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Rethinking the Federal Surface Transportation Program

Rethinking the Federal Surface Transportation Program. by Robert W. Poole, Jr. Director of Transportation Policy, Reason Foundation www.reason.org/transportation bobp@reason.org. Overview of presentation. Need for increased highway investment Near-term outlook for reauthorization

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Rethinking the Federal Surface Transportation Program

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  1. Rethinking the Federal Surface Transportation Program by Robert W. Poole, Jr. Director of Transportation Policy, Reason Foundation www.reason.org/transportation bobp@reason.org

  2. Overview of presentation • Need for increased highway investment • Near-term outlook for reauthorization • Shortcomings of current proposals • Need for a Plan B • What a Plan B might consist of

  3. The need for increased highway investment is well-documented. • Major highways and bridges are wearing out and must be replaced. • Cost of reconstructing Interstates has not been included in most estimates of “needs.” • Locations of people and business are very different from when the Interstates were being planned. • Many highways and bridges are under-sized for current—and projected—traffic.

  4. How large is the highway funding shortfall? • Estimates from AASHTO, Policy & Revenue Commission, Financing Commission, and FHWA C&P Report. • Federal, state, and local capital investment. • 2008 FHWA C&P report (all roads)*: • “Sustain” scenario: $27B/year short • “Improve” scenario: $59B/year short *Using B/C>1.5; no tolling/pricing

  5. Reauthorization prospects • Timing: • Most observers say Spring 2011 • Slight chance of “lame-duck” attempt • If not next Spring, may be after 2012 presidential election. • Funding increase: chances close to zero • Hence, need for a Plan B

  6. The Oberstar bill • Further centralizes control in DC, not states. • Empowers MPOs at expense of state DOTs. • Makes most highway funding “flexible.” • Expands “livability” programs. • Heavily regulates tolling and PPPs.

  7. DOT’s Draft Strategic Plan • Also highly centralized and pro-”livability.” • Aims to force people out of cars and freight from trucks to trains. • Spend highway money on repair, not capacity expansion. • Seeks “transportation revenue” usable for all modes, discarding users-pay/users-benefit principle.

  8. What is “livability”? • Attempt to reshape cities and infrastructure to let people live and work without cars. • Shift ever-larger sums from HTF to transit, bike paths, sidewalks, etc. • Aim is large mode-shift away from auto use. • FTA now evaluating “New Starts” based on community development, not transportation. • MPOs to be required to develop “smart-growth” land-use plans, to get federal transportation funds.

  9. Problems with livability agenda • Doubling density leads to only 4 to 5% reduction in VMT. • Hence, smart growth is very costly way to reduce GHGs (e.g., $4,000/ton). • Higher density leads to worse traffic congestion. • Higher-density cities have more costly housing. • Transit today typically handles 1.5% of urban travel; doubling it (at huge cost) would still leave over 95% of trips by car.

  10. Problems with inter-city mode shifting • Goods movement will double by 2050. • Most studies predict rail will retain or slightly expand mode share (in ton-miles). • Truck volume will double; hence, large highway capacity expansion needed. • Most HSR plans involve shared use of freight rail ROW; serious conflicts likely. • Inter-city bus (coach) provides unsubsidized alternative to massively subsidized HSR.

  11. A digression on federal subsidies • Net federal subsidies, by mode, 1990-2002 • Passenger rail: $186/thousand pass-mi • Urban transit: $118/thousand pass-mi • Airlines: $ 6/thousand pass-mi • Highways: $ -2/thousand pass-mi Source: “Federal Subsidies to Passenger Transportation,” USDOT Bureau of Transportation Statistics, Dec. 2004

  12. The need for a Plan B • Oberstar and DOT plans are bad for highways, drivers, and trucking. • You can’t fight “something” with “nothing.” • High likelihood of change in Congress. • Opportunity to rethink entire federal program.

  13. The users-pay/users-benefit principle is sound—but at risk • Fairness: those who pay benefit. • Proportionality: use more; pay more. • Self-limiting: unlike Europe’s gas taxes • Predictable: annual revenue stream. • Investment signal: at least in the form of tolling.

  14. But diversion of Trust Fund monies is destroying this principle. • 1956: Interstates only • 1970: other highways, bus facilities • 1973: rail facilities • 1982: Mass Transit Account • 1991: “flexible” STP and CMAQ can fund bikeways, sidewalks, trails, etc. • 1998 and 2005: even more flexibility • Today, 25% of Highway Trust Fund monies are used for non-highway purposes. • Oberstar and DOT would make nearly all HTF “flexible,” no programs for new capacity.

  15. Outline of a possible Plan B • Restore the users-pay/users-benefit principle to the Highway Trust Fund. • Refocus the federal program on Interstate reconstruction and modernization. • Devolve other highways, transit, etc. to states—or fund non-highway modes out of general revenues, not HTF. • Empower states to toll Interstates, both urban and rural. • Don’t regulate state use of PPPs; instead, assist via expanded TIFIA and Private Activity Bonds.

  16. Budgetary impact of refocused federal program (1) Programs no longer funded by Highway Trust Fund: • Urban transit: $8.0B/year • Enhancements/misc. 1.8B/year • Safety regulation: 1.1B/year Total: $10.9B/year

  17. Budgetary impact (2): Interstate 2.0 • Rebuild 233 interchange bottlenecks: $128B • Add HOT networks in 19 most- congested metro areas: $98B • Reconstruct and modernize long-haul Interstates, starting with key truck routes: ??? • Net federal increase @ $10B/yr would be $200B over 20 years.

  18. Political feasibility (1):Highway community • Increased funding for the most important highways, urban and rural. • Addresses loss of trust in Trust Fund. • Restores users-pay/users-benefit principle. • But major break from 30-year status quo.

  19. Political feasibility (2):Non-highway programs • “Social infrastructure” should be paid for out of general taxes. • General fund: 2008 and 2009 bailouts of Trust Fund equal current Transit Account budget (≈$8B/yr). Plus $19.5B in 2010-11. • State/local support is already 70-80% of transit funding.

  20. Political feasibility (3):state highway budgets • Assumptions: • Feds replace transit funds • States don’t replicate all former highway programs. • State $ worth more than federal $ • Increased use of tolling and PPPs • Use of B/C screen of 1.2 or 1.5 • 46 states shortfall of only 4-11 cents/gallon; only 4 & DC greater.

  21. Next steps: • Plan for changed make-up of next Congress. • Work with new leadership on Plan B legislation. • WPRI/Reason Foundation study on tolling Wisconsin’s Interstates. • Fight hard against any lame-duck reauthorization bill.

  22. Questions? Contact information: www.reason.org/transportation Bob.Poole@reason.org

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