Cascadia Center is co-sponsoring an important West Coast Corridor Coalition conference -- The Climate Policy and West Coast Transportation Conference -- at Stanford University in Palo Alto, Calif., on Sept. 16-17, 2010. Federal and state policy makers will join private sector leaders to explore cross-border opportunities in exciting initiatives like the Interstate 5 Green Highway. 

Issues to be addressed at the conference include:

• An overview of the economic, security and environmental reasons to move beyond oil in transportation.
• Congressional action on climate and energy legislation and the effort to find bipartisan solutions that will benefit the economy, national security and the environment.
• The Bipartisan Policy Center's National Transportation Policy Project report on the metrics needed to measure success in transportation policy.

Two months ago we reported on the railroad industry's reaction to the FRA's directive setting forth the terms of the so-called "Stakeholder Agreements." Those are the agreements between state authorities and Class I railroads that will govern the shared-use freight-passenger rail service in rail corridors receiving federal aid under the Administration's high-speed rail (HSR) program. The FRA directive stunned and angered railroad executives by what they regarded as unreasonable demands, and burdensome requirements. For example, the government proposed to impose penalties on freight railroads for failing to meet on-time performance standards for passenger traffic. Railroad executives also objected to the peremptory manner in which the directive was handed down. Reportedly, they had no advance knowledge of the announcement nor did they participate in the preparation of the guidance. Although none of the parties would go on the record at the time as threatening to break off negotiations and walk away from the high speed rail program, senior railroad executives left no doubt that there were limits to how far they were willing to compromise their primary responsibility to maintain safe operations and keep commitments to their customers -- a responsibility that requires giving precedence to freight operations, especially in capacity-constrained corridors. As we wrote at the time:

We are happy to report that reason and good sense have prevailed. In a press conference on August 20, FRA Administrator Joseph Szabo announced that the agency has withdrawn the controversial directive. We commend the Administrator for his integrity and candor in admitting that his agency "did not have an appropriate level of dialogue and vetting" with the railroads prior to releasing the directive. "It was poorly worded and poorly vetted," Szabo said, accepting personal responsibility for the failure to consult with the rail community and recognizing "the legitimate concerns and fears" the FRA directive caused within the rail community. The Administrator promised to engage in a "constructive dialogue" with the railroads in redrafting the directive and pledged to preserve and improve America's freight rail system. "We are not going to let anything harm our world-class freight railroad network," Szabo declared.

These are reassuring words. But the devil is in the details. It remains to be seen precisely what concessions the FRA will be willing to make in its earlier stance of requiring measurable service standards, and whether the freight railroads are prepared to relent in their opposition to quantifiable service outcomes. One thing is certain: the rail community will not let Mr. Szabo forget his pledge to "do no harm" to the freight rail system.

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In the meantime, despite Secretary LaHood's confident prediction that high-speed trains would link 80 percent of America within 25 years, the debate about the future of high-speed rail in America is far from over. With new high-speed rail lines requiring massive sums of money and long-term financial commitments, railroad industry observers agree that the program will need a dedicated source of funds. This raises three questions: First, will high-speed rail engender grassroots support for a dedicated tax-financed rail fund similar to the Highway Trust Fund, that could sustain a rail investment program over several decades? Second, will there be enough passenger rail users to generate sufficient tax revenue for such an ambitious  program (estimated at $500 billion)? And, lastly, will future presidents and Congresses share this Administration's enthusiasm for high-speed rail, or will concern about budget deficits oblige them to focus on other, more urgent infrastructure priorities? Despite the optimistic rhetoric of HSR boosters and Secretary LaHood about the "inevitability" of high-speed rail in this country, there are huge uncertainties concerning all three questions. 

Both sets of issues will be explored at two forthcoming events: the former, at a conference on "Passenger Trains on Freight Railroads" sponsored by Railway Age at the Washington Marriott Hotel on October 18-19; the latter, at a National Press Club debate on High-Speed Rail, to be sponsored by the Progressive Policy Institute on September 29.

Innovation Briefs, now in their 20th year of publication, are published by Ken Orski. Cascadia Prospectus reprints them with permission. The content of Innovation Briefs does not necessarily represent the views of Cascadia Center.

Photo Source: WSDOT

"Is there a culture war being waged for the soul of Seattle?," asks Jordan Royer in an article that appeared today in Crosscut. A one-time candidate for Seattle City Council and former public safety staffer for Seattle mayors Paul Schell and Greg Nickels, Royer's article folds the debate about replacing the Alaskan Way Viaduct into his article, "How a Quiet Culture War is Dividing Seattle." 

The great debate raging about the Alaskan Way Viaduct is another place where the cultural battle is playing out. Some are eager to test the theory that reducing car capacity forces people to get around by other means. The problem with conducting this experiment on our waterfront, however, is that you squeeze the port and all those well paying jobs. The Port of Seattle is contributing up to $300 million for the tunnel project, and it's not because they want to be nice or because it's part of their responsibility. They are contributing because they know they are in a competitive fight for survival as a major container port and understand what's at stake if the project doesn't move forward.

Photo Source: Washington State Department of Transportation

Today on KUOW 94.9 FM's "The Conversation," Ross Reynolds and reporter Deborah Wang took on a comprehensive reporting assignment to look at the deep-bore tunnel--the transportation option chosen in 2009 by Seattle, King County and Washington State to replace the aging Alaskan Way Viaduct.

Cascadia Center and Discovery Institute have been front and center on the idea of a deep-bore tunnel since the beginning of the debate. And Cascadia Center director Bruce Agnew provides an abundance of context and background for the KUOW report. 

KUOW's report summarizes the history, policy and dynamics of replacing an aging, elevated highway with a highly advanced and technical tunnel. Listen to the report here. 

