, ports, harbors, and airports. In the rail industry, the
infrastructure was separated from the operating authority, with
separate companies for each. We, of course, are not in that
position.
A major attribute of international reform initiatives has been to
redefine the role of government by separating policy and management
responsibilities from program and service delivery. Public trust is
a concern, and the funding constraints associated with each. By
saying it's a business approach to delivering transportation, we're
saying that we're bringing competition into the fore. The long-term
implications are not clear. But the short-term benefits are widely
touted--in many cases, a 15 to 30 percent increase in efficiency or
maintenance expenditures as well as in new construction.
In all cases, there has been a decrease in the size of government.
The focus has been on maintaining core competencies in critical
areas--that's part of defining the government role. There has been
increased competition across the board. Public units are competing
among themselves and with private units domestically and
internationally. Some public units are encouraged to compete
internationally as well as domestically.
There has been general dissatisfaction with some aspects of services
provided by the private sector--for example, in the design of a
transportation facility. As a result, these countries have adopted
quality assurance standards. The use of benefit cost analysis and
performance measures is evolving in a variety of ways.
I think the lessons learned from these international experiences will
reveal some significant opportunities to help us meet the
transportation challenges of the 21\st century.
PROFILE OF SPEAKERS
========================================================== Appendix XI
Peter "Jack" Basso, Assistant Secretary for Budget and Programs at
the U.S. Department of Transportation. Mr. Basso joined the Office
of the Secretary in 1995, when he was named the Deputy Assistant
Secretary for Budgets and Programs. Previously, he held several
financial and administrative positions within the Federal Highway
Administration, an agency within DOT. From 1990 to 1995, for
example, he was the Director of Fiscal Services for FHWA. He has
served as a member or chairman of numerous councils and committees,
including the President's Council on Management Improvement and the
Small Agency Council. He also served as Deputy Chair for Management
at the National Endowment for the Arts and as Assistant Director for
General Management at the Office of Management and Budget.
Anne P. Canby, Delaware's Secretary of Transportation, has over 20
years' experience in transportation administration, strategic
planning, finance, budgeting, and management. Appointed as Secretary
in March 1993, she has focused on applying an integrated multimodal
approach in constructing and preserving Delaware's developing
transportation network. Prior to her appointment, she was a partner
in the transportation consulting firm of Canby, Cameron and Company
and the Principal of Canby Associates. She also served as
Treasurer-Controller for the Massachusetts Bay Transportation
Authority, as a Commissioner of the New Jersey Department of
Transportation, and as Chair of the New Jersey Transit Board of
Directors.
Anthony Downs, Senior Fellow at The Brookings Institution (a private,
nonprofit research organization specializing in public policy
studies) in Washington, D.C. He previously chaired the Real Estate
Research Corporation, a nationwide consulting firm advising clients
on real estate investment, housing policies, and urban affairs. He
has served as a consultant to many of the nation's largest
corporations; major developers; local, state and federal government
agencies (including the Department of Housing and Urban Development
and the White House); and private foundations. He is the author or
coauthor of numerous articles and books, including Stuck in Traffic,
New Visions for Metropolitan America, Political Theory and Public
Choice, and Urban Affairs and Urban Policy. Dr. Downs is a frequent
speaker on real estate economics, housing, urban policies, and other
topics.
James A. Dunn, Jr., Professor of Political Science and Public
Administration at Rutgers University/Camden. He was an Alexander von
Humboldt Research Fellow in European transportation policy at the
University of Bonn and a National Endowment for the Humanities
scholar in modern French politics and transportation policy at the
Institute of Political Studies in Paris. Dr. Dunn has written
articles on a range of topics, including the outlook for high-speed
rail in North America. He is the author of Miles to Go: European
and American Transportation Policies and Driving Forces: The
Automobile, Its Enemies, and the Politics of Mobility. In 1987, he
received the Rutgers Presidential Award for Distinguished Public
Service for serving as Chair of the South Jersey Transit Advisory
Committee.
Stephen C. Lockwood, Vice President of Parsons Brinckerhoff, the
nation's largest transportation planning and design firm. He manages
its special Finance and Economics group and serves as Senior
Technical Advisor on projects involving Intelligent Transportation
Systems planning, public private partnerships, and multimodal
applications. He previously served for 3 years as FHWA's Associate
Administrator for Policy, overseeing policy development and new
legislation, as well as strategic studies and international programs.
In addition, he directed the Transportation 2020 Alternatives Group,
a coalition of state and local government interest groups dedicated
to reshaping national transportation policy for the 21st century, and
served as vice president of a major national and international
consulting firm. Mr. Lockwood chairs the ITS -America Task Force on
Regional Deployment and is Vice Chair of the American Road and
Transportation Builders Association, Public-Private Ventures
Division.
David Luberoff, Associate Director of the Alfred Taubman Center for
State and Local Government at Harvard University's Kennedy School of
Government. His research and writing focus on the political economy
of infrastructure and land-use policies. He is currently coauthoring
a book on the politics of large-scale urban infrastructure projects,
which will draw heavily on a 1996 political history of Boston's
Central Artery/Third Harbor Tunnel project. He is also a columnist
on infrastructure issues for Governing magazine and was co-editor of
The Public's Capital, a quarterly forum on infrastructure issues.
