Federal funding for highways is stagnant and the Federal Aid Highway Program (FAHP) appears to be “shrinking by default.” Transportation infrastructure is not a top 10 public polling issue. Highway conditions have improved and there is little “inside the beltway” dialogue on transportation infrastructure.  Meanwhile, popular discussion of mobility is more focused on new vehicle technology than on highway infrastructure.

Federal funding for highways is stagnant and the Federal Aid Highway Program (FAHP) appears to be “shrinking by default.” Transportation infrastructure is not a top 10 public polling issue. Highway conditions have improved and there is little “inside the beltway” dialogue on transportation infrastructure. Meanwhile, popular discussion of mobility is more focused on new vehicle technology than on highway infrastructure.

October 25, 2014  | Carter Templeton

BY STEVE LOCKWOOD
Senior Vice President, Parsons Brinckerhoff

A New Context for the FAHP?
In the absence of Congressional action, the revenues of the highway account of the Highway Trust Fund (HTF) will stabilize at $34 billion (in 2010 dollars) at the end of this decade, a decline of 25 percent from recent outlay levels of $45 billion-plus. Whether this simply represents a temporary artifact of politics or a potentially permanent condition, it is a least relevant to consider the adequacy of a $34 billion FHAP to meet key national interests in the changing context for national highway development.

Three trends are at play that impact the future context of the FAHP – quite different from the past – and which, together, may suggest the need to rethink the appropriate program:

Reduction in “needs” growth. Recent trends suggest a general flattening in the growth of vehicle miles of travel and a stabilizing of upper-level highway conditions (although with significant variations in highway priorities among states – urban/rural, big/small, high/low growth). Changes in vehicle ownership and sharing suggest the love affair with the auto is cooling.

Innovative program finance and development initiatives. State and regional transportation programs are increasingly differentiated to local circumstances. New funding and project development initiatives continue to gain ground (including tolls and bond issues) — with or without public-private partnerships. State DOTs are increasingly contracting-out functions – especially those related to real-time highway systems operations and management – involving technologies, skills and approaches not readily available in-house.

Vehicle automation. New in-vehicle technologies and services provided by vehicle manufacturers and other service vendors are introducing functionality that substitutes for both public infrastructure as well as for agency activities regarding safety, information and traffic control functions. Some estimates suggest that by 2025, most vehicles may have the full array of crash-avoidance technology and the nation would be approaching zero traffic fatalities.

In a world now characterized by relatively stable needs, promising new technologies and aggressive state initiatives, is $34 billion enough to meet critical national interests? If stuck at that level, what adjustments in federal role are appropriate? What are the unavoidable federal responsibilities? Is a smaller FAHP a “national problem” or just “right sizing” for the 21st century?

Rethinking the FAHP
Two legislative commissions, several policy studies, and recent legislative proposals have attempted to define a reformed and restructured FAHP. These initiatives have included consolidating the current programs; expanding financing options; increased support for goods movement and focusing on increased performance accountability. The National Transportation Policy Project (NTPP) of the Bipartisan Policy Center (BPC) opened a dialogue in a 2011 workshop focused the need for significant change in the goals, purpose, and structure of the federal program[1]. This paper extends the discussion to a greater level of specificity regarding scale and focus – and introduces core considerations regarding the implications of new technology.

At the $34 billion level, only a few unique federal interest responsibilities can be addressed at scales consistent with resources. In such a context, two types of federal priority emerge:

The system of national significance (SNS). Developing a core highway network that provides a high-standard backbone focused on capturing national network efficiencies, and expands as affordable, while at the same time integrating the technical and design modifications required to capitalize on new vehicle and highway technology.

Issues of interest programs (INS). Addressing certain key priority public interest concerns related to highways that cannot be efficiently or practically devolved and which cannot be addressed by new technology or private initiatives.

The SNS: Support of a High-Standard “Intelligent” Core National Highway Network
Highway system leverage depends on both network effects and their maintenance through operational management. A recent Rand Corporation review of the literature on economic costs and benefits of highway investments emphasized the value of an interconnected, high-standard, continental highway network—a “System of National Significance” (SNS). The Rand study found that the principal benefits of highway investments are captured on a network basis at the national scale: “produc[ing] a net economic gain across a wide geographic area or the nation as a whole – rather than on projects with limited or only local economic effects.”[2]  This assessment of relative payoff is reinforced in FHWA analyses indicating that an economically driven approach to highway investment favors systematic expansion of a high-standard core network (the Interstate) over continuing to sprinkle stand-alone project investments over large systems of eligibility.[3]  At the same time, the core network must represent the best available technologies in support of efficiency and effectiveness – just as the Interstate System did in its day. Such an SNS would include:

Affordable national network development program that can maintain continuity of high standards and consistent application of best available technology on a connected network. The extent of network commitment must be calibrated to real costs – as described in greater detail below. A 90 percent federal match is presumed, reflecting the stricter national interest network project eligibility.

