A Better New New Deal

How can we get the most bang for our transportation buck? Here are six ideas for the new president and cash-strapped governors.

On December 6, 2008, President-elect Barack Obama announced to a nation battered by job losses and worsening economic conditions that his administration would make "the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s." The massive public works stimulus package, estimated at $850 billion as of press time, prompted further comparisons to Franklin Delano Roosevelt and his Works Progress Administration. Time magazine had already put Obama on the cover, superimposed over a classic image of FDR, under the headline "The New New Deal?"; now liberal writers and activists were rubbing their hands together at the prospect of attacking the recession through federal make-work. Obama did nothing to discourage such hopes. By repairing bridges, expanding transit, and paving roads, he claimed, "we will create millions of jobs."

There is an important grain of truth in the new president's rhetoric. American transportation systems are antiquated, better suited to the low-mobility days of the 19th century than the wealth-driven, movement-driven economy of today. Inadequate infrastructure contributes significantly to the burden that traffic congestion imposes on America's urban economies—about $168 billion each year, according to Jack Wells, chief economist for the U.S. Department of Transportation. Just maintaining our roads, highways, and transit systems in "good repair" would mean increasing current spending by about $36 billion a year, according to reports by the Department of Transportation and the Transportation Research Board of the National Academy of Sciences.

So Obama and his policy team will have to do more than think of transportation as a 1930s-style pump-priming program. Sending armies of workers out onto the highways and byways to fill potholes won't come close to meeting the country's urgent transport needs, nor would it be a cost-effective use of tax dollars. Rates of return on highway investments have been falling steadily since the 1970s. Seventy-three million Americans know this firsthand because they drive on severely congested roads almost every day. Congestion is growing so fast that 58 cities will face chronic stop-and-go congestion during longer peak hours by 2030, according to a 2006 study by the Reason Foundation, the organization that publishes this magazine.

Instead of the old transportation hub-and-spoke system, in which towns and suburbs are tethered to big cities through straight lines made of concrete or steel, 21st-century systems should operate much more like the Internet, connecting individual nodes in a complex and dynamic web of origins and destinations, customized to the travel needs of individual residents and businesses. Just as the Internet benefits from the networked actions of millions of self-interested parties operating from the ground up, an agile, Web-like transportation network can be created only by unleashing the ideas and money of the private sector and rejecting the Rooseveltian notion that money is spent most efficiently by central planners on job-stuffing projects.

New technologies have made it possible to put the users of roads, highways, and rails in charge of decisions about what facilities get built. That, in turn, can allow future investments to be tied to steady, dependable revenue streams. Such a shift requires the still-controversial step of charging people for the roads and trains they use. With advances in electronic ticketing and boothless toll collection points (which drivers roll past without slowing down) and commuters' increasing willingness to pay their own way out of congestion, reconnecting transportation costs to use is the best method for ensuring that the government doesn't slop money onto roads and tracks that don't serve a meaningful purpose. It's also the only practical way the U.S. can tap into the available private equity —estimated by the investment analysis firm Probitas Partners to total about $90 billion—that could leverage another $200 billion to $300 billion for private infrastructure projects in 2009 alone.

With Obama promising improved infrastructure even while states and municipalities beg Washington to fill rampant budget deficits, reforming the way transport dollars are spent is a necessity, not a luxury. Obama insists that he "won't just throw money at the problem" and that he'll "measure progress by the reforms we make and the results we achieve." It's doubtful that he'll get very far with his current approach, which takes it for granted that it's Washington's responsibility to fund parking policies in Pasadena. But if we can't avoid national meddling into local problems, the feds should at least consider ways to introduce choice, competition, and sound budgeting into our subsidized and centralized transportation system. As the new Congress takes up Obama's stimulus package and weighs the six year, $500 billion-plus transportation bill reauthorization in 2009, the time has never been riper for reform.

If House Transportation and Infrastructure Committee Chairman James Oberstar (D-Minn.) has his way, we will spend about $85 billion for the infrastructure piece of the "stimulus" package. Most of that money will go to state and local governments to spend, and in theory it could do a lot to upgrade our transportation system. But Congress includes all manner of programs in its infrastructure funding, from a broadband Internet backbone to bicycle trails to bridges. Add in the amount needed just to maintain existing infrastructure, and only a fraction of that $85 billion will likely go to build new, useful projects.

