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226 As an alternative to raising additional revenue in response to declining fuel-tax receipts, or perhaps as a complement, states could focus on strategies for reducing costs. This could involve striving for greater efficiency or paring the scope of DOT responsibilities to focus on core missions and either eliminating or devolving other activities. This appendix pro- vides assessments for these two strategies. J.1 Increasing Efficiency DOTs have in recent decades focused significant attention on increasing efficiency. This broad concept encompasses efforts to select investments that maximize social benefitsâ including improved economic, environmental, and equity outcomesâand to reduce the life-cycle costs associated with ongoing construction, maintenance, and administrative tasks. This strategy involves a range of new materials, technologies, and management approachesâincorporating strategic asset management, improved risk management, and greater reli- ance on performance measuresâthat some states have already employed to achieve dramatic increases in efficiency. J.1.1 Supportive Policies States have pursued at least three broad approaches for improving cost-efficiency: adopting advanced materials and technologies, inclusive of information technologies aimed at more effective asset and risk management; contracting out for certain services; and structuring incentives tied to mea- sured performance measures (described in the following as performance-based accountability). Adopting materials and technologies that lower DOT operating costs. Maintaining and operating existing high- way facilities consumes large shares of the budgets of most state DOTs. Innovations that lower these costs can increase efficiency and stretch increasingly limited funds. Adopting synthetic building materials (e.g., lightweight composite structures having long service lives) and recycled materials has already helped some states reduce operations and mainte- nance costs, and advances in these fields suggest that increas- ing efficiencies are possible in the future (Kissinger and Testa 1997). Similarly, adopting lower-cost approaches to the delivery of traditional servicesâfor example by substituting light-emitting diodes for traditional traffic signal lightsâhas saved agencies money and reduced their use of energy and production of greenhouse gases. A third example of innova- tive technology likely to yield significant efficiency gains is the replacement of traditional bridge and pavement inspection procedures by embedded sensors that report on the condi- tion of assets continuously, more accurately, and at lower cost than traditional visual inspections. Optimizing the use of sensors in the context of more strategic asset management systems has been shown to reduce maintenance costs by up to half in some instances, while improving the safety of the system (Ralls 2007). Publicâprivate partnerships. States have lowered costs for the delivery of many transportation services by contracting with private entities that in some instances are able to offer those services at a lower cost to the public than when they are offered directly by the state. Examples are contracting with private corporations and Amtrak to operate state-supported rail operations in California and privately operated bus tran- sit operations in many states (Richmond 2001). The capital- ization of such state-owned assets as the Indiana Toll Road through long-term leases to private operators has produced cash flow in the short run to replace revenues lost due to reductions in fuel taxes, while the contractual agreements have also provided for ongoing maintenance and manage- ment of the stateâs assets. In increasingly common arrange- ments, designâbuildâoperateâtransfer agreements have resulted in considerable cost savings when new projects have been managed by the private sector through carefully specified contractual obligations (International Technology Scanning Program 2009). A p p e n d i x J Strategies to Reduce Costs
