Category Archives: Transportation

Tesla’s Grand Plan

The Tesla Model 3. Is this the breakout model that will create a mass market for electric vehicles and transform the electric grid?

The Tesla Model 3

Tesla Motors, which wants to expand its retail presence in Virginia, is more than a manufacturer of high-end electric vehicles. It’s part of Elon Musk’s quest to transform the electric grid.

by James A. Bacon

Richmond businessman Stuart Siegel loves his Tesla Model X. The SUV is loaded with luxury options and its electric motor is as quiet as a mouse. After he recharges his car battery at night, the car holds enough juice to run 280 miles more than enough for daily needs rarely exceeding 50 miles. If he ever wanted to drive to Maine or Florida, he says, the car monitor shows the location of hundreds of Tesla recharging stations around the country. Twenty minutes with a supercharger — not much longer than it takes to grab a coffee or take-out at a nearby restaurant– gives him enough power to drive another 175 miles.

Selling luxury electric vehicles is not the only thing that endears Tesla to Siegel. The company is redefining how an automobile manufacturer sells and services cars. Unlike traditional manufacturers, who work through auto dealer franchises, Tesla controls the customer experience from start to finish.

When ordering his Model X, Siegel went online to pick all the options — color, interior, wheels, seating configuration, size of battery. A few m0nths later, Tesla delivered a vehicle to Tesla’s retail outlet in Tysons, manufactured to his exact specifications. He couldn’t get that degree of customization with any other car, he says.

If the car needs maintenance, Siegel doesn’t go to Tesla, Tesla comes to him. When he had a problem with a door latch, the company dispatched a “ranger” from the Washington area to his house in Richmond. “This guy showed up in a white van,” he recalls. “Everything he needed to fix a car was in that van. He put on a new latch, and an hour later he was gone.”

Tesla also provides tech support. When he picked up his Tesla X at the Tysons sales center, a delivery specialist spent two hours showing him how to drive the car, Siegel says. “He took me through everything. He gave me his card.” One day, when the car monitor went dark, Siegel called a tech support number. The technician told him exactly what to do, and the monitor came right back on. “I love the car. It’s unlike any other I’ve ever owned.”

As Tesla expands its product offering from the sporty Tesla S sedan ($85,700 sticker price) and Tesla X utility vehicle ($106,200 sticker price) to electric vehicles in the $35,000 range, it needs to ramp up its retail footprint. Due to the unique nature of how it interacts with customers, however, the company is unwilling to outsource the relationship to independent auto dealerships.

Tesla’s corporate philosophy has caused a rift with the Virginia Automobile Dealers Association (VADA), which maintains the company should abide by the same automobile-franchise and consumer-protection laws as every other auto manufacturer. After negotiating a deal that allowed the company to set up a retail outlet in Tysons two years ago, Tesla now wants to add one in the Richmond area.

Following lengthy hearings, a Department of Motor Vehicles hearing examiner recommended yesterday rejection of Tesla’s request.  Tesla had argued that there are no independent automobile dealers in the Richmond area capable of profitably selling its cars. But at least 11 dealers had expressed an interest to sell and service Tesla’s cars, noted examiner Daniel P. Small. The case goes to DMV Commissioner Richard Holcomb for a final decision.

Holcomb’s decision, driven by a consideration of Virginia’s auto dealership laws, could have profound implications for the future of Virginia’s electric grid. Tesla is but one component of a larger vision by California entrepreneur Elon Musk to move the world toward a more environmentally sustainable economy.

In Musk’s view, selling more electric vehicles helps the world by cutting gasoline combustion and the carbon dioxide emissions implicated in global warming. But EVs need electricity, most of which comes from burning fossil fuels. So Musk has announced his intention to merge Tesla Motors, his EV company, with SolarCity, another company he has founded, creating what he calls “the world’s only vertically integrated sustainable energy company.” His ultimate goal is to make solar the primary energy source for the electric grid, using Tesla’s battery technology to store excess electricity produced during peak sunlight hours for use during periods of peak demand later in the day.