A better way forward would be for Congress to a) focus the "stimulus" on crucial projects that provide measurable benefits at least commensurate with their costs, b) favor projects that draw on private investment to get more bang for the buck, and c) require that the funds be spent as advertised, with the benefits documented. Under those conditions, the spending could accomplish something useful. Of course, by the time the feds collect the money from taxpayers, pass it through the big sausage factory of Congress, then pass it again through the Vienna sausage factories of state and local governments, there won't be much left for jobs and economic development. A one-time $85 billion tax relief package probably would stimulate a lot more job growth and consumption.

Wherever the money comes from, transportation planners should pay close attention to the innovations already taking place on the ground. As the stories below indicate, impressive projects are already coming online in places ranging from London to Anchorage to Beijing, providing lessons that the Obama administration would do well to heed.

THE NO-RUSH HOUR IN SOUTHERN CALIFORNIA

Afternoon rush hour finds thousands of cars and trucks plodding along at 15 miles per hour on the "free" lanes of Route 91 in Orange County, California. Just a few feet away, on a 10-mile stretch of median road called the 91 Express Lanes, toll-paying motorists fly by at 65 miles per hour. Pricing the roads on an hourly basis allows the 91 Express Lanes to maintain speedy traffic and carry 33 percent more cars per hour than regular lanes.

Twenty years ago, keeping rush-hour speeds at free-flow levels (i.e., 55 miles per hour or faster) in Southern California would have been unimaginable. Now advances in electronic tolling allow governments and private companies to change prices in real time based on traffic levels. Prices increase during congested times to encourage travelers to choose other routes and fall during uncongested times to encourage more use.

In 1989, after the state passed pioneering legislation crafted on ideas first proposed a year earlier by the Reason Foundation's Robert Poole, the California Private Transportation Company built and began operating the 91 Express Lanes. Unfortunately, the company's principal shareholder, Kiewit, decided to leave the toll road business, and the profitable roads were eventually sold in 2003 to the Orange County Transportation Authority. They still turn a profit for the county and even fund public transit along the corridor.

Every three months, the transportation authority sets new prices for each hour of the day, based on the average hourly traffic volume. The price swings can be dramatic. During rush hour, lanes can cost as much as $1 per mile. At off-peak times, the price per mile can be as low as 12 cents.

Toll rates also change depending on the day of the week. On weekends the lanes are lightly traveled, so the transportation authority sets rates lower during the same period when they might be high on another day. For eastbound traffic in April 2008, a toll at 4 p.m. varied from $2.30 on Sunday for the 10-mile stretch to $8.50 on Thursday or Friday. For westbound traffic, tolls varied from $1.85 to $2.75 for the same time period on different days.

Variable rate tolling is essential because users value free-flow speeds, not the traffic volume prized by too many road planners and engineers. While maximum throughput could be achieved by allowing average speeds to fall to 45 miles per hour, the service that customers are actually willing to pay for is quick access to their jobs, homes, and appointments. Many also pay the premium for the added certainty provided by the reliable express lanes.

Variable pricing provides another increasingly important benefit: It helps identify the sections of the road network in greatest need of new capacity. In effect, it's a market test for the viability of new road investments. The more tolls can cover the costs of new facilities, the more viable the projects should be.

SWIFTER IN SAN DIEGO

Orange County's 91 Express Lanes may be the most heralded example of variable pricing in the U.S., but it's not the most advanced. The I-15 express lanes north of San Diego were created about the same time as the ones in Orange County, under the same bill. But the I-15 project uses realtime pricing to maintain free-flow speeds. Two reversible lanes in the median of the freeway allow for uninterrupted traffic along an eight-mile corridor. Southbound traffic toward San Diego begins at 5:45 a.m. At noon, the direction of the traffic flow is reversed to accommodate northbound traffic toward Riverside County. Car pools and public transit buses use the lanes for free, but solo drivers pay a toll that's billed electronically.