227 Performance-based accountability. By putting in place sys- tems that periodically rate the performance of transportation facilities and services and then allocate funding on the basis of established improvements in measured performance over time, some states have improved the efficiency of service deliv- ery in the realm of public transit and in highway maintenance and traffic safety. Some states have applied performance-based accountability to operations that are privately managed; other states have applied it to the funding and oversight of local pro- grams, such as transit programs operated by cities or counties, and others still have applied it to ongoing statewide programs (Poister 1997, Cambridge Systematics 2000, Bipartisan Policy Center 2011). Assumed policies for assessing efforts to increase effi- ciency. States are already pursuing most of the policies listed previously. In the assessments that follow, it is assumed that a state would continue to invest in such policies even more broadly. J.1.2 Intended Mitigation Effects The main intent of this strategy is to mitigate adverse effects associated with the likely decline in fuel-tax revenue and the potential for higher future oil costs to increase the cost of construction and maintenance. Striving for greater efficiency is a worthy goal even in states that also take steps to boost transportation funding, but it may be crucial in states that allow revenue to continue to decline. Reducing DOT costsâmoderately effective. Reducing the unit cost of construction and maintenance is the pri- mary objective of most of the strategies considered here, and these strategies, in most cases, have already been proven by experience to be effective (Ralls 2007). The reason that this is only ranked as moderately effective is that many states have already been striving for greater cost-efficiency, thus leaving less room for further improvement at the margin. J.1.3 Intended Shaping Effects This strategy is not expected to have any appreciable effect on shaping broad energy use patterns and outcomes. As noted earlier though, DOTs may in some cases achieve cost savings through energy efficiency measures. J.1.4 Other Effects This strategy could have a modestly positive effect on the economy but also poses some risk for negative equity impli- cations. The environmental effects are unclear. Economyâmoderately positive (uncertain). All else being equal, this strategy should lead to more efficient use of resources with corresponding positive economic effects. If, on the other hand, a state facing declining fuel-tax rev- enue were to solely focus on greater efficiency and not seek to bolster revenue, this decline could preclude investment in new facilities that might otherwise spur growth. The moderately positive rating is therefore characterized as uncertain. Environment and public healthâneutral (uncertain). Focusing on efficiency rather than raising new revenue is likely to limit new capacity investment, in turn limiting growth in travel and corresponding emissions. On the other hand, limiting new capacity may also lead to greater traffic congestion, producing more emissions per mile of travel. This leads to some uncertainty as to whether the net envi- ronmental effects would be positive or negative. It is likewise unclear whether this would have any significant effect on public health. Equityâmoderately negative. Privatizing certain functions could result in cost savings resulting in part from the reduction of employee salaries and benefits. Unionized state employees have brought legal action in opposition to privatization on the grounds that it is deliberately designed to deprive them of work and benefits. Another issue related to equity is that the distri- bution of funds based on performance-based accountability would likely result in some geographical areas losing out, result- ing in assertions of unfair treatment. J.1.5 Barriers This strategy could face modest barriers with respect to financial cost, legislation, and institutional restructuring. Financial costâmoderate barrier. More efficient asset management is likely to require up-front investment in soft- ware systems, sensors, and training of state employees in the use of the technology. While a state could be expected to recoup this cost over time (given the underlying goal of greater efficiency), the start-up costs could act as a barrier in some states given prevailing budgetary shortfalls. Enabling legislationâmoderate barrier (uncertain). Relying to a greater extent on publicâprivate partnerships could require enabling legislation, for example where tolls are prohibited by law on state facilities, as could a shift to performance-based accountability as a principle for allocat- ing funding. This is likely to vary, though, from one state to the next. Institutional restructuringâmoderate barrier (uncer- tain). There are presently regulations in many states that require unionized state employees to perform many of the duties that could possibly be contracted out under publicâ private partnerships. These would have to be modified or sus- pended in order to implement some of the strategies in this section. Likewise, greater use of publicâprivate partnerships
