Transportation Public-Private Partnerships Will Weather The Storm

Ken Orski

But Lessons Learned Will Bring Changes

Andrew Bary's recent piece "The Long and Binding Road," in Barron's  has been widely noticed. "The credit market collapse and political opposition have all but killed the U.S. highway privatization trend," the respected commentator opined in his article.  What is more, Bary wrote, the Indiana Toll Road deal "was one of the most illogical prices paid for any major piece of transportation infrastructure during the bubble period of 2005 to 2007,"  suggesting that Macquarie made a huge miscalculation.  Gov. Mitch Daniel's comment  ("It was the best deal since Manhattan was sold for beads...") did not help, implying that the State got the better of the naive Macquarie. The article concluded, "for toll road investors, what had promised to be a pleasant ride has turned into a painful trip," citing Macquarie's shares tumbling 50% in the past year.

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Steve Heminger, Robert Poole: Context Trumps Ideology On Transportation Public-Private Partnerships

Matt Rosenberg

The National Journal's transportation blog asks what's the proper role, if any, for public-private partnerships? Among the replies from their expert panel, two stand out. Steve Heminger, executive director of the nine-county (Bay Area) Metropolitan Transportation Commission, writes:

The debate about the wisdom of greater private investment in our surface transportation system is almost always contested on theoretical or ideological grounds, and that may be enjoyable for the debaters but it is completely unenlightening for the rest of us. I suggest instead that we try to answer the following practical question: what part of our investment shortfall are PPPs most likely to address? It is probably not deferred maintenance (about 50% of our total shortfall), because there's not much money to be made in that unglamorous activity. It is also probably not many public transit extensions, which tend to require operating subsidy, not generate operating profit. Nor is it new road capacity that may be needed for overall national system connectivity, but may be located in areas with slower population growth (and less income potential).

So, that probably leaves the sweet spot for "greenfield" PPP's in extremely congested, high growth areas, where new highway or freight capacity can not only pay for itself but generate additional income through tolls or other fees to pay back investors. This category of investments is critical to the nation's future economic well-being, but it probably represents less than 20% of our total investment shortfall.

We do not face an "either/or" choice between PPP's and traditional forms of public funding such as gas taxes and municipal debt. We need both of these tools (plus others) if we are to climb out of the huge investment hole we've dug for ourselves. And we need to deploy these funding tools in the right proportions to address the functional and modal investment needs we face.

Another noteworthy response comes from Robert Poole, Director of Transportation Studies for The Reason Foundation. Poole is a leading advocate of transportation P3s, and automated variable-rate tolling to control metro-region traffic congestion. Poole rebuts a new study by the Public Interest Research Group critical of transportation P3s, to make a few essential points about how P3s should be structured to protect the public interest and draw participation from private investors so important metro-region projects that states and regions cannot fully fund on their own can actually get built.

....their report blurs the distinction between leasing existing toll roads ("brownfields") and creating new toll roads via PPP mechanisms ("greenfields"). Reporting the total amount committed to various PPP projects (including relatively uncontroversial design-build projects), the report says that $21 billion was "paid for 43 highway facilities" between 1994 and 2006. The context and the wording make it appear that 43 existing highways have been long-term leased during this period. In fact, a grand total of four toll roads have been leased in the United States. All the rest of the PPP activity has involved the financing of much-needed new capacity.

PIRG's report also makes it sound as if most of these projects involved 75 to 99-year leases, such as those involved in the four brownfield projects. In fact, most new PPP toll roads are being developed under 35 to 50-year concessions. And large up-front payments, another PIRG target, are relatively uncommon on the growing number of greenfield projects. Why? Because these projects are challenging to finance solely based on their projected toll revenues. In the event that traffic and revenues turn out to be more than originally forecast, the trend now is to include revenue-sharing provisions in the concession agreements.

....the public-interest recommendations of the PIRG report are either platitudes ("the public should retain control over decisions about transportation planning and management") or unrealistic. Two examples of the latter: 1) No deal should last longer than 30 years. 2) The legislature must approve each negotiated PPP agreement.

The first would rule out many projects that would pencil out at 40 or 50 years, thereby reducing the scope for the private sector to help close the funding gap. And the second is a proven deal-killer. The few states that have included such a provision in their enabling legislation have received exactly zero proposals. Why? Because the cost and time involved in winning a competition for a billion-dollar project and then negotiating a 300-page concession agreement are too large to be risked on the whim of a legislative vote. The workable approach, which both California and Florida figured out after trying the PIRG way, is to enact legislation spelling out the parameters within which deals can be negotiated, and leaving the details to their state DOT or transportation commission.

More Public-Private Partnerships Needed For U.S. Transport Finance

Matt Rosenberg

(Article as published at Crosscut)

When California recently resolved its mammoth budget deficit, it presciently moved to ease restrictions on transportation public-private partnerships, which over the long run could help control costs to taxpayers of improving overloaded roads, rails and freight facilities. P3s, as the arrangements are called, draw from among construction, engineering, highway management firms - plus infrastructure investment groups often funded partly by public employee and building trades union pension funds - to form consortiums that get important transportation projects built more efficiently, and sooner versus later or never. A P3 consortium may provide consolidated services such as designing and building a toll bridge or highway section, and can also provide upfront capital if public funds are constricted, as is so often the case now.

The private consortiums may not only design, build, and help finance these variably-tolled facilities, they may operate and maintain them too, for several decades under a lease agreement with their public partner, such as a state department of transportation. (The latter can retain ownership, control toll rates and enforce contractual performance standards). Over the long haul, the private partners make back their investment and a profit, while the savings to taxpayers over a project's full life cycle accrue, versus going it solely on the public's dime, and solely under public-sector management. P3s can also target transit, and crucial port and rail infrastructure. (Various types of P3 are described here by the Canadian Council For Public-Private Partnerships.)

Many of the P3 projects have a genuine green hue: such as "managed" lanes on highway sections, bridges and tunnels where booth-less electronic tolls are set higher during peak hours and lower off-peak to maintain a steady traffic flow at speeds of 45 to 50 miles per hour while ride-share vehicles and transit go free. Increased telework at home, as well as off-site meetings, remote work centers and para-transit offer additional ways around the higher peak-hour tolls.

The P3 approach is a hot topic, and a tool increasingly being considered by elected officials. In a new report, the Pew Center On The States paints the backdrop:

In 2008, the federal Highway Trust Fund - one of the nation's primary sources of funding for highway renovation and construction - almost went broke. States, hurting from falling revenues of all kinds, including gas tax proceeds, lack the money to meet their own infrastructure needs. These funding problems have turned into a crisis. Every year the numbers worsen. Much-needed highway repairs are being neglected...The current trend is unsustainable. Congestion and pollution will continue to increase, public safety will be compromised, and states' economic growth and ability to attract and retain strong businesses will falter if the nation's transportation system fails to receive the investments it needs. Federal funding - through the stimulus package, a proposed infrastructure bank or both - will help. But the gap remains large, and as a result, state leaders are looking to partner with the private sector.

Burgeoning global population has huge market implications for infrastructure finance. In a new working paper, the Organisation for Economic Development and Cooperation estimates (p. 5) that through 2030, annual infrastructure requirements for electric transmission and distribution, road and rail transportation, telecommunications and water are likely to average about 3.5 percent of global gross domestic product, or about $2 trillion per year, higher if other kinds of infrastructure are added in. Small wonder new consultancies fluent in P3s are forming. States and nations are coming to the dance, and matchmakers are in demand.

Senate Bill 4 is the game changer in California, signed into law in late February. Under restrictive 2005 pilot project legislation, California had allowed the state transportation department and regional transportation agencies to enter into only four P3 arrangements, total, up until January 1, 2012, two in southern California, two in northern California. Under SB 4, unlimited transportation P3s are allowed between now and January 1, 2017. Jim Christie of Reuters explains:

Billions of dollars of private capital for infrastructure may pile into California with the state, the world's eighth-largest economy, opened to public-private partnerships....Hopes for busy construction sites meeting infrastructure needs across California have been thwarted by increasing strains on traditional financial sources for public works -- taxes, user fees and the municipal debt market.

...Officials responded by clamping down on spending, including for public works. They hope to open the infrastructure spigot when the state resumes market sales of its debt and expect federal stimulus money to help bring projects on line sooner. But California's needs are so vast it could use even more infrastructure dollars -- most obviously for congested roads, a reason for the bill aimed at highway P3s. "The clearest cases for public-private partnerships have always been made for transportation," said (Gov. Arnold) Schwarzenegger adviser David Crane.

Up the road a piece, Washington has unfunded transportation needs of $38 billion (in 2005 dollars) over the next 20 years, according to the state's transportation plan update issued in 2007; that amount is exclusive of local transit needs, says the Washington State Transportation Commission (p. 5, here). The transportation commission in a 2007 report noted that:

A series of key state assessments have urged the P3 approach be more closely considered for major transportation projects. The Expert Review Panel on SR 99 Alaskan Way Viaduct Replacement and SR 520 bridge replacement stressed the value of regional tolling and P3s as finance tools, especially for the looming life-safety rebuild of the 520 bridge. The Regional Transportation Commission chaired by former Seattle Mayor Norm Rice and ex-Western Wireless CEO John Stanton recommended serious attention to possible long-term concessions and build-operate agreements with private partners. A report prepared for the legislature's Joint Transportation Committee stressed that P3s can attract new capital otherwise unavailable, accelerate project delivery, and offload government's construction cost overrun risk.

P3s could prove especially helpful in getting built the new bridge across the Columbia River between Clark County, Wash. and Portland, Ore., extending SR 167 from South King County to the Port of Tacoma, constructing the SR 704 "Cross Base Highway" in Pierce County, in making improvements on Interstate 90 at Snoqualmie Pass, upgrading the state ferry system's big Colman Dock terminal in Seattle, and in financing additional ferry terminal, freight rail capacity, and "transloading" projects.

State-issued bonds are required for all projects; that should be changed to allow comparison of alternative financing structures. State bonding timelines should be extended from 30 to 40 years to help finance mega-projects. No fewer than six entities can effectively stop a P3 project; clearer authority should be given to the transportation commission to make final decisions.

To its credit, the state used a design-build P3 approach for the newer, southbound tolled span of the Tacoma Narrows Bridge, and lately has been exploring P3 possibilities for ferry facilities, and alternative fuel stations in the I-5 corridor. But with as much as $6.6 billion now needed for the SR 520 bridge rebuild, and another $4 billion required to put right I-5 in Seattle and US 2 to the north, plus a slew of other unfunded, important projects (see above), Washington needs to really open up to transportation P3s.

Recent news only underscores the paucity of funding. The Seattle Times reports that the state senate's proposed transportation budget has would delay until 2016 some 31 highway projects that had been planned for sooner (the House proposal slices things a bit differently). At the same time, Sound Transit is warning that its voter-approved $18 billion second phase expansion plan, including light rail across Lake Washington to Bellevue and Redmond, may come up as much as $2.1 billion short due to the recession and declining tax revenues.

Lawmakers admit that by (2016), a combination of declining gas-tax revenue and high bond debt will leave few dollars for new projects. Tolls or other taxes in the 2010s would be needed to keep promises made in the 2000s, when Olympia boosted gas taxes by 14-½ cents a gallon.

After the planned deep-bored tunnel to replace the Alaskan Way Viaduct (for which the primary pot of state funding is intact), the 520 bridge is the next Puget Sound roads mega-project on the horizon. The Seattle Times reports that the cost could rise to $6.6 billion but the state only has about $1.9 billion exclusive of tolls. The most aggressive tolling scenario identified by a state committee (with the earliest start on the old 520 bridge plus tolls on parallel I-90) would yield another $2.4 billion, for a total of $4.3 billion, which is $2.3 billion less than the priciest and least intrusive option, most favored by influential activists in Seattle neighborhoods at the bridge's west end. (Fine tuning of the state transportation budget could boost dedicated non-toll funds, but a large gap is still a distinct possibility).

Credit has been tight lately, to say the least, dampening near-term enthusiasm for government borrowing, P3s, and activity by infrastructure investment firms. But a slew of recent deals foretell transportation P3s re-gaining traction as the economic recovery gradually unfolds.

In Florida, a Spanish-based consortium, ACS Infrastructure Development, has closed a $1.6 billion-plus deal to design, build, finance, operate and maintain a 10.5-mile reconstructed I-595 connector in Broward County, from near the Fort Lauderdale Airport and I-95, going west to the I-75/Sawgrass Expressway interchange. A central feature, right down the middle, is three reversible, electronic time-variable tolled lanes called 595 Express. Other project components will include improved interchanges, direct connections to the express lanes, ramps and bypasses, a greenway, sound barriers and bus rapid transit in the corridor. By having the private consortium design, build and finance the rehabbed connector and then maintain and operate it for 35 years before ownership reverts to the state, Florida offloads construction cost overrun risk and maintenance and operations costs. The state will lease the center express lanes from the consortium and collect the tolls. If the tolls must be raised at some point in the future, that will be done by the state, not the private consortium.

The Wall Street Journal's Christopher Conkey reports:

"This project is a harbinger of what we may be seeing over the next decade or so, as we don't have enough money for major construction," said Robert Poole, director of transportation studies at the Reason Foundation, a free-market think tank....The Obama administration has rejected the idea of increasing the 18.4-cent-a-gallon federal gasoline tax to raise revenue for infrastructure projects. That could lead states to pursue more private-funding options.

In Texas, a private consortium of Cintra, Meridiam and the Dallas Police And Fire Pension System has been chosen as the preferred partners in a $2 billion, 52-year concession to finance, operate and toll new managed lanes on I-635, or the LBJ Expressway. At four lanes in each direction, this 1969-vintage metro Dallas corridor is seriously congested, an "avoid it if you possibly can" route like I-5 through Seattle or Portland. Under the agreement, the private partners will completely rebuild 9.7 miles of I-635 and 3.6 miles of intersecting I-35E. In each direction along the way there will be two frontage lanes, four tax-funded general purpose lanes and three managed lanes to be variably tolled, electronically, at rates meant to attract traffic yet also keep it flowing no slower than 50 mph. If average speeds dip below that mark, sliding scale damages would be paid by the private operators to the state department of transportation. The Dallas Morning News reports that the deal comes amidst plans to develop tolled, managed lanes on all highways in the metroplex. Rush-hour tolls will be steep on the new tolled LBJ lanes, at $7 one way to start; off-peak tolls lower.

Two billion dollars worth of work is to be completed in five years. Four hundred workers will begin laboring full-time at the outset, with as many as 1,500 more added in phases from 140 subcontractors. Cintra, Meridiam and the pension fund will invest $600 million, borrow $500 million from private sources and plan to secure another $500 million in government-backed loans from the Federal Highway Administration. Texas will contribute $445 million.

In another Texas project, a consortium including Cintra and the Dallas Police And Fire Pension System will partner on the 13-mile North Tarrant Express toll road. More from Christie, of Reuters:

Some of the money for the Texas projects will come from direct equity stakes held by the Dallas Police & Fire Pension System that should return at least 8.5 percent annually after 10 years, said Richard Tettamant, the fund's administrator. He said the stakes are the first direct P3 infrastructure investments by a U.S. public pension fund, and "we are open to investing in any type of infrastructure ... anywhere." Other pension funds seeking stable returns for long-term obligations may be interested as well, said Joel Moser, lead partner in the infrastructure practice at Fulbright & Jaworski in New York. "We're talking about trillions of dollars in equity that could potentially flow into this sector," he said.

The Dallas fund has 8,500 members, current and retired police and firemen. Cintra expects to hire 2,000 workers for 5 to 6 years for the job.

In another tolling-based P3, construction began last year in Northern Virginia to build 14 miles of "HOT" lanes on the Capital Beltway/I-495. Private partners Fluor-Transurban are investing $349 million and the commonwealth $409 million, supplemented by another $1.1 in toll-backed bonds and loans. Vehicles with three or more passengers will travel free in the new lanes while others will pay variable electronic tolls. Drivers will have the option of free lanes in both directions, though they will be more prone to congestion. The HOT lanes will be owned and overseen by the commonwealth but managed and operated by the private partners. Construction is to be completed in 2013.

Ports are getting in on the action, too. A division of a private infrastructure fund has won approval from the Port of Oakland for a $150 million deal which will give the Port $60 million in the near term and allow the private concern, Ports of America, to invest the remainder in cranes and environmental improvements to complement a 50-year operating agreement for several docks. Six thousand jobs will be created and a second-stage, $350 million deal is being discussed, which would connect the port to more rail lines.

Already operational North American toll facilities built under P3 arrangements include the E-470 in metro Denver (going totally cashless this summer), the South Bay Expressway in San Diego, the SR 91 express lanes in Orange County, Calif., the William R. Bennett Bridge in Kelowna, British Columbia, and the Dulles Greenway and Pochohantas Parkway in Virginia. Not to mention the Hiawatha Light Rail Transit System in Minneapolis and a cruise ship terminal in Galveston, Texas, among a bevy of P3 projects discussed in this recent trend piece by Wired magazine.

Other major transportation P3s nearing completion in North America include the Sea To Sky Highway from Vancouver to Whistler, British Columbia, and the Canada Line rail extension from Vancouver south to the suburban hub of Richmond, and the region's airport.

