Future Surface Transportation System Needs (continued)
Strategies of Four State Departments of Transportation to Meet Future Needs
Pennsylvania Calls for Funding Reforms
In 2005, Governor Edward G. Rendell created a nine-member Transportation Funding and Reform Commission to conduct a review of the state’s transit, highway, and bridge systems. The Commission, which was chaired by Secretary of Transportation Allen Biehler, and included three key legislative leaders, delivered their recommendations in November 2006.
They found that Pennsylvania’s highways and bridges have reached the point where significant rehabilitation is required and that the time to make these repairs is now. Delay will result in more costly repairs later. They found that the state’s dedicated funding sources are simply not keeping pace with inflation—in the past several years costs have skyrocketed. They recommended that funding should be coupled to reform to assure taxpayers of value for their investment and a lasting funding solution.
They recommended reforms which could annually generate $120 million in savings, and revenue measures to support highways which could generate an additional $900 million annually: $750 million by increasing the equivalent of a gas tax by 11.5 cents per gallon, and $150 million by raising various motor vehicle registration fees.
The Commission believed $60 million annually could be generated through transit reforms. They saw a need for $760 million annually in new investment to stabilize transit funding and bring the system to a good state of repair. They recommended that $576 million be generated at the state level through a realty transfer tax and that local governments should be allowed to generate an additional $184 million.
Said Commission Chairman Biehler, “Not only is the Commission proposing a solution to ensure Pennsylvanians have a better transportation system, it is also recommending management practices to make sure investments are made wisely and service is improved.”
If the Commission’s recommendations are adopted, the average driver would pay $7 more per month to fund highways and bridges. The new funds from the realty transfer tax for transit would add $5 a month to a 30-year $150,000 mortgage.
Iowa Analyzing Options to Meet Future Needs
Recently the Iowa Legislature asked the State DOT to prepare an assessment of the needs of the state’s highway program. In brief, here is what was found.
Each year vehicles in Iowa travel over 31 billion miles on Iowa’s roadway system. Nearly $390 billion worth of freight is hauled. Iowa manufacturers rely more and more on just-in-time delivery and agriculture relies on reliable, low-cost transportation solutions to get goods to market. This requires a road system that is in good condition, has adequate capacity and is well-maintained, even in inclement weather. Finally, the citizens of Iowa count on transportation to support their quality of life. Roads provide the primary means to access recreation, education, and health care. Companies want good roads not only for business purposes, but to attract and support a stable workforce.
Even though Iowa’s population is not growing all that rapidly, travel demand has been. Over the past 15 years traffic in general has increased 36 percent, and large truck travel increased 51 percent, with over 60 percent of this growth on Iowa’s 9,000 miles of primary roads, including their Interstates and other key arterials. By 2020, large truck traffic is expected to grow by another 50 percent.
Because of lagging revenues and rapidly escalating construction costs, Iowa is falling behind in maintaining its roadway system. Pavement conditions are deteriorating and the number of structurally deficient bridges has increased. To maintain and improve Iowa’s roads to the levels required will require an investment over the next 20 years of $67 billion. From current sources, only $39.5 billion in revenues are expected to be available, so Iowa faces a 20-year revenue shortfall of approximately $27 billion.
The conclusion of the State DOT study is that the most critical needs on Iowa’s roads can be met with an additional $4 billion in revenue over the next 20 years. This will require an annual revenue increase of $200 million. Several options have been outlined for the legislature to consider in order to generate this amount, including increases in current road fund taxes and fees. They explored new sources of revenue such as a sales tax on fuel purchases, a severance tax on exported ethanol, and a per mile tax. They also analyzed the feasibility of tolls, bonding, and privatization. Once the report has been submitted, it will then be up to the legislature to decide what to do to meet the state’s future needs.
Utah Focusing on Financing Tools and Improved Project Delivery
As the fifth fastest growing state in the union, Utah continues to experience rapidly growing transportation needs. With a population of 2.5 million people, 88 percent live in urban areas, with most of that population along the Wasatch Front—a narrow 125-mile corridor comprising the metropolitan areas of Salt Lake City, Ogden, and Provo. Utah will add another one million people along the Wasatch Front alone by the year 2030. Consequently, while Utah faces challenges associated with an aging and deteriorating infrastructure, the greatest challenge is addressing growth and increasing congestion.
Utah continues to pursue new strategies to address growing transportation needs, including new state financing tools and improved project delivery.
In the past, Utah’s primary source of transportation funding was limited to highway user fees. Since 1997, the state has also contributed significant state general funds to help meet highway capacity needs through the $3 billion Centennial Highway Program. Starting in 2005, the state began contributing even greater amounts of general funds to highway needs through the Transportation Investment Fund by directing auto-related sales tax to transportation. Additionally, the state recently passed legislation allowing counties to impose an added vehicle registration fee for corridor preservation purposes, and a new local option sales tax for counties to build regionally significant highway, transit, or airport congestion mitigation projects.