228 and performance-based accountability could require modest restructuring of offices within the DOT. J.1.6 Required Lead Time This is difficult to predict with precision. Some of the strat- egies in this section could be undertaken within 5 years, but others might take longer because of legal and political chal- lenges. The lead time is therefore estimated at 5 to 10 years. J.1.7 Qualifications This strategic direction should be equally applicable in any state. J.2 Reduced Scope of DOT Responsibility Should a state face declining fuel-tax revenue and not choose to develop an alternative revenue source, its DOT may eventually be required to re-prioritize its efforts, reduc- ing the range or scope of activities for which it is responsible. There are two ways in which this could occur. With reduc- tions in funding levels and absent state legislation, a DOT might reduce the efforts devoted to existing functions, for example by performing maintenance activities less frequently or reducing miles of roadway on the state system through devolution. Re-prioritization could also be the result of state legislation that explicitly reduces the scope of state DOT responsibilities, for example by removing any responsibilities associated with public transit or livability initiatives. J.2.1 Supportive Policies The main options in this vein include devolving ownership and maintenance responsibilities for certain facilities to local jurisdictions and reducing or eliminating certain programs. By extension, any such retrenchment would also suggest sig- nificant reduction in the construction of new facilities. Devolving responsibility for facilities. This would prob- ably be most often applied to lightly used roads that are especially expensive to maintain and on which the major- ity of traffic is local in nature and does not generate fuel- tax revenues that justify continuing state expenditures. For example, Caltrans has proposed devolving to local govern- ments its responsibility for Highway 39, a lightly traveled, 27-mile winding road through rough mountainous terrain that is costly to maintain and serves largely recreational users (Scauzillo 2011). Narrowing areas of program responsibility. Given the historical origins of state departments of transportation, the reduction of program scope would probably involve focus- ing mainly on highway maintenance and preservation and shedding programs more recently acquired that are related to transit, aviation, and what have been called âenhancements,â which might include the maintenance of historic sites and aesthetically pleasing vistas and rest areas. Other efficiency strategies. Reduction of the scale and scope of state transportation programs is distinct from but complementary to programs that might instead achieve pro- grammatic goals through greater efficiency, as described in the prior section in this appendix. As an example, where more maintenance can be performed per dollar spent as a result of technological innovation, it would become less necessary to reduce the miles of highway maintained each year. Assumed policies for assessing re-prioritization. In the assessments that follow, it is assumed that a state resorting to this strategy both would pare back its programs to focus mainly on highway maintenance and operations and would also seek to devolve to local jurisdictions the responsibility for lightly traveled state routes that do not serve a signifi- cant economic role. It is further assumed that a state would be systematic and consistent when assessing options for devolution. A state could employ economic evaluations of alternatives, for example by applying benefitâcost or cost- effectiveness methodologies to alternative proposals for devolution. Because each facility or service proposed to be eliminated from the state system has a constituency that benefits from it, it would be necessary to base decision mak- ing on a process that is recognized to be fair, neutral, and unbiased. Note that there is little precedent for systematic downsiz- ing of state DOTs in the manner described in this strategy. As such, many of the ratings are inevitably speculative. J.2.2 Intended Mitigation Effects The main intent of this strategy is to mitigate the effects of reductions in fuel-tax revenueânot by raising additional revenue, but rather by reducing state DOT responsibilities in light of the revenue reductions. Reducing DOT costsâhighly effective. Depending on the number of facilities or services that a DOT devolves, this strategy could be highly effective in reducing costs for which a DOT is responsible. It is worth noting, however, that while devolution may relieve the state of responsibility for ongoing maintenance and operations of certain facili- ties, there is no guarantee that local jurisdictionsâmany of which face similar budgetary constraintsâwill have the financial wherewithal to take over these duties. Thus, stra- tegic devolution of certain facilities could ultimately equate to abandonment.
