With regards to aging infrastructure, we can pay now or pay later

The list of America’s infrastructure shortcomings is long, and deferred maintenance is near the top.  A 2019 report from the non-profit, non-partisan Volcker Alliance warned that repairs to the nation’s aging infrastructure (roads, highways, and other critical public assets) could cost more than $1 trillion, or about 5 percent of the country’s gross domestic product.

Reflecting the poor condition of U.S. infrastructure, the American Society of Civil Engineers gave it an overall grade of C- in 2021.

Congress is considering a $1.2 trillion, eight-year bipartisan physical infrastructure package that includes about $579 billion in new spending on roads, broadband, and other public works projects.

It is unclear how much, if any, of the new funding will be used to eliminate the backlog of deferred maintenance that plagues America’s public works infrastructure. Deferred maintenance is broadly defined as maintenance and repair needed to bring current infrastructure assets up to a minimum acceptable physical condition.

Democrats hope to follow up this legislation by moving a $3.5 trillion spending package that includes funds for education, climate change, Medicaid, and other social programs. They plan to expand the social safety net without Republican support using the budget reconciliation process, which avoids the 60-vote threshold typically needed in the Senate.

When it comes to the hard infrastructure package, it is important to remember that maintenance funding is often seen as the step- child of infrastructure assets, since it does not generate the excitement associated with new capital projects.

Given maintenance’s relative invisibility (except when a system failure occurs), it is often the first expense to be deferred, a short-term, stop-gap that usually leads to higher costs in the long run. Another challenge is that government often sets the price for using the asset too low to cover the cost of service delivery.

The maintenance of existing infrastructure is not politically compelling.  Short-term political incentives conflict with asset management activities that focus on the long-run sustainability of infrastructure assets. Guaranteed media coverage for ribbon cutting events and the ability to issue debt (to be paid by future taxpayers) encourage politicians to favor new public works projects, perpetuating the Build, Neglect, Rebuild model.

Ignoring or reducing ongoing maintenance funding enables politicians to move resources to more politically rewarding investments in new infrastructure.  The idea of states having balanced budgets is fiction if they fail to account for the cost of infrastructure maintenance that has been deferred.

Poor asset management means infrastructure maintenance is conducted on an ad-hoc basis and is reactive rather than routine and preventive. Delayed maintenance of infrastructure assets can add billions of dollars to the cost of assets and accelerate the time when they must be replaced.

Infrastructure investment has traditionally been divided into two categories: Capital, and Operations and Maintenance (O&M).  A more useful breakout would include four categories:  New Capacity, Rehabilitation, Maintenance and Operations.  These represent the life-cycle cost of an infrastructure asset.

Sure, a rigorous breakout of spending into each category is difficult. For example, maintenance and rehabilitation in particular are easily confused. Maintenance focuses on short-term improvements while rehabilitation has a long-term focus. Effective maintenance reduces rehabilitation costs.

Still further it is difficult to separate maintenance from operating activities.  But an effective asset management program must account for the full life-cycle costing of a public infrastructure asset.

In short, the story of maintaining infrastructure assets is pay me now or pay me many times more later.  Current funding programs need to be modified to make sure maintenance is not ignored.

If government is to be a responsible steward, new infrastructure projects should not be pursued until the sponsor has demonstrated the true life-cycle costs of existing assets can be paid for.

The economy and COVID-19, Part 2

Americans are struggling to adjust to a pandemic whose future progression is uncertain. They have not seen an economic downturn of quite such scale or scope, and people are unsure about how the United States can pull out of the crisis.

Righting the economic ship will require a delicate balance of managing debt and encouraging growth. A large infrastructure investment program that includes private contributions is a feasible way to achieve that goal.

Governments are struggling to prop up economies while confronting the serious and immediate public health challenges of COVID-19, resulting in unprecedented emergency spending and huge budget deficits throughout the world. In the United States, Congress has passed huge spending bills to help businesses and households that have swollen the national debt by about $2.4 trillion. The Congressional Budget Office numbers for its Doctor Doom scenario recently projected a budget deficit of more than $3.7 trillion for the current fiscal year.