Over the past eight months the U.S. Department of Transportation has been conducting a series of "listening sessions" around the country to solicit new ideas from stakeholders and interested citizens for the next multi-year surface transportation bill. The sixth and final session on the national listening tour was held at the U.S. DOT headquarters on July 14. Participating in the latest town hall meeting was the full complement of the department's senior management team (save Secretary Ray LaHood). Complementing the session with U.S. DOT officials were four panel sessions involving local officials and transportation professionals discussing local transportation issues, program funding, state and local needs and outreach to the public.

A Game Changing Event

The latest listening session took place amid growing speculation by political analysts that the Democrats may lose control of the U.S. House of Representatives in November. This speculation has been reinforced by White House press secretary Robert Gibbs who commented on last Sunday's "Meet the Press" and again at his regular press briefing the following day, that "there are enough seats in play that could cause Republicans to gain control." Gibb's conclusion was not inaccurate, given that about 60 Democratic seats are in jeopardy and Republicans need a net gain of only 39 to re-take the House. But, as Washington Post political observer Dana Milbank pointed out, when the president's chief spokesman announces that his party is in trouble, it could become a self-fulfilling prophesy.

A Republican victory in the House would also mean an organizational realignment in the House congressional committees. The coveted chairmanship of the Transportation and Infrastructure Committee would pass to Rep. John Mica (R-FL) who has already gone on record as saying that "the gas tax is dead" (see our NewsBrief of June 3, "Some Frank and Unscripted Comments from Capitol Hill.") Nor would Rep. James Oberstar's (D-MN) ambitious dream of a $500 billion six-year surface transportation bill necessarily remain intact under Republican House leadership, which would be anxious to distance itself from free-spending Democrats and may not fully share current transportation policy priorities of the Obama Administration .

Strengthening Republican resolve to avoid a fuel tax increase in the next Congress would be the projections by the Congressional Budget Office indicating that the surface transportation program is assured of adequate funding (i.e. at the levels authorized for FY 2009) at least through the end of Fiscal Year 2012. With assured funding possibly as long as mid-2013 (if our reading of the CBO projections is correct), a Republican Congress might well decide there is no reason to hurry and postpone consideration of a multi-year bill until after the presidential election of 2012 when a program of infrastructure investment can be considered in an environment less colored by electoral politics.

A Disappointing Session

The DOT Listening session was in some respects disappointing. In a typical "inside the Beltway" fashion, the meeting offered a tribune to a variety of special interests and advocacy groups to advertise their ideas, big and small, and to plead for government attention. For its part, the DOT leadership offered few hints as to its own thinking. However, since the goal of the "listening sessions" was for the DOT officials to, well... listen, they could be excused for revealing little of their intentions.

However, if the purpose of the listening sessions was to offer the DOT leadership exciting fresh ideas on how to reform and refocus the federal transportation program and how to give it new direction and a new sense of purpose, we think the assembled Washington transportation community could have done better.

But then, if  White House Press Secretary Robert Gibbs is indeed correct in his prediction, the U.S. Transportation Department  need not  worry about having to craft a reuthorization bill any time soon.  

Innovation Briefs, now in their 20th year of publication, are published by Ken Orski. Cascadia Prospectus reprints them with permission.

At 55 feet in diameter, the Puget Sound's deep-bore tunnel is in the higher range of tunnels around the world that have been completed largely on time and within budget. Tunneling success has spread to North America, too. While the often-maligned Boston Central Artery project (Big Dig) is cited for cost overruns, another Boston project, the Wastewater Treatment Tunnel, was completed successfully with little notice. Other on-time and on-budget tunnel projects include the 1.2 mile, $538.8 million Allegheny subway tunnel in Pittsburgh and the "Gold Line" rail tunnel in Los Angeles. For navigating complicated soils with far more history and debris than Seattle's, the just completed tunneling for New York's No. 7 Subway Line to 34th Street bodes well. According to the city transit authority, "the 24-hour construction operation was completed in six months instead of 2-3 years as originally planned."

Cascadia attended and reported from the North American Tunneling Conference in Portland, Ore., earlier this week. The Alaskan Way Viaduct replacement project (a key Cascadia issue for many years) was highlighted as a project that could "advance the U.S. into the major leagues with Europe and Asia in tunnel technology."

See the full article here or in the extended post.

"The eyes of the world's tunneling community are on Seattle," said Martin Herrenknecht, president of a worldwide company building tunneling machines, speaking at the North America Tunneling Conference in Portland this week.

Herrenknecht spoke in glowing terms of the opportunity for the Alaskan Way Viaduct deep bore tunnel to advance the U.S. into the major leagues with Europe and Asia in tunnel technology. Tunnel boring machines, he and other presenters said, are steadily increasing in diameter with better ground control and now safely excavate in all types of soil, rock or groundwater conditions.

At 55 feet in diameter, the Puget Sound's deep-bore tunnel is in the higher range of tunnels around the world that have been completed largely on time and within budget. Tunneling success has spread to North America, too. While the often-maligned Boston Central Artery project (Big Dig) is cited for cost overruns, another Boston project, the Wastewater Treatment Tunnel, was completed successfully with little notice. Other on-time and on-budget tunnel projects include the 1.2 mile, $538.8 million Allegheny subway tunnel in Pittsburgh and the "Gold Line" rail tunnel in Los Angeles. For navigating complicated soils with far more history and debris than Seattle's, the just completed tunneling for New York's No. 7 Subway Line to 34th Street bodes well. According to the city transit authority, "the 24-hour construction operation was completed in six months instead of 2-3 years as originally planned."

