Improving Transportation Performance: Time to Focus on Operations

Improving Transportation Performance: Time to Focus on Operations

September 25, 2014  | ENO CENTER FOR TRANSPORTATION

Congress has been able to accomplish very little this year, but one thing they agreed they needed to do was avoid insolvency in the Highway Trust Fund (HTF). Thus much of the summer was spent agonizing over pay-fors that could justify yet another transfer of general fund revenues into an increasingly unsustainable HTF. In continuing to provide general funds transfers and failing to deal with the systemic long-term problem – which is that we are spending more money on transportation than we are taking in for that purpose – Congress continues to choose the worst possible way forward. Two potential improvements would be cutting spending to match revenues or increasing revenues to match spending, but Congress continues to avoid these hard choices. Their de facto policy of leaping from crisis to crisis is the worst of all worlds, as funding continues to be inadequate AND grantees have little assurance of stability in federal funding.

Unfortunately there does not appear to be a resolution to this perpetual crisis anywhere in sight. Given that challenge, if we care about improving transportation using federal dollars, it may be most prudent to turn our focus back to how we can spend existing money more effectively. Assuming that Congress is eventually in a position to authorize a multi-year spending bill, no matter how much money is available, there is much work to be done in using that money wisely.

One potential area for immediate improvement could be in beginning to shift the focus of the federal program away from traditional capital investments and towards operational improvements. Economists have long recognized that the most valuable improvements to our transportation network, from a cost-benefit perspective, are typically operational changes. While capital needs are necessary and large, particularly in order to adequately preserve our existing infrastructure, those investments are not typically going to result in performance improvements in the short-run. We need to make capital investments for long-term economic reasons because the longer we postpone needed investments, the more expensive they will become and the more performance will slowly deteriorate. Operational changes, on the other hand, can be fast, inexpensive, and produce immediate improvements.

However, far from encouraging operational changes, current law often prohibits using federal funding for operations. Aside from operational funds for transit in rural areas, federal funding is targeted primarily towards capital. The reason for this is understandable, as Congress would not want to encourage higher costs by subsidizing operations.

However, there are many opportunities to use federal funds to improve operations, reduce costs, and provide a much better return on federal investment in line with national goals if proper incentives are offered. Congress should not simply allow federal funds to be spent on operations. Instead they must outline specific outcomes they wish to see achieved with operational funding and hold grantees accountable for achieving them.

Some ideas for opening up these opportunities include:

  • Reorganized transit networks. Whenever federal funding for transit operations is discussed, there is concern that making such funding available could increase labor costs. But the bigger federal responsibility is in targeting federal funds toward more effective transit networks that could in turn boost economic growth in metropolitan areas. Transit in many major metropolitan areas in the U.S. consists primarily of buses operating on routes that correspond more or less to the routes originally operated by trolleys half a century ago or more. The networks have rarely been updated or rationalized, and changing them is politically difficult because the constituencies that are likely to argue against change are much louder than those who would benefit from such a change. But the potential benefits to reorganization could be very large. For example, in Houston an ongoing reorganization—spearheaded by Jarrett Walker—will result in a larger network with higher frequency for the same amount of money.

The federal government could play a crucial role in encouraging transit agencies to redesign their networks. By providing a even a small amount of additional incentive funding—for example, new buses or perhaps providing something easier such as greater flexibility in how existing funding may be spent—the federal program could help localities overcome the barriers to redesigning their networks. These redesigns could potentially be more cost-beneficial than investments in new rail network expansions, the primary current federal capital expense, and accomplish many of the same goals.

  • Better utilization of highways. It is not news to anyone, from the average motorist to the transportation economist, that we do not use existing capacity on our roadways effectively. Motorists perceive most of our roads as being “free”, since there is little to no out of pocket cost for using them at any time. This results in overuse, congestion, and uncertainty in travel times. While congestion pricing is the solution typically proposed for better utilization of the roadways, it has encountered strong political obstacles in the U.S. However, where it has been implemented – Stockholm, London, Singapore – it has ultimately proved quite popular. If we could get congestion pricing working in just one major city in the U.S., it would likely spread to others rapidly. The Urban Partnership Agreements, which provided transit funding to cities implementing some form of variable pricing, demonstrated the power of federal money in this regard by getting High Occupancy Toll (HOT) lanes implemented in numerous cities.

But even shy of congestion pricing there are many things we could do to better use road capacity. Dick Mudge has floated the idea of paying people to drive in off-peak hours, which is an easier sell politically. Numerous ridesharing apps aim to improve capacity by putting “butts in seats” of cars that have excess capacity, which is virtually all of them. Intelligent Transportation Systems, including better information for motorists or even something as simple as ramp metering, have demonstrated their ability to improve capacity utilization. All of these ideas could be incentivized with the promise of federal money, for a fraction of the cost of building new lanes on highways.

  • Safety improvements. There are many ways to address safety through operational improvements. Perhaps the easiest strategy is speed limits. For example, New York City recently lowered its speed limit to 25 miles per hour as part of its “vision zero” initiative. Even more powerful means of improving safety are those that deal with seat belts and impaired driving. While we have made substantial progress in this area over the last decade, drivers are also more distracted than ever. The Center for Disease Control estimates that seat belts can reduce injuries and death in vehicle crashes by 50 percent, and that approximately 30 percent of all fatalities can be attributed to alcohol. Primary seat belt laws and stricter drunk driving or distracted driving enforcement can yield substantial benefits. Yet the federal safety program still focuses on infrastructure as the primary means of reducing fatalities and injuries.

In the past, Congress has made attempts to link funding to the implementation of primary seat belt laws, but these have failed. It is difficult to threaten to withhold funding – much easier is to hold out additional funding or greater funding flexibility as an incentive. For a small amount of money, accompanied by effective measurement of and accountability for results, the federal government could encourage states and localities to reduce injuries and fatalities through operational improvements and policy changes.

Conclusions

The federal transportation program needs to shift away from being a capital-intensive program focused on infrastructure and towards a program focused on outcomes. This in no way means that capital is unimportant – quite the opposite, infrastructure remains the crucial backbone of our transportation network. But realistically, there is unlikely to be a surge in the total amount of federal funding being made available for transportation. We need to use what we have more effectively in order to make timely improvements to the transportation system.

MAP-21 made some excellent strides in this regard by specifying national goals and performance measures for federal money. Where it fell short was that it did not provide an incentive for accomplishing those goals or improving performance. In the next bill, rather than trying to achieve accountability for performance for every federal dollar, we might consider taking the smaller step of allowing states to apply to use federal funds for operational purposes such as those identified above. Successful applicants could be rewarded, ideally with additional funding, but alternatively with greater flexibility. A few demonstration projects, where federal incentives provide the crucial piece that overcomes local political hurdles, could prove very valuable.

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