Abstract: Given tight federal budget restraints and shrinking transportation trust fund revenues, states and the federal government need to find alternative financial resources to finance needed transportation infrastructure projects, especially maintaining and expanding the capacity of the Interstate Highway System. Increased use of public–private partnership contracts (P3s) promises to help finance some of the needed infrastructure projects, but the federal government needs to allow states more freedom to use P3s, and states need to adopt the policies and practices needed to use P3s effectively. P3s are not the solution to every transportation infrastructure challenge, but they can be used to address some of the challenges.
The House of Representatives and the Senate are working to complete the legislative language for their respective highway reauthorization plans. Proposals circulating in the House and Senate indicate that Congress could exercise some degree of restraint in federal transportation spending compared with earlier proposals and the President’s exceptionally generous plan of February 2011.
As a consequence, federal, state, and local transportation programs may need to find alternative financial resources just to maintain current levels of inflation-adjusted spending. Under the right circumstances, public–private partnerships could play a targeted role.
To shrink the financial gap between wishes and reality, many have proposed that governments seek to negotiate public–private partnership contracts (P3s) with infrastructure investors and developers. These complex and carefully drafted agreements allow governments to leverage scarce public funds with private capital for major transportation projects. However, while P3s have demonstrated the ability to raise substantial sums of money for major infrastructure projects—especially those that add needed capacity in congested corridors—experience demonstrates that they can be complicated and time-consuming to create and that not every transportation project is amenable to the P3 approach.
For the most part, the quest for alternative financing sources is driven by public opposition to raising state and federal fuel taxes. The last time the federal fuel tax was increased was in 1993. The federal excise tax is currently 18.3 cents per gallon and is the major source of revenue for the highway trust fund. Much higher fuel efficiencies mean lower gas tax proceeds and a shrinking trust fund.
The disparity between transportation spending needs and wants as defined by congressional transportation committees, the Obama Administration, and the program’s stakeholders is growing as shrinking trust fund revenues limit future investment. Under the circumstances, a non-tax alternative procurement approach based on private-sector involvement using tolls and other types of user fees would fill part of the yawning gap.
Options Under Review
A number of states have expressed interest in placing tolls on their free interstate highways, which are state-owned assets. While such proposals arouse considerable controversy, governments clearly need to find some source of funding in the coming years to rebuild the aging road network that has fostered U.S. economic productivity for the past 50 years. The federal government is steadily backing away from this responsibility, but it still restricts states’ options for financing the modernization of their own roads. If Washington is not going to be part of the transportation solution, it should simply get out of the way and let states find their own ways forward.
Among the many non-tax options under review by many states is greater reliance on public–private partnerships, an arrangement in which private investors, construction companies, and developers join with state or federal government agencies to combine their experience, expertise, and funding sources to build and operate major transportation projects. These arrangements can come in many forms, and the examples that follow are indicative of the several transportation P3s already underway or completed.
P3 Successes in Virginia and Texas
In the Virginia suburbs of Washington, D.C., a $2 billion project is adding 14 miles of four high-occupancy toll (HOT) lanes in the median of the Capital Beltway from the Springfield Interchange of I-95, I-395, and I-495 to the Dulles Toll Road exit in Fairfax County. Single-occupant cars will be charged variable-rate tolls to pay for the improvements, while carpools and express buses will travel for free.
The partnership between the Virginia Department of Transportation and a private company formed by Transurban (Australia) and Fluor (U.S.) expects to complete the project by 2013. The project is financed by a $409 million grant from the state of Virginia; a $589 million Transportation Infrastructure Finance and Innovation Act (TIFIA) loan from the U.S. Department of Transportation (USDOT); $589 million in private activity bonds (PABs); and a $350 million equity investment by the joint venture partners. Net revenues after expenses for operations, maintenance, and reserves will be applied first to the PABs and then to the TIFIA loan. Any residual revenue will accrue as profit to the private joint venture partners.
The benefits to Virginia are obvious. For an investment of $409 million, Virginia gets $2 billion worth of new road capacity in one of the nation’s most congested regions. Area motorists will have quicker commutes. Thousands of new construction and engineering jobs will have been created between 2008 and 2013, and more than $280 million of aging infrastructure, including more than 50 bridges and overpasses, will be replaced in the process.
A second Virginia P3 project will reduce congestion choking the Hampton Roads area by expanding highway and tunnel capacity between Portsmouth and Norfolk. The state recently agreed to contribute $395 million to fund the $1.9 billion project. In exchange, the private developers agreed to put in $318 million in equity and carry $495 million in debt that will be repaid by toll revenues alone.