Other strategies pursued by the state include adoption of comprehensive authority for public–private partnerships for tollways. The state is also considering Mountain View Corridor as a toll facility in order to help finance and deliver the project years sooner than it could be built otherwise. Additionally, the state recently converted 38 miles of HOV lanes on I-15 to High Occupancy Toll (HOT) lanes to help manage congestion through the heaviest-traveled sections of I‑15.
Project Delivery
The $1.6 billion project to rebuild Interstate 15 through downtown Salt Lake City would have normally taken 10 years but was completed in just 4.5 years and $32 million under budget, all while maintaining traffic flow throughout the valley. Utah rebuilt 17 miles of Interstate 15 using a design-build contract with Wasatch Contractors, a team led by Kiewit Pacific, Granite Construction, and Washington Construction. They expanded I-15 from 6 to 12 lanes and rebuilt 142 bridges.
The initial segment of Utah Transit Authority’s TRAX light rail was constructed to move additional people through Salt Lake Valley’s congested I-15 corridor, providing new travel choices and helping to relieve peak-hour congestion. The project was completed 13 months ahead of schedule and $20 million under budget. Additional light rail lines are under development throughout the Salt Lake City metropolitan area.
In addition to expanding existing roadways, new limited access facilities will be added to the system. The Legacy Parkway project north of Salt Lake City will be completed by fall 2008, providing 14 miles of new roadway to relieve congestion and provide an alternate to I-15. An Environmental Impact Study is currently underway on the Mountain View Corridor, which would provide 38 miles of new roadway in the rapidly growing western portion of Salt Lake and Utah Counties. Additionally, a Record of Decision has been issued for the Southern Parkway near St. George City. The new 26-mile roadway will help address growth in the southwest portion of Utah.
California Voters Approve Transportation Funding
California is the largest state in the country with a population of 36 million which is expected to increase by 15 million over the next 30 years. It contains two of the largest metropolitan areas in the country, the Los Angeles region with over 16 million and the San Francisco region with close to nine million. Forty percent of the nation’s international container traffic moves through the ports of Los Angeles and Long Beach. Because of increased trade with China and other booming Asian economies, that container volume is expected to quadruple over the next 20 years.
When the technology crash hit in 2001, it hit the California economy hard, and state revenues dropped dramatically. To balance the state’s budget, resources were shifted from transportation to the general fund. By 2004, the state had recovered and transportation funding began to be increased once more. Between 2004 and 2006, Caltrans increased its highway construction program from $7.9 billion to $9.6 billion.
The November 2006 elections produced two important transportation successes. First, the voters approved $19.9 billion in transportation improvement bonds. Second, five self-help counties succeeded in securing voter approval for a one-half cent sales tax increase dedicated to transportation. Remarkably, in each case the measures received at least the two-thirds majority support required for the referendum to pass. For these five counties, these measures will generate nearly $17 billion in transportation revenues over the next 30 years.
The 30-year value for all of the counties that have succeeded in passing such one half-cent referenda by two-thirds majority is $50 billion.
Now that the voters have approved $19.9 billion in state-wide transportation bonds, Caltrans is hard at work together with the State’s MPOs and the California Transportation Commission to systematically program the investments to be made. Some of the highlights so far show plans for investing $4.5 billion in highway projects to reduce congestion on key corridors; $3.1 billion for port infrastructure; $4 billion for transit rail, bus and ferry improvements; $1 billion for transit safety and security; and $2 billion for local streets and roads.
Future Cost Estimates for Highway, Transit, and Rail
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. We believe the starting point for a long-term estimate of need 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.
The most widely respected adjustment factor for inflation over time is the “consumer price index (CPI).” The CPI has been 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.
For purposes of this report, AASHTO has adjusted the U.S. DOT’s 2004 estimates of $118.9 billion as the “Cost to Improve” for highways and $24 billion as the “Cost to Improve” for transit to incorporate increased construction costs. That was done by applying the Producer Price Index for highways for years 2004, 2005 and 2006, to supplement the Consumer Price Index adjustment. For years 2007 and beyond, the projected “cost to improve” is estimated by applying the Consumer Price Index. (See Figures 5 and 7.)
Highways Are the Keystone of Passenger, Freight, and Travel
Over the past century, funded by Federal, state, and local governments, the United States has built a highway system of nearly 4 million miles—the largest and best system in the world. This includes a 47,000-mile Interstate System, which together with 115,000 miles of additional arterials constitute the 162,000-mile National Highway System. Other arterials and collectors make up an additional 810,000 miles that are eligible for Federal aid. What remains are three million miles of roads that are not eligible. Nineteen percent of U.S. highways are owned by states, 45 percent by counties, 33 percent by cities and townships, and 3 percent by the Federal government, either on military reservations or public lands.
