Plus, the difficulty getting politics out of discretionary infrastructure grants, public-private partnership questions in Michigan, and more.

At Last, a Federal Conditions and Performance Report on Highways and Transit

For decades, Congress has required the U.S. Department of Transportation (DOT) to produce a biennial report on the conditions and performance of U.S. highways and transit, in part because the federal government funds a considerable portion of the total spending on these modes.

In recent years, these reports have occurred with decreasing regularity. Until last month, the most recent conditions and performance (C&P) report was the 2015 edition, which used data from 2012 and was released in 2016. But last month, those of us waiting for a more-current version were greeted with a new C&P report. It no longer carries a date, instead, it is simply called the 23rd Edition. And the data on which it is based are from 2014. Thus, while the previous report published in 2015 was based on three-year-old data (2012), the 2019 report is based on five-year-old data. Still, it is more recent than the old one and includes revisions to its methodology.

The report is useful for its overview of the extent and composition of the U.S. highway system and the country’s transit systems. For highways and bridges, most of the numbers show modest progress in the condition of highway infrastructure, but (no surprise) worsening performance in terms of congestion. For transit systems, the report points out that the agencies do not collect or report standardized data on the condition of their infrastructure.

From a policy standpoint, I find the greatest value of the C&P reports in the projections of capital investment needs. In contrast to “needs assessments” based on what can better be characterized as wish lists, the Federal Highway Administration’s (FHWA’s) Highway Economic Requirements System (HERS) model runs projected projects through a benefit-cost model with the modest requirement of a benefit/cost (B/C) ratio of at least 1.0. That model continues to be refined over time, so the latest version is likely to be more rigorous than previous ones.

Here is an overview of the three highway and bridge annual investment scenarios from the 2015 and 2019 C&P reports. The numbers are the total of federal, state, and local spending.

Scenario 2015 C&P 2019 C&P
Maintain current conditions & performance $89.9B/year $102.4B/year
Sustain current funding $105.2B/year $105.4B/year
Improve conditions & performance $142.5B/year $135.7B/year

I have problems with some of the assumptions built into the performance measures associated with the 2019 scenarios. Both the ‘maintain’ and the ‘sustain’ scenarios claim about an 18 percent reduction in average delay per vehicle mile of travel by 2034 because FHWA assumes that “travel growth gradually slows over time and various highway management and operational strategies are adopted more broadly.” I find that hard to believe, given actual upward trends in travel and congestion over the last 35 years. And by comparison, the ‘improve’ scenario shows only a 19 percent reduction in delay, just one percentage point better than the more-modest spending scenarios. By contrast, when it comes to pavement roughness and poor bridges, the projected improvements are much more dramatic.

Chapter 9 of the 23rd Edition explains ongoing revisions to the forecasts of annual vehicle miles of travel, which are now based on a detailed model developed by DOT’s Volpe Center rather than estimates from each state’s DOT (which FHWA considers less reliable). The national average baseline rates of vehicle miles traveled (VMT) growth used in the models are 1.01 percent/year for passenger vehicles, 1.72 percent for single-unit trucks, and 1.46 percent for combination trucks (tractor-trailer rigs), for an overall weighted average of 1.07 percent. By contrast, the overall average from projections supplied by state DOTs is 1.40 percent. Since the latest 12-month moving average national VMT data released by FHWA in December showed 1.01 percent, I’m inclined to agree with preferring the Volpe model, at least for shorter-term projections.

Another shortcoming of the highway investment scenarios is what is not included. Since all the analytical work very likely preceded the December 2018 Transportation Research Board (TRB) report on the future of the Interstate highways, that report’s finding that most of that aging system needs to be reconstructed over the next two decades (at a baseline cost of about $1 trillion) is not addressed. One hopes that by the time the next C&P report is released, state DOTs will have identified an array of needed (unfunded) Interstate reconstruction and widening projects that can be assessed by the HERS benefit/cost model.

