Another one bites the dust. A vacant Walmart in Lewiston, Washington. Photo: Flickr/Happy Vampire

These empty husks — yet to be filled by any other retail tenant — are part of the detritus left behind by a paradigm shift in the real estate industry. Signs of the changing times, they tell us what kind of society we were before the bubble burst.

Now, as the commercial real estate industry regroups, evidence is mounting that Walmart and other mega-retailers will take a much different form than they have in the past. The new American shopping experience, according to many industry observers, will be less “suburban big-box” and more “urban destination.”

The demise of several mega-retail chains during the recession, including Circuit City and Linens ‘n Things, helped produce a vast oversupply of retail space, particularly that of the giant, boxy, just-off-the-interstate variety. Last summer, the research arm of giant commercial real estate firm Colliers International reported that there was nearly 300 million square feet of vacant big box retail space on the market — 34 percent of total retail vacancy left behind by a recession that walloped commercial real estate almost as hard as housing.

Since 2008 alone, 120 million square feet of big box retail space has become available. To put such numbers in perspective, that is the equivalent of the total shopping center space in Cincinnati, Kansas City and Baltimore combined, Colliers reported.

This period of retrenchment has humbled even the once-mightiest of retail forces. CNN reported last month that Walmart stores suffered their ninth-straight quarterly drop in sales. Another sign of the times: Walmart is no longer enough of a bargain for U.S. consumers, it appears. The mega-retailer has been losing market share to dollar stores.

The situation has apparently reached the point where the retail monolith is rethinking its whole carbon-gulping model. Walmart is joining other retailers in thinking smaller and more urban, says Ed McMahon, a fellow at the Urban Land Institute.

“What the recession has made completely clear is that we have way too much retail,” McMahon said. “We are going from the era of the big box to the era of the small box.”

Enter the “Walmart Express.”

Generally, the opening of a Walmart store isn’t the kind of occasion that draws national media attention. Yet, in early June, ABC, Bloomberg News, and USA Today lined up in a parking lot in Gentry, Arkansas. This wasn’t a typical Walmart opening. Gentry, Arkansas is home to the first “Walmart Express,” a 18,000-square-foot, drug-store-sized prototype of the old, big-box heavyweight.

WalMart's new micro-sized "Express" stores are about one-tenth the size of its Supercenters. Photo: ABC New

Walmart plans to open 15 to 20 of the small stores — about one-tenth the size of a “Supercenter” — by the end of the year, mostly throughout the southeast but also including three in Chicago. By 2012, they plan to open as many as 350 a year, part of the mega-retailer’s strategy to regain its dominance over dollar retailers.

Walmart isn’t the only retailer turning its sights on the urban market it once eschewed. Increasingly, retailers see urban areas as the one remaining growth market, said Bob Gibbs, a national site selection and planning consultant with Gibbs Planning in Birmingham, Michigan.

“Retailers used to think that if they went to the edge of suburbia, that farmland would turn into housing,” Gibbs said. “They no longer want to do that. They want to be right in the middle of people, even if they’re lower-income than they’re used to.”

Industry observers have long marveled that there are approximately 20 square feet of retail space for every U.S. resident, compared to three to four square feet per capita abroad. In urban areas of the U.S., however, the actual ratio is more like one resident to two square feet.

Cynthia Stewart, a researcher with the International Council of Shopping Centers, says the movement toward urban areas is being slowed by a couple of factors. For one, urban site acquisition is traditionally more time consuming and expensive. And financing isn’t as easy to secure as it once was. Nevertheless, the market is in urban areas, she said.

“That’s where the opportunities are, for sure,” she said.

Another factor shaping the retail landscape has been the growth of online retailers. Again, this trend favors smaller stores in more urban locations, said McMahon.

Where Walmart once reigned supreme, the golden child of the post-recession retail world is Amazon, said McMahon. Fighting traffic, then battling to find a space in an ocean-sized parking lot, is an increasingly difficult sell when online retailers make their products available at the touch of a key.

“If old-school retail outfits like Best Buy want to compete in the bricks-and-mortar world, they’ll need to focus on making shopping less hassle and more pleasure, said McMahon. In order to lengthen trips and boost profits, retailers have been adding “cafes,” and moving toward Main Street-style, walkable settings. “This is known as the place-making dividend,” McMahon said.

