Conditions and Performance Chapter Listing

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Introduction

Summary

Highway and Bridge Spending Versus Investment Requirements

Transit Capital Spending Versus Investment Requirements

Timing of the Investment Requirements

While the investment requirement analysis in this report centers around the average annual investment requirements for the 20-year period 1998 through 2017, the HERS and BNIP models do provide information on how investment requirements would vary within this period. Each model reports investment requirements for four 5-year funding periods.

Effect of Backlog on Early Year Investment Requirements

For the Cost to Improve Highways and Bridges, the pattern of investment is heavily influenced by the existence of a backlog of highway and bridge investments. As indicated in Chapter 7, HERS estimates that a total of $166.7 billion of investment could be justified based solely on the current conditions and operational performance of the highway system. The BNIP estimates that $87.3 billion of investment would be required to repair or replace all bridges that are currently functionally obsolete or structurally deficient. For the highway Maximum Economic Investment scenario and the Bridge Eliminate Deficiencies scenario that are included in the Cost to Improve Highways, the models assume that the backlog will be addressed as quickly as possible, within the first 5-year funding period.

The existence of a backlog means that HERS and BNIP have a wide variety of potential improvements to choose from, when selecting investments included as part of the Cost to Maintain Highways and Bridges for the first 5-year funding period. This would tend to reduce investment requirements in this period, as the models would tend to implement the improvements with the greatest returns first. However, for highways this reduction is more than offset by another effect of the backlog, which tends to increase investment requirements in the early years. Some of the highway deficiencies that currently exist could be addressed relatively inexpensively in the short term, but will become much more expensive to correct if they are deferred. HERS recognizes this, and incorporates the potential costs of delaying improvements into its analysis process.

Investment Requirements by Funding Period

Exhibit 8-7 shows the distribution of investment requirements among the four 5year analysis periods in HERS and BNIP. For the Cost to Improve Highways and Bridges, 36.6 percent of the investment requirements are for the first five years. This investment would eliminate the existing highway and bridge investment backlog, as well as correct new deficiencies that are expected to arise during this period. Investment requirements for the years 6 to 10 are sharply lower than for years 1 to 5. Investment requirements for years 11 to 20 are higher than for the preceding five years, but are still well below those for years 1 to 5.

Exhibit 8-7. Distribution of Investment Requirements by Five-Year Periods

For the Cost to Maintain Highways and Bridges, the differences in investment requirements between the funding periods is lower. For the Cost to Maintain Highways and Bridges 26.6 percent of investment requirements are for the first five years. Investment requirements for years 6 to 10 are lower. During the final 10 years the investment requirements increase, but not quite to the level for the initial 5-year funding period.

Comparison with Previous Reports

The comparison between spending and investment requirements is presented differently in this report than in previous versions. Exhibits 8-2 and 8-3 emphasize the difference between current spending and average annual investment requirements. Exhibit 8-8 takes the same approach, and applies it to the spending and investment requirement information in the 1995 and 1997 C&P reports.

Exhibit 8-8. Average Annual Investment Requirements Versus Current Spending: 1995, 1997 and 1999 C&P Reports

The difference between current spending and the Cost to Maintain Highways and Bridges has shrunk in recent years. While the 1995 C&P report did not directly compare average annual investment requirements for the Cost to Maintain Highways and Bridges with 1993 report-related capital outlay, the difference would have been 57.5 percent. As shown in Exhibit 8-8, a comparable analysis of the data in the 1997 C&P report would have shown a 21.0 percent difference between the average investment requirements to Maintain User Costs, and 1995 spending. As indicated in Exhibit 8-6, the trend is expected to continue, as this difference is projected to close from 16.3 percent in 1997 to an average of 5.7 percent from 1998 through 2003.

Based on the information in the 1995 C&P report, the difference between the Cost to Improve Highways and Bridges would have been 112.6 percent. This difference would have fallen to 108.9 percent based on the 1997 C&P report. As indicated earlier, the difference is projected to close further, from 92.9 percent in 1997 to an average of 75.3 percent from 1998 through 2003.