Outstanding national debt now exceeds $25 trillion. Additional outlays in response to a second wave of COVID-19 outbreaks could further increase the debt and add to sovereign risk. Even in a low interest rate environment, higher debt service costs will crowd out other government spending. Trying to explain to the average politician that debt is a drag on future growth is a waste of time. Spending today and making a suitcase of promises is what helps them get reelected tomorrow. The future is someone else’s concern.

The Federal Reserve Bank has taken emergency measures to make credit easier to obtain with a bigger money supply and lower interest rates. Additionally, the Fed is lending more than $2 trillion to businesses and state and local governments. There is concern that the Fed’s actions risk future price inflation which would decrease the purchasing power of the dollar. The era of the dollar as the world’s primary reserve currency may also come to an end. In that case the U.S. would no longer benefit from the typical safe-haven demand from foreign investors as the value of the dollar collapses.

Policymakers note that these concerns must take a backseat to addressing the immediate crisis. The present commands their attention, but they may insufficiently appreciate that the future may be more of the present.

Going forward, the U.S. will have to manage the debt, deficits, and debt service payments, and at the same time find ways to support economic recovery to grow its way out of all this debt. While fiscal consolidation—raising taxes, cutting spending, or both—is the tried and true method for tackling debt challenges, it is likely to encounter some major tactical problems.

Raising taxes is politically difficult given the perception among many in Congress that voting for tax increases is tantamount to announcing your retirement from elective politics. Similarly, cutting high-dollar payment programs like Social Security, and Medicare is bound to be strongly opposed by legions of elderly voters.

Another approach is to focus and allocate resources to areas that create the most jobs. The time is long overdue for a bipartisan infrastructure investment package that rebuilds America’s crumbling roads and bridges, invests in future industries, and promotes increased productivity while immediately employing people whose income would give the American economy a shot in the arm. There is a broad consensus among mainstream economists that infrastructure investment has a large multiplier effect through the economy.

The problem is where the actual dollars can come from to fund such an ambitious program. One solution is to recruit private firms to help start, fund, and run as many of these infrastructure projects as possible. If properly structured, such public-private partnerships could tap into the billions of dollars in private capital hungering for low-risk investment opportunities able to offer decent rates of return.

COVID-19 has introduced a host of new economic challenges. A robust infrastructure program that includes private participation would be an effective way to begin to address them.

Congestion pricing is part of the solution to gridlock

The problem of traffic congestion is reminiscent of Mark Twain’s comment about the weather, “Everybody talks about it, but nobody does anything about it.” It is no easy matter to deal with the congestion problem in major urban centers.

New York is getting ready to address the issue with a congestion pricing plan. After many years, it may be an idea whose time has finally come, but there is even more governments can do to combat traffic bottlenecks.

Congestion pricing advocates point to an array of health, safety, and environmental benefits, including air pollution, pedestrian injuries, and unclogging city streets. They cite the success of congestion pricing plans in places like London, Stockholm and Singapore.

These cities use different methods to toll drivers in their respective congestion zones. London uses a video surveillance system to record car license plates. Singapore uses larger gantries with sensors to read license plates, or directly charges E-ZPass-like units in cars. Stockholm has installed gantries and cameras at all entry points to the tolled zone.

Some New Yorkers claim congestion pricing is an unfair tax that disproportionately hurts poor people who do not have access to public transit. While affluent motorists can pay for a quicker ride, the working class will struggle to pay the toll. Suburban commuters, of course, see the plan as benefiting the city at their expense.

After years of hesitation, New York is on the verge of becoming the first U.S. city to charge motorists for driving into a central business district. The program is expected to be implemented in 2021, once the necessary infrastructure is in place.

The congestion pricing plan will help pay for badly needed repairs to the city’s transit system and reduce gridlock. The goal is to generate $1 billion annually to secure the issuance of $15 billion in municipal bonds.

Drivers could pay $12 for cars and $25 for trucks to enter the heart of Manhattan. Prices may vary based on time of day and traffic volume, and potentially offer exemptions and credits to certain travelers, such as discounts for buses, taxis and motorcycles. For example, residents in the congestion zone who earn less than $60,000 annually will be eligible for credits.

