Cascadia Prospectus

Article as published in Crosscut

During his successful campaign for the presidency, Barack Obama embraced the cause of surface transportation, arguing with gusto for improvements to inter-city high speed rail, for research and development to advance the mainstream adoption of alternative fuels, and for other green transportation initiatives. In contrast, his general election opponent John McCain trilled one note on the evils of transportation funding earmarks. To those who follow surface transportation policy, the difference between the two was stark: Obama won big points as the more knowledgeable, engaged, and passionate of the two. McCain appeared to be either out of his depth, disinterested, or constrained by poor political counsel.

Now flash forward to our current and befuzzled times. While a disappointingly scant $50 billion of the $787 billion federal stimulus bill was allocated to transportation, Team Obama seemed again to be warming to transformation when newly-appointed Transportation Secretary Ray LaHood in a wide-ranging recent interview told Joan Lowy of the Associated Press the country needs to take a good hard look at taxing vehicles by the mile, and more regional tolling. The White House brusequely and publicly notified LaHood that in mentioning a mileage tax he had wandered far off the reservation.

That's hardly where the story ends, as I will explain below. But first, just what is this beast, anyway?

The envisioned vehicle miles traveled tax, or VMT, is seen by backers as a better way for drivers on our nation's worn out highways, bridges and roads to pay as they go, resulting in a more sustainable surface transportation system. A VMT is also meant to make choices such as transit, ride-sharing and tele-work more attractive than peak-hour solo driving, while helping to fund those alternatives, too. Why do some believe a VMT is needed? Even if raised, the by-the-gallon federal gas tax will fail to deliver over the long haul, as vehicle fuel efficiency continues to increase. The big federal Highway Trust Fund it feeds is already on last-gasp life support. Meanwhile, VMTs have already been successfully beta-tested in, of all places, Central Puget Sound, and the state of Oregon, which is widely seen as a national leader in evaluating the policy's possibilities.

What about common criticisms of a mileage tax? The answer is to design it well. A VMT can be designed to protect privacy. It can also be calibrated to give discounts to drivers of more fuel efficient vehicles and those who travel during off-peak hours and on less-congested roads.

By 2020, Congress willing, GPS trackers could be built into all new cars sold in the U.S. and added to older ones. Cross-state coordination would be required, as would inter-operability between a federal roads VMT and state or regional tolling systems. Regional systems, in addition to imposing time- or congestion-sensitive electronic tolls on certain bridges and stretches of highways, could - if Congress does not - extend the VMT concept to major arterials or even all streets and roads. Such a bold step is all but unthinkable today, but could help make maintenance of county and local roads and funding of regional transit less dependent on endless ballot measures and special pleadings to the legislature.

To be sure, the costs and benefits of the current versus the new approach would have to be convincingly detailed to win voter approval for anything so radical as a mileage tax on arterial and sub-arterial roads. The political risks would be considerable at the front end, but could diminish sharply over time as turmoil around surface transportation funding eases and user benefits steadily accrue.

For Washington state, a national VMT on federal-aid roads would mean a steady funding source for the $2 billion worth of mostly-orphaned work needed on Interstate 5 between downtown Seattle and Northgate, and for the nearly $2 billion needed to fix fatality-plagued U.S. 2 which runs east from Snohomish County. That same VMT could be divvied up in such a way as to help fund more transit in those corridors, too. A regional or state VMT could provide a steady share of funding for all manner of languishing pavement repair, interchange re-design, Active Traffic Management, Intelligent Transportation Systems and life safety projects on roads, plus high-capacity corridor transit enhancements.

Some politicians intuit the game-changing possibilities. That's why the VMT has been gaining momentum in recent years and months despite predictably visceral reactions from the general public. Recent news reports show the VMT concept being advanced, at various stages and in various ways, in Nevada, Oregon, Colorado, Ohio, North Carolina, Georgia, Minnesota, Michigan and Massachusetts. The head of Missouri's state transportation department says a VMT is probably inevitable there within several decades. Even Idaho's Republican Governor Butch Otter has voiced support for taxing vehicles by the mile. In Washington, the state transportation commission's 2009 policy platform suggests a closer look at a VMT tested across state lines on the West Coast.

So the VMT's prospects are considerable, though we're only in the early innings of this contest.

Yet no sooner had the mention of a mileage tax escaped Secretary LaHood's lips to Web news sites, than Obama spokesman Robert Gibbs issued a sharp rejoinder, saying a VMT was not, and would not, be a policy of this administration.

A predictable barrage of stories immediately ensued, declaring the mileage tax dead, sunk, history, D.O.A.