The Texas Transportation Commission started its P3 program in 2001. During the next seven years, it negotiated three concessions worth $8.15 billion—State Highway 130 between San Antonio and Austin and two HOT lane projects in the Dallas–Fort Worth region. The state leveraged its contribution of $990 million in public funds to eight times that much by attracting investment from the private sector.
Growing Support in Congress
To date, all of these projects have been developed and initiated by states, private investors, or a combination of the two, often with federal support, such as TIFIA grants and permission to build on the interstate right-of-way. With federal transportation funding limited by macroeconomic budget concerns, many in Congress are looking to be more proactive. Both the House and Senate reauthorization draft proposals welcome and encourage greater private-sector involvement in transportation investment.
In June 2011, House Committee on Transportation and Infrastructure Chairman Jon Mica (R–FL) released a 22-page summary of his highway reauthorization proposal, which included several provisions that would encourage states to utilize P3s and access other sources of funds to meet their transportation needs. While Chairman Mica has since announced that his committee will issue a new reauthorization plan in early 2012, it is likely that his P3 proposals will be included. Chairman Mica’s earlier P3 proposals included:
While Chairman Mica’s proposal for greater use of P3s is a great start, Congress should consider other ideas and changes, such as:
As for the proposal that the federal government should offer guidance on and standardization of P3s, whenever the federal government begins to promulgate policies and manuals, it often ends up managing projects, especially if it has a $1 billion program (i.e., TIFIA) for leverage. Opening the door to federal manuals and standard contracts for these very local, innovative, and evolving deals could kill P3s.
Moving Ahead for Progress in the 21st Century (MAP 21, or S. 1813), the Senate’s version of the reauthorization, is silent on P3s, but it proposes boosting TIFIA funding to $1 billion per year.
In addition to the House reauthorization proposal that supports P3s, individual Members of Congress have introduced bills to enhance the private sector’s role in transportation infrastructure. Notable in this regard is the Lincoln Legacy Infrastructure Development Act (S. 1300), a bill introduced by Senator Mark Kirk (R–IL) that would provide P3 Challenge Grants, allow for privatizing interstate rest stops, add more interstate tolling pilot projects, increase TIFIA funding, remove the cap on PABs, and reform the airport privatization pilot project program.
Limited P3 Use to Date
While some P3s have succeeded in adding significant road capacity in a number of metropolitan areas in recent years, they remain a minor contributor to overall transportation infrastructure investment. According to a comprehensive 2011 review of P3s prepared for the American Road and Transportation Builders Association:
Thus, despite the successes beginning with Denver’s E-470 tollway in 1989, P3s are still a minor part of the surface transportation landscape. Opposition to tolling, opposition to private profits from operating public infrastructure, and concern over foreign investment in government assets in the U.S. have generated political opposition in some states. These challenges need to be overcome before the P3 concept can become a significant supplement to taxpayer funding.
As a consequence, policymakers should recognize that P3s are not the solution to the transportation infrastructure investment gap that threatens to undermine commerce in the United States. There are too few financially viable P3 projects to meet the national need for new highway capacity and to modernize existing roads. No amount of enabling legislation will bring private investors into projects that are not financeable, and very few highways could support themselves on tolls alone. Thus, some combination of gas taxes, sales taxes, fees, and appropriations of state funds is necessary to make a creditworthy public–private partnership.
Nonetheless, P3s offer valuable improvements and opportunities for U.S transportation. P3s are coming to America and will become a growing component of U.S. infrastructure investment.
Creating Opportunities for P3s
In contrast to past skepticism in the House and Senate about the P3 concept, renewed congressional interest in and endorsement of new policies and additional resources to facilitate P3 use are welcome changes. Nonetheless, supporting states in developing P3 programs will require significant challenges.
Given these difficulties—more thoroughly discussed in the 2011 review— federal and state governments should take several steps in addition to the proposed increase in TIFIA funding:
Creating an Innovative Future
The leaders of the House and Senate transportation committees should be commended for proposing reauthorization plans that include a greater role for the private sector in surface transportation. The relevant provisions included in the final reauthorization bill need to reflect the lessons learned from projects that have been completed, are underway, or have failed to move forward.
P3s have demonstrated the ability to raise substantial sums of money for major infrastructure projects, especially to add needed capacity in congested corridors. Experience has also demonstrated that P3 projects can be complicated and time-consuming to create and that not every transportation project is amenable to this approach. As a consequence, other innovative and traditional finance solutions will be needed to meet current and future infrastructure spending plans.