"We do the extraordinary every day and make it seem mundane," said Brenda Bohlke, president of Virginia-based Myers Bohlke Enterprise and a tunnel association leader, citing successful tunnel projects completed with little news coverage. The industry can deal with changing engineering challenges in cost effective ways, she said. "Long-term economic and environmental benefits that have come from transforming waterfronts and city centers to magnificent people places drive the engineering community, too," she said.

Conferees indicated that three extremely talented worldwide teams are bidding on the viaduct project and praised the geotechnical and consultative work done by the state Department of Transportation in preparation for the design-build project.

The upbeat mood and praise for the state's efforts are good news to Gov. Chris Gregoire, who spent a whirlwind week and a lot of political capital in Seattle and Vancouver, British Columbia, bucking up support for the tunnel. At the Port of Seattle, she exhorted a big crowd of union, business and community leaders to urge the Seattle City Council to stay the course on moving forward with a tunnel agreement with the state. She then boarded the Amtrak Cascades with state Sen. Mary Margaret Haugen (D-Camano Island) and state Rep. Judy Clibborn (D-Bellevue) to visit Vancouver's Canada Line rail tunnel, which was completed months ahead of schedule for the 2010 Olympics.

Our history of building big things underground is one of success. The 1906 railroad tunnel for freight, Amtrak and Sounder passengers built under Third Avenue is still going strong, while the viaduct, built in 1952, has reached the end of its safety life. The Interstate 90 Mount Baker tunnels (wider at 61 feet than the deep bore viaduct tunnel) came in 54 percent below budget in the 1980s during a similarly favorable low bid construction climate. In spite of faulty claims from the tunnel opponents, the Sound Transit's Beacon Hill tunnel did come in close to budget -- overruns occurred in the stations and elevators.

There is no question there will be risks. The 37-mile Brightwater tunnel, while a much different type of project than the viaduct replacement, had two of its four boring machines get stuck and the state is learning lessons. With healthy contingency funds, independent experts hired separately by the state and Seattle City Council, and yearly advances in technology since experts were first brought here in 2008 to encourage a deep-bore tunnel, however, the return on investment for the tunnel looks brighter than ever. And the whole world is watching.

BRUCE AGNEW is policy director of the Cascadia Center, a research organization focused on transportation at the Discovery Institute in Seattle.

Ever since President Obama announced his high speed rail (HSR) program initiative and Congress approved $8 billion to fund it as part of the American Recovery and Reinvestment Act in February 2009, many States have lined up to stake out a share of the new money. States that had been working on high-speed rail plans for years saw it as an opportunity to finally bring their projects to fruition, while others scrambled to get rail corridor planning underway so that they too could qualify for a share of the pie. The prize looked particularly attractive because the dollars will flow directly to the recipient states without requiring a local match.

For most states, competing for a piece of the action meant developing a plan in cooperation with the Class I freight railroads to upgrade existing infrastructure to accommodate passenger rail service at speeds higher than 79 mph. While such speeds would hardly qualify as "high-speed" in Europe and the Far East, they became the de facto threshold standard for qualifying under the HSR program. Only California and Florida have proposed construction of dedicated new track that would allow true high speeds, i.e. top speeds of 150 mph and higher (however, Florida's Tampa-to-Orlando project is expected to operate only at average speeds of 86 mph; see "Weighing the Future of High-Speed Rail in America," NewsBrief, October 29, 2009).

For the Administration, there was a political incentive to focus on the projects requiring upgrades to existing infrastructure. While the Florida and California high-speed lines will take years to complete, long after the present generation of political leaders has left office, most of the "upgrades" could become operational in a shorter time frame and become part of this Administration's catalogue of accomplishments to be proudly cited in the 2012 presidential election campaign. Major grants have been awarded for improvements in the Chicago-St.Louis, Madison-Milwaukee, Seattle-Portland, Raleigh-Charlotte and Cleveland-Cincinnati corridors. These projects typically will involve reconstructing track to meet more stringent requirements for higher speed operations, building bypass tracks, eliminating grade crossings, installing advance signal systems and implementing positive train control technology.

Since virtually all the existing rail infrastructure in America is owned by private railroads, the ticket of admission to the federal HSR grant program has been the instrument of an operating "Stakeholder Agreement" that the prospective state grantees are required to sign with Class I railroads whose facilities they intend to use for passenger rail service. Execution of such an agreement (which also involves a service operator, such as Amtrak) is a condition of participating in the capital portion of the HSR program.

On May 12, the Federal Railroad Administration issued a 19-page directive setting forth the proposed terms of these agreements. The directive includes specific quantitative performance measures. It stipulates that the freight railroads and the grant recipients (in most cases state departments of transportation) must agree to "measurable service outcomes" in terms of number of daily trips, trip time and on-time performance for the proposed passenger rail service. If a railroad fails to meet those targets, it must "at its sole expense" take all necessary corrective measures to achieve compliance within two months. If failure to achieve the stipulated outcomes continues over the long term, the railroad must repay a pro-rata share of the federal grant. To protect the public investment, any new capacity created by the federal grant must be reserved for future passenger train use and may not be used to increase freight carrying capacity. In addition, the railroad must agree to a number of audit, labor, reporting and other federal procurement requirements (Davis-Bacon, Buy America requirement, environmental protection, etc) .

Although the FRA directive was couched in the form of an advisory "guidance," railroad executives soon found out that FRA intended its provisions to be mandatory and would reject any operating agreement that did not include the recommended performance standards. Many agreements, some of which had taken months to negotiate on the strength of earlier understandings, ran the risk of being rendered invalid because they did not meet FRA's stipulations. According to published reports, one railroad company, which had already negotiated agreements with two state DOTs, had the performance standards stipulated in its agreements rejected by FRA as inadequate.