Regarding transit capital improvements, the C&P report dutifully repeats that the Federal Transit Administration’s (FTA’s) claim that its Transit Economic Requirements Model (TERM) also incorporates benefit/cost analysis. Alas, it is widely known that TERM is something of a black box, with little transparency in how it works. (Interested readers can peruse the report of a Transportation Research Board special committee here.) The two transit investment scenarios that go beyond achieving a state of good repair are admittedly flawed, since they assume 1.2 percent annual ridership increase (low-growth) or 1.8 percent annual ridership increase (high-growth). A footnote on the scenarios chart notes that those projections are based on trend data through 2014 and do not take into account recent declines in transit ridership.

More State Pursuing Toll-Financed Interstate Replacement

By my count, the number of states where either legislators or state DOTs (or both) have expressed serious interest in using toll financing to replace some or all of their aging Interstate highways and bridges is now 14. Connecticut, Indiana, and Wisconsin have completed tolling feasibility studies, and political wrangling over proposed trucks-only tolling is still ongoing in Connecticut, while the current governors of both Indiana and Wisconsin have balked at moving forward, despite considerable legislative support. In other states, Alabama and Louisiana have several major I-10 bridge replacement projects, Illinois is examining a major bridge on I-80 and an adjacent stretch of I-80 that needs widening. Alabama’s bridge project failed to win political support last year, but Louisiana has just authorized a smaller bridge replacement to be financed via tolls and developed as a long-term public-private partnership (P3) project. Oregon and Washington are jointly looking into toll financing to replace the major I-5 bridge across the Columbia River.

Legislation to authorize tolling studies is in prospect this year in Michigan, South Carolina, and Wyoming. In Michigan, Sen. John Bizon (R, Battle Creek) has introduced SB 507 which would assess the feasibility of using toll financing for Interstate modernization and develop a potential implementation plan; this is similar to what Indiana did several years ago. Bizon’s bill was approved by the State Senate’s transportation committee in November and is waiting for a Senate floor vote. South Carolina’s tolling champion, Sen. Hugh Leatherman (R, Florence), is focused on aging I-95, which has only two lanes each direction (compared with three lanes in Georgia). Leatherman is planning to introduce tolling legislation in this year’s session. The champion in Wyoming is Sen. Michael Von Flattern (R, Campbell County). His tolling study bill was approved by the legislature’s Joint Transportation Committee in December and is expected to be debated in the upcoming session.

In all three of the above states, one focus is the extent to which out-of-state travelers use the Interstates in question. In Wyoming, Von Flattern has written that it’s 85 percent of all I-80 travel, and 50 percent of that is long-distance trucks. Legislators in these states hope to structure the toll rates so that local users pay less than through traffic, which was also at issue in Alabama’s proposed toll-financed replacement of the I-10 bridge across the Mobile River. Frequent-user discounts are one proposed approach, while an outright exemption from tolls for locals could well run into legal challenges under the Commerce Clause of the Constitution.

There are also different approaches being considered for federal tolling approval, given that the 1956 law creating the Interstate highway program banned the use of tolls on federally supported Interstates. Toll-financed bridge replacement is already legal, as is tolling all lanes with variable pricing to reduce congestion. Several of the above states are looking into applying to the never-used three-state pilot program that permits a state to use toll financing to reconstruct one Interstate corridor. All three slots in that program are currently open.

Prospects for Electric Trucks Are Increasing

Are the stars aligning for an electric truck future? I’ve been somewhat skeptical, but there are some signs of change that are worth paying attention to.

First of all, environmental regulations are likely to make it more costly to continue operating petroleum-fueled vehicles indefinitely. Last June, the European Council adopted new CO2 emission regulations for new trucks. By 2025, trucks must emit 15 percent less CO2 than they do in 2020, and 30 percent less by 2030. These regulations apply throughout the European Union. Nothing that stringent exists in the United States thus far, but new fuel-efficiency standards for heavy trucks will be effective as of 2021, just a year from now.