While the three main components of Musk’s empire — generation, storage, EVs — can work independently of one another, Diarmuid O’Connell, Tesla’s vice president of corporate development told Bacon’s Rebellion, “It’s best if they all work together.”

A Tesla outlet for selling EVs eventually will become “a single retail touch-point for the customer,” O’Connell says. “We’re trying to pull the pieces together with one offering in the market. The best possible case in Virginia is to modify our existing retail footprint so we can offer the full package” — electric vehicles, solar panels and energy storage.
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Where Have All the Riders Gone?

by James A. Bacon

Where have all the riders gone? That’s the question transit agencies are asking nationally, but nowhere more urgently than in the Washington metropolitan area. Rail and bus ridership for the Washington Metropolitan Area Transit Authority (WMATA) fell 6% in the fiscal year ending July 31, a decrease of 20 million trips. Ridership had been forecast to increase slightly, according to the Washington Post‘s Martin Di Caro.

The fall-off in Metro rail traffic, which tumbled 7%, is at least comprehensible. Metro has been plagued by accidents, delays, interruptions and maintenance backlogs that have left many commuters disgusted with the service. But ridership on WMATA’s bus lines declined, too, while New York, Chicago, Los Angeles and other cities with large mass-transit systems have seen falling ridership.

It wasn’t supposed to happen this way.  This decade was supposed to experience a great mass transit revival as growth and development shifted back to the urban core, and as Millennials and Empty Nesters gravitated to walkable, mixed-use communities served by commuter rail. Millennials were supposedly abandoning the idea of car ownership in favor of walking, biking and transit.

Although there are plenty of theories about what’s happening, no single explanation has emerged as decisive. Ridership was down across all time periods, days of the week, and nearly all individual stations, although losses were especially severe in off-peak periods,” states one WMATA document cited in the article. Di Caro summarizes the possible explanations:

Demographic changes, the rise of telework, the proliferation of transport alternatives such as Uber or Capital Bikeshare, the economic downturn and reductions in federal spending, constant weekend track work over the past five years – all have combined with consistently poor rush hour service to drain Metrorail ridership.

Mass transit authorities across the country are focusing on the dramatic ridership gains by Uber, Lyft and other “e-dispatching taxis.” Their effect seems to be most pronounced late at night and early at morning when transit service is spottiest. But there is no research to support a conclusion that the Uber revolution is capturing millions of commuter trips.

Demographic changes should be favoring mass transit, not hurting it. So should the economy, which, though sluggish, is growing. As for Capital Bikeshare, total ridership ran about 2 million last year. Any increase in ridership could have diverted only a tiny percentage of Metro passengers.

Bacon’s bottom line: I have no explanation for the decline, which I didn’t anticipate. I have never been a transit utopian, but I thought that social and economic trends did portend at least a modest shift from single occupancy vehicles to bus and rail. Clearly, I was wrong.

What set me apart from other transit advocates was a reluctance to spend heavily to build expensive new commuter-rail facilities that had no hope from the get-go of supporting themselves financially. Private developers, not government entities, should take the risk that notoriously unreliable traffic projections would pan out.

WMATA, already facing a multibillion maintenance backlog, now must divert millions of dollars slated for critical preventive maintenance to cover the the operating the revenue deficit. The authority is staring at a vicious cycle. Less maintenance = poorer service = fewer riders and revenue. The WMATA board is considering a fare hike to help cover the revenue gap. But higher fares drives off riders as well. The deficit could surpass $150 million this year.

Until the dynamics driving mass transit ridership are better understood, it would be advisable for Virginia localities to revisit their assumptions underpinning proposed projects like Virginia Beach light rail and Richmond Bus Rapid Transit. Their ridership and revenue projections are almost certainly flawed. The same applies to toll-funded highway megaprojects, such as the $2 billion in Interstate 66 improvements. Given the precarious condition of the global economy, the fragility of the sovereign debt bubble, and the vulnerability of Virginia to cutbacks in federal spending, we need to be more disciplined than ever with our capital spending.

