4.8.19

THE STATES ARE IN THE TRANSPORTATION BUSINESS.

In National Review, Robert Poole, a regular Reason Foundation transportation wonk, suggest that they behave accordingly.
It’s not hard to see that there is something fundamentally wrong with the way we fund and manage the highways we all depend on. Highways are one of our basic public utilities — along with water, electricity, natural gas, telephones, etc. Yet we don’t have huge political battles over how to pay for those utilities. Every month you get a bill from your electric company, water company, phone company, and satellite or cable company. You pay for the specific services you used, and the money goes directly to the company that provided those services. None of that is true for highways.
There's more to this discussion than whether using tax revenue from gasoline sales on governmental functions other than road repair or traffic enforcement at work, although in Wisconsin, there are elected officials who would like to reduce gasoline taxes with the implementation of tolls on the interstate highways.  "[Now former governor Scott] Walker was cool to the idea [of making the interstates toll roads]. He said he would go along with implementing tolling or raising the gas tax if other taxes were cut by an equivalent or greater amount." There are times to think about revenue neutrality, but not when you have an asset that isn't paying off.

Mr Poole extends the argument that the highways are assets to the possibility of selling them to operating companies.
That means each highway needs an owner. Highway customers should pay their highway bills directly to that owner, based on how much they use the roads and how damaging their vehicle is to the pavement. The owner should assess the need for new links or more lanes, and finance the construction by issuing long-term revenue bonds. Of course, as with any other major construction projects, they should have to comply with existing planning and environmental regulations.

This might sound like a libertarian fantasy, but it’s a model with a long history that stretches into the present day. Private turnpikes were the main inter-city roadways in 18th and 19th century Britain — and 19th century America.
I kind of like the idea of selling the interstates to joint ventures of motor carriers, but that's getting ahead of my story.
Highway owner/operators have strong incentives to properly maintain their facilities, so that customers willingly pay to use them. (In fact, those who purchase the revenue bonds insist on proper maintenance for this very reason.) With per mile toll charging, they have reliable, bondable revenue streams that make it possible to finance large-scale reconstruction, widening, etc. when it’s needed, not someday in the future when the money is somehow cobbled together.

Chronic expressway congestion has a twofold solution: Market pricing brings demand into balance with supply, which in this case means capacity, but it also generates the funds to expand capacity to what makes sense for current and projected traffic levels. Like a cell-phone company, a highway company wants to have the capacity it needs to provide good service — and unlike the state, it will have the means to pay for that additional capacity.
That approach sounds more promising than the current repeating cycle-of-crisis where from time to time a pork-laden infrastructure bill gets reported out of Congress to give the impression of Doing Something.

Mr Poole partners with Badger Institute president Mike Nichols to attempt to square the double-taxation circle the now former governor drew.  " Modern technology makes it easy to rebate fuel taxes paid by drivers on electronically tolled roads. This should satisfy concerns about double-charging users."  Why?  The toll is a capacity charge, and the fuel tax is a usage charge.  That's common in utility bills.  There's a new governor in Madison, and yet, paying for the roads (and the road repairs: potholes became a campaign sound bite north of the Cheddar Curtain last year) still takes more than general revenues can cover.
More than 20 percent of all Wisconsin transportation fund revenues already go toward debt service instead of improving our roads. The state spends over a half-billion dollars every year just servicing transportation-related debt.
The roads are assets, but the state is not using the assets to generate revenue; and hoping to generate enough tax revenue in other ways to service the debt just because is wishful thinking, not good business.

In his National Review column, Mr Poole also writes, "You may see the merits of this case yet despair over how such a large change could ever come about. But continuing the status quo is untenable."

Heck, if the status quo is untenable, why not contemplate even larger changes?  Let's start with something I wrote a year ago, taking a look at a smaller traffic sink, namely surface carrier corridors into the container ports of Los Angeles and Long Beach.  "Nor do I see any reference to incentives to make more effective use of the existing rail corridor, something that the railroad companies and the truckers might consider in the presence of tolling."

Let's continue with an observation I made about mixing freight and passenger trains on the same railroad.
[L]ook closely at the Union Pacific map. Why are there two lines between the Chicago area and Milwaukee? Once upon a time, the two tracks closest to the lake were primarily for passenger service, the two tracks inland, which bypassed downtown Chicago, were for freight.

Many of these tracks are now gone, and the legal relationship between Amtrak and the freight railroads is not good. If the freight trains have to be held in order for the passenger trains to stay on schedule, do the railroads not have a case that a regulatory taking is in effect? Who, then, has the responsibility for providing the additional tracks? [Michigan State's Andreas] Hoffrichter sees a role for public spending, infrastructure, if you will. "Dramatically expanding rail use, particularly passenger service, will require government investment in more frequent service on existing lines, starting service to areas that don’t have access to rail currently, reducing journey times and building out a larger passenger rail network." Whether Our Political Masters will go along remains to be seen.
A lot of those casual rail enthusiasts who sought photo opportunities of Big Boy a week ago might have learned about that freight main.  It also could figure in Wisconsin's infrastructure plans.  "Wisconsin officials announced plans to add three Amtrak Hiawatha round trips to the Chicago-Milwaukee route over the next five years, and should be able to add two of those trains with or without cooperation from Illinois."  The Illinois part is a consequence of well-off residents of a few northern suburbs objecting to the restoration of freight and passenger train frequencies to levels short of those immediately after the end of the War.  In Wisconsin, though, there's this.
Those improvements include a bypass that would allow freight trains to avoid the downtown Milwaukee station and a second platform at the Mitchell Airport station. The airport station project has already received federal funding. The state has committed $35 million in funding toward the Hiawatha effort in its 2019 to 2021 budget.