But Gibbs' curt smackdown of LaHood was itself quickly overtaken by events.

First came the reaction of U.S. Rep. James Oberstar (D-Minn.) who chairs the House Transportation and Infrastructure Committee. ABC News Senior White House Correspondent Jake Tapper describes it, at the blog Political Punch:

In an interview with Congressional Quarterly, Oberstar said that LaHood "had the temerity to think...and what did he get? Slapped down. He's a good man. A decent man. Don't let him get slapped down by know-nothings." Oberstar then suggested that Gibbs ought to stay out of the conversation on transportation policy. "I've got news for you," Oberstar said, "transportation policy isn't going to be written in the press room of the White House."

"Oh, it's on," Tapper concluded with relish.

That it is. For then came the velvet hammer: the issuance last week of a long-awaited final report of the Congressionally-created National Surface Transportation Infrastructure Revenue Financing Commission, titled "Paying Our Way" (executive summary here). An earlier version had already favorably highlighted the VMT option.

In its final report, the commission first noted the troubling backdrop. There's been a doubling of U.S. auto and truck traffic from 1980 to 2006 while growth in highway lane miles was virtually flat and maintenance of roads and bridges lagged. Real spending per highway mile traveled is down by nearly half since the Interstate system was established in the late 1950. Total highway and transit outlays as a percent of gross domestic product is down one-quarter over the same span, to 1.5 percent today. Because it has been unadjusted for inflation, the federal gas tax has lost one-third of its purchasing power since the last time it was hiked, 16 years ago.

The price of inaction is high. With resulting lost time, squandered fuel and vehicle deterioration, congestion in the U.S.'s 437 urban region costs upward of $78 billion annually. The commission reported the feds ought to be providing half of the $200 billion required per year to maintain and improve the nation's highways and transit systems, but that currently all levels of government are generating only one-third the needed funding. The commission took pains to point out - quite properly - that state, regional and local governments must shoulder the burden too, finding new resources to boost capacity and make other improvements.

What to do, then? The 15-member commission in its unanimous report said the gas tax - buried in a per-gallon price that is shaped by other factors - sends poor price signals to motorists, and that a mileage tax would clarify the linkage between driving and the needs of a poorly maintained, underpriced system.

The commission emphasized that a VMT could be calibrated by time of day, type of road, vehicle weight and fuel economy, and could be implemented nationally in 2020 after a decade of thorough research and development, and demonstration programs. To meet the base-case goal of providing sufficient federal funding for maintenance and improvement of highways and transit, the rate would need to be set at about 2.3 cents per mile for cars, if a VMT was charged on all roads. If the charge were restricted to federal-aid roads only, it would need to be somewhat higher, according to the report.

In its report, the commission also pinpointed variable tolling as a key approach at the state and regional levels and identified a slew of effective federal revenue-generating measures complementary to a VMT, such as a tax on auto and truck tire purchases, a 10 cent per gallon hike in the federal gas tax to help meet near-term needs, a 15 cent per gallon hike in the federal diesel fuel tax, and a federal carbon tax.

Major national dailies weighed in thoughtfully after the release of the commission's final report, drawn to the flame of the VMT debate. The Christian Science Monitor editorialized:

Gas taxes - at both the federal and state levels - must inevitably go the way of the gas guzzler. As vehicles become more fuel-efficient, they'll drink less gas, and thus produce less revenue to maintain and improve America's aging roads and mass transit. Add electric cars to the mix, and this revenue stream turns to a trickle.......Financing for transport infrastructure can no longer depend on indirect fees hidden in the overall cost of a gallon of gas but must rely more on direct user fees, such as tolling and congestion pricing.

Gasoline taxes may have sufficed to build the highways of the 20th century, but they've done little to influence vehicle use of roads. Changing behavior is the key to 21st century transport that must unclog crowded highways and reduce dependence on fossil fuels. Taxing miles alerts drivers to the real cost of using roads and can better motivate them to drive less....Last week, the US Department of Transportation secretary spoke favorably of the VMT, but the White House press secretary quickly dismissed the idea - odd for an administration interested in innovation.

Members of Congress, which commissioned the panel in the first place, can drive the VMT idea when they reauthorize the surface transport bill, which expires this year. Well they know the fragility of the federal Highway Trust Fund, which last year neared bankruptcy and needed an $8 billion infusion because the gas tax couldn't keep up with repair and improvement needs. A VMT is the more reliable and efficient way to pay for transport. Its time has come.

