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Conditions and Performance Report
Chapter 7—Future Capital Investment Requirements

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Introduction

Summary


Economics-Based Approach to Transportation Investments

Highway Investment Requirements

Bridge Investment Requirements

Combined Highway and Bridge Investment Requirements

Transit Investment Requirements

 

Introduction

This chapter provides general investment benchmarks as a basis for the development and evaluation of transportation policy and program options. The 20-year investment requirement estimates reflect the total capital investment required from all sources to achieve certain levels of performance. This chapter does not directly address which revenue sources might be used to finance the investment required by each scenario. It also does not identify how much might be contributed by each level of government.

The Maximum Economic Investment scenario for highways, the Eliminate Deficiencies scenario for bridges, and the Cost to Improve scenario for transit are intended to define the upper limit of appropriate national investment based on engineering and economic criteria. The lower highway, bridge, and transit scenarios are designed to show the level of performance that might be attained at different funding levels. The benchmarks included in this chapter are intended to be illustrative, and do not represent comprehensive alternative transportation policies.

The investment requirement projections in this report are developed using models which evaluate current system condition and operational performance, and make 20-year projections based on certain assumptions about the life spans of system elements, and future travel growth. The accuracy of these projections depends in large part on the underlying assumptions used in the analysis. For example, the highway travel growth forecasts included in previous versions of this report have traditionally been understated. If the highway VMT projections included in this chapter turn out to be too low, then the investment requirements may be understated. Chapter 10 explores the impacts that varying travel growth and some other key assumptions would have on the investment requirements.

The chapter begins with a summary comparing key highway, bridge and transit statistics with the values shown in the last report. The investment requirements for 1996-2015 for bridges and transit used in the last C&P report were based on 1995 data (and stated in constant 1995 dollars). In the second column of this table, these values have been indexed up to constant 1997 dollars, to make them more directly comparable to the new investment requirement projections for 1998-2017, which are based on 1997 data and shown in the third column. The highway investment requirements for 1996-2015 have been revised much more significantly, to incorporate new analytical procedures introduced in this report, and to correct some errors that were inadvertently introduced into the highway database during the preparation of the last report.

The next section contains a general discussion of the economics-based approach to analyzing transportation investments. The procedures for developing the investment requirements have evolved over time, to incorporate new research, new data sources, and improved estimation techniques. This transition to economic analysis is consistent with continued emphasis within transportation agencies toward asset management, value engineering, and greater cost-effectiveness in decision making.

Highway Investment Requirements

The highway section of this chapter begins with a discussion of the Highway Economic Requirements System (HERS), and describes how the model is used to develop future highway investment scenarios. While HERS was primarily designed to analyze highway segments, and the HERS outputs are described as "highway" investment requirements in this report, the model also factors in the costs of expanding bridges and other structures when deciding whether to add lanes to a highway segment. All highway and bridge investment requirements related to capacity are modeled in HERS; the separate bridge models consider only investment requirements related to bridge preservation and bridge replacement.

The highway investment requirements section of the report has changed significantly from prior years. Since the release of the "1997 Status of the Nation's Surface Transportation System—Condition and Performance" report to Congress (C&P report), the FHWA has conducted a series of outreach meetings with members of the academic community and other transportation professionals on the report and the HERS model. As a result of this process, the FHWA has reevaluated several of the procedures used in the development of previous reports. For example, in earlier reports the analytical model outputs were adjusted using external procedures in an attempt to estimate investment requirements for some types of capital improvements that were not modeled. Some other types of capital improvements, such as system enhancements, were not included in the investment requirements at all. In this version of the report, the external adjustment process has been simplified, and expanded to include all types of highway capital outlay. Therefore, the investment requirements shown reflect the realistic size of the total highway capital investment program that would be required in order to meet the performance goals specified in the scenarios. The scenarios now attempt to include all elements of system preservation, system expansion, and system enhancement.

The TEA-21 required that this report include information on the investment requirement backlog; it also required that this report provide greater comparability with previous versions of the C&P report. To meet these requirements, HERS has been modified to calculate backlog figures, a new scenario has been added to roughly correspond to the old Cost to Maintain scenario in the 1995 C&P report, and the Highway Performance Monitoring System (HPMS) data used to develop the 1995 and 1997 C&P reports have been rerun through the current version of HERS.

This report defines the highway investment backlog as all highway improvements that could be economically justified to be implemented immediately, based on the current condition and operational performance of the highway system. An improvement is considered economically justified when it corrects an existing deficiency, and its benefit/cost ratio (BCR) is greater than or equal to 1.0; i.e., the benefits of making the improvement are greater than or equal to the cost of the improvement.