—William G. Reinhardt is editor and publisher of Public Works Financing. Ronald D. Utt, Ph.D., is Herbert and Joyce Morgan Senior Research Fellow in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.
From Dec. 5 to Dec. 7 there will be five public forums, one in each parish expected to be affected by the loop: East Baton Rouge, West Baton Rouge, Livingston, Ascension and Iberville. ABMB is one of the lead firms on the BR loop project.
The Baton Rouge Loop is moving forward, and soon area residents will be invited to offer their input about the proposed 85-mile express highway circling the capital area.
Progress by the Capital Area Expressway Authority, which is the legal entity set up to pursue the loop, continues desspite the widespread loss of support for the $4.5 billion project among outlying parish leaders.
From Dec. 5 to Dec. 7 there will be five public forums, one in each parish expected to be affected by the loop: East Baton Rouge, West Baton Rouge, Livingston, Ascension and Iberville.
The public hearings are one of the final requirements of the project’s environmental impact statement, which is a cumbersome, multi-year application process submitted to the Federal Highway Administration for approval.
Approval from the FHA means the expressway authority will receive a “Record of Decision,” which is essentially a legal permit, or “green light to move forward with the project,” said Mike Bruce, managing principal of ABMB Engineers Inc., one of the lead firms on the loop.
Once the loop receives an OK from the federal government, private investors are more likely to get involved in the project, backers have said. The Record of Decision also means there could be federal dollars allocated toward the project.
Comments from the public made during the forums will be recorded in the impact statement submitted to the FHA and could influence the project’s approval, Bruce said.
“The federal government will weigh these comments along with all the other factors,” Bruce said. “Historically, there have been projects that have been stopped because of overwhelming public disapproval.”
The environmental impact study also includes information about social, economic and transportation patterns in the region which the FHA will consider, Bruce said.
After the public hearings, Bruce said, the impact statement will be submitted to the FHA within about 90 days. But he didn’t know how long the approval process would take.
Despite the project just continuing to trudge along, some parish presidents are calling the loop a lost cause.
In April 2010, three of the five parish presidents serving on the expressway authority’s board of directors resigned over possible route alignments, opposition from residents and questions about economic feasibility.
“It’s just politics and dreaming at this point,” said Iberville Parish President J. Mitchell Ourso. “Show me the money and all the people that are happy about this going through. Make a believer out of me.”
Tommy Martinez, Ascension Parish president, said he doesn’t believe the southern part of the loop is feasible.
“The loop concept is not a bad concept,” Martinez said. “My objection is not that we don’t need a project to alleviate traffic. My objection is that I don’t know if there will ever be money to dothis project.”
East Baton Rouge Mayor-President Kip Holden, who chairs the expressway authority, and West Baton Rouge Parish President Riley “Peewee” Berthelot, the only other remaining parish president on the board, did not return phone calls seeking comment.
Bruce said the loss of support from the parish presidents would also be documented in the impact study.
The loop is also running out of funding needed to get the project off the ground.
In 2009, the state Legislature allocated about $4.5 million toward the planning and engineering work for the loop.
As of September, $3.8 million had been expended.
Bruce said the remaining funds will last long enough to submit the impact study.
In July 2010, Gov. Bobby Jindal used a line-item veto to reject $5 million Baton Rouge legislators inserted into a spending bill to move the loop project along.
Bruce said that money would have been used to begin searching for private partners, which the expressway authority ultimately expects would fund the project.
People who cannot attend the public hearings can contribute feedback by going to http:www.BRLoop.com and printing out the form and mailing it in before Jan. 9.
The multibillion-dollar Baton Rouge Loop project, for which ABMB is a lead firm, is on track and moving forward.
The multibillion-dollar Baton Rouge Loop project is on track and moving forward, Mayor-President Kip Holden said Monday after a meeting of the Capital Area Expressway Authority.
“This project is not dead by any stretch of the imagination,” Holden said. “We’re still on track for what we had originally proposed.”
The loop is a proposed 85-mile toll road surrounding Baton Rouge that supporters say will alleviate traffic problems.
Last year, the loop project took multiple blows when three of the five parish presidents serving on the authority’s board of directors — Ascension’s Tommy Martinez, Livingston’s Mike Grimmer and Iberville’s J. Mitchell Ourso Jr. — resigned.
