Today's guest post is courtesy of Strong Towns Network contributor Virgil Payne.  The article was selected by the Strong Towns Content Review Team (aka Jim K., Andrew P., and Nate H.) to be published on the blog via a contest we announced last year.  If you are interested in having your content shared with thousands of readers, go ahead and post it on the Network and we'll contact you if you "make the cut."  

In the meantime, keep doing what you can to build Strong Towns.

-Justin Burslie 

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The inherent leveraging in using fuel excise taxes collected on the vast mileage of local city and county roads, some existing for more than a century and paid for by sales and property tax, to build select higher grade highways is like knocking a ball in the air. You can strike it hard and rest a second, but you better be ready to run over and do it again to keep it up. We are at that point where the grip on the bat should be tightening, but instead there is an ongoing argument about what exactly should be done, perhaps for the best, as limited finances force us to rethink the original rationale. Now that is not to say that the arrangement is entirely wrong, just that perhaps some reform could be had and limits applied.

FHWA 2006 Conditions and Performance Report

As an example of limits, consider the logical financial outcome of the Interstate Highway in an urban area that has been induced toward low density in the first cycle of development? It used to be that urban areas of the Interstate system generated a reasonable leverage ratio (low single digits) of the cost to build and maintain the road to direct fuel taxes collected for each extra mile. But that was in the first cycle, when the roads were built new and land was obtained in ways we would not do today in the name of justice. It is also due to system operating near to its ultimate capacity, far beyond the original design intent for following distance and merging safety. Now the system is wearing out and needs to be rebuilt at incredible cost.

To think about this question, that is the logical financial outcome for desirable metro areas that are attracting residents, perhaps it would be best to look at what the planners of the 1930's to 1960's thought of the town shaping effect of what would be know as the interstate system before it was built.

One particularly interesting planning paper is the 1944 Interregional Highways report along with library of others at the somewhat ongoing National Surface Transportation and Revenue Study Commission site, though importantly they left out the 1961 Highway Cost Allocation Report from the collection.

The idea that many think tanks try to promote today that highways were simply a free market response to where town form was progressing anyway ignores the financial leveraging. It was clearly not the understanding of the authors at that time either. They instead wanted to change the form of the town to conform to highways and thought of ways to do so, believing this to be the best outcome.

But even within Eisenhower's Administration, General Bragdon was taking a contrary position based on his reading of the negative attributes of changes to town form, supported by a team of experts who understood the project just might make everything worse. Ultimately, Ike broke the stalemate, but expressed his disappointment that the urban portion of the interstate was developed against his wishes. However, since the congestion that the interstate was supposed to alleviate was really just the effect of underpricing the prior generation of highways, the depression era WPA program, nobody seemed ready to walk back the earlier financial giveaway much less constrain it. While many of these WPA era roads still serve modern traffic in low density rural areas they have long ago been buried in urban areas due to extensive demand at a price below the cost to produce.

To correct the congestion on the depression era highways, the interstate promoters instead believed that towns would need to be rebuilt in an automobile oriented manner, at a lower density, and intended that this would be done to spread out demand spatially, instead of having a centralized business core. The town form certainly has been altered, in many cases by just demolishing buildings to create parking downtown, but in doing so we have now run out of land to increase capacity on the network in a reasonable manner. We cannot afford to continue underpricing each extra mile traveled, but there is little appetite still to come up with a solution. Part of the answer might just be to actually discuss more openly the financial cost of new and expanded roads to the public and establish some limit.

The I-4 Moving-4-Ward project serving Orlando, Florida is a good example of the current land constraints. Here you can see the spread out city form and the proposed size of the highway now needed to accommodate the form. Notice the rail corridor to the right if you can pick it out.

The current solution to the now limited and constrained right of way stretching to the horizon brought on by this theory of city planning is a Managed Lane in the middle of the existing roadway. But this will probably be our last reasonable expansion opportunity, what will happen next? The managed lanes in the I-4 project will be incorporated during its major rebuilding. All in all this represents reform of the transportation financing process, but we should consider the assumptions for the system performance behind their use. I am also sure that every effort is being put in to engineering a structure and roadway that will last in the competitive bid process. But what is the logical outcome after this project?

