Transportation Infrastructure: Building Hope for the Future

Transportation Infrastructure: Building Hope for the Future

As U.S. industry confronts the realities of a failing transportation system and looming capacity crunch, does MAP-21 offer the promise of improvement?

When Gil Carmichael discusses the feasibility of a national transportation plan, it’s apparent a huge and glaring need exists—but the solution is clear, and well within reach.

"When I visualize it, I get excited about what it could be and how easy it is to do—if we think intermodally," he says.

Carmichael’s years of experience as a former Republican nominee for governor of Mississippi and for the U.S. Senate, head of the Federal Railroad Administration under President George H. Bush, and founding chairman of the University of Denver’s Intermodal Transportation Institute have collectively shaped his designs for what he terms Interstate 2.0—a 21st-century new works program that invests in intermodal infrastructure and gets the U.S. economy back on track.

But he is also aware that, when it comes to this type of big-picture policy palaver, there are always caveats— the ifs and buts that get in the way of progress.

That knowledge breeds frustration—especially in light of recent events.

The May 2013 I-5 Skagit River Bridge collapse in Mount Vernon, Wash., recast a familiar story—one that was first exposed in 2007 when the Minneapolis I-35 Mississippi River Bridge buckled during rush hour, killing 13 people and injuring scores more. These two events attached a public face to a veiled problem. But in the six years between the events, little changed.

In 2012, the Federal Highway Commission reported that 11 percent of the nation’s 607,000 bridges were considered "structurally deficient." In 2007, the number was 12 percent. The American Society of Civil Engineers’ 2013 infrastructure report card assigned U.S. bridges a C+ grade, matching that of the U.S. rail network.

More disappointing, inland waterways and roadways, many of which were built as part of FDR’s Works Progress Administration and Dwight D. Eisenhower’s Interstate system, respectively, scored a D and D-. Even those ratings may be optimistic, given current circumstances.

As rumors of a manufacturing renaissance and natural gas boom stir optimism in an otherwise stagnant economy, the state of America’s transportation infrastructure offers a stark counterpoint. U.S. competitiveness is contingent on an efficient and economical means for moving people and product.

The agriculture industry has always been Exhibit A in this regard. What American agribusiness sacrifices in labor and production cost, it has always made up for with transportation and logistics efficiencies. The recent Midwest drought that ravaged crops, and Brazil’s inability to capitalize on this shift in supply because of poor infrastructure and a dearth of capacity, speaks to this long-standing U.S. advantage. But that edge is increasingly blunted. Global competitors are catching up, investing in transportation and logistics systems that complement and capitalize on low-cost labor.

At a federal level, U.S. transportation lacks direction. Consequently, state departments of transportation (DOTs) have been largely left to their own devices. Some excel; others are lagging. Most are turning over stones looking for new revenue sources. The burden of further taxation on both public and commercial services has only increased public distrust of a broken system.

If there’s one kernel of optimism, it’s that conditions could hardly be worse.

There’s no getting around the fact that U.S. transportation planning and funding has been heavily politicized in recent years. The U.S. Department of Transportation’s Transportation Investment Generating Economic Recovery (TIGER) stimulus offers a prime example. The $2 billion doled out to shovel-ready transportation infrastructure projects through the first three rounds of grants turned into a pork barrel lottery that favored local earmarks over utilitarian good.

The majority of projects awarded TIGER funding focused on mass transit and pedestrian- or bicycle-related improvements. Freight-specific projects received 33 percent, 36 percent, and 26 percent of the total pie in three successive sweepstakes.

For Carmichael, the solution is clear and simple—and draws less distinction between passenger and freight modes, because they are inherently linked.

"You cannot plan people movement without planning goods movement," he says.

As far as transportation goes, rail is the foundation, the most economical means for moving freight. Since deregulation, the railroads have demonstrated an earnest commitment to investing in infrastructure and developing their service capabilities.

Carmichael maintains that aggregating the strengths of each transport mode diminishes their individual weaknesses, providing a safer and more efficient means for moving people, product, and information.

This is the framework he uses to define intermodal. A new transportation mindset must consider highways, railways, waterways, and airways holistically because, he says, "the trip doesn’t end at the baggage counter."

With few exceptions, the U.S. supply chain is multimodal by necessity—yet transportation policy has failed to embrace this truth.