Embrace the Uber-Enabled Mass Transit Revolution

Photo credit: Washington Post

Photo credit: Washington Post

by James A. Bacon

The Uber/Lyft revolution is beginning to transform public transportation around the country. Other than in Arlington County, where county officials are considering replacing under-utilized bus lines with subsidized Uber service, little of this dynamism seems to be seeping into Virginia, however. Too bad. We’re missing a major opportunity.

Reports Spencer Woodman with The Verge:

Both Uber and Lyft have been striking agreements with transit agencies, mostly for so-called “first-last mile” programs — meant to shuttle commuters to bus or train stations. Since last year, Uber has scored public transit agreements with San Francisco, Atlanta, Philadelphia, Cincinnati, and Pittsburgh among other cities. Uber and Lyft have been edging into niche public transportation services, like transit for disabled people or low-income residents who need rides to work or the grocery store. Last month, officials in Washington, DC proposed having Uber respond to some 911 calls for ambulances.

Even Google’s Alphabet, through its Sidewalk Labs program, has joined the transit bonanza. The company recently offered to overhaul transit in Columbus, Ohio, with a system that sets parking prices based on demand and funnels low-income commuters into subsidized ride-share vehicles.

These companies are arriving at an opportune time for cities, many of which are struggling just to fund existing transit service, much less expand it to meet the needs of growing numbers of urban commuters. Both Uber and Lyft tell The Verge that the past year has seen a surge in public officials interested in giving the companies taxpayer dollars for public transit contracts. … Given the pace at which these partnerships are coming together, it’s possible to imagine ride-hailing companies taking on the role of all-encompassing smartphone-driven public transit providers, one town at a time.

The Uberization of transportation may prove to be a boon to mass transit. But it also raises ethical questions, notes The Verge. Catching a ride on Uber and Lyft requires two things that many poor people lack: a smart phone and a credit card. Shouldn’t subsidies be reserved for the poor,  not better-off passengers who can afford iPhones and Capital One cards? Should transit agencies restructure themselves to serve Yuppies at the expense of people for whom mass transit may be their only transportation option?

Those are legitimate concerns, but they shouldn’t slow down the Uber Revolution. The smart phone-driven ride-hailing industry is still in its early phases of entrepreneurial innovation. It is the natural progression of things for entrepreneurs to target the affluent market first because that’s where the money is. As companies gain experience and establish economies of scale, they will move down-market to less affluent riders. In fact, that is already happening with Uber’s shared-ride programs. At some point the technology behind Uber and Lyft will become so ubiquitous that we’ll see all manner of entrepreneurs targeting under-served niches. If large numbers of people lack smart phones and credit cards, entrepreneurs will find ways to serve them.

It’s going to be a wild ride, and no one is quite sure where it is heading. In addition the Uber-Lyft revolution, there is the driverless car revolution, and the transportation-as-a-service revolution. Everyone from Ford, General Motors, Mercedes, Google and Tesla has ideas of how to reinvent transportation. It’s as if the transportation industry is being hit by three tsunamis simultaneously, not just one.

Here in Virginia, transportation planners at the state, regional and local level are behaving as if none of this is occurring. The same old transportation mega-projects are lumbering down the same bureaucratic approval pathways. Even as Virginia government at all levels experience chronic fiscal stress, they seem sublimely unconcerned by the implication of saddling themselves with Big Infrastructure projects that they know can never be self-supporting financially, that they know will require ongoing subsidies.

Just wait until the next recession. How many jurisdictions will be able to maintain money-losing transit operations? How many will find themselves pruning money-losing routes? How well will the poor be served by the inevitable cutbacks? Shouldn’t we at least be considering the transportation-as-a-service alternative?