Railroad Industry Reaction

The FRA directive reportedly "stunned" the railroad industry. What the U.S. DOT's customary clientele assumes and tolerates as the price of doing business with the federal government--the myriad requirements and the peremptory style in which they often are delivered -- must have come as a genuine shock and surprise to the private railroad executives who are unaccustomed to the complexities of the federal procurement and grant-making process and to dealing with the often inflexible posture of the federal bureaucracy. "OMB Circular A-87," "49 CFR Part 18" and other arcana of the federal financial assistance  program are not part of the railroad executives' vocabulary. Upset at what they regarded as excessive and unreasonable demands, burdensome requirements and an inflexible bureaucracy, these railroad executives seemed in no mood to accept unquestioningly the FRA dictates. Although none of the parties would go on record as threatening to break off negotiations and walk away from the high speed rail program, several senior railroad executives have left no doubt  that there are limits to how far they were willing to compromise their paramount objectives of maintaining safe operations and keeping commitments to their customers -- objectives that require giving precedence to freight operations, especially in the capacity-constrained Class I rail corridors. "These are not people accustomed to be pushed around," one long time rail industry insider told us. "The Administration may want to bully them, but they will fight tooth and nail and they have the ability to push back and push back hard."

Indeed, the railroads are not without leverage. They know that achieving progress with the high-speed rail program -- one of President Obama's signature initiatives-- ranks high on the Administration's list of priorities. "There's a sense of urgency; we need to get going. We want some of this work to begin this year," Secretary LaHood was quoted in one press account as urging the railroad executives at a June 9 meeting. Abandoning cooperative efforts on the joint operations projects would "effectively derail the Obama Administration's high-speed passenger rail program," wrote one railroad industry observer.

Seeking a Compromise

The Federal Railroad Administration has tried to minimize the conflict. Federal Railroad Administration Administrator Joseph C. Szabo said "we are fully committed to working with states and freight railroads to help them reach mutually beneficial agreements that promote the public interest and satisfy private sector interests." An FRA spokesman tried to reassure the railroad industry that the agency's mind is not all made up: "We are aware of the freight railroads' concerns and have asked them to meet with us for dialogue."

Nor is the FRA without its defenders. Former Transportation Secretary James Burnley (the only one of the many sources we contacted for this story who agreed to speak to us on the record) thought that the U.S. DOT is wisely attempting to fashion stakeholder agreements that reduce the "substantial danger that most of the federal grants will end up in the pockets of the Class I freight railroads," adding that the Department " will have to be aggressive in enforcing them."

The final act in this imbroglio has yet to be written. In the months ahead, a number of Stakeholder Agreements will be executed and submitted to FRA for approval. The agency will have an opportunity to acknowledge the railroads' concerns and demonstrate flexibility by accepting the terms of these Agreements as negotiated by the the States and their railroad partners. We hope the Administration will come to realize that there is too much at stake to let overly stringent performance standards and rigid grant-making procedures become obstacles to gaining the railroads' active support and cooperation. Surely, there are ways of protecting the public investment without imposing draconian conditions and unrealistic requirements that would lead to endless disputes and litigation---and delay completion of the work past the 2012 elections. We think that with good will on both sides, a workable compromise can be found.

Innovation Briefs, now in their 20th year of publication, are published by Ken Orski. Cascadia Prospectus reprints them with permission.

Though it often gets pushed off the front page, everyone knows that the U.S. is going to require money and minds to solve and secure its infrastructure future. An agreement signed today in Washington, D.C., will help make sure that women remain -- and advance -- as a key part of that effort.

With the WTS audience as witnesses, I signed an understanding between DOT and WTS to encourage women to complete undergraduate and graduate degrees in science, technology, engineering and math--without having to put their transportation careers on hold.

Those are the words of U.S. Secretary of Transportation Ray LaHood, who today signed an agreement with WTS (Women's Transportation Seminar International), the leading group dedicated to advancing the careers of women in transportation.

As Secretary LaHood wrote on his blog, Fast Lane, "the entire (transportation) industry is full of opportunities," ranging from "environmental engineering and alternative fuel research" to "railroad, construction, and aerospace." Those opportunities, however, won't be without challenge -- a challenge requiring the best science, engineering, technology and math minds the country can offer. The agreement signed today is important for sure. And it will hopefully help ensure the country has the resources and talent to meet its inevitable future infrastructure needs.

Seattle's Center for Wooden Boats was the setting Thursday evening for a gathering of passenger-only ferry advocates, including those from Kingston and King County, Wash., and the U.S. federal government.

The well-attended event (followed by an Ivar's Seafood-sponsored reception) was organized within the specific context of a new passenger-only service between Kingston and Seattle, and a broader context of supporting more service throughout the region. The Port of Kingston will launch passenger-only service between Kingston and Seattle this fall. (This article in the Kitsap Sun offers details about the new service.)

Capital funding for the new link came from the U.S. Federal Transit Administration. The Port has also developed public-private partnerships to cover initial operating costs. It will, as reported in the Kitsap Sun, "cater to commuters" at first, cutting down on travel times for those who commute to Seattle.

The Port of Kingston's Eric Osnes told the audience assembled at the Center for Wooden Boats that though this new route will connect Kingston and Seattle, they "don't see this as a Kingston-only ferry." Echoing what many have said about a regional approach to the issue, he said he and the Port are interested in the "whole logistics chain not just to Seattle, but beyond." Designed with commuters in mind, Osnes told the crowd that the new Kingston ferry will allow commuters to travel between Kingston and Seattle in 45 minutes and will initially offer two morning and two evening departures.