Use of functional and performance criteria to identify consistent network-related extensions and expansions to maximize capture of network effects that are central to its value to the economy, including connections to major regions not currently served by the Interstate; links to intermodal connectors at ports and airports; incorporation of major non-Interstate freight corridors (NAFTA); and addressing major Interstate interchange bottlenecks.

Deregulation of the Interstate tolling prohibition to provide an important revenue option that could be used to preserve and expand the core system – as well as provide the basis for congestion management – facilitated by a range of electronic road pricing technologies.

An “Intelligent” Network
The core SNS would be fully instrumented and designed to capitalize on new technology – public and private – including automated and connected vehicles and advanced ITS and telematics. A new national standard for FAHP highways would require (and support) appropriate vehicle-to-roadside infrastructure, communications systems and enhanced transportation management center capabilities to ensure the most efficient use of federal highway investments. Automated and connected vehicles will reduce crashes and recurring congestion as well as provide extensive and detailed information for traffic management.  Advanced vehicle-to-infrastructure-to-vehicle communications will gradually substitute for conventional roadside safety appurtenances. In addition, the efficiencies gained through instrumentation would support a long-term strategy to make more effective use of existing right of way – based on narrower lanes consistent with increasing fleet penetration of crash avoidance and lane-keeping technology.

A right-sized core “Intelligent SNS” would establish an expanding “backbone network” at the highest technical standard that would also provide the basis for additions by state and local entities based on local priorities and resource availability. Eventually the new vehicle-highway operational capabilities would modify the logic of “if, where and what” types of additional capacity-related investments are needed.

Issue-Related Priority Programs
At a $34 billion FAHP, INS program targets must be constrained to issues that represent inescapable federal responsibilities that are inappropriate for devolution from a legal, efficiency, or practicality point of view, and can be administered on an apportioned basis. These would include:

– Highway Safety both vehicle and highway infrastructure – including actions addressing the key policy issues associated with vehicle automation, such as security, privacy, liability and appropriate technology standards. It would also consolidate existing Federal Highway Administration (FHWA) safety programs (HSIP) but focus on areas not likely to be impacted by emerging automated vehicle safety payoffs (especially education and enforcement).

Continuing federal road support including Indian, national park, and federal lands roads, but shifting a portion of the latter to an electronic user-fee basis or—where there is no real transportation implication—to other federal departments.

Expanded research, data, education, administration and planning – Consolidating highway research and development programs as well as accommodating the costs of exploiting telematics-derived “big data” to support the performance management components.

Two additional non-network programs can play an important role in supporting SNS network development but on a discretionary basis:

“Off System” improvements of national significance – Combining a set of national interest highway strategic issues not necessarily addressed by the limited SNS network, especially for “lumpy” projects with significant metropolitan/interregional importance, key off system improvements such as non-Interstate bridge rehabilitation and reconstruction (currently in the STP); and support of goods movement including major freight corridors, border crossings and missing intermodal connectors. Allocations for these specific purposes would be discretionary but on a competitive basis, using transportation performance-based cost-effectiveness thresholds.

Federal highway infrastructure bank – Expanding the Transportation Infrastructure Finance and Innovation Act (TIFIA) in light of reduced federal aid, providing loans and loan guarantees, other forms of credit enhancement and private activity bonds to qualifying projects – together with streamlined processes and technical assistance for states and metropolitan areas. The deregulation of the Interstate for tolling would substantially expand the potential of the bank

Increased Local Effort
As a matter of affordability, a $34 billion program cannot afford a separate metropolitan network-related program and still address national priorities as defined at a significant level, as currently addressed in the Surface Transportation Program (Transportation Alternatives Program) or those that are substantially addressed by advancing technology (CMAQ). However, the reduction in federal aid impact most state DOTs at the level of 4-7 percent of their total revenues. In addition, significant components of the SNS and the INS will overlap with metropolitan and regional improvement needs, especially in the case of major projects like bridges. Also, a reduced level of federal aid may provide greater incentive to states and regions for aggressive systems operations and management upgrades, capitalizing on connected vehicles, use of tolls and congestion pricing, expanded transit, etc. New forms of public-private partnerships are likely to be key to these developments.

Scaling and Balancing the Programs
The relative investment in systems-related versus issue-based programs (SNS versus INS) has always been a key policy and political issue. There is no “correct” answer to this policy question. The issue programs are somewhat self-scaling and variable over time – according to their policy objectives and systems targets – and use of new technology. For example, advances in crash avoidance technology, education and enforcement can increasingly be substituted for capital investment in safety infrastructure. Increased application of electronic payment of user fees may reduce federal lands’ budgetary needs. On the other hand, new research, development and planning costs may be incurred to fully capitalize on new systems development and big data management. Taken together, and using existing program levels as a point of departure, these factors suggest an INS total of  $5 billion for the three apportioned INS programs and an additional $7 billion for the remaining two discretionary INS programs.