Integrating Uber with Mass Transit

Photo credit: Washington Post

Photo credit: Washington Post

by James A. Bacon

Arlington County is toying with the idea of replacing under-utilized bus lines in the northern part of the county with ride-sharing services provided by Uber Technologies Inc., and Lyft Inc. The service could offer rides to and from Metro stations at Ballston, East Falls Church and Courthouse

Subsidizing the ride-sharing services would be more cost-effective than operating full-service bus lines with low ridership,  Marti Reinfeld, the county’s interim transit chief, told the Washington Post

“What we would be supporting is picking up residents in their neighborhood and taking them to one or two designated stops, most likely a transit station,” Reinfeld said. “The county will subsidize that at some level.”

The idea is still conceptual, but Arlington officials confirm that they have held conversations with Uber and Lyft, both of which have sought similar partnerships elsewhere in the United States.

Bacon’s bottom line: Every transit operation in Virginia with money-losing routes ought to be thinking the same way.

The first step is to prune under-utilized and money-draining bus routes and concentrate resources into the most robust transportation corridors, offering greater frequency and reliability of service, in turn increasing ridership on those routes. This is what Houston famously has done, boosting ridership at no extra cost. The same consultants behind that transformation are working to rationalize the Richmond bus system.

The second step is to work with Uber, Lyft and anyone else with a bright idea to create a shared-ridership feeder system, in effect substituting vans and carpools for near-empty buses. Subsidies might be useful in order to stimulate the start-up of these services, but ideally they could be phased out over time as the concept takes hold and ridership builds to profitable levels.

A third step worth considering — requiring input from Uber, Lyft and others on what would be cost-effective — would be to invest in remodeling bus stops, rail stations and intermodal facilities to accommodate the easy ingress and egress of vans and carpools. The more seamless the connection between Uber-like services and mass transit, the more attractive the set-up is to passengers, and the more likely the idea is to succeed.

While I am no fan of subsidizing any mode of transportation, I acknowledge that there is no getting rid of money-losing transit operations, and we must do the best job with them we can. If subsidizing shared Uber rides instead costs less money, then there is a net gain to taxpayers.

Spending Your Transportation Tax Dollars More Wisely

tax_dollarsI had lunch the other day with Nick Donohue, Virginia’s deputy secretary of transportation, and he brought me up to speed on developments in state transportation policy that have occurred since the good ol’ days when I covered Commonwealth Transportation Board meetings. It was just a casual chat, and I wasn’t taking notes, but a couple of points stood out.

First big test for new-and-improved P3 law. Last month the Virginia Department of Transportation (VDOT) issued its final Request for Proposal to design and build an estimated $2.1 billion in improvements to Interstate 66 outside the Capital Beltway. The McAuliffe administration is not ideologically committed to privatizing the project. Rather, it has a clear idea of how much it will cost VDOT to do the job. If a private consortium can meet the project specifications at lower cost, VDOT will go the public-private partnership (P3) route. If not, VDOT will handle it.

Weeding out worthless projects. The new system for scoring transportation projects according to six sets of metrics such as congestion mitigation, safety, environmental impact and economic development, has already proven its value. Numerous projects in the Six Year Improvement Plan, with total costs running into the hundreds of millions of dollars, were demonstrated to be of marginal value. They’d been moving slowly through the bureaucratic pipeline, and it wasn’t anybody’s job to question or re-evaluate them. But the new scoring system, which ranks hundreds of proposed projects on the “bang for the buck” they deliver, laid bare the flimsy justification for the projects. More worthy projects have been elevated in their place.

Defense of express lanes. It is getting increasingly expensive to expand the capacity of Interstates and other transportation arteries by widening them. In urbanized areas, the highways are getting hemmed in with expensive commercial property. The cost of purchasing Right of Way and running the regulatory gamut is getting prohibitive. How, then, do we increase the capacity of these vital transportation corridors? By using more express lanes. Express lanes do three useful things: (1) they provide a congestion-bypassing option that didn’t exist before; (2) they raise money to continue making improvements to the corridor, and (3) they double as HOV lanes that give preferential access to buses, vans and carpools. As a practical matter, the most cost-effective way to increase capacity of many highways is to encourage more shared ridership.

