Bacon's Rebellion

by James A. Bacon

NORFOLK–The McDonnell administration characterized a public-private partnership agreement for HOT lanes on Interstate 95 as a win-win arrangement that will expand capacity and create new choices for Virginia drivers without dunning taxpayers or motorists who don’t want to pay tolls.

The agreement in principle with Fluor Transurban also protects taxpayers from financial harm if ridership projections fail to meet expectations but shares revenue with the state if revenues exceed a pre-set level.  “People have a choice. Nobody’s forcing them to go onto the HOT lanes,” Transportation Secretary Sean T. Connaughton said during Wednesday morning meeting of the Commonwealth Transportation Board. “As tolls rise, it will encourage people to use transit or carpools. This is all about using market forces.”

Hours later, at the Governor’s Transportation Conference, the McDonnell administration highlighted other design-build and public-private partnership projects (P3s), including a major truck-climbing lane on rugged terrain on Interstate 81, the addition of HOT lanes to the Washington Beltway, the Coalfields Expressway and the Interstate 295 interchange in Chesterfield County. In the absence of significant new revenue sources, the administration is turning to P3s to leverage the $4 billion the state will borrow during Gov. McDonnell’s four-year term.

The unapologetic trumpeting of P3s and megaprojects followed the release yesterday of a report by the Virginia Chapter of the Sierra Club, “21st Century Green Transportation: A Vision for Virginia,” that criticized McDonnell’s “frantic road building program” for spending billions of dollars in borrowed money to build “major, unneeded and destructive roadways.” The Sierra Club said the state should prioritize spending on maintenance, establish performance standards to guide the selection of projects, require stronger links between transportation and land use and devote more spending to alternate forms of transportation such as mass transit, van pools, bicycles and pedestrian-friendly infrastructure.

The governor’s office announced the I-95 HOT lane agreement Tuesday morning. The $940 million deal will add, improve or extend 29 miles of HOV lanes from Fairfax County through Stafford County. The HOV (high occupancy vehicle) lands will be converted to HOT (high occupancy toll) lanes, in which people can pay a toll to bypass congested traffic in the general lanes.  Carpoolers, buses and motorcycles will be allowed to continue using the HOT lanes with no extra charge.

Virginia Department of Transportation officials expect that trips will run around 11 miles for a $4 charge on average, although the toll will change continually, depending upon demand, and could be considerably higher or lower. There will be no toll gates. Drivers will enter the HOT lanes like they enter HOV lanes, but they will pass under a gantry that will record their activity based on EZPass transponders in their cars. Toll rates will be set to maintain free-flow conditions of 55 miles per hour minimum speed.

As tolls rise, the HOT lanes will encourage to carpool, ride buses or even join the ranks of “slugs” who hitch rides with drivers eager to avail themselves of the free HOV lanes, Connaughton said. To create transportation options, the deal contemplates the investment of $200 million in the expansion of transit bus services and park-and-ride lots.

Chief Deputy Commissioner Charlie Kilpatrick gave a detailed explanation of how the commonwealth’s interests are protected in the agreement with Fluor Transurban. Although the state is granting a 73-year concession upon completion of construction, it will maintain legal ownership and all assets will revert to the state at the end. The state has the right to audit the concessionaire’s books, and it can suspend tolling in emergencies. The agreement outlines the concessionaire’s obligations to maintain operating standards and roadway conditions. And Fluor Transurban assumes the full risk of cost overruns or schedule delays.

By investing $97 million, the state will attract roughly$840 million in private investment, some of it equity and some of it financed by bonds. CTB members asked what protection the state has if revenues fall short of projections and the venture loses money. Revenues would go first to pay operating expenses, he said, and only then be used to meet payments to bond holders. If the entity went bankrupt, private investors would lose their equity.

The agreement also builds in options and protections for Fluor Transurban, such as allowing the enterprise to propose enhancements not contemplated in the original deal. The state has no effective veto over tolls, which are set by market rates. And the private partner has the right to be compensated if the state undertakes a project that is proven to impact the revenue flow from the road, such as making significant improvements to U.S. Route 1, which runs parallel to the Interstate.

The Federal Highway Administration is scheduled to review and approve the project in the spring of 2012. The financing will close that summer. Construction is scheduled to be complete in 2015.

by James A. Bacon

The automobile industry may not be anybody’s idea of a dynamic business sector, but it is highly competitive and more innovative than people give it credit for. The latest example is the research being conducted on driverless cars, which Bloomberg Business Week predicts could become the new “road rage,” a sci-fi dream that “could be real within a decade.”

Needless to say, no-hands cars would scramble everything we think we know about transportation preferences today. On the positive side, automobiles  equipped with laser sensors would allow them to travel much closer together, increasing the capacity of existing roadway and reducing the number of accidents. Driverless cars also would provide more independence for the elderly and the disabled. Furthermore, people could do something productive with their drive-time, like reading, answering email or surfing the Web (OK, maybe that’s not so productive), instead of listening to talk radio. On the other hand, driverless cars potentially would put more people (and cars) on the road, aggravating traffic congestion. It’s hard to say how it would all play out.