A few months later, Gov. Bobby Jindal used his line-item veto to delete $5 million of state spending.
Mike Bruce, managing principal of ABMB Engineers which is one of the lead firms on the loop project, said it’s unclear if the loss of state money affected the timeline.
He said the authority is still in the process of obtaining a “Record of Decision,” or permit, from the Federal Highway Administration to move forward.
A lack of available funding prevented the authority from being able to expedite the process this summer, but Bruce said he is hopeful the permit will be issued before year’s end.
At that point, the authority will attempt to sign a private partner for the project.
“Once you have the Record of Decision, private partners know that this can be a reality so they’ll be ready to step forward,” said Bryan Harmon, deputy public works director.
Bruce said in the short term, the authority is looking for a private partner for the first phase of the project which is the 25-mile northern bypass costing $750 million.
He said there has already been some investment interest from international firms.
Bruce said there may be public perception the project is dead because of slow progress.
“It’s a long process and there’s been some vocal opposition that puts it in a light that it’s not moving forward,” he said.
But Bruce said “if everything goes well,” the project could prepare to break ground within three years.
ABMB is on the team that developed the new FutureBR comprehensive master plan for East Baton Rouge Parish.
FutureBR, the two-year-in the-making master plan for East Baton Rouge Parish, was officially approved by the Metro Council on Wednesday.
The vote ends a comprehensive process that included dozens of public meetings with the business community, developers and civic associations and collected feedback from about 3,500 residents — all of whom helped shape the final product, FutureBR officials said.
Mayor-President Kip Holden applauded the council for moving forward with a plan that will help the parish “build the kind of quality of life we want for all of our families rather than simply letting circumstances dictate our future.”
The $1.9 million overhaul of the city-parish’s former Horizon Plan focuses on land use, urban design, neighborhood revitalization, transit and transportation goals, parks and recreation, environment and conservation, housing and infrastructure and economic development.
Several business leaders in the parish, who urged council support, roundly supported the 20-year plan Wednesday.
Adam Knapp, of the Baton Rouge Area Chamber, applauded the process used to develop the plan.
“It’s government at it’s best,” he said. “Bringing people into the process and bringing business leaders to the table.”
Elizabeth “Boo” Thomas, president of the Center for Planning Excellence, said the plan meets the “wishes and desires” of parish residents.
“It sets a vision, it recognizes who we are as a community and where we want to go,” she said. “It’s a blueprint, a road map. It’s all the things we hoped it would be.”
The Metro Council was mostly complimentary of the plan, except for some concerns about the inclusion of the northern part of the Baton Rouge loop project.
The loop is a proposed 85-mile toll road surrounding Baton Rouge intended to alleviate traffic.
The project has lost support the past year from residents in surrounding parishes as well as state funding. But a 25-mile northern stretch of the loop was included in the FutureBR plan.
“It’s one of the routes that, really, most people were against,” said Councilman Scott Wilson. “That’s the only thing I can’t support.”
Wilson made a motion to delete the loop from the plan, but the motion died for lack of a second.
John Fregonese, the project’s Oregon-based planning consultant, said the northern part of the loop was included because it’s in the statewide plan, and is intended to acknowledge traffic problems in those areas.
But he said the loop, like other projects in the plan, are conceptual and not a guarantee something will be built.
Councilman Ulysses “Bones” Addison moved that the council accept the FutureBR land use plan, with the provision that Fregonese make a modification clarifying the loop was conceptual.
The council unanimously approved the plan, with only Ronnie Edwards absent.
Fregonese said in the next few weeks a strategic plan will be released to guide implementation of the new master plan. It will include updating zoning codes and picking areas and neighborhoods for improvement projects.
Nw study shows that navigation systems in which vehicles collect and share traffic information with each other can decrease the average travel time of all vehicles in a traffic network.
(PhysOrg.com) -- Traffic congestion is not only annoying, it’s expensive. In 2005, traffic congestion cost an estimated $78.2 billion in 437 urban areas in the US, according to the Texas Transportation Institute’s 2007 Urban Mobility Report. The cost is measured by the travel time index, which is the ratio of travel time in rush hours to travel time at quiet periods, and has increased from 1.09 in 1982 to 1.26 in 2005. In addition to the use of public transportation and bicycle commuting to address this problem, some researchers have been developing intelligent transportation systems in which vehicles use near-real-time traffic data to choose the fastest route and decrease congestion throughout the network.