Increasingly, small retail locations, like Apple stores, serve as a showcase for the broader selection of items that are available online, retail industry observers say. Photo: MacStories

Some of the strongest retailers, right now, are those that focus on providing a fun and engaging experience for customers, like Apple retailers or the mall-eschewing Urban Outfitters, the Wall Street Journal reported this spring.

Broad trends signal that the retail industry, like housing, is coming back down to earth. That has the potential to be a good thing. After all, stores like Walmart, Circuit City and Linens ‘n Things were always built to the scale of cars, not people. They reinforced and fed off American car-dependency.

Of course, the entry of big-box retailers into urban markets can erode cities too.

Developments like the regrettable Gateway Center in the South Bronx, which impose the suburban-scale big box model on urban areas, only serve to make cities more car-centric.

And a report by the Hunter College Center for Urban Affairs and Planning projected that the entrance of Walmart into New York City would produce a net loss of jobs, by forcing smaller stores out of business. It would also force New Yorkers to pay increased taxes because of Walmart’s famously woeful wages and benefits, the report found.

Developments like the Gateway Center, crammed full of parking, also make cities less walkable, the authors wrote. But there isn’t a whole lot of room for suburban-style Walmarts to enter New York City in a big way, said Tom Angotti, director of Hunter College’s Center for Community Planning. It’s not clear yet whether the retailer intends to splash its trademark happy faces all across the New York City market through small stores, he said. And even if it did, it’s not clear that the results would be as negative as the big stores.

Furthermore, it’s still an open question whether stores like Walmart, which have always made their home in suburban and rural locations, will even work in a different context.

On the other hand, Gibbs said he thinks the increased competition provided by large retailers will ultimately be good for urban consumers, particularly in less-served urban markets like Detroit and Cleveland.

“I think it’s going to make our cities more positive and attractive,” he said.

State-by-state impact from shutdown of federal highway and transit programs. Source: Senate EPW Committee.

Two key Democratic senators today released state-by-state numbers showing how many jobs would be lost if the current surface transportation authorization bill is not extended by September 30. Sen. Barbara Boxer (D-CA), chair of the Environment and Public Works Committee, and Sen. Tim Johnson (D-SD), chair of the Banking, Housing, and Urban Affairs Committee, sent a letter to their Senate colleagues urging them to act and highlighting the job loss numbers for their state.

Across the country, they say, 1.8 million jobs will be threatened nationwide if the SAFETEA-LU transportation law is allowed to lapse. They say they are working on “a bipartisan proposal to reauthorize surface transportation programs for two years at current funding levels” but they need an extension in the meantime “to allow time to complete work on this legislation.”

Boxer’s home state of California stands to lose the most in case of a lapse: More than $4.6 billion and nearly 165,000 jobs are at stake. But that doesn’t mean that rural, low-population states like Johnson’s South Dakota are unaffected. According to Robert Puentes at the Brookings Institution, South Dakota is one of 11 states that rely on the federal government for more than half of their road money. That could give Republican senators from states like Wyoming, Alaska, and Alabama pause before letting the federal transportation program founder.

You can see the state job numbers here.

The Chamber of Commerce report states that American transportation performance has been through the roof lately, a finding that should lead the Chamber to question some of its assumptions. Source: U.S. Chamber TPI 2011 Update

The Chamber of Commerce released its annual Transportation Performance Index (TPI) last week [PDF], and you can tell it’s due for a total overhaul, because according to the Index, recession-battered 2009 was a banner year for transportation performance.

Using 2009 data, the Chamber, a powerful lobbying group that represents millions of American businesses, determined that the performance of the nation’s transportation infrastructure is improving. However, even the Chamber dismisses the significance of its own results, saying the “improvement” is illusory — due to the decline in driving, and thus congestion, during the recession. But there’s another good reason to dismiss the results: The Chamber is measuring the wrong things.

The Chamber uses the TPI “to track the performance of transportation infrastructure over time… and demonstrate the connection between infrastructure performance, rather than spending, and the economy.” It claims to be the first organization to ever measure the correlation between the quality of transportation systems and economic growth.

But the Chamber’s metrics produce some truly baffling results. During the economic torpor of 2009, the index experienced its greatest improvement in a single year since 1990. Despite the nonsensical figures, the Chamber uses the report release as an opportunity to call for renewed infrastructure investment.

“By all accounts, the nation’s transportation networks continue to languish.” said Janet Kavinoky, head lobbyist for the Chamber’s infrastructure program. “The improvement of the TPI is not sustainable and does not represent a long-term trend… It is due to the economic downturn, rather than strategic policy and regulatory reforms or new investment.”

That’s all true, but that’s not the only reason to question the results of the TPI.

Of the 21 indicators the Chamber uses in its complex formulas, none deal with emissions. Of all of the ways the Chamber chooses to evaluate the U.S. transportation system, none investigates the effect on air and water quality. They certainly don’t take public health into account, ignoring the effect of our transportation choices on our waistlines or our lungs. In fact, the Chamber completely glosses over non-motorized transportation. Pedestrian and bicycle infrastructure doesn’t count as one of the “fixed facilities” the Chamber examines.

Here’s all you need to know to be convinced that the Chamber’s measurements of transportation performance don’t add up: Though it didn’t name the top states for transportation performance this year (that listing only comes out every other year), these were the top winners last year:

Source: U.S. Chamber of Commerce TPI 2010

Maybe that’s what you get when you evaluate performance on congestion based on “route-miles per 10,000 population” — the higher the better. That’s right. The Chamber judges congestion using a simple formula: asphalt divided by people.

The Dakotas don’t have a congestion problem because they have about 10 residents per square mile. If you want to see how a state deals with congestion, check out New Jersey (1,196 inhabitants per square mile). Trying to solve their congestion problem by building more “route-miles per 10,000 population” would be an exercise in futility.

Notably, the Chamber uses the Texas Transportation Institute’s Urban Mobility Report as its gold standard for measuring congestion, saying that methodological revisions in the TTI are a “game changer.” Report authors like that the TTI now measures off-peak travel times and includes San Juan, among other changes.

But those changes don’t address the major defects with the Urban Mobility Report. Real, significant changes would have included a move away from highway traffic speeds as the main measure of urban mobility. CEOs for Cities has produced a detailed review of the report [PDF] that should give the Chamber pause when using it as a primary data source. Among their findings: The UMR rewards longer commute times as long as average driving speeds stay high, and it fails to recognize regions that have actually succeeded in making commutes shorter.

The Chamber’s performance index does take into consideration the availability of transit and rail, as well as safety indicators on all modes. But even the measurements of rail and transit availability only measure route-miles and capacity — not frequency, reliability, ridership, or whether the route miles go to the right places, adequately connecting people with jobs and destinations.

So what are we left with? A transportation ranking that tells us that the wide-open states of the American West have wide-open highways, and that’s good for business. And as soon as those highways fill up with enough vehicles to justify their existence, better build more.

Clearly, as a representative of business interests, the Chamber believes it is looking out for the best thing for economic growth. But the assumptions it’s using are out-of-date. Building a transportation system that produces economic growth in the 21st century does not entail creating the conditions for vehicle miles traveled to rise continually. A recent report from the Center for Clean Air Policy documented how GDP is increasingly disconnected from VMT. Even the Chamber has recognized this trend, stating that “the importance of travel as a component of the U.S. economy has been declining since the early 1990s.”

For next year’s Transportation Performance Index, instead of more metrics praising empty highways, how about a smart growth indicator?

President Obama speaking at a Chrysler assembly plant in Toledo last month. Photo: Paul Sancya/AP

To this day, Americans remain unconvinced of the bailout’s wisdom, and fewer than half of likely voters are optimistic that we will be repaid the total $80 billion we coughed up. And if Americans were more familiar with one underreported aspect of the bailout — the rescues of the automotive financial firms — they’d feel even less enthusiastic about joining the party in Detroit and Washington.

Between 2008 and 2009, we taxpayers forked over $17 billion to GMAC (now Ally Financial) and $1.5 billion to Chrysler Financial under the vague theory that they formed an essential part of the auto industry. In doing so, we preserved two entities that, like the banks and mortgage companies, were making subprime loans to consumers: high-interest loans made to high-risk borrowers. Chrysler Financial has paid us back, but despite making more auto loans than any other company last year, Ally just delayed its planned IPO because it is not doing well enough to enable the government to reduce its majority stake.

To repay taxpayers and be profitable going forward, these institutions have concluded that they must expand their portfolio of subprime loans, and they are doing so with gusto. Last month, the credit scores of those buying new cars hit a five-year low. Overall, lending to buyers with credit scores under 680 has been rising quarter after quarter so that four out of 10 auto loans today are subprime. That’s right: 42 percent of Americans — including many economically vulnerable people — are taking on auto debt at high rates of interest, making purchases set to become albatrosses dragging down their tissue-thin household budgets.

Although these lenders assert that subprime auto loans do not pose a risk to the financial system similar to that presented by subprime home loans, this is distinctly disingenuous. Yes, the auto loan market is smaller than the mortgage market, and yes, lenders can quickly repossess cars against which loans are made. But this by no means ensures that these companies won’t fail or find themselves in need of another bailout. Subprime auto lenders might not be the principal driver of a financial crisis, but they absolutely contributed to and suffered from the last one. Like the mortgage lenders, they bundled, securitized, and sold off car loans into a market that collapsed, and GMAC actually diversified into home loans at the bubble’s peak. Obviously, these firms can feed into — and falter from — the next crisis as well.

Aside from potentially causing major damage to the economic system, subprime loans also end up hurting their supposed beneficiaries. Subprime lenders enjoy playing the hero, trumpeting that they provide struggling Americans the opportunity to buy a car. This might have some merit, if subprime loans were being made solely on modestly and fairly priced economy cars. Instead, lenders are taking the opportunity to maximize profit; people with lower credit scores tend to be sold cars at inflated prices and are subject to higher dealer interest rate markups.

The rationale for rescuing the two financial arms remains murky. In Overhaul, a memoir of his stint as so-called car czar, the best that Steven Rattner offers is that the “fincos” were part of the auto industry and that the collapse of the financial markets had “created havoc for the automakers.” From where we sit today, it is hard to know exactly what would have been the outcome of allowing them to fail.

Many car buyers, ironically, would have been better off. These companies provide most of their loans through dealerships, and car buyers usually benefit when they borrow instead from a neighborhood bank or credit union. Buyers who head into the showroom already financed are less likely to buy a pricier car than they need, are more assured of getting the best rate, and are less susceptible to sales or lending fraud.

But most are not so lucky. We spoke with a Rhode Island factory worker, Greg, who was convinced to take on more than $20,000 in debt for a sensational new pickup he bought under the Cash for Clunkers program. To keep up with his payments and avoid repossession, he had to take a second job driving a taxi.

Taxpayers would surely have been better off without the bailouts of the auto financial firms. Even if fully repaid, we will find we have enabled the re-bloating of our national auto debt.

It is easy to imagine how $18.5 billion could have gone instead to reducing the deficit or to sustaining or building our transportation system in more efficient and equitable ways. Preventing transit fare hikes, maintaining eroding infrastructure, keeping traffic and transit police on payrolls, funding investment in green transportation and complete streets, and working on creating jobs closer to the people who really can’t afford cars: The alternatives were a beautiful and bountiful lot.

Catherine Lutz, a Brown University anthropologist, and Anne Lutz Fernandez, a former marketer and banker, are the authors of Carjacked: The Culture of the Automobile and its Effect on our Lives (Palgrave Macmillan).

“Right now, Congress could send me a bill that puts construction workers back on the job rebuilding roads and bridges –- not by having government fund and pick every project, but by providing loans to private companies and states and local governments on the basis of merit and not politics,” the president said. “That’s pending in Congress right now.”

The inclusion of the line about merit went over well in transportation reform circles, where people have been pushing for a greater emphasis on performance metrics and less spending by strict formulas regardless of outcome.

Later, in response to a question about whether the debt debate was hamstringing his ability to take action on creating jobs, Obama talked again about transportation.

“I think it’s important for us to look at rebuilding our transportation infrastructure in this country,” he said. “That could put people back to work right now — construction workers back to work right now.”

Obama’s not the only one to try to sell the transportation bill as a jobs package. Sen. Barbara Boxer likes to have her aides hold up 20 poster-sized pictures of the Dallas Cowboys stadium, filled with people, to illustrate the number of construction workers out of work right now. She uses this to show the urgency of passing transportation investment legislation.

But according to Joshua Schank, CEO of the Eno Transportation Foundation, it’s a mistake to focus on construction jobs.

“The Interstate system created a lot of jobs, but no one talks now about how many jobs it created from constructing it,” Schank said. “People talk about the impact it had on the economy. And I think that’s the mistake the president and other elected officials often make. They say, ‘This will create jobs; it’ll put people to work.’ But that’s like taking the smallest portion of the economic benefits from transportation and focusing on that. The real benefits are for long-term economic growth.”

After all, he said, “We could put people to work digging a hole and filling it,” but that’s not going to be an engine for economic growth the way a modern transportation infrastructure network would.

Sure, everyone cares about jobs right now, and it might be expecting too much to ask people to get as pumped about long-term economic growth from fast trains or well-maintained bridges as they do about bread on the table. But Schank said, but from the point of view of someone who cares about the industry, it gets “bothersome” to see so many people make the wrong point. Besides, we want to do better than just spend federal money to “dig holes and fill them” to give people jobs. Schank was one of the authors of a recent report on performance metrics, and how smart, outcome-based spending decisions could transform how this country spends money on infrastructure. If all we care about is creating jobs, he says, who’s to say we won’t keep spending precious resources inefficiently on wasteful projects?

And mortgage lenders have only gotten more skittish since then about overextended borrowers.

Once you've filled your three-car garage you won't be able to afford this house anymore. Photo: El Gato Painting

Transportation and housing are inextricably tied, but many people are slow to realize the full implications of this link. CNT President Scott Bernstein says that although lenders understand the link when it comes to rejecting applicants who are overextended on car payments, they don’t include transportation costs in their mortgage underwriting. (Changing this practice was a key recommendation of the Congressional Livable Communities Task Force’s “Freedom From Oil” report.)

“The mortgage crisis was more intense in less location-efficient areas,” Bernstein said at a panel discussion on regional transportation planning for equity at the National Building Museum Monday. “I’m not saying car ownership caused it. But a precipitating factor was a lack of flexibility to tinker with your household budget because you had fixed costs for transportation.”

Transportation options, he said, could be an antidote to future recessions. They helped cushion the blow in urban areas, which saw an overall lower rate of foreclosure, even in poor neighborhoods. A 2010 study by NRDC found that in Chicago, Jacksonville, and San Francisco, “the probability of mortgage foreclosure increases as neighborhood vehicle ownership levels rise, after controlling for income.” [PDF]

Housing affordability looks very different when seen holistically as the cost of living in a certain place. “If you measure affordability as just the cost of housing as a ratio to income, 70 percent of people are living in an affordable situation,” Bernstein said. “When you account for transportation costs, that drops to 40 percent.”

CNT has a Housing + Transportation Affordability Index for people to check the true affordability of where they live, but most people don’t access this kind of information when making decisions about where to live.

When agencies start considering housing and transportation costs at the regional level, major changes in infrastructure investment follow. Bernstein says that when Chicago and the Bay Area set out to reduce the joint costs of transportation and housing, their efforts resulted in the reprogramming of state money away from highway construction.

Of course, location efficiency isn’t what it used to be. Employment is less centered in cities now than in years past, as a recent Brookings report pointed out, so picking an efficient place to live is tricky. What if you live in a walkable, bikable neighborhood but you work on a suburban corporate campus? Robert Puentes of Brookings’ Metropolitan Policy Program, an author of the report, acknowledged, “It doesn’t make economic sense or spatially-efficient sense to start building transit lines way out into the suburbs.” But without those transit lines, the only way to get out to those inefficiently-located jobs is to drive.

“If being near transit stops can reduce your risk of foreclosure and increase your access to jobs, that‘s powerful,” said Bernstein. He advocates for a “jobs-to-people” policy, not a “people-to-jobs” policy. “We keep saying we can’t do anything about where businesses locate, when we pay them to locate there.” Incentives should work the other way, encouraging employers to locate in urban areas.