"Our transportation network, especially with freight, is a system of systems," says Randy Mullett, vice president, government relations and public affairs, for Ann Arbor, Mich.-based trucking company Con-way Freight. "Some intermodalism is not recognized as such—for example, UPS is the railroads’ single largest customer, and many trucking companies put their freight on rail."

Investment is often directed to areas where intermodal is most visible—alleviating congestion and bottlenecks around ports, for example.

But look at the totality of freight movements within North America, and a more telling picture emerges. Import-export container shipments may capture the greatest attention, but truckload moves the country.

"We focus 90 percent of our efforts on four percent of the freight," notes Mullett. "We forget the law of big numbers—that if we make a one-percent improvement in the other 96 percent, that’s better than a 50-percent improvement in the rest. Sometimes we get myopically focused on one particular transportation leg or situation, and miss the entire pie."

Mapping the Future

This myopia is what Carmichael and others at the University of Denver’s Intermodal Transportation Institute are trying to rectify with their Interstate 2.0 vision.

Since Eisenhower’s Federal-Aid Highway Act of 1956, a succession of transportation bills have aimed to build upon this foundation. But these legislative meanderings have failed to coalesce into a concrete blueprint. In many ways, the manner in which Congress has tiptoed around transportation planning over the past two decades reflects the aimless direction of state DOTs in today’s landscape.

Carmichael believes the 1991 Intermodal Surface Transportation Efficiency Act, which he contributed to, was a step in the right direction because it addressed the intermodal nature of U.S. transportation, and created a funding mechanism to support collaboration. But what should have jumpstarted a new era in transportation planning devolved into a series of stops and starts.

The most recent legislation—the two-year Moving Ahead for Progress in the 21st Century Act (MAP-21) transportation bill, which President Obama signed into law in July 2012—offers a glimmer of hope that the tide is shifting.

For one, consensus is growing that freight transportation need should be prioritized over other public transit efforts. Funding for bicycle and pedestrian transportation projects has been reduced and consolidated under a broader Transportation Alternatives program.

"Legislators, particularly those interested in transportation issues, have recognized that the ability to move goods is key to economic growth and our ability to sustain it," Mullett says.

MAP-21 features two noteworthy provisions. First, it requires the U.S. DOT to establish a national freight network to assist states in strategically directing resources toward improved freight movement on highways.

Second, MAP-21 directs the DOT to develop a national freight strategic plan in consultation with states and other stakeholders. This plan includes:

  • Assessing the condition and performance of the national freight network.
  • Identifying highway bottlenecks that cause significant freight congestion.
  • Forecasting freight volumes.
  • Identifying major trade gateways and national freight corridors.
  • Assessing barriers to improved freight transportation performance.
  • Identifying routes providing access to energy areas.
  • Identifying best practices for improving the performance of the national freight network and mitigating the impacts of freight movement on communities.
  • Providing a process for addressing multi-state projects and strategies to improve freight intermodal connectivity.

MAP-21 will help states collectively recognize freight corridors they need to pay attention to, Mullett says. It also helps provide a framework where different DOTs can collaborate and work toward common goals.

"Funding mechanisms will encourage this," Mullett explains. "Once a project is designated, the percentage of federal funds that can be earmarked toward it escalate."

States of Discontent

When it comes to transportation funding, states are looking for direction. Following the 2012 election-year cycle when politicking took precedence over policymaking, a rash of news items documented the challenge state DOTs face as they assess infrastructure needs and identify how to subsidize these efforts.

In early January 2013, Ohio Governor John Kasich announced plans to issue $1.5 billion in new bonds through the Ohio Turnpike Commission (OTC) to fund transportation projects in northern Ohio.

"It began with the $1.6-billion deficit in our highway funding program, an inadequate gas tax formula, the reality that we were getting less federal funding every year, and recognition that we can’t build the roads we need within this existing framework," says Jim Riley, director of innovative delivery for the Ohio Department of Transportation.

The state had a number of options on the table: commit to a 50-year lease that would generate up to $4 billion in revenue, but incur regular toll increases; merge the OTC with the state DOT to gain economies of scale in managing operations; or maintain the status quo and issue bonds backed by future toll revenue.

Ohio DOT and OTC conducted a comprehensive operational and technical analysis that fed a financial model to determine the value it could derive from each alternative.

