Five Principles of Responsible Transportation Policy
Posted on October 14th, 2009
In the last session (2009), the Arkansas Legislature formed the Arkansas Blue Ribbon Committee on Highway Finance. The full committee membership may be found here. The committee is also broken into two subcommittees: the New Revenue Subcommittee and the Revenue Transfer Subcommittee
One of the stated purposes of the Blue Ribbon Committee on Highway Finance in the enabling legislation is to define an equitable and adequate system to properly finance improvements to the systems of state highways, county roads, and city streets within the state. This was a key provision in the bill that influenced me to vote for it. Unfortunately, this purpose has received little attention, if not outright ignored. Instead the majority of the emphasis to date has been on what tax could be “sold” to the Arkansas voters. I can foresee the day coming when Republican legislators are going to be asked why they are voting against highways, when in reality, they will be voting against an ill considered tax for even more ill considered plans of irresponsible transportation policy. I, and most other Republican legislators, believe that transportation infrastructure is a legitimate and important use of Arkansas taxpayer’s dollars… if it is raised, distributed, and utilized in a responsible way.
Therefore, I would like to encourage five principles of responsible transportation policy to help guide policymakers in returning to a system that provides people’s freedom of movement.
1. Tie spending to specific and objective performance measures, like traffic relief and economic development
Congestion relief is the most basic tenet in transportation policy, yet most people are surprised to learn it is not a priority in Arkansas. Even though Governor Beebe continues to state the same promises he made in his campaign that “money should follow the cars”, he also continues to fail to take any leadership responsibility in making it happen. He goes as far as even denying that one clearly stated purpose in the enabling legislation of the committee is to define an equitable and adequate system to properly finance improvements to the systems of state highways, county roads, and city streets within the state.
Recent press articles:
- Highway Panel Eyes Funding
- Highway Funding Divisive
- Highway Funding Stirs Lawmakers
- Panel to Consider New [and] Existing Sources for Road Funding
Let me be clear, I am NOT claiming that we should be telling the Arkansas Highway Commission which roads to build or even specifics on how the resources are to be allocated. However, I am strongly claiming that we should strengthen the link between spending and traffic relief by adopting strict performance-based measures. We need to develop a comprehensive transportation policy that incorporates preservation, safety, mobility, economic development, environment, and good stewardship of taxpayer dollars.
Strengthening the tie between spending and traffic relief does not sacrifice safety or preservation. These are not competing priorities. Traffic relief and safety/preservation can happen simultaneously, as long as we stop spending money in areas that do not relieve congestion. If economic development is indeed a criteria for infrastructure investment, then objective performance metrics need to be established. Arkansas policymakers should create specific performance measures and create a stronger link between spending and desired outcomes. A good place to start would be the 2009 Urban Mobility Report. Unfortunately, I doubt the Arkansas Blue Ribbon Committee will ever see that report.
In business, measuring performance is a way of life. It is viewed as an indispensable tool that shapes decisions on resource distribution. In the public sector, however, performance measures are treated more like an inconvenience. This is especially true in transportation policy.
Across the country, transportation spending decisions are too often tied to political agendas and the wishes of influential constituencies, not objective measures of public need, such as safety, traffic relief, and economic development.
Unfortunately, as usual, we are going about things backwards. First we start off by trying to create a marketing strategy to market an unspecific and undiscussed tax increase. But even determining the specific tax increase is premature if you have not established a rigorous and performance based transportation policy. The Arkansas Blue Ribbon Commission has the cart before the horse and the horse before the carrot.
2. Respect people’s freedom of mobility
Government serves society, not the other way around. Policies that force citizens to behave differently than they normally would disregards the natural marketplace of society and ultimately threatens to take away political freedom from its citizens.
Likewise, government policies in transportation should be responsive to the market and improve the freedom of citizens to live and work where they choose.
Manipulating transportation policies to force a particular behavior coerces people to abandon their individual liberties in favor of a socialistic benefit where supposedly, a greater collective good is created.
These measures always fail because of what Milton Friedman called, “one of the strongest and most creative forces known to man,” rational self interest; or people’s desire to do what they believe is best for their own lives.
Instead, proponents of social change should work in the marketplace of ideas to persuade others to share their vision and work towards it. They should not use the power of government to force through their own ideas, but should seek to change policy, if that is needed, once reform is broadly supported by the public. Policymakers should respect people’s choices and allow for a greater freedom of their mobility by actively working to reduce traffic congestion.
3. Deploy resources based on market demand
Transportation resources should be distributed based on natural market demand rather than the current system of building infrastructure that is somehow meant to attract demand.