Will Washington state's public employees get in on the P3 action? Only if makes good money management sense. The Washington State Investment Board oversees 17 different public employee pension funds and 22 other state funds with combined holdings of $67.6 billion, and would like to increase to at least five percent of its portfolio its "tangible assets" class, which can include timber lands, real estate and infrastructure assets. WSIB Public Affairs Director Liz Mendizabal says the board's first and foremost responsibility to its members is fiduciary. An ongoing performance benchmark is to achieve an eight percent average annual return on investments. Another aim, with the stock market meltdown at top of mind, is to diversify the portfolio further. Mendizabal cautions that while some public employee pension funds may invest directly in a specific transportation project (i.e. Dallas), WSIB is not one of those: it invests in managed funds only. Any WSIB investment in infrastructure would thus have to be through an infrastructure fund.

An additional note: because public employee pension funds already enjoy tax-exempt status on their interest earnings, they are highly unlikely to buy the tax-exempt, lower yield bonds that state governments often issue to fund transportation projects.

The Big Daddy of infrastructure investors among public employee pension funds is the Ontario Municipal Employees Retirement System. Bloomberg News reports OMERS manages $44 billion ($C) for its 390,000 members, and hopes to increase its infrastructure holdings from 31 to 35 percent of its holdings. North American rail systems are among its targeted areas for new infrastructure investment. The mammoth California Public Employee Retirement System - where former WSIB Executive Director Joe Dear is now Chief Investment Officer - is often mentioned as another potential investor in transportation infrastructure. But the talk has amounted to little so far. That may change with California's new transportation P3 law, though Calpers' members have previously been vigilant and litigious in warning the board off any P3s involving private partners. There are other approaches. A division of a wholly-owned Calpers subsidiary is proposing a sizable P3 investment in the state of Virginia's ports network. Calpers and the Dallas Police and Fire Pension Fund also are trying to advance a larger federal role in seeding infrastructure P3s. A key element would be a National Infrastructure Investment Bank. Famed financeer Felix Rohatyn helped develop the proposal and continues his advocacy. But Kiplinger Letter Associate Editor Jim Ostroff predicts it's a virtual non-starter.

Also in the political breakdown lane: a national infrastructure bank to fund large, multistate projects....It would be seeded with Uncle Sam's money and chartered to borrow money at ultralow interest rates that only federal entities can obtain. But Washington lawmakers won't cotton to ceding control of several billion dollars of highway money each year to an independent agency.

Which, if proven true, will tend to leave political leadership on transportation P3s at the state level, despite some existing federal programs that can help facilitate these deals, such as U.S. DOT "private activity bonds", and loans through the Transportation Infrastructure Finance and Innovation Act (TIFIA project roster here). In any case, it is states especially that must confront one of the biggest perceptual obstacles to U.S. P3 investment by infrastructure firms: their characterization as "foreign" and "private." In truth they're often as much or more Main Street than Wall Street - drawing capital from building trade and public employee unions, and hiring loads of U.S. workers for big projects such as those in Texas and Florida, in all sorts of categories.

Another objection to managed lanes, which are often at the heart of roadway P3s, is that the higher peak-hour tolls are unfair to lower-income drivers. A study by UCLA and USC researchers is the latest to debunk that contention about so-called "Lexus Lanes" that favor the well-off.

Those who oppose tolls and other forms of road pricing argue that low-income, urban residents will suffer if they must pay to use congested freeways. This contention, however, fails to consider (1) how much low-income residents already pay for transportation in taxes and fees, or (2) how much residents would pay for highway infrastructure under an alternative revenue-generating scheme, such as a sales tax....Low-income drivers as individuals save substantially if they do not have to pay tolls, but as a group low-income residents, on average, pay more out-of-pocket with sales taxes.

So though the debate continues, there's already a brave new world of transportation finance taking shape. In the past, Washington state and regional elected officials have tended to approach planning and financing of transportation mega-projects on a piecemeal basis rather than developing a comprehensive strategy. Now, some - such as State Sen. Ed Murray - clearly get that a systematic approach to tolling regional highways, plus public-private partnerships are needed.

Next year, state lawmakers could begin the process of extending electronic time-variable tolling to major highway corridors in the region (federal approvals are required for Interstate tolling, but the signals are generally green). Regional tolling, new or raised taxes or fees of some sort, and private partnerships will be needed to build and operate vital surface transportation projects in many states, at a time when funding and finance prospects are dimming so precipitously. In a report on the proposed Washington Senate 2009-2011 Transportation Budget, the Senate Transportation Committee somberly warns:

The world is changing. Existing sources of state and national long-term transportation funding are not sustainable. In addition, new car technology and policies to reduce greenhouse gas emissions have a significant and negative impact on transportation revenues. A concerted effort is needed to merge a new reality with new policies, and bring key stakeholders together to develop and drive the transition.

In a presentation last summer to a gathering of the Pacific Northwest Economic Region, Washington State Transportation Secretary Paula Hammond and WSDOT's Director of Public-Private Partnerships Jeff Doyle shared some important observations:

U.S. public sector motivations for P3s include contractual allocation of risk and price certainty; outsourcing of unpleasant tasks and costs of facility operations and maintenance; creation of new revenue sources, use of innovative financing and the monetizing of existing assets (3rd slide).

In the continuum of P3s, WSDOT sees the state as firmly in the middle, comfortable with approaches going as far as "design-build" contracts which unite those two phases for increased efficiency and savings (such as for the newer southbound span of the Tacoma Narrows Bridge,) but shying away, so far, from more full-on P3s such as design-build-finance-operate-maintain lease arrangements with private partners. (5th slide)

In the U.S., P3s are seen in a more limited function, as an alternative finance mechanism, while "Canada views P3s more holistically" in terms of full life cycle project costs (2nd to last slide, "Conclusions").

Therein lies a telling point. Private debt adds costs to a project more than state-issued debt, but other savings during a project's full life cycle, such as from privately-managed operations and maintenance of a toll road or transit line for several decades, can compensate. Add to that the value of an asset returned to public management in turn-key condition after an operating lease expires, replete with the "12 secret spices" recipe for smooth going from industry-leading experts.

Then there's the real show-stopper: the hefty economic and social benefits of getting something built years sooner - including the associated savings in congestion avoided, business opportunities not lost, and idling vehicle emissions reduced.

All told, P3s can pencil out well. It depends on the project specifics; and how thorough and honest is the calculus.

At least as important in Washington state as freer rein for private partnerships in financing, operating and managing transportation assets, is that such a liberalized P3 policy would signal a new openness to finance innovation in times when system needs far outpace available public resources.

But even vaunted "innovation" is only as good as what it gets. Surface transportation systems emulate smaller entities and organisms. They must adapt and improve, or be eaten.

Chicago's New Parking Deal Accents Tricky Terrain For P3s

Matt Rosenberg

Transportation public-private partnerships should not be used to plug holes in a government budget. The proceeds should be directed to transportation capital investments. But the Chicago Tribune reports that under a new agreement starting January 1, the City of Chicago will lease for 75 years its 36,161 metered parking spaces to a Morgan Stanley partnership for $1.1 billion, with the proceeds going, variously: to patch the city budget through 2012; to a special fund to offset city revenue shortfalls tied to the economic downturn; to a special reserve fund; and to city programs for low-income individuals. I won't say this sort of, ah, creative attempt to breach city fiscal gaps smells exactly like the thousands of dead alewives that used to wash up on the 57th Street Beach in Hyde Park when I was growing up in Chicago, and giving tours of the captured German U-Boat at the Museum of Science and Industry. But it's sure not anywhere near what you'd call "best practices," either.

There are two upsides to the deal, which are not uncommon to P3s in transportation. A private management team with industry expertise will oversee the metered street parking system, including maintenance and operations. And a scarce public resource will be priced more competitively with private parking, driving more consumers to consider other options - like taking transit or ride-sharing, versus driving alone.

Back in the day, on temporary hiatus from college, I drove a limo for a service owned by a mean, badly-toupeed guy named Ribaldo - and used to pride myself on finding street parking for the beastly Caddies and stretch Lincolns in downtown Chicago anytime anywhere. But those days are as distant as a solvent federal gas tax trust fund.

As we've made clear repeatedly at this blog and elsewhere, we're all for properly structured public-private partnerships in surface transportation. P3s and heftier user fees through time-variable tolling, increased transit fares, and perhaps even a vehicle mileage tax will have to cover an increasing share of the infrastructure costs in major metro regions struggling to catch up with growth and beat congestion. The U.S. is improving but still far behind Europe, Canada and Australia in recognizing the robust life-cycle cost savings, accelerated project completion, and facility management benefits of transportation P3s.

However, public and political skepticism toward transportation P3s abounds, and one reason is that they can be used as cash cows to patch budget shortfalls resulting from poor management of public monies. For coherent, sound public stewardship, the lion's share of upfront proceeds to the government lessor in a P3 need to go back into the sector from whence they came, to meet high-priority infrastructure needs. Future cost avoidance and debt resolution may also be considered good cause for transportation P3s, but this "escape hatch" rationale has limited political appeal.

Chicago has been in the forefront of U.S. transportation P3s - a canary in the coal mine, if you will. The 2006 Chicago Skyway lease deal brought $1.8 billion to the city. As reported by the well-regarded magazine Illinois Issues, the proceeds went to: paying off city and Skyway debt; long-term investment reserves; mid-term investment with earnings used to help plug city budget holes until 2011; and after-school programs, parolee job training and services. Whiff of alewives, the prequel.

Another deal signed in 2006 had a better fragrance, fiscally. For $563 million the city entered a long-term lease with a private partnership to manage its underground parking garages on a long stretch beneath downtown city parks property including Grant Park - where for 25 years the world's largest free blues festival has been held, featuring such legends as Pinetop Perkins amidst a sea of liquid-fueled revelry. One of the garages was relatively new, but the rest were older, and one badly needed repairs. And parking garage management was not something at which the city excelled, versus, say, blues festivals. Better still, funds reaped from parks department properties went into new capital development for the city parks system. Then-City of Chicago Chief Financial Officer Dana Levenson told Parking Today:

"When an investor is waving a large check in front of you, it's going to have some influence....The city was on the hook for the debt service...payments that the garage revenues were servicing. What this did was that if you took the price that was paid against the amount of debt that was outstanding, there was a significant amount of excess left over, not to mention the $65 million or so in cost avoidance ... for the East Monroe Street Garage repair and rebuild.

You take that excess above and beyond the debt and you apply it to a capital budget for city parks throughout the city, not just downtown but throughout the neighborhoods. It was a rather elegant solution to a problem that we were having in terms of city parks that needed a capital budget and didn't have one before that.

.....Ultimately, for any municipality looking at an asset like this, they have to think about, first and foremost, not that they are going to get a lot of money but what they are going to use the money for. The municipality that takes the money and plugs their budget hole is doing itself and the taxpayers such a disservice, because the following year they will have the same budget hole and then some and they will have nothing to show for it."

The city's P3 deal this fall to lease Midway Airport to a private operator yielded $2.5 billion. As the Chicago Tribune noted, under a special state law, ninety percent of the remainder, after debt resolution, has to be apportioned to infrastructure projects, or public employee union pension funds.

The latter are an emerging, and important source of capital for P3 infrastructure investments, which can earn steady long-term returns for pensioners. But many city governments - not to mention major U.S. automakers - have over-promised and under-delivered to employee pension funds. Sales of public assets should not be used to stanch that bleeding for a few moments.

In addition to exacting contracts with private partners to protect the public interest in locales where the political environment actually encourages P3s, what would make sense are comprehensive laws in still more U.S. states, removing barriers to transportation P3s. These laws should also require that all proceeds from the lease or sale to private operators of existing, publicly-owned transportation assets be reinvested in transportation. Any operating revenues which might be apportioned to the government owner of the leased facility, should be used similarly.

Put another way: don't rob Peter to pay Paul. Peter in this case representing those who pay every day with time and money to use inadequate, congested surface transportation systems in our country's major metro regions.

RELATED:

"A State Agency Eyes Public-Private Transportation Funding," Crosscut.

"How To Pay For The Roads Still Travelled," Crosscut.

"Toll-booth-free Tolling On SR 520 and I-90," Crosscut.

"A Discriminating View Of Public-Private Partnerships," Cascadia Prospectus.

There's No Free Ride Anymore

Matt Rosenberg

I had a telling conversation with an old friend several months ago, a devoted environmentalist who's a community college biology teacher living south of San Francisco in a pleasant small town abutting the Pacific. I don't recall how it came up, but she declared, "We've just got to get more people out of their cars." Then came a pregnant pause, followed by her admission that of course, because of where they lived and worked and their packed daily schedules, she and her husband drove themselves and their children everywhere.

I've been thinking about this lately because, well, the roads are still chock full of cars and trucks, and despite an uptick in transit and bicycle use, traffic is still congested here in metro Seattle, and metro regions nationwide. Meanwhile, U.S. surface transportation will needs require some $12.5 trillion (yes, with a "T") over the next 50 years according to a landmark federal report issued this year. But the way we fund such projects is broken, relying too much on dwindling by-the-gallon gas taxes due to improved fuel efficiency, and ever more difficult local and regional sales tax hikes.

The historical trends show whopping increases in U.S. miles driven and gasoline supplied. We've gone from 2 million barrels of gas a day in the 1950s to more than 9 million per day by 2007, the U.S. Energy Information Administration reports. The U.S. Bureau of Transportation Statistics reports that U.S. vehicle miles travelled (VMT) multiplied more than fourfold from 1960 to three trillion in 2006. Though the term "highway" is sometimes attached to VMT, they are estimated monthly for all U.S. roads and streets, drawing from data gathered at 4,000 continuous traffic counting locations.

What of the future?

BTS projects that VMT will grow by more than half the current level to 4.7 trillion in 2030, while U.S. population grows about 23 percent from 2005 to 2030. In Washington state, annual VMT nearly doubled between 1980 and 2007, and is projected to rise another 54 percent by 2030.

In the four core counties of metro Puget Sound, daily VMT has more than doubled between 1980 and 2007.

During the oil and gas price run-up earlier this year, drawing considerable media attention were marginal decreases, of a few percentage points only, in monthly and calendar year-to-date U.S. VMT compared to a year ago. Even a slight dip in VMT draws notice in a time when some celebrate the end of suburbia and advocate "carectomies."

One can hope. These days, it seems that every seminar addressing surface transportation and every green "visioning" session includes earnest discussion of how to "reduce vehicle miles travelled." To the skeptic, the imperative sounds like one of those wishful commands sported on the seven-bumper-stickered Subaru Outbacks endemic to Seattle, like "World Peace Now," or "End Poverty." It's an appealing idea, sure. But the devil is in the details.

In the meantime, there's still a pressing need to deal with roadway and bridge wear and tear, and increased congestion resulting from exponential VMT growth during a post-Interstate-building era when transportation investment chronically lagged. One reminder comes via veteran Chicago Tribune transportation reporter Jon Hilkevitch, who this month wrote that despite a five percent regional drop in VMT, traffic congestion there has remained high. One big reason:

Roadways were already so badly saturated with traffic before the recent spikes in fuel prices that the decline in miles traveled hasn't significantly loosened the gridlock.

Most daily trips in metro regions actually aren't to and from work, a point often overlooked. But many of those trips by their nature are less likely to involve transit. If you're going to Costco or Lowe's or Target, to your in-laws in Olympia or friends in Lynnwood, to curriculum night at your kid's school across town, or your cottage on Whidbey Island, you're most likely to be driving. Of total daily trips in the four-county core of the Puget Sound region, only four percent were via scheduled public transit, according to a 2006 Puget Sound Regional Council survey (second paragraph of p. E-6, here).

Work-related travel is somewhat more predictable and there's more room, potentially, to change behavior and actually get some people out of their cars, some of the time. But progress there had been scant. The BTS also reports that - based on federal surveys and Census data - between 1989 and 2006 the percentage of U.S. workers for whom the principal means of transport to work was solo driving, remained at 76. Those workers usually carpooling declined very slightly, to 10 percent of the workforce over the same 17-year stretch, and those usually taking public transportation decreased from 4.6 percent to 4.3 percent. Walking, biking, taxi and "other" principal means of conveyance to work grew from a combined 4.7 percent of the workforce in 1989 to 5 percent in 2006, while telecommuting increased from 2.6 percent to 3.9 percent.

Numbers for 2007 and 2008 will likely show some decrease in solo driving to work, and a shade more transit use nationally, but without drawing up a whole new landscape, prospects remain iffy for reducing VMT or merely curtailing its growth.

As politically unpalatable as it seems now - and that would be "very" - some experts believe within a few decades we'll be tolling not just managed highway lanes with time- or congestion-related variable fees, but tolling every mile travelled, via GPS devices planted on most if not all vehicles. "VMT tolling" or "mileage fees" have already been studied in Puget Sound and Oregon, and imposed on heavy trucks in Germany. This month, the Atlanta Regional Commission mused publicly about the unsustainability of the federal gas tax and the attractiveness of mileage fees. The Atlanta Journal-Constitution reported:

The board of the Atlanta Regional Commission is studying the idea of eventually dropping the federal gas tax, the main source of transportation funding, as it looks for "sustainable" transportation funding. The gas tax doesn't rise with inflation and gets weaker every year. The ARC, metro Atlanta's planning agency, hasn't approved a final statement on the issue and has no authority to implement it. The agency is giving its recommendations to Congress, as it begins to look toward renewing the multiyear federal transportation funding law.

