Tag Archives: Interstate 95 HOT lanes

Another Shot at Redistricting

Current Virginia congressional boundaries

Current Virginia congressional boundaries. Source: VPAP

by James A. Bacon

So, the General Assembly is under the gun to redraw the boundaries of Virginia’s congressional districts, which most disinterested observers would agree are a travesty of democracy and desperately in need of a fix. While Republicans and Democrats justify their positions with lofty principles, few voters are under any illusion that either party is interested in anything other than advancing its own electoral prospects.

Look at the map above of the boundaries of the current congressional districts. The packing of African-Americans into the oddly shaped district stretching from east Richmond through the Virginia Peninsula to Norfolk stands out. A federal court declared that gerrymandering to be unconstitutional on the grounds that it dilutes the impact of African-American voting in other districts. The district must go. But that means redrawing the entire map.

What might the new districts look like? So far, Republicans have yet to present a plan of their own. But two Democrats have. Here, according to the Virginia Public Access Project, is what the congressional districts would look like under the plan submitted by Sen. Mamie Locke, D-Hampton:

The Locke plan. Source: VPAP

The Locke plan. Source: VPAP

And here’s the plan submitted by Sen. Chap Peterson, D-Fairfax:

The Peterson plan. Source: VPAP

The Peterson plan. Source: VPAP

Both Democratic plans would concentrate Republicans into districts deemed by VPAP to be “much more Republican,” while creating other districts deemed merely “more Democratic.” What we can’t tell from the VPAP data is which districts, after the dust settles, will end up dominated by Republicans, which will be dominated by Democrats, and which will be competitive.

Of the two, the Peterson map is the more elegant, creating more compact communities with fewer squiggly lines. That holds out the hope of creating more competitive districts rather than more reliably Democratic and Republican districts where the real contests are in the nominating fights dominated by hard-line party partisans. Competition is good for democracy, we need more of it, and a superficial look at the Peterson map suggests that his plan just might deliver it.

Coping with Risk in Highway Megaprojects

Aubrey Layne explains the concept of fiduciary risk.

Aubrey Layne explains the concept of fiduciary risk.

by James A. Bacon

As Transportation Secretary Aubrey Layne has had more time to dig into his job, he has developed an ever more nuanced appreciation of how things went wrong with the U.S. 460 Connector. There was more to the fiasco, which could cost the Commonwealth up to $300 million, than a simple failure to acquire necessary wetlands permits before opening the spending spigots and then discovering that the permits were not forthcoming. The McDonnell administration, he says, negotiated a public-private partnership deal without sufficient appreciation of risks entailed with the project.

“I can’t tell you if they didn’t know they weren’t transferring the risk [to the private-sector partner] and got out-foxed, or whether they didn’t give a damn,” Layne told Bacon’s Rebellion in an interview today. Either way, the Commonwealth was left holding the bag when plans for the 55-mile Interstate-quality highway linking Petersburg and Suffolk had to be redrawn to do less environmental damage. He still hopes to recover some of the $250 million paid to U.S. 460 Mobility Partners (over and above $50 million in sunk design and engineering costs) for pre-construction work, but that outcome is uncertain.

Layne is optimistic that public-private partnership (P3) reforms enacted with bipartisan cooperation this year will prevent recurrences of the U.S. 460 debacle and help the state negotiate better terms in future deals than it got with the Interstate 495 and Interstate 95 express lanes projects in Northern Virginia, which effectively capped bus transit on the highways for the next half century. The McAuliffe administration’s big test will be to do a better job structuring the financing and risk of $2 billion in proposed improvements to Interstate 66 in Northern Virginia.

Before 1995, the Virginia Department of Transportation (VDOT) had one way of building roads. It designed them, put construction out for competitive bids, arranged its own financing, operated them, maintained them and absorbed the risk of anything going wrong. The system got the job done but it had drawbacks. It overlooked potentially creative solutions to engineering and design problems, and it was prone to cost overruns. Then the General Assembly passed legislation enabling public-private partnerships, which provided the Commonwealth a whole new range of options for financing big projects and shifting selected risks to the private sector.