229 that a state DOT pursuing this strategy would likely elimi- nate programs related to transit, biking, and the like, and that transit users in particular are disproportionately more likely to come from lower-income and minority groups, a rating of moderately negative has been assigned with respect to equity. Given the considerations outlined, however, this strategy may be perceived as being significantly inequitable. J.2.5 Barriers This strategy could face moderate barriers with respect to public support, enabling legislation, and institutional restructuring. Low public supportâsignificant barrier (uncertain). Members of the public along with local officials, especially in affected areas and among affected groups of system users, could object strenuously to plans that call for devolving cer- tain facilities or eliminating certain programs. It is unclear, however, whether voters would view a reduced scope for the DOT as preferable to increasing fuel taxes or other sources of transportation revenue. Thus the rating of significant barrier is described as uncertain. Enabling legislationâmoderate barrier (uncertain). Enabling legislation could be required for states to eliminate certain programs, especially where transportation services have been expanded by state legislation over the past several decades. Institutional restructuringâmoderate barrier. Elimi- nating certain programs would require corresponding elimi- nation or restructuring of some existing offices within state DOTs. In some cases, employees to be affected are unionized, and negotiations would be required under the terms of many existing union agreements. J.2.6 Required Lead Time There would be great variation and uncertainty in the time that would be required to reduce the scope of some state pro- grams or to devolve the management of facilities to local governments. The variation would depend greatly on public responses and the frequency of lawsuits and other challenges. In some cases, lead times as short as 1 to 5 years seem real- istic, but controversy could extend this period considerably. Therefore, a more conservative time frame of 5 to 10 years is assumed. J.2.7 Qualifications Any state could pursue this strategy, although it would appear to be a more likely outcome in states with the strongest anti-tax sentiment. J.2.3 Intended Shaping Effects This strategy is not expected to have a significant effect in terms of shaping future energy use patterns and outcomes. J.2.4 Other Effects This strategy could have negative effects on the economy as well as on equity; net impacts on the environment are unclear. Economyâmoderately negative (uncertain). This strat- egy implies a reduced tax burden, which, all else being equal, could promote economic growth. On the other hand, it also constrains the stateâs ability to invest in improved infra- structure that might otherwise have stimulated economic growth. It is also possible that reduction of maintenance would increase vehicle operating costs for at least some system users. Further, removing some roads from the state system, assuming that they are ultimately abandoned, could increase the circuitry of some travel, thus increasing economic costs. States would logically choose to first shed routes and functions that have the smallest negative impacts on the economy. Because the econ- omy depends so heavily on effective transportation, however, the net effect over time seems likely to be negative, but the exact trade-offs are uncertain and likely to vary by location. Environment and public healthâneutral (uncertain). Lack of investment in new capacity is likely to constrain growth in travel and accompanying emissions. It is also likely to lead to more congested travel conditions and slower speeds on lower-quality roads and, hence, more emissions per mile. Trade-offs between these two factors are uncertain in the abstract but amenable to analysis at the level of individual cases. From a public health perspective, any reduction in vehicle travel could translate to more transit use, walking, and biking. On the other hand, any narrowing of programmatic scope might well lead to the elimination or severe reduction of investments in transit, walking, and biking to preserve more funding for highways, still the dominant mode of travel and the historic focus of state DOTs. Equityâmoderately negative. Each road or service has a natural geographic constituency on the basis of where it is located and a user constituency that differs from the population as a whole. That is, the reduction of transit service affects one group of travelers and the elimination of bicycle pro- grams affects another, and rural projects affect different populations than do urban ones. Political action will reflect the perceptions of each constituency. While analysis may demonstrate that proposals are efficient or even fair in terms of cost saved per user, the removal of existing services and programs is nearly always controversial because some groups are affected more directly than others. Given the assumption
230 Kissinger, P. and N. Testa. 1997. âThree Years Later and Exceeding Expectations: Highway Innovative Technology Evaluation Center.â Public Roads, 61 (3). Poister, T. 1997. NCHRP Synthesis 238: Performance Measurement in State Departments of Transportation. TRB, National Research Council, Washington, D.C. Ralls, M. L. 2007 (November/December). âTransportation Structures Over, Under, and Across to 2020 and Beyond: Targeting a Service Life of 100 Years.â TR News, 25 (3): 15â19. Richmond, J. 2001. The Private Provision of Public Transportation. Taubman Center, John F. Kennedy School of Government, Harvard University. Scauzillo, S. 2011 (December 29). âCaltrans to Shed Responsibility for Highway 39.â San Gabriel Valley Tribune. References Bipartisan Policy Center. 2011. Performance Driven: Achieving Wiser Investment in Transportation. Report of the National Trans- portation Policy Project of the Bipartisan Policy Center, Washing- ton, D.C. Cambridge Systematics. 2000. NCHRP Report 446: A Guidebook for Performance-Based Transportation Planning. TRB, National Research Council, Washington, D.C. International Technology Scanning Program. 2009. PublicâPrivate Part- nerships for Highway Infrastructure: Capitalizing on International Experience. Federal Highway Administration, American Associa- tion of State Highway and Transportation Officials, and National Cooperative Highway Research Program, Washington, D.C.