The gas tax is charged as cents-per-gallon instead of cents-per-dollar, so the same size tank always reaps the same amount of money in taxes, no matter how much the price of gas goes up. In addition, as people get more fuel-efficient cars, they use less gas, and so pay less gas tax. The ARC suggests more research on one of the more talked-about ideas, an odometer charge, or vehicle miles traveled. Such a charge would tax drivers by the amount of miles they drive. The idea is for drivers to pay for the wear they put on the roads. Depending on how sophisticated the tracking is, it could send the tax paid directly to the jurisdictions whose roads the driver uses. To avoid getting weaker every year, as the gas tax does, it would have to be designed to rise with inflation.

For now, to untie Atlanta's grimly congested traffic, the state transportation department is pushing a $400-million-plus plan to convert the region's 44 miles of carpool lanes to electronically-tolled high-occupancy and toll (HOT) lanes, which are open to carpoolers and transit for free, and to solo drivers for a variable fee depending on time of day or congestion levels. Nearly half of the spending would be for added bus service and park-and-ride lots along the HOT lane corridors.

Closer to home, the rationale for considering mileage fees was also well-stated by Oregon officials. A report from ODOT to the state legislature makes the case for advance planning even if political acceptance isn't an immediate prospect.

The first question people ask about the pilot program for mileage fees is, "Why are you doing this?" The answer is simple. Oregon is preparing for the day when a substantial number of motorists are driving highly fuel efficient vehicles and no longer paying enough gasoline taxes to support their road system.....that day may come about ten years from now. No one in Oregon proposes immediate implementation of an electronically collected mileage fee. Investigation and preparation for a new revenue system, however, is warranted because of the long lead time necessary for any change.

The Los Angeles Times, in an editorial last month titled, "America's Broken Infrastructure," provocatively argued:

The vehicle mileage tax is probably the answer. Rather than taxing people based on the amount of gas they buy, it would tax them based on the number of miles they drive. Most likely, this would be done by installing tamper-proof devices in vehicles that would transmit mileage information to a tax office, though the data also could simply be confirmed by a certified mechanic. Some states are performing pilot studies on mileage taxes, but they're a long way from having all the bugs worked out - there are serious technical and logistics questions, not to mention privacy concerns (many people are uncomfortable beaming information about their driving habits to the government). Nonetheless, a mileage tax makes sense because it rightly puts the burden for building and maintaining roads on the shoulders of those who use them, even if they happen to drive high-mileage cars.

I'll admit to deep ambivalence about tolling every mile travelled. It's not about the privacy concerns, which to me seem exaggerated. But mileage fees feel like pervasive fiscal over-reach, no matter how reasonable the peak-hour charges and how meaty the off-peak discounts which would need to be part of any such package. I always eschew a car rental agreement that includes any kind of mileage fee. So I'm not supporting mileage fees here, and Cascadia Center has made no such endorsement either. But, we have hosted public conversations on the topic, and the national dialog on mileage fees will continue to gain impetus because tax funding for surface transportation will need to be leavened more and more with a variety of updated pay-as-you-go strategies.

Whatever one's feelings - and they are likely to be intense - mileage fees with off-peak discounts, and a robust but revenue-neutral national carbon tax could drive increased off-peak travel, greater transit usage, and tele-work.

How soon any of this will happen, if ever, is unclear. What's more clear now is that we like living in the suburbs and that driving is often a necessity. In the suburbs, housing costs are less, though bargains have crept toward the edges, which in turn increases VMT. Suburban public schools aren't always ideal, but are much less problematic than urban public schools. More and more jobs are dispersed across metro regions, in varied suburban locales. Meanwhile, the vision of "living close to work" is reality only for a lucky, small slice of the populace.

Puget Sound voters will get a chance to weigh in on a $17.9 billion second-phase Sound Transit proposal next month that would extend the starter north-south light rail line in both directions and east, and add to existing ST express bus and commuter rail service. Other regional needs include replacing the shaky Alaskan Way Viaduct and SR 520 bridge, fixing dangerous US 2 in Snohomish County; revising tangled interchanges and repairing cracked pavement on I-5 in Seattle (a crucial but unfunded $2 billion job that's rarely discussed); and building key missing links in Pierce County, such as the Cross-Base Highway and the SR 167 connector to the Port of Tacoma.

Funding the roads piece, and any major additions to the regional transit infrastructure beyond the pending "Sound Transit 2" plan, will be daunting. Regional taxpayers here aren't a bottomless well. And the federal role in surface transportation funding has been heading into permanent decline, as Atlanta's planners and the L.A. Times both pointedly note. The federal gas tax hasn't been raised since 1993, and no amount of Beltway jabber and finagling will produce any substantive hike in it soon, or quite possibly ever again. The federal gas tax trust fund was poised to land about $4.3 billion in the red by last month's end, but as Logistics Management reports, Congress threw the troubled account a one-year life preserver of $8 billion from the U.S. Treasury General Fund.

State gas taxes, which often support state bonding for transportation projects, are losing buying power, too. Oklahoma's road and bridge bonds are getting pricier because of tighter credit. Connecticut couldn't find a refinancing deal for highly-rated transportation project bonds worth nearly half a billion dollars, a never-before challenge for a state with serious surface transportation needs. Syndicated columnist Neil Pierce writes in the Seattle Times, "The Wall Street fiscal crisis effectively shut the state-local government sector out of borrowing." Well before that storm hit, state transportation project budgets had already been smacked by sharply rising costs for construction materials and equipment fuel, plus a tightening global labor market. India, China and other fast-developing nations are on a global road building binge.

It's true that a proposed U.S. infrastructure bank could raise some $60 billion over 10 years for deserving projects. That'd be a start, but as Congressional Quarterly reports, the National Surface Transportation Policy and Revenue Study Commission in a major report issued earlier this year said $225 billion per annum is needed for the next 50 years for repairs and upgrades to meet future needs. That's $12.5 trillion. The commission noted that current expenditures are less than 40 percent of their recommended yearly nut, and that future funding will need to be closely tied to cost-benefit analyses and performance-based outcomes. Expect some major wrangling next year when the new Congress takes up reauthorization of the surface transportation bill, which is rather hopefully named the Safe, Accountable, Flexible, Efficient, Transportation Equity Act, a Legacy for Users - or one by the American Society of Civil Engineers that just to get moving on vital projects, the nation's infrastructure needs an infusion of $1.6 trillion over the next five years.

A promising development, as much or more for its cost-saving peak-hour rationing incentives as for its revenue-raising potential - is variable-fee highway tolling - now spreading across the U.S., often in so-called HOT lanes. A HOT lane pilot project is underway on SR 167 in Puget Sound, and a federal grant to help fund the SR 520 bridge replacement requires state legislative approval of pricing on 520.

Whether or not Puget Sound decides to move toward regional variable-fee highway tolling, there's another important tool we're going to be hearing more about: public-private partnerships, or P3s, which help share taxpayer risk and dramatically speed up project delivery. They're not a solution for every occasion, but deserve leeway to support more of our region's and nation's staggering surface infrastructure needs. P3s are widespread in Europe, Canada and Australia, and now beginning to gather steam stateside.

High-profile Democrats such as Pennsylvania governor Ed Rendell (pictured at right), House Speaker Nancy Pelosi, Los Angeles Mayor Antonio Villaraigosa, and Chicago Mayor Richard M. Daley are all supporters. The new, Democratic Governor of New York David Patterson is interested in transportation P3s, too.

P3s need not involve the sale of public assets such as highways and bridges or transit systems, but rather the leasing of such facilities, which then yield toll or fare revenue for the private operators. These operators are not reviled foreign sovereign concerns but either transit service firms, or special "private" infrastructure investment groups which may be headquartered in Europe or Australia, but are increasingly bankrolled by U.S. public employee union pension funds or those of building trades unions. Those funds have lost some value in their stock portfolios lately, but they're still flush and see infrastructure as good risk diversification for their long-term obligations to pensioners.

The Washington State Investment Board, representing a slew of state employee retirement funds, plans to invest 5 percent of its sizeable portfolio in infrastructure. The board explains here (p. 2) that it has come to view "tangible asset types" (other than real estate and) including infrastructure as capable of producing "long-term" and "high-quality" revenue streams. A number of others public employee union pension funds in North America have invested in infrastructure, and more have announced similar plans.

They tend to go with the private infrastructure investment groups because directly buying state highway bonds doesn't meet their fiduciary duties to pensioners. Interest earnings on state bonds are tax-exempt, so interest rates are correspondingly a bit lower. Yet public pension funds are already granted a tax exemption on interest earned, so unlike individual investors they have no financial incentive to go for the state bonds. In fact, they have a disincentive, as Robert Poole of the Reason Foundation explains.

For the WSIB and most other public-employee pension fund managers, investing in privately-held companies is simply a part of smart portfolio diversification and risk management. As of last year, WSIB had already earned $9.7 billion in private equity profits since 1981 and had one-seventh of its portfolio in private equity.

Can P3 investments that are paid off in toll revenue still prove viable as worries persist about gas prices and road travel volume? In a word, yes. Travelers value their time most of all; private vehicles are usually more direct, flexible and faster than transit; and tolls for managed lanes guaranteed to maintain traffic flow of 45 mph or higher yield a valued benefit, like housing, utilities and groceries. This perspective cuts across income levels. UCLA and USC researchers in a case study released this year found a sizable percentage of lower-income drivers used HOT lanes and that it was less regressive in terms of tax policy for them to pay related tolls versus sales taxes for transportation projects.

Fears tend to be overblown about runaway toll rates to cover P3 finance costs and profit margins. Governments retain control over P3 toll rates and transit fares. The contracts between private partners and governments are long-term, usually 35 years or more. That's plenty of time to make the margins. In the meantime, P3s deliver transportation projects sooner rather than later or not at all, thus providing quantifiable economic benefits that are rarely counted by critics.

A slew of P3s and traditional-procurement projects studied by The University of Melbourne showed the P3s were up to 30.8 percent more cost-efficient from inception; that cost overruns were nearly non-existent for P3s; that they were completed faster, even when large; were far more transparent; and their benefits tended to be underestimated because the hefty value to the public of quicker project completion and integrated professional management aren't part of the present calculus.

Cal Marsella, the Executive Director of Denver's Regional Transportation District, which is now pursuing a P3 bid process (and, yes, perhaps a small sales tax hike) to complete an over-budget regional light rail program within the original timeline, states in this presentation that P3s can save 10 to 25 percent in the design-build phase and 10 to 30 percent in the course of operations and maintenance.

This approach to P3s emphasizes bundling of design, construction, operations and maintenance services provided by private consortiums of industry-leading transportation firms. The payments occur over time and can be pegged to strict contractual performance standards. Exemplified in British Columbia, it's a strategy well-suited to controlling cost overruns during construction, meeting construction deadlines, limiting operations and maintenance costs after project delivery, and ensuring good service. Partnerships BC has employed design-build-operate P3 contracts, os some variation thereof, to construct a new rapid rail line to the airport and the suburban center of Richmond, to rebuild the treacherous road north to Whistler before the 2010 Winter Olympics, and to develop an electronically-tolled bridge across the Fraser River in Vancouver's east suburbs.

The American Public Transit Association in a white paper on public transit P3s says they're no silver bullet but need to be encouraged as part of the financing mix and as a good management tool. Europe, Asia, Australia and South America are far ahead of the U.S. in implementing public transit P3s, APTA says, although Houston, the Bay Area and Denver are highlighting the approach. Private investment in transit-oriented development is a related tack and should be encouraged, according to APTA, by working with developers to learn their needs and by encouraging value-capture strategies pegged to new development around transit stations. To facilitate broader consideration of highway and transit P3s, APTA's P3 task force has drafted model legislation for state governments to consider.

Another organization, the National Council For Public-Private Partnerships, holds a special conference this week on transit P3s, including officials from the regions of Boston, Miami, Atlanta, Dallas and Charlotte, as well as federal figures and private firms.

While the U.S. struggles to fund it surface transportation infrastructure backlog, and shift the balance from fossil-fueled vehicles to greener alternatives, the world is undergoing a vehicle population boom. A New York University study projects total vehicle stock will more than double globally between 2002 and 2030, with the highest annual percentage growth rates in vehicles per 1,000 population in Asia and South America.

BTS data show that since 1960, the number of passenger vehicles in use globally has about quadrupled, while the U.S. share of that total has decreased more than five-fold. Global commercial truck population is five times greater over the same period, with the U.S. share holding steady at less than a third.

However, in the U.S. we tend to drive longer distances and use a disproportionate share of available fossil fuels. The holy grail in the auto industry is substitution of renewable-source electricity for fossil fuels, in "flex-fuel" plug-in hybrid cars. The vision is that they'll be able to run not only on clean electricity (itself a major undertaking) but also net-green second generation bio-fuels which don't require acres of food-producing farmland to grow.

GM, Toyota, Ford and Chrysler are among the automakers focused on bringing plug-in electric flex-fuel hybrids to market in the next few years, with lithium ion battery packs. Those haven't been fully debugged yet, but engineering teams are working hard to do so. Congress has passed a tax exemption of up to $7,500 per vehicle for plug-in buyers, and large government and corporate fleet purchases would allow manufacturers to scale up production for the masses.

There are still reasons environmental and financial to try to engineer boundaries on growth of vehicle miles travelled. A good framework was provided last month in Redmond by Microsoft's Chief Environmental Strategist Rob Bernard at Cascadia Center's "Beyond Oil: Transforming Transportation" conference. (TVW video of Bernard and full transcript of his remarks here).

Bernard set out a hierarchy of descending transportation preferences that he calls "zero miles, shared miles and efficient miles." The first priority entails schedule-juggling and trip avoidance through tele-work from home, with small meetings as needed in locales near workers' home bases. More than a few Microsoft employees have discovered they can meet near home at a coffee shop rather driving to Redmond, Bernard said. An astounding 40 percent of the workforce at British Telecom (a Microsoft client) work from home regularly, Bernard said.

With current virtual conferencing tools, and an emphasis on "deliverables" from tele-workers, many other employers - albeit not those in fields such as manufacturing, construction and retail - could raise their percentage of tele-workers. One wonders: To further reduce congestion and vehicle miles travelled, what about more "distance learning" in public education? It need not be the domain largely of older students. A federally-funded report looked at a range of studies on distance learning programs in grades six through twelve and found they were as effective as classroom instruction (see p. 16, here).

"Shared miles" would cover public transit but at present, transit routes here just aren't convenient for that many people, said Bernard. He evangelized for an alternative of matching ride-sharers on the fly through smart carpooling, using networked real-time data on the shifting locations and schedules of riders. The same basic principles could help better consolidate freight shipments, said Bernard.

"Efficient miles" entail alternative fuel breakthroughs, and more of the real-time traffic data purveyed by companies such as the Microsoft spin-off Inrix, of Kirkland, to help drivers optimize routes and departure times.

As far as behavior change around driving, there's a long way to go. If we were constantly reminded of the cost to the infrastructure every time we used it, would that change our actions enough to make a difference, a "zero miles more often" difference? It's not unimaginable.

For surface transportation funding, the federal teat is running dry. States and especially regions will shoulder the brunt in coming decades as we try to catch up before the rising tide of population threatens to overwhelms us. So we're going to have to do a few things differently. We can start sooner, or we can start later. But the longer we wait, the higher the price.

Beyond The Gas Tax

Ken Orski

"We must respond to the reality that the gas tax, the traditional source of revenue for transportation investments at both the state and federal level, is not expected to keep pace with transportation needs in the future." 

With these words, New York Transportation Commissioner Astrid C. Glynn ( pictured below, right) welcomed participants to a  New York State DOT-sponsored symposium, "Beyond the Gas Tax: Funding Future Transportation Needs."

We moderated a panel on "Options Beyond the Gas Tax." An edited text of our remarks follows. 

* * *
     
A modest boost in the federal gas tax - and only a modest increase has a chance of passing muster with the congressional tax writing committees and obtaining a filibuster-proof majority support in the Senate - will be consumed by ever-growing demands for maintenance and preservation  of the Interstate system and other parts of the highway network. It will leave little revenue to invest in new facilities. The federal program contributes only about 40-50 percent toward the capital cost of transportation infrastructure. The remaining 50-60 percent has traditionally come from state and local budgets. There is no guarantee that states will be able to meet their part of the bargain through local tax increases - be it gas or sales tax.

States will be obliged to look for new sources of capital. Where will the money come from? At this point in time the credit markets are virtually frozen. But these conditions will not last forever. Eventually, liquidity in the banking system will be restored and infrastructure asset financing will resume, albeit on more conservative terms. 