Cascadia Center has advocated for expanded passenger ferry service for years, having launched the Passenger Ferry Coalition aboard the Royal Argosy on July 1, 2003, with U.S. Senator Patty Murray, U.S. Representative Norm Dicks, and 300 community leaders. Reduction in greenhouse gases, well-paying careers in local marine manufacturing, advancing technology and tourism are just some of the reasons the organization has supported expanded service. Early on Cascadia Center suggested a "Return of the Mosquito Fleet," a theme articulated in this 2008 op-ed.

Though building a network of passenger-only ferries in the Puget Sound is a long process, the new service between Kingston and Seattle, is an important piece of the puzzle. And if the excitement on display at Thursday's event is any indication, communities throughout the Puget Sound could follow in Kingston's footsteps. They'll have to in order to complete the puzzle and, as Cascadia's Bruce Agnew wrote in 2008, "to develop a Salish Sea Express regional foot ferry network transcending political boundaries...."

Hoping to sustain interest in the Committee's efforts to enact a new multi-year transportation bill during this session of Congress, Reps. James Oberstar (D-MN) and Peter DeFazio (D-OR), leaders of the House Transportation and Infrastructure Committee, convened a hearing on April 14 to explore innovative ways of financing highway and transit investments. But while the hearing provided a useful survey of available financing tools and programs, it produced no new answers to the key question that has bedeviled transportation advocates for many months and remains as the chief obstacle to moving the legislation forward-- the question of how to pay for the proposed multi-year surface transportation program.

The Administration's opposition to increasing the current 18.4 cents/gallon federal gas tax-- the most obvious means of generating the needed funds-- was reiterated once again at the House hearing by Christopher Bertram, U.S. DOT's Assistant Secretary for Budget and Programs. The White House has also announced its opposition to any additional taxing of motor fuel as part of the Senate energy legislation. "The Senators don't support a gas tax, and neither does the White House," the White House said in a statement, thus squelching any secretly entertained hopes that the energy bill might offer a backdoor way of raising the gas tax in the guise of a " carbon fee." (The proposed Kerry-Graham-Lieberman energy plan reportedly would have called for an additional levy of 15 cents/gallon. To fully fund the proposed $500 billion six-year transportation bill would require approximately a 20 cents/gallon increase in the gas tax.)

White House opposition to a gas tax increase is only one of several obstacles standing in the way of an early passage of a multi-year law. Three other factors make passage of the legislation this year unlikely:

1. The Senate faces a crowded legislative agenda that includes confirmation hearings for a Supreme Court justice and consideration of the Finance Reform Bill in addition to the energy bill. The likelihood of taking up a multi-year transportation bill on top of that busy agenda in the 60 legislative days remaining before the pre-election congressional adjournment, appear remote according to congressional observers.

2. Passage of the HIRE Act has taken the pressure off the lawmakers to move the multi-year bill this year. The Act not only has extended the existing law until the end of December 2010; it also has transferred $19.5 billion from the General Fund into the Highway Trust Fund and restored an earlier $8.7 billion rescission of contract authority. The latest projections by the Congressional Budget Office indicate that the General Fund transfer, when added to the projected revenue stream from the gas tax, is expected to support highway and transit programs at the levels authorized for Fiscal Year 2009 through the end of Fiscal Year 2012 and into FY 2013 (Congressional Budget Office, "Highway Trust Fund Projections, March 19, 2010.) Our own reading of the CBO projections suggests that both the Highway Account and the Transit Account of the Trust Fund could remain solvent as long as the second or third quarter of Fiscal Year 2013. With assured funding possibly through mid-2013, the case for passing a multi-year transportation bill this year has become less than compelling. In an unspoken acknowledgment of this state of affairs, many interest groups have quietly dropped their efforts to lobby for enactment of the reauthorization bill this year.

3. Last but not least, there are no signs of a popular outcry about the stalled transportation authorization. Despite extensive documentation of the needs for new infrastructure investments (notably, U.S. DOT's 2008 Conditions and Performance report and the findings of the two commissions established by Congress to study future transportation funding needs) there seems to be no sense of urgency on the part of the public to embark upon a massive program of infrastructure modernization. Signs of aging infrastructure are kept largely hidden from view thanks to diligent efforts by state and local highway agencies to maintain their assets in good repair. In the absence of any visible signs of system deterioration, warnings by advocacy groups about "crumbling infrastructure" are falling on deaf ears. The recent injection of some $50 billion of federal funding into surface transportation in the form of Recovery Act (ARRA) stimulus funds, TIGER Discretionary Grants and High Speed Rail grants has further weakened the argument that the transportation sector is not receiving adequate attention and that we are vastly under-funding our transportation needs.

Leveraging Future Revenue Streams

Although the House hearing shed no new light on how to generate new revenues for the federal-aid transportation program, it sent a strong message that innovative financing methods can help expedite project delivery and offer other benefits to the public. Under traditional methods of financing, transportation projects are completed on a pay-as-you-go basis: projects are built incrementally as public funds become available over a period of years. Using financing tools, notably tax-free bonds, state and local transportation agencies can gain immediate access to the funds necessary to advance projects into construction, and use their traditional funding or project-generated revenue streams to liquidate the indebtedness over time. While toll revenue is often used as security (collateral) in highway financing, project-generated user fees are not the sole means of backing debt issuances for transportation projects. Other types of security include dedicated sales tax revenue, future federal grants and revenues derived from tax assessment districts, transit-oriented development and other "value capture" projects. As Philip Washington, General Manager of the Denver Regional Transportation District testified, this has enabled transit agencies to gain access to private capital even though transit lacks sufficient project-generated revenue to use it as collateral for long-term debt obligations.

