Task 1.3: US Experience

1. Task 1.3: US Experience Outline A short history of federal road funding in US Some statistics Lessons learned PK - 9.12.2005 meeting

2. Timeline 1: Start Towards the end of 19th century • Railroads dominated interstate travel • Road network (used by horse carriages) fell into neglect • Good Roads Movement: dominated by bicycle clubs and bicycle manufacturers • The problem was road conditions outside cities. 1893: Office of Road Inquiry • Collated information about state laws concerning road building, promotional literature, initiated testing new road materials • Cooperation with Post Office in experiments with rural free delivery made farmers favorable to idea of road improvement. • Demonstration projects: directing work on building short stretches of roads with local engineers. • “It must be borne in mind that the actual expense in the construction of these highways is to be borne by the localities and states in which they lie.” • Cooperation with railroad companies, sponsoring Good Roads Trains movement. • Agency got a permanent status within the Department of Agriculture 1906: Office of Public Roads (OPR) • Budget USD 50.000,-, staff of 10 persons • Director “shall be a scientist and have charge of all scientific and technical work” • Progressive Movement: “Reform trough apolitical expertise” • Formal agreement with Postal Office Department to make OPR engineers available to inspect proposed RFD routes PK - 9.12.2005 meeting

3. Timeline 2: Organizational Choice 1913 • Formal agreement with the Forrest Service: program for roads in national parks • Experimental post road program USD 500.000,- , - OPR administered in cooperation with states and counties. - Did not improve roads much - Convinced the OPR that it was not interested to work with the nation’s 3000 counties, but preferred to work with the states 1915 OPR renamed as OPR and Rural Engineering (OPRRE) lobbied successfully in favor of progressive views 1916 Federal-aid Highway Program • Money from federal budged to state highway agencies • 75 mil USD over 5 years • Apportionment formula based on land area, population, and post road mileage • Funding restricted to rural post roads • Federal share was 50%, with limit 10.000,- per mile • States prepare plans, control construction and maintenance, subject to federal approval and inspection • 10 mil USD for roads on federal lands PK - 9.12.2005 meeting

4. Timeline 3: Form & function 1918 • OPPRE becomes Bureau of Public Roads (BPR) • Policy disputes: federal versus federal-aid construction, long distance versus farm-to-market roads 1921 Federal Highway Act: • Retained federal-aid principle • Satisfied supporters of long-distance roads by restricting funds to a system, to be linked at state lines, comprising 7 percent of total public road distance and requiring that paved surfaces should be at least 5.5 meters wide.. 1920’s • Decade when vehicle registrations grew from 10.4 million in 1921 to 26 million in 1931 • 1920 BPR director helped to found National Advisory Board on Highway research, renamed Highway Research Board in 1925, and Transportation Research Board in 1974 1930’s • During the depression federal funding of road building continued, mainly to create jobs quickly. • The matching share concept was temporarily abandoned. • 1939 BPR was renamed Public Roads Administration (PRA) and subjected to the new Federal Works Agency. • New problem focus: Urban congestion, road safety PK - 9.12.2005 meeting

5. Timeline 4: Interstate 1944 The Federal-Aid Highway Act: • Designation of a 64,375 km network to be called National System of Interstate Highways • Routes selected by state highway agencies, with PRA concurrence • No funds were authorized • President F. Roosevelt favored self-supporting toll roads • Congress intended the highway program to be federally assisted state program. I.e. that the states would decide which projects shall be federally financed. 1947 PRA announced the selection of the general location of 60,670 km • States were supposed to give priority to the program in their general use federal aid. Largely, this did not happen. Toll-ways were constructed in Northeast. 1949 PRA was transferred to Department of Commerce and renamed BPR. 1956 Congress approves the National System of Interstate and Defense Highways and president signs the Federal-Aid Highway Act and the Highway Revenue Act Highway Trust Fund, an accounting mechanism restricting highway user tax revenue to highway purposes. • Called for completion of the 41,000 miles of interstates by 1972. • Met the president’s goal of avoiding deficit spending by including an anti-deficit provision. • Taxes on truckers went up, but not too much to lose their support • Urban areas did not get the control they wanted, but the bulk of funding would be spent in the cities. • Rural officials, who did not believe the interstate system would benefit them, received continued funding for federal-aid secondary roads PK - 9.12.2005 meeting