Transportation Funding Needs Likely To Exceed Bonding Capacity

Many states will be foreclosed from borrowing funds in the municipal bond market because they will run into a statutory debt ceiling or because of citizen opposition to further bond indebtedness. At the very least, borrowing in the municipal bond market will become more costly. Even after the market returns to more normal conditions, the cost of borrowing will rise because the structured-finance instruments that formerly made borrowing less costly, will be replaced by the more expensive old fashioned  fixed-rate bonds. On top of that, the sheer magnitude of the need for new infrastructure is likely to overwhelm the bonding capacity of most state and local governments.

A purely federal-centric approach - be it a gas tax increase or a federal capital budget, or even a combination of both - cannot by themselves make up for decades of under-investment and meet future demands for increased transportation capacity.

Hybrid Funding Model To Emerge

What we are likely to end up with instead is a hybrid funding approach. Part of it will be a modest increase in the federal gas tax. Another part may involve some kind of a new federal financing initiative - most likely a National Infrastructure Bank. But this will still leave a major portion of future additions to road capacity to be financed by toll revenue and the private sector. Private investment  will most likely take the form of project-based private toll concessions. In New York State, the new Tappan Zee Bridge would be a prime candidate for such a concession.

Congressional Concerns On P3s Can Be Met 

There has been some speculation that private concessions might run into opposition on Capitol Hill when  the federal surface transportation program comes up for a new authorization next year. But recent statements by Congressman Peter DeFazio(D-4th, Ore.), chairman of the influential House Highways and Transit Subcommittee, suggest that congressional lawmakers will not object to private toll concessions for new projects so long as PPP agreements contain adequate safeguards to protect the public interest. These safeguards could involve a cap on toll increases (or on the rate of return), prohibition on noncompete clauses, revenue sharing requirements, recapture of excess profits, prohibition against diversion of funds and limits on length of concession agreements.

While the age of highly leveraged deals such as the Indiana Toll Road concession may be over, there are still billions of dollars  in domestic and foreign infrastructure funds waiting to be invested in transportation facilities. Toll roads appeal to long-term investors such as pension funds because they generate strong demand even in times of slower economic growth and produce steady and predictable cash flow relatively unaffected by economic downturns. And pension funds require stable, income-oriented investments to match their long-term liabilities and payout obligations.

Given the current volatility of the equities market, the low interest rates of the government bond market and the risky nature of investments in corporate credit instruments and real estate, infrastructure is now seen as a "safe haven" for long-term investors, a senior bank official told us. Financial News calls it "a rare bright spot in a tumultous market."

Again, I am aware of the current decline in toll revenue (caused by reduced VMTs) which makes investment in toll facilities less attractive, but I consider this a cyclical phenomenon tied to a recessionary economy. In the long run, toll roads have lost none of their revenue earning potential.

Vehicle Mileage Tax Eyed, In Long-Term
German Precedent - Trucks

In the long-term, we must find the means not just to supplement the gasoline tax but to replace it with a more stable source of revenue. The most likely candidate appears to be a mileage tax (VMT fee), i.e. a fee based on trip length and possibly vehicle size and weight. Such a revenue system would reflect more closely the actual usage of the road system and would not rely on taxing a commodity whose use we are actually trying to discourage. It is possible that a VMT fee will be phased in progressively, with commercial trucks being the first to be subject to it. With many trucking concerns already using the Global Positioning System to monitor and track their trucks' movements, a mileage fee for commercial trucks could be introduced relatively quickly and with fewer complications.

Precedent for truck VMT fees already exists. A satellite-based mileage fee system for heavy trucks, called TollCollect, has been operating successfully in Germany since January 2005.  There are currently 640,000 vehicles equipped with TollCollect transponders. Last year they generated $5.15 billion in fees. But a mileage-based revenue system in this country is for the long term. Estimates range between 10 and 25 years before a VMT tax is fully tested and ready to be implemented nationwide. In the meantime, we must devise other ways to supplement the inadequate stream of revenues from the gas tax. 

Washington State Investment Board Eyes Infrastructure Projects

Matt Rosenberg

The need for public-private partnerships to help rebuild the nation's overburdened and underfunded surface transportation network is growing. Even before gas prices spiked and gas tax hike prospects dived, the Washington State Transportation Commission was calling for P3s. They did so in this January 2007 report, and then again here.

The January, 2007 report states that P3s should be closely examined as a potential strategy for completing planned major projects including the SR 520 floating bridge replacement, I-5 Columbia River Crossing, the State Route 167 extension to the Port of Tacoma, I-90 Snoqualmie Pass improvements, the State Route 704 Cross-base Highway in Pierce County, improvements to the state ferry system's busiest dock, in downtown Seattle, Colman Dock, and for other ferry terminal, freight rail capacity and transloading improvements. Two other P3 candidates would be the unfunded and badly-needed $2 billion worth of pavement and interchange work on I-5 in Seattle; and treacherous, deadly U.S. Route 2 in Snohomish County, also in need of about $2 billion worth of work. That's money which again, the state doesn't have.

Legislators are taking notice. At Cascadia Center's West Coast Tolling and Traffic Management Workshop in late June of this year, Washington State Senate Majority Caucus Vice-Chair Ed Murray of Seattle (D-43rd, pictured below, right) voiced his strong support for surface transportation P3s. Public radio station KPLU-FM reported:

ANCHOR: "Western Washington is coming up tens of billions of dollars short of what's needed for highway improvements, bridge replacements and transit infrastructure. Tolls and more involvement by the private sector were among the solutions discussed at a workshop in Seattle Thursday....

REPORTER: "The gathering, sponsored by the non-profit Cascadia Center, brought together public officials, entrepreneurs and policy-makers, wrestling with the region's growing transportation woes. Democrat Ed Murray is vice-chair of the senate transportation committee in Olympia. He told the group that traditional sources of transportation funding are drying up."

STATE SEN. ED MURRAY: "There is simply not enough revenue to do what we need to do, in this state, anyway, for education, for health care, and to use the amount of money we would need to use - $50 billion - to finance a transportation system" (ed. - in Central Puget Sound).

REPORTER: "Murray says government is likely to move toward more contracts with private sector businesses to build and operate toll highways and transit systems....

Those, and bridges or tunnels may come to mind first when contemplating transportation P3s. But other sectors, such as maritime cargo, are stimulating public-private deals, too. Freight rail - expected to double in the U.S. over the next 30 years - is also ripe for P3s. The Seattle Times reports today the non-profit research group Rand in a new study estimates $148 billion in needed improvements to the U.S. freight rail infrastructure; and adds that a third of that will need to be covered either by P3s or tax incentives.

There's a spotlight on the whole arena. Foreign- and domestic-based private infrastructure investment funds backed by U.S. public employee and building trade union pension funds have been buying into North American transportation infrastructure projects more and more in recent years. In Europe, Canada and Australia, transportation P3s are already well-established.

In article published just yesterday, the New York Times mentions several of the union pension funds which are now or are planning to invest in surface transportation infrastructure. The list includes the Washington State Investment Board, which has $81.9 billion under management. The board invests on behalf of 17 funds for public employees including teachers, other school workers, law enforcement officers and firefighters; and on behalf of another 21 funds supporting industrial insurance, higher education, developmental disabilities and wildlife protection. Here's the NYT:

Some American pension funds see an investment opportunity. "Our infrastructure is crumbling, from bridges in Minnesota to our airports and freeways," said Christopher Ailman, the head of the California State Teachers' Retirement System. His board recently authorized up to about $800 million to invest in infrastructure projects. Nearby, the California Public Employees' Retirement System, with coffers totaling $234 billion, has earmarked $7 billion for infrastructure investments through 2010. The Washington State Investment Board has allocated 5 percent of its fund to such investments.

Some foreign pension funds that jumped into the game early have already reaped rewards: The $52 billion Ontario Municipal Employee Retirement System saw a 12.4 percent return last year on a $5 billion infrastructure investment pool, above the benchmark 9.9 percent though down from 14 percent in 2006.

Sorry, but I'm not seeing Gordon Gecko here. Still, it's plainly worrisome to some voters - and those who must account to them - that a private interest with a profit motive, rather than a solely public entity with no such incentive, would manage transportation assets for a state, regional or local government.

The choice is often between getting a vital project built sooner versus much later (and at a far higher cost), or not at all. With additional capital available from "private" funds, we can begin again to keep pace. These deals are typically not "make-a-quick-buck" schemes. The public sector retains ownership of the facility and control of tolls, rates and fees, over a payback period of 35 to 40 years, or longer. Performance standards for the private partners - who often operate and maintain the facilities, once built - can be baked into the contracts.

In the meantime, more than half the battle has to do with reality versus calumny around "private, foreign" infrastructure funds, as Leonard Gilroy of the Reason Foundation and Matthew J. Brouillette of the Commonwealth Foundation point out in this Philadelphia Inquirer op-ed:

...the New Jersey Teachers' Pension Fund is a major shareholder in the Spanish toll-road operator Cintra. Australia-based Macquarie, one of the biggest international toll-road firms, has received significant investments from the Mid-Atlantic Carpenters Pension Fund and the Midwest Operating Engineers Pension Fund. Therefore, restricting the participation of foreign firms actually threatens the investments of hard-working Americans - union members, public employees and individual investors alike.

When our friends, family and neighbors are invested in these companies, are they really foreign?....(states) should welcome companies interested in creating job opportunities and investing billions of dollars in the state. This is the reverse of outsourcing - it's "insourcing" - and it's good for the economy.....Those fostering foreign fears need a reality check. We drive foreign cars and strap our kids into foreign-made car seats every day. Most people watch the news on foreign-made televisions and surf the Internet on computers filled with foreign-made parts. We routinely fly on foreign-made Airbus planes. But somehow we don't want to drive on asphalt poured by a foreign company?

The Washington State Investment Board's plans are another indication that transportation P3s are seen not only as in the public interest due to the mobility and economic gains; but that Regular Joes and Janes right here on our home turf are prominent among the investors who reap the rewards.

Funding is just one piece of the puzzle right now in transportation. At the same time that infrastructure needs are demanding creative solutions, the push is growing to move beyond oil in surface transportation, toward new generations of electric-powered and flex-fuel cars, something that Anne Korin (left) of the Set America Free Coalition explained well on the Dave Ross Show last Friday on KIRO-AM 710 in Seattle, appearing with our Senior Fellow Steve Marshall and Chelsea Sexton of Plug In America. They'll all be speaking at Cascadia Center's "Beyond Oil: Transforming Transportation" conference Sept. 4 and 5, co-sponsored with Idaho National Laboratory, Microsoft, USDOT and WSDOT. There's a stellar agenda, and space is still available. Register here, directions here. To get a sense of the game-changing mindset, here's a current Wired profile on one our "Beyond Oil" speakers, the electric car infrastructure champion Shai Agassi of Better Place.

Whether the issue is funding or fueling surface transportation, dramatic change isn't a nice-to-have. It's a must-have.

"A Coalition Of Change Agents At The State Level" Will Boost P3s

Ken Orski

Funding infrastructure with private capital, a practice widely used abroad, has had its tentative beginnings here at home, but its domestic long-term future is still clouded. We interviewed a diverse group of individuals of varying political persuasion, on public-private partnerships in U.S. surface transportation. They included state legislators, congressional staffers, senior U.S. DOT officials, state and local transportation officials, members of the two congressionally-chartered transportation commissions,  executives of trade and professional associations, and analysts on Wall Street, in think tanks, academia and private consulting firms.
 
Support for Public-Private Partnerships is Growing

Total reliance on public resources and the fuel tax to fund future investments in transportation infrastructure is no longer a realistic option. Such, in essence, is the considered judgment of a great majority of participants in our survey.

State officials tell us they are embracing private sector financing and tolling not because of any ideological commitment to "privatization" or a philosophic attachment to market-driven solutions but out of sheer fiscal necessity. Increasingly, state departments of transportation are obliged to commit a major part of their tax-supported transportation budgets to preserving, modernizing and replacing existing infrastructure, leaving little money for new construction.

"We are struggling to have enough money to hold together what we have, let alone be able to think about the level of investment that would be needed to provide new infrastructure," Allen Biehler, Secretary of PennDOT told state legislators recently.  

Influential political leaders on Capitol Hill, in state capitals and in the Bush Administration have taken note of the growing need for private investment in infrastructure.  House  Speaker Nancy Pelosi (D-CA) (below, left) stated approvingly in an address to the American Public Transportation  Association that  "Private investment is playing an increasingly larger role in public infrastructure. Innovative public-private partnerships are appearing around the country, bringing much-needed capital to the table."

Texas Governor Rick Perry (above, right), in a keynote speech at the annual meeting of the Texas Transportation Forum, observed  "I am convinced that private dollars, administered through public-private partnerships, are a significant part of the answer to our transportation infrastructure challenge."

As another high-ranking state official told us, "since Congress is not likely to come up with adequate resources to help us meet our future infrastructure needs, we have no option but to move on our own and find new ways of funding our capital needs." The  official in question reflected a widespread sense among state officials and lawmakers we have talked to that  there is little prospect for a substantial increase in federal aid. This judgment  was also shared by Sen. Chuck Hagel (R-NE) at a recent congressional hearing. "The Federal Government," he said, "does not and will not have the resources to meet our future national infrastructure needs."

USDOT and a range of blue-chip advocacy groups have been contributing to the dialogue on infrastructure and PPP. So are many states. In Colorado, Iowa, Massachusetts, Michigan, Minnesota, Oregon, South Carolina, and Texas, governors and local authorities have convened special commissions to identify new revenue sources for infrastructure investments. In other states, such as Arizona, Nevada, North Carolina, Oklahoma, Washington and Wyoming, special legislative committees are studying "revenue enhancements"  to supplement existing transportation funds. 

"A Coalition Of Change Agents"

"A coalition of change agents at state level will bring about a fundamental reorientation in the way we approach transportation funding," one senior state financial official told us, adding that tolling and private investment will play an increasingly prominent role.

By our count, a total of 22 states are contemplating the use of tolls to support road capacity expansion.  Some of them, such as Florida, Pennsylvania and Texas may resort to long-term concession-based PPPs, while others will choose the more traditional approach of using  tax-exempt debt, design-build contracts, and operation through state departments of transportation or regional public toll authorities. 

Municipal Bond Market Has Limited Potential

However, survey participants pointed out that many state and local governments will be precluded from using  the municipal bond market as a financing mechanism because they have reached their statutory debt ceiling or because voters have refused to approve further bond issues.  Moreover, pension funds, a potentially major source of investment capital for infrastructure,  do not participate in the municipal bond market because they do not benefit from the munis'  tax-exempt status.

Is Private Capital Really Necessary?

Not all of our survey participants were convinced that future infrastructure investments will require private capital. Some of those we consulted suggested that the nation's future transportation needs could be met by raising the federal fuel tax or through new federal financing initiatives. The former option, they said, has never been taken off  the table and will most likely figure in the transportation reauthorization proposal shepherded by Rep. Jim Oberstar (D-MN). The latter option includes the National Infrastructure Bank (S. 1926 and HR 3401) championed by Sens. Christopher Dodd (D-CT) and Hagel, and the "Build America Bonds" program (S. 2021) proposed by Sens. John Thune (R-SD) and  Ron Wyden (D-OR, below at left). Both initiatives  would create a de facto national capital budget  that could be used  to fund "qualified public works projects of  regional or national significance." 

The NIB  proposal has gained political traction by receiving the support of presidential candidate Barack Obama and House Majority Leader Pelosi.  
 
But many survey participants pointed out that the extra revenue generated by a gas tax increase - even assuming that such a tax increase would pass muster with the tax-writing congressional committees and obtain a filibuster-proof majority support in the Senate - would be largely consumed by demands for preservation and reconstruction of the existing highway network and by escalating construction costs, leaving little  capital for new construction. 

Besides, the federal program contributes only about 40 percent of the capital cost of transportation infrastructure. The remaining 60 percent comes from state and local budgets, and there is no guarantee that local jurisdictions would be able to meet their part of the bargain. 

As for the new federal financing  initiatives, their revenue - $60 billion over 10 years in the case of the National Infrastructure Bank and  $50 billion in the case of the Build America Bonds program - would hardly suffice to make up for decades of underinvestment.

These bills could only fund a small fraction of the infrastructure deficit - a deficit that the American Society of Civil Engineers  estimates at  $1.6 trillion.  "A federal-centric approach does not offer an adequate long- term solution to closing the huge infrastructure funding gap,"  summed up one respected think tank analyst.  

Overall Verdict For PPPs Is Positive

Overall, our survey participants thought that  tolling, private equity capital and long-term concession-based public-private partnerships will play a significant role in  the nation's efforts to expand infrastructure capacity. The circumstances which they believe are driving states to partner with the private sector are largely fiscal in nature. They include declining tax revenues flowing into the Highway Trust Fund due to  improvements in vehicle fuel economy and a possible slowdown in the growth of vehicle-miles traveled (VMTs); public opposition to higher fuel taxes; and the sheer magnitude of the infrastructure deficit which overwhelmes the bonding capacity of state and local governments. But motivation to partner with the private sector also includes recognition of some positive benefits of private sector involvement, such as willingness of private concessionaires  to contribute equity capital, do the job faster, introduce innovation and assume operating and financial risks.  

