Conditions and Performance Chapter Listing

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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

Highway Investment Requirement Scenarios and Benchmarks

The investment requirement scenarios and benchmarks in this report project total investment requirements for period 1998-2017. The Maximum Economic Investment scenario would implement all improvements with a BCR greater than or equal to 1.0. This scenario would eliminate the existing highway investment backlog, and address other deficiencies that will develop over the next 20 years due to pavement deterioration and travel growth.

The Maximum Economic Investment scenario is of interest mainly because it defines the upper limit of highway investment that could be economically justified. This scenario does not target any particular level of desired system performance. However, by varying the minimum BCR cutoff, HERS can identify the impact that different levels of investment have on certain key indicators. Exhibit 7-3 demonstrates how this approach was used.

The graph shows the impact that varying the minimum BCR cutoff has on the level of investment recommended by HERS. The table shows the impact that the various levels of investment have on average IRI, average total user costs, and average travel time costs. (See Chapter 9 for other impacts of different levels of investment.) Each row in the table represents a different minimum BCR cutoff point, shown in the first column.

The top row in the table in Exhibit 7-3 represents a minimum BCR of 1.00, and is defined as the Maximum Economic Investment scenario, as indicated in the far-right hand column of the table. As shown in the third column, the average annual investment required under this scenario is $83.4 billion. The fifth, sixth, and seventh columns of the table reflect that at this level of investment, average pavement roughness, highway user costs and travel time costs would all improve. Average IRI would decline (improve) 18.3 percent compared to the baseline 1997 level. Average total highway user costs (including travel time costs, vehicle operating costs, and crash costs) would decline by 1.8 percent below the baseline 1997 level in constant dollar terms. The travel time costs component of highway user costs would decline by 0.9 percent below the 1997 baseline. As shown in the second column, at the average investment level required under the Maximum Economic Investment scenario, the average BCR would be 3.67, since many of the projects implemented would have a BCR that is much higher than the minimum BCR cutoff of 1.0. This indicates that an average of $3.67 dollars of benefits would be obtained from every dollar of expenditure.

Exhibit 7-3. Investment Requirements at Different Minimum BCRs

Although the graph in Exhibit 7-3 has been drawn to include the total highway investment requirements shown in the third column of the table, the minimum and average BCRs reported in Exhibit 73 are actually based only on the "Directly Modeled" amounts shown in the fourth column of the table. The total investment requirements shown in the third column include both amounts derived from HERS, and additional amounts added to account for functional classes not included in the HPMS database, and for types of capital investment that are not currently modeled. These additional investment requirements have not been subjected to the same sort of benefit cost analysis as those developed in the HERS model. The external adjustments are discussed in more detail in Appendix G.

The remaining rows in Exhibit 7-3 show the effect of varying the minimum BCR cutoff point. As shown in the fourth row of the table, raising the minimum BCR cutoff to 1.50 would reduce the level of recommended investment to the level required to keep travel time costs constant at 1997 levels. Setting the minimum BCR cutoff to 2.15 (eighth row) would reduce the level of recommended investment to the level required to maintain user costs at 1997 levels. Raising the minimum BCR cutoff point to 2.33 (tenth row) would reduce the level of recommended investment to the level required to maintain average pavement roughness at 1997 levels. The level of total investment shown for the bottom row of the table (minimum BCR = 3.00) approximates actual spending in 1997 for types of improvements that are modeled in HERS.

Exhibit 7-4

Highway Investment Requirements 1998-2017 Maximum Economic Investment Scenario Billions of Dollars (1997 Dollars)

Source: Highway Economic Requirements System.

Maximum Economic Investment Scenario

As indicated above, based on HERS results and the external adjustment procedures for types of capital improvements not modeled in HERS, the maximum level of highway investment that could be economically justified is $83.4 billion. At this level of investment, average pavement roughness, total highway user costs, and travel time costs would all improve. Additional impacts of investing at the Maximum Economic Investment scenario are discussed in Chapter 9.

Exhibit 7-4 shows the 20-year total and average annual investment requirements under this scenario, broken down by functional class. These totals are further broken down into their system preservation, system expansion, and system enhancement components later in this chapter in the Combined Highway and Bridge Investment Requirements section.