There is, however, one factor missing from the breathless Bloomberg Business Week article, in which the only sign of skepticism is whether the technology really will be ready for widespread commercialization within 10 years. Here’s the big question: Will driverless cares be affordable? There was no indication in the article how much driverless systems would cost. Equipping cars with all those lasers, sensors, GPS navigation systems, artificial intelligence and who knows what else will be expensive.

The cost of automobile ownership is already slipping beyond the financial reach of more and more American families as it is.  (See “The Era of Foreclosed Possibilities.“) Meanwhile, other factors are driving costs higher. The Obama administration has proposed mandating an increase in U.S. car-fleet fuel efficiency from 27.3 miles per gallon today to 54.5 miles per gallon in 2025. The Heritage Foundation says the mandate will add $2,000 to $2,800 to the sticker price of a car. Admittedly, that would be offset by lower gasoline expenditures, but it does not account for an increase in the number of injuries resulting from lighter cars and concomitant cost of insurance.

Americans will not wake up one day to find that the technology fairy waved her magic wand and converted the entire motor vehicle fleet into driverless cars. Most likely, the new-car market will bifurcate into two tiers with auto makers packaging driverless cars for the high-end market and selling the old-fashioned dumb vehicles to middle-class Americans. And don’t forget the 10 years it takes to turn over the automobile fleet. Those two factors mean that a lot of dumb cars will stay on the road for a long, long time. Will the putative benefits of reduced traffic and improved safety materialize if only 10% of the cars on the road are equipped with lasers and sensors that allow them to communicate with other cars? One way around that problem would be for government to mandate use of the driverless technology. But another mandate would put the price of cars beyond the reach of even more Americans.

Personally, I would love to own a driverless car, especially on those long, boring rides to visit family or escape to the beach. While my wife whips out her laptop, switches on her Verizon air card and answers business emails, I get stuck behind the wheel. Grrr. If a driverless car came equipped with a computer screen that would let me play Civilization, read a book or post content to Bacon’s Rebellion, I would pay almost any price! But I suspect that most Americans would deem driverless cars to be a luxury they cannot afford.

by James A. Bacon

The McDonnell administration has prepared legislation to reclassify state roads along the lines of the system used by the federal government, Transportation Secretary Sean Connaughton told a transportation roundtable Friday sponsored by the Thomas Jefferson Institute for Public Policy.

Virginia’s outdated classification of roads  — primary, secondary and Interstates — does not serve the commonwealth well, Connaugton said. Some “secondary” roads in Northern Virginia carry far more traffic than many “primary” roads in other parts of the state. By contrast, the Federal Highway Administration has a well-defined set of criteria for classifying streets as principal arterials, minor arterials, collectors or local roads based on their length, traffic volume and function in the road network.

The classifications are important. For one reason, the Virginia Department of Transportation allocates money for maintenance and construction to separate funds based on road classification. As Connaughton acknowledged, if Virginia changes the road-classification system, it will have to change funding allocation formulas. For another, the McDonnell administration is inching closer to devolving responsibility for maintenance of secondary roads to local governments.

Virginia is one of only four states in the country for which the state is responsible for maintaining secondary roads. “It’s crazy that the commonwealth is paving and plowing cul de sacs in Fairfax County,” Connaughton said. Moreover, formulas for allocating maintenance funds have become severely out of whack. VDOT pays cities an average of $17,000 per lane-mile for maintaining roads within their borders, leaving only $5,000 per lane-mile on average for county roads for which the state is responsible, he added. State law requires that reimbursements to cities be adjusted annually for inflation, which drives up VDOT’s payments to the cities over time. By contrast, VDOT’s main revenue source, the gasoline tax, is not adjusted for inflation — it has remained the same since 1986.

Whit Clement, former transportation secretary in the Warner administration, warned that legislators will be concerned mainly with “where the dollars fall out.” The way to pull off reform, he advised, would be to “hold rural areas harmless” by ensuring they don’t end up with less money than before. But that would require injecting new money into the system — money the state doesn’t have.

In related discussions, roundtable members explored ideas on how to raise more money for road funding. Among the candidates: Raise the motor fuels tax, pursue more public-private partnerships and create more special tax districts. There was little discussion in this Republican-leaning roundtable about exploring ways to moderate the number of Vehicle Miles Traveled through land use reforms or strategies such as Transportation Demand Management.

Connaughton was the exception. A critical reason for devolving responsibility for secondary roads to local governments, he said, was to put accountability for transportation and land use decisions at the same level of government. He cited Fairfax County’s decision to upgrade density in Tysons Corner, which will stick the state with a $1 billion liability for improving road access to the business district. He also noted that the City of Alexandria lobbied the Pentagon to relocate 6,400 defense workers to the Mark Center office complex, which will cost the commonwealth $100 million for transportation improvements. Local officials weren’t concerned about the transportation implications of their decisions, the secretary said: They assumed the state would pick up the tab.

Connaughton did not say if the administration had yet lined up anyone to sponsor its road-reclassification bill nor did he provide details on how VDOT  funding formulas might be rejiggered.