On the positive side, truck makers in Europe, Asia, and the United States are all developing electric trucks of various kinds. Battery electric propulsion seems likely to become the mode of choice for local-service trucks that operate from a central base and traverse 100 miles or so per day. That is within the range limits of battery systems of reasonable size and weight for delivery trucks, dump trucks, garbage trucks, etc.

The bigger challenge is heavy-duty (Class 8) trucks for over-the-highway use. Here the problems with batteries are range, recharging time, and weight—in addition to cost. An interim solution is the diesel-electric hybrid, which companies such as Hyliion are developing. The concept is about the same as long-standing practice for diesel locomotives. They are actually diesel-electrics, in which a smaller than usual diesel engine drives an onboard generator to power electric motors and storage batteries. Since the diesel is smaller and uses less fuel, emissions are reduced compared with comparable conventional diesel Class 8 tractors.

But for pure electric, the competing methods are hydrogen fuel cells producing electricity to drive electric motors or banks of batteries directly powering electric motors. The trade-offs here are becoming well-known. Enough batteries to power an 80,000 lb. (gross weight) big rig are very heavy, reducing the available payload. Nikola, the start-up developing Class 8 fuel cell tractors, says its hydrogen fuel cell system weighs 5,000 lbs. less than the batteries for Tesla’s battery-electric Semi. Range is also a factor, but I have not seen reliable data comparing the range of comparable battery-electric and fuel cell electric Class 8s.

Refueling/recharging might turn out to be a key deciding factor. Tesla claims 30 minutes for its Semi to recharge enough to go another 400 miles. Nikola claims its fuel cell refueling time will be comparable to that of diesel trucks. On the other hand, the refueling/recharging infrastructure for Class 8 electric trucks does not yet exist. Tesla has said it will build a network of Megachargers for its Semis, as it has done with 1100 Superchargers for its passenger vehicles. But no numbers or timetable have been announced. Nikola, on the other hand, has announced plans for 700 hydrogen fuel stations, for use by Nikola’s and others’ hydrogen fuel cell trucks.

And there are quite a few others. Toyota has been developing hydrogen fuel cell technology for years, and is now working with Kenworth Truck Co. to develop 10 heavy-duty hydrogen fuel cell trucks for the Port of Los Angeles. And Hyundai Motor Co. is already in production on a fuel cell heavy truck for the European market, in cooperation with Swiss-based H2 Energy. The estimated range is 250 miles. It is also developing hydrogen fueling infrastructure for Switzerland and later, for other European countries. And at the recent North American Commercial Vehicle Show, Hyundai unveiled its first Class 8 fuel cell concept truck.

My guess is that the hydrogen fuel cell Class 8 will prove to be better, overall, than the battery electric Class 8. But a key factor will be the cost of generating hydrogen to fuel and refuel these trucks. That strikes me as the biggest unknown.

Are Discretionary Grants Better Under the Trump DOT?
By Baruch Feigenbaum

A recent Government Accountability Office (GAO) report and story by Politico highlighted the political nature of discretionary transportation grants. “How DOT chose which projects is a question the agency couldn’t answer even when the GAO was examining the grant-making process last spring,” Politico reported. Developing a quantitative metric-driven process is challenging and U.S. DOT needs to make changes to increase the rigor of the grant-making process.

Most federal surface transportation programs are funded by formula. For example, in the FAST Act the National Highway Performance Program section awarded each state a lump sum of money based on mileage and population. But formula funding may not reflect actual needs. If Florida is growing more quickly than Rhode Island, it may need more money to widen its highways. Further, formula funding does not provide an incentive to states that are more efficient with taxpayer dollars. If Georgia has an innovative process that allows it to maintain its highways at half the cost of New York, good policy would provide Georgia a bonus for its financial stewardship.