As several elected officials have pointed out to us, engaging  the private sector in the task of modernizing the nation's infrastructure may be the best way to ensure the continued growth of the nation's transportation capacity without imposing an unacceptable fiscal burden on American taxpayers or burdening future generations with further debt.

The viability of the partnership model depends, of course, on the willingness of the private sector to invest in public infrastructure assets. On that score there appears to be little doubt. Our inquiry has revealed an impressive number of private equity funds (72 by one count) dedicated to investments in infrastructure. In the aggregate, they are estimated to have raised in excess of $120 billion. After leveraging the estimated equity capital pool through bank loans and the capital markets, the infrastructure funds could support investments in the range of $340 to $600 billion.

Skepticism About PPPs Persists

Skepticism about PPPs and questions about the proper role of the private sector in infrastructure development persist. The two-year moratorium on PPPs in Texas and strong opposition to the "monetization" of the  New Jersy Turnpike  have been vivid reminders of the continued opposition to tolling and private sector involvement.  A more recent example has been the failure of two bills in the California legislature to establish an Office of Public-Private Partnerships to promote PPPs among local agencies (AB 2278), and to authorize state agencies to enter into public private partnerships to support infrastructure development (AB 2600).

Further evidence of anti-PPP sentiments comes from public employee unions.  The Service Employees International Union (SEIU) has been particularly aggressive in its campaign to police  the authority of states' employee pension funds to invest in private equity companies - a major  source of  investment capital for public-private partnerships. Having failed in this effort in California, the union has switched its attention to the state of Washington. Among the union's demands is that  the State Investment Board (SIB) which manages public pension money, weigh the private equity companies' "corporate behavior" before it could invest in them. By prevailing in its demands, the union would, for all practical purposes, deprive public-private infrastructure partnerships of a major source of investment capital.   

Opposition to PPPs Has Many Faces

Much of the opposition to public-private partnerships is motivated by a belief that the public interest demands strong public oversight over investment decisions relating to public infrastructure. Advocates of this point of view in Congress and elsewhere argue that the national road system is "a public good" that should be provided and maintained by the public sector to serve the public interest. They contend that a series of private toll concessions would lead to "cherry picking," resulting in a patchwork of uncoordinated facilities that would undermine the integrity and connectivity of a  national highway network. PPP opponents are particularly critical of  contractual "non-compete" provisions,  diversion of upfront lump-sum lease payments to non-transportation purposes and  long-term leases of existing toll facilities. Referring to the 99-year lease of the Chicago Skyway and the 75-year lease of the Indiana Toll Road, Sen. Jeff Bingaman (D-NM, at right), chairman of the Subcommittee on Infrastructure of the Senate Finance Committee  observed,  "I think we ought to reconsider the perverse incentive that the tax code creates for such long leases...If current depreciation rules lead to forms of investment that we judge to contravene public policy, then the Finance Committee should consider changing those rules...".

These concerns are legitimate and need to be addressed, observed the participants in our survey, noting that recent concession proposals provide for strong safeguards to protect the public interest.  But  opposition to private sector involvement is motivated by more than just an altruistic desire "to protect the public interest." Rather, we have found that it is fueled by a complex mix of motives. Some people are concerned that a widespread use of PPPs would shift more power over infrastructure development to the states and weaken the federal role in transportation. 

Congressional lawmakers are opposed to PPPs because they suspect  private sector involvement would lead to an erosion of congressional control over public investment decisions and reduce opportunities for earmarking. 

Public employee unions worry that transportation facilities under private management would lead to a loss of union jobs and prevent unions from organizing workers at those facilities. The trucking industry fears that private road concessions would lead to rapidly escalating tolls.

And some Beltway interest groups and lobbyists are concerned that private sector involvement would decentralize decisionmaking to the states and lessen their ability to influence the transportation program at the federal level. To the extent that many of the public-private partnerships are likely to involve foreign entities, there is also concern - justified or not - about foreign control of strategic transportation assets. 

PPPs at the Crossroads

There are well founded speculations that Congress may attempt  to assert oversight over public-private partnerships and place conditions on long-term  toll road concession agreements, ostensibly "to protect the public interest."  The House Transportation and Infrastructure Committee is rumored to consider establishing a regulatory commission to oversee public private partnerships.  An influential member of the Senate Finance Committee has raised the possibility of amending the federal tax code to prohibit "excessively long" concession lease terms. Some interest groups in  the trucking industry and public employee unions may be expected to vigorously applaud congressional  moves to assert oversight and impose regulatory restraints on PPPs. There are indications that the National Transportation Infrastructure Finance Commission also will recommend certain legislative restrictions on private toll road concessions.

Whether efforts to rein in PPPs will come to pass, and if they do, how onerous the restrictions will be, remains an open question. So far, there have been few signs of any organized attempts by PPP proponents to change congressional minds. Ongoing advocacy efforts of various PPP coalitions appear fragmented and uncoordinated. This may change as we draw closer to the reauthorization deadline and as the  House Transportation and Infrastructure Committee makes its intentions better known by releasing a preliminary legislative proposal (next February, we are told). Of particular importance at that time will be the posture of  the governors and state legislatures. Will they go along with recommendations for federal controls over  PPPs or will they assert the right to determine for themselves the conditions of  locally negotiated partnership agreements? Above all, will the current level of experience with long-term concession-based public-private partnerships offer state officials and legislators sufficient confidence and comfort level to champion  this novel approach  in the face of determined congressional and labor union opposition?

How this complex interplay of political forces will eventually play out in the post-election environment may ultimately determine whether the private sector will become a major partner in the efforts to renew the country's  transportation infrastructure. Or will private capital (especially foreign capital), faced with mounting legal restrictions and regulatory barriers in the U.S., turn its attention to investment opportunities abroad and deprive fiscally strapped state and local governments of much needed resources to modernize and expand America's infrastructure? That is the bottom-line question.     

Transportation Transformation Group Challenges Status Quo

Ken Orski

There's been growing concern about the state of the nation's transportation infrastructure, as evidenced by a proliferation of private sector initiatives to influence policy. This includes the U.S. Chamber of Commerce's "Let's Rebuild America" campaign; the Rockefeller Foundation-supported Building America's Future coalition founded by Gov. Edward Rendell (D-PA), Gov. Arnold Schwarzenegger (R-CA) and New York Mayor Michael Bloomberg; the Bipartisan Policy Center's National Transportation Policy Project led by Emil Frankel; the "Critical Commerce Corridors" proposal to establish a distinct and separately funded national freight transportation program; and the America Moving Forward coalition, whose goal is to champion the principle of public-private transportation partnerships and oppose legislative and regulatory moves to restrict their utilization.

Running through these initiatives is a common thread: the nation needs a new transportation vision. The current transportation program lacks a compelling national purpose and has become nothing more than a vehicle for revenue sharing, with a growing portion of the Highway Trust Fund revenue devoted to earmarks for projects of purely local interest. Lacking a well-defined national mission, the program is buffeted by lawmakers' demands for a "fair share" of the revenue, rather than guided by the need to direct resources to where they are most needed. This would be toward preservation, renewal and replacement of aging transportation facilities of critical national importance.

Merely reauthorizing the existing surface transportation program, runs the argument, is not enough. That would simply perpetuate the status quo and encourage continued bickering between "donor" and "donee" states. What is needed is a fundamental rethinking, a transformation, of the national transportation program into a policy instrument that would help preserve and rebuild the nation's aging infrastructure, reduce metropolitan congestion and ensure increased mobility and economic competitiveness for the nation as a whole.

The Transportation Transformation Group

The latest entrant to espouse this philosophy is the Transportation Transformation Group, or "T2" Group, an initiative announced at a standing room only press conference which we attended on June 5 at the National Press Club. The T2 Group is an alliance of state government, finance, academic and private industry leaders "who wish to add a fresh set of ideas to the transportation policy debate," said former House Majority Leader Richard Gephardt, representing Goldman Sachs, one of the founding principals of the coalition. As its name implies, the coalition supports the transformation of American transportation policy not just a reauthorization of current policies, pointed out Gen. Barry McCaffrey, member of the Board of HNTB Corporation and another coalition spokesman. In this respect, the new coalition is echoing and reinforcing what appears to be a growing consensus within the political, business and transportation communities, that perpetuating a programmatic status quo is not a solution.

Rather, Congress must establish a new long-range vision for the national surface transportation program -- a vision that will enable states to employ new strategies and innovative finance techniques such as tolling, congestion pricing, and public-private ventures that would bring additional private capital to supplement the resources of the federal and state governments. A gas tax increase, as recommended by the congressionally-chartered Transportation Policy Commission, is not going to happen, said Gephardt, so "we might as well put it off the table" and think in terms of a new paradigm. The new paradigm should be shaped by customer-oriented, performance-driven objectives, and provide states with incentives to be entrepreneurial, added Dr. Joseph Giglio, another coalition spokesman.

T2 Group's State Members Highlight Expanded PPP Opportunities

The coalition's members include several states, notably Indiana, Florida, Texas and Utah. Their presence and influence is reflected in the coalition's espousal of policies that would allow states full latitude to employ entrepreneurial strategies and enter into partnerships with the private sector to finance, construct and operate transportation facilities. In the coming decade, the solution to the nation's transportation problems will not lie in an increased federal aid program but in greater reliance on state and regional-level approaches, noted Texas Transportation Commission member Ned Holmes, another Coalition spokesman.

In a Q&A session, attention turned to how the Coalition could "make a difference." Competition for attention will be intense, with Congress and the next Administration buffeted by competing and often conflicting proposals from various interests on how to address the challenges ahead.  A specific suggestion was made from the floor to urge the presidential candidates to include the subject of transportation infrastructure on the agenda of the proposed town hall meetings proposed by Republican presidential candidate Sen. John McCain (R-AZ), pictured at right, above, and accepted in principle by his Democratic opponent Sen. Barack Obama (D-IL), pictured above at left.

This would give both candidates an opportunity to discuss and take a position on a number of innovative ideas that are currently being debated on Capitol Hill and in the transportation community-- such as a national infrastructure bank, federal capital budget for infrastructure, tolling, congestion pricing, public-private partnership financing strategies and long-term alternatives to the gas tax.

Let's Have A Presidential Debate On Transportation Challenges

The idea of a debate by the presidential candidates on the problems of traffic congestion and the aging transportation infrastructure is most relevant and timely. How the next Administration intends to face the challenge of repairing and modernizing the nation's highways, bridges and transit systems, what policies it ought to pursue to combat traffic congestion that increasingly paralyzes metropolitan areas, and how it intends to accommodate the growing demands for the transport of freight to preserve the nation's global competitiveness, are three issues that should rank high in importance on the agenda of any future president. They certainly deserve a place on one of the ten proposed town hall debates.

Sexy, Sexy Infrastructure

Matt Rosenberg

Okay - so you already knew that pink was the new black and real estate was the new sex. Now infrastructure is sexy. So say Forbes, The Guardian, and the Wall Street Journal.

We're not talking about your grandfather's municipal bonds either. Operating costs and necessary maintenance and improvements are something every homeowner understands - all too well. You may be able to meet all these needs without assuming debt beyond your mortgage. Or you might just have to endure an avocado-hued fridge, pastel yellow formica counter, midget sink, pinched shower stall and shaky deck for far longer than you'd like. Cue the violins. Life is hard. But suppose you owned a worn-down state ferry fleet or highway system and were responsible to millions of people?

As a government rather than a household, you've got way more income, but it's spread thinner and there's major pushback on "revenue enhancement." An aging upper rear deck attached to a private home can be prudently roped-off until money is available for repair. No one will suffer as a result. But an elderly, disaster-prone bridge or elevated roadway, or a chronically dangerous maldesigned highway, or ancient car ferries with rusting hulls cannot easily be decommissioned at a moment's notice. Yet, neither should the risks of continued operation be borne for long.

Squeezed by rising costs, constricted cashflow and often, gobs of existing debt, owners can't keep borrowing to operate, maintain, improve or build public infrastructure. Nor, as they are reminded by the period stick in the eye from voters, can they count on raising taxes whenever they'd like. So to keep pace with the infrastructure challenges stemming from wear and tear, vibrant states and regions with real leaders are increasingly turning to private investors in carefully-structured, project-specific partnerships.

Public employee union pension funds are a fast-growing part of the mix within private infrastructure investment groups. The focus is on steady, long-term returns, not "grab and go" profit-taking. Scrutinizing their courtiers carefully are the governments which own the assets, rights of way or greenfield properties around which the public-private deals are struck. They have to steer a deliberate course to ensure the public interest is served. But doing it all the old way isn't an option anymore. Not with the growing gap between basic needs and public resources. There's an estimated $400 billion in private resources to be tapped for U.S. infrastructure, and capital formation is accelerating.

Here are a few signposts on the road to the future.

Forbes pronounces "Infrastructure Is Sexy," highlighting the formation of two more new funds that have raised more than $10 billion for first-round investments in the sector. Morgan Stanley has secured $4 billion for a new infrastructure fund that will invest in transportation, energy, utilities and communications; and a similar General Electric/Credit Suisse-led group has marshalled $5.6 billion.

Infrastructure assets such as utilities, toll roads and airports are attractive to financial bidders like banks and pension funds because of their stable cash flow despite having lower growth rates than other private equity opportunities..."The successful fund-raising underscores the particular demand for infrastructure investment, and broadly, for alternative assets that generate long-term stable cash flows," said James Gorman, co-president of Morgan Stanley (pictured above, right). The company said it raised capital in North America, Europe, Australia, the Middle East and Asia in to reach the $4 billion mark, which far exceeds the fund's initial target of $2.5 billion.

Investors ran the gamut from pension funds, insurance companies and high-net-worth individuals to Morgan Stanley employees. Morgan Stanley infrastructure's investment team will operate out of New York, London, Hong Kong and Beijing. Morgan Stanley had a total of $577 billion in assets under management as of February 29, 2008.

Across the pond, The Guardian explains "How Infrastructure Got Sexy In The City."

With more esoteric investments becoming unfashionable, it is easy to understand why longer-term funding of real, if prosaic assets has become more appealing. They are often quasi-monopolies with virtually guaranteed inflation-linked returns. They are also pretty much recession-proof - people still use bridges and electricity even in hard times.

The market is also ripe for investment. In the developed world, money is needed to replace ageing infrastructure, and there are growing demands for roads, water and electricity. Meanwhile, public finances are under increasing strain because of ageing populations. In emerging economies, the need is even greater to build huge infrastructure projects from scratch. Then there are the broader global trends: the world's population is expected to add another one billion people over the next decade, there is increasing urbanisation and the challenge of climate change. In a lengthy recent report, the Organisation for Economic Cooperation and Development said $53 trillion of investment is needed in infrastructure by 2030.

In "Why U.S. Highways Are Falling Into Private Equity Hands," Mayer Brown partner John Schmidt explains to The Wall Street Journal's "Deal Journal" blog:

Every day you pick up the paper and you find that a major fund has raised more money than it expected to, or is raising a new fund. Capital is being raised in an almost amazing way, with funds that raised $2 billion before now pulling in $4 billion. The infrastructure of one of the strongest economies in the world has to be one of the best long-term investments in the world. Most of the money for the private equity investments is coming from big pension funds. There's a lot of competition and the gestation period for the sector has been long.

For more than a year, Cascadia Center has continued to recommend that public employee and union pension funds be tapped as partners to help fund pressing regional transportation infrastructure needs in Puget Sound. That does not mean that every sort of infrastructure investment is equally attractive to a pension fund. As Robert Poole of the Reason Foundation observes (second article from top here), because pension funds are already tax exempt, they are unlikely to buy the lower-interest tax-exempt bonds issued by a public tolling authority. However, as Poole emphasizes, pension funds are getting in the transportation infrastructure game by buying direct equity stakes in revenue-producing facilities or by joining with private infrastructure investment groups in equity or lease deals. That's something for policy-makers here to consider, going forward.

Washington state must confront a big whammy. There are tight limits on available public funds. This is a permanent, not temporary condition, even with the odd transportation tax measure passing now and then. Yet according to the state there is $2 billion of needed work on I-5 in Seattle plus $1.84 billion more required for fixes to deadly State Route 2 in Snohomish County. And while studies grind on, the effort to raise money for replacement of the badly aging fleet of state car ferries is far from complete. Funds for crucial improvements to car ferry terminals also remain unsecured. The state car ferry fleet is the nation's largest and the boats and facilities - by an act of the legislature - are part of our state highway system. In Pierce County, unfunded major road projects include completion of the Cross-Base Highway, and extension of SR 167 to the Port of Tacoma.

Seattle Times editorial page editor James Vesely suggested last weekend that the region may have already resigned itself to playing small ball for a while on transportation infrastructure. He's right to raise the point. Maybe, following the defeat of last fall's controversial roads and transit ballot measure, some more stasis has to precede bold action. But what's being contemplated is a transit-only measure, centered on modest improvements - over the course of more than a decade - to a starter light rail system that won't begin operating until next year. That's hardly all the doctor ordered. We've got a 52 percent increase in the four-county population due by 2040 (up by 1.7 million from 3.2. million in 2000), and as many as four million newcomers expected by the turn of the century. The ultimate costs of wearily muddling through will be far higher than doing things a new way. That new way must include private capital for roads and transit; transit that truly competes on travel time and reliability; congestion pricing to ration limited peak-hour highway capacity; and a federal carbon tax to drive broad adoption of clean vehicle technology.

