Tuesday 20 May 2014

Australian infrastructure lobbying group and motoring clubs call for radical reform

I reported on 27 March that Infrastructure Partnerships Australia had published a discussion paper called "Road Pricing and Transport Infrastructure Funding" which has essentially recommended a move from ownership and fuel taxes to distance based charges for road use, including mass, location and time of day components.

I have since had a chance to read the report, so that I can now give a more detailed review of the paper.  It's worth reading in its own right, at least because the way it is presented and structures the key issues is both accessible and logical.

It's notable for being a report commissioned not only by contracting sector lobby groups (who would traditionally be expected to endorse more construction), but also motoring clubs (who would traditionally be expected to endorse more construction and resist user charging).  This report is not pushing construction, and openly admits that big cities are unable to "build themselves out" of congestion, although there will be an ongoing need for new road capital investment.  It does support road pricing, and it also supports using some road pricing revenue to enhance public transport.  That is fairly revolutionary in thinking from these sorts of entities, and is to be applauded.  

It is important to note that not all Australian motoring clubs are parties to this report, but many key ones are.  It indicates a level of analytical rigour and honesty to admit that the future will be improved by measures that, on the face of it, many if not most motorists will be sceptical about.  There are plenty of motoring clubs worldwide that simply oppose user charges and call for more road construction to fix major problems, hopefully this report will catalyse some to apply some more economic rigour.
The report has a number of key things going for it:

- The key limitations of existing forms of motoring taxation are outlined.  Taxing ownership and fuel has major issues of equity, sustainability and lack of flexibility, which are not compensated for by simplicity.

- The benefits of user charging are made clear around network efficiency and addressing congestion.

- A range of options are looked at, and assessed at a strategic level according to some clear objectives

- A pathway of small steps to go forward with is presented.

- It has the endorsement of a number of several (although not all) motoring clubs in Australia.  Getting support from this lobby is crucial and important, given how influential it is.

It is worth reading in its own right, but I thought it would worthwhile providing a brief synopsis of the main points.   I have also included some graphics from the report, which is blatant plagiarism, but help to explain some key points.

Tuesday 13 May 2014

Belgian road pricing tender goes to preferred bidder status

The T-Systems led consortium has been selected as the preferred bidder for Belgium's distance based truck tolling system across main roads according to various media sources (e.g. Wirtschafts Blatt Austria in German).  

The consortium comprises T-Systems (76%) and Strabag (24%), with Belgacom as telecommunications partner.

Strabag subsidiary Efkon will provide the enforcement software and system technology, T-Systems will provide the communications and charging technology.  The contract is expected to be an availability charge basis.  Finalisation of contract is expected in July 2014 with 18 months for testing and implementation, with tolling starting in 2016.   The contract for construction and operation would be until 2027.

The contract will include 40 fixed enforcement sites and 40 mobile enforcement units.

There is no news as to whether any charging system for cars is also to be established.

Of course what's particularly peculiar about this piece of news is that it is not the Belgian Government doing this.  It is the three regional governments of Belgium operating in unison (Flanders, Walloon and Brussels).

Thursday 8 May 2014

UK Government to convert Highways Agency into a state owned company, but no change to road taxation

Whilst it is not strictly about road pricing, reform of management of the national highway network in England is of relevance, if only because of the profound absence of any discussion about how charging might be linked to the funding and management of roads.

What has been announced is the corporatisation of the Highways Agency, the executive agency of the Department for Transport that currently manages England's strategic road network.  What this means is that the new Highways company (let's call it England Highways Ltd.)  will no longer be a government agency, but will act as an autonomous company owned by the state.

Details of the reform are in this document, which is the government response to consultation on its plans and summarised in this press release.

