Thursday, May 31, 2007

“Privatization is seen by many as manna from heaven, but I think it s almost an abrogation of responsibility!”

Land Transportation:

What Truckers Want From National Transportation Policy

May 31, 2007

by Gail Dutton
World Trade magazine
Copyright 2007

Talk to truckers and you’ll hear tales of sitting stuck in traffic watching hours of service click eat away; talk to Senate staffers, and you’ll hear talk of nebulous safety concerns that they’re convinced can be addressed by more regulations.

Different problems depending on your perspective. But one issue they both agree needs to be addressed is congestion. “Congestion is the biggest transportation issue in the next decade or two,” notes former secretary of transportation James Burnley, now a partner at Venable LLP in Washington, D.C. “The trucking industry doesn’t control its production line—highways—and there are severe bottlenecks that are only getting worse.”

Traffic congestion costs the U.S. hundreds of billions of dollars—1.5 percent of the GDP, according to Jeffrey J. Shane, under Secretary of Transportation for Policy. By 2050, expectations are for a 250 percent increase in freight and passenger traffic, yet miles of highways are only expected to grow by 10 percent. The national transportation system is stressed and running out of funding.

“In two years, the flow of revenue from the Highway Trust Fund will be less than necessary to meet existing obligations,” Burnley says. The Congressional Budget Office and the Office of Management and Budget agree.

To make matters worse, the U.S. Department of Transportation (DOT) notes that highway construction costs have increased three times the rate of the consumer price index, increasing 31 percent between 2002 and 2005. According to the June 2006 USDOT presentation, “Congestion Initiative: Unleashing Private Sector Investment Resources,” each new mile of highway costs $30 million, so the $25 billion allocated to highway from federal state and local funds buys less than 900 miles of highway.

The vision

“Everybody is talking about funding, but they have no clear vision of what we need to do to keep commerce rolling,” emphasizes Doug Duncan, president and CEO, Fed Ex Freight. “We’ve got the cart before the horse.” First, he says, “We have to frame our business case. What do we want the business to look like and how do we get there?” Only then, he says, can we address how much achieving that vision will cost and how it can be financed.

The Mineta Commission, headed by the former Secretary of Transportation, had the goal of developing a vision for highway infrastructure but, according to industry sources like Duncan, smooth handling of traffic involves more than roads. More and more freight comes from offshore, straining port infrastructure and requiring a coordinated effort to move beyond the entry port. APL’s Bowe agrees. The transportation network—highways, ports, rail, air and marine terminals—must begin to work seamlessly. “Therefore,” he says, “we need to create an environment for investment, pricing mechanisms and a role for individual companies.”

That renews emphasis on intermodal transportation and, as Con-Way’s Mullett says, “that means between different types of trucks, too.” Freight, he explains, is fluid—“hydraulic,” in his lexicon—with many alternate routes and modes. Using those resources in the best ways possible, with a creative blend of policy, technology and investment, is inherent in developing an efficient, affordable transportation policy for the 21st century.

The technologies to help do this have been available for at least a decade. Electronic toll collection technology and intelligent transportation systems (ITS) that can alter traffic flow on roads and provide better information to help traffic reroute itself have been deployed successfully in heavily congested areas throughout the country. Automatic collision avoidance systems hold promise.

So what’s holding back freeing the transportation corridors? It has less to do with technology than the problem of integrating historically distinct services and facilities. “We’ve always approached ports, rail and highways as separate entities,” FexEx’s Duncan says, “but a cohesive transportation network is really what’s needed.” And, Burnley emphasizes, it’s vital to talk with the entities involved. Burnley cites the example of how Virginia introduced “trucks only” lanes on I-81. “They made a fundamental mistake. They didn’t talk to the trucking industry.” The result? “They got no extra capacity because the plan was fundamentally flawed.”

“We’re very worried, because highways are our assembly line,” notes Mullett. “We need a holistic approach. It’s unfortunate, but you can’t decouple economic growth from transportation growth.


Highway capacity is the overarching issue. “When most talk about capacity, they mean specific bottleneck areas, but by narrowing the focus, we miss a lot of issues,” Mullett says. How to avoid this? Broaden potential solutions to include such things as highway privatization, congestion pricing and other highway payment schemes and, to a lesser extent, increasing the use of technology to even out congestion. Then, of course, industry sources cite onerous trucking regulations.

“There are two kinds of opportunities,” explains Gabriel Roth, research fellow, The Independent Institute and author of the Street Smart: Competition, Entrepreneurship and the Future of Roads. The first is to make existing roads run more efficiently. The second is to create new road capacity.