Facing a severe transportation budget crunch, the McDonnell administration made the strategic decision early on to use P3s to leverage scarce public dollars with private capital. From a high-level perspective, this made sense because the Commonwealth had limited capacity to issue road-building bonds without jeopardizing its AAA bond rating and then-Governor Bob McDonnell had not yet pushed through tax increases to bolster transportation funding. Moreover, the administration wanted to take advantage of historically low interest rates on long-term bonds.

But politics and ideology were pushing P3s as well, says Layne. There was a bias that something is always better if the private sector does it. Sometimes the private sector can do things better than VDOT, he says, and sometimes the private sector is better suited to take on certain risks than the state. But not always. The McAuliffe administration’s goal is to find the best fit — the best balance of cost and allocation of risk — on a case by case basis.

The devil is in the details. Layne, a Republican and a McDonnell supporter at the time, backed the governor’s mega-project funding priorities and voted to approve them while serving on the Commonwealth Transportation Board. Indeed, he chaired an independent bonding authority that issued bonds for the U.S. 460 project.  But now that he’s transportation secretary, he realizes the issues were far more complex than presented to him and the CTB board.

The McDonnell administration first proposed a public-private partnership for the U.S. 460 project with the hope that outsiders could devise a more creative way of building and financing the highway than VDOT could come up with. Three consortia took a look and came up with similar conclusions — there would be insufficient toll revenue to finance more than a fraction of the construction cost with bonds. The McDonnell administration then switched gears, deciding to pay for most of the project with state funds but retaining the P3 structure in order to outsource the design and construction of the project to a private-sector partner, which turned out to be U.S. 460 Mobility Partners. The state should have gone back to square one and started over, says Layne, re-defining the project and putting it up for bids instead of using the P3 structure. Instead of getting multiple bidders to compete, the state wound up negotiating with a single player, U.S. 460 Mobility Partners. Even worse, Governor McDonnell had signaled that U.S. 460 was his highest priority, and there was no back-up plan — the administration had to reach a deal with U.S. 460 Mobility Partners or the project would never get built during McDonnell’s term. U.S. 460 Mobility Partners had all the bargaining leverge.

Negotiations took place within the P3 structure, which meant that the deliberations were secret and the contract not released to the public. VDOT briefed the CTB, the state’s transportation oversight board, but failed to disclose the information that critical wetlands permits had not been obtained and might not be obtainable.

The final contract for the U.S. 460 deal was more than 700 pages long. Layne says he can’t imagine than anyone in state government read the whole thing. “I’m confident that no one person understood it all. No one person could tell you what the deal was, what risk was transferred, and what risk the state was taking. And that’s a recipe for disaster” when negotiating with sophisticated business people on the other side of the table.

The dynamic would have played out very differently, says Layne, if the McDonnell administration had set up U.S. 460 as a design-build project.  First, VDOT would have opened up the proposal to competitive bids, very likely getting a lower price even while the private contractor took on the risk of delivering the project on budget and on time. Second, VDOT guidelines would have ensured that all necessary permits were granted before the project commenced and the state started shelling out money.

Layne doesn’t blame U.S. 460 Mobility Partners for negotiating the best deal for itself that it could. It’s not a charity. The company’s managers had a fiduciary responsibility to get the best deal for its shareholders that they could. But elected officials have a fiduciary responsibility to the public. The challenge for the Commonwealth is to bring to bear an equally acute understanding of risks and rewards and to cut the best deal possible for the taxpayers. That’s where the state failed utterly with U.S. 460. If he’d had negotiated such a disastrous real estate sector when he worked in the real estate business, he says, he would have been fired.

Now it’s Layne’s turn. He has to structure a mega-project deal for I-66. Tomorrow, I’ll describe how he is approaching that task.

Highway Robbery

express_lane_camerasby James A. Bacon

I’ve always considered Transurban, operator of the express lanes on the Interstate 495 and Interstate 95, to be a pretty savvy outfit. The company may have over-estimated traffic demand for its express lanes when deciding back in the mid-2000s to build the Northern Virginia toll operations, but corporate executives seemed highly professional in the way they designed, constructed, promoted and managed the business.