6. Timeline 5: Reality Bites • “Stop the Road” movement gained momentum against urban freeways. 1) Planners’ intention to “revitalize downtown” versus the poor black city dwellers’ wish to continue living in black downtown areas. 2) Planners’ intention to prevent the transformation of urban form from monocentric to multicentric. • Serious problems: allegations of corruption, financial problems, popular protests against construction of the interstate routes. 1958 Interstate cost estimate: • During the debates of 1955 and 1956, BPR had estimated the total cost for 64,375km network to be 27 billion, federal share 25 billion. • 1958 estimate for 62,035 km indicated cost would be 37.6 billion. • A few months later Congress increased funding. • Legislation also set aside the pay-as-you-go feature of the HTF, with resultant shortfall in revenue made up by borrowing from the general treasury and imposing quarterly limitations on spending. 1959 Federal-Aid Highway Act temporarily increased federal gas tax and lowered interstate authorizations. 1961 Congress restored the pay-as-you-go provision and made the temporary gas tax increase permanent. PK - 9.12.2005 meeting

7. Timeline 5: regulation answers 1962 Federal-Aid Highway Act specifies that planning process should be “continuing, cooperative, and comprehensive”. 1966 Department of Transportation Act restricted construction of roads on publicly owned land in a public park, recreation area, or wildlife and waterfowl refuge. Congress started to periodically impose annual ‘‘limitations on obligations’’ 1969 National Environmental policy Act 1969 required formal environmental assessment of all federal-aid highway projects. 1967 BPR became part of Federal Highway Administration (FHWA), part of the US Department of Transportation. 1973 Federal-Aid Highway Act authorized withdrawal of controversial interstate segments and substitution of urban mass transportation projects. (expanded to allow substitute highway projects by the Federal-Aid Highway Act of 1976). • The withdrawal option has been used (starting 1974 in Boston (I-95 and I-695), until 1989 withdrawal of I-205 bus lanes in Portland, Oregon). 1982 Surface Transportation Assistance Act increased gas tax by 5 cents, including one cent for mass transit, and adjusted other highway user taxes to fund restoration of highway and bridge conditions. The act also established a 10-percent goal for participation of disadvantaged business enterprises, exclusive of women business enterprises in federal-aid highway projects. PK - 9.12.2005 meeting

8. Timeline 6: ISTEA 1991 Intermodal Surface Transportation Efficiency Act (ISTEA). • Funded interstate completion and maintenance, bridge replacement and rehabilitation, and a Surface Transportation Program for all roads except those classified as rural minor collectors or local roads. • Directed FHWA to develop a proposal for designation of the National Highway System (NHS), subject to congressional approval. NHS would consist of the interstate system and other principal arterials of national significance, improved to appropriate standards. • Stressed increased flexibility of choice among modal options, including bicycling and walking. In other areas, ISTEA emphasized environmental enhancement, preservation rather than expansion of the highway 1992 situation: The original extent of interstate system has been increased to 68,880 km. By 1992 Interstate system was essentially complete (99.7%) . PK - 9.12.2005 meeting

9. Timeline 7: Current situation Transportation Equity Act for the 21st century (TEA-21) for years 1998 -2003 • “Guaranteed” specific annual funding levels for most highway programs on the basis of projected receipts to the Highway Trust Fund and provided for annual adjustments to these funding levels based on actual receipts and revised projections of trust fund revenue. • In fiscal year 2003, for the first time, the adjustment was negative—decreasing the guaranteed level of highway funding by $4.369 billion. • Last accepted Act (at least until a couple of months ago) GAO (1995) evaluation: the mechanism has serious faults • Based on criteria that are no longer valid (e.g. length of postal routes), • Appropriation formula is complex and irrelevant due to the cap measures that make the outcome predetermined to status quo. • Creates permanent “donor states” and “receiver states” Knight: • Analysis (2004) results suggest over-spending in aggregate, especially in politically powerful districts, and large associated deadweight losses. PK - 9.12.2005 meeting

10. Federal Highway Trust Fund Balance and Commitments PK - 9.12.2005 meeting

11. Federal Highway Trust Fund Receipts PK - 9.12.2005 meeting

12. PK - 9.12.2005 meeting

13. Lessons learned LONGEVITY OF INITIAL BENEFICIARY POSITIONS • The organization stays alive even when its task disappears. There is a need to safeguard against this by stating clear ending criteria and date. • The money allocation formulas stay fixed even when tasks and needs change. In US this happened through the complexity-increasing serial computational process. EVOLUTION FAVORS INCREASING FEDERAL SHARE • The program started as federally aided state program, now it is state-aided federal program • Federal money is increasingly tied by mandates • The program started as 50-50 between federal and state level, the federal share has increased THERE ARE UNINTENDED CONSEQUENCES • Common pool incentives realize: representatives vote for home state projects and against projects in other states. Overspending in aggregate, located in powerful states, large deadweight losses. • Conflicting evidence of the stimulating effect on transportation spending: does it stimulate, is the stimulated spending efficient, would decentralized decision making be more efficient? • Culture clashes about values. • Encourages logrolling. PK - 9.12.2005 meeting