Not surprisingly, politicians avoided making many of these difficult decisions. Instead, they will be made by a six-member Traffic Mobility Review Board.

The idea of road pricing was developed by Professor William S. Vickrey, the 1996 Noble Prize winner in economics who passed away four days after winning the prize. He argued that the consequences of not charging motorists for their rush-hour usage could be “disastrously expensive”.

Society pays a high price for congestion. When traffic flow nears maximum road capacity, each additional motorist imposes a delay on others (as density increases, speed drops and travel time lengthens). The delays increase geometrically. Vickrey argued that only peak-load pricing could solve the congestion problem in urban transportation.

Major U.S. cities including Los Angeles, San Francisco, Seattle and Boston are exploring various forms of congestion pricing to unclog city streets and raise money for transportation. And the time may be right to consider tying price to performance. Money-back travel time guarantees could be offered to help customers accept higher prices for transportation services.

For instance, a turnpike a charge of 10 cents per mile during a particular time of day would be linked to a minimum average speed. If the average falls below the minimum, customers are charged progressively less. Advances in technology make it possible to put customers first and introduce a new level of accountability for public transportation providers by offering these guarantees.

This would promote customer trust and acceptance of pricing changes and provide a turnpike operator with an incentive to insure that the road is providing superior service. Former House Speaker Tip O’Neil famously said, “All politics is local”. The same can be said for trust in government transportation agencies.

Originally Published: April 12, 2019


Shifts in automobile technology and ownership will have consequences for public transit.

TechBy Joseph M. Giglio and Charles Chieppo

The rise of shared electric self-driving cars and the transition from a world of ownership to one of consumers purchasing transportation as a service holds the promise of significant economic, environmental, and quality-of-life benefits. But it will also pose an existential threat to public transportation in general and commuter rail in particular.

The first recommendation in the December report from Governor Baker’s Commission on the Future of Transportation is “Prioritize investment in public transit as the foundation for a robust, reliable, clean, and efficient transportation system.” In broad terms, the commission is right. But maximizing potential benefits from the unprecedented disruption of surface transportation that lies ahead will also require fundamental change at the MBTA and a hard look at which transit modes are positioned to compete in a brave new world.

The commission’s charge was to look at the Commonwealth’s needs and challenges over the next 20 years. But if that horizon is extended to 40 years, station-to-station service to the suburbs is unlikely to be very attractive in a world where shared electric self-driving cars will offer much faster door-to-door service at a price that won’t be much higher.

Drivers are normally the largest expense for any transportation business. It currently costs about 55 cents a mile to operate a vehicle with a single occupant. But it’s estimated that the cost could fall to 15 cents a mile for autonomous vehicles carrying two or three passengers, which would significantly reduce public transit’s price advantage.

Connected vehicles will also dramatically reduce human error, resulting in big increases in throughput thanks to variables like higher travel speeds, less space between vehicles, and less frequent braking in response to accidents and other travel events.

In the future, agencies like the MBTA will probably subsidize trips that are currently taken on commuter rail rather than operate them. Even with the transportation transformation in its infancy, Florida’s Pinellas Suncoast Transit Authority, which serves the St. Petersburg/Clearwater area, eliminated some bus routes further from the urban core, after it experienced an 11 percent overall drop in ridership, and replaced them with subsidies for Uber and Lyft rides. Since then, over 25 US communities have established similar partnerships — and the disruption caused by ride-hailing services is minuscule compared with what is to come.

MBTA commuter rail ridership has declined. Nonetheless, it will remain with us for the next couple of decades. It still needs to be improved, but massive investments in new lines like South Coast Rail or, even worse, Springfield, would be a fool’s errand.

The biggest challenge for the future will be making transit work in congested downtown areas. One Boston traffic simulation model showed that while shared autonomous vehicles would reduce travel times and the number of vehicles on the road even as total miles traveled rose by 16 percent overall, downtown travel times would be 5.5 percent longer because the vehicles would substitute for transit use.

Rising to this challenge will require focusing more investment in the urban core. But success will require something more: changing the MBTA’s top priority from providing jobs and pensions to serving its riders.