At least, they did until now…  Fox News reports that Transurban has filed 26,000 cases against I-495 express lane users for non-payment. It’s one thing to dun people for $10, $20 or even $100. But Transurban is slapping some drivers with thousands of dollars in fees and fines for a single offense. Reports Fox News:

Luis Viera used to take the Express Lanes from Clinton, Md., to his job in Tysons Corner. His E-ZPass was automatically deducting tolls from his credit card.

Then one day, Luis was slapped with a summons to Fairfax County Court. Transurban was suing him for $4,500 in fees and fines for exactly $7.70 in missed tolls.

Luis went to court the first time without a lawyer. “I was nervous,” Luis said. “I didn’t get any sleep. I wasn’t eating. It was a bad week leading up to it.”

In the courtroom, a woman who said she represented Transurban approached Luis before the judge entered. She said the company would settle for $2,488.

“How does $10 turn into $2,000?”

Darn good question. How does $10 turn into $2,000? Transurban responded as follows: “Although less than 0.1% of all 495 Express Lane trips end up in court, we continue to do all we can to minimize any traveler going to court, this is why we have the First-Time Forgiveness program which has helped nearly 800 travelers. Additionally, we do not profit from the fines or penalties. As defined by Virginia law, any and all revenue collected from toll fines and penalties are cost recovery only to fund the enforcement program and we currently we do not even recover costs.”

Ah, hah! The fines cover the expense of the entire enforcement program — including lawyers, license plate-reading cameras, and IT systems to track the scofflaws. I can’t blame Transurban for wanting to cover its costs but the company has to weigh the business consequences: Charging $2,500 or more will piss off a lot of drivers — I mean really piss them off. Luis Viera says he won’t ever use the express lanes again. Who can blame him? How many other people, hearing of Viera’s experience, will refuse to ever use the express lanes? Who wants to run the risk of getting clobbered with a $2,500 fine?

Bacon’s bottom line: Conceptually, using the price mechanism to ration scarce highway capacity is one of the most cost-effective tools we have to manage traffic congestion. But the devil is in the details. Economic models that model supply and demand equations don’t ordinarily consider such grungy facts as enforcement. People make mistakes. People cheat. Toll road operators must have a mechanism for enforcing payment. If those enforcement mechanisms lead to manifestly unjust results, as appears to be happening in Fairfax County, people will avoid the express lanes and political support will wither.

Virginia authorities need to revisit the enforcement provisions in the Transurban public-private partnership contract and, ideally, induce Transurban into re-negotiating the offending clauses. It won’t be easy because traffic volumes and revenues are falling short of projections, and Transurban may not be receptive to changes that might raise its cost structure. On the other hand, the company does have a 70-year contract and it needs to consider the long-term implications of alienating its customer base. If a huge fan of the express lane concept like myself finds $2,500 fines for $10 offenses to be outrageous and indefensible, I feel like I’m pretty safe in saying that Transurban stands all alone on this one.

(Hat tip: Rob Whitfield)

Express Lanes as Precursors to Ubiquitous Road Pricing

express_lane_simulation

I-95 Express Lanes simulation

by James A. Bacon

After years of anticipation, 95 Express Lanes opened its Interstate 95 HOT lane system to the public Sunday. Drivers get to use the lanes for free outside of rush hour, when the lanes remain restricted to high-occupancy vehicles (HOVs). Tolls will go into effect around the end of the month.

The nearly $1 billion project converts existing HOV lanes along I-95 into tolled HOT lanes while letting HOVs continue to drive for free, and extends the lanes to Stafford County. While the project won’t do much to shorten the commute for most commuters, it will give them an option when they place a high value on their time, said Matthew Click, vice president-national director of price-managed lanes for HNTB, an engineering firm that worked with 95 Express Lanes on the project.

“We expect most people to use them sometimes, when they really need to get somewhere and they need to get there now,” said Click in an interview with Bacon’s Rebellion. Click took issue with the description of HOT lanes as “Lexus” lanes. Tolled lanes provide a valuable option for less affluent drivers, he said. Someone making $25,000 a year could use the express lanes to pick up their kid at day care to avoid the $10-per-minute late charges. Plumbers might use the lanes to squeeze in an extra call, or taxi drivers an extra fare.