Private Capital Eyed For Transit, Roads

Matt Rosenberg

Drawing from $19.9 billion in Prop. 1B voter-appproved bonding authority, a California commission has allocated $3 billion to help fund 79 road, rail, bridge, transit and other transportation projects. The bottom line of this summary shows the projects will cost $8 billion to complete, necessitating the usual cost-sharing with other jurisdictions. Included are more High Occupancy and Toll (HOT) lanes on 1-15 in San Diego, arterial lane additions in Yuba City, various rehab projects for crumbling roads statewide, replacement of an unsafe bridge at Fort Bragg, crossovers between mainline freight train tracks, enhanced grade separation for Los Angeles-region commuter rail, rehab and addition of inter-city train tracks at L.A's downtown station, second-phase seismic upgrade work on the San Francisco-Oakland Bay Bridge, and microwave vehicle detection systems at 20 locations around Bakersfield to analyze traffic patterns and develop computer models to assess current and future highway system needs.

With the state's broader transportation needs in mind, officials say the $3 billion California Transportation Commission allocation is a step in the right direction but that there remain another 121 high-priority projects identified in the state's Goods Movement Action Plan, requiring another $47 billion. That's more than double the Prop 1B kitty, and the Goods Movement Action Plan only represents a portion of needed infrastructure projects. In their announcement (second link, above) officials say private capital will need to be part of the transportation funding mix.

California's transportation network is indeed vast. But the state's need for private partners to finance, fix and build roads, bridges and transit isn't unique. Many others are in the same situation. The federal gas tax trust fund is expected to go bankrupt next year. Political impetus for hiking federal or state gas taxes is nearly zero, thanks to rising gas prices and the economic slowdown. Gas tax revenues are levelling off anyway, as cars get better and better mileage. In many metro regions, tax fatigue is widespread. Yet the squeeze comes from the other end, too. Officeholders know they can't shirk responsibility for worn-out, overburdened roadways and in metro regions, for major transit improvements. It's all going to cost billions upon billions. New variable-rate tolling strategies are key to mananging traffic congestion, and the revenues will help fund roads, bridges, and transit. But there'll still be big funding gaps. Simply going hat in hand to the feds, the statehouse and the voters won't cut it anymore.

Fortunately, private resources for transportation investment are vast. U.S. Department of Transportation Sec. Mary Peters estimates there's $400 billion in private investment to be tapped by states and regions for road, bridge and transit projects. But to do so will require that states lay out the welcome mat. That's beginning to happen around the U.S., including the West Coast, where from Baja to British Columbia a slew of mobility improvements are urgently needed to support the economy and maintain quality of life. These should be paired with "Green Highways" improvements that Cascadia Center and others have championed.

Democratic California Assembly Member Anna Caballero (pictured, right) writes in the San Jose Mercury News that private partners can provide $100 billion of the state's $500 billion in overall infrastructure needs (transportation, utilities, public facilities) in the next 20 years.

As Gov. Arnold Schwarzenegger has recognized, California should be building bridges, roads, rail transit - or schools, libraries and fire stations - the way they are built in many places around the world. Using public-private partnerships, governments join with businesses to finance, design, construct, and sometimes operate and maintain, public facilities. It pays off in lower costs, better design, faster construction and better performance.....(officials) could employ partnerships on a (grand) scale: the proposed $4.7 billion extension of BART to San Jose; the realignment of the treacherous Highway 152 east of Gilroy; or making Caltrain an electric railway.

Los Angeles Mayor Antonio Villaraigosa, who also serves on the Metropolitan Transportation Authority (MTA) of Los Angeles County board, details in this recent press release the gathering impetus for private partners on LA transit projects. The backdrop: The MTA board has identified 23 transit projects that would increase ridership by 122,000 each year and cost up to $30 billion. The city council has adopted a motion commissioning a report on potential private finance options for the incomplete Purple Line Subway to the Sea, and other light rail and bus rapid transit projects. The MTA recently approved a motion of its own, sponsored by its vice-chair, Villaraigosa, requesting preliminary proposals for private finance plans on specific transit projects. This will lead to an MTA board decision this July on proceeding with formal requests for proposals (RFPs). More here from KNBC-TV. Under the plan, the MTA and its labor unions would continue to handle maintenance and operations of transit, while private partners would be eligible to head finance, design, construction and construction management of transit extenstions and additions.

How it will all shake out in LA remains to be seen, but it's significant that the mayor, city council and Metro board acknowledge private capital can help meet the region's bracing transportation needs. There's ample precedent, according to the mayor's office.

The Mayor's motion is partially based on successful private efforts to revamp public transit throughout the United States and around the world. In London, a public-private partnership increased the capacity of the city's transportation system by 20 percent and reduced costs by 17 percent. A similar model in Vancouver boosted rapid transit capacity by 33 percent -- the equivalent of ten 11-mile lanes on city streets. In the US, public-private partnerships are being explored as a potential way to fund and build a new three-mile connection between Oakland International Airport to the Bay Area Rapid Transit system; a 5.4-mile extension of Houston's rail service; and operational improvements to Denver's commuter rail and bus stations.

In Metro's draft long-range transportation plan, agency CEO Roger Snoble (right) neatly ties together growth, mobility challenges, and private investment in transportation.

...The job of Metro is to make sure that mobility is maintained and improved in the face of growth in population and in the number of cars and trucks in the County. Population is expected to increase by another 2.4 million by 2030, while the number of vehicles has surpassed 7 million a day....No single solution works. It is a multi-pronged approach that includes the Metro Freeway Service Patrol, traffc signalization, freeway ramp metering, carpool lanes, intersection improvements and expanding public transit and other rideshare options that have staved off gridlock.

It is the right approach, but we have to do more. A lot more. We are falling short of the resources necessary to fund many of the critical projects needed for congestion relief and air quality improvements. And neither Sacramento nor Washington can be counted on to plug the shortfall.....we need to look to new ways of increasing transportation revenues. Public-private partnerships can stretch limited public funds. Joint development in transit corridors, congestion pricing, and developer mitigation fees are just some of the other options Metro is exploring with a renewed sense of urgency.

The new breed of private funding partners are a varied cast with which state and regional governments are becoming more familiar. Each state and region can pick and choose which players to deal with. Governments can and should retain ownership and fee/fare authority over their roads, bridges and transit systems. But those tolls and fares are a steady source of revenue with which to pay back private investors - who, unlike taxpayers these days - are ready to ante up, again and again.

There are a few different types of dance partners. Sovereign investment funds? Ah....thanks but no thanks. Privately held infrastructure funds, like, say, Macquarie, or Goldman Sachs? Yeah, maybe. Especially if on transportation projects they can partner with public employee union and construction trade union pension funds. This last group is attracting growing attention for investments made in transportation projects around the world, either directly, or through private infrastructure funds.

We'll have more on that in coming posts.

RELATED:

"Report On The Transportation Innovative Partnership Program," Washington State Transportation Commission, 1/07;

"Strategic Growth Plan: Performance-Based Infrastructure," Office of Gov. Arnold Schwarzenegger, CA, 1/9/08;

"Residents Agree -- Public Infrastructure Projects Need Boost From Public Private Partnerships, Bay Area Council Poll Shows," PublicWorks.com, 4/16/08;

"Train Builders Meet To Seek Private Investment For California Groundbreaking Plan For High-Speed Trains," Business Wire, 3/26/08;

"High Speed Rail Bonds Heading For Ballot," SF Chronicle, 4/20/08.

Private Solutions to a Public Mess

Linnea Noreen

At least that's what I call our transportation situation--"mess". And the mess now has a glimmer of hope of untangling itself, thanks to private companies that see potential in self-financed commuter rail.

Let's review a bit of history. Trolley lines and street cars, for the most part, were built and maintained with private money. Railroads were built and are still operated by private entities. Maybe it is time to revisit these scenarios and allow private companies to lease and operate commuter rail lines.

It solves the problem of public financing. With precedent set for public ownership and private construction and/or operation (AKA "public-private partnerships"), there is no worry of "selling out" to big developers, or losing public assets.

According to the Seattle Times, a private company wants to develop an Eastside rail link for trains and bikes. It seems like a win-win situation; I figure there must be a catch. Maybe there isn't one. It could be that we have reached a point where the economics of rail do make sense, and private companies see an opportunity to provide services while making a profit.

Let's let them try -- the worst that could happen is that it fails. At least we didn't spend public money to experiment with something that ultimately doesn't work (Monorail, anyone?). The best outcome is that we get a functioning commuter rail service and bike path for free. How bad could that be?

TECHNORATI TAGS: EASTSIDE COMMUTER RAIL, BNSF LINE, PUBLIC-PRIVATE PARTNERSHIPS, SNOHOMISH COUNTY, KING COUNTY, PORT OF SEATTLE

Cargo Traffic, Private Investment Growing At U.S. Ports

Ken Orski

Forecasts predict a veritable tsunami of maritime cargo swamping U.S. port facilities in the years ahead. In the past 5 years container trade in North America has increased by 6.8%. It's projected to soar by 50% by 2015, from 48 million TEUs in 2005 to 72 million in 2015. (TEU stands for "twenty-foot equivalent unit," a standard measure of container capacity).

By 2020 North American ports and their associated intermodal systems will be severely congested, with demand exceeding current capacity by as much as 200% assuming current productivity and growth levels, predicts John Vickerman, an industry expert in planning and design of port, intermodal and freight logistics facilities.

How should U.S. ports respond to this challenge? Some observers suggest that the capacity problem would be solved if port authorities placed operations on a 24/7 basis, as many foreign ports are doing. But there are many good reasons why that would be impractical in the case of U.S. ports, claims Brooks Royster, former director of the Port of Baltimore. These constraints include local regulation and work rules limiting hours of operation, inadequate labor pool of longshoremen, and the need for some slack time to perform routine maintenance. Only Asian ports exceed the productivity of our own ports, Royster contends, and then only because many of them are transshipment ports that do not have to move containers "through a gate" as is the case with destination ports like ours.

In rare cases, large private shippers will take care of their growing needs for cargo processing by constructing their own marine terminals. The Maersk Terminal in Portsmouth, Virginia is the first such in the U.S. to be independently constructed and privately financed by a major shipping line. But in the great majority of cases, major improvements and expansion of physical port capacity and their intermodal connectors currently falls on the shoulders of local taxpayers.

For example, container fees have been used to fund construction of the Alameda Corridor freight rail expressway conecting the ports of Los Angeles and Long Beach (above, left); while "availability payments" would be used to help finance the Miami Port Tunnel, and the Port of Savannah Connector. Private concessionaires will invest in the projects up front and assume construction and performance risks. The public authority will pay the concessionaires an annual fee based on the condition and performance of the facility and its availability for public use. If maintenance, congestion levels, incident response or other stipulated performance measures are not met, the payments will be reduced.

A relatively new trend that may profoundly affect the future of port expansion is the growing willingness of private equity markets to invest in port facilities.

For example, last February, the AIG Global Investment Group bought long term leases to the Port of Newark terminal. The investment division of Deutsche Bank has bought Maher Terminals, the company that runs operations at the Port of Elizabeth in New Jersey. And the Ontario Teachers Pension Fund has taken over the lease from a shipping conglomorate to operate a terminal on Staten Island, N.Y.

In each case, the private investors are expected to inject new capital to improve the facilities and make them more productive. Even larger initiatives are in the offing. The Port of New Orleans is preparing a request for proposals (to be issued in 2008) inviting the private sector to participate in a one billion dollar program of facilities expansion including a new container terminal and a new cruise ship terminal.

Just as in the case of toll roads, the global capital markets have come to recognize that ports are a sound investment. Institutional investors with long-term investment horizons, such as pension funds, look upon these assets as a safe investment that offers future returns comparable to those from fixed income and real estate.

The growing scarcity of deep water port capacity and environmental obstacles to building new "greenfield" ports gives existing port facilities a large "revaluation" potential and more future pricing power -- and thus makes them more attractive to private investors, speculates Robert Flanagan, Senior Vice President of First Southwest Company and former Secretary of Transportation in Maryland.

Three recent announcements underscore the interest of global capital markets in transportation infrastructure: Australia's Macquarie Bank is planning to raise up to $8 billion to invest in European infrastructure assets as it continues its aggressive expansion in Europe, Middle East and North America. Called "European Infrastructure Fund III," it will be Macquarie's biggest single fundraising move in Europe, as it seeks to take advantage of plans by governments across Europe to privatize roads, airports and utilities. The Carlyle Group, one of the largest U.S. private equity funds, has announced that its Infrastructure Partners fund has raised $1.15 billion for investments in U.S. and Canadian transportation infrastructure projects. CalPERS, the largest public pension fund in the US ($245 billion in assets), has announced that it plans to shift up to $2.5 billion to a new infrastructure program focused on investments in new roads, bridges, ports, and water systems.

In announcing their decision, Charles Valdes, Investment Committee Chair, said CalPERS could become a major player in solving some pressing capacity problems related to transportation infrastructure.

CalPERS' action, which is the first such initiative by a major U.S. public pension fund, may augur similar moves by other pension funds.

Private investment in ports will be highlighted on the agenda of the North American Port and Intermodal Finance Investment Summit December 3-5 in Coral Gables, Florida. The Port of Tacoma's Jeannie Beckett, Senior Director, Inland Transportation, will be among panelists discussing new financing techniques in a Dec. 5 segment titled, "The Road Ahead."

TECHNORATI TAGS: PRIVATE INVESTMENT, INFRASTRUCTURE FUNDS, PORTS, NEW JERSEY, NEWARK, ELIZABETH, LOUISIANA, NEW ORLEANS, PORTSMOUTH, VIRGINIA, ALAMEDA CORRDIDOR, MIAMI PORT TUNNEL, AIG, DEUTSCHE BANK, ONTARIO TEACHERS PENSION FUND, MAERSK, ROBERT FLANAGAN, TOLL ROADS, MACQUARIE, CARYLYLE GROUP, CALPERS

A Discriminating View Of Public-Private Partnerships

Ken Orski

Not all forms of public-private partnerships received an unreserved endorsement at the19th annual Conference on Public-Private Ventures in Transportation, staged recently by the American Road and Transportation Builders Association. Long term leases of existing toll roads, as exemplified by the Chicago Skyway and Indiana Toll Road, were viewed with skepticism by some speakers. Coming in for particularly severe criticism were leases whose proceeds would be dedicated to non-transportation purposes.

"If the motivation for a P3 project is to generate upfront cash that can be used to solve statewide budget problems or finance other expenditures not related to transportation, we will oppose that deal," announced AAA's Robert Darbelnet in a luncheon address. However, "public private partnerships are certainly one of the options, and I am here to say that AAA believes that these partnerships have a role to play."

Opposition to Chicago Skyway-type deals was also expressed by Jack Schenendorf, Vice Chairman of the federal commission on transportation policy and revenue, who cited the potential diversion of cash raised from long-term assets leases as a reason why the public and Congress are questioning the wisdom of letting out toll road concessions to private operators.

The current targets of this criticism -- proposals to lease the New Jersey Turnpike and the Pennsylvania Turnpike -- were absent from the program after having been prominently featured in past conference programs. Was this a subtle sign that the P3 community wishes to distance itself from these initiatives or at least to represent them as outside the mainstream of private sector involvement? That would be the hope of those who contend that the true purpose of public-private partnerships is to share in the risks (and rewards) of investing in new capacity-enhancing "greenfield" projects.

Confusing "monetization" of existing public assets with public-private partnerships sends a wrong message about the true purpose of the P3 process, and could lead to a withdrawal of congressional support from public-private ventures, or to the promulgation of restrictive congressional guidelines governing their use.

To Tax Or Not To Tax?

Many speakers voiced skepticism about the prospect for increased gasoline taxes and doubted that a small tax increase would make a dent in the infrastructure deficit. In sum, the consensus was that public resources will never be enough and complementary private capital will be needed to accomplish public purposes. A small increase in the fuel tax would be a band-aid solution, and with oil prices predicted to push past the $100-a-barrel mark, the prospect of Congress and state legislatures approving major increases in fuel taxes is remote.

Congressional reluctance to increase gas taxes was underscored by the news, made public on the eve of the Conference, that Rep. Jim Oberstar (D-MN) chairman of the House Transportation and Infrastructure Committee, bowed to political reality and withdrew his proposal for a 5-cent-a-gallon federal gas tax increase to fund his bridge reconstruction program. Oberstar's proposed tax hike was vetoed by the Congressional leadership and received little support from rank-and-file Democrats as well as Republicans. A gas tax increase faces bleak prospects heading into an election year, Oberstar acknowledged.

Discussions in the breakout sessions revealed a growing sophistication with the concepts of public-private ventures and a more cautious assessment of the rate of their penetration of the infrastructure market. Setbacks, such as the Texas moratorium, have moderated the initial "irrational exuberance," and the tendency now is to shift focus from high profile megadeals and long-term asset leases to more modest ventures, such as the public-private concessions in Mississippi and Georgia. New financing techniques such as "availability payments" that are tied to performance, and "shadow tolling" are emerging as alternatives to the first generation concession model.

