Most roads in the United States are owned and managed directly by government, with funding for construction and maintenance derived primarily from taxes on gas. For many decades, this system worked well enough, despite widespread problems with congestion and road quality. Recently, however, rising maintenance costs and falling fuel tax receipts have begun to call into question the sustainability of this model.
At their current levels, gas taxes will not provide the revenue needed to maintain America’s roads satisfactorily, let alone to rejuvenate and extend the network where necessary. Yet, direct political management hinders the development of new revenue streams, leads to operational inefficiencies and hampers innovation. Put simply, the organizations that built the U.S. highway networks are no longer suited to running them.
A better approach is urgently needed. Ideally, the organizations that manage roads should be able to finance road construction and maintenance through the sale of bonds, without requiring direct consent from higher political authorities. And they should be able to cover the costs of those bonds by charging for road use. More generally, they need to be capable, energetic, ingenious and ready to act. And for all those reasons, they need greater autonomy.
This paper argues that roads should be managed by independent enterprises, with a clear mission of providing service to customers. One way to achieve this, while maintaining overarching political control—and thereby prevent abuses of monopoly power—is to convert existing government operated road management organizations (such as the state Departments of Transportation) into regulated public utilities.
Within such a framework, a wide variety of ownership structures are possible, ranging from municipal- or state-ownership to mutual- and investor-ownership. Each structure has its own set of advantages and disadvantages, but all are superior to the existing system in one crucial respect: they clearly orient the road enterprise away from day-to-day politics and toward providing value to their users.
The regulated public utility model is already well-established in other important sectors in the U.S., including water, energy and telecommunications. Indeed, around 10% of wastewater utilities, 20% of water utilities, most pipelines, electric utilities, natural gas utilities, and virtually all telecom and cable utilities are investor-owned.
Internationally, the regulated public utility model is already operating successfully in transportation. The New Zealand Transport Agency, for example, has an independent board of directors who appoint the CEO, and works in accordance with a performance agreement negotiated with the New Zealand Ministry of Transport. Management is separated from governance, and service delivery is separated from policy. New Zealand’s approach has delivered large efficiency gains without compromising service levels.
Australia’s state road enterprises, meanwhile, demonstrate the benefits commercialization could bring to state Departments of Transportation in the U.S. By contrast with their American equivalents, Australian road enterprises—like New South Wales’s Roads and Traffic Authority or Victoria’s VicRoads—are innovative and highly business-like.
The United States should follow Australia and New Zealand’s lead, and transform its state Departments of Transportation (or the highways divisions thereof) into separate, publicly regulated, self-financing corporate entities. Full-cost accounting—as already performed by Arizona’s Department of Transportation—constitutes a necessary first step in this direction. In making the transition, policymakers should strive to impose regulation only where absolutely necessary, to minimize the anti-competitive effects of any such regulation, and to leave social objectives to the government, thereby freeing road enterprises to focus on economic ones. Accordingly, road enterprises should be permitted to pursue cost-effective contracting and public private-partnerships as they see fit.
The new road enterprises should also be given latitude to make greater use of user fees—as opposed to general revenue—for funding their activities. Such charges are not just more efficient and equitable than traditional funding sources; if properly designed and implemented, they are also better suited to reducing congestion through effective pricing. Vehicle-miles-traveled charges, weight-distance charges and electronic tolling are all options that road enterprises should be free to pursue.
There is no single formula for success. Road enterprises will learn by doing, and by trialing alternate strategies. The U.S. has 50 separate laboratories of democracy in which road enterprises and state authorities can experiment to find out what works and what doesn’t. There will be successes and failures along the way: successes will be replicated; failures will be eradicated. It is only by establishing a learning process like this that innovative progress in surface transportation can be made.
Metro benefits are presented in terms of reduced car use (p.10). This is the wrong way of looking at the benefits. The main benefits of Metro are the service to riders (more trips, faster trips, higher quality trips), not the reduction in congestion for non-riders. Who knows how many auto trips there would be instead? If Metro were closed for a day, everyone would work from home. If it were a month, people would carpool. If it were a few years, jobs would relocate. The ridiculous assumption that everyone would drive instead, and need to park in garages filling all of the central area are self-negating.
The region expect to keep growing, to 8.6 million people in 2040 (including an outer ring that includes many of Baltimore’s suburbs). If it continues to grow, it will need more service. Will it continue to grow? I would much prefer a scenarios approach (e.g. high growth/low growth/decline) and consideration of alternative strategies for alternative futures. I bet if we looked at Detroit’s plans from 1950 or 1960 or 1970 or 1980, they anticipated growth too (amusingly Google classifies that link as “fiction”, unfortunately it is not downloadable, so I can only speculate). Maybe DC will become the east coast’s primate city, displacing New York, analogous to London or Paris or Tokyo.
It looks like Fleet expansion solves most problems (Table 4), begging the question of why there needs to be new tunnels. (Not that there need not be tunnels, but high crowding is the price to be paid for dense cities, and Washingtonians should become better acquainted with their neighbors, just like Londoners and Tokyo residents). Further, why can’t more streets just be converted to bus-only transitways to satisfy the demand? This should require some paint and little else at the margin. (And of course can be as expensive as you want to make it).
p. 11 “The Washington, D.C. Metropolitan Statistical Area (MSA) added 275,000 households and 295,000 jobs between 2004 and 2010. Of that growth, 6.4 percent of new households and 13.8 percent of new jobs located within one-half mile of suburban and one quarter-mile of urban Metro stations. The land area around these Metro stations comprised only 0.5 percent of the MSA land area, which suggests that Metro-adjacent locations are capturing far more than a simple share of growth” (6.4% of HH is only 17,600 HH, or 2514 per year over 7 years. Metro should do better than that. And a half mile is a pretty long area, most people within 1/2 mile in suburban Washington will not be using transit)
p. 12 “The land around Metrorail stations generates $3.1 billion annually in property tax revenues to the jurisdictions. Of these revenues, $224 million of incremental property value is from land near Metrorail stations – extra value that would not exist without Metro. ” $224 million in incremental property value revenues (I assume this means taxes) is great. This should be captured to pay for the system improvements. Over 30 years this is $6.6 billion in additional revenue (assuming no additional development and 0% interest rates). Ballpark, this is oneway of capitalizing the value of the system. A value capture district around all the stations would be a good idea.
Figure 6 shows that Washington has more vehicle-miles per capita of transit service, and it is claimed this means more competitiveness. I am unconvinced of the causality here:Do Agglomerating benefitting industries create density and demand public transit,
Or does transit create population density attracting agglomeration-benefitting industries?
I am all for mutual co-location as a theory and explanation, but there are reasons some industries (government and its courtiers, e.g.) likes to agglomerate, which are independent of transportation. Transportation serves and reinforces (and maybe attracts) that industry of course. A city without government (or finance, or one of the few other strongly agglomerating sectors) would see far less demand for central city development and commensurate transit. Since Washington has this industry, it should have more transit than a fast-growing metropolis without such industries (e.g. Phoenix)
More Vehicle-miles per capita without accompanying mode share indicates an inefficient land use pattern. I would think if people were closer together, fewer vehicle-miles of transit needed to be provided to serve the same trips. (The data I think comes from this 2004 study, which perhaps surprisingly has Minneapolis in third place for Economic Competitiveness, Figure 7, despite its relatively poor public transit showing).