Key components of the reform

-  A new company is to be established, with the Secretary of State for Transport listed as sole shareholder, to vest the contracts, property and staff of the Highways Agency;

- It will be empowered to manage, operate and maintain the strategic road network;

- The framework for governance will comprise Legislation, a Licence, a Framework Agreement, a Road Investment Strategy and Articles of Association;

- A Road Investment Strategy with a "long-term funding guarantee, a performance specification and a defined funding and investment plan" will be established.   This means there will be a commitment of funding over a set number of years (approximately seven years);

- There will be environmental performance responsibilities and incentives to improve environmental performance;

- The company will be required to co-operate with local authorities, emergency services and "other stakeholders";

- The public transport users' representative quango "Passenger Focus" will include a "Road User Focus" unit, and the Office of Rail Regulation will include a "Strategic Road Network Monitor" to ensure the new company  "delivers its commitments efficiently and effectively";

-  Legislation will amend planning powers to make the new company a statutory consultee for relevant planning applications.

There will be no powers for the new company to toll, as it will be funded from central government through its Road Investment Strategy guaranteeing state funding for a set number of years.  From that the company will implement the strategy, but its role in informing the strategy will be advisory.  So whilst it has independence and accountability, the decisions on what gets funded will still be undertaken external to the company.   Indeed, no mention has been made of private finance, indicating no push for PPP based financing, but rather a more traditional Pay As You Go model.

Friday 2 May 2014

US Federal Government to allow tolling of existing Interstate Highway capacity

In the United States, the Interstate Highway network has long been a source of pride.  One of the few really grand Federal Government projects that didn't involve defence or space that large numbers of average Americans regularly use.

Whilst it is an interstate network, unlike national highway networks seen in other countries, it is not managed by a single agency.  The name "Federal Highways Administration" (FHWA)  sounds like a body that would undertake this role, but rather the states take responsibility for looking after the parts of the Interstate network within their jurisdiction.  The FHWA oversees the allocation of Federal funds for this purpose, as well as Federal funds for other highways within states.  The FHWA also sets standards for highways, sponsoring research on highways and transport management.

Funding comes from the Highway Trust Fund, which is itself funded from hypothecated Federal fuel taxes, currently US$0.184 per gallon (US$0.048 per litre) for petrol and US$0.22 per gallon (US$0.064 per litre) for diesel.  It also receives tax revenue from a tax on tyres, a sales tax on trucks over a certain size and annual heavy vehicle tax.

It is well known that given that the fuel taxes have not been increased in 21 years, a combination of inflation and increasing fuel efficiency has eroded revenues to the Highway Trust Fund in real terms.  The shortfall is over US$10 billion a year, so that general Federal funding has been to subsidise plug the gap.  The approach being to use Federal legislation to authorise spending, and then worry about the revenue afterwards.

Of course, the Federal Government has reflected problems at the state level, with some states facing similar deficits on their own highways, they have chosen to use tolls to assist with funding highways.  Texas and Florida are notable for this, but many other states have done so too.  

Tolls on Interstate Highways were restricted to new capacity, being brand new roads or additional lanes on existing ones.  Now The Hill reports that the Obama Administration is willing to allow states to toll existing lanes to help fund projects.  The Transportation Bill that has been introduced into Congress would remove that blanket restriction, meaning that states may be able to charge existing roads as long as there are improvements to the highway corridor.

Associated Press reports:

The administration plan would let states toll interstates to pay for repair or replacement of the highways. Many interstates, built to last 50 years, are past their life expectancy and in need of more substantial repairs than simple repaving. States would also be allowed to introduce "variable tolling, tolls that change according to the time of day or traffic conditions. The tolls are designed to encourage more drivers to carpool or use public transit in an effort to relieve congestion.

So it appears that large-scale maintenance/renewals and improvements can all be justification for tolling, and on top of that tolling that varies by time of day to reflect demand.  This is a significant step forward and represents perhaps the single most worthwhile transportation policy measure that the Obama Administration has introduced.

The IBTTA has understandably applauded the move in a press release.  It should mean more tolling, and as such tolling where it can work.  That means places where the traffic volume can generate enough revenue, and the alternative untolled routes are significantly inferior, so tolls wouldn't divert traffic onto them (I can assume State DOTs can get the modelling for that right)

Is it enough?