TECHNORATI TAGS: PUBLIC-PRIVATE PARTNERSHIPS, TOLLING, REVENUE USE, CONCESSIONS, GAS TAX, TRANSPORTATION FUNDING, JAMES OBERSTAR, JACK SCHENENDORF, ROBERT DARBELNET, AAA, CHICAGO SKYWAY, PENNSYLVANIA TURNPIKE, NEW JERSEY TURNPIKE

Puget Sound Mobility Requires Public-Private Partnerships

Matt Rosenberg

The Tacoma News Tribune reports this morning that the crumbling, 94-year-old Murray Morgan Bridge has been ordered closed by State Transportation Secretary Paula Hammond, raising strong city council concerns about access to Tacoma's tidelands areas for medical or industrial emergency response. A 2004 estimate pegs rehab costs at $77 million, but only $25 million has been secured to date, the TNT reports.

Current road and transit needs for the Puget Sound Region total $66 billion over the next two decades, according to a transportation governance commission created by the Washington State Legislature and Governor Christine Gregoire. Those needs are likely to grow. The population of four-county metro Seattle will rise from the 2000 U.S. Census level of 3.276 million by 52 percent, or 1.712 million - about as much as metro Portland today - to just shy of 5 million by 2040. This according to the Puget Sound Regional Council's new draft Vision 2040 regional update on growth, transportation and economic development. Additionally, roads and transit construction costs are rising ever higher.

The upshot: A solid long-term transportation finance strategy is crucial. Our Cascadia Center's Director Bruce Agnew and Senior Fellow Steve Marshall argued in a News Tribune "Insight" section op-ed Sunday, October 21 that we're at a crossroads, and must move well beyond reliance on traditional funding sources to address current system maintenance and future system expansion needs.

....new construction should be financed from tolls and private equity while federal Highway Trust Fund and state resources handle the maintenance of the existing system. Until now, large international construction firms and foreign banks have dominated the private sector partnership world. But today, local labor unions like the Northwest Building Trades and state public employee pension funds like the giant California Public Employee Retirement System want a piece of the action. The potential for funding alliances between public entities and labor unions or public employee pension funds is an important consideration in a state that has banned most public-private partnerships.

We are not talking about foreign investors making huge profits and setting ever-higher tolls. Instead, the men and women who build the infrastructure would share in returns on the investment while the public retains control over toll rates. As former U.S. House of Representatives Majority Leader Dick Gephardt noted earlier this year at our Cascadia Forum, "pension funds are patient funds, a 50-year return on investment" for union members and the public.

A special state transportation performance audit prepared for the office of State Auditor Brian Sonntag recommends, among other things, that the legislature "review whether new legislation is required for public-private partnerships for transportation infrastructure and implement any necerssary changes."

In California, interest in PPPs is also running high. Former Governors Gray Davis, Pete Wilson and George Dukemejian yesterday highlighted the need for private-public partnerships, in a Southern California newspaper op-ed, "California Infrastructure Needs 'Plan B.'" They wrote:

It's clear we need a new solution, a Plan B, to ensure our state's future success. We can do so by creating "Public Private Partnerships" or "P3." Through P3, most of the highway, bridge, rail, water conveyance, public health and other facilities projects are paid for out of a combination of taxpayer supported bonds, private equity and debt, and fees charged to those who actually use or benefit from the infrastructure and services. One successful model in British Columbia created a "state enterprise agency" to identify P3 opportunities and then impartially evaluate private- or public-sector involvement while focusing on ensuring the long-term protection and benefit of the community.

...Sacramento needs to pass legislation enabling P3 to function in this state. Senate Bill 61 (Runner), supported by the governor, is a first step but is stuck in the Assembly because of opposition by public employee unions who believe their jobs may be threatened. What they don't understand is that without this Plan B, a lagging economy and dwindling state revenue stream will indeed threaten their jobs and retirements.....We need a fair, open process that clears the way to plan for major new infrastructure projects that attract private sector planning, management and financial skills, while protecting the long-term interests of the broader community.

Thomas J. Donahue, president of The U.S. Chamber of Commerce, put it this way, in a recent Washington Post op-ed titled "Bridges To Somewhere":

What must our nation do to meet the urgent infrastructure funding challenges? Where is the money going to come from? We can start by unlocking potentially hundreds of billions of dollars in private investment just waiting to be spent on power plants; pipelines; shipping and hauling routes to railroads and airports; privately constructed and operated roadways; and more. The money is there if government regulators would get out of the way. Countries around the world use an array of innovative financing approaches and public-private partnerships to bring key projects on line quickly. It's about time America did the same.

Transportation construction companies are taking the lead right now in public-private partnerships to build new infrastructure. One example is the new South Bay Expressway in San Diego. On a highway route initially proposed in 1959, the $635 million north-south artery built on the eastern edge of San Diego was financed by Macquarie Infrastructure Group funds based in New York and Australia, which will recoup their outlays via a 35-year tolling concession. Regular users can bypass tollboths, using windshield-installed tolling account cards which are automatically read by overhead transponders in the roadway. Depending on distance travelled, tolls for two-axle vehicles range from 75 cents to $3.50 for account-holders, nominally more for tollbooth customers. The toll is doubled for vehicles with three or four axles. The South Bay Expressway opens November 19.

Cascadia Center is planning a luncheon forum on public private partnerships in transportation, during the week of Dec. 17, in Seattle. Stay tuned for more details.

TECHNORATI TAGS: ROADS, BRIDGES, PUBLIC PRIVATE PARTNERSHIPS, TACOMA, SEATTLE, PUGET SOUND, WASHINGTON STATE, SAN DIEGO, MACQUARIE, SOUTH BAY EXPRESSWAY, TOLLING

Tolling Goes Mainstream

Ken Orski

Approaching 2008, tolling has entered the mainstream and begun to influence transportation decisions throughout the country. At the same time - as Forbes magazine notes - transponder technology is enabling higher-speed, automated "open road" tolling, foreshadowing an eventual end to the era of tollbooths.

Recent news reports underscore the increased momentum for tolling - although often the pathway to implementation is challenging, and some proposals pencil out while others ultimately do not.

Let's survey the tolling landscape.

With the state facing a projected 30-year, $74 billion shortfall in needed road funding, Georgia Board of Transportation member David Doss has unveiled a plan which includes a 10-year statewide one percent sales tax hike to raise $22 billion for transportation, and which calls for the infusion of private capital for a tolled east-west connector north of Atlanta and an eight-mile tolled tunnel to relieve downtown congestion.

Near San Francisco, the (Silicon) Valley Transportation Authority is vetting plans to widen Highway 101 and add a High Occupancy and Toll (HOT) lane that is free to some carpoolers but for which lower-occupancy vehicles would be charged. Conversion of current High Occupancy Vehicle (HOV) lanes to HOT lanes that are open to toll-paying solo drivers is also being evaluated for other Bay Area highways, including portions of southbound I-680, I-580, I-880 and Route 101 in the North Bay.

Installing more HOT lanes has increasingly become a priority for the federal Department of Transportation, which recently released $1.2 billion to agencies across the country willing to charge tolls...."The feds are looking for dramatic, dynamic ways to get big projects moving," said John Ristow, who is overseeing the VTA's toll plan for 85 and 101. "The huge piece is there had to be tolling involved. You see that in Seattle, in New York...That is where the trend is moving both on the federal and state level in a major way."

Virginia is proceeding with plans to construct HOT and toll lanes on a 14-mile stretch of the Capital Beltway. Private firms will finance $1.3 billion of the $1.7 billion project, the state will provide the rest. The private partners will maintain and operate the HOT and toll lanes. Transit and commuter buses, plus vehicles with three or more passengers will ride free in the HOT lanes; vehicles with fewer than three passengers will pay a congestion-based fee to use the HOT lanes, typically five to six dollars.

Alabama Governor Bob Riley has directed the state transportation department to evaluate the feasibility of private or public-private funding for toll roads on up to five key projects which can't be fully financed by the federal goverment or via a raised state gas tax, which is considered politically unviable. The projects include a southern bypass around Huntsville; an elevated roadway to skirt the congested intersection of two interstates in Birmingham; and a limited access road from Dothan to I-10 in Florida's Panhandle. Alabama already has four privately-operated toll bridges.

Meanwhile, in Maine, The Kennebec Journal reported last week:

The Legislature's Transportation Committee voted Wednesday to direct the Maine Turnpike Authority to study the feasibility of charging tolls on the Interstate. Just hours after the vote, Gov. John Baldacci released a strongly worded statement opposing new tolls. "I oppose the idea of adding tolls to Maine's existing Interstate highway system, and I can assure you it will not happen during my term in office," he said.

Regardless of the governor's feelings, Transportation Committee Chairman Rep. Boyd Marley, D-Portland, said the study will go forward. "I think it's irresponsible not to at least look at it," Marley said, adding that the state Department of Transportation is facing a funding crisis. "We're at such dire straits," he said. "The gas tax is flat, construction costs are out of control, we have 288 bridges in need of repair." The department is projecting a $2.2 billion funding gap over the next 10 years. The study will look at the feasibility of adding tolls to I-295 from Falmouth to Gardiner and I-95 from Augusta to Houlton.

In North Carolina, regional planning officials have signed off on a state-backed plan for a $553 million 21-mile tolled bypass road running parallel to I-74 from Monroe to Marshville.

Backers of an interstate highway forking together from the North Carolina and South Carolina coasts and then running through Virginia, West Virginia and Ohio to Michigan's Canadian border heard from U.S. Assistant Secretary of Transportation Tyler Duvall at a recent gathering. He said the multi-billion dollar proposal would certainly require extensive tolling, transponders instead of toll booths, and would would also greatly benefit from pension and hedge fund investment. Any interstate road projects costing more than $500 million will need to incorporate tolling, Duvall said.

The Palm Beach Post reports that at Florida Governor Charlie Crist's urging, the state will closely examine possible privatization and new or increased tolls on four road facilities: "Alligator Alley," or I-75 running east-west between Naples and Fort Lauderdale; the Tampa Bay Sunshine Skyway Bridge; Pinellas Bayway in St. Petersburg; and the Bee Line Expressway in Orange County. Early indications are that management of I-75 may be best retained by the state.

A combination of factors has helped to propel highway tolling into the mainstream.

Growing transportation budget shortfalls have been keeping the tolling option front and center before governors, state legislatures and state transportation officials. In a Washington Post op-ed, U.S. Transportation Secretary Mary Peters wrote:

"A substantial increase in the nation's gas tax is ill-advised. Of far greater promise than traditional gas taxes is direct pricing of road use similar to how people pay for other utilities."

Secretary Peters' skepticism about the potential of increasing the fuel tax is well founded. As the New York Times recently observed, "The mere mention of raising gasoline taxes remains almost tantamount to political suicide."

Private capital markets, especially institutional investors with long term investment horizons such as pension funds, have discovered transportation infrastructure to be an attractive investment opportunity. Toll facilities in particular, produce a steady cash flow that is relatively unaffected by economic downturns, and offer stable, long term investment returns with a relatively low risk. CalPERS, the nation's largest public pension fund ($246 billion in assets), may have been the harbinger of the new mindset when it announced in September that it was creating a $2.5 billion pilot infrastructure program and establishing a new asset class focused on investments in new roads, bridges, airports and other utilities. In announcing the decision, Charles Valdes, Investment Committee Chair, said "CalPERS could become a major player in solving some pressing public policy problems related to transportation."

State legislatures and public authorities have recognized the need for periodic toll increases to keep up with inflation, enhancing the attractiveness and popularity of toll road investments to private capital markets, which now consider toll roads a sound long-term investment.

The willingness of private toll concessionaires to accept availability payments and toll revenue sharing has contributed to the public sector's embrace of tolling, by allowing the state to retain the toll revenue. -- This arrangement is politically more defensible than letting a private concessionaire pocket the toll proceeds. Second, by tying payments to the volume of traffic, the state creates a profit incentive for the private concessionaire to manage the facility efficiently and attract a maximum number of customers. Third, the state owes money to its private sector partner only to the extent the facility generates revenue. If traffic is lower than forecast, the private partner bears the risk.

Unlike the politically unpopular private leases of existing public toll roads (as exemplified by the Indiana Toll Road and Chicago Skyway deals), concession agreements involving new toll roads have received a positive reception.

Tolls may well assume a dominant role in the funding of new highway capacity as early as the next decade. This conclusion does not stem from an ideological preference for "privatization" nor from a libertarian impulse to seek a reduced federal presence in the nation's transportation program. Rather, it is grounded in the reality that every last cent we can raise through the gas tax will be needed to maintain and modernize our aging infrastructure.

Resorting to tolls and private capital to help finance future highway capacity is not only the logical way -- it's the only way to ensure the growth and long-term vitality of our surface transportation system without imposing an unacceptable tax burden on the American people.

TECHNORATI TAGS: TOLLING, TOLLS, TRANSPONDERS, PUBLIC-PRIVATE PARTNERSHIPS, CALIFORNIA, MAINE, WASHINGTON, NEW YORK, NORTH CAROLINA, SOUTH CAROLINA, FLORIDA, GEORGIA, ALABAMA, VIRGINIA, MARY PETERS, TYLER DUVAL

Governors Assert States' Rights On Public-Private Pacts

Ken Orski

Ordinarily the National Governors Association (NGA) does not take a public position on statements made by individual congressional lawmakers. But, concerned about future transportation funding options, the NGA broke that rule recently to respond to a much-noticed warning from U.S. Rep. James Oberstar (D-MN) and U.S. Rep. Peter DeFazio (D-OR) against entering into public-private partnerships (PPPs), in which the legislators threatened to "undo" PPP agreements that did not conform to their conception of "the public interest."

In a June 15 response to the congressmen, NGA chair Gov, Janet Napolitano (D-AZ), NGA Vice Chair Gov. Tim Pawlenty (R-MN), were joined by Gov. Dave Heineman (R-NE) and Jennifer Granholm (D-MI), chair and vice chair respectively of NGA's Economic Development and Commerce Committee. They wrote:

"We believe Congress must work with states to advance our national transportation needs in a way that respects federalism and the states' role as the primary steward of our national transportation network."

"Fiscal pressures confronting the nation's transportation system have prompted governors to look beyond traditional funding mechanisms such as bonding and state tolling to help finance and deliver on transportation. Burgeoning capacity needs and escalating operating and maintenance costs are driving states to pursue innovative financing options to complement traditional financing tools."

The letter went on to say:

"While some governors may choose not to partner with the private sector ...we are concerned that your position on PPP agreements may have already hardened against them, which could make it more difficult for states to use this tool for transportation improvements."

Behind the governors' decision to take this unusual step was a sentiment that the Oberstar/DeFazio challenge to the principles of federalism must not remain unanswered. Couched in polite terms was an unmistakable message: "Do not meddle in what properly is the states' business. Let us be the judge of what is in our states' best public interest." The governors' strong reaction (an earlier version of their letter was even stronger, we've been told) could not have gone unnoticed.

But by inviting the congressmen "to engage constructively with the states" in a dialogue how to improve the state-federal partnership, the governors have left the door open to a less confrontational dialogue. We hope that future exchanges will avoid recriminations and focus constructively on how to address the budgetary shortfalls facing the state transportation programs.

As Rep. John Mica (R-FL), the committee's ranking member observed, Congress has failed to come up with adequate resources to help states meet their infrastructure funding needs, so states are moving on their own to fill the vacuum. For many states this means resorting to tolls to supplement existing sources of transportation revenue and soliciting private sector help to finance future highway capacity.

States have come to this conclusion not because they are ideologically committed to "privatization" but because, pragmatically, they view the prospects for significant increases in the fuel tax -- both at the state and federal level -- as remote in these times of record high fuel prices. If there are other ways out of the fiscal quandary, state officials assure us, they will be more than happy to explore them with congressional lawmakers.

(Note to readers: Ken Orski is a veteran observer and analyst of transportation policy and politics; he is based in the Washington, D.C. area. Cascadia Prospectus is pleased to have Mr. Orski on board as a new contributor. His bio is here; his first post for the blog is here).

TECHNORATI TAGS: PUBLIC PRIVATE PARTNERSHIPS, TRANSPORTATION FUNDING, STATES RIGHTS, NATIONAL GOVERNORS ASSOCIATION, JANET NAPOLITANO, TIM PAWLENTY, JENNIFER GRANHOLM, JAMES OBERSTAR, PETER DEFAZIO

Public-Private Partnerships Boost Infrastructure In B.C., Canada

Matt Rosenberg

For a nation thought to embody the concept of "Big Government," Canada has some lessons for advocates of private investment in the West Coast's lagging transportation infrastructure. The Los Angeles Times reports that while efforts have stalled in the state legislature to broaden private sector involvement in the enhancement of California's transportation system, Governor Arnold Schwarzenegger found inspiration for that cause during last week's visit to Vancouver, British Columbia.

