Transportation Finance: Meeting the Funding Challenge Today, Shaping Policies for Tomorrow (2005)

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The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. On the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Bruce M. Alberts is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. William A. Wulf is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters per- taining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, on its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to asso- ciate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both the Academies and the Institute of Medicine. Dr. Bruce M. Alberts and Dr. William A. Wulf are chair and vice chair, respectively, of the National Research Council. The Transportation Research Board is a division of the National Research Council, which serves the National Academy of Sciences and the National Academy of Engineering. The Board’s mission is to promote innovation and progress in transportation through research. In an objective and interdisci- plinary setting, the Board facilitates the sharing of information on transportation practice and pol- icy by researchers and practitioners; stimulates research and offers research management services that promote technical excellence; provides expert advice on transportation policy and programs; and disseminates research results broadly and encourages their implementation. The Board’s varied activities annually engage more than 5,000 engineers, scientists, and other transportation researchers and practitioners from the public and private sectors and academia, all of whom contribute their expertise in the public interest. The program is supported by state transportation departments, fed- eral agencies including the component administrations of the U.S. Department of Transportation, and other organizations and individuals interested in the development of transportation. www.TRB.org www.national-academies.org

vPreface In October 2002, approximately 350 people assem-bled in Chicago, Illinois, to participate in the ThirdNational Conference on Transportation Finance. The conference brought together individuals from the transportation, finance, and public policy communities at national, state, and local levels and from both the public and the private sectors. The public sector was represented by federal, state, and local government officials and managers of transportation assets such as airports, seaports, and toll roads. Private-sector partic- ipants included investment bankers, financial advisors, design and construction professionals, attorneys, developers, credit analysts, journalists, and consultants in the transportation sector. As the third in a series of national transportation finance conferences sponsored jointly by the Trans- portation Research Board of the National Academies and the Federal Highway Administration, the confer- ence continued the dialogue on the challenges of financ- ing the nation’s transportation systems and provided a forum to exchange perspectives on what has worked, what has not, and what might be tested. Given the tim- ing of the conference—as proposals were being devel- oped to be part of reauthorization of the nation’s surface transportation and aviation programs—special attention was paid to considering new approaches for the future. The Third National Transportation Finance Conference had two primary objectives: 1. To educate federal, state, and local officials regard- ing new transportation infrastructure and operations financing mechanisms, their structure, and the benefits and costs of implementing such techniques and 2. To explore the development of additional new funding mechanisms and sources. CONFERENCE PROGRAM The conference program was designed to maximize the exchange of information and perspectives among pro- gram participants. In addition to the standard panel sessions—16 organized around four substantive tracks—each panel included a discussant, whose sole function was to energize the question-and-answer period and spur discussion following the panel presen- tations. Two general sessions were devoted to recap- ping the highlights of the panel sessions and further stimulating the exchange of views among conference participants. Four preconference workshops were provided to give participants at all levels a chance to brush up on the state of the practice of transportation finance. By the close of the conference, participants not only had collected a significant amount of information but also had exchanged perspectives and built a dialogue for the upcoming legislative debates at the national level. As with previous conferences, the Committee for the Third National Conference on Transportation Finance has recommended a continuing round of con- ferences in the coming years, especially soon after the reauthorization of federal surface and aviation trans- portation programs. Other recommendations of the

committee can be found in the section on committee findings and recommendations. ACKNOWLEDGMENTS This report has been reviewed in draft form by individ- uals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the National Research Council’s Report Review Committee. The purposes of this independent review are to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process. The conference committee thanks the following indi- viduals for their review of this report: John Bartle, University of Nebraska at Omaha; Jeremy F. Plant, Pennsylvania State University; Michael A. Vaccari, Nixon Peabody LLP; and Jenifer Wishart, International Finance Corporation. Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the conclusions or recommenda- tions, nor did they see the final draft of the report before its release. The review of this report was overseen by C. Michael Walton, University of Texas at Austin. Appointed by the National Research Council, he was responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authoring committee and the institution. The committee thanks Suzanne H. Sale of the Federal Highway Administration for providing the vision and encouragement that made the conference the success that it was and Paul Marx of the Federal Transit Administra- tion for his instrumental participation in the development of the conference program. The committee also thanks Tamar Henkin and Karin DeMoors of TransTech Man- agement, Inc., who prepared this report on behalf of the conference committee and supported the committee in development of the conference program and invitation of selected speakers and participants. v i TRANSPORTATION FINANCE