Bacon’s bottom line: The system for raising transportation revenues is still a mish-mash that decouples a driver’s use of public roads from the payment for those roads. Riddled with subsidies and cross-subsidies, the arrangement encourages excess driving. The McAuliffe administration has not seen fit to grapple with this legacy of the McDonnell administration, but it has made great strides at least to see that the funds raised from this dysfunctional revenue-raising system are at least spent more carefully.

— JAB

Metro Positions Itself for the Big Ask

metroby James A. Bacon

Staring into a fiscal black hole, Washington Metropolitan Area Transit Authority Chairman Jack Evans is trying to nail down the authority’s 2018 spending plan by November, months earlier than usual. The move, suggests Washington Post writer Martine Powers, “is a signal that the transit agency is preparing to ask the District, Maryland and Virginia for additional money if fares are not raised or the federal government does not come forward with more funding.”

How much money? Between $75 million to $100 million per jurisdiction.

Evans issued the warning after a meeting in which the WMATA board discussed a presentation by McKinsey & Company indicating that the mass transit organization was paying significantly more for expenses than comparable transit agencies.

The McKinsey report, issued in April, is must reading for Virginia legislators pondering how to respond when WMATA approaches, tin cup in hand, begging for more money or risk seeing the collapse of the mass transit service so critical to Northern Virginia’s economy. That report clearly lays out the management challenges facing the authority and provides concrete ideas on how to address them.

WMATA’s long-term mismatch between revenues and expenses has been getting worse, not better. According to McKinsey, Farebox recovery has declined from 47% of costs in 2011 to 45% today and will continue to drop further as passengers fed up with the rail system’s poor reliability commute by other means. Rail system revenues would need to grow at 7% yearly just to maintain the current operating deficit. Personnel growth averaging 5% annually has driven most of the cost inflation. The authority has more employees who getting paid more (wages growing 4% annually) to work less (regular hours per full-time equivalent employee down 2% annually).

Poor railcar maintenance is the single-most important driver of service unreliability — 63% of all rail line delays are caused by railcar failures, the report says. There are two main reasons for cars being unavailable: parts are frequently out of stock, and repair throughput is exceptionally low. “Estimated technician wrench time ranges between 25% and 40%, below a best-in-class standard of 60%.” The reasons for the low productivity can be traced to systemic management failures such as the uneven distribution of cars between shops, turnover in mechanic staff, and technicians starting work orders without all necessary tools and parts.

The report also took note of the high cost of MetroAccess, a transportation service for people with disabilities. McKinsey estimated that WMATA could cut the $110 million program’s costs 20% by experimenting with innovative delivery models. The report also recommended extensive changes to WMATA’s capital allocation model and the structure of its pension, retirement-benefits plans and workers compensation plans.

Bacon’s bottom line: The McKinsey report provides an objective checklist of reforms that WMATA needs to make before entrusted with any more Virginia taxpayer dollars. Give management the money without conditions, and the urgency to implement the reforms disappears. Make added money contingent upon implementing reforms, and WMATA actually might wind up needing less than it thinks it does. If WMATA’s board and management are unwilling or unable to execute these of equivalent reforms, Virginia should give them no more money.

Hat tip: Tim Wise

Rocky Mountain High Real Estate Values

Street scene in Aspen, Colo.

Street view in Aspen, Colo.

by James A. Bacon

According to a 2011 Wall Street Journal article, Aspen, Colo., could boast of having the most expensive real estate in the country. I don’t know if that’s still true, but I wouldn’t be surprised. As I sit here blogging at Ink! Coffee, looking upon a patio filled with Pellegrino umbrellas and baskets of bright mountain flowers while perusing the real estate ads in The Aspen Times, it quickly becomes clear that this is a place where I could never afford to live. A 3,414-square-foot home with a view of Aspen Mountain and within walking distance of downtown is on the market for $4,995,000. Select neighborhoods in Manhattan might be more expensive on a per-square-foot basis — I don’t pretend to know the national real estate market — but there cannot be many places that are.