“The current Secretary of Transportation Mary Peters is very keen on using private sector incentives for roads and has launched various incentives,” says Roth. That includes toll express lanes. The U.S. DOT action plan calls for encouraging state legislation to allow private sector infrastructure agreements, education stakeholders and forming public-private partnerships. “There is a feeling in transportation departments,” Roth emphasizes, “that road capacity has to be priced.”

But not everybody agrees with this approach. “One hears the new ruling party (the Democrats) is not keen on toll roads and even less on privatization,” intones Roth, a former World Bank transportation economist. Personally, he believes privatization may well resolve many of the congestion issues.

The premise is that those owning the roads will take the initiative to help them operate smoothly, with minimal congestion in an effort to continue attracting drivers. The 7.8 mile Chicago Skyway, for example, became the first existing toll road in the U.S. to be privatized. In January 2005, Skyway Concession Company (formed by Australian and Spanish companies) leased the operating rights from the City of Chicago for 99 years, paying the city nearly $2 billion. One of the first things the new owners did was introduce three reversible, electronic payment lanes to relieve congestion on this notoriously clogged artery into Chicago and increase tolls by fifty cents to $2.50. In ten years, those tolls will double to $5.

Right now, only a handful of states have comprehensive laws governing highway privatization. As more add those laws, investment is likely to increase. “There are many funds around the world that are interested in investing in transportation projects,” APL’s Bowe says. “Private investors see it as an opportunity. So, an ideal partnership can exist, empowered by government policy. It’s a good thing overall.”

Mullett, at Conway, adamantly disagrees. “Privatization is seen by many as manna from heaven, but I think it s almost an abrogation of responsibility!” He’s not alone. Bill Graves, president of the American Trucking Associations and former governor of Kansas, this spring announced the formation of a coalition—Americans for a Strong National Highway Network—to fight privatization.

One of his concerns is non-compete clauses that prohibit or restrict improvements to competing roads. Such a clause thwarted the Orange County (California) Transportation Authority (OTCA) when it sought to improve the Riverside Freeway (state highway 91), ending in the OCTA buying back the lease on the express lanes on that freeway for nearly 1.6 times the cost of building the eight year old freeway.

Other concerns include “double taxation” as motorists are charged highway tolls and traditional taxes, the lack of public accountability for the social impacts of toll rates on workers and the costs to businesses that depend on those highways, and the demise of federal standards for privatized highways. Lawmakers given to privatizing our infrastructure also must account for the fact that many of the highways being considered for privatization are “critical links in our freight and military logistics chains,” as ATA briefings say, and the companies most active in operating highways are foreign.

“Is this the correct thing to do for the good of our nation?” Graves asked. “The U.S. can’t maintain a highway network if key parts are leased or sold to the highest bidder.” The long-term effects must addressed, he says, and all available options must be explored.

Congestion pricing

As on the Riverside Freeway, privatization sometimes involves only express lanes and allows congestion pricing. Adding tolls to express lanes of traffic or adjusting the amount of the tolls depending upon congestion has been successful, Roth says, in California, Denver and Minneapolis.

In the U.S. in 2005, approximately 80 percent of the highway projects budgeted at more than $500 million involved toll roads. About 60 percent of those involved privatization.

The Utah Department of Transportation, for example, is discussing congestion pricing for sections of Interstate 15 and for a new corridor between Salt Lake City and Ogden. Tolls could vary from 25 cents to $6 per mile.

Singapore adopted a form of congestion pricing in 1975, based on a proposal the World Bank originally developed for Caracas, Venezuela that involved purchasing daily or monthly stickers to access certain roads. “Caracas didn’t proceed with the recommendations, and congestion is as bad as ever,” Roth says. “Singapore adopted that scheme and is getting richer.” Similar plans are considered successes in London, Stockholm and Bergen, Norway, too.

Congestion pricing would affect freight transportation by giving carriers the choice of running more quickly, but for a price, or sitting in traffic. Additionally, says Duncan, toll roads aren’t seen as a new tax, so have some political appeal. Likewise, “Privatization, in a perfect world, is not a good idea,” but “when they see the size of the bill (for upgrading our transportation system), it may look pretty good.”

The other benefit, Roth says, is that companies operating roads do so with professional transportation management, taking the decisions for their roads out of the hands of politicians. Political give-and-take worked until about 20 years ago, Burnley says, until Congress began planning on a project-by-project basis, adding earmarks to bills (thus designating how revenue from those bills should be spent). Earmarks have grown from 154 in 1987 to more than 7,000 in 2005. “It’s out of control,” says Burnley, “and we need rational planning.”