The Washington Post editorialized:

A mileage tax could be tailored so that Hummer drivers, for example, paid more per mile than Prius owners. The tax could also be levied at higher rates during rush hour or on congested highways, discouraging people from driving at times when they would spend the longest on the road. It's no surprise, then, that groups such as the Environmental Defense Fund have praised the proposal.

Most mileage tax proposals call for a tracking device in vehicles that, according to the commission, would "function like the GPS devices that million of Americans have already installed in their cars without worry of privacy loss." There are potential privacy pitfalls, but, as the commission wrote, "such systems can and should be designed to fully protect travelers' privacy." The trackers could be designed so that the government would only receive information about how much a driver owes, not where the driver has traveled. Reassuringly, a successful mileage tax pilot program in Oregon protected drivers' privacy.

Among other dailies that have editorialized in recent months for going forward with more VMT testing are the Denver Post, the Yakima Herald-Republic, The Columbian of Vancouver, Wash., and the Los Angeles Times.

In leaping to quash any further discussion of a mileage tax, Obama spokesman Gibbs was more likely than not doing the bidding of some higher-up adviser wary of blowback from the political Right. But Team Obama's Old School move has had exactly the opposite of its intended effect, as indicated by the reaction from Chairman Oberstar and the national dialog that has ratcheted up following the issuance of commission's final report.

If Oberstar is as serious as he sounds about continued examination of a VMT, the next logical step would be for Congress to include robust funding in the reauthorized surface transportation bill this autumn for several VMT demonstration projects. The I-5 corridor - crowded and worn, but vital to freight and passenger vehicle mobility - is an especially suitable candidate.

As it happens, in April a national symposium on VMTs will be staged by the Texas Transportation Institute. Leaders of the completed Oregon and Puget Sound pilot projects will be among the featured presenters, as will a representative from Germany, where a VMT for heavy trucks has already been instituted. Also scheduled to speak is a representative of U.S. DOT's Federal Highway Administration. Perhaps the White House should send an envoy as well, to listen, and learn.

Columbia River Crossing is the $4.2 billion project to replace two old, crowded and dangerous bridges connecting Washington and Oregon on Interstate 5 (pictured below left, courtesy of KATU-TV Portland). The old structures (one goes northbound-only, the other southbound) are to be supplanted with a new, two-way variably-tolled bridge, that will also extend Portland's light rail system to Vancouver, Wash., add bike and pedestrian pathways across the river, and fix six devilish bridge corridor interchanges near the crossing.

It's been announced recently that the bridge will be 12 lanes total, then the highway will narrow back to six. The wider bridge will be built to help handle crossing volume fed by longer-haul traffic and also by local and regional drivers, a goodly portion of whom may not travel great distances on I-5, but need to access the bridge, from safer new merge and exit lanes, to get between Clark County, Wash. and points south, in Portland and environs. Yet the bridge lane count is prompting considerable worries among some critics that the new facility will encourage more vehicle use, suburban residential development, and greenhouse gas emissions.

Another, but somewhat contradictory argument is that the 12 bridge lanes aren't going to be needed because more and more people will be taking transit - witness the slight increase in transit use nationally last year, and slight drop in vehicle miles travelled.

Let's back up for a quick minute. First, it's great to see more people using public transit. That's been encouraged by the gas price run-up of last year, the faltering economy, and growing concerns about greenhouse gas emissions. Metro region transit systems are in a good position to increase their market share, except that they're now scrambling to make up for sharply declining sales tax revenues which may force cutting routes that carry fewer passengers, at higher costs.

But even assuming transit systems successfully re-tool, and even with a slight drop-off last year in vehicle miles travelled, the nation's roadways are still strained after decades of explosive growth in use, while maintenance lagged. We can all agree - or should - on the need to create more incentives to expand ride-sharing, transit and tele-work. Yet the private vehicle is here to stay and to plan metro region transportation systems based on a hope against hope that auto usage will go into significant decline, is just plain....not smart.

Improving fuel efficiency, and in coming years, mainstream market penetration by electric and plug-in hybrid electric vehicles will help keep cars in heavy circulation. So too will the current daily realities of the driving life, for people who have pressures of limited time or longer distances to travel, or spread-out daily "trip chains."

There's hope, though, that Columbia River Crossing can be completed in a timely manner while successfully addressing mobility and environmental concerns. Now likely to be deployed on all lanes of the new bridge is electronic time-variable tolling - which rewards carpoolers, van-poolers and transit vehicles with free passage, but charges tolls to solo drivers, on a sliding scale determined by time of day or real-time congestion levels. (Lower tolls when traffic is lighter, off-peak; higher tolls when it's heavier, at peak hours.) Time-variable electronic tolling will help fund the project, and can help produce effective limits on peak-hour solo trips and congestion.

