Combating Congestion: Who Pays the Bill?

The U.S. Secretary of Transportation, Mary E. Peters, in National Strategy to Reduce Congestion on American's Transportation Network writes, "congestion and the growing unreliability of the highway system impose severe costs on the quality of life for millions of Americans." That observation extends to the impact congestion has on the supply chain.

One example Peters offers is the need for retailers to increase safety stock because of delivery delays. "An Atlanta area distributor of pet food with an 11truck fleet, finds it difficult for one truck to make more than 12 daily deliveries ," she claims. "In 1984 one truck made as many as 20 deliveries each day."

Looking to the multi-billion dollar leases of the Chicago Skyway and Indiana Toll Road, Peters calls for increased private sector investment in U.S. transportation infrastructure. To that end, the U.S. Department of Transportation(DOT, www.dot.gov) is aiding the formation of Public Private Partnerships (PPP). The $244 billion Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) includes provisions to make "it easier and more attractive for the private sector to participate in highway infrastructure projects." DOT has posted a number of PPP projects in order to provide models for local and state governmental agencies.

The agency is currently selecting three to five major "Corridors of the Future" to provide long-term funding. In response to its September 2006 request for proposals, it received 38, which it has whittled down to eight corridors that include 14 projects. Those project proponents have until May 25, 2007 to submit more detailed proposals. DOT hopes to make final choices before the end of the year.

In addition to the highly publicized leasing of the Chicago Skyway and Indiana Toll Road, other examples DOT highlights using a PPP option include State Route 895 in Virginia, called the Pocahontas Parkway. Construction of the 8.8-mile parkway began in 1998. At a construction cost of $381 million it was opened to traffic in stages beginning in May 2002. Among other aims of the Virginia Department of Transportation (VDOT) on the project was the implementation of newer toll collection technology and better access to Richmond International Airport.

To finance and get the work done, VDOT entered into an agreement with Transurban, an Australian corporation (transurban.com.au), giving it exclu-sive right to manage, operate, maintain and collect tolls on the Parkway for 99 years. In looking back at the opening of the Parkway, DOT claims that creative financing is why the roadway could have been built without a 15-year delay to assemble financing with only $27 million of the Parkway's total price. "The vast majority of the funding was raised through the sale of private bonds,which minimized the risk to both the localities and the taxpayers," says DOT.

If it were only so simple
Robert Poole, the founder and director of transportation studies at Los Angeles headquartered Reason Foundation (www.reason.org), has been tracking and advocating private financing for highway projects for some years and is known for his testimony on the subject at Congressional hearings.

"Unless and until there's a political willingness at both the federal level in Congress and state levels to have very large increases in fuel taxes, which I don't see, then it's sort of toll-way or noway," he observes. "It's because of the need for relieving congestion that I think alternative financing, especially through tolls, is so crucial."

Not all of those concerned with congestion are convinced that PPP is the best solution to the nation's congestion problems, particularly when it comes to leasing public roads. Among others in opposition is a coalition calling itself Americans for a Strong National Highway Network. Members include the AAA, American Highway Users Alliance, American Motorcyclist Association, American Trucking Associations (ATA), NATSO, Inc., the Owner-Operator Independent Drivers Association (OOIDA) and the Recreation Vehicle Industry Association.

"The sale or lease of existing toll facilities generates revenue at great expense to taxpayers and the trucking industry and carries potential negative impacts on highway safety, security and the motoring public," says ATA President and CEO, Bill Graves. "We must consider the long-term impact privatization will have on our nation's transportation system and explore all available financing options to ensure that the government is motivated by public good and transportation purposes."

Todd Spencer, executive v.p. of the OOIDA, is forceful in stating his organization's opposition. "The companies investing in our roads want to induce congestion on the roads they profit from, not reduce it. Their profits are derived from high traffic volumes and high tolls. Remember they are accountable to their shareholders, not the public," he observes. "We recognize elected officials are confronted with difficult funding decisions, but these deals are akin to pawn-shop mentality of hocking your assets for cash now, but paying much more down the road."

As to the matter of tolls, in remarks for the Nevada Motor Transportation Association, ATA vice president for State laws, Robert Pitcher said the association has consistently taken the position that tolls are only acceptable if levied on newly constructed highways or lanes. There are many downsides to tolling, including the uncontrolled raising of fees, long lag times to build and staff toll plazas, and disparate treatment of interstate motor carriers versus the often exempt treatment received by intrastate carriers.

Congressman Peter DeFazio (Dem., Ore.) who chairs the U.S. House Subcommittee on Highways and Transit, casts the controversy over privatization in political terms. "The Bush administration has been warning state governments about the growing gap between infrastructure needs and resources," he claims. "Unfortunately their only suggested solution is to privatize existing infrastructure. In pushing this ideological policy the administration has failed to disclose the potential downfalls as well as possible gains of privatization."

Speculating how the ATA might want to fund specific improvements in key goods movement corridors, Poole points to an earmarked fuel tax for goods movement. "The problem with that," he claims, "is it will become a general goods movement improvement fund applicable to ports and waterways as well as highways. It will be subject to all the same pork incentives that Congress has now for general highway funds.

"I can just imagine with a new goods movement trust fund," Pool continues, "All of a sudden you have the barge industry claiming access to it for completely unjustified lock and dam projects that have a benefit-to-cost ratio of point five. But they'll get it because of political clout."

In addition to SAFETEA-LU privatization efforts, there is Special Experimental Project 15 (SEP-15) an experimental process for the Federal Highway Administration (FHWA) to identify new public-private partnership approaches. "SEP-15 was created by the FHWA with the goal of finding innovative ways to improve project development and delivery," says Rep. DeFazio in remarks to the OOIDA. "This may sound good, but the devil is always in the details."

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