The I-15 Express Lanes is one of the first cases in which high-occupancy vehicle (HOV) lanes have been converted into high-occupancy toll (HOT) lanes. Minneapolis converted a section of I-394 into a privately operated HOT lane, where variable pricing maintains free-flow speeds. Denver, Salt Lake City, and Houston also have HOT lanes open and running. One of the most ambitious projects is a 56-mile HOT lane outside heavily congested Washington, D.C., on the I-95 and the I-395 beltway in Northern Virginia. Two private companies, Fluor and Transurban, combined to win the $1 billion contract from the Virginia Department of Transportation, based on toll revenues generated by solo drivers paying a premium to drive on uncongested lanes. Eighteen other cities are planning or implementing HOT lane proposals.

Public agencies simply don't have enough money to pay for many of these projects, nor can they borrow at the levels necessary to finance them. So policy makers have brought in private capital to pay for anywhere from 25 percent to 100 percent of construction costs on these projects. The tolls generate enough revenue to cover road maintenance and pay back both private investors and public bondholders.

MARKET-RATE PARKING IN ANCHORAGE

Up to 30 percent of congestion in urban central business districts is caused by vehicles cruising around looking for curb parking, according to Donald Shoup, a professor of urban planning at the University of California at Los Angeles. In his 2005 book The High Cost of Free Parking, Shoup recommended that cities price parking to reflect market demand, recognizing that the best spots should cost the most. Shoup believes that only about 85 percent of curbside spaces should be filled at any given time, leaving enough spots empty that drivers can readily find parking rather than circle blocks searching and creating more congestion. As demand changes, so would prices, so that some spaces probably would always be empty. New meters would be required, but they would pay for themselves.

Anchorage, Alaska, and Portland, Oregon have adopted the 85 percent target and are using demand-driven pricing to achieve the goal. Two California municipalities, San Francisco and Redwood City, also price their parking spots according to desirability, although they have not adopted an explicit 85 percent occupancy target.

Shoup also advocates cash-out programs for employee parking. In these schemes, rather than pay for employees' parking spaces as a benefit, employers give workers a cash amount roughly equivalent to the value of the subsidy, to spend however they want. A handful of California companies who tried the system found that when employees faced an explicit cash parking cost to weigh against the benefit of driving, the number driving to work fell by 13 percent on average.

These ideas are not without problems. Drivers, who are also voters, are never happy to start paying for something they thought they were getting for free, a fact that obviously doesn't escape the elected officials who determine parking policy. Downtown merchants object because free city-provided parking helps draw business.

There are also pressures to overprice or undersupply parking. The "demand management" culture found in most transportation agencies sees parking as a problem in that it enables driving, which is the behavior planners are always trying to reduce. Parking policies often function as a tool for discouraging mobility, rather than a crucial adjunct to the road network that could be tweaked to produce significantly less congestion.

That said, market-based parking prices have worked in many places that have tried them. Such a scheme in Old Town Pasadena, California, not only reduced congestion but improved access to, and total spending in, the shopping and entertainment district.

TRAFFIC JUMPING IN MANHATTAN

Most of the people causing gridlock in Manhattan don't even want to be on the island in the first place. Many drivers are merely passing through the borough on their way to destinations outside or on the outskirts of the world's most famous chunk of bedrock.

The local roadway network, unfortunately, does not allow them to bypass one of the country's most congested city centers. Instead, motorists are crammed together, crosstown travelers with locals. Many become box blockers, drivers who effectively close intersections when the traffic backs up, preventing cross traffic from moving through.

Few U.S. cities pose a bigger challenge to adding physical road capacity than New York City, Manhattan in particular. Many people, including elected officials and transportation planners, simply presume that the capacity cannot be increased, so they rely exclusively on transit and law enforcement approaches to manage traffic and "tame" bad driver behavior. Despite their learned pessimism, several opportunities exist to add physical road space in Manhattan and other dense urban areas where right of way is scarce and expensive.

In many cities across the world, including Beijing, Paris, and Washington, commuters can avoid stopping at intersections by either driving over or under them using "queue jumpers"—short elevated or underground roads. In New York, the Murray Hill Tunnel already serves this function, allowing express traffic to bypass the locals. The tunnel, which carries two lanes of car traffic from East 33rd Street to East 41st Street, is a great way to avoid the congestion on Park Avenue.

Queue jumpers and tunnels often make sense in dense urban spaces and neighborhoods, as well as areas constrained by environmentally sensitive surface factors, because they operate within existing rights of way. Thus the use of eminent domain is limited, which is a major benefit in streamlining construction and honoring property rights alongside major thoroughfares.