Last week, the CRC Project Sponsors Council approved a "mobility council concept" that paves the way for a high-level advisory body to help direct management of the new, tolled bridge and quite possibly, the parallel I-205 bridge to the east, across the Columbia.

That last part will be important because the two form a natural two-pronged highway corridor running north-south across the river, connecting Washington and Oregon. From the north, I-205 branches off from I-5 in Clark County, Wash., north of Vancouver and about six miles from the river, and then proceeds southeast across the river, parallel to I-5, but some four-plus miles apart from it, to the Oregon side. From there, I-205 connects with key arterial roads, and state routes, running approximately 24 more miles south, and finally back west before it rejoins I-5.

Joined At The Hip With I-5

Serving as a gateway to populous suburbs, plus commercial, business and leisure destinations, and providing an oft-utilized workaround to snarled I-5 in Portland, I-205 is literally joined at the hip to I-5. They can't be considered as anything less than a single corridor - where peak-hour solo driving must be priced and rationed, and transit, ride-sharing and tele-work further encouraged. If one bridge is tolled, but the other isn't, then there's great potential for exponentially more traffic diversions from one to the other. Corridor management is where things are headed in surface transportation, and defining corridors the right way is essential.

Here's the background to last week's action. The "locally preferred alternative" for Columbia River Crossing, set last July, established that the new bridge would replace, not augment the current I-5 bridges; and that design and planning should facilitate use of the bridge by light rail, bus, high-occupancy vehicles and bicycles while also taming "one of the most significant chokepoints" for traffic in the "nationally significant" West Coast trade and commerce corridor.

The mobility council concept agreement approved last week by the Project Sponsors Council represents part of the plan to make those aims reality. The agreement notes some important points of consensus as the project moves through the final phase of the Environmental Impact Statement and into design:

At its meeting this coming June, the sponsors council will create a technical group to develop performance measures and initiate public dialog on tolling strategies. This work will serve as at least a partial template for the mobility council, when it sets to work. Once formally seated, it would advise the two state transportation departments and local and regional transit agencies on how best to manage the 1-5 bridge and possibly also the I-205 bridge with tolls and other policies.

While the CRC Project Sponsor Council's mobility council concept does not specifically mention including the I-205 bridge in performance management corridor, a corollary resolution approved a week earlier by the Portland City Council does. The city resolution and an "attachments" backgrounder can be viewed here (click on the magnifying glass icon for each to access the MS-Word documents). The city resolution states, in part:

...the Columbia River Crossing is a project of great importance and unprecedented magnitude in our region, with far-reaching benefits for the city of Portland and the city of Vancouver; and...the physical capacity of a new bridge is inextricably linked to the issue of how it will be managed over time...the City of Portland supports the concept of performance-based management to maximize freight and personal mobility through the I-5 and I-205 Columba River Crossings using performance standards....the City recommends that a new bridge be built to accommodate up to three add/drop lanes and three through lanes in each direction, but that use of these lanes will be actively managed over time to get the right mix of tolling, HOV or HOT lanes, vanpools, and transit fare programs to reduce vehicle miles traveled and pollution...the City of Portland supports the formation of a Columbia River Crossing Mobility Council...

The Mobility Council would have a chairperson jointly appointed by the governors of both states, and one non-elected member serving a three-year term appointed by each of the two state DOTs, the two states, the two cities (Portland, and Vancouver, Wash.), the four designated transit or planning agencies, and the two ports. The two DOTs would provide staff to the Mobility Council, and the council would every year develop a Columbia Crossing Mobility Operations Plan on tolling, transit service, vehicle demand management and related measures, which the two DOTs and two transit agencies would then either accept or reject. Parts of each yearly plan could be rejected with comments, for re-submission. Stalemates would be broken by a meeting of the mobility council's chair with the chairs of both state transportation commissions or both transit agencies. The two DOTs and the transit agencies would retain the right to act without recommendation of the mobility council if deemed necessary, and the DOTs could also raise toll rates at a faster than recommended schedule if needed to satisfy bond obligations, including maintenance and operations costs.

Those seem reasonable caveats. Given the political and economic stakes, it would be mistaken to assume the mobility council would be just another paper tiger. Policy experts and everyday users alike will be watching the corridor closely to see if traffic flow and environmental objectives can be met. One thing is certain. The complex juggling act is one faced by scores of other major metro regions, on the West Coast and across the U.S. And at the root of it all are two clear realizations. Free peak-hour highway lanes for solo drivers carry huge social and economic costs, and failure to develop robust road pricing systems and better mobility choices will hobble surface transportation and the economy.