Trucking issues

Privatization and congestion pricing may be the most-discussed issues, but they are far from the only ones.

An issue for truckers that’s been put on the back burners by the ATA and rail concerns involves increasing truck weight and size. Duncan says the strategy is working well in Canada, letting the Canadians get more use from their existing roads by increasing the size and weight of the vehicles on those roads in certain areas.

In the U.S., size and weight restrictions vary among the states. Florida allows twin 53-foot trucks on the Florida Turnpike and truckers in Montana and Wyoming can run with a 53-foot truck and 28 foot trailer. Some other states also allow longer or heavier loads.

“We’d really like to see states open roads to larger vehicles,” adds Sam Faucette, manager of safety and compliance at Old Dominion. “For every triple, you’ve eliminated one set of doubles,” which makes sense in areas of open roads. And, if those trucks could run to a marshalling yard outside major cities and transfer goods to trains to finish the runs to or from major ports, a lot of congestion could be relieved, Con-Way’s Mullett opines. None-the-less, Senate sources consider truck size and weight restrictions “a dead issue in the Democratic Congress.”

They’re more focused on further reducing hours of service and championing wider use of electronic on-board recorders, much to the dismay of the National Association of Small Trucking Companies (NASTC). The new hours allow a 14 hour service window and mandate a stop for 10 hours “even if you’re 30 minutes from home,” according to David Owen, president, NASTC. “The new hours of service don’t allow the driver flexibility. If drivers don’t have the flexibility of driving when they need to drive and sleeping when they need to sleep, they can’t do their jobs,” he says.

“Freight transportation should take a higher political agenda at the federal and state levels,” insists APL’s Bowe. Senate staffers say any streamlining of regulations is unlikely. In fact, they’re likely to add more regulations and tinker with others. It’s a mistake, though, to try to oversimplify the industry to make one regulation fit all, Owen says. “Line haul companies have different issues than less-than-truckload or courier services.”

Uniform regulations, that ignore operational differences between line-haul companies, LTLs and courier services contribute to the driver shortage.

Federal policy can affect the fringes of the driver shortage, Burnley says, particularly in terms of making it harder or easier to hire drivers. For example, should we change licensing requirement to allow military-trained drivers to enter the trucking workforce directly? Should we allow younger people?

Standardize laws

Trucking companies haven’t mentioned this as a concern, but Jay Barry Harris, national director of DRI (Defense Research Institute) in Chicago, suggests that a new transportation policy, ideally, would remove the variances in law among the states. For example, Pennsylvania, where he practice as a partner at Fineman Krekstein & Harris, “is a no fault state, with an exception” that allows a party in an accident to sue if the trucking company is from out of state. Likewise, Pennsylvania allows a party that was even one percent negligent in an accident to bear the full brunt of the damages, under the deep pockets rationale. Laws like these, Harris says, “are killing the golden goose,” because “legislators fail to realize how important the trucking industry is to the welfare of state economies.”

The transportation policy must address some vexing issues, and the solutions are unlikely to please. What all agree on, however, is that the transportation network—highways, ports, rail, air and marine terminals—must begin to work seamlessly.

Overall, as Jill Ingrassia, director of government relations, AAA says, “We’ve lost sight of the fact that the federal transportation system is broken and needs reform. We need to formulate a new vision of how to address our needs.” wt

Sidebar: Who Owns America's Roads?

Once they’re privatized, it’s generally not the U.S. The Australian firm Macquarie Infrastructure Group has teamed with the Spanish firm Cintra Concesiones de Infraestructuras de Transporte SA to operate the Indiana Toll Road and the Chicago Skyway. Macquarie also owns the Foley Beach Expressway in Alabama; much of the California’s Route 125, which serves international truckers; the U.S. side of the extremely busy Detroit-Windsor Tunnel border crossing; and most of the Dulles Greenway between Leesburg, Virginia and Washington’s Dulles International Airport. Another Australian firm, Transurban, operates the Pocahontas Parkway in Virginia, connecting the Richmond airport with highways south of the city.

In Texas, San Antonio-based Zachry Construction Co. teamed with Cintra to build and run a toll road in the Austin area, as well as a 600-mile toll road linking Oklahoma to Mexico. In Virginia, Dallas-based Fluor teamed with Transurban to build new toll lanes of the Capital Beltway. Privatization and leasing agreements also are being considered for the New Jersey Turnpike, Garden State Parkway, Atlantic City Expressway, Pennsylvania Turnpike and several highways in other states.

Gail Dutton

Gail Dutton is a veteran journalist, covering national and international business and technology issues from her office in Montesano, Washington.

© 2007 World Trade Magazine (BNP Media):

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE