Comparing the falloff in state tax revenue to shifts in total unemployment. (Chart: Moody's)

Credit-rating agencies -- particularly Moody's and S&P, the nation's two premier shops -- wield significant influence over the financial health of private companies. But state and local officials are often equally dependent on good credit ratings to borrow money for transportation and infrastructure improvements.

Even the federal government monitors its credit outlook to a degree that might surprise the average voter. When Moody's suggested last month that the mounting deficit might imperil America's AAA rating (the highest available), Treasury Secretary Tim Geithner leapt to the defense of Washington's fiscal health.

So which states do credit raters believe are weathering the recession, and which will continue to struggle with yawning deficits that jeopardize their ability to invest in transportation and infrastructure? Bob Kurtter, manager of Moody's state ratings team, addressed the question last month during a speech at New York University's Institute of Public Knowledge.

Only two states, California and Illinois, have seen their credit downgraded in recent months, Kurtter said. Negative credit outlooks have been issued for 15 more states, and two are benefiting from positive credit outlooks: West Virginia and Louisiana.

Why are things looking rosy for those two governments?

"They got buffered on the early part of this downturn" thanks to their reliance on coal and oil production, Kurtter said. The two states "both have very conservative administrations that have managed pretty aggressively."

When states can reap credit gains by doubling down on fossil fuels, it's easy to see why coal- and oil-state lawmakers are resisting legislative action on climate change. Take West Virginia Sen. Jay Rockefeller (D), a longtime supporter of transportation reform who today proposed to block the Environmental Protection Agency from reining in emissions for two years -- a delay twice as long as what many Republicans had endorsed.

(Chart: AAR)

You know, although passengers and commuters have human faces, we need to remember that trade depends upon the safe, smooth, and efficient delivery of goods. Our groceries depend upon it as well. And jobs depend on it.

This DOT understands that.

But freight companies are hardly resting on their laurels today. The Association of American Railroads (AAR), a Washington trade group that represents freight movers as well as Amtrak, is just out with a report that carves out the industry's turf in a big way -- including a legislative wish list.

Titled Great Expectations, the report positions the freight industry as an economic powerhouse well-positioned to power the nation through a recovery from its lingering recession. Freight railroads generate $265 billion of economic activity per year while emitting 75 percent less than similar shipments carried by truck, according to the AAR.

To illustrate the financial might of the top U.S. freight companies, the AAR produced a chart (above) that compares train shippers' annual spending on capital infrastructure and maintenance with the highway budgets of major states.

So with the industry riding high from its stimulus victory, much to the dismay of its trucking competitors, what's standing in the way of a freight renaissance? Government regulations, according to AAR chief Edward Hamberger.

"Select legislative and regulatory proposals are creating an air of uncertainty at a time when there is already too much of that," Hamberger said in a statement accompanying the report. "When so much is riding on freight rail's ability to sustain a healthy national rail network necessary to help America through to economic recovery, now is not the time to undermine our financial viability."

The AAR report puts federal policymakers on notice on several fronts. After praising the White House's multi-billion-dollar high-speed passenger rail program, which is proving a boon to freight firms that control most existing local tracks, the AAR warns: "[T]he development of a world-class passenger rail system must not come at the expense of our country’s existing world-class freight rail system."

Another bogeyman for the freight industry -- despite its efforts to play up its own environmental upside -- is the prospect of carbon emissions caps that could negatively impact Big Coal. The AAR report effectively lashes coal and freight's fates together:

The impact of climate change policies on the railroad industry cannot be weighed without first examining the impact such policies would have on America’s coal industry. Coal generates close to half of America’s electricity, and railroads haul more than 70 percent of it.

Freight companies are also lamenting the government's mandate for positive train control (PTC), a computerized safety program recommended by Congress after a fatal commuter train crash in Los Angeles in 2008. Citing Federal Railroad Administration data, the AAR report puts the 20-year price tag of PTC installation at up to $14 billion and adds that "this well-intended legislation will have negative unintended real-world consequences."

Yet the industry is not wholly concerned with beating back federal measures that could hurt its bottom line. The AAR report makes a concerted push for a 25 percent tax credit that would reward any company spending money on rail infrastructure.

Late Update: Matthew Lewis of the Center for Public Integrity notes that the AAR has a lobbying team well-stocked with congressional veterans and former advisers to both GOP and Democratic presidents. Check out this map for more details.

Weeds spring up near a foreclosed home in Illinois. (Photo: Getty)

And what did the report's authors find?

In all three cities ... statistically sound results [indicated] that the probability of mortgage foreclosure increases as neighborhood vehicle ownership levels rise, after controlling for income. These results suggest that mortgage lenders should include measures of location efficiency in their underwriting to more accurately predict the risk of default.

In addition to including transit access and walkability in mortgage underwriters' measurement of borrowing terms, the NRDC recommended that location-efficiency be formally adopted as a goal for community planners. Particularly in Sun Belt and West Coast areas where waves of foreclosures have prompted new fears of suburban blight, the report suggests that rebuilding neighborhoods with location-efficiency in mind could stave off negative effects from any future downturn in home prices.

NRDC's conclusions are already being heeded by federal officials. Several House Democrats banded together this summer to add language to their chamber's climate bill asking the Federal Housing Administration (FHA) to insure 50,000 location-efficient mortgages.

That climate legislation is stalled for the time being, but the Obama adminstration's deputy housing and urban development secretary said last week that the White House would spend $10 million on research aimed at boosting the issuance of location-efficient home loans.

(Chart: US Conf. of Mayors)

All this despite the fact that those 363 cities accounted for 90 percent of the U.S. gross domestic product (GDP) last year and 86 percent of all jobs.

Looking at the chart at right, the weight of urban contributions is even clearer: the most economically vibrant U.S. city, New York, had a higher productivity rate in 2008 than all but 10 foreign nations.

Going further down this list (to rankings not pictured at right), the transportation contrasts become clearer.

The United Arab Emirates, where Dubai just opened a $7 billion subway line, has a lower GDP than Miami, where transit cuts are a fact of life. Singapore, which boasts a vast rail network, has a lower GDP than Detroit, the only major U.S. city without rapid transit.

Still, as diverting as it may be to compare American cities to their international counterparts, the domestic struggle for better urban transportation planning has less to do with overseas competition and more to do with entrenched bureaucracy.

Transportation Secretary Ray LaHood told the mayors' group today that he understands the complaints from metro areas that federal stimulus money was siphoned off by state-level politicking and failed to reach cities in sufficient proportions.

"Congress wanted the money out the door within 120 days," LaHood said. "The only way you can do that is through these relationships we have with the [state DOTs]."

To better meet urban needs in a jobs bill that "will be structured pretty much the same way the current one is," LaHood added, he is pressing for a larger infusion for TIGER, the stimulus' merit-based grant program where metro areas can apply directly for federal transport aid.

"It's the one way that cities can have direct access to the money without going through anyone else," he explained to the mayors.

Still, the heartening prospects of extra TIGER money may not salve the transportation funding gaps developing in many large cities. The mayors' group reported that of the 85 biggest metro areas, 35 are dealing with double-digit unemployment and getting proportionately less transportation aid from the state DOT than they contribute to the state economically.

Now economist Todd Litman, founder of the Victoria Transport Policy Institute, has taken direct aim at the mileage-growth arguments made by Cascade's Randall Pozdena. In a paper [PDF] prepared for next week's Transportation Research Board conference in D.C., Litman charges that Pozdena's research "misrepesents" the relationship between prosperity and VMT "in important ways."

Litman questions Pozdena's conclusion, based on the below chart, that "increasing a country's income by 10 percent appears to increase its use of energy by the same percentage."

(Chart: VTPI/Litman)

Note that Pozdena equates a per-capita mileage in poorer nations with a per-capita mileage increase in richer ones, despite data showing that growth in car travel slows markedly once individuals reach a certain income level. Moreover, Litman notes, America and Norway end up close together on Pozdena's graph even though "Norwegians actually consume about half as much fuel per capita as U.S. residents."

Looking exclusively at developed nations -- specifically, the United States -- Litman found that per-capita productivity and VMT were negatively correlated. Check out his graph of the state-by-state trend below:

(Chart: VTPI/Litman)

By contrast, Litman found a positive correlation between per-capita productivity and fuel prices, suggesting that political opposition to gas-tax increases, motivated by fear of impeding economic growth, may be misguided.

But it's his takedown of Pozdena, using a truism that many remember from elementary statistics class, which packs the most punch. (Incidentally, the Cascade paper does argue in favor of one progressive transportation policy: congestion pricing, which it says may have a positive "economic footprint.")

Congress isn't eager to raise fuel taxes to pay for transportation -- but what about the states? (Photo: Pop and Politics)

So as Congress and the Obama administration declining to debate a gas tax increase to pay for the next federal transport bill, how are the states coping?

Some are taking the plunge that Washington won't, debating new user fees on fuel and driving. Others are simply spending less on maintaining existing infrastructure that is bordering on disrepair. To get a taste of the local developments, let's take a quick tour of the transportation-financing crisis as it's unfolding outside of D.C.:

In Kansas, state lawmakers are debating alternative proposals to raise gas taxes and car registration fees to help close a transportation budget that has seen [PDF] $229 million in funding cuts over the past year.

In Virginia, planned transportation cuts over the next six years total $4.6 billion. The planned extension of Washington D.C.'s Metro to Dulles airport will push local tolls 25 cents higher this week, with a planned doubling by 2012. The state gas tax: 40th-highest in the nation, according to the Tax Foundation.

In Georgia, a new report from the state transportation director endorses new revenue-raising methods equivalent to a 1 percent sales tax and warns that the current gas tax -- which only meets half of existing infrastructure maintenance needs -- may fall short of federal matching requirements as soon as 2012.

In Michigan, an $84 million transportation budget gap for the current fiscal year is expected to cause the loss of $475 million in federal funding. Looking only at maintenance needs, the state fears the share of roads in good repair to fall from 92 percent to 66 percent over the next four years.

In New Jersey, debt service and interest payments on nearly $11 billion in bonding is set to swallow the state's entire transportation trust fund for 2011, prompting much hand-wringing as new Gov. Chris Christie (R) prepares to take office. Christie campaigned on a promise not to raise the state's gas tax, which ranks as the nation's 47th-highest.

In South Dakota, a bipartisan panel of legislators is moving forward with a proposed 10-cent increase in the state gas tax, imposed in two phases, to help raise $240 million for transportation. Other revenue-raising tactics on the table include higher vehicle license fees and new-car excise taxes. The measure could face an uphill battle, however, with a two-thirds majority needed for passage.

In Iowa, a state budget gap estimated at $500 million or more has persuaded Gov. Chet Culver (D) to propose that state troopers be financed by the transportation trust fund -- which would leave less money for maintenance of roads and bridges. Bipartisan support for a gas tax increase that materialized last year reportedly has evaporated in the face of a Culver veto threat.

Riders of Chicago's El train, shown above, were spared fare hikes in 2010 thanks to a last-minute deal. (Photo: ~JudyCrawford via Flickr)

The cost of riding public transit rose at a 17.8% annual rate in the six months ended in November, the Bureau of Labor Statistics reported. Overall consumer prices were up at a 4.2% rate in the same period.

That statistic is a bit tricky, since it projects twelve-month inflation rates by looking at six months of data.

But it's still striking -- and scary -- to see transit fare inflation hitting levels that look as bad as price increases for health insurance, which in recent years has grown 8.7% faster than the annual inflation rate, according to the Kaiser Foundation.

Heading into 2010, it's easy to see urban transit agencies falling into a vicious cycle driven by state budget woes verging on the apocalyptic (see California), local resistance to fare increases that disproportionately affect non-car-owning commuters, and federal inaction on much-needed transportation reform.

If there's any upside to the grim picture, it may be that scarce funding is likely to force lawmakers into honestly apportioning scarce resources based on infrastructure projects' true value to local communities -- not the political popularity of ribbon-cutting ceremonies or promises of local job-creation that ultimately fail to materialize.

HOT lanes on Virginia's I-495 are one of seven projects approved by U.S. DOT for private activity bonds. (Photo: WaPo)

But the stimulus law included one AMT tweak that ultimately could prove a big boon for transportation. As the American Association of Port Authorities observed yesterday in a letter to Congress on economic recovery strategies, the stimulus helped transportation planners by eliminating the AMT for two years on private activity bonds issued by state and local governments.

So what in the world are private activity bonds? Simply put, they are a still-developing tool to encourage public-private partnerships (PPPs) for infrastructure by allowing private companies to benefit from tax exemptions similar to those enjoyed by municipal bonds (generally issued by public entities for public projects).

As the AAPA wrote in its letter to Capitol Hill:

The AMT reduces the attractiveness to investors of bond issues necessary for infrastructure development projects. As a consequence, public port authorities must discount the bonds; thereby reducing the overall funding available for investment in infrastructure and the attendant jobs and income creation which would have been created. AAPA strongly supports the permanent elimination of the AMT for private activity bonds.

Of course, the virtuousness of private activity bonds -- much like that of PPPs overall -- depend on the type of project that benefits from the debt issuance. And unfortunately, the bonds have yet to be approved for use on transit.

As of December 2008, the U.S. DOT has okayed private activity bonds for seven projects, totaling $4.9 billion of the $15 billion cap set in 2005. Only one of the seven has actually progressed to issuing bonds: suburban Virginia's plan to add high-occupancy toll (HOT) lanes to I-495, a.k.a. the Capital Beltway.

Given that the Beltway HOT lanes project is looking more and more like an old-fashioned giveaway to corporate interests, the prospect of more private activity bonds may set transportation reformers' teeth on edge. But with a nationwide high-speed rail on the horizon, the more funding available for rail improvements, the better.

And in a world where Wall Street lobbyists have long angled for an exemption from the corporate version of the AMT, it's to be expected that infrastructure planners should reach for funding help, wherever they can get it.

Gov. Ed Rendell (D-PA) (Photo: Post-Gazette)

Rendell, who co-chairs the infrastructure advocacy group Building America's Future with New York City Mayor Michael Bloomberg (I) and California Gov. Arnold Schwarzenegger (R), has proposed seeding a new NIB using part of a short-term loan from the federal Treasury to the nation's highway trust fund -- the meat of the "front-loading" concept.

"The original stimulus bill had decent infrastructure spending," Rendell said in an interview. "It probably should have had more."

The Pennsylvanian, who is bidding for his state to become only the third in America to add tolls to an existing interstate highway, described a "front-loaded" transport spending bill as a means to create jobs quickly while giving Congress time to reach an agreement on long-term infrastructure reform after the 2010 midterms.

Approving a loan from the federal government's general fund to the highway trust fund would ensure that "the tough political decisions involved in" debating a new six-year transportation bill don't slow the pace of job creation, Rendell said.

His pitch would involve postponing the "guts of reform" -- for example, progress on national performance targets for transport and more flexibility for states to spend highway money on transit -- for 12 months, at which point lawmakers would be called upon to resolve the nation's transportation funding gap in order to pass a new bill that repays the Treasury's loan.

The design of a new NIB, which the Obama administration strongly supports, is a key issue for Rendell. The bill introduced in June by House transportation committee chairman Jim Oberstar (D-MN) would make an NIB part of the U.S. DOT and set up an Office of Public Benefit within the Federal Highway Administration to monitor the terms of any public-private partnerships.

Rendell expressed concerns that such a setup would limit the NIB's independence and subject it to excessive political scrutiny. His preferred method would be setting up an independent board to manage the NIB, as envisioned in legislation offered by Connecticut Rep. Rosa DeLauro (D) and Sen. Chris Dodd (D).

Rendell said he has talked up his plan in recent days with Treasury Secretary Tim Geithner and President Obama, who stopped in Allentown, Pennsylvania, on Friday for a speech on the struggling economy. The governor described Obama's eyes widening as he heard statistics on the manufacturing growth sparked by transportation stimulus spending in Pennsylvania: 4,300 more tons of steel bought in the first 10 months of this year than in all of 2008, a 43 percent increase; a similar increase in concrete production, with 95 percent of it coming from Pennsylvania factories.

Rendell told Streetsblog Capitol Hill that he would support efforts to increase the transportation accountability language in the new jobs bill, including sending some aid directly to urban metropolitan planning organizations (MPOs) and setting stronger "use it or lose it" guidelines to cut through possible delays at state DOTs.

But the governor's ideal jobs bill would involve using "ready-to-go" project lists generated by state DOTs, which environmental advocates tend to consider to be little more than "vague 'wish lists'," as John Krieger of the U.S. Public Interest Research Groups (PIRG) put it today.

"Is any of this perfect? No," Rendell acknowledged, vowing to keep "banging the drum" for long-term infrastructure investments after the current jobs bill is finished. "If I were the king of the world," he said earlier in the interview, "we would go on a 10-year infrastructure repair push, we'd build out the passenger rail system."

For now, however, Rendell is focused on amassing support for a "front-loaded" transportation bill that emphasizes economic recovery. "My message to fellow reformers is, we are with you," he said. "But understand that there are priorities, and right now No. 1 is to get Americans back to work."

Senate Majority Leader Harry Reid (D-NV) (Photo: LV City Life)

Sen. Ben Cardin (D-Md.) told The Hill that Reid (D-Nev.) made the announcement about a new jobs bill at the Senate Democrats’ weekly lunch.

Reid said he was looking at an initiative focused on job creation “and that our caucus will take it up,” Cardin said.

Reid didn’t specify what would be in the bill, but he said that it was going to be “one of the priorities” for the Senate, Cardin added.

The political urgency behind Democrats' job-creation push is obvious; the "generic ballot" question, a polling staple that measures support for congressional re-elections, shifted in favor of the GOP today for the first time in months. 

But what's less clear is how open senators are to the perspective of Reid's No. 2, Dick Durbin (D-IL), who has emphasized the importance of new transportation spending, and whether any new spending would be targeted to repair the nation's aging roads and bridges before building new capacity.

The American Association of State Highway and Transportation Officials (AASHTO) found earlier this year [PDF] that crumbling, rickety roads cost the average American about $400 a year in repair and maintenance, with the average city dweller paying nearly double that amount. Still, a "fix-it-first" rule for transportation spending is in place in only some states, such as New Jersey and Maryland, and was shot down during this year's stimulus debate.

Will transportation reformers and environmental groups publicly press for a "fix-it-first" approach in the Democrats' jobs bill, once it materializes? That may be the million-dollar (or billion-dollar) question.

Jonathan Silver (Photo: DC Business Journal)

Silver may have his work cut out for him on the latter program. While the auto industry loans have been coming at a more than healthy clip in recent months, three renewable energy companies have received a total of less than $600 million from the $32 billion pot for green power.

And as the Wall Street Journal notes, renewables industries aren't happy about the slow pace:

Some renewable-energy advocates have complained that the agency isn't moving quickly enough on other companies' applications for help. In a letter to congressional leaders last week, the heads of the Solar Energy Industries Association, the National Hydropower Association and three other trade groups warned that many projects are in danger of missing construction deadlines, partly because of what they said were delays in implementing the loan-guarantee program.

The recent letter comes after a May missive [PDF] from solar, wind, hydropower, biomass, and nuclear producers that lamented the slow pace of loan approvals and requested multiple changes to the process. The first solar company to win a DoE loan this year had to spend three years and $10 million before winning a final deal from the government.

In response to the concerns, Energy Secretary Steven Chu promised to speed up the process -- and Silver's appointment appears to be the first step in that effort.

When Chrysler asked the government for a second round of bailout money in February, it submitted a 177-page restructuring plan that vowed to usher in a new era of fuel-efficient vehicles at the famously gas-chugging automaker.

The chart above, taken from that restructuring plan, shows six models of electric and hybrid cars labeled "ENVI," the name of the company's cleaner-car unit. Chrysler told the White House it would apply "electric-drive technology ... across all three brands (Chrysler, Dodge and Jeep)," and touted its goal of putting 500,000 cleaner vehicles on the road by 2013. Some environmentalists invoked the news to suggest Chrysler should receive more taxpayer aid.

The Obama administration ultimately rejected Chrysler's plan as too weak, setting the stage for a bankruptcy filing and a new marriage with Fiat. But the government still holds a 10 percent stake in Chrysler and has little chance of recouping its billion-dollar bailout of the automaker -- which makes the company's decision to disband its "ENVI" unit all the more alarming to fuel-efficiency advocates.

"It's certainly a bad sign for Chrysler that they emerge from bankruptcy and immediately shift into reverse on clean cars," Dan Becker, founder of the Safe Climate Campaign, said in an interview. "It doesn't bode well for their future, and it's a terrible way to thank the American people for investing billions of dollars in their future."

Chrysler's about-face on cleaner cars was first reported by Reuters, which noted that Fiat chief Sergio Marchionne was knocking down Chrysler's 2013 cleaner-vehicles projections from 500,000 to 60,000. A company spokesman noted that electric vehicle development was not canceled outright but "absorbed into the normal vehicle development program."

Still, Chrysler's restructuring plan was not the only rosy prediction turned on its head. The company received $70 million in Department of Energy (DoE) grants in August to produce hybrid pickup trucks and minivans, only to cancel that project this month.

"It's a sign of Chrysler being tremendously out of touch with where the market is going," Lena Pons, transportation policy analyst at Public Citizen, said in an interview. "They're going to find it difficult to compete without having at least the engineering capacity [to produce EVs]."

Given that the bailout money is already out the door, the Obama administration has little or no recourse to hold Chrysler to its early vow. But the taxpayers who helped rescue the company are still free to register their disappointment.

Late Update: Below is a copy of Chrysler's new cleaner-cars plan, which replaces the initial plan for 10 low-emissions vehicles with two, one a Dodge and one an unnamed Fiat vehicle. The DoE grants are still depicted -- now going towards the hybrid Ram, which is expected to get 30 percent better fuel economy than the current version, or just shy of 20 miles per gallon.

(Chart: Chrysler)

Alice Rivlin (Photo: Brookings)

So it's reasonable to ask how Rivlin would approach the federal government's transportation funding crisis. And she answered the question yesterday during a legal conference. The Bond Buyer, a trade newspaper, put her remarks near the end of a related story (emphasis mine):

[Rivlin] argued on an earlier panel that major metropolitan areas, rather than state or local governments, should play a key role in financing and executing major infrastructure projects.

Metro areas are the focal points of the nation’s economy, she said, pointing out that while the 100 largest metropolitan areas nationwide account for just 12% of the land nationwide, they contain 65% of the country’s population and produce more than 75% of its gross domestic product. ...

Furthermore, she said the nation needs to overhaul how it finances its infrastructure needs, calling the gas tax flawed and increasingly outdated as consumers turn more and more to fuel-efficient vehicles.

“We need a major shift in the financing methods for roads and transit to incent efficiency and send stronger price signals,” she said.

Instead, infrastructure needs should be funded by a vehicle miles-traveled tax in conjunction with fees imposed on drivers using congested roads during peak travel times, she said.

A map of the companies involved in the supply chain for U.S. transit buses. (Image: EDF)

When Vice President Joe Biden visited Minnesota's New Flyer bus company to tout the economic stimulus law's $8.4 billion investment in transit, hopes were high for a boom in cleaner-burning vehicle production -- which made for some bad press when the nationwide transit funding crunch forced New Flyer to lay off 13 percent of its workers.

But the recession hasn't dampened the economic potential of hybrid bus production, as the Environmental Defense Fund (EDF) laid out today in a new report [PDF] on the industry. In fact, EDF found, transit bus companies share enough skills and regional foothold with the auto industry -- the map of bus makers pictured above could be mistaken for a map of automakers -- to pave the way for fuel-efficiency advances that would ultimately benefit all vehicles.

After noting that 32 percent of American transit buses do not rely on gas or diesel to run, today's report continues:

The bus industry serves as an important entry point for advanced vehicle technologies, especially in new vehicles that require refueling infrastructure and other major changes. For instance, since transit agencies have a well-defined base of centrally managed fleets, they are ideal for testing and proving plug-in hybrid and all-electric buses — thus leading the way for the passenger car industry.

While U.S. bus companies are well-positioned proving grounds for cleaner-burning vehicles, their export potential remains low, according to the EDF report. That's largely because the largest market for transit buses is China, where demand is expected to grow by 12 percent annually over the next decade -- double the projected growth rate in North America -- and where production standards are markedly lower.

"Emerging countries’ lower technology levels and standards appear to prevent them from competing in industrial country bus markets, while industrial countries’ higher production costs and standards appear to prevent them from competing in emerging country markets," EDF concluded.

Even so, there is a limited opening for bus supply companies to prosper on a global level. About 12,000 of Indianapolis-based Allison Transmission's 14,000 sales have come in China, and Firestone, which produces bus suspensions, has operations in China and India.

Yet it's the domestic employment and growth potential of bus makers that is the ultimate subject of EDF's report, which notes that such potential "is heavily dependent on the availability of public funding for bus transit." And at a time when labor unions are pushing the job-creating power of federal funding for operating costs, EDF's findings represent the other side of the coin -- the role transit money plays in sustaining manufacturing jobs many miles away from the cities where local networks operate.

What's good for the driver in the middle is also good for public health. (Photo: FHWA)

Take performance parking. Both urbanists (and drivers) seem to believe that it's good (or bad), because it makes parking more expensive, which is bad (or good) for drivers. But this assumes that a free parking system, where open spots are almost never available, is desirable for drivers.

That's like saying that a store that gives away bread for free -- and which subsequently never has any bread -- is good for people who like eating bread.

For the most part, thinking about congestion pricing follows this same rule. Urbanists tend to like it because it makes driving more costly and raises revenue for transit infrastructure. Drivers tend to oppose it, because they don't want to pay more to drive. In fact, congestion pricing would be good for people who really want to drive and good for people who'd like to have an alternative to driving.

This message has been slow to sink in, but the fact that drivers may benefit from congestion pricing may be beginning to resonate with urbanists. Unfortunately -- and so powerful is the what's-bad-for-drivers-is-good-for-cities mentality -- the absorption of this message has caused some urbanists to conclude that they've been wrong all along, and that congestion pricing really is bad. If drivers might benefit, it must be the case that cities, and the earth, will not.

So writes the New Yorker's David Owen, in an extremely misguided piece in the Wall Street Journal.

By requiring car drivers to pay a fee to drive in a city at peak hours, congestion pricing reduces traffic and raises money that can be used to support public transit—both worthy goals.

Yet congestion pricing has dubious environmental value. Traffic jams, if they’re managed well, can actually be good for the environment. They maintain a level of frustration that turns drivers into subway riders or pedestrians.

He is saying that congestion pricing is a bad idea, because traffic encourages drivers to switch to transit or otherwise get off the roads. But this misses the point that congestion pricing works by ... encouraging drivers to switch to transit or otherwise get off the roads. And as a bonus, it creates revenue which can be used to build more transit alternatives for frustrated drivers.

Owen seems to be arguing that the primary effect of congestion pricing may be to spread driving out over a longer period of time rather rather than to encourage a shift away from driving. But of course, the primary effect of congestion might also be to spread driving out over a longer period of time rather than to encourage a shift away from driving, particularly in places that don’t have good transit systems (which makes the revenue question all the more salient).

The argument doesn't make sense, and it doesn't appear to be supported by actual experience with congestion pricing schemes, as Charles Komanoff points out here. In London, better driving conditions after the adoption of a congestion pricing regime encouraged some drivers to take additional trips, but that increase didn't come close to offsetting the drop in vehicle trips induced by the cordon charge.

As difficult as it may be for all involved to accept, congestion pricing manages to benefit transit riders and drivers. Commutes are faster and emissions are reduced. But the benefits don't stop there.

A new economics paper by Janet Currie and Reed Walker explores what happened to neighborhoods near congested highway toll plazas after those plazas were replaced by the E-ZPass electronic tolling system. Here's the abstract (paragraph breaks mine):

This paper provides evidence of the significant negative health externalities of traffic congestion. We exploit the introduction of electronic toll collection, or E-ZPass, which greatly reduced traffic congestion and emissions from motor vehicles in the vicinity of highway toll plazas.

Specifically, we compare infants born to mothers living near toll plazas to infants born to mothers living near busy roadways but away from toll plazas with the idea that mothers living away from toll plazas did not experience significant reductions in local traffic congestion. We also examine differences in the health of infants born to the same mother, but who differ in terms of whether or not they were “exposed” to E-ZPass.

We find that reductions in traffic congestion generated by E-ZPass reduced the incidence of prematurity and low birth weight among mothers within 2km of a toll plaza by 10.8% and 11.8% respectively. Estimates from mother fixed effects models are very similar. There were no immediate changes in the characteristics of mothers or in housing prices in the vicinity of toll plazas that could explain these changes, and the results are robust to many changes in specification.

The results suggest that traffic congestion is a significant contributor to poor health in affected infants. Estimates of the costs of traffic congestion should account for these important health externalities.

That last line is key. We're used to seeing estimates of the costs of congestion, which tend to peg those costs in the tens of billions of dollars annually in the United States. Those estimates primarily estimate cost in terms of wasted time and wasted fuel. Some may attempt to estimate the cost of additional greenhouse gas emissions. Few take into account the direct health effects of congestion.

It's interesting to think about this research in light of the equity arguments made against congestion pricing. Set aside the fact that drivers tend to be richer than transit riders, and that congestion pricing would generate revenue for progressive transit improvements. Neighborhoods located in the shadows of congested highways are unlikely to be filled with wealthy families.

We want our cities to work better, and congestion pricing is one of the very best policy tools available to help that happen. It can make cities more efficient, more equitable, and greener, and it can lead to improved mobility for transit-riders, pedestrians, cyclists, and drivers.

As tempting as it may be for those who love cities to conclude that whichever policies irk drivers the most are the ones we should adopt, far more progress will be made if we recognize that some of the most promising policy changes can be good for nearly everyone.

How many transportation jobs could this $1 billion create? (Photo: Infosthetics)

But by the time Democrats were using AASHTO's estimate, the group had already lowered its number to 35,000 jobs created, attributing the claim to "analysts." And it turns out that members of Congress have been using the "over 40,000" range since at least 1997, before years of inflation limited the value of that hypothetical billion dollars.

Former Transportation Secretary Mary Peters told Streetsblog Capitol Hill yesterday that she was amazed the outdated "47,500 jobs" number  had remained an article of faith at the U.S. DOT. In fact, Peters' chief economist tried to use the number last year to bolster a bizarre argument against spending stimulus money on infrastructure -- before getting taken down by my colleague Ryan Avent.

As Ryan observed at the time, casting transportation spending as a matter of economic productivity rather than job creation was a stunningly out-of-touch move by the Bush administration, and one that ignored the likelihood of imminent double-digit unemployment.

But focusing on that aging AASHTO estimate of job creation (also credited to the Federal Highway Administration) overlooks the fact that a more updated study of that billion-dollar hypothetical was recently completed ... for transit.

The American Public Transportation Association (APTA) concluded in March that $1 billion in transit money would create "betwen 24,000 and 41,000 jobs," depending on how the spending was targeted. And APTA's data showed that transit operating money, i.e. what it takes to run trains and buses, creates more than 50 percent jobs per dollar than money for capital investments.

So until the puzzle of counting highway stimulus jobs can be solved, one might think Congress would focus on the demonstrable job-generating potential of transit operating aid. And they have -- to the tune of 10 percent.

(Photo: Roloff via Flickr)

Former federal highway official Steve Lockwood presented that hypothetical at today's University of Virginia conference to illustrate the nation's wacky notion of transportation pricing.

"The reason we don't have a flexible dialogue when it comes to pricing is that we don't know how much things cost," he said.

Right now tolling is prohibited on existing interstate highway systems built with federal funds, with a few exceptions. But conference speakers on both ends of the political spectrum agreed that the transportation system must be priced more accurately in order to avoid catastrophic consequences.

In other words: It's time to start properly labeling the price of a movie ticket.

Douglas Foy, the former development secretary of Massachusetts, and transit critic Adrian Moore of the Reason Foundation, sparred on many issued but agreed that any new highway capacity should include charges beyond the gas tax.

The comparison of film-going to driving is an imperfect one, to be sure, but the core need to inform the public about the consequences of decision-making applies to both activities.

"People love to believe they can be free riders," Jay-Etta Hecker of the Bipartisan Policy Center told conference attendees today. "People need to be educated that this isn't a free-rider system."

The federal effort to encourage sounder urban transportation pricing remains in its infancy, however. Mary Peters, George W. Bush's second transportation secretary, introduced the Urban Parternship Agreements (UPA) in 2007 to incentivize congestion mitigation efforts, but New York City lost its chance at the UPA cash after the state legislature voted down congestion pricing.

Flickr Photo: pbo31

• Impact of economy on operating budget
  

The biggest challenge that I'm focused on right now is certainly the effects of the economic reality that we're living in on our ability to do our job. We're no more immune than any other facet of society, be it personal family budgets or other government or private organizations. We're really seeing the impact of the economy on both of our major sources of operating revenue: fares (customer revenue is the workhorse of our budget) and ridership.  After a very robust fiscal year ending this summer, after seeing very healthy growth rates in ridership starting about the first of this year, those numbers are trending down and trending down pretty rapidly. I think the last two months ridership has been down about 6 percent for those two months. Overall for the year the reduction will be less than that, but going into next year we're looking at about a 4 and a half percent drop in ridership.

Sales tax, which is the second major source of our revenue, [is] tied to how the local economy is performing.  Last quarter we had the second worst sales tax receipts in our history, with about 11-12 percent drop in sales receipts.  There's a quarter lag, so that would have reflected taxable sales activity October, November, December.  [That] makes up about 35 percent of our revenue.  Fares are about 62 percent.  The rest is a mishmash of a small amount of property tax, other revenue from advertising on the system, leasing of properties, etc.  About 95 percent of our operating budget comes from those two sources....

We've made some good progress this year in closing what we're forecasting as a $54 million deficit for next year.  The board acted on a series of revenue increases where their objective was to try to minimize the impact on the regular, everyday customer.  So the biggest piece of that revenue package was moving our regularly scheduled inflation-based, every-other-year fare increase forward six months, not increasing it, but just bringing it forward in time.  Other elements include increasing the fare at the [SFO] airport station and expanding parking charges to eight additional stations in the East Bay.

• Expansion Versus Core Capacity
  

We've been working hard to create awareness around core capacity issues, which is really expanding the built systems to handle more and more demand.  In my mind it is new service, it is expansion, it's just not geographic expansion.

Generally we do not borrow or use BART funds to build an extension.  I mean, there has probably been some BART money in every expansion that we've built, but the bulk of the funding for those capital improvements have come from special purpose fund sources that have been made available for those purposes, the local sales tax measures in the BART counties that have been passed historically with a BART extension as a marquee project.  The voters have said, 'yes,' we're willing to approve a new sales tax to generate revenue to build those extensions.  Grants from regional, state, federal sources.  SFO attracted $750 million in discretional federal money.  Warm Springs is a real hodge-podge of funding sources.

• On plans for future urban BART extensions
  

We participated in a leadership role with an MTC effort to look at a region-wide study of metropolitan rail system to look at some of those issue to look at what solution is suited for what demand, what would it take for BART to become a more urban rail system, not just primarily commuter--about half of our surface looks like commuter, half looks like urban rail--identifying some opportunities for infill stations on existing lines.  We looked at another study a few years ago--again MTC was in the lead--looking to add more capacity in the Transbay tube or more capacity.

Our most immediate focus is on how we eke more capacity out of what's already been built, as we look to replace our rail car fleet.  Looking at a three-door design to the cars rather than the two door so that we can get more people on and off without increasing the dwell times in the stations and therefore reducing capacity.  In our preliminary assessment [of weight issues] we think a three-car is doable.  We certainly have answered the question to our satisfaction that it achieves more capacity. We are moving forward hopefully to be in a position this fall to begin the procurement process, to identify a car builder.

• Labor Negotiations

Our forecast, which includes an assumption that our economy improves… by FY 2012, we still over the next four years are forecasting an imbalance between our revenue stream and our cost picture that produces about $250 million deficit.  This is a long term issue and contract negotiations are a critical opportunity to make some improvement on that structural imbalance between revenues.  Contracts expire June 30th, so we are into our last month of negotiations.

I'm hopeful that we can get there.  We certainly need to be mindful that our customers are living in the same environment.  I think we're seeing lots of changes being made in benefit and compensation packages across the employment horizon and I don't believe BART can expect to be exempt from that or ask our customers to pay for things that are really out of line with their own experience in their workplace.

• "What if BART could get out of the healthcare business altogether?" Question from Greg Dewar, N-Judah Chronicles

As an employer I believe people ought to have benefits.  So if this country came to grips with a health program…  I can give you one number right now, which is of that $250 million deficit that I described over the next four years, $116 million of that is cost attributed with the expected increase in the cost of maintaining existing costs of BART health, retirement and ancillary benefits.  That's the increase, not the base cost.

Read Part I of the roundtable here

Photo by Matthew Roth

Welcome to town Chase.  I'm super impressed you have been reading Streetsblog San Francisco and made an ad that reflects some of the knowledge you've acquired here. This is obviously a shout out to the car-free community. Might the admen understand the incredible cost savings of ditching the car for a bike, which can save you more than $9,000 every year in direct vehicle costs, not to mention the health savings from an active lifestyle and the peace of mind of contributing fewer greenhouse gases to a dangerously warming planet?

Or maybe this is an homage to the cyclist as hero, walking into the sunset after defeating the highway lobby in Washington and securing billions for transit in the re-authorization of the transportation act.

I'm not sure a big bank like that has the time in between taking billions of taxpayer bailouts and spending them on new airplanes to focus on the subtleties of the message they're sending to the more than one-hundred thousand San Franciscans who ride weekly.

What do you think, Streetsblog Nation?

Photo by dav id from East Bay Indymedia

Over an hour into intense public comment calling for the firing of BART General Manager Dorothy Dugger and Police Chief Gary Gee, Gabriel Meyers, 31, who had been visibly agitated and unstable throughout the meeting, hurling epithets from behind the speakers at the podium, rushed at Dugger and sprayed her with a tube of red paint. 

A quick acting BART police officer, who Board President Tom Blalock later commended and called "a runningback" for how quickly he crossed the room, tackled Meyers and subdued him.  Meyers was charged with two counts of battery, one count of resisting arrest, and one count of disrupting a lawful assembly.

No Justice No BART organizers and a Grant family member present at the meeting condemned the attack and said Meyers was not associated with their efforts to seek justice for the shooting.  Several protesters in the hall were upset by the attack and said they knew it would dominate the news coverage of the event, detracting from their message.

Discussion of BART's Availability and Utilization Study (PDF), which examined racial and gender disparity in BART's contracts for construction and professional services (Disadvantaged Business Enterprise, or DBE goals) was only slightly less eventful. The study found that when BART had DBE goals in place from 2002-2006, they failed to award construction and professional services contracts in accord with the demographic availability of contractors.  Over the past two years, when BART suspended its DBE goals, the results were much worse.

While African Americans make up 8.01 percent of available construction contractors, they were only awarded 0.28 percent of contract dollars; Asian Americans 10.98 percent availability, 0.30 percent awarded, Hispanic Americans 8.08 percent availability, 0.79 percent awarded, Caucasian Females 6.87 percent availability, 3.11 percent awarded, and Caucasian Males 65.71 availability, 95.32 percent awarded.

The study recommended that BART re-instate DBE goals immediately, and among other long term goals: improve district wide communications with DBEs, develop BART Staff DBE program training, implement prime, sub awards, and bidders tracking, and publish enhanced bi-annual DBE utilization reports.

BART Director James Fang criticized the study, which took over two years to complete and cost the agency nearly half a million dollars, for only completing analysis of construction contracts and some service contracts, but failing to address procurement.  Fang said he couldn't endorse the recommendations of the study if it failed to include procurement and to more completely analyze services, despite warnings from staff that any delay on endorsing the study's recommendations for racial and gender screening would mean that projects like the Oakland Airport Connector would go to bid without the higher standard.

A member of the public became so enraged with Director Fang he suggested Fang "should be taken out back and beaten with a rose bush" for being racially divisive (the man was African American, Fang is Asian American).  After a heated back and forth, order was finally restored to the meeting and the Board voted 7-1 to endorse the recommendations of the study.

The Budget

Visibly exhausted Board directors tabled discussion of the budget, but released staff's proposals to the public and set a date for a public hearing on May 28th.  Final adoption of the budget is expected on June 11th.

Staff proposed many options for eliminating the budget deficit, which would be $54 million this year and $249 million over four years without action by the Board, most notably a 10 percent fare increase (up from 6.1 percent already approved) effective July 1st, service cuts across the system, and revising BART's East Bay parking formula to extend a daily parking fee to every station where parking is currently free, except for Hayward, Oakland Coliseum, and North Concord.

This packet of proposals would still leave a deficit of $23 million. Other remedies proposed by staff that will be discussed at the next Board meeting, could include:

• Cut 50-100 additional positions ($5-10M)
  
• Eliminate mid-day Richmond-SF and Fremont-SF service ($2-3M)
  
• Higher fare increase across the system: 15 percent instead of 10 percent ($8M)
  
• Increase minimum fare from $1.50 to $1.75 ($14M)
• Increase Transbay surcharge 10 cents ($5M)
• Increase SFO Premium fare by $2.00 ($7M)
• Parking: increase fees, market based ($0.5 - 3M)
  

Director Tom Radulovich was confident the controversial proposal among suburban directors to expand parking fees to stations that don't currently have them would pass, given the budgetary concerns.  "I think there is finally opportunity for movement," he said. Radulovich suggested that the operator should consider market-rate parking charges could be used to offset the longest-distance trips, which wouldn't suppress reverse commute incentives, and even suggested they revisit the possibility of a monthly pass for riders.

"Right now you can get a monthly pass on parking, not on riding," said Radulovich.  "We should reverse that."

General Manager Dugger said the monthly pass is not beneficial to BART's bottom line as a budget proposal.  "I would not advocate looking at that as part of a budget strategy solution but as a fare-policy consideration, which we have looked at from time to time.  To date we've decided that our distance-based fare is equitable, beneficial, and we would not recommend any changes."

Board President Tom Blalock, who has historically resisted charging for parking, rejected a call for market-based parking, which he said would disproportionately impact riders in stations farther from the BART core. "I think we'll have some nibbling around the edge of the parking charge.  I think there'll be more stations with parking charges," but he said that he knew there were many directors who would resist raising fees at stations that already charge for parking.

When asked why parking fees weren't set to a ratio that would at least cover the cost of maintaining the parking space (over $1/space/day for surface lots, over $2/space/day for garages), Blalock said, "Well that's an interesting cliche, but nobody makes the same parallel in terms of the cost of maintaining the huge grandiose stations that are underground in Oakland and San Francisco.  Suburban riders pay for those.  Nobody wants to hear that.  It's part of the same system that paved the parking lots.  I call it the same infrastructure and everyone ought to pay for it."

Expect some fireworks from the Board side of the rostrum at the next Board meeting, assuming the directors can get to the budget.