RELATED: "States Agree To Build 12-lane Columbia River Bridge," The Oregonian, 3/6/09

"Advisory Panel Gives Its Blessing To New 12-lane I-5 Bridge; Group Also Plans To Recommend Funding Tools And Management Committee," Portland Tribune, 3/6/09

"Wide Bridge Would Have Watchdog," The Columbian, 3/7/09

"Council Votes For 12 Lanes For Columbia River Crossing; Formation Of Mobility Council Would Provide Project Accountability, Says Metro President," Daily Journal Of Commerce (Oregon), 3/9/09

(Article as published at Crosscut)

When California recently resolved its mammoth budget deficit, it presciently moved to ease restrictions on transportation public-private partnerships, which over the long run could help control costs to taxpayers of improving overloaded roads, rails and freight facilities. P3s, as the arrangements are called, draw from among construction, engineering, highway management firms - plus infrastructure investment groups often funded partly by public employee and building trades union pension funds - to form consortiums that get important transportation projects built more efficiently, and sooner versus later or never. A P3 consortium may provide consolidated services such as designing and building a toll bridge or highway section, and can also provide upfront capital if public funds are constricted, as is so often the case now.

The private consortiums may not only design, build, and help finance these variably-tolled facilities, they may operate and maintain them too, for several decades under a lease agreement with their public partner, such as a state department of transportation. (The latter can retain ownership, control toll rates and enforce contractual performance standards). Over the long haul, the private partners make back their investment and a profit, while the savings to taxpayers over a project's full life cycle accrue, versus going it solely on the public's dime, and solely under public-sector management. P3s can also target transit, and crucial port and rail infrastructure. (Various types of P3 are described here by the Canadian Council For Public-Private Partnerships.)

Many of the P3 projects have a genuine green hue: such as "managed" lanes on highway sections, bridges and tunnels where booth-less electronic tolls are set higher during peak hours and lower off-peak to maintain a steady traffic flow at speeds of 45 to 50 miles per hour while ride-share vehicles and transit go free. Increased telework at home, as well as off-site meetings, remote work centers and para-transit offer additional ways around the higher peak-hour tolls.

The P3 approach is a hot topic, and a tool increasingly being considered by elected officials. In a new report, the Pew Center On The States paints the backdrop:

In 2008, the federal Highway Trust Fund - one of the nation's primary sources of funding for highway renovation and construction - almost went broke. States, hurting from falling revenues of all kinds, including gas tax proceeds, lack the money to meet their own infrastructure needs. These funding problems have turned into a crisis. Every year the numbers worsen. Much-needed highway repairs are being neglected...The current trend is unsustainable. Congestion and pollution will continue to increase, public safety will be compromised, and states' economic growth and ability to attract and retain strong businesses will falter if the nation's transportation system fails to receive the investments it needs. Federal funding - through the stimulus package, a proposed infrastructure bank or both - will help. But the gap remains large, and as a result, state leaders are looking to partner with the private sector.

Burgeoning global population has huge market implications for infrastructure finance. In a new working paper, the Organisation for Economic Development and Cooperation estimates (p. 5) that through 2030, annual infrastructure requirements for electric transmission and distribution, road and rail transportation, telecommunications and water are likely to average about 3.5 percent of global gross domestic product, or about $2 trillion per year, higher if other kinds of infrastructure are added in. Small wonder new consultancies fluent in P3s are forming. States and nations are coming to the dance, and matchmakers are in demand.

Senate Bill 4 is the game changer in California, signed into law in late February. Under restrictive 2005 pilot project legislation, California had allowed the state transportation department and regional transportation agencies to enter into only four P3 arrangements, total, up until January 1, 2012, two in southern California, two in northern California. Under SB 4, unlimited transportation P3s are allowed between now and January 1, 2017. Jim Christie of Reuters explains:

Billions of dollars of private capital for infrastructure may pile into California with the state, the world's eighth-largest economy, opened to public-private partnerships....Hopes for busy construction sites meeting infrastructure needs across California have been thwarted by increasing strains on traditional financial sources for public works -- taxes, user fees and the municipal debt market.

...Officials responded by clamping down on spending, including for public works. They hope to open the infrastructure spigot when the state resumes market sales of its debt and expect federal stimulus money to help bring projects on line sooner. But California's needs are so vast it could use even more infrastructure dollars -- most obviously for congested roads, a reason for the bill aimed at highway P3s. "The clearest cases for public-private partnerships have always been made for transportation," said (Gov. Arnold) Schwarzenegger adviser David Crane.

