Ken Orski: A 21st Century Approach to Transportation Funding

As states acquire more familiarity with credit transactions and develop more capacity to pursue public-private partnerships, and as federal budgetary constraints continue, long term financing of new transportation facilities and of multi-year reconstruction programs could become the states’ primary method of expanding and modernizing aging infrastructure. At the same time, states' growing fiscal independence points to a new approach to funding the nation's transportation needs in the 21st century. 

In this prospective new model, routine highway maintenance and system preservation would continue to be funded on a pay-as-you-go basis with current state and local tax revenue as supplemented with federal-aid highway dollars from the Highway Trust Fund . However, capital-intensive multi-year reconstruction programs and new capacity expansion projects ---investments that are beyond the states' fiscal capacity to fund out of current revenue --- would be financed largely through public-private partnerships employing long-term credit and availability payments. 

Provision of credit would remain a shared responsibility of the public and private sectors. Private Activity Bonds, the TIFIA program and State Infrastructure Banks would continue to serve as the main public sources of credit assistance while additional public credit facilities could be created, if need be, to handle a growing backlog of reconstruction needs. Potential candidates include Sen. Mark Warner's National Infrastructure Financing Authority (IFA) and Rep.John Delaney's $50 billion American Infrastructure Fund (AIF). The latter proposal would capitalize the AIF by selling bonds to U.S. companies. In exchange for purchasing the bonds, companies would be able to repatriate a portion of their overseas earnings tax-free. (A somewhat similar approach forms part of Rep.Camp's tax reform proposal).

The Highway Trust Fund--- freed from the obligation to fund new infrastructure and large  reconstruction programs on a cash basis---would be placed on a more stable financial footing, while an ample supply of long-term credit ---both public and private---would reduce the need for contract authority and multi-year transportation authorizations. Meanwhile, states and localities would gain more independence to plan and fund infrastructure improvements on their own terms, free of excessive federal regulatory oversight.

It's a highly plausible answer in our judgment to the nation's search for a long-term solution to the infrastructure funding problem.  

Earlier versions of this commentary were presented at the Transportation Research Board workshop,  "States are leading the charge on transportation revenue initiatives," January 12 2014; at the Conservative Policy Summit of the Heritage Foundation on February 10, 2014; and in a Governing magazine interview dated February 27, 2014.

Kenneth Orski
Editor/Publisher
Innovation NewsBriefs (celebrating our 25th year of publication)

Free transit: A case study from Estonia

SOURCE: Free public transit in Tallinn is a hit with riders but yields unexpected results

In January 2013, Tallinn, the capital city of Estonia, did something that no other city its size had done before: It made all public transit in the city free for residents.

Researchers at the Royal Institute of Technology in Sweden found modest results.

• They calculated an increase in passenger demand of just 3 percent — and attributed most of that gain to other factors, such as service improvements and new priority lanes for buses. In their analysis, free pricing accounted for increased demand of only 1.2 percent.
• Traffic speeds in Tallinn had not changed — a sign that drivers were not shifting over to riding transit as intended.
• If any modal shift is happening, it’s that some people are walking less and riding transit more.

All this at a city with far lower income and far lower auto ownership than most of the EU and the US.  Meanwhile fare box revenues have been lost.

Bottom line: Free public bus fares are a losing proposition even in transit dependent first world cities.

By the way, this was a Social Democrat proposal that, once a suitable mayor was elected, went to effect.

January, Tallinn, the capital city of Estonia, did something that no other city its size had done before: It made all public transit in the city free for residents. - See more at: http://citiscope.org/story/2014/free-public-transit-tallinn-hit-riders-yields-unexpected-results#sthash.uhflpuH4.dpuf

Household Electricity and Solar Panels

This brief analysis is a simple case of a picture is worth one thousand words.

The GREEN line is our house's monthly electricity consumption which averages about 450 kilo-watt-hours or KWh.

The ORANGE line is our house's monthly solar panel electricity production which averages about 250 KWh.

To make them directly comparable both averages were normalized to the level of 100. Also these were further smoothed to account for HECO's accounting variability because some monthly bills include as few as 28 days or as many as 33 days. So power consumption was estimated on a per day basis and then converted to a monthly basis.

What is there to observe?  Simply that the solar (renewable electricity) production profile is not at all in tune with our household's monthly electricity consumption. Humid days call for more A/C use, Christmas celebrations call for more lights and cooking, summer months take us to vacations or time away from home, but the sun's trajectory and cloud density do not follow any of these habits.

The lesson on a grand scale is that a city, state or country cannot possibly depend on renewables such as wind and sun for more than a small fraction such as 10% for its power generation because of significantly negative productivity, health and safety implications.

One must be a great fool to believe that the large deviations shown in the graph (which can be extreme on an hour-by-hour basis) can be covered by ... batteries.

On the other hand, renewables from geothermal, nuclear and tidal wave harnessing are in a different class and can offer base-load reliability that covers the fluctuating needs of a large population concentration. But even them they need supplementation by true base load power generation from nuclear, coal, oil or natural gas power plants. As mentioned in an earlier article, waste-to-energy for Maui, natural gas for Oahu and geothermal power plant development on the Big Island are best near term choices for Hawaii.

What do Americans Think About Federal Tax Options to Support Trasportation?

A long term study at the Mineta Transportation Institute at San Jose State University contains a number of interesting findings:

• A majority of Americans would support higher taxes for transportation—under certain conditions. For example, a gas tax increase of 10¢ per gallon to improve road maintenance was supported by 67% of respondents, whereas support levels dropped to just 23% if the revenues were to be used more generally to maintain and improve the transportation system.

In other words, people are tired of potholed and rutted pavements.  Fix it and stop the "system" talk which in most cases are more union bureaucracies or projects custom-set for special interests and favors.

• With respect to public transit, the survey results show that most people want good public transit service in their state. In addition, two-thirds of respondents support spending gas tax revenues on transit. However, questions exploring different methods to raise new revenues found relatively low levels of support for raising gas tax or transit fare rates.

See the point below. Most people want "good transit" because they think it costs a couple bucks per trip whereas the reality is much different and nationally the cost per trip on transit is over $10. How many people in San Francisco know that large portion of BART is over 30 years old and its refurbishment requires over $3 Billion?

• Not all respondents were well informed about how transit is funded, with only about half knowing that fares do not cover the full cost of transit.

I think that "about half" is a huge underestimation.  Only a small fraction of Honolulu's population knows that the average trip revenue on TheBus is about $1.50 but the actual average cost per trip is over $6.00.

Preserving the American Dream: Lessons in Beating Boondoggles

A summary by Gini David.

In late October, I attended the Preserving the American Dream conference in Washington DC, sponsored by the American Dream Coalition (ADC, http://americandreamcoalition.org), a  coalition that promotes freedom, affordable home ownership, property rights, and mobility. To combat big government boondoggles, the ADC provides strategic and tactical counsel from planning experts like Randall O’Toole (Cato Institute), demographer Wendell Cox, ADC’s executive director Eileen Bruskewitz, transit expert Tom Rubin, ethics analyst and writer Stanley Kurtz, and others.

...

What’s more, Panos Prevedouros, a professor of transportation engineering at the University of Hawaii, told the ADC audience that rail projects are rife with corruption and fraud, quoting   Bent Flyvbjerg, the renowned Chair of Large Program Management at Oxford University:  “Rail projects are the projects most fraught with delusion and deception.” As Prevedouros explained, “Deception because proponents lie to constituents and overstate ridership and understate costs.  And delusion because proponents believe that their projects are better and different than other failures from the past.”