At the same time, Bernstein said, people need to make wiser decisions about where to live. “You think you’re moving to some lovely bucolic place called Whispering Acres or something, but you find yourself in a poverty trap, a foreclosure trap, a risk trap.”

Bernstein said transportation planners have their priorities wrong. “At the moment, transportation planners prioritize traffic throughput; then pay attention to intangibles like health, safety, and the environment; and, third, they look at economic factors,” he said. “That’s upside down. First, we need to invest in people so they have a fighting chance at participating in the economy. Then we need to look at how you can do that in a way that safeguards public health and the environment. And then we can look at how you can do it so you move people relatively quickly.”

Puentes agreed. “We have to look at issues through economic lens,” he said. “If we’re trying to increase manufacturing, double exports, or move to a lower carbon economy, all of these have transportation aspect but you can’t look at it through a transportation lens. You have to look at it through an economic lens. If you just look at throughput, you can’t get there.”

(Chart:
University of Vermont Transportation Research Center)

The
success of state-level plans to increase gas taxes is tied to the
media’s portrayal of the proposals in question, with narratives tied to
"crumbling infrastructure" and "economic progress" showing more success
than those emphasizing long-term transportation budget gaps, according
to a new report released by the University of Vermont’s Transportation
Research Center (TRC).

The TRC report examined six states where lawmakers debated raising
gas taxes to close infrastructure budget gaps between 2006 and 2009.
Three of the states ultimately approved gas tax increases (Oregon,
Minnesota, and Vermont) — two of them over the opposition of the
governor, as seen in the third column of the above chart — and three of
the state (Massachusetts, Idaho, and New Hampshire) nixed the proposed
tax increases.

While acknowledging that "there are many possible explanations for
the success and failure of gasoline tax increases at the state level,"
TRC researcher Richard Watts attempted to categorize the "frames" used
to depict the proposals in local media as well as the Associated Press
wire service.

Watts broke down the most popular media narratives by whether they
emphasized arguments made by supporters or opponents of the proposed tax
hikes. The most common so-called "pro frames" focused on each state’s
decaying infrastructure, which would be in line for a boost thanks to
new gas tax revenues; the economic upside of improving travel times and
creating jobs by pursuing more gas tax-funded repair projects; and the
long-term benefits of solving persistent budget crises by raising fuel
fees.

Watts also marked off three frequently used "anti frames": broad
opposition to tax increases of any kind; a perceived public preference
for cutting other government spending before resorting to raising taxes;
and the economic downside of raising fuel charges during a recession.

The report did not show an across-the-board correlation between
positive portrayals of higher gas taxes and the ultimate passage of
state-level proposals to that effect. As seen in the above chart, media
coverage in five out of the six states studied featured a majority of
"pro frames," yet two of those states failed to act on gas tax
legislation.

But the nature of the media narratives used did appear to have an
effect on the success of state-level tax increases. From Watts’ report:

In Vermont and Minnesota, crumbling infrastructure
comprised the majority of the pro-gas tax frames. This is a powerful
frame that carries images of collapsing bridges, aging and deteriorating
roadways, threats to physical health and a system in dire jeopardy. …

In Massachusetts and Idaho the dominant pro-gas tax frame was
long-term solution – displayed about 75 percent of total pro-gas tax
frames. This frame emphasized funding and financial mechanisms and lacks
the imagery of crumbling infrastructure. In both states the debate in
the news discourse became about transportation system funding, not the
deteriorating system.

Another wild card, according to Watts’ research, was the "media
standing" of the public figures making pro- or anti-gas tax arguments.
In Massachusetts, for example, he found insufficient data to explain the
source of the media’s emphasis on the more wonkish "long-term solution"
frame — whether it was also the dominant narrative of Gov. Deval
Patrick (D), a tax-hike supporter, or whether it dominated the debate
for other reasons.

Nonetheless, the report could provide food for thought for House
transportation committee chairman Jim Oberstar (D-MN), as his
party’s resistance to a federal gas tax increase continues to force
a challenging search for alternative transport financing tactics.