Up the road a piece, Washington has unfunded transportation needs of $38 billion (in 2005 dollars) over the next 20 years, according to the state's transportation plan update issued in 2007; that amount is exclusive of local transit needs, says the Washington State Transportation Commission (p. 5, here). The transportation commission in a 2007 report noted that:

To its credit, the state used a design-build P3 approach for the newer, southbound tolled span of the Tacoma Narrows Bridge, and lately has been exploring P3 possibilities for ferry facilities, and alternative fuel stations in the I-5 corridor. But with as much as $6.6 billion now needed for the SR 520 bridge rebuild, and another $4 billion required to put right I-5 in Seattle and US 2 to the north, plus a slew of other unfunded, important projects (see above), Washington needs to really open up to transportation P3s.

Recent news only underscores the paucity of funding. The Seattle Times reports that the state senate's proposed transportation budget has would delay until 2016 some 31 highway projects that had been planned for sooner (the House proposal slices things a bit differently). At the same time, Sound Transit is warning that its voter-approved $18 billion second phase expansion plan, including light rail across Lake Washington to Bellevue and Redmond, may come up as much as $2.1 billion short due to the recession and declining tax revenues.

Lawmakers admit that by (2016), a combination of declining gas-tax revenue and high bond debt will leave few dollars for new projects. Tolls or other taxes in the 2010s would be needed to keep promises made in the 2000s, when Olympia boosted gas taxes by 14-½ cents a gallon.

After the planned deep-bored tunnel to replace the Alaskan Way Viaduct (for which the primary pot of state funding is intact), the 520 bridge is the next Puget Sound roads mega-project on the horizon. The Seattle Times reports that the cost could rise to $6.6 billion but the state only has about $1.9 billion exclusive of tolls. The most aggressive tolling scenario identified by a state committee (with the earliest start on the old 520 bridge plus tolls on parallel I-90) would yield another $2.4 billion, for a total of $4.3 billion, which is $2.3 billion less than the priciest and least intrusive option, most favored by influential activists in Seattle neighborhoods at the bridge's west end. (Fine tuning of the state transportation budget could boost dedicated non-toll funds, but a large gap is still a distinct possibility).

Credit has been tight lately, to say the least, dampening near-term enthusiasm for government borrowing, P3s, and activity by infrastructure investment firms. But a slew of recent deals foretell transportation P3s re-gaining traction as the economic recovery gradually unfolds.

In Florida, a Spanish-based consortium, ACS Infrastructure Development, has closed a $1.6 billion-plus deal to design, build, finance, operate and maintain a 10.5-mile reconstructed I-595 connector in Broward County, from near the Fort Lauderdale Airport and I-95, going west to the I-75/Sawgrass Expressway interchange. A central feature, right down the middle, is three reversible, electronic time-variable tolled lanes called 595 Express. Other project components will include improved interchanges, direct connections to the express lanes, ramps and bypasses, a greenway, sound barriers and bus rapid transit in the corridor. By having the private consortium design, build and finance the rehabbed connector and then maintain and operate it for 35 years before ownership reverts to the state, Florida offloads construction cost overrun risk and maintenance and operations costs. The state will lease the center express lanes from the consortium and collect the tolls. If the tolls must be raised at some point in the future, that will be done by the state, not the private consortium.

The Wall Street Journal's Christopher Conkey reports:

"This project is a harbinger of what we may be seeing over the next decade or so, as we don't have enough money for major construction," said Robert Poole, director of transportation studies at the Reason Foundation, a free-market think tank....The Obama administration has rejected the idea of increasing the 18.4-cent-a-gallon federal gasoline tax to raise revenue for infrastructure projects. That could lead states to pursue more private-funding options.

In Texas, a private consortium of Cintra, Meridiam and the Dallas Police And Fire Pension System has been chosen as the preferred partners in a $2 billion, 52-year concession to finance, operate and toll new managed lanes on I-635, or the LBJ Expressway. At four lanes in each direction, this 1969-vintage metro Dallas corridor is seriously congested, an "avoid it if you possibly can" route like I-5 through Seattle or Portland. Under the agreement, the private partners will completely rebuild 9.7 miles of I-635 and 3.6 miles of intersecting I-35E. In each direction along the way there will be two frontage lanes, four tax-funded general purpose lanes and three managed lanes to be variably tolled, electronically, at rates meant to attract traffic yet also keep it flowing no slower than 50 mph. If average speeds dip below that mark, sliding scale damages would be paid by the private operators to the state department of transportation. The Dallas Morning News reports that the deal comes amidst plans to develop tolled, managed lanes on all highways in the metroplex. Rush-hour tolls will be steep on the new tolled LBJ lanes, at $7 one way to start; off-peak tolls lower.