The Racine Journal-Times reported that the Wisconsin transportation department is completing an analysis of the infrastructure improvements needed on the Canadian Pacific- and Metra-owned route, then will work with those railroads and the Illinois Department of Transportation to complete those improvements.

Even after Illinois officials withdrew support for the sidings, they said they were still committed to expanding service, a commitment Thompson reaffirmed Wednesday.
The second platform at the airport is long overdue: currently all passenger trains must be on the east track between the Milwaukee Depot and Lake or the new crossover near Caledonia; with the trains often meeting at or near Sturtevant where there are two platforms, the dispatcher has a regular headache.

That freight bypass is the restoration of an old idea, one that will be more difficult now that Miller Park occupies much of the space once devoted to The Milwaukee Road's yards and shops.  There still is at least one track deviating from the passenger main at Cut-Off and rejoining the passenger main on the south side of Milwaukee.

There is, however, another option, involving the Union Pacific Freight Main, that an entrepreneurial state department of transportation might consider.  Canadian Pacific won't add more Hiawatha frequencies, they say, without a little help from Illinois.

Canadian Pacific are a tenant on other railroads from Rondout, a junction near Libertyville, Illinois, to the former Milwaukee Road classification yard in Bensenville.  From Rondout to Northbrook, they are on Metra tracks, with commuter trains given priority, and the controversial sidings in Glenview are required to park freight trains that would otherwise interfere with the commuter service.  From Rondout to Bensenville they are on the Union Pacific Freight Main, and those sidings might come in handy when Union Pacific want to get their train by first.

Here's where things stand, anyway, Amtrak and the state departments of transportation not thinking like businesses.
In any case, adding round trips would require an additional trainset with cars and locomotives that won’t be available for at least three years. However, the most-needed rush hour departures are set to operate in conjunction with Metra trains south of Rondout when CP movements are already sidelined at those times of day.

Canadian Pacific’s decision to release the letter a month after it was written indicates the railroad initially chose to keep negotiations private, but was not a part of what it considered to be any meaningful discussions with WisDOT before the agency publicly indicated that it was seeking more frequencies.

WisDOT’s Passenger Rail Manager Arun Rao told Trains News Wire in May, “The big issue is finding a solution to the capacity and infrastructure needs of the railroads.” Rao has not yet responded to inquiries whether CP’s letter might impact future negotiations or the department’s investment plans.
What would happen if Wisconsin sought ownership of the Freight Main, with the intention of putting all Canadian Pacific freights on it at Washington Street south of downtown Milwaukee, to join with Union Pacific freights at St. Francis, and if Wisconsin and Illinois put double track and a few recessing sidings back on the Freight Main?

Suppose, in addition, that Wisconsin took this Badger Institute idea seriously.  "[A tolling study] could assess value-added features for trucking companies, such as lots of safe overnight parking spaces with various other services, including electric vehicle recharging and alternative fuel sources."  I like the idea of such a truck park near a railroad, with incentives for truckers to contract for rail delivery to the truck park, perhaps with favorable toll treatment on such moves.

The mind considers all sorts of possibilities.  Here's Charles "Strong Towns" Marohn on the possible negative going concern value of Interstate 80 across Wyoming.
What do we do with an interstate across, say, Wyoming, if the traffic counts aren't high enough for the state to justify maintaining the roadway? I don't think this is likely, and I think the negative ramifications to the Wyoming economy of letting this system go bad would preclude it happening, traffic counts or not. Nonetheless, we could theoretically face this situation. If that is the kind of thing that keeps you up at night, you have some real paternalistic/materialistic tendencies that my more pragmatic worldview just can't reconcile.
Perhaps Union Pacific don't want to solicit for a 500 mile piggyback haul (Julesburg to Salt Lake) but perhaps Wyoming could contract to run such trains. We're going to have to take a closer look at how public money gets put into trains: the existing preference for Amtrak might well be a regulatory taking; at the same time when public money goes into upgrading freight railroads, perhaps that money ought be conditional on the provision of capacity for (at the moment) local, state, or federally supported passenger trains.  If the Interstates can't pay their own way, that doesn't mean there isn't some transportation option that can (even if it costs more, but if you introduce the possibility of trade-tested betterments ...)

In conclusion, though, I suspect that any serious attempt to introduce market principles into the provision and use of roads just might induce entrepreneurial behavior from the railroads, even if the state departments of transportation have to take the lead.

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