A private firm recently signed a deal with New Orleans officials to help run the city's streetcars, seen above. (Photo: NYT)

Few definitive answers to those questions were on offer today at a transit panel sponsored by the Mobility Choice coalition, which allies members of conservative-leaning think tanks with a handful of environmental advocates and urbanists -- but the discussion yielded some provocative evidence of the fault lines between public and private operators.

Principally sponsored by the Institute for the Analysis of Global Security (IAGS), the group describes itself as adopting "a fiscally responsible, free market oriented approach to expanding competition among transportation modes for the purpose of reducing oil's strategic value."

American Bus Association (ABA) Chairman James Jalbert, whose group represents private bus and motorcoach companies, lamented that the U.S. DOT's implementation of its $10.5 billion high-speed rail program -- which is expected to receive billions more in federal funding in the coming years -- did not envision a role for private-sector firms that already provide inter-city service.

"A good-quality system that could be included in a rail project is now going to be run over by that rail project," said Jalbert, also the president New Hampshire-based bus company C&J. "We want to be part of the solution, but we need to be invited to the party."

Integrating private bus operators into proposed passenger rail projects has to start at the state level, where officials make the call on whether and how to pursue federal bullet-train money, Jalbert added. He described a potentially successful partnership between public inter-city rail and private bus companies as a shared scheduling system, where passengers could purchase tickets for rail during peak hours but an equivalent bus journey during off-peak times, when operating a motorcoach could be more efficient.

Tom JeBran, ABA vice chairman and president of Trans-Bridge Lines in Bethlehem, Pennsylvania, went further than his private-sector cohort in suggesting that public transit agencies receive an unfair advantage, thanks to their operating subsidies and exemption from the federal gas tax.

"The only way I'd support" raising fuel taxes and adding new interstate tolls to pay for nationwide transport improvements, JeBran said, would be if both private and public transit operators got an exemption from those new charges.

Robert Padgette of the American Public Transportation Association (APTA), the transit industry's leading D.C. trade group, fired back at JeBran's depiction of government subsidies that go only to public operators. The U.S. DOT's Section 5311 grants, Padgette noted, do make taxpayer funds available to smaller, private inter-city bus companies.

Women- and minority-owned companies would have an easier
time winning federal transportation contracts under a new rule released
by the Obama administration today, which comes in the wake of complaints
from social-equity advocates that such firms had received
just 2 percent of infrastructure contracts awarded under last
year’s economic stimulus law.

(Photo: CA
DOT)

The new rule would increase to $1.3 million the maximum owner’s net
worth required to classify a company as a "disadvantaged business
enterprises" (DBE), qualifying it for federal assistance in winning
contracts on the state and local level. Under the existing program,
owners of DBEs were required to earn $750,000 or less per year, an
income level that was last adjusted 20 years ago.

State DOTs also would face stronger monitoring requirements to
ensure their DBE hiring targets are met, according to a release from
Transportation Secretary Ray LaHood’s office.

The new rule asks states to monitor transport contractors to ensure
their promises to use DBE subcontractors are kept, and states that fail
to meet DBE hiring goals would have to submit a remedy to Washington
that would increase deals with women- and minority-owned firms.

Finally, the rule would eliminate the need for businesses to obtain
DBE status in multiple states, requiring one state DOT to accept
another’s DBE certification "unless it found good reason not to," the
U.S. DOT stated.

LaHood launched
a $20 million bonding program last year, as well as a task force to
examine strategies for increasing women- and minority-owned contractors’
presence in the transport work force. But a February
report that DBEs had won less than $1 billion in business from the
stimulus law’s $48 billion infrastructure pot fueled more contention
over access.

The new rule is now in a preliminary format, with public comments
accepted by the U.S. DOT until July.

The decline in American driving that began at the start of the recession, fueled by record-high gas prices, came to an end late last year. But the Obama administration believes that its transport and energy policies have ushered in a long-term shift, "changing the fuel mix in ways that will drive down gasoline demand," according to a senior adviser to Energy Secretary Steven Chu.

Matt Rogers, a senior adviser to the Energy Secretary. (Photo: Recharge News)

The Chu adviser, Matt Rogers, made his comments on gas demand during a House hearing last week.