The managed lanes are new capacity and will have a market variable toll charged on them to compensate some of the costs to FDOT of the needed rebuilding project while allowing for some higher occupancy vehicles. The toll will vary, keeping at least the managed lanes free-flowing, while it is presumed the rest of the lanes will just begin to fail. But there is a problem with the Managed Lanes in this concept. The toll rate that will be set by FDOT in the future has been taken to be quite high in the I-4 Planning-Level Traffic and Revenue Study which will impact the amount of money the state will be forced to find from other sources.

It would seem the very high peak toll rates of $0.67/mile ($2010) in 2020 ($14.20 for a 21.1 mile trip) to $0.88/mile ($2010) in 2045 are derived from a model of total time savings in the Managed Toll lanes relative to the increasingly congested and slower general lanes.

Few will in actuality be willing to pay a toll of $0.88 per mile. The problem with an analysis that came up with this as a permissible mileage based toll where there are other routes available, as opposed to a bridge, is that there appears to be no substitute consumer good financial safety valve. It was based on time savings when time is valued at $18.08/hour, probably a high percentage of the local wage. But what if the real determination of value is something like a driver's dis-utility of the total travel and work experience, with total time as only one of the inputs?

The $18.08/hour value used in the I-4 analysis is just an assumption that allows the model to fit somewhat to the current conditions but it is not a real input. Here is what I mean, since long distance commuter traffic would govern use of these Managed Toll lanes, due to the limited ramps to local streets, consumers might evaluate alternatives that are outside the model. To a degree this is reflected in the realization by some modelers that the real value of time for a majority of the population is a lot lower as shown below.

The more likely long-term marketplace solution would be for one to just spend the $150,000 in extra mortgage buying power that the toll represents on housing costs nearer to the daily destination, while pocketing the savings in automobile operating costs time.

But this would leave a lot of ordinary working people behind as they don't have the extra finances to afford the toll to begin with. You can't really save any time by driving faster after all if you have to take a second job to afford to spend the money to save the time can you? To really know the answer, a financial model of regional housing costs would need to be created. I don’t have that, maybe some of you do, but my seat of the pants estimate says the toll revenue is two times too high.

So really the town form will likely be in a process increasing in density, but instead of having a balanced density of single family residences and two to five story apartments and commercial buildings, with good pedestrian oriented infrastructure, we will be left with buildings adapted to fronting the roadway cast-offs of trying to accommodate more cars on surface streets in the later stages of this development process. Unfortunately, the negative impacts on the local roadways will distort the real estate market. 

If the toll revenue is off by such a large factor in the future years then that means that FDOT, who will be on the hook for actually collecting tolls, will once again be gathering financial resources from a large base of taxes instead of finding revenue from the individuals directly using the facility. My best guess is users in the non-tolled lanes will generate a capital deficit of about $0.08 a automobile mile in constant $2010 for the life of the facility. Once you add in accident costs we are talking about some real money.

In other words we are hitting the ball in the air again until it comes down in the next cycle. But it came down a lot quicker and a lot faster than we thought this time and will probably do so the next time. However, it is commendable that FDOT is providing for some mobility options in future years through the managed lanes and commuter rail alongside I-4.

In the meantime the seeming inevitable outcome of a town where all the surface streets are given over to excessive automobile orientation, the interstate non-tolled lanes are no longer free flowing, and to move at any speed a very high toll has to be paid could spur changes in the approach. Yes, commuter rail is supposed to be there, but SunRail seems to be designed to meet the needs of the highway planning approval process, offsetting highway externalalities, instead of allowing for a town to grow around it. SunRail will stop short of ultimate destinations, at the end of just this highway corridor, with no lines in other directions such as the airport for now, and the only links outside of the corridor are on a national system that is constantly under attack even though it does as well financially per person mile as the rural interstate at the route level. This is important as for rail to really function as it should it has to have a network, but instead we create disjointed corridors.  

So at the local level, part of the solution for the town itself is changing how we design the first and second generation local roads, so that we won't be left with, well leftovers of excessive automobile orientation and excessively expensive urban buildings after several cycles of redevelopment. There is a balancing density that makes sense as the least cost financial outcome. I will speak to that in a future post on using financial ratios in the design process.

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Virgil Payne, PE is an engineer working for his state DOT where he helps coordinate contracts and plans, mostly for highway projects, from planning to construction. His previous experience working on infill buildings and sites provides a perspective on what the user needs from transportation projects. While the position taken within this post is entirely his own position, it is part of a series of suggestions to other professionals that we actually begin talking about how much highway projects financially cost in order to provide some reform to the entire transportation system design process and establish reasonable funding to maintain the system.