Testimony by Assistant Secretary Bertram showed that there is no scarcity of federally-assisted financial tools and programs to leverage available funds and expedite delivery of transportation projects. They include the TIFIA Program (authorized by the Transportation Infrastructure Finance and Innovation Act of 1998) offering direct loans, loan guarantees and lines of credit for surface transportation projects of "regional and national significance;" tax-exempt Private Activity Bonds (PAB), issued by state and local governments to aid in financing privately funded transportation projects; taxable Build America Bonds (BAB) whose interest rates are subsidized by the Federal government, thus lowering the net borrowing costs (by 35%) for state and local government issuers of the bonds; State Infrastructure Banks (SIBs) which provide credit assistance in the form of loans, loan guarantees and letters of credit and serve as revolving infrastructure investment funds for state-sponsored surface transportation projects; and Grant Anticipation (GARVEE) bonds, debt instruments secured by a pledge of future Title 23 (highway) and Title 49 (transit) Federal-aid funding.

The latest addition to this arsenal of financing instruments is the proposed National Infrastructure Innovation and Finance Fund (I-Fund). As Assistant Secretary Bertram testified, this entity, capitalized with an initial $4 billion General Fund contribution ($25 billion over 5 years), would serve as a one-stop clearinghouse for financing and funding high-value multi-modal transportation projects of regional or national significance. A portion of the annual capital contribution would be handed out in grants rather than loans. The Fund could eventually fold in TIFIA, RRIF (The Railroad Rehabilitation and Improvement Financing program) and other federally-assisted transportation financing programs into a single loan and grant dispensing entity, housed in the Transportation Department. Congressional support for this proposal is uncertain, competing as it does with broader proposals for a National Infrastructure Bank (NIB). The latter is being advanced by several congressional sponsors as an independent stand-alone entity that would support infrastructure investments across a broad range of sectors. However, for the NIB to qualify as a genuine bank, its loan portfolio would need to be confined to revenue-generating projects and to projects secured by other sustainable revenue streams.

Availability Payments

Another financing method given prominent mention at the House hearing was the technique of "availability payments." This relatively new financing method has received wide publicity because of its use in two recent concession-based transportation projects: the $900 million Port of Miami Tunnel and Florida's $1.65 billion I-595 express lanes/reconstruction project. Availability payments also will be used in financing the reconstruction of Doyle Drive in San Francisco and are being considered by a number of other public agencies .

Availability payment concessions are used where the facility in question is not intended, for policy reasons, to generate its own stream of toll revenue or where toll revenue alone may not be sufficient to cover the full cost of building, operating and maintaining the facility. Instead, the public authority pays the private concessionaire periodic payments out of its regular budget over a fixed term of the concession. Payments are made only once the project is completed and upon certification that the concessionaire is meeting certain performance requirements. Availability payments can be supplemented by "milestone" payments tied to the attainment of specific construction milestones and a "final acceptance payment" due upon completion of the project, as incentives for timely completion and avoidance of cost overruns. Because private concessionaires receive fixed payments regardless of the volume of traffic generated by the facility, they do not assume the revenue risk as in the case of a classic long-term toll concession.

Innovative Financing Is No Substitute for New Funding

In the final analysis, innovative financing is no substitute for new funding. As Eugene Conti, Secretary of the North Caroline DOT concluded in his testimony, "while these [financing] tools can be valuable, the effectiveness of any of these finance techniques depends on the establishment of a reliable and substantial source of funding, as innovative financing generally assumes an associated revenue stream to support credit activity. There is no doubt as to its usefulness when combined with grant funding which still remains as the core of the federal-state partnership. We need to pass a long-term and well-funded bill that will allow for much greater funding and program certainty to meet transportation investment needs."

The question of where the money for such a "well-funded" bill is to come from remains unanswered. Until the political will and public support are found to either: (1) raise federal fuel taxes, (2) permit the tolling of  Interstate highways, (3) phase in distance-based (VMT) charges in lieu of fuel taxes, or (4) accept the notion of funding the federal surface transportation program out of General Fund revenues, the future of a multi-year transportation bill will remain shrouded in uncertainty.

Innovation Briefs, now in their 20th year of publication, are published by Ken Orski. Cascadia Prospectus reprints them with permission.

Seattle Times editorial columnist Lance Dickie just penned a strong piece about the Eastside Rails and Trails issue -- the 42-mile corridor that connects Seattle's Eastside communities. It's the same corridor that Cascadia Center has been encouraging be used for both rails and trails.

Bruce Agnew, policy director of the Discovery Institute's Cascadia Center, has a ready answer: Rails and trails must be done simultaneously. It is the only way Agnew sees it happening.

He views the Cascadia Center as the neutral broker among a variety of public entities and potential users of the corridors. The center is a longtime proponent of rail from Eugene to Vancouver, B.C., and has actively led discussions and hosted field trips on the possibilities for the Eastside corridor.

Agnew, consultant Thomas M. Jones of TMJ Group, LLC, and Loren Herrigstad, president of All Aboard Washington, have crunched the numbers to find competitive estimates for refurbishing tracks, building and paving a bike trail and developing commuter service.

I'll let the article do the talking. Here it is.

Optimists always like to look for the positive, even in the most dire of situations. Even so, you almost hate to talk about silver linings with regard to the slow economy that has hurt so many individuals, families and businesses. But the lower-than-expected bid that came in yesterday for replacing a section of the Alaskan Way Viaduct just might fall into that category. The Seattle Times reports that all of the bids to replace the Sodo section of Viaduct "were below the state engineers' estimate of $153 million, a reflection of the recession making construction companies hungry for business."

