Executive Summary
Congress created the National Surface Transportation Policy and Revenue Study Commission to examine “future surface transportation system needs, expected demographic and economic changes that will shape traffic demand, the future of the Interstate System, and the potential for expansion, upgrades, and other changes to the surface transportation system to meet the nation’s needs.”
The Commission was directed to consult with representatives of State departments of transportation. This report is the first of six that AASHTO plans to provide to assist the Commission. It contains a comprehensive assessment of transportation needs today and in the future, and the demographic and economic changes that will shape that future.
On October 30, 2006, AASHTO’s Board of Directors approved a series of policy recommendations for the Commission which included a “Call for Action.” In part it read,
“Our generation inherited the world’s best transportation system made possible by the commitment of the past two generations to invest in the country’s future. We have spent that inheritance.”
“The 21st Century is an increasingly competitive world where countries like China and India have set their sights on overtaking America as the preeminent economic power. Our prosperity and way of life are at stake. America must respond.”
Today the country is faced with increasing global competition. China, with a population of 1.3 billion, is building a 53,000-mile National Expressway System which, when complete in 2020, will rival the 47,000-mile U.S. Interstate System. India, with a population of one billion, is building a 10,000-mile national expressway system. Europe, with a population of 450 million, is spending hundreds of billions of euros on a network of highways, bridges, tunnels, ports, and rail lines.
To support their economic development, nearly all the major players on the world stage are investing aggressively in their transportation infrastructure. The two questions this raises for the United States are: First, does not the United States also need to invest to compete? And second, if so, how much?
Future Surface Transportation Needs
The future needs of the U.S. surface transportation system are great and the costs to provide them are increasing:
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Preservation. The current system of highways, transit, and railroads is growing old and will need to be rebuilt or replaced.
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Capacity. Travel on the current system has increased well beyond what it was designed to carry. Over the next 50 years, nearly as much highway arterial capacity as was built over the past 50 years will need to be added. Over the next 20 years, we should double transit ridership.
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Increased Costs of Construction. Between 1993 and 2015, construction costs will have increased nearly 70 percent. To restore the purchasing power of the highway and transit programs, revenues will have to be increased to levels which match the increase in costs. For highways, that would mean increasing the Federal program from $43 billion, in 2009 to $73 billion in 2015. For transit, it would mean increasing the Federal program from $10.3 billion in 2009 to $17.3 billion in 2015.
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Global Trade. International trade and the volume of freight needed to be carried by truck and rail is increasing rapidly. This will require substantial additional capacity and in many cases dedicated truck lanes.
Highways and Transit
The 2007 “cost to improve” highways and bridges in the United States is estimated at $155.5 billion and the “cost to improve” transit is estimated at $31.4 billion.
Freight Rail
The “cost to maintain freight rail’s current market share,” in 2007 is estimated at $12 billion—$2.75 billion annually in public support and $9.25 billion annually in railroad private capital investment.
Intercity Passenger Rail
The “cost to bring 21 intercity passenger rail corridors to a good state of repair” is $3.3 billion in annual rail capital investment.
Are these investments achievable?
Is it is even worthwhile to consider investments of these magnitudes? Yes, for three reasons. First, the needs are based on the estimate made by U.S. DOT in 2006, updated using a credible index which accounts for the increases in construction costs which have occurred in the recent past and are expected in the future.
Second, when put into historic perspective they look more realistic. Actual highway capital spending nationally increased from $19.7 billion in 1981, to $75 billion in 2005, an increase of 280 percent over 24 years. Between 1981 and 2004, transit capital investment increased by 290 percent. If both the Federal and state governments continue to fund their shares of the increases needed over time, significant growth in both programs can be achieved.
The third reason to consider investments of this magnitude is that while they are huge, they do not have to be achieved all at once. The program needs to be increased over many years and several phases. In the first phase, from 2008 to 2010, the objective should be to assure sufficient revenues to sustain the highway and transit programs at the levels promised in SAFETEA-LU. In the second phase, from 2010 to 2015, the objective should be to restore the purchasing power of the highway and transit programs to 1993, the last time the Federal gas tax was increased. In the third phase, from 2015 and beyond, the objective should be to close the gap between current spending and the “cost to improve” goals.
Demographic Trends Affecting Transportation
Population
Between 1955 and 2005, the U.S. population grew by 130 million to 295 million. Over the next 50 years it is expected to grow by 140 million to 435 million. Over the next 30 years, 88 percent of that growth will occur in the south and west. By 2030, the population of people over 65 will have grown from 35 million to 70 million. More than 70 percent of the nation’s population growth and 80 percent of its economic growth are expected to take place in metropolitan areas. At the same time, rural states will face the enormous cost of preserving the network of roads they have built over the past 80 years.
Vehicles
In 1955, U.S. highways carried 65 million cars and trucks. They carry 246 million today, and that number is expected to reach nearly 400 million by 2055.
Travel
Highway travel, measured in “vehicle miles traveled,” increased from 600 billion in 1955 to three trillion in 2006. FHWA forecasts that it will grow by 2.07 percent through 2022. Travel may exceed seven trillion vehicle miles by 2055.
Truck Freight
Truck tonnage is expected to increase 114 percent between 2004 and 2035. Trucks are expected to carry 79 percent of total tonnage. Today’s Interstates carry an average of 10,500 trucks per day per mile. By 2035, this figure will increase to 22,700 trucks per day per mile.
Rail Freight
Rail tonnage is expected to grow by 63 percent by 2035. Rail is expected to carry 13 percent of total tonnage in 2035, down from 14 percent in 2004.
Trade
Trade as a percentage of Gross Domestic Product (GDP) increased from 13 percent in 1990 to 26 percent in 2000, and is expected to reach 35 percent in 2020. Container traffic increased from 8 million units in 1980, to 42 million in 2005. By 2020, container volume is expected to hit 110 million units.
Economic Forecast
U.S. economic growth is anticipated to remain healthy, with real GDP projected to expand by 2.8 percent annually. Oil prices are expected to drop from the record-setting levels of $70 a barrel and above in early 2006 and hover around the $50 per barrel range. Thereafter, the forecast shows oil prices climbing steadily to 2030 and beyond.
Determining Long-Term Estimates
In March 2006, U.S. DOT published its 2004 Conditions and Performance Report which estimated that the “cost to improve” highways nationally to the levels needed would require an annual investment of $118.9 billion and that the “cost to improve” transit nationally to the levels needed would require $24 billion. AASHTO has confidence in the modeling methodology used to prepare this report and believes it should be used as the starting point for estimating future needs.
However, two adjustments are needed to bring estimates up to current and future needs. First, the 2004 report is based on 2002 data. Between 2002 and 2006, there has been a significant increase in commodity prices in petroleum, concrete, asphalt, steel, and construction machinery. The starting point for a long-term estimate of needs must take this cost increase into account.
Second, U.S. DOT’s C&P Report expresses its estimate as a constant dollar amount to be invested each year for 20 years. The Commission was directed to study “revenue sources to fund the needs of the surface transportation system over at least (a) 30-year period…” In order to correlate the C&P Report’s “constant dollar” estimates with a future “30-year” revenue stream, costs need to be converted to “year of expenditure” dollars.
For the period from 2004 to 2006, actual producer price index data was used to reflect increases in construction costs. For the period 2007 and beyond, the Consumer Price Index was used to adjust the Conditions and Performance Report estimates from “constant” dollars to “year of expenditure” dollars so these can be correlated with revenue projections over time.