"As the study evolved, the administration saw positives in all the options, and began thinking about how they wanted to best implement from a policy perspective," Riley explains. "Then they moved toward the status quo, seeing how we could leverage what we already had and not compromise the turnpike’s independence."

The decision not to privatize, and thereby maintain control of its infrastructure, was a public relations windfall—an important consideration in terms of building public trust. One challenge transportation authorities regularly face is getting the public to understand the importance of transportation infrastructure and funding.

"The perception is that with private sector involvement, road conditions wouldn’t be as good," explains Riley. "That perception has an impact. The biggest issue is toll policy control. Assigning that for 50 years was not a direction this administration wanted to go."

Other states have found similar difficulty coaxing support for transportation infrastructure improvements. Raising tolls to fund projects is a necessary evil that often earns the voting public’s wrath. That’s when it becomes political.

Washington State Representative Jan Angel (R-Port Orchard) has been working to identify innovative ways to offset toll increases. In 2012, she began exploring the feasibility of selling naming rights to help mitigate a toll rate escalation plan for the Tacoma Narrows Bridge.

"Tolls are used to pay for the debt service, and these rates were set with a forecasted number of cars crossing the bridge," she says. "But the forecast was inaccurate. So I started thinking about what could be done to get additional revenue for this debt service, rather than hitting up drivers who were already paying higher tolls."

Angel began looking to draft legislation that would allow the sale of naming rights for bridges, ferries, parks, and other public facilities, while ensuring that money wouldn’t be swept into the general fund.

Throughout 2012, she sought input from consultants as well as other states—notably Virginia, which has passed such legislation—to build a case for taking Washington in a similar direction. Ohio has since launched its own Sponsorship, Maintenance, Advertising, Revenue, Targeted (SMART) program to similarly assess statewide assets and identify potential sponsorship opportunities.

Angel got a hearing on the bill, during which the Transportation Commission testified that it had studied the possibility of naming rights for its ferries, and had identified a benefit as well. But the bill died in committee. Instead, newly elected Governor Jay Inslee has now raised a similar idea for monetizing park-and-rides.

In light of the I-5 Skagit Bridge collapse, Washington’s transportation priorities are under the microscope. The state has been tasked with determining how to generate new revenue to fund infrastructure improvements. A $10-billion transportation package currently on the docket, which features a 10.5-cent gas tax increase, has hit one roadblock after another. The state is also mulling the possibility of taxing electric/hybrid vehicle users who are skirting the gas excise tax.

Trying to persuade the public that an increase in tolls or taxes is necessary to invest in infrastructure that supports the greater good is a recurring challenge for state legislators. People are more easily swayed by projects that impact their quality of life in a transparent way. It’s why special interests have had great success lobbying for, and steering pubic funding toward, pedestrian and public transport projects.

In Mississippi, Gil Carmichael has found similar inertia. He is currently trying to convince state officials to assess and preserve railroad rights-of-way—old assets that have new value in his Interstate 2.0 plan—in lieu of letting them grow economically fallow by converting them to foot or bike paths.

Call to Action

If there is one positive outcome of the Minnesota and Washington bridge failures, it’s that government has greater leverage to make the case for policy action. "It’s difficult to get the public to understand how improving a piece of interstate or a bridge 200 miles from their city helps them economically," says Mullett.

That’s especially true when, in a fit of urgency, infrastructure repairs can be made at an accelerated pace. After the Minneapolis bridge collapse, a replacement span was built in little more than one year, and well ahead of deadline. That it takes years of planning and approvals to otherwise green-light projects contributes to rampant public skepticism.

"If you can’t make the economic argument, or the goods movement argument, you can make the safety argument," Mullett notes. "It gives transportation officials and legislators another arrow in their quiver."

Still, funding remains the sticking point. The Highway Trust Fund—an accounting mechanism in the federal budget that comprises two separate accounts, one for highways and one for mass transit—is not sustainable. The Congressional Budget Office has acknowledged that the fund will become insolvent by 2015.

To fill the coffers, Congress can raise fuel taxes, reduce spending, or look elsewhere to siphon money, which has been the option of choice over the past several years, a cosmetic fix that fails to address the root problem. While some hope that the two-year MAP-21 bill will address some of these concerns, it, too, is a product of this dysfunction.