Accommodating the above INS programs would leave $22 billion to $29 billion for an (intelligent) SNS development. Within this constraint, SNS options may be specified representing various mixes of investment in conditions and performance level versus investment in extensions. The most recent FHWA Conditions and Performance Report provides some benchmarks for SNS scaling.[4]

The FAHP has been investing about $36 billion annually in the 62,000-mile upper-level highway system (Interstate plus freeways and other expressways) sufficient to maintain “acceptable” conditions with a high percentage of “good”. Of the $36 billion, about $11 billion represents systems expansion. While this includes both upgrades and extensions, 500 to 1,000 new route miles of high standard network creation per year is a reasonable estimate

Just maintaining the conditions and performance on the 162,000 mile NHS would require the entire $34 billion. Maintaining the conditions of the Interstate system alone costs $17 billion, while making the most cost-effective investments in the 47,000 mile Interstate (and eliminating highway and bridge backlog) would cost about $28 billion.

The added roadside infrastructure for a connected vehicle program is presumed to cost approximately $1 billion per year for installation and operation.[4]

These benchmarks indicate that the high standard SNS network extent that can be improved, maintained, and extended at the indicated range of $22 billion to $29 billion investment level lies somewhere between the current 47,000 mile Interstate and 62,000 miles of Interstate plus other freeways and expressways.

Combined Issue and System FAHP Options
Four options illustrate a range of INS plus SNS approaches within the $34 billion budget limit. Each option consists of an INS program component combined with an intelligent SNS program component. The SNS programs in common assume an upgraded Interstate as the point-of-departure and are defined in terms of a budget for maintaining or improving conditions of the existing Interstate along with a budget for incremental expansions and improvements:

Option 1 includes all five of the issue programs ($11 billion) would leave $22 billion to be matched for an SNS involving maintenance of the existing Interstate System conditions and performance ($17 billion) and still provide $7 billion (matched) for extensions of the SNS (up to 800 miles per year).

Option 2 includes only the three apportioned issues programs ($5 billion) leaving $29 billion that could be used (matched) to improve the existing Interstate to cost-effective levels ($28 billion) with $4 billion remaining for SNS extensions (over 500 miles per year).

Option 3 is a combination of 1 and 2 and includes only the three apportioned issues programs ($5 billion) leaving $29 billion of which $15 billion (matched) could be used to maintain existing Interstate conditions and performance ($17 billion) plus an additional $14b for SNS extensions (1400 miles per year).

TOLLING PHOTO GOES HERE

Options with Interstate tolling. The impending full instrumentation of vehicles will substantially facilitate tolling and pricing. Presuming federal deregulation, Interstate toll revenues could be added to any of the above options. As an example, congestion pricing applied to the 20 percent of travel on congested Interstate System facilities in larger urban areas (> 500,000 population) – at an average of 20 cents per mile – would generate about $9 billion of annual revenue. Depending on toll coverage and credit support, these revenues could be leveraged to accelerate major improvements that on average might yield another 900 miles per year of SNS extension.

There are clear trade-offs regarding federal priorities in a constrained program. Other options could be developed, representing different policy targets for preserving versus improving the existing Interstate conditions and performance versus investment in intelligent SNS expansion and extensions.

Conclusions
Key trends in demand, devolution, technology and private sector roles are establishing a new context for right-sizing the FAHP. Nevertheless, a 25 percent reduction in the FAHP forces hard choices to identify the few priority programs that reflect unique federal highway issues. The INS programs identified and scaled represent the few key areas that cannot easily or efficiently be devolved. The affordable system of national interest, the “Intelligent SNS”, is based on expanding the Interstate system as its core and could be undertaken in several mixes of system conditions and expansion.

Importantly in the context of the $34 billion limitation, there is need for assurance that limited federal investment will actually achieve—rather than simply target—priority national objectives. Program policy and design must go beyond an expression of intentions – inherent in the current conventions of “systems of eligibility,” broad discretion, and project-based investment justification – to one that is structured to actually achieve targeted, concrete, predictable and affordable improvements in function and performance that reflect unique federal responsibilities. The program adjustment must also fully respond to new technologies that suggest changes in the needed federal role. While this approach is substantially different from those under consideration in past proposals, it provides insight that may be useful for future policy and program discussions.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of either Parsons Brinckerhoff or The Eno Center for Transportation.

[1] Highway Infrastructure and the Economy, Implications for Federal Policy, Shatz, H, Kitchens, K, Rosenbloom, S., Wachs, M. 2011.

[2] 2013 Status of the Nation’s Highways, Bridges, and Transit: Conditions & Performance, FHWA

[3] All these figures from the FHWA 2013 Conditions and Performance Report

[4] Vehicle-Infrastructure Integration (VII) Initiative Benefit-Cost Analysis: Pre-Testing Estimates, NHTSA 2007

[1] Strategies for Defining the Core Federal Role in Surface Transportation. Strategies for Defining the Core Federal Role in Surface Transportation, BPC, 2011

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