That was the predictable part of the interview, entirely in line with the business case for building HOT lanes. I have written extensively on this blog in support of HOT lanes. They come as close to a “win win” arrangement politically as it’s possible to devise in the transportation realm. They conform to the principle of “user pays,” they use market mechanisms to ration scarce capacity, and no one has to use them if they don’t want to.

Traffic forecasts. The conversation got much more interesting when we veered into the topic of demand for the HOT lanes. Will the volume of traffic on the Beltway and I-95, both of which are public-private partnerships, generate sufficient revenue to pay the back the billion-dollar investments?

The revenue forecasts for express lane projects are “very sensitive” to demand, Click said. “In an express lane situation, the competition is three feet away in the general-purpose non-tolled lane,” he said. The worse the level of service in the general lanes, the greater the traffic — and revenue — in the tolled lanes. An increase in demand for the tolled lanes does two things. It increases the number of cars being tolled, and it increases the toll rates, which are dynamically priced according to demand.

Click conceded that 495 traffic volumes are lower than forecast. “You’re seeing some initial birthing pains getting up and running,” he said. “It’s taking a little longer for volumes to ramp up during peak hours. … We’re seeing the impact of the recession of 2008., the greatest downturn in the economy since the Depression.” As the economy recovers, he said, he expects traffic demand to increase. The public-private partnership has a 75-year time horizon. “It’s warranted to give a couple or few years” for traffic volumes to recover.

But there are risks over the mid- to long-term as well, Click acknowledged. Demographic pressures may dampen Vehicle Miles Driven (VMT) overall and demand for HOT lanes specifically. Members of the Millennial Generation tend to drive less than predecessor generations. The population is aging, and the elderly don’t drive as much. Also, technology and the sharing economy are scrambling long-term demand forecasts.

“Imagine a future when people don’t own a car,” Click said. “I’ve got my mobile phone. I walk up to a subscription car, and it recognizes me. The car starts driving. I see my buddy Tim two blocks over. I pick him up. He bumps his phone to mine, and we split the fare. … Destructive creativity is really coming. It’s real.” And it means that VMT will not grow in the same linear relationship with population and the economy as in the past. “I see a future where [demand] is flat.”

Transformative technology. Click sees express lanes as the “precursor” of a world in 25 years “in which all lanes are priced.” The main barrier to such a future is not technology, it’s political will, he said. “The American public has a 50-year relationship with the fuel tax and the federal Interstate program. Peoples’ reaction to tolls is, ‘I’ve already paid.’ But I say, once you’ve paid off the mortgage on your house, you still have to fix the roof. You have to maintain the roads.” As fuel taxes decline and infrastructure degrades, express lanes will look better and better.

“We will fondly look back on express lanes as the first step toward the new transportation paradigm,” Click said. Charging drivers for usage of all roads on the basis of dynamic pricing will be the greatest driver of urban transformation since the invention of the elevator. “The next generation will change everything.”

Dude, Where’re My Cars?

Washington state HOT lane revenues — actual collections versus forecast.

by James A. Bacon

In 2008 the Washington Department of Transportation converted 10 miles of HOV lanes in the Seattle metro region to tolled HOT lanes. If the experiment was successful, the state  planned to expand the HOT lane concept around the state. After four years of experience, the verdict is in: People aren’t willing to pay nearly as much to avoid congestion as assumed.

According to Washington DOT data (see chart), toll revenues are coming in at less than half of the worst case forecast. Two factors seems to be at work, sums up Angie Schmitt with D.C. Streets Blog: “People are driving less, and they aren’t as willing to pay their way out of congestion as was assumed.”

Less congestion means less incentive to pay for [Route] 167′s HOT lanes. But there’s more going on than that: Not only are fewer people choosing to use the priced lanes than expected, those who do are paying lower prices than expected. The lanes are dynamically priced, with the costs rising — and falling — based on demand. …

The prevailing theory about HOT pricing is that people would be willing to pay half their hourly wage rate to avoid sitting in traffic. But based on income data from WSDOT, far more commuters earn more than $24 per hour than are opting for the priced lanes.”

HOT lanes represent a real-world test for how much value drivers place on cutting their commuting time. Virginians should pay heed. While everybody complains about congestion, when push comes to shove, they may not be willing to pay much to avoid it.