Two main highway investment requirement scenarios are developed fully in this report, the Maximum Economic Investment scenario and the Maintain Conditions scenario. To facilitate comparisons between reports, the Maintain User Costs scenario introduced in the 1997 C&P report has been retained, but it is described as a "benchmark" in this report, and is not developed in as much detail as the two major scenarios. The investment required to Maintain Travel Time Costs is also identified as a separate benchmark, in response to suggestions received during the outreach meetings on the C&P report and HERS.

The Maximum Economic Investment scenario would correct all highway deficiencies when it is economically justified. This scenario would address the existing highway investment backlog, as well as other deficiencies that will develop over the next 20 years due to pavement deterioration and travel growth. This scenario implements all improvements with a BCR greater than or equal to 1.0. At this level of investment, key indicators such as pavement condition, total highway user costs, and travel time would all improve.

The Maintain Conditions scenario, the Maintain User Cost benchmark, and the Maintain Travel Time benchmark were developed by progressively increasing the minimum BCR cutoff point above 1.0 so that fewer highway improvements would be implemented, until the point where these key indicators would be maintained at current levels, rather than improving. For the Maintain Conditions scenario, the minimum BCR cutoff point was raised until the point where the projected average pavement condition at the end of the 20-year analysis period matched the current 1997 values. Under this investment strategy, existing and accruing system deficiencies would be selectively corrected. Some highway sections would improve, some would deteriorate; overall, average pavement condition in 2017 would match that observed in 1997. The Maintain User Costs benchmark shows the level of investment required so that highway user costs (travel time costs, vehicle operating costs, and crash costs) in 2017 would match the baseline highway user costs calculated from the 1997 data. The Maintain Travel Time benchmark shows the level of investment to maintain only the travel time costs component of the Maintain User Costs benchmark.

Bridge Investment Requirements

The bridge section of this chapter discusses the current investment backlog and two future investment requirement scenarios. As noted earlier, the amounts reported in this section relate only to bridge preservation and replacement. All investment requirements related to highway and bridge capacity are estimated using the HERS model, and are shown as highway investment requirements.

The investment backlog for bridges is calculated as the total investment required to correct all bridges currently determined to be structurally deficient or functionally obsolete. Under the Eliminate Deficiencies scenario, all existing bridge deficiencies and all new deficiencies expected to develop by 2017 would be eliminated through bridge replacement, rehabilitation or widening. Under the Maintain Backlog scenario, existing deficiencies and newly accruing deficiencies would be selectively corrected. At the end of the 20-year analysis period, the total investment required to correct all structurally deficient and functionally obsolete bridges would remain the same as the current amount.

This section also contains a brief discussion of the Bridge Needs and Investment Process (BNIP) used to develop the investment requirements for this report, as well as the National Bridge Investment Analysis System (BIAS) which is currently under development. BIAS will incorporate benefit cost analysis into the bridge investment requirement evaluation in future C&P reports.

Combined Highway and Bridge Investment Requirements

The separate highway and bridge sections of this chapter are followed by a combined highway and bridge section. This portion of the chapter breaks down investment requirements by functional class. It contains an analysis of investment requirements for system preservation, system expansion, and system enhancements.

The Cost to Maintain Highways and Bridges combines the Maintain Conditions scenario for highways, and the Maintain Backlog scenario for bridges. The Cost to Improve Highways and Bridges combines the Maximum Economic Investment scenario for highways, and the Eliminate Deficiencies scenario for bridges.

The Maintain User Costs benchmark for Highways was not combined with a bridge scenario, because BNIP is not capable of developing a comparable user-oriented investment requirement projection.

Transit Investment Requirements

The transit section begins with a discussion of the Transit Economic Requirements Model (TERM), which was used to develop two investment requirement scenarios for this report. TERM uses separate modules to analyze different types of investments; those that maintain and improve the physical condition of existing assets, those that maintain current operating performance, and those that would improve operating performance. All investments identified by TERM are subject to a benefit-cost test, and only those with a BCR greater than 1.0 are implemented. Greater detail on the TERM methodology is presented in Appendix I.

The Cost to Maintain scenario maintains equipment and facilities in the current state of repair, and maintains current operating performance while accommodating future transit growth. These investments are modeled at the transit agency level and on a mode-by-mode basis. The Cost to Improve scenario makes additional improvements to improve the condition of transit assets to a "good" rating, and improve the performance of transit operations. Investments in performance enhancements are evaluated on an urbanized area basis for TERM forecast investments. The intermediate scenarios of Maintain Conditions/Improve Performance and Improve Conditions/Maintain Performance are also presented.

Breakdowns of transit investment requirements by type of improvement and type of asset are also presented for both the Cost to Maintain and the Cost to Improve scenarios.

 

 
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