During a three-year exemption from the Commonwealth’s costly anti-privatization law, the T dramatically improved performance in areas such as cash collection and reconciliation and warehousing and logistics, and saved millions. Despite this success, there was nary a peep about extending the exemption or making it permanent.

Few would argue that the MBTA is skilled at putting customers first. The question is whether — in the face of an existential threat to public transit and with far less margin for error — political leaders, bureaucrats, and unions can change the authority’s culture and begin to lay the groundwork that will allow the T to perform the way we’ll desperately need it to in the future.

Part of that culture change will be recognizing that commuter rail is poorly positioned to compete over the long-term. When the Patriots win the 2060 Super Bowl, stories about a suburban rail network overwhelmed with riders are likely to generate the same reaction as when we tell our kids about having to get up and walk to the television to change the channel.

Originally Published: February 15, 2019.

Joseph M. Giglio is a professor of strategic management at Northeastern University’s College of Business Administration. Charles Chieppo is the principal of Chieppo Strategies.


Private firms offer a route to financing infrastructure

President Trump and his advisors have identified recruiting private firms as active participants as one solution to the choking shortage of money to finance critical infrastructure needs. He’s right, but maximizing the private sector’s impact will require the administration to think outside the box.

If properly structured, public-private partnerships could tap into billions of dollars of private capital hungering for low-risk investment opportunities that offer decent returns. Piles of dough would be deposited on the front steps of city halls and state houses with the steely hand of the private sector at the tiller, minimizing the need for scarce taxpayer dollars to get infrastructure projects underway.

This means designing such partnerships as overtly commercial enterprises able to demonstrate reasonable prospects for earning reliable income streams large enough to pay consistent returns to their private investors. Not a simple challenge to be sure. But scarcely one that’s beyond the capabilities of Wall Street’s more innovative investment bankers.

Making this work on a sufficiently large scale would require significant rethinking of how government deals with private firms (which may be overdue anyway), since some of these partnerships may require user charges to generate the necessary income streams. If approached creatively, this could actually enhance the likelihood that the activities of these partnerships would meet environmental goals and other regulatory mandates that serve the public interest.

In many jurisdictions, the public may not sit still for turning over the responsibility to operate an infrastructure project to the private sector because they know a business’ natural instinct is to maximize profits. Government could set up some sort of regulatory commission to oversee the project like they do for utility companies. But a better approach might be to set up an independent commercial corporation fully funded by user fees to build, own, and operate the infrastructure asset so taxpayers can participate in any upside from the project.

The state or local government could solicit bids from private investors to buy shares of equity ownership in return for annual dividends paid by the corporation. That brings private equity capital to the corporate balance sheet, reducing the amount of debt capital it has to issue.

In theory, government’s incentive is to offer the most service for the lowest cost. Private investors, on the other hand, have the opposite incentive: to charge the highest user fees the market can bear while providing the least service it can get away with.

But a second class of private investors would likely purchase equity shares in the enterprise mainly because they have a vested interest in assuring better roadways or other transportation infrastructure in the area. These investors might be private utility companies, local banks, and other local firms whose future revenue growth depends heavily on rising levels of economic activity. This class of owners would push for user fees that make sense from a financial standpoint and service levels that meet public needs in a financially responsible manner.

This model may be a reliable way to ensure that, for example, the original cost of every facility is evaluated on a lifecycle basis so customers and operators alike don’t wind up being confronted by expensive ongoing maintenance nightmares. There would also be the certainty of long-term financial commitments so taxpayers never have to deal with orphaned facilities displaced by disruptive technologies such as autonomous ride sharing vehicles.

This model holds owners responsible for sound asset management in a clear and unambiguous way. Opportunities for abuse by limited-life warranties, guarantees written by “paper companies” that melt into the woodwork when push comes to shove, and the kind of multi-party finger pointing that only ends up enriching the legal profession would be minimized. These realities are unlikely to be lost on the relevant parties.