Maintain Conditions Scenario

The second major highway investment requirement scenario in this report is the Maintain Conditions scenario. As shown in Exhibit 7-3, raising the minimum BCR cutoff point to 2.33 results in fewer improvements being implemented, so that the average pavement condition at the end of the 20year analysis period is the same as in 1997. The average annual investment required under this scenario is $50.8 billion.

Under this investment strategy, existing and accruing system deficiencies would be selectively corrected; some highway sections would improve, some would deteriorate, but overall, average pavement condition in 2017 would match that observed in 1997. This scenario is roughly equivalent to the Cost-to-Maintain scenario in the 1995 C&P report. The major differences are that the Cost-to-Maintain scenario was not based on economic criteria, and attempted to maintain an index of pavement condition and operational performance for four 5-year intervals. This Maintain Conditions scenario attempts to maintain pavement condition on a 20-year interval; operational performance may improve or decline depending on the mix of improvements implemented at this particular minimum BCR level.

Exhibit 7-5

Highway Investment Requirements 1998-2017 Maintain Current Conditions Scenario Billions of Dollars (1997 Dollars)

Source: Highway Economic Requirements System.

The average BCR under this scenario is 6.08, indicating that an average of $6.08 of benefits would be obtained from every dollar of expenditure. This average is higher than the average under the Maxi-mum Economic Investment scenario, since the Maintain Conditions scenario omits all projects with a minimum BCR between 1.00 and 2.33.

Average highway user costs would rise by 0.4 percent above baseline levels in constant dollar terms under this scenario. The travel time cost component of user costs would grow by 2.0 percent in constant dollar terms. Additional impacts of investing at the Maintain Conditions scenario level are identified in Chapter 9.

Exhibit 7-5 shows the 20-year total and average annual investment requirements under this scenario, broken down by functional class. These totals are further broken down into their system preservation, system expansion, and system enhancement components later in this chapter in the Combined Highway and Bridge Investments Requirements section.

Note that this scenario assumes that investment in system enhancements will continue to occur, and that system expansion will continue where economically justified, so it does not represent the absolute minimum amount required to preserve the existing system.

Maintain User Costs Benchmark

As shown in Exhibit 7-3, setting the minimum BCR cutoff point to 2.15 results in a level of investment sufficient to allow total highway user costs per VMT at the end of the 20-year analysis period match the baseline levels. Highway user costs include travel time costs, vehicle operating costs, and crash costs. The average annual investment required to attain this benchmark is estimated to be $53.9 billion.

The Maintain User Costs concept was introduced in the 1997 C&P report to provide a new highway system performance benchmark based on economic criteria and focusing on highway users, rather than the traditional engineering-based criteria, which are oriented more toward highway agencies. The Maintain User Costs benchmark is an important technical point that provides insight into the operation of HERS, since the VMT growth rates in the model are partly dependent on changes in user costs, due to the operation of the travel demand elasticity feature. The investment required to maintain user costs is identified as a "benchmark" rather than a "scenario" in this report, and is not discussed in as much detail as the two main highway scenarios.

The average BCR for this benchmark is 5.70 indicating that an average of $5.70 of benefits would be obtained from every dollar of expenditure. Pavement condition would improve at this level of investment, as average IRI would decrease by 2.6 percent.

While average highway user costs in 2017 would match baseline levels in constant dollar terms, individual highway user cost components would vary. Travel time costs would increase 1.5 percent, vehicle operating costs would decrease 1.2 percent while crash costs would decline 1.6 percent. This indicates that at this investment level, HERS predicts there would be a relatively greater rate of return on improvements aimed at reducing crashes, rather than those aimed at reducing congestion or improving pavement condition.

The Maintain User Costs benchmark in this report is calculated slightly differently than its equivalent in the 1997 report, maintaining user costs over a 20-year interval rather than four 5-year intervals.

Maintain Travel Time Benchmark

Another point of interest on the curve shown in Exhibit 7-3 is the investment required to maintain travel time. Changes in average travel time per VMT are an indicator of the operational performance of the highway system. This benchmark focuses on one aspect of the Maintain User Costs bench-mark, travel time costs. Since travel time costs happen to rise at the investment requirement level for the Maintain User Costs benchmark based on the 1997 data, the average annual investment requirements for the Maintain Travel Time benchmark are higher at $67.9 billion. This would not necessarily always be the case; this benchmark could theoretically be lower in certain circumstances. Maintaining travel time costs requires the minimum BCR cutoff point be set at 1.50, below the level used for the Maintain User Costs benchmark.