And since the formulas were developed by leaders of the Appropriations and Transportation committees the formulas are written to benefit the districts and states of congressional leadership. The formulas rarely advance specific goals or reflect good transportation policy.

With this reality, the George W. Bush administration, the Obama administration, and the Trump administration created discretionary transportation programs. DOT has found that by dangling a small amount of federal funding, the department can encourage states to make targeted improvements. The Bush administration, for example, used the Urban Partnership Agreement competition and the Congestion Reduction Demonstration Program to promote road pricing that reduced congestion and enhanced bus service. The Obama administration used the Transportation Investment Generating Economic Recovery (TIGER) Grants to promote transit and multimodal projects, and the Trump Administration is using Infrastructure for Rebuilding America (INFRA) Grants to improve rural infrastructure.

However, to be effective, the discretionary grant process has to maximize the use of technical criteria and minimize political decision-making. Unfortunately, rather than focusing on mobility, the Obama administration created TIGER grants in part to help improve the economy during the recession and recovery and fund non-roadway projects. (even after the economy improved, DOT still focused on shovel-ready projects). The quantitative metrics were a secondary consideration. As a result, many of the evaluation criteria were vague. DOT provided limited information to the public, because the agency knew the metrics used were not defensible. DOT funded almost as many projects ranked “Recommended” as “Highly Recommended.” In the early rounds of TIGER, less than 25 percent of the highly recommended projects were actually funded.  And the majority of the unfunded projects were roadway improvements. In terms of where the money was spent, the districts of Democrats in Congress received 70 percent of the funding despite representing less than half of the districts at those times.

GAO issued multiple recommendations to add quantitative metrics to the project review process and explain how DOT selected projects. In response, the Obama administration revised its application guidelines. But the new guidelines didn’t provide for any more information than the original process.

When the Trump administration entered office in 2017, it made a number of changes to the discretionary grant program. DOT renamed the TIGER program INFRA and created a spreadsheet showing the results of the reviews, project scores and a rationale for the scores. GAO reviewed the spreadsheets and found the data reliable. This was a major improvement over the Obama administration, which had failed to release any quantitative data to GAO or the public at large.

Further, after GAO reviewed the process in mid-2017, DOT implemented several of GAO’s recommendations. GAO found that some modal review teams scored projects more generously than other teams. In response, DOT provided discrete numeric rating categories that allowed less subjective interpretation. GAO recommended that DOT provide more documentation to applicants. In response, DOT formally notified unsuccessful applicants and offered a debriefing that showed how the project was rated.

While the Trump administration improved the discretionary grant process, problems remain. Last month, Politico reported, “The $67.4 million grant application for Boone County — a rapidly growing suburban district of political importance to Senate Majority Leader Mitch McConnell, the husband of Transportation Secretary Elaine Chao — was initially flagged by professional staff as incomplete. But after giving the state and local officials behind the application an extra opportunity to submit missing information, Chao chose it as one of 26 grant winners out of an initial pool of 258 applicants.” Boone County wasn’t alone. Forty-two of the 97 applicants with flawed applications received an extra opportunity, but 55 applicants did not. In addition, even though DOT has more-rigorous quantitative information, many projects with a high uncertainty rating relative to cost-effectiveness got funded. These projects may have a benefit-cost rating of less than 1.0. If so, limited resources could be better spent on other projects.

One of the underlying problems is the poor original design of the program. The TIGER grants gave too much power to political officials, allowing less effective projects to be funded. While the Trump administration seems to have improved some metrics, political decision-making remained, both because it is challenging to make major programmatic changes and because political decisions benefit the administration in charge.

Designing a discretionary grant program correctly from the start is key to success. Criteria need to include benefit-cost analysis, national interest, congestion reduction, and economic benefit. Political actors’ influence should be reduced as much as possible.

DOT could take additional steps to improve the INFRA grants. In a number of cases DOT allowed project sponsors to supplement their applications; there should be guidelines for when supplemental information is allowed. Further, DOT’s guidelines for merit scoring are vague. The department needs to use numeric scoring systems for all evaluations.