Prone as I am to over-thinking absolutely everything, I have been asking myself, how did Aspen get to be one of the most desirable locations in the planet, while small mountain towns in Virginia with comparable natural beauty slide into senescence? Does Aspen provide lessons that Virginia communities can learn from — not with the unrealistic aim of becoming a playground of the one percent, but with the modest goal of attracting tourists and retirees, supporting jobs, lifting the tax base, and paying for amenities that make life more enjoyable for the people who live there?

In the article that follows, I will endeavor to address those questions, fully cognizant that anything I say is based upon the hasty and superficial impressions. My methodology is simple: I stroll around town with iPhone camera in hand and an eye to observing land use, architecture, transportation, and the retail scene. As always, I pay attention to the quality of the public sphere and the “small spaces.” When possible, I engage people in conversation. As it happens, Aspeners (or Aspenites, whatever they call themselves) are incredibly friendly and eager to talk about their fair city.

Aspen got its start in the late 1880s as a silver-mining boom town. When the silver boom went bust, so did the town. Fortunes did not revive until 1946 when Friedl Pfeifer, a former Austrian skiing champion, linked up with industrialist Walter Paepcke and his wife Elizabeth to form the Aspen Skiing Corporation. The town’s most enduring resource, as it turned out, was not silver but world-class skiing.

The inter-mountain west has many  popular ski resorts, but none has done as well as Aspen at winning name recognition and attracting the super-rich. One key to its phenomenal success, I would suggest, is its silver-mining inheritance: a downtown laid out in a classic grid street pattern, a number of handsome brick buildings, and a municipal government intent upon preserving that heritage. Aspen has something that many of its ski-resort peers does not: walkability. Admittedly, Aspen isn’t the only walkable ski town — Jackson, Wyoming, springs to mind — so pedestrian ambiance is not exclusively responsible for vaulting it into the real estate stratosphere. But a comparison with Virginia/West Virginia ski resorts such as Wintergreen, Snowshoe and Massanutten lacking downtown districts suggest that walkability is a critical differentiator.

Downtown Aspen, comprising about two dozen blocks, is a destination in itself, and real estate ads tout houses’ proximity to the urban center. While the “Mountain Modern” style of architecture often presents a jarring contrast with the 1880s-era buildings, the overall effect is still magical. Visitors come to Aspen, fall in love, and gladly pay a premium to buy a house or condominium that allows them to live here.

Aspen5

Not only are historic buildings from Aspen’s silver-mining past architecturally distinctive but they help define the walkable street space.

Walkability

One of the first things my wife, friends and I noticed when strolling around downtown was the paucity of cars. Traffic was negligible. I assumed the empty streets reflected the lassitude of the summer season at a skiing destination. But a friendly acquaintance, a commodities trader who moved here from Chicago, assured me otherwise. We were, in fact, experiencing peak downtown traffic. Summer tourism is booming, and a lot of people bring their own cars and four-wheel drives to take advantage of the hiking, fishing, rock climbing, and whitewater rafting.

While cars may be scarce, human beings are everywhere. The ability to live here without driving is a prime attraction. People can meet most of their daily needs by walking and biking. The commodities trader said he goes a week at a time without ever stepping in a car. Another acquaintance, a native Philadelphian who lives here eight months of the year and does business in New York, said when he recently sold a Jeep he’d owned twelve years, it only had 15,000 miles on it.

Uncongested streets are the result of thoughtful design. Aspen hews to the rules of classical urbanism. For starters, the buildings define the street space. Rather than standing out and saying, “Hey, look at me” with egocentric starchitect designs, they conform with one another in size, height and relationship to the street. By abutting the sidewalks, their facades delineate the public space of the sidewalk realm. While you won’t see many cars driving around, plenty are using the on-street parking — and that’s a good thing. Parked cars and building facades bracket the pedestrian domain as a distinct space. This pedestrian realm, as I shall describe, is adorned by flower gardens, rain gardens, statuary, street seating, and window shopping that make it extraordinarily inviting. Continue reading