"....We have the benefit of being in one of the most favorable environments for affordable, low-cost construction bids and we need to take advantage of them now," Gov. Chris Gregoire said. "The fact that today's bids for the south mile of the project came in millions below our estimates is proof of that."

The project manager for the Viaduct told the Seattle Times that this "could be a sign the bid for a proposed tunnel under the central waterfront also could come in under estimates." And Washington State officials say "about 600 construction jobs" will be created by the Sodo project.

Jobs. Cost-savings. Important infrastructure work being done. Maybe, despite the surrounding economic gloom, it's okay to find the silver lining.

With the City of Woodinville's support, Seattle's Eastside this week took one more step toward realizing a vision for a dual use rails and trails corridor along the 42-mile Eastside corridor. The Woodinville City Council passed a resolution expressing its support for an idea long supported by Cascadia Center. From the resolution:

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF WOODINVILLE, WASHINGTON, DOES RESOLVE AS FOLLOWS:

Section 1. Support of Dual Rails and Trails Use of the Eastside Rail Corridor. The Woodinville City Council supports dual rails and trails use of the entire Eastside Rail Corridor, including the main line between Snohomish and Renton; and the spur between Woodinville and Redmond.

Section 2. Support of Dual Rails and Trails Use by All Communities. The Woodinville City Council encourages all agencies and communities along the Eastside Rail Corridor, including the mainline and the spur, to actively support dual rails and trails use of the corridor.

There is more to do, of course. But this is an important step in the creation of a functioning North-South corridor that would have an immediate positive effect and that would extend to future generations on Seattle's Eastside.

A recent series of events, notably an invitational conference on Public-Private Partnerships convened by the National Conference of State Legislatures (NCSL), has focused attention on the role of public-private partnerships (PPPs) in transportation, and underscored once again the need to more clearly define  the proper federal role in PPP oversight.

The NCSL Conference on Public-Private Partnerships. For the past 18 months, a working group of the National Conference of State Legislatures has been studying domestic and international experience with public-private partnerships. The group's objective has been to provide state legislators with an informed and objective appraisal of PPPs-- something that the NCSL believes has been missing from the public dialogue. "Boosters and detractors of PPPs have dominated public debate," states NCSL, "while reasoned voices have been hard to discern."

To share its findings with the transportation community and seek its input, the NCSL invited an influential group of state legislators and leading members of the transportation community to a meting on March 26 to consider the next steps. Opening speakers featured Jane Garvey chairman of the investment fund Meridiam Infrastructure (North America) and the recently appointed board chairman of the Bipartisan Policy Center; former Secretary of Transportation Mary Peters; and U.S. DOT's Regina McElroy, Director of the Office of Innovative Program Delivery. Co-sponsoring the meeting was UK Trade and Investment (UKTI), the economic  development arm of the British Government. The NCSL program was designed as a US-UK government-to-government dialogue.

The formal presentations and subsequent breakout group discussions evidenced strong support for the use of PPPs as a method of financing transportation infrastructure. However, support for PPPs was conditioned on the need to protect the public interest in PPP transactions.  A key theme running through the discussions was the appropriate state and federal role in protecting that interest.  The tenor of the day-long discussions could be summarized as follows:

The discussions proceeded from the assumption that state legislatures are primarily responsible for deciding whether and on what terms states can enter into public-private partnerships. Currently, 28 states have PPP enabling statutes. These statutes are designed  to guide PPP implementation and ensure through  groundrules for the contracting process and bidding procedures that the public interest is properly protected. State legislation also provides for legislative oversight--typically on a program rather than project basis, although eight states require individual PPP proposals to be approved by the state legislature. State executive agencies are responsible for negotiating specific contracts with the private parties. Key provisions that protect the public interest in PPP contracts include length of concession, bidding procedures, performance standards, toll policies, labor protections, revenue sharing, risk allocation, use of toll proceeds, transparency, and public participation.

The federal role in PPP oversight is less clear. As a financial partner in PPPs (through TIFIA, Private Activity Bonds, TIGER grant program and other financial mechanisms) the federal government  has a legitimate interest in and shares the responsibility for protecting the public interest. But a highly regulated oversight of PPPs at the federal level would preempt state authority and could have, in the words of more than one speaker, a "chilling effect" on private sector participation in infrastructure investment.

The proposed federal Office of Public Benefit (OPB), which would have the authority to approve or disapprove all tolling and PPP projects on a case-by-case basis, came in for special criticism. OPB represents "regulatory overreach" that could stifle partnership initiatives and  discourage private investment in infrastructure,  many participants asserted. Private investors, it was alleged, may be reluctant to develop costly project proposals if there is a risk that federal approval will be withheld even though the project conforms to all state legislative requirements and has been selected and approved by the governor and the state DOT.

Striking the proper balance between the federal interest in protecting the public interest and the states' right to determine the appropriate level of private sector participation and to exercise oversight over the contractual PPP process will be a critical challenge in designing future federal legislation. The prevailing sentiment among the conference participants was that the proper federal role should be one of encouraging rather than inhibiting public-private partnerships. The responsibility to regulate PPPs and ensure that they protect the public interest should be reserved to the states.

In expressing their opposition to strict federal oversight, the Governors were reaffirming their official position as adopted in the National Governors Association Policy Statement on Surface Transportation (July 20, 2009). That statement, in a section titled "Non-Traditional Financing," states that the Governors "oppose any federal restrictions on states' ability to pursue public-private partnership arrangements to address their own infrastructure needs. ... State and local authorities, as the owners and operators of the surface transportation system, must determine the appropriate level of private sector participation in their surface transportation programs. Governors oppose any efforts to condition federal financial investment in state transportation programs to any mandate for a particular level of private sector participation."