Two billion dollars worth of work is to be completed in five years. Four hundred workers will begin laboring full-time at the outset, with as many as 1,500 more added in phases from 140 subcontractors. Cintra, Meridiam and the pension fund will invest $600 million, borrow $500 million from private sources and plan to secure another $500 million in government-backed loans from the Federal Highway Administration. Texas will contribute $445 million.

In another Texas project, a consortium including Cintra and the Dallas Police And Fire Pension System will partner on the 13-mile North Tarrant Express toll road. More from Christie, of Reuters:

Some of the money for the Texas projects will come from direct equity stakes held by the Dallas Police & Fire Pension System that should return at least 8.5 percent annually after 10 years, said Richard Tettamant, the fund's administrator. He said the stakes are the first direct P3 infrastructure investments by a U.S. public pension fund, and "we are open to investing in any type of infrastructure ... anywhere." Other pension funds seeking stable returns for long-term obligations may be interested as well, said Joel Moser, lead partner in the infrastructure practice at Fulbright & Jaworski in New York. "We're talking about trillions of dollars in equity that could potentially flow into this sector," he said.

The Dallas fund has 8,500 members, current and retired police and firemen. Cintra expects to hire 2,000 workers for 5 to 6 years for the job.

In another tolling-based P3, construction began last year in Northern Virginia to build 14 miles of "HOT" lanes on the Capital Beltway/I-495. Private partners Fluor-Transurban are investing $349 million and the commonwealth $409 million, supplemented by another $1.1 in toll-backed bonds and loans. Vehicles with three or more passengers will travel free in the new lanes while others will pay variable electronic tolls. Drivers will have the option of free lanes in both directions, though they will be more prone to congestion. The HOT lanes will be owned and overseen by the commonwealth but managed and operated by the private partners. Construction is to be completed in 2013.

Ports are getting in on the action, too. A division of a private infrastructure fund has won approval from the Port of Oakland for a $150 million deal which will give the Port $60 million in the near term and allow the private concern, Ports of America, to invest the remainder in cranes and environmental improvements to complement a 50-year operating agreement for several docks. Six thousand jobs will be created and a second-stage, $350 million deal is being discussed, which would connect the port to more rail lines.

Already operational North American toll facilities built under P3 arrangements include the E-470 in metro Denver (going totally cashless this summer), the South Bay Expressway in San Diego, the SR 91 express lanes in Orange County, Calif., the William R. Bennett Bridge in Kelowna, British Columbia, and the Dulles Greenway and Pochohantas Parkway in Virginia. Not to mention the Hiawatha Light Rail Transit System in Minneapolis and a cruise ship terminal in Galveston, Texas, among a bevy of P3 projects discussed in this recent trend piece by Wired magazine.

Other major transportation P3s nearing completion in North America include the Sea To Sky Highway from Vancouver to Whistler, British Columbia, and the Canada Line rail extension from Vancouver south to the suburban hub of Richmond, and the region's airport.

Will Washington state's public employees get in on the P3 action? Only if makes good money management sense. The Washington State Investment Board oversees 17 different public employee pension funds and 22 other state funds with combined holdings of $67.6 billion, and would like to increase to at least five percent of its portfolio its "tangible assets" class, which can include timber lands, real estate and infrastructure assets. WSIB Public Affairs Director Liz Mendizabal says the board's first and foremost responsibility to its members is fiduciary. An ongoing performance benchmark is to achieve an eight percent average annual return on investments. Another aim, with the stock market meltdown at top of mind, is to diversify the portfolio further. Mendizabal cautions that while some public employee pension funds may invest directly in a specific transportation project (i.e. Dallas), WSIB is not one of those: it invests in managed funds only. Any WSIB investment in infrastructure would thus have to be through an infrastructure fund.

An additional note: because public employee pension funds already enjoy tax-exempt status on their interest earnings, they are highly unlikely to buy the tax-exempt, lower yield bonds that state governments often issue to fund transportation projects.