A better option might be to eliminate discretionary grant programs altogether. Created to fund projects more on merit than formula funding, the results have been mixed at best. The Obama administration’s program supported things like recreational trail programs that were neither transportation-related nor in the national interest. The Trump administration seems to be doing a better job supporting needed infrastructure projects, but questions remain whether the “best” projects are being funded.

Amtrak Accounting Tricks Cover-Up Losses
by Randal O’Toole

A recent article in the Wall Street Journal claimed Amtrak “had its best year ever,” losing just $29.3 million on claimed revenues of $3.3 billion in 2019. The company is “moving closer to the goal” of breaking even in 2020, says the Journal.

Amtrak claims these figures by using an accounting system that, as the Rail Passengers Association charges, is “fatally flawed, misleading and wrong.” Amtrak covers up its losses with two major accounting tricks. First, Amtrak counts subsidies it receives from 17 states as “passenger revenues” even though the vast majority of taxpayers who pay those subsidies never ride Amtrak.

Second, Amtrak doesn’t count the second biggest operating cost on its expense sheet: depreciation. Depreciation is not just an accounting fiction; it is a real cost indicating how much a company needs to spend or set aside to keep its capital facilities in good working order. After correcting these two tricks, Amtrak lost nearly $1.1 billion in 2019, and none of its trains earned a profit.

Amtrak’s fantasy that depreciation shouldn’t be counted as a cost shows that it is engaged in the old railroad accounting trick of propping up the bottom line by deferring maintenance. For example, Amtrak’s fleet of passenger cars have an expected life span of 25 years, yet their average age is more than 33 years and less than a quarter are under 25 years.

Amtrak claims the Acela, its moderately high-speed train between Boston and Washington, is profitable, but if that were true, Amtrak would have used some of those profits maintaining its infrastructure. Instead, Amtrak admits that the Boston-to-Washington corridor has a $38 billion backlog of maintenance needs. If the route were truly profitable, Amtrak would never have allowed such a backlog to build up.

Amtrak’s biggest trick of all is making people think that intercity passenger trains are vital to our economy. In fact, the average American rode Amtrak just 20 miles in 2017, compared with nearly 15,000 miles by automobile, 2,100 miles by air, and more than 1,100 miles by bus. If Amtrak disappeared tomorrow, hardly anyone would notice, not even in the Northeast Corridor, where Amtrak reluctantly admits it carries just 6 percent of intercity travelers.

There’s a good reason why few people ride Amtrak: passenger trains are expensive. Amtrak fares in 2019 averaged more than 35 cents a passenger mile, compared with average airfares of 13 cents a mile and average driving costs of 24 cents a passenger mile. Federal and state subsidies to Amtrak added nearly 34 cents per passenger mile, bringing the total cost of passenger train travel to nearly 70 cents a passenger mile.

Of course, airlines and highways are also subsidized, and we should end those subsidies as well. But federal, state, and local subsidies to air and auto travel average around a penny per passenger mile. So why does Amtrak deserve subsidies of 34 cents per passenger mile?

Despite the imbalanced subsidies, Amtrak’s already miniscule share of travel is steadily eroding. In the last five years, air travel has grown 23 percent and auto driving 8 percent, but Amtrak’s passenger miles have declined 7 percent.

So what should Congress do about Amtrak? Rather than give it billions of dollars to restore or build infrastructure that it can’t afford to maintain, Congress should simply agree to pay Amtrak a given amount for every passenger mile it carries. This will give Amtrak an incentive to focus on passengers, not politics.

Over time, Congress should reduce that amount until Amtrak receives no more per passenger mile than airlines or highways — by which time it should also eliminate airline and highway subsidies. Any trains that can truly be profitable will survive, but if they do it will be because Amtrak has found ways to efficiently transport people, not because of accounting tricks.