His remarks appeared to reflect a high degree of confidence within the administration that even if the nation's vehicle miles traveled continue to increase, the total energy consumption of U.S. transportation would decrease thanks to the rise of alternative-fuel vehicles such as hybrids and plug-in electric cars.

One of the most remarkable changes that has already occurred is we probably saw the peak demand for gasoline in the United States in 2007. And since then, the demand for gasoline has been going down in the United States and will continue to go down for more than the next decade as a result of a combination of renewable fuels, CAFE standards, and an increasing electrification of the transportation fleets.

So, we are seeing in front of us right now, a restructuring of the transportation sector to allow it to require substantially less fossil fuel ... you can actually see demand going down even as the economy continues to grow.

Rogers' remarks track with the conclusions of the Energy Information Administration, which predicted last year that the growing popularity of fuel-efficient vehicles would make 2007 the peak of demand, and the U.S. DOT's research arm, where the most recent available data shows a drop in demand for refined petroleum products in 2008.

The total energy consumption of the transport sector also fell in 2008 by more than 1 quadrillion Btus (British thermal units). Government energy data from last year, when the downturn in nationwide driving began to reverse itself, is not yet available.

Nevada’s state DOT is in the early stages of a years-long study aimed at mapping a possible
transition from the gas tax to a vehicle miles traveled (VMT) fee, a
shift urged
last year by a congressionally chartered panel on infrastructure
financing and encouraged
by Rep. Earl Blumenauer (D-OR).

In-vehicle
GPS units, such as the one above, are often discussed as a method for
tracking VMT. (Photo: JustGetThere)

But
after the first of the state’s two public hearings on the study, the
very idea of evaluating an eventual VMT tax is proving to be polarizing
and politically risky.

The Nevada chapter of the American Civil Liberties Union has decried
the study as a privacy risk, raising "serious questions about any VMT
proposal that would set up what
amounts to a perfect infrastructure for tracking citizens everywhere
they go in their vehicles," while two regional transportation
commissions have
withdrawn funding from the effort.

The Nevada Motor Transport
Association, a trade group representing trucking and bus companies,
also has spoken out against the concept of VMT charges, while business
and labor interests are countering with support for the study under the
umbrella of the Nevada Highway Users
Coalition (not connected to the American
Highway Users Alliance).

Local road users, meanwhile, appear to be divided on the merits of a
move from gas taxes to mileage-based charging. From the Reno
Gazette-Journal:

Gasing
up one recent afternoon at a Reno service station, [Luiz] Garcia said he
would
probably be open to a mileage-based fee system to raise needed road
funding.

"It seems like that would be fair," said
Garcia, 48. "If you use, you have to pay."

Scott
Deupree, 62, said he would be open to considering the possibility but
would want to be sure fees wouldn’t be added to existing gas taxes for
an overall tax increase "on the sly."Roads
"have got to be taken care of" and if a mileage fee is the most
efficient way to do so, it might be a reasonable step, said 25-year-old
Brandon Rasmussen of Carson City.

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)

The NRDC examined data for 40,000 mortgages in Chicago, Jacksonville, and San Francisco, seeking to test the contention — emphasized most
often by the nonprofit Center for Neighborhood Technology — that
affordable housing should include transportation costs as well as
mortgage bills.

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.

Among those cities getting super-shortchanged: Los Angeles,
Atlanta, Detroit, Miami, Chicago — and Portland.

One notable recent flare-up in that debate took place on National Journal’s blog after road lobbyist Greg Cohen, referring to an October paper [PDF]
released by the Cascade Policy Institute, contended that "it’s not
simply a correlation but VMT actually causes economic growth."

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)

The
needs of northeastern states can bear little resemblance to those of
their southern or midwestern counterparts, and the mandate for
localities to "match" federal transportation funds at an 80-20 ratio
(or 50-50, for some transit programs) can prove daunting for cash-strapped areas — particularly as the dwindling value of the gas tax saps transportation budgets.

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.

Such
an outcome could well put transit and road projects on a more equal
footing. But much like incremental emissions reductions taking shape
at the state level, any change will surely take longer than most
Americans would like. One thing that might help prod political leaders
into action: more of a spotlight on the Journal’s transit inflation
number.

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."