The Big Daddy of infrastructure investors among public employee pension funds is the Ontario Municipal Employees Retirement System. Bloomberg News reports OMERS manages $44 billion ($C) for its 390,000 members, and hopes to increase its infrastructure holdings from 31 to 35 percent of its holdings. North American rail systems are among its targeted areas for new infrastructure investment. The mammoth California Public Employee Retirement System - where former WSIB Executive Director Joe Dear is now Chief Investment Officer - is often mentioned as another potential investor in transportation infrastructure. But the talk has amounted to little so far. That may change with California's new transportation P3 law, though Calpers' members have previously been vigilant and litigious in warning the board off any P3s involving private partners. There are other approaches. A division of a wholly-owned Calpers subsidiary is proposing a sizable P3 investment in the state of Virginia's ports network. Calpers and the Dallas Police and Fire Pension Fund also are trying to advance a larger federal role in seeding infrastructure P3s. A key element would be a National Infrastructure Investment Bank. Famed financeer Felix Rohatyn helped develop the proposal and continues his advocacy. But Kiplinger Letter Associate Editor Jim Ostroff predicts it's a virtual non-starter.

Also in the political breakdown lane: a national infrastructure bank to fund large, multistate projects....It would be seeded with Uncle Sam's money and chartered to borrow money at ultralow interest rates that only federal entities can obtain. But Washington lawmakers won't cotton to ceding control of several billion dollars of highway money each year to an independent agency.

Which, if proven true, will tend to leave political leadership on transportation P3s at the state level, despite some existing federal programs that can help facilitate these deals, such as U.S. DOT "private activity bonds", and loans through the Transportation Infrastructure Finance and Innovation Act (TIFIA project roster here). In any case, it is states especially that must confront one of the biggest perceptual obstacles to U.S. P3 investment by infrastructure firms: their characterization as "foreign" and "private." In truth they're often as much or more Main Street than Wall Street - drawing capital from building trade and public employee unions, and hiring loads of U.S. workers for big projects such as those in Texas and Florida, in all sorts of categories.

Another objection to managed lanes, which are often at the heart of roadway P3s, is that the higher peak-hour tolls are unfair to lower-income drivers. A study by UCLA and USC researchers is the latest to debunk that contention about so-called "Lexus Lanes" that favor the well-off.

Those who oppose tolls and other forms of road pricing argue that low-income, urban residents will suffer if they must pay to use congested freeways. This contention, however, fails to consider (1) how much low-income residents already pay for transportation in taxes and fees, or (2) how much residents would pay for highway infrastructure under an alternative revenue-generating scheme, such as a sales tax....Low-income drivers as individuals save substantially if they do not have to pay tolls, but as a group low-income residents, on average, pay more out-of-pocket with sales taxes.

So though the debate continues, there's already a brave new world of transportation finance taking shape. In the past, Washington state and regional elected officials have tended to approach planning and financing of transportation mega-projects on a piecemeal basis rather than developing a comprehensive strategy. Now, some - such as State Sen. Ed Murray - clearly get that a systematic approach to tolling regional highways, plus public-private partnerships are needed.

Next year, state lawmakers could begin the process of extending electronic time-variable tolling to major highway corridors in the region (federal approvals are required for Interstate tolling, but the signals are generally green). Regional tolling, new or raised taxes or fees of some sort, and private partnerships will be needed to build and operate vital surface transportation projects in many states, at a time when funding and finance prospects are dimming so precipitously. In a report on the proposed Washington Senate 2009-2011 Transportation Budget, the Senate Transportation Committee somberly warns:

The world is changing. Existing sources of state and national long-term transportation funding are not sustainable. In addition, new car technology and policies to reduce greenhouse gas emissions have a significant and negative impact on transportation revenues. A concerted effort is needed to merge a new reality with new policies, and bring key stakeholders together to develop and drive the transition.

In a presentation last summer to a gathering of the Pacific Northwest Economic Region, Washington State Transportation Secretary Paula Hammond and WSDOT's Director of Public-Private Partnerships Jeff Doyle shared some important observations:

Therein lies a telling point. Private debt adds costs to a project more than state-issued debt, but other savings during a project's full life cycle, such as from privately-managed operations and maintenance of a toll road or transit line for several decades, can compensate. Add to that the value of an asset returned to public management in turn-key condition after an operating lease expires, replete with the "12 secret spices" recipe for smooth going from industry-leading experts.

Then there's the real show-stopper: the hefty economic and social benefits of getting something built years sooner - including the associated savings in congestion avoided, business opportunities not lost, and idling vehicle emissions reduced.

All told, P3s can pencil out well. It depends on the project specifics; and how thorough and honest is the calculus.

At least as important in Washington state as freer rein for private partnerships in financing, operating and managing transportation assets, is that such a liberalized P3 policy would signal a new openness to finance innovation in times when system needs far outpace available public resources.

But even vaunted "innovation" is only as good as what it gets. Surface transportation systems emulate smaller entities and organisms. They must adapt and improve, or be eaten.