In economics, supply is a function of demand. This means a willingness to use a service must exist before a supply of that service is created. Boeing executives do not make 300 airplanes knowing they will only sell 100. Likewise, governments should not spend a disproportionate amount of taxes in low demand sectors, where the public’s willingness to use the service does not justify the investment.
European and U.S. transit systems provide good contrasting examples of how these economic concepts apply.
European countries are often believed to have highly successful public transportation networks and one of the more familiar systems is Switzerland. Switzerland lies in the center of Europe and is an important transportation hub for both freight and passenger traffic throughout the continent. The Swiss system is primarily successful, not because of the amount of service or infrastructure, but because they have certain demographic and economic characteristics that induce demand.
In other words, there is an existing market with a natural customer base and Swiss policymakers responded with proportional infrastructure investments. As a result, mode share, ridership and fare box recovery are high.
In the United States, transit resources are distributed in just the opposite way.
Under the “build it, and they will come” theory, many policymakers think that increasing the supply of transit will somehow create more public demand. This speculative model fails because most U.S. cities do not posses the economic or demographic characteristics that create enough voluntary consumers for public transit.
Using the economic principles of supply and demand shows that building excess transit capacity before there is an equal amount of willingness to use it leads to an under-performing system. As a result, mode share, ridership and fare box recovery are low.
In any market, increasing the supply of a service or product before demand is available creates a large space between costs and benefits.
In the private sector, where benefits are measured by consumer choices, this type of behavior is unsustainable. A business will simply cease to exist once costs exceed benefits to consumers.
But in the public sector economic laws are not as strict. There is a higher tolerance for fiscal inefficiency because benefits are not always measured by consumer choices. There is also an element of public value.
In transportation policy, public value should be measured by freedom of mobility and traffic relief for the public. Therefore, policymakers can keep the space between costs and benefits small by separating projects that provide these values from projects that do not.
When prioritizing transportation projects, policymakers should use consumer demand to drive investments, not the other way around. Applying these time-tested economic principles in transportationpolicy will improve people’s mobility and reduce traffic congestion.
4. Improve freight mobility
Freight mobility possesses a significant economic role in transportation policy but ironically, the state’s investment strategy is an obstacle for improving the efficiency of moving goods.
The freight industry pays a large amount of the revenues the state receives from fuel taxes and vehicle registration and weight fees in Arkansas. Yet, very little goes to pay for freight-specific infrastructure. The industry is forced to rely on projects that prioritize other transportation areas. The theory is, “what’s good for one mode is good for all modes.”
The problem is that transportation spending is based on other agendas, rather than congestion relief, and not surprisingly, freight mobility suffers.
According to the Federal Highway Administration, it costs the freight industry $32 for every hour of traffic delay. In 2004, that amounted to about $7.8 billion nationally. That means the cost of getting goods to market includes nearly $8 billion directly attributed to traffic congestion.
Policymakers must acknowledge that congestion relief is possible and look for cost-effective solutions that measurably reduce delay. While applying these principles to transportation policy that will improve freight mobility, policymakers should also consider:
- Creating a freight investment account for freight specific projects, by rededicating existing revenues
- Increasing heavy rail capacity to allow medium and long range freight more choice to shift from roads to rail
- Creating freight-only lanes/corridors to support local freight distribution
5. Utilize Public/Private Partnerships
Using the Public/Private Partnership (PPP) concept, policymakers can find effective ways to fund new projects, and to maintain the current transportation infrastructure. But relative to the rest of the United States, Arkansas has been slow to fully embrace the PPP strategy.
These partnerships can take many forms and, according to the National Council for Public-Private Partnerships, there are generally about a dozen types. They can range between mostly private to mostly public and several types incorporate a balance of both characteristics.
There are many benefits associated with a PPP. They include leveraging private dollars for public use, shifting risk from taxpayers to the private sector, and lowering overall project costs.
Other factors like public oversight, asset ownership, long-term maintenance, liability and labor, will dictate which PPP is a better fit. In Arkansas, these issues have been treated as obstacles and prevented partnerships from forming. Yet, these questions have been addressed by other states by adapting the various types of partnerships. Undoubtedly, these concerns are important but they should not deter the benefits of a Public/Private Partnership.
Partnering with the private sector is one way to increase financial resources and get roads built. Otherwise, funding problems become insurmountable, roads are not built and our system continues to deteriorate. Public/Private Partnerships have a proven track record across the United States and should be embraced by public officials in Arkansas.
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The post is adapted with permission from the Washington Policy Center publication titled Five Principles of Responsible Transportation Policy written by Michael Ennis
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