Transportation strategy needs to dovetail with energy policy—the two go hand-in-hand. Freight is not only a fuel consumer, but a fuel mover as well. Whatever direction the United States follows with regard to energy policy will have a direct impact on transportation.

"As an example—and this is a big leap—if 30 years from now we have moved beyond coal consumption, that will free up a lot of rail capacity," says Mullett. "But will this capacity be in the right places?

"Pipelines are another example," he adds. "People forget how much bulk liquid is moved in this manner. If pipeline capacity isn’t there, the cargo is going on road and rail.

"Freight doesn’t go away, it goes somewhere else," Mullett notes. "These are the kinds of questions and long-term planning we need to consider."

This is why Carmichael believes his Interstate 2.0 vision has legs. "Steel wheels on steel rails is the most fuel-efficient and safest way to move people and goods," he says. "And it meets the parameters of an ethical transportation system: it doesn’t kill, pollute, or waste fuel, and it’s economical. We can design and build a freight and passenger intermodal system within those parameters, and we can price and tax our fuel so that it doesn’t add to the deficit."

The sustainability play is an important consideration given public concerns and Obama administration directives. Intermodal transportation, especially via rail and inland waterways, meets this need and serves as a platform for more innovative green solutions. It does not compromise U.S. economic competitiveness like a carbon tax would. It’s a non-partisan position that public and private sectors can rally around—a win-win scenario for industrialists and environmentalists alike.

Meeting Future Demand

While America’s energy trajectory is still a wild card, Mullett believes one truism is inevitable: freight volumes will increase, placing additional strains on capacity. Consequently, planning for the future will require a systemic approach to infrastructure development.

Freight volumes for all modes will grow more than 20 percent in the next decade, according to the American Trucking Associations’ U.S. Freight Forecast to 2024. The trucking sector will absorb some of this growth; its share of total tonnage is expected to expand from 68.5 percent in 2012 to more than 70 percent by 2024.

"Several modes don’t have 20 percent more capacity in them," notes Mullett. "The way the country funds and builds infrastructure, it’s nearly impossible to build our way ahead of that growth curve. These constraints are forcing people to consider other levers we can pull to get more throughput in our existing systems."

Transportation policy will play a role, whether it’s a matter of amending truck productivity regulations—notably Hours- of-Service and truck weight restrictions—or rethinking intermodal in the same vein that Carmichael and others have endeavored. Short-sea shipping is another transport mode that has been largely ignored in North America because of cabotage rules.

A looming capacity crunch—something the United States hasn’t experienced in more than five years—will likely force the issue. Artificially low interest rates that have afforded companies greater flexibility to hold inventory will probably rise, placing more pressure on faster transport modes such as air, truck, and van-to-rail.

"That takes capacity away because you boost the velocity of the entire system," notes Mullett.

Some policy moves cost far less, but are hard decisions because they pit one mode against another. "Politicians generally aren’t very good at playing that card," he adds.

Carmichael agrees. "We have to refigure the way we tax fuel," he adds. "That will frame how we build this new intermodal system. Highway lobbyists are scared that railroads will get this money."

Adversarial hubris won’t die easily. But modal collaboration will be pivotal moving forward. The U.S. transportation system is only as strong as its weakest link. If pipeline capacity can’t accommodate oil shipments, and agriculture shippers can’t move product via inland waterways—as occurred in 2012 when extreme drought and flooding conditions impeded river traffic—rail and truck assume a greater burden.

"If we close up that system and it can’t flow freely—maybe it’s infrastructure related, a flood, or policy—that freight still has to move," says Mullett. "It transitions to the next efficient mode—rail. When rail hits capacity, it moves to truck.

"We’re not just messing with the inland water system, we’re putting false capacity constraints on the entire system," he continues. "It’s not only driving up the cost of bulk commodities, but the cost of delivering everything. Take away water transport, and it puts more strain on the system in terms of capacity as well as infrastructure."

To see U.S. transportation as anything less than an interconnected network of modes—or a "system of systems" as Mullett suggests—is foolhardy. Legislation has to respect this reality. When capacity tightens, inventory will seek its own level across all modes. Infrastructure cracks will only get worse as freight volumes increase.

MAP-21 provides a structure for states to purposely engineer their own freight transport strategies—from funding to approvals to execution. The hope is that leaders will set an example that others—perhaps even the federal government —can follow.

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