What it means to Virginia. Virginia and its private-sector partners have made a huge commitment to HOT lanes — both for the recently opened Capital Beltway and the I-95 project under construction. The Downtown-Midtown Tunnel in Norfolk also varies toll prices by time of day.

No one has officially acknowledged it yet but I’m willing to bet that toll revenues on the Capital Beltway express lanes are running below expectations. According to a Public Works Financing newsletter article published in 2007, the project was expected to generate $335,000 daily in toll revenue by 2015. That’s roughly $10 million monthly or $30 million quarterly. While the 495 expressways are still in their ramp-up stage, they have a long way to go.

In their first quarter of reported results, Capital Beltway Express LLC reported total revenue of $828,000. As Washington-area drivers became more aware of the expressway option, traffic volume picked up considerably. The quarter ending March 31, 2013 yielded $2,475,000 in revenues. “Consistent with other express lane facilities, the 495 Express Lanes are still within the expected ramp-up period with both usage and pricing expected to increase progressively over time,” the report stated.

Please note what the report did not say: It did not say that traffic volumes and revenue were meeting forecasts. Revenue must quadruple within two years to meet expectations.

In a possible hint that revenues have proven disappointing, Capital Beltway Express made the express lanes open to drivers for free April 6 and 7. The stated justification: “The free weekend is part of an educational campaign to encourage Beltway drivers to try the new travel option on the Virginia side of the Capital Beltway and see how the Express Lanes can work for them.”

I have been a big supporter of the theory of using dynamic pricing to ration scarce highway capacity and the concrete application of that theory with the I-495 and I-95 HOT lanes projects. Further, from everything I’ve seen, Capital Beltway Express is a highly professional and well-run organization. But the situation bears watching as Northern Virginia politicians line up with their pet projects to get a piece of Governor Bob McDonnell’s transportation funding package.

Last year’s debate over transportation funding took place in a reality warp. Even  as the special interests and their toady politicians worked themselves into a frenzy over congestion, statewide congestion costs were dramatically lower than they had been five years previously. (See “Can We Have a Reality Check, Please?“)

But even I, as skeptical as I was, missed a critical part of the picture. I accepted the Texas Transportation Institute (TTI) estimate of how much congestion cost Washington-region motorists, which the McDonnell administration routinely trotted out to justify the need for more transportation spending. But what if it turns out that motorists don’t value congestion relief as much as TTI thought they do? What if it turns out that motorists aren’t willing to pay hard cash just to drive a little faster, and they’re just as content to sit in their air-conditioned cars listening to talk radio, NPR or their iPod play list?

The beauty of the 495 express lanes is that it will provide a reality-based B.S. detector. By tracking what Washingtonians are willing to pay in expressway tolls, we can measure how much monetary value they place on reducing their drive time. That information will prove invaluable as the commonwealth — and Northern Virginia in particular — plans billions of dollars on transportation projects that no one would want if they had to pay for them themselves. As Angie Schmitt put it, “If drivers won’t pay to bypass congestion, why should taxpayers?”

Full Throttle for I-95 Expressway Project

Hopefully, there will be fewer days on I-95 that look like this.

The McDonnell administration has entered into a comprehensive agreement with 95 Express Lanes LLC to build roughly 29 miles of express lanes on Interstate 95 in Northern Virginia. Construction will begin early next month and is scheduled for completion in late 2014.

The I-95 express lanes will tie into the Capital Beltway express lanes already nearing completion, creating one of the largest networks of tolled expressways in the country. Arguably, Virginia is conducting the most significant experiment in subjecting a regional highway system to supply-and-demand economics anywhere in North America.

The $925 million project will expand existing express lanes and add new ones over a 29-miles of length of I-95 in Fairfax, Prince William and Stafford counties. Drivers will pay a toll that will vary according to the level of traffic in order to avoid congestion on the free lanes. Express lanes will remain open for buses, van pools, motorcycles and high-occupancy vehicles, and 95 Express Lanes will add 4,300 parking spaces to new or expanded parking lots to make it easier for commuters to shift to buses.

“The 95 Express Lanes combined with the nearly completed 495 Express Lanes will bring a transportation network that manages congestion efficiently, saving time and better connecting commuters with some of Virginia’s most important employment centers and military sites,” said Transportation Secretary Sean T. Connaughton in a prepared statement released late this morning.