At a Vancouver construction site that he dropped by, workers were busily boring a tunnel for the type of public works project that the governor has been unable to get off the ground at home: one owned and operated entirely by a private company. A 12-mile rail line that will connect Vancouver's waterfront to its airport is one of dozens of ventures like it in Canada. Provinces are turning to private companies to build and operate trains, roads, public hospitals, university facilities -- even local schools. "The way they do it is, I think, the right way to go," Schwarzenegger said in an interview....He said that Wall Street is clamoring to invest in private infrastructure projects and that California must examine ways to "benefit from all the private money that is out there."

However, Schwarzenegger's incremental, politically cautious approach to promoting privatization at home has drawn criticism.

....Adrian Moore, vice president of research at the Reason Foundation, a Los Angeles think tank....worked with the Schwarzenegger administration to craft privatization plans soon after the governor was elected. But he has since become critical of what he sees as Schwarzenegger's reluctance to antagonize public employee unions. "Canada is doing it, for crying out loud. I just spent 10 days in China, a communist country, and they are creating these partnerships right and left," Moore said. "They don't see this as some kind of mystical thing. They see it as a way to get things done."

But the Democrats who control California's Legislature have sided with public-employee unions that see privatization as a threat to tens of thousands of government jobs."Democrats -- we're not in the business of contracting out state services," said Assembly Speaker Fabian Nuñez (D-Los Angeles). "It doesn't fit well with our political diet."

OK. Give Nunez points for honesty. But not vision.

Taxpayer protections are par for the course, The Times reports.

....many governments have found ways to structure their contracts so that if a project is not completed on time or fails to provide the promised level of service, it is investors rather than taxpayers who get stuck with the bill. Most projects in Canada include such provisions. "It is very rare that they come in late or over budget. If they do, the private company eats the costs," said Jane Peatch, executive director of the Canadian Council for Public Private Partnerships.

Among the successes is a $1-billion bridge, built by a private company, linking Prince Edward Island to New Brunswick. A hospital in Vancouver was built and is maintained by a private company; government and university doctors provide care. A privately built water treatment facility was completed $10 million under budget, and several sections of roadway throughout the country have been built and are maintained by private firms. At a makeshift conference table under a canopy at the Vancouver construction site Thursday, British Columbia Premier Gordon Campbell told the governor that within a decade every major infrastructure project in his province will be built and managed by private interests.

The Governator's snazzy blog includes this video on the topic from special economic advisor David Crane, who says California must draw on the lessons of BC and Canada to finance needed infrastructure with private capital - resulting in projects that are built more quickly, at lower taxpayer cost, and are better maintained.

This press release from Schwarzenegger's office provides a good quick overview of BC's approach.

British Columbia's government owns Partnerships BC (PBC), an independent organization that evaluates and implements financing and construction of major infrastructure projects. PBC is staffed by professional project finance experts who determine the best approach for each project, conduct a standardized and competitive bidding process, and then oversee construction. PBC uses a number of financing models for projects, including traditional bond financing, vendor financing and public-private partnership financing. Public-private partnerships are increasingly being used by governments around the world. The province of Ontario, Britain, Ireland, Australia and others already use professional-financing models similar to British Columbia's.

"Public-private partnerships have been a tremendous success in British Columbia, resulting in millions of dollars in additional benefits to over 20 projects, including critical transportation and health care infrastructure," said British Columbia Premier Gordon Campbell. "P3s take advantage of innovation and expertise of the private sector, while reducing risks and delays. P3's will be fundamental to B.C. meeting our infrastructure requirements."

The issue resonates in Washington state. Even if one chooses not to factor in debt and inflation, Central Puget Sound is looking at tens of billions in needed transportation network improvements - the big-ticket item now is the roads and transit package facing voters this fall. Well worth review is this video of King-5 TV's "Upfront" public affairs program aired yesterday (Windows Media Viewer required). Always-incisive host Robert Mak and guests discuss the November transportation funding measure - which relies on hikes in sales tax, motor vehicle excise taxes, and long-term debt.

Clearing the decks for robust private sector investment in Washington state's public infrastructure only makes sense. Taxpayers are willing to pay for what they perceive to be pieces of the solution to road congestion and maintenance problems. But the project list is long, and the standard menu of tax increases and public debt will not suffice, over the long haul.

TECHNORATI TAGS: PUBLIC PRIVATE PARTNERSHIPS, TRANSPORTATION, ROADS, TRANSIT, ARNOLD SCHWARZENEGGER, BRITISH COLUMBIA, PARTNERSHIPS BC, CALIFORNIA, WASHINGTON

Research Compendium

Matt Rosenberg

Last updated August 25, 2008

The research, it just keeps coming. On this page, we'll compile links to key studies and reports on innovation in transportation.

MANAGING, PLANNING & FUNDING TRANSPORTATION

Cascadia Center Reports

"Lessons In Public-Private Partnerships & Climate Change: What British Columbia Taught California, And What Washington Can Still Learn," 10/07.

"A Tale Of Three Cities: How San Diego, Denver and Vancouver, B.C. Raised Major Regional Funds For Transportation," Doug Hurley, Cascadia Center For Regional Development, 9/06.

"Travel Value Pricing: Better Traffic Operations Management & New Revenue For The Puget Sound Region," John S. Niles, for Cascadia Center, 4/06.

"Transportation Working Group Recommendations," Transportation Working Group, Cascadia Center For Regional Development, 2/15/05.

Transportation Working Group background, members, and resource book.

"An Institutional Conundrum - A Simplified Overview Of Metropolitan Institutional Reform Applied To Transportation In The Puget Sound Region," Deb Eddy, Cascadia Center For Regional Development, 2004.

"How Do We Get There From Here? A Transportation Future For The Puget Sound Region," Bruce Agnew & Bruce Chapman, Cascadia Center For Regional Development, 2003. View the video, as aired on Seattle Channel, 5/20/05.

Other Reports

"Just Pricing: The Distributional Effects Of Congestion Pricing and Sales Taxes," Brian Taylor, UCLA Institute Of Transportation Studies; Lisa Schweitzer, School Of Policy, Planning And Development, University Of Southern California, 5/08

"Transportation For Tomorrow," National Surface Transportation Policy & Revenue Study Commission, 1/08.

"Running On Empty - 2007 Annual Report," Washington Transportation Commission, 12/07.

"Building New Roads Through Public-Private Partnerships: Frequently Asked Questions," Leonard C. Gilroy, Robert W. Poole, Jr., Peter Samuel, Geoffrey Segal, Reason Foundation, 11/07.

"Review Of Congressional Earmarks Within Department Of Transportation Programs," Office Of The Inspector General, U.S. DOT, 9/7/07.

"Case Studies Of Transportation Public-Private Partnerships In The United States," Aecom Consult Team, for U.S. DOT, Federal Highway Administration, 7/7/07.

"Case Studies Of Transportation Public-Private Partnerships Around The World," Aecom Consult Team, for U.S. DOT, Federal Highway Administration, 7/7/07.

Draft Vision 2040 Puget Sound Regional Council, 7/07.

"Lake Washington Urban Partnership," Washington State Department of Transportation, 4/30/07.

"Report On SR 520 Bridge Replacement And HOV Project Funding Alternatives," Seattle-Northwest Securities Corporation, Montague DeRose & Associates, LLC, 3/28/07.

"Destination 2030 - Taking An Alternative Route," Washington State Transportation Center/Booz Allen Hamilton (For King County Executive), 3/05/07.

"Overview Of National Strategy To Reduce Congestion On America's Transportation Network," USDOT, 3/07.

"Public-Private Partnerships For Toll Highways," Robert W. Poole, Reason Foundation, Testimony To U.S. House Committee On Transportation & Infrastructure, Subcommittee On Highways & Transit, 2/13/07.

"Report On The Transportation Innnovative Partnerships Program," Washington Transportation Commission, 1/07.

"Regional Transportation Commission Final Report," Regional Transportation Commission (of Puget Sound), 12/31/06.

"Washington Transportation Plan 2007-2026," Washington Transportation Commission, 11/06.

"Reducing Congestion In Atlanta: A Bold New Approach To Mobility," Robert W. Poole, Reason Foundation, 11/06.

"Public-Private Partnerships & The Development Of Transport Infrastructure: Trends On Both Sides Of The Atlantic," Benjamin G. Perez, PB Consult Inc., James W. March, Federal Highway Administration; 9/06.

"Transportation Finance At The Ballot Box: Voters Support Increased Investment & Choice," Center For Transportation Excellence, 8/06.

"Building Roads To Reduce Congestion In America's Cities: How Much & At What Cost?," David Hartgren, M. Gregory Fields & Robert W. Poole, Reason Foundation, 8/06; (WA state congestion analysis, from study).

"Why Mobility Matters," Ted Balaker, Reason Foundation, 8/06.

"Current Toll Road Activity In The U.S.: A Survey & Analysis," Benjamin Pereze, Steve Lockwood, for U.S. DOT, Federal Highway Administration, 8/06.

"Remarks Of Pat Jacobsen - CEO, Greater Vancouver Transportation Authority - To House & Senate Transportation Committees of Washington State Legislature, 1/19/06.

"Traffic Congestion & Reliability: Trends & Advanced Strategies For Congestion Mitigation," Cambridge Systematics & Texas Transportation Institute (for Federal Highway Administration), 9/1/05.

"2005 Urban Mobility Report," Texas Transportation Institute, 2005.

"Unclogging America's Highways - Effective Relief For Highway Bottlenecks," American Highway Users Alliance, 2/04

HUBS, CORRIDORS & GATEWAYS

" Canada: A Macroeconomic Study of the United States' Most Important Trade Partner,"U.S. Department of Agriculture Economic Research Service, Updated 9/15/06

Canadian Embassy State Trade Fact Sheet 2006, Canadian Embassy, 2006.

Canada/U.S. Regional Economies, Canadian-American Border Trade Alliance.

"Western Hemisphere Travel Initiative: The Basics," U.S. Department of Homeland Security.

Resolution Of The West Coast Corridor Coalition, 11/03.

"From B.C. To B.C. - And Beyond - the Story Of The West Coast Corridor Coalition."

"Spatial Concepts & Cross Border Governance Strategies," Susan E. Clarke, University of Colorado, (presented to EURA Conference On Urban & Spatial Policies), 4/02.

"The Character of Non-Governmental Transborder Organizations In The Cascadia Region of North America," Lawrence Douglas Taylor Hansen, Revista Mexicana De Estudios Canadienses, 2/02.

SURFACE & MARINE TRANSPORTATION

Cascadia Center Reports

"Testimony In Support Of King County Passenger-Only Ferry District," Matt Rosenberg, 11/13/07.

"Alaskan Way Replacement: Alternative Approaches," Ove Arup & Partners, for Cascadia Center, 11/06.

"A New Vision For Developing Transit For Livable Cities." Enrique Penalosa, former
mayor of Bogota, Columbia speaks at a Cascadia Center co-sponsored event on implementation of Bogota's TransMileno Bus Rapid Transit system. Seattle Channel video, 9/27/06.

"Statement of Tom Till to Washington Transportation Commission On Amtrak & Related Issues, Including Availability of Federal Funding," 1/18/06.

Other Reports

"King County Passenger-Only Ferries Project Briefing Paper," IBI Group, for King County Executive, 11/7/07.

Puget Sound Regional Council Passenger-Only Ferry Study, 2007 (ongoing).

Chapter 7, "I-405 Plan: Transit and HOV", in "I-405 Congestion Relief & Bus Rapid Transit Projects - Final Recommendations Report," WSDOT. (See "I-405 BRT Service").

BNSF Corridor Preservation Study, Puget Sound Regional Council, 2/27/07.

Statewide Rail Capacity and System Needs Study, Washington State Transportation Commission, 12/06.

Columbia River Crossing Project Alternatives Page.

Willamette River Ferry Feasibility Study, City Of Portland Department of Transportation, 2006.

Waterborne Transit Policy Study, King County Department of Transportation, August, 2005.

Rich Passage Passenger-Only Ferry Study, Phase I, WSDOT, Federal Transit Administration, 4/05.

"Report Card For America's Infrastructure," American Society Of Civil Engineers, 2005.

TECHNOLOGY & ENERGY

Cascadia Center Reports

Speaker Presentations At Cascadia/Microsoft/Idaho National Laboratory "Beyond Oil: Transforming Transportation" conference, 9/4/08 and 9/5/08, Redmond, Wash. (Topics included electric vehicles, plug-in hybrid electric vehicles, renewable energy, traffic management systems and technology, transit. Many of these files are very large and may take several minutes to open/download depending on your internet connection).

9/4/08 Presentations:

Sharon Banks
Scott Belcher
Charlie Botsford
John Clark
June Devoll
Rob Elam
Dick Ford
Jim Francfort
Andy Frank
Arti Gupta
Jerry Hautamaki
Craig Helmann
John Horsley
Cornie Huizenga
Ron Johnston-Rodriguez
Preet Khalsa
Dave Kristick
Felix Kramer
Justin McNew
Paul Minett
Brian Mistele
Tim Murphy
Jack Opiola
Syd Pawlowski
Dick Paylor
Ron Posthuma
Matt Sheldon
Jim Stanton
Ed Stern
Julian Taylor
Michael Weick

9/5/08 Presentations:

Kevin Banister
Rob Bernard
Don Foley
Paul Genoa
KC Golden
Paula Hammond
David Kaplan
Rich Laukhart
Jim Piro
Bill Rogers
Jim Walker
Brian Wynn

"Greening The Highway From Baja To B.C. - A Discussion Brief," Matt Rosenberg, 9/19/07.

"Replacing Oil With Electricity And Biofuels In Transportation: The Convergence Of Technology And Public Policy," Steve Marshall, 8/7/07.

Speaker Presentations at Cascadia-Microsoft "Jump Start To A Secure Clean Energy Future" Conference on Plug-in Hybrid Electric Vehicles and Alternative Fuels, 5/7/07

Roger Duncan, Austin Energy/Plug-In Partners (4.78 MB)
Mark Duvall, Electric Power Research Institute (1.13 MB)
Andrew A. Frank, University of California/Davis (1.33 MB)
K.C. Golden, Climate Solutions (1.81 MB)
David Horner, U.S. Dept. of Transportation (700 KB)
Michael Kintner-Meyer, Pacific Northwest National Laboratory (1.91 MB)
Felix Kramer, CalCars.org (708 KB)
John M. Miller, Maxwell Technologies (496 KB)
Philip Mote, University of Washington (3.88 MB)
Tim Murphy, Idaho National Laboratory (674 KB)
Vic Parrish, Energy Northwest (494 KB)
Bill Reinert, Toyota USA (2.00 MB)
Bill Rogers, Idaho National Laboratory (1.05 MB)
Greg Rock, Green Car Company (82.9 KB)
Neil Schuster, Intelligent Transportation Society Of America (2.14 MB)
Rogelio Sullivan, U.S. Dept. of Energy (1.08 MB)
John Wellinghoff, Federal Energy Regulatory Commission (4.23 MB)
Nick Zielinski, General Motors/Chevy Volt (1.79 MB)

Other Reports

"Basic Research Needs: Catalysis For Energy," (report from U.S. Dept. Of Energy Basic Energy Sciences Workshop), 8/07.

"Environmental Assessment of Plug-In Hybrid Electric Vehicles," Electric Power Research Institute, Natural Resources Defense Council, 7/07.

" Joint Science Academies Statement on Growth and Responsibility; Sustainability, Energy Efficiency and Climate Protection, for G8 Summit, 5/07.

"Fourth Assessment Report of Intergovernmental Panel On Climate Change," United Nations, 4/07/07.

Annual Energy Outlook 2007 - With Projections To 2030," U.S. Department of Energy, Energy Information Administration, 2/07.

Impacts Assessment of Plug-in Hybrid Vehicles On Electric Utilities and Regional U.S. Power Grids; Michael Kintner-Meyer, Kevin Schneider, Robert Pratt; Pacific Northwest National Laboratory, 12/06.

"Alternative Fuels Study: A Report To Congress On Policy Options For Increasing The Use Of Alternative Fuels In Transit Vehicles," Federal Transit Administration, U.S. Dept. of Transportation, 12/06.

"Intelligent Transportation Systems Regional Architecture", Puget Sound Regional Council, IBI Group, 8/21/06.

"Future Visions," Washington Transportation Plan Update Process, WSDOT/Washington Transportation Commission, 6/17/05. (See pp. 27-34, "Intelligent Transportation Systems").

GridWise Program Overview, Pacific Northwest National Laboratory.

Technological Basis For GridWise, Pacific Northwest National Laboratory.

Primer On Vehicle-Infrastructure Integration, Intelligent Transportation Society Of America.

TECHNORATI TAGS: TRANSPORTATION, RESEARCH, TRANSPORTATION GOVERNANCE, TRAFFIC CONGESTION, TRANSIT, BUS RAPID TRANSIT, PASSENGER-ONLY FERRIES, TOLLS, PUBLIC PRIVATE PARTNERSHIPS, SEATTLE, PUGET SOUND, CASCADIA, WEST COAST CORRIDOR, FRIEGHT, INTELLIGENT TRANSPORTATION SYSTEMS, ALTERNATIVE ENERGY, ALTERNATIVE FUELS, PLUG-IN HYBRID ELECTRIC VEHICLES