Cities such as Paris, Sydney, Melbourne, Tokyo, and even Tampa, Florida, have upgraded beyond queue jumpers to provide longer underground and above-ground motorways. While much of a metropolitan area is packed with subway and train tunnels and other utilities, elevated facilities need only airspace. Furthermore, on the western edge of Manhattan, there are no serious underground obstructions from the Battery to the George Washington Bridge that would prevent building express intersection bypasses. Various east-west streets are also free of subway tunnels. And as Frank Sinatra sang, if you can make it in New York, you can make it anywhere.

WATCHING OVER YOU IN LONDON

Around 300,000 traffic signals turn red, green, and yellow every day in the United States. According to the Institute of Traffic Engineers, a leading professional association, three-quarters of these could be improved by updating equipment or improving timing. The institute surveyed 378 traffic agencies in 49 states and discovered that only a third actively monitor traffic signals for accidents, signal malfunctions, or cars having to wait more than one cycle to get through an intersection.

Traffic light optimization—timing and synchronizing lights to minimize delay at intersections—can improve traffic flow significantly, reducing stops by as much as 40 percent, gas consumption by as much as 10 percent, emissions by as much as 22 percent, and travel times by as much as 25 percent, according to the institute.

In London the regional transportation agency uses 1,200 cameras to watch over the city's streets through a Traffic Control Centre. (These cameras, unlike others found in the English capital, are used solely for traffic and safety monitoring, and do not record anything.) If there's an incident –anything from a fender bender to a celebration of England's rugby team at Trafalgar Square–staffers can reset traffic lights remotely to improve flow, sometimes varying signal lengths by just a few seconds to smooth things out further along the network. As with road pricing, technical control of signals allows real-time changes to the system to help cars and trucks move more smoothly, based on the ebb and flow of traffic.

This strategy is comparatively cheap. One billion dollars allocated to the largest cities in each of the 50 states to coordinate the timing of traffic lights at intersections could significantly improve signal operations and traffic flow on arterials and other major roads. Since the early 1980s, a statewide California program has optimized more than 3,000 signals; the state estimates that the benefits of increased circulation and traffic flow—in terms of travel time, reduced delays, and reduced stops at intersections—outweighed costs by 58 to 1. A 1995 study by the Texas Transportation Institute, one of the nation's leading research centers on congestion, traffic management, and transportation policy reform, looked at 26 similar projects in Texas. It found a signaloptimization benefit-to-cost ratio of 38 to 1. Although Texas officials spent only $1.7 million combined on the optimization projects, they were able to cut fuel consumption by 13 percent, stops by 9 percent, and delays by 19 percent.

President Obama says he wants to reduce car emissions. Few changes could have a more immediate impact on that goal than improving traffic flow, since stop-and-go traffic requires cars and trucks to burn more fuel at inefficiently slow speeds.

NIGHT SHIFT IN INDIANA

The average value of time for each person on the road is $14.60 per hour, according to the Texas Transportation Institute. So a repaving project that causes 40,000 people 15 minutes of delay each day for a week can impose $1 million in largely uncounted costs.

Performing road maintenance often means closing one or more lanes of a road, which can cause long delays during rush hour and other times of the day. Since construction work, which is mostly maintenance, causes between 8 percent and 27 percent of all delays in a typical large city, according to the Transportation Research Board, these costs are not uncommon.

There are a number of strategies to avoid or minimize congestion increases from maintenance work. The most effective is to do most of the work during low-traffic times such as nights and weekends. That can cost a bit more on the government balance sheet, since workers may demand higher pay to work night shifts, but the real-world benefits can be much greater.

A good way to encourage off-hour scheduling is making it an important part of maintenance contracts and having companies' bids include incentives to avoid traffic delays. According to a 1998 report in Public Roads, the Indiana Department of Transportation had bidders for an Interstate 70 rehabilitation job include in their proposals the cost of traffic delays caused by the roadwork. As a result, the winning contractor finished the work almost two months ahead of schedule, with one-third fewer lane closures than expected, saving travelers between $1 million and $1.5 million in fuel, time, and other user costs.

Sam Staley is director of urban policy at the Reason Foundation. Adrian Moore is vice president of research at the Reason Foundation. They are co-authors of Mobility First: A New Vision for Transportation in a Globally Competitive 21st Century (Rowman & Littlefield, 2008).