In theory, the project should be well received. First, it will take only $71 million in public subsidies, a far smaller sum than other mega-projects approved by the McDonnell administration. And second, it will expand options. No one is forced to use the express lanes. Drivers can continue to use the old lanes as before. Indeed, insofar as the new lanes divert traffic from the old lanes, drivers will enjoy somewhat reduced congestion at no cost to themselves. Meanwhile, the project will expand the bus option and allow anyone who is in a hurry or who otherwise places a high value on his or her time to pay to use the express lanes.

It’s anybody’s guess how the project will influence human settlement patterns. By reducing the unpredictability of travel times for marathon commutes, the project could foster sprawl by reducing the pain of driving long distances. Conversely, the shift of growth and development back toward the Washington region’s urban core could dampen demand for expressway tolls below what project partners Transurban DRIV and Fluor Enteprises have forecast. Transurban has already announced one write-down in Virginia, an investment in the Pocahontas Parkway outside Richmond, because expected residential growth never materialized.

The 95 Express partnership will provide $854 million in funding, of which $3oo million will be backed by federal TIFIA guarantees. The $71 million contribution from the Virginia Department of Transportation (VDOT) will be less than the original estimate of $97 million, due to lower-than-expected financing costs at closing. Tolls will be collected electronically using the E-ZPass, including the new E-ZPass Flex , eliminating the need for toll booths.

The concession will extend 76 years. 95 Express will assume the risk of delivering the project on time and on budget. The project will pay to beef up the Virginia State Police presence on the Interstate to reduce HOV violators.

Among the questions not answered in the press release:

  • What happens if traffic volumes and toll revenues do not increase as planned? Does the state have any exposure?
  • To what extent is 95 Express protected from competition? Are VDOT’s hands tied in any way from making improvements to U.S. 1, which runs parallel to I-95? Is the state limited in the support it can provide to van pools and buses, or the extent to which it can promote Transportation Demand Management programs?
  • How will the project change traffic patterns in the I-95 corridor? Will new congestion hot spots arise, and how much will it cost the state, if anything, to ameliorate them?

— JAB

Fast and Furious

The Fast and the Furious, starring Vin Diesel as Sean Connaughton, Paul Walker as Tony Kinn and Jordana Brewster as Thelma Drake.

by James A. Bacon

The public-private partnership deals are coming fast and furious. The McDonnell administration announced a new one today, a $940 million agreement in principle with Fluor-Transurban to build, operate and maintain a 29-mile HOT/HOV lane project on Interstate 95 from the Springfield Bypass to Stafford County.

“With HOT lanes on both the Beltway and I-95, we will create a region-wide network of managed lanes that will enable travelers to get to and from some of Virginia’s most employment centers and military sites,” said Transportation Secretary Sean T. Connaughton in a prepared statement.

Highlights of the project include:

  • Expansion of HOT/HOV capacity from two lanes to three for 14 miles in the northern leg, improvements to six miles in the middle leg, and extending the HOV/HOT lanes for nine miles into Stafford County, “alleviating the worst bottleneck in the region.”
  • Establishing a seamless connection with the Interstate 495 HOT lanes now under construction.
  • Free access for High Occupancy Vehicles.
  • Investment of $200 million into the expansion of regional bus services, including construction of more than 3,000 new park-and-ride spaces. A Department of Rail and Public Transportation study recommended a total of 9,575 park-and-ride spaces, 46 more buses, off-site parking, shuttle services at the Franconia-Springfield Metrorail station and other intermodal features.

The project will generate revenue by charging single-occupancy vehicles for using the HOT lane; traffic volume will be regulated to ensure minimum travel speeds. The price will vary according by time of day, fluctuating with demand.

The commonwealth will contribute $97 million to the project. Fluor-Transurban will pay for the rest. The consortium will have a 73-year franchise.

The statement provided no details on what toll rates are expected. Connaughton undoubtedly will provide details in a media briefing this afternoon, but I will be on the road to Norfolk, where I will attend the Virginia Transportation Conference tomorrow. Although I-95 HOT lanes are not on the schedule of events, I would be surprised if the topic doesn’t come up for discussion.