However, there has been some debate on whether or not these high-tech systems actually work – that is, whether or not they minimize the overall average travel time of all vehicles in a traffic network. Some studies during the past several decades have shown that even having perfect traffic information does not guarantee lower congestion. In one model, a traffic network in which every vehicle had full information of the roads had the same overall performance as a traffic network with no information feedback.
Now a new study shows that navigation systems in which vehicles collect and share traffic information with each other can decrease the average travel time of all vehicles in a traffic network. In contrast to some of the previous studies that found the opposite result, this study dealt with a fully decentralized, crowd-sourced system rather than sensors located at specific road locations, and also tested the system using real-life experiments and simulations of more complex, realistic traffic flows compared with the simpler models in previous studies.
The researchers, Ilias Leontiadis from the University of Cambridge and coauthors from there, the University of Bologna, and the University of California, Los Angeles, will have their study published in an upcoming issue of IEEE Transactions on Intelligent Transportation Systems.
First, the researchers designed a smart navigation system called CATE (Computer-Assisted Traveling Environment). In CATE, every vehicle acts as a traffic sensor by sending traffic data every time it exits a road segment, which is typically at an intersection. The data, which includes the intersection, the time the vehicle entered the road segment, and the time the vehicle exited the road segment, gets sent to other vehicles via a wireless network. As demonstrated by experiments at UCLA’s Campus Vehicular Testbed (C-VeT), the low data rates that the technology requires can easily be supported by the bandwidth used by personal wireless devices, such as GPS systems or smart phones.
Next the researchers compared different algorithms that these devices might use to choose the best route based on the traffic information they receive. Using computer simulations as well as traffic data collected in downtown Portland, Oregon, the researchers found that, with the best algorithms, 64% of vehicles reduced their travel time by more than 10%. Of the rest, 23% had trip times within 10% of their times without the information (and so were considered to not really be affected), and the remaining 13% required more time than without the information. The researchers attribute the increased time to the fact that some traffic was being diverted into relatively open roads that consequently became busier than before.Still, the overall average trip time was significantly reduced when the CATE navigation system was used. The researchers also found that, when just 34% of the vehicles used CATE, the performance of the entire traffic network was comparable to the performance when up to 100% of the vehicles used the system.
“The results show that crowd-sourced information can be used to estimate traffic conditions,” Leontiadis told PhysOrg.com. “Since traffic measurements are subjected to a lot of noise (e.g., some vehicles might be caught in traffic lights, some not, etc.), we showed that this information is still valuable when the appropriate algorithm is used in order to correlate information from multiple vehicles.”
Part of the reason for the positive results of the evaluation is due to the way that CATE works compared with other navigation systems, such as video cameras or induction loops that monitor select street locations. With these latter systems, all vehicles can instantly access the same information using cellular networks or FM radio stations. However, not all streets are monitored, which can cause unknown congestion in these areas. In contrast, all streets with vehicles that use CATE are monitored, so vehicles do not congest streets due to lack of information. Also, all vehicles have a slightly different perspective of the traffic conditions, which may lead to more individualized routes. Leontiadis explained that one of the surprising results was how quickly and effectively information could spread among vehicles.
“Although the information spreads quite quickly, we still receive information based on past observations,” he said. “We expected a phenomenon that in computer science (networks) is called ‘route flapping.’ This happens when traffic constantly moves (flaps) from one route to another due to delay of information. For example, imagine that there are two highways to travel between cities (A and B). If I broadcast that a highway A is currently empty while highway B is busy, then every vehicle that hears this information will select A. Highway A will then become congested as more and more vehicles will start going there and due to the fact that the information that A is now getting congested needs some time to reach incoming vehicles. When eventually this information is out, most vehicles will switch to highway B, causing problems there. This constant flapping between A and B happens on computer networks (the internet). Surprisingly we didn't observe this problem: based on our results, it seems that the speed at which the information spreads is much faster than the speed that road traffic builds up.”
By showing that a decentralized intelligent transportation system can greatly improve traffic flow, the results of the study could lead to significant economic savings. The study also opens up new research directions, such as investigating the impact of different algorithms and flow intensities on the average travel time. Other areas for improvement include better algorithms, ways to lower bandwidth, and data encryption for security issues.
More information: Ilias Leontiadis, Gustavo Marfia, David Mack, Giovanni Pau, Cecilia Mascolo, and Mario Gerla. “On the Effectiveness of an Opportunistic Traffic Management System for Vehicular Networks.” IEEE Transaction on Intelligent Transportation Systems. To be published. DOI:10.1109/TITS.2011.2161469