Alternative models based on elaborate legislative mandates might accomplish the same thing. That is, if you believe the necessary legislation could be passed without being riddled with compromises, trade-offs, escape clauses and weasel language.

originally published: April 15, 2017

No easy or cheap fix for America’s infrastructure

Earlier this month, the American Society of Civil Engineers’ “2017 Infrastructure Report Card,” which looks at 16 categories of infrastructure from schools to airports to dams, gave the nation an overall grade of D+. Creative approaches can be used to finance some of the needed improvements, but others will need to be paid for the old-fashioned way.

The report is yet another in a series of reports making the case that America has under invested in infrastructure for decades. Such chronicles of wretched conditions are a national sport that is nearly as popular as the Kardashians. But although much of the material is familiar, infrastructure is a gift that keeps on giving; there always seems to be something new to chew on.

The report card projects that $4.59 trillion will be required to bring America’s infrastructure to a grade of B. That is more than the nation’s annual budget of about $4 trillion.

Americans can quibble about the actual size of these projections, just as maritime historians quibble about the size of the iceberg that sank the Titanic. But it scarcely matters whether the estimates are off by 5 or 10 percent (give or take). What matters are the general proportions of these needs and the risks for the U.S. economy if they are not addressed. The longer we wait, the bigger the problem becomes.

Most who deal with this issue agree that the country’s infrastructure is in a bad way, but there is much partisan disagreement over how to pay for the fix.

Using public-private partnerships to invest in infrastructure was one of President Trump’s major campaign promises, but fiscal conservatives in Congress are reluctant to back massive spending that exacerbates the federal budget deficit and skyrocketing federal debt.

Democrats, on the other hand, are for more direct federal spending. By reducing taxes on overseas profits, they believe some of the estimated $2-$3 trillion companies have kept outside the U.S. could be repatriated. The result is that the political hills come alive with the sound of heated debates over proposals to address the infrastructure gap.

The permanent political aristocracy’s failure to deal with infrastructure reflects the simple fact that talking about balancing the budget is easy, but doing the things you have to do to balance it is hard. By the very nature of the process, politicians are focused on the very near term.

Upcoming elections, like hangings, have a way of focusing the mind on the here and now. That is why the federal gasoline tax of 18.4 cents per gallon and the diesel tax of 24.4 cents per gallon, the most important sources of federal transportation funding, have not risen since 1993. During that time, they have lost about 40 percent of their purchasing power due to inflation. Fuel tax revenues can no longer keep pace with needs.

This is not just a problem with politicians, it’s also a problem with voters, who say the deficit is a major concern, yet favor lower taxes, more benefits and fixing our infrastructure. Put simply, they don’t want to pay for the government they want.

It’s time to get real. Nothing works without a funding source and we will need hard cash to correct our under-investment in infrastructure. The feds, state and local governments, and the private sector have plenty of access to capital markets to finance infrastructure; the real issue is identifying revenue sources such as user fees or taxes to repay the debt.

A partial solution is to minimize the need for scarce government dollars by recruiting private firms as partners to help start, fund, and run infrastructure projects that have predictable revenue streams, like toll roads. But a larger universe of projects such as schools, dams, and local roads, for example, cannot be monetized.

Infrastructure’s biggest challenge is funding. In the real world, that comes down to a choice between taxes and user fees. There is no free lunch.

originally published: April 1, 2017

Put a money-back guarantee on infrastructure work

Americans are told that the most serious problem facing the nation’s transportation infrastructure is a lack of money. Perhaps people would be willing to pay more if they receive a money-back guarantee in return.

Today’s roadway funding depends primarily on motor-vehicle fuel taxes and state and local appropriations. But federal fuel tax revenues no longer keep pace with needs because of the self-serving assumption that it’s become politically impossible to “raise taxes.” Everyone wants better roads and bridges, but almost no one wants to pay for them.

All this makes finding adequate funding to rehabilitate the nation’s highway system, add new lanes and highway corridors a major challenge. Between 2005 and 2015, there were two five-year federal surface transportation reauthorization bills and 34 short-term funding extensions. To maintain the committed level of funding, the federal government was forced to raid the General Fund for an average of $10 billion per year to supplement the dwindling Highway Trust Fund

Even so, Congress struggled to find the revenues to support a long-term bill without increasing the fuel tax, which has remained at 18.4 cents per gallon for cars since 1991. Congressmen have moved in unison to avoid dealing with an increase in the federal fuel tax.