America is a vast nation which has overcome the tyranny of distance through investments in a highway system that has tied communities together and linked them to the world. The highway network provides American businesses and consumers with unparalleled mobility and choice. Automobiles allow people to travel where they want, when they want, and with whom they want. Today nearly 90 percent of U.S. trips to work and 86 percent of all trips are made by automobile. Highways are the keystone of the U.S. freight transportation system carrying nearly 80 percent of domestic tonnage and 94 percent of domestic value. Trucks provide direct service for both long-distance and local shipments, and provide the pickup and delivery for long-distance shipments made by rail or overnight airfreight.
AASHTO’s 2007 Highway “Cost to Improve” Estimate: $155.5 Billion
AASHTO has calculated the level of investments needed through 2030 to bring the highway system to a condition that produces positive net benefits to the American public in terms of both condition and performance—referred to as the “Cost to Improve.” When the U.S. DOT’s 2002 estimate of $118.9 billion is adjusted for inflation and increased construction costs, AASHTO estimates that the “Cost to Improve” is actually $155.5 billion in 2007, increasing to some $273.8 billion by 2030. (Figure 5.)
Are These Investments Achievable?
Is it even worthwhile to consider investments of this magnitude? Yes, for three reasons. First the investment 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, 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. (Figure 6.) Increasing highway capital investment between 2005 and 2029 by the same percentage would yield approximately $210 billion.
Figure 5. Highway Needs Increased by the Consumer Price Index*
2007 Through 2030
Figure 6. Highway Capital Expenditures Increased 280% in 24 Years
Over the past 15 years the historical share of highway capital investment has been 45 percent. Federal highway assistance will have increased from $32 billion in 2004 to $39 billion in 2007.
In this period, states have increased their capital programs as well. Washington State which has increased its gas tax by 14.5 cents over the past four years, will increase its capital spending from $725 million in 2004 to $1.1 billion in 2007. Georgia will increase its highway capital spending from $911 million to $2 billion, Alabama from $580 million to $800 million, Texas from $3.8 billion to $5 billion, and California from $7.9 billion to $9.6 billion. Other states have not been able to grow their programs by these rates. But if both Federal and state governments continue to increase their highway investments by similar rates, considerable progress can be expected.
The third reason it is reasonable to consider investments of this magnitude, is that while they are huge, it is not necessary for them to be achieved all at once. The program needs to be increased over many years and several reauthorization cycles. It should be approached in three phases. In the first phase, from 2008 to 2010, the objective should be to assure sufficient revenues to sustain the $43 billion highway program promised in SAFETEA-LU. In the second phase from 2010 to 2015, the objective should be to restore the purchasing power of the highway program 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” goal.
FHWA indicates that highway capital spending in 2005 was $75 billion, of which Federal assistance represented $33 billion. (Figure 6.) Between 1993, when Federal fuel tax rates were last adjusted and 2015, it is estimated that highway construction costs will have increased nearly 70 percent. To restore the purchasing power of the Federal highway program it will need to be increased from $43 billion in 2009 to $73 billion by 2015. State and local highway capital investment in that year would be expected to increase to $89 billion.
Highway Investment Needs Are Understated
As good as U.S. DOT’s Conditions and Performance Report is as a basis for estimating national needs, there is one area in which AASHTO believes it understates future costs long-term.
Long-Term Interstate Highway System Costs Are Substantial
Today’s biennial conditions and performance reports do not adequately estimate several future Interstate Highway System needs.
Bridges. The Interstate System has more than 55,000 bridges, many of which are reaching 40 to 50 years of age. Bridges and other structures of this age usually require substantial rehabilitation, and in another 20 to 30 years, they will require replacement.
Pavement. The Interstates have approximately 210,000 lane-miles of pavement. As these pavement structures reach 40 to 50 years of life, major portions will need to have their foundations completely reconstructed.
Interchanges. The Interstate System has almost 15,000 interchanges, many of which do not meet current operational standards and create bottlenecks or safety problems. Some of the most significant congestion on the system is at major interchanges that were not designed to carry the volumes of traffic that currently use them. Higher projected future traffic volumes will exacerbate these problems.
AASHTO recommends that the National Commission call on Congress to direct U.S. DOT and State DOTs to jointly undertake two comprehensive Interstate Highway System needs assessments during the period from 2010 to 2013. The first should study the costs of rebuilding or replacing the 55,000 bridges on the system, the 15,000 interchanges, and the pavement foundations for the system’s 210,000 lane-miles. The second should study long-term, system-wide expansion needs of the network, taking into account the global economy, population, and economic growth, safety, national defense, and homeland security needs. Initial analysis shows the need to nearly double the lane-miles on the existing Interstate System.