Strong opposition to federal oversight of PPPs was also registered by Patrick Jones, Executive Director of the International Bridge, Tunnel and Turnpike Association, speaking at IBTTA's Legislative Conference on March 22. An AASHTO spokesman at that conference stated that his organization supports "maximum state discretion to make decisions to engage or not to engage in PPPs."

U.S. DOT Comes Out in Favor of PPPs. More support for PPPs came from Under Secretary of Transportation for Policy Roy Kienitz. Testifying on March 11 before the Senate Environment and Public Works (EPW) Committee, Kienitz said the Obama Administration hopes to increase the use of public-private partnerships to help meet the nation's growing infrastructure needs. The Under Secretary urged increased funding for the Transportation Infrastructure Finance and Innovation Act (TIFIA) program, the Transportation Investment Generating Economic Recovery (TIGER) grant program, and the Administration' s proposed National Infrastructure Innovation and Finance Fund (NIIAFF).

Online Debate on the "Appropriate Role for Public-Private Partnerships." The nature and extent of private sector involvement in transportation was also the subject of a recent online exchange on the "Tolling Points" website, the official blog of the International Bridge, Tunnel and Turnpike Association ("where transportation leaders raise and debate questions on important issues of the day").

The debate confirmed that there is widespread support for PPPs but no clear consensus concerning the level of public oversight or the desirability of PPP concessions involving existing roads. Robert Poole, Transportation Director of the Reason Foundation, contended that, "since political factors continue to make increases in federal and state highway fuel taxes modest and infrequent, we are going to need a large-scale increase in funding based on toll revenues to have any hope of closing the investment gaps." He was supported in this view by Geoffrey Yarema, former member of the National Surface Transportation Infrastructure Financing Commission, who argued that PPPs are not just a method of financing transportation infrastructure but also an innovative method of program delivery: they can lower costs, accelerate project delivery, and reduce public sector risk.

But support for PPPs was not unqualified. Some bloggers, such as Robert L. Darbelnet, President of AAA, urged that high levels of public oversight should be maintained. " Where it makes sense to pursue PPPs, the public interest must be the overriding consideration," Darbelnet stated. Bill Graves, President of the American Trucking Association, echoed these cautions. Public-private partnerships, he wrote, should only be considered as a viable option if used for the construction of new roads. Leasing existing roads for large upfront payments should be avoided. "The United States cannot maintain a national highway network if key segments are leased to the highest bidder."

Policy Toward PPPs is Evolving. The combined effect of these public and private expressions of views is bound to influence congressional lawmakers when the time comes to address the multi-year surface transportation authorization, most likely in the next session of Congress. Signs of a possible softening of the House position concerning tolling, PPPs and the federal oversight of PPP transactions have already appeared. Jim Kolb, Staff Director of the House Committee on Transportation and Infrastructure, speaking at the IBTTA Conference, affirmed that the Committee sees a role for tolling and PPPs as a supplement to traditional financing. He said that the staff is "open to discussion" on how to modify the original OPB concept to minimize the barriers to private investment while protecting the public interest. More insight about the Committee's future posture on tolling and PPPs can be expected at the forthcoming hearing on Innovative Financing to be held by the House Subcommittee on Highways and Transit on April 14.

Recent Reports on PPPs. In addition to the NCSL report, Public-Private Partnerships for Transportation--A State Legislators' Toolkit (still in draft form), three other recent reports provide a valuable addition to the literature on PPPs: (1) The Congressional Research Service recently released an updated version of its July 2008 report titled Public-Private Partnerships in Highway and Transit Infrastructure Provision. The report describes a wide variety of public-private partnerships, focusing on two types of highway PPPs: construction and operation of new infrastructure by private entities and leasing of existing public toll roads to the private sector that involve upfront cash payments. The report offers three policy options: incremental changes in the status quo; promotion of PPPs with regulations designed to protect the public interest; and deregulation of the state use of tolling and PPPs, with the federal role limited to providing guidance concerning good practices. (2) Another useful reference is FHWA's report, Public-Private Partnerships for Highway Infrastructure: Capitalizing on International Experience. (3) Finally, a privately sponsored publication titled, Benefits of Private Investment in Infrastructure (March 2010), presents the case for using private capital and offers recommendations for programmatic, regulatory and tax code changes. The publication was produced by the public relations firm Kearsage Global Advisors and was funded by leading private institutions active in infrastructure financing (Abertis, Allen&Overy, Barclays Capital, Carlyle Infrastructure Partners, Credit Suisse, Macquarie, Merrill Lynch, Morgan Stanley, RBC Capital Markets, Scotia Capital, Skanska, UBS, plus several leading law firms.)

With an agreement announced today at the New York International Auto Show, Ford and Microsoft will, according to the Associated Press, "work together on a computerized link between houses, electric cars and utility companies to help manage energy use."

The system would start with the all-electric Ford Focus compact car that is scheduled to go on sale late in 2011. Called "Microsoft Hohm," it will allow utilities to vary electric rates based on the time of day. A computer would determine the best time to recharge the car at the lowest cost and the least burden on the utility's generating system.

With this deal, the two companies are taking a major step toward addressing how to blend technology, vehicle advancements and energy. This is an issue that Discovery Institute's Cascadia Center has addressed as part of its "Beyond Oil" conferences in the last several years. At the 2009 conference, the all-electric Ford Focus -- appearing for the first time in the Northwest -- was among the key attractions for regional leaders.

"Ford is the first automaker announcing the use of Hohm..." according to the company's press release about the announcement. "Hohm will help owners determine when and how to most efficiently and affordably recharge battery electric (BEV) and plug-in hybrid (PHEV) vehicles. It also should help utility companies manage the added demands of electric vehicles on the electric grid."