In real terms, fuel tax revenue is actually projected to decline as the nation’s motor vehicle fleet becomes more fuel efficient. It is safe to say that the fuel tax is like a marriage that dies long before divorce papers are filed.

At the same time, state and local government budgets are increasingly burdened with funding demands for education, fighting crime, better security against terrorist threats and a host of other deserving services. Roadway funding inevitability gets shortchanged which is relatively easy to do, since it takes a while for the impact to become apparent.

A new U.S. Department of Transportation “conditions and performance” report estimates that there is a $926 billion backlog of needed highway and transit infrastructure projects, and that many more billions more will be needed to keep up with demand over the next 20 years. The congressionally mandated biennial report identifies an $836 billion highway and bridge backlog.

The public can quibble about the size of these numbers, just as maritime historians do about the size of the iceberg that sank the Titanic. But their magnitude is so enormous that it scarcely matters whether the estimates are off by 5 or 10 percent. What matters is that the needs are enormous, and the longer you wait to address them, the worse they become.

Senate Democrats just unveiled a 10-year, $1 trillion infrastructure plan that includes $210 billion to repair “crumbling” roads and bridges, but they are vague about how to finance it other than through direct federal spending. During the campaign, President Trump also called for a $1 trillion infrastructure investment that proposed leveraging new revenues and using public-private partnerships to incentivize investment and spare taxpayers from bearing the burden.

At one end of the funding spectrum are people who think the public should pay for it via tolls. At the other end are those who argue that the benefits transportation infrastructure provides aren’t confined to users, so society as a whole should pay out of general tax revenues. Between these extremes lies a range of payment mechanisms.

But for a plan to be accepted by American motorists, it must be perceived to deliver superior travel service with appropriate regard for equity and environmental considerations. One thought is to pair any increase in taxes or user fees with a money-back performance guarantee so customers can rest assure that they will get guaranteed travel-time savings in return for paying for access to surface transportation such as highways. This gives the travelling public confidence that they are getting their money’s worth.

The rapid introduction of intelligent transportation technologies facilitates an efficient way to implement a money-back guarantee. The result would be a dramatically transformed approach to transportation infrastructure.

originally published: February 4, 2017

Automakers under pressure to reinvent the industry

Automakers face unprecedented technological changes and market trends that will ultimately force them along with the Cleveland Browns and the Democratic Party to reinvent their business models. Sources of disruption include electric vehicles; connectivity; autonomous vehicles, including trucks; changing patterns of car ownership and use; and on-demand ride services.

Car companies face an array of new competitors. Besides their traditional rivals, new market entrants including Google, Apple, Tesla, Uber, and Lyft, are fielding new technology vehicles.

Technology is but one of the threats that connected, automated and autonomous driving are introducing to the industry. Connected vehicles are able to “talk” with one-another through radio frequency devices or cellular technology.

General Motors plans to have connected vehicles on the street by the end of the year. The 2017 Cadillac CTS sports sedan will offer technology that allows sharing information about driving conditions like weather, speed, sudden braking and more. Other automakers are expected to follow suit.

Automated and autonomous driving is more complicated. Automated cars use on-board sensors and systems to aid the driver, while autonomous vehicles actually do the driving. It is unclear whether fully autonomous vehicles are 10 or 15 years away.

Autonomous vehicles may get the attention, but the notion of cars talking to one another is the real deal. Vehicle connectivity has garnered great interest from the U.S. Department of Transportation. The Holy Grail of connectivity is vehicles talking with one another without human intervention. The feds have bet that such communication will prevent millions of crashes that result in thousands of fatalities. Last December, USDOT proposed rules requiring that all new cars and small trucks contain technology allowing them to broadcast data to other vehicles within a 984-foot radius about their speed, location and direction.

The proposed rules will standardize how one car talks to another and warns drivers, and eventually autonomous vehicles, about potential dangers. The car- maker determines what to do with the data, be it automated braking or a visual dashboard warning. At an intersection, vehicles would decide if you have enough time to make that right on red and who gets to go next at a four-way stop.