Before joining the Taubman Center, he was the editor of the Boston
Redevelopment Authority's 1987 Midtown Cultural District Plan and
served as editor-in-chief of The Tab, greater Boston's largest group
of weekly newspapers.
Bradley L. Mallory has been Pennsylvania's Secretary of
Transportation since March 1995. Under his leadership, the
Pennsylvania Department of Transportation has redirected $170 million
from overhead to road work and achieved a $550-million-per-year
revenue enhancement for highways and mass transit. Mr. Mallory
previously served as counsel to the law firm of Dechert Price and
Rhoads. From 1977 to 1989, he served in a variety of management
positions at PennDOT, spending 3 years as Director of Strategic
Planning and 3 years as the first Deputy Secretary for Aviation, Rail
Freight, and Ports and Waterways.
Robert H. Muller, currently the Managing Director of Municipal Bond
Research at J.P. Morgan Securities, has been active in municipal and
health care research for more than 25 years. Before joining Morgan
in 1981, he worked for Standard and Poor's Corporation and E.F.
Hutton and Company. The past three Institutional Investor surveys
ranked him as the top transportation analyst in municipal bonds, and
prior surveys identified him as the top generalist analyst. He is a
member of the Society of Municipal Analysts and has served on the
Blue Ribbon Committee on Secondary Market Disclosure of the National
Association of State Auditors, Controllers, and Treasurers and on the
board of the Government Accounting Standards Advisory Council. He is
also a board member and past treasurer of the National Civic League,
has been a juror for the All American Cities award program, and has
spoken widely before both investor and issuer groups.
Representative James L. Oberstar, an 11-term Member of Congress,
serves as the Senior Democrat of the House Committee on
Transportation and Infrastructure. From 1989 to 1994, he served as
the Chairman of the Aviation Subcommittee. As such, he has been a
principal author of much of America's transportation legislation
during the past two decades, including the Aging Aircraft Safety Act
of 1991, the landmark Intermodal Surface Transportation Efficiency
Act of 1991, and, most recently, the Transportation Equity Act for
the 21\st Century, which provides a 40-percent increase in funding
for federal transportation programs. Representative Oberstar has
taken a leading role on such issues as rail safety, improving
railroad infrastructure, developing high-speed intercity rail,
expanding mass transit, protecting environmental statutes, expanding
facilities for bicycle and pedestrian travel, and aviation safety.
He has held a number of memberships including membership in the Great
Lakes Task Force; Renewable Energy Caucus; House Trails Caucus; and
Forestry 2000. He has also received a number of awards, including
the James L. Oberstar Award, from the League of American Bicyclists,
and the Award for Excellence, from the National Association of State
Aviation Officials.
Les Sterman, Executive Director of the East-West Gateway Coordinating
Council since 1983, a position he assumed after working for 5 years
as the organization's Director of Transportation Planning.
Responsible for some of the Council's largest and most visible
projects, he conceived and planned the MetroLink light-rail system.
He has spoken on metropolitan transportation, urban development, and
environmental issues at the state and national levels, testifying
before several congressional committees and national conferences on
these topics. Before assuming his current position, he worked as a
transportation planning consultant and civil engineer. He is
currently President, Missouri Association of Councils of Government,
and Co-Chair and Founding Member, National Association of
Metropolitan Planning Organizations, as well as a member of several
governing boards of transportation-related organizations.
Brian Taylor, Associate Director of the Institute of Transportation
Studies, University of California/Los Angeles (UCLA), and Associate
Professor of Urban Planning at UCLA's School of Public Policy and
Social Research. He teaches courses in transportation policy and
planning, and urban policy planning. His current research is on the
politics of transportation finance and planning, including the
history of highway finance and the effect of public transit subsidy
programs on system performance and social equity. Professor Taylor
has also examined the relationships between transportation and urban
form, including the effects of suburbanization on access to
employment and the evolving commuting patterns of women, minority,
disabled, and low-income workers. He was previously an Assistant
Professor in the Department of City and Regional Planning at the
University of North Carolina/Chapel Hill and a transportation analyst
for the San Francisco Bay Area Metropolitan Transportation
Commission.
C. Michael Walton, Professor of Civil Engineering, holds the Ernest
H. Cockrell Centennial Chair in Engineering at the University of
Texas/Austin. He has a joint academic appointment at the Lyndon B.
Johnson School of Public Affairs. He formerly served as
Transportation Economist, Office of the Secretary, DOT, and
Transportation Planning Engineer, North Carolina State Highway
Commission. A member of the National Academy of Engineering, Dr.
Walton has served on or chaired a number of national study panels,
some mandated by the Congress and others by the National Research
Council. He is a founding member of the Intelligent Transportation
Society of America and currently chairs its Coordinating Council. He
is a Fellow of the American Society of Civil Engineers and of the
Institute of Transportation Engineers. He also holds many other
positions within the transportation profession's technical societies
and industrial boards. Dr. Walton has received numerous awards,
contributed to more than 200 publications, and delivered several
hundred technical presentations.
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix XII
Joseph Christoff
Susan Fleming
Libby Halperin
David Lehrer
Ronald Stouffer
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