According to the National Highway Transportation Safety Administration, the vehicle-to-vehicle (V2V) equipment and supporting communications functions would cost about $350 per vehicle in 2020. If the rule is adopted, the feds say all new cars would have the technology in four years.

The rule would not require existing vehicles to be retrofitted. As technology evolves, automobiles will likely become more connected to people’s home and mobile devices, and integrated into the internet of things.

Deployment of V2V technologies faces a number of hurdles, such as data security and privacy concerns. If V2V communications get hacked, the possibilities for traffic accidents increases.

Then there is the question of the underlying technology that would enable V2V communication. The feds mandate the use of dedicated short-range communications (DSRC). Many believe DSRC is obsolete and that newer technologies, such as 5G cellular wireless to power smartphone communication, will be released before DSRC market penetration is achieved.

Moreover, critics argue that cellular has already built infrastructure in the form of cell towers, obviating the need to for state and local governments to roll out dedicated short-range receivers on roadside infrastructure.

The other half of the communication network is vehicle-to-infrastructure (V2I). USDOT plans to issue guidance on V2I communications, which in theory should help transportation planners integrate the technologies to allow vehicles to “talk” to roadway infrastructure such as traffic lights, stop signs, and work zones to improve mobility, reduce congestion, and improve safety.

No matter how the technology battle sorts out, the car of the future will be connected. Our transportation system is on the cusp of a transformation, with technology bridging the gap between vehicles and intelligent roadside infrastructure, creating a network that works like the internet and can prevent collisions, keep traffic moving and reduce environmental impacts.

Originally posted: January 21, 2017

Infrastructure Yes, But Not Just Any Infrastructure

The American public is routinely bombarded with messages about the need to spend vast sums of money on infrastructure, drumming the subject into the public consciousness, promoting an often rehearsed-sounding catalog of new capital projects. The need is indeed great, but so is the importance of spending wisely. That means emphasizing the lifecycle management of infrastructure assets.

President-elect Trump says his plan to spend $1 trillion on infrastructure projects over 10 years would be paid for by leveraging public-private partnerships and encouraging private investment through tax incentives. Infrastructure spending is a priority Trump shares with congressional Democrats, who have said they believe they can work with him on the Augean task of renewing America’s infrastructure.

What is often overlooked is that infrastructure spending is not just about new construction, but the maintenance of existing assets. Timely lifecycle management and maintenance is needed to extend the service lives of infrastructure assets in a state of good repair and significantly reduce overall costs. The rationale is to avoid the high cost of reconstruction and replacement that results from deferred maintenance.

Political leaders frequently say that stewardship of infrastructure assets is essential for economic growth. But the evidence suggests that many of them don’t believe it. They are predisposed to defer maintenance because their concept of the future extends no further than the next election cycle, and initial timeframe for infrastructure assets to show the effects of irreversible deferred maintenance is much longer than their likely terms in office.

Consider, for example, that large sections of the Washington D.C. transit system are out of service because maintenance has been shortchanged over decades. Service quality declines substantially when maintenance is deferred. Here in Boston, MBTA maintenance has been underfunded for so long that it will take years to eliminate a $7.3 billion maintenance backlog even though the T plans to devote $870 million to the cause this year.

Also, public officials all too frequently understate the true costs of infrastructure projects by focusing on what they cost to build and ignoring operation and maintenance.

Another factor contributing to the failure to maintain infrastructure assets is that highway funding arrangements, for example, traditionally favored capital expenditures for new construction. As originally established by Congress, the Federal-Aid Highway Funding Program specified that Federal Trust Fund grants would cover up to 80 percent of the cost of new construction and subsequent reconstruction or replacement.

But state and local governments had to bear operating and maintenance costs. When highway links inevitably wore out before their time, state and local governments only had to worry about coming up with 20 percent of the total sum from their capital budgets since federal construction grants covered the rest, so maintenance was not a priority.

All but forgotten in this dubious calculus were costs incurred by motorists who had to struggle with increasingly decrepit highways, as well as plenty of congestion when highway lanes were closed for restoration; an inconvenience, any driver knows, that always last much longer than advertised.

Although later reauthorization bills made federal funds available for rehabilitation, renewal, and reconstruction at levels comparable to new construction, the damage had already been done. Today the advanced deterioration of the nation’s highway system is testament to the consequences of deferred maintenance.

The price tag for renewing America’s infrastructure is astronomical, and comes at a time when a federal funding regime dependent on insufficient fuel tax revenues is least able to afford escalating construction and maintenance costs.

Going forward with a big infrastructure package and setting aside, for the moment, the issue of finding the cash to do it, there needs to be an emphasis on the lifecycle management of infrastructure assets. The health care industry understands that it is far less expensive to keep a patient well than to treat them once they become sick; the same is true for our nation’s infrastructure.

Originally Published: December 10, 2016

Infrastructure spending must look forward

Many economists and politicians are once again peddling the conceit that billions of dollars in infrastructure spending (aka investment) will create new jobs, raise incomes, boost productivity and promote economic growth. After all, a report card from the American Society of Civil Engineers gave America’s infrastructure a D+ grade and claimed that an investment of $3.6 trillion is needed by 2020.

But before we accept this idea as gospel, we should remember that the future isn’t likely to look like the past.

Americans are reminded that a large part of President Roosevelt’s New Deal to “Save Capitalism in America” was massive federal investments in economic growth projects like rural electrification, the Tennessee Valley Authority, the Boulder and Grand Coulee Dams, and other monumental hydroelectric generating facilities. Not to mention hundreds of commercial airports like La-Guardia and JFK in New York City, thousands of modern post offices, schools and courthouses.

The investments culminated in the 41,000-mile Interstate Highway and Defense System, begun in the 1950s under President Eisenhower (the Republican New Dealer”) because of what he had learned from his military experiences leading the allied armies in Europe during World War II.

It is further claimed that Americans have been living off these federal investments ever since. Their contribution to decades of job growth and increasing national prosperity has been so enormous that Americans have come to take them for granted as cost-free gifts from a beneficent God, like the unimaginably bountiful resources of crude oil discovered under that legendary East Texas hill called Spindletop, which came exploding out of the Lucas Number 1 well in 1901 with a roar that shook the world.

The $828 billion stimulus plan President Obama signed in 2009 focused on “shovel-ready” projects like repaving potholed highways and making overdue bridge repairs that could put people to work right away. Still as Gary Johnson noted in 2011, “My neighbor’s two dogs have created more shovel-ready jobs than the Obama stimulus plan”.

Let’s not kid ourselves, spending for these projects scarcely represented “investment in the future.” Had we been managing infrastructure assets sensibly, they would have been little more than ongoing maintenance activities that should have been funded out of current revenues, like replacing burned-out light bulbs in a factory.

One problem with initiating a massive new capital investment program is figuring out where the dollars to fund it will be found. Projections for escalating federal deficits and skyrocketing debt are bound to raise questions about the federal government’s ability to come up with the necessary cash.

For starters, it’s time to recognize that the future will be quite different from the past, particularly when it comes to transportation infrastructure. Large projects may be rendered obsolete and the burden of stranded fixed costs left to the next generation.

Disruptive technologies such as electric or hybrid, semi-autonomous or self-driving vehicles, and changing consumer preferences, especially among urban millennials who are more interested in the on-demand riding experience than driving, is a cause for optimism about the future of America’s infrastructure condition.

These new patterns of vehicle ownership and use and the emergence of privately funded technologies are changing the way people and goods move, and transforming the transportation industry in both the public and private sectors. They offer the potential for dramatic improvements in traffic congestion (due to improved safety and reduced spacing between vehicles) and reducing motor vehicle accidents and fatalities.

They can also generate environmental gains from smoother traffic flow, promote productivity growth as reduced congestion improves access to labor markets, and improved utilization of transportation assets such as existing highway capacity with higher through put without additional capital investments.

These changes create an opportunity for a new generation of political leaders to present the public with a modern vision for transportation, the economy, and the environment, not one that harks back to an earlier time.

Originally Published: Nov 12, 2016