Conditions and Performance Report

Conditions and Performance Report
Chapter 9—Impacts of Investment

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Introduction

Impact of Highway and Bridge Investment on Conditions and Performance

Transit Investment Impacts

Methods for Increasing Future Investment for Transportation Projects

Impact of Highway and Bridge
Investment on Conditions
and Performance

This section explores some of the impacts that future levels of investment would be expected to have on future travel growth and on future highway user costs. This analysis moves beyond the investment requirements and scenarios defined in Chapter 7, to explore a variety of different investment levels.

This chapter also compares recent trends in highway and bridge investments with the changes in conditions and operational performance described in Chapters 3 and 4. This includes an analysis of whether the "gap" identified in Chapter 8 between current funding and the Cost to Maintain Highways and Bridges is consistent with recent condition and operational performance trends. This section concludes with a discussion of innovative means to increase the resources available for future highway and bridge investment.

Impact of Investment Levels on
Future Travel Growth

As discussed in Chapter 7, HERS predicts that the level of future investment on highways will have an impact on future VMT growth. The travel demand elasticity features in HERS assume that highway users will respond to increases in the cost of traveling a highway facility by shifting to other routes, switching to other modes of transportation, or forgoing some trips entirely. The model also assumes that reducing user costs (travel time costs, vehicle operating costs, and crash costs) on a facility will induce additional traffic on that route that would not otherwise have occurred. Future pavement and widening improvements will tend to reduce highway user costs, and induce additional travel. If a highway section is not improved, highway user costs on that section will tend to rise over time due to pavement deterioration and/or increased congestion, which will tend to suppress travel.

Q Do the travel demand elasticity features in HERS differentiate between the components of user costs based on how accurately highway users perceive them?

A No. The model assumes that comparable reductions or increases in travel time costs, vehicle operating costs, or crash costs would have the same effect on future VMT. The elasticity values in HERS were developed from studies relating actual costs to observed behavior that did not explicitly consider perceived cost.

Highway users can directly observe some types of user costs such as travel time and fuel costs. Other types of user costs, such as crash costs, can only be measured indirectly. In the short run, directly observed costs may have a greater effect on travel choice than costs that are harder to perceive. However, while highway users may not be able to accurately assess the crash risk for a given facility, they can incorporate their general perceptions of the relative safety of a facility into their decision-making process. The model assumes that the highway users' perceptions of costs are accurate, in the absence of strong empirical evidence that they are biased.

One implication of travel demand elasticity is that each different scenario and benchmark developed using HERS results in a different projection of future VMT. The higher the overall investment level, the higher the projected travel will be. Another implication is that any external projection of future VMT growth will only be valid for a single level of investment in HERS. Thus, the State-supplied 20year growth forecasts in HPMS would only be valid under a specific set of conditions. HERS assumes the HPMS forecasts represent the level of travel that would occur if a constant level of service is maintained. As indicated in Chapter 7, this implies that travel will occur at this level only if pavement and capacity improvements made on the segment during the next 20 years are sufficient to maintain highway-user costs at current levels.

Projected Average Annual Travel Growth

Exhibit 9-1 shows how the effective VMT growth rates in HERS are influenced by the total amount invested in highways, and the location of highway improvements. The highway investment levels shown in the table line up with those in Exhibit 7-3, which defined the highway scenarios and bench-marks used in this report. Each row represents a different minimum benefit-cost ratio (BCR) cutoff point in HERS, as discussed in Chapter 7. The italicized bridge values shown in the second column are interpolated or extrapolated from the $5.8 billion bridge component of the Cost to Maintain Highways and Bridges, and the $10.6 billion Cost to Improve Highways and Bridges. Only these two values are directly obtained from the Bridge Needs and Investment Process (BNIP) model. The remaining bridge values are included in this table to facilitate comparisons with the combined highway and bridge spending projections from Chapter 8. As discussed in Chapters 7 and 8, investment requirements for new bridges are included as "Highway" rather than "Bridge" since BNIP only considers existing bridges.

Exhibit 9-1. Projected Average Annual VMT Growth Rates, 1998-2017, for Different Possible Funding Levels

The weighted average annual growth rate for all HPMS sample sections in rural areas is 2.35 percent. At all levels of investment shown in the table, the travel demand elasticity features in HERS cause additional travel to be induced in rural areas. A new safety module has been added to HERS that has improved the models ability to evaluate the safety impacts of highway improvements, particularly in rural areas (See Appendix G). The model now recommends a larger number of widening and alignment improvements in rural areas to reduce crashes, fatalities, and injuries. By reducing crash costs, these improvements reduce the overall cost of using rural highways, which has the side effect of encouraging additional travel.

The weighted average annual growth rate for all HPMS sample sections in urban areas is 2.04 percent. If average annual highway capital outlay rose to $53.9 billion ($60.1 billion for highways and bridges combined) in constant 1997 dollars, HERS predicts that overall highway user costs would be maintained at 1997 levels. However, at this funding level, the improvements recommended by HERS would reduce user costs on rural highways, while allowing costs on urban highways to rise. The Maintain User Costs Benchmark derived from HERS attempts to maintain the weighted average user costs for all highway sections, but user costs can vary on individual functional classes, and on individual highway sections. Due to the travel demand elasticity features in HERS, the model projects that the increase in user costs in urban areas would limit average annual urban VMT growth to 1.97 percent, below the baseline forecasts in HPMS.

In 1997, all levels of government spent $42.6 billion for highway capital outlay (excluding bridge preservation expenditures), falling between the values in the first column of the last two rows in Exhibit 9-1. If average annual investment remains at this level in constant dollar terms over the next 20 years, urban VMT would be expected to grow at an average annual rate between 1.78 percent and 1.83 percent.

As indicated in Chapter 8, average annual capital investment on highways and bridges by all levels of government from 1998-2003 is expected to grow to $53.6 billion in constant 1997 dollars. Reading down the third column, this amount falls between the $55.4 billion and the $52.2 billion shown in the third and fourth rows from the bottom. Reading across these rows to the average annual urban VMT growth rate in the fifth column, Exhibit 9-1 indicates that if this level of investment were sustained for 20 years, and used in the manner recommended by HERS, the model projects urban VMT growth would rise at an average annual rate between 1.87 percent and 1.92 percent.

Projected Average Annual Travel Growth in Large Urbanized Areas

Exhibit 9-1 shows that the weighted average annual growth rate for all HPMS sample sections in urbanized areas with population over 1 million is 1.86 percent. A separate survey of metropolitan planning organizations (MPOs) indicates that they are projecting average annual VMT growth of only 1.68 percent. The source of the differences between these two sets of forecasts appear to stem from their underlying assumptions. The MPO forecasts incorporate the effects of actions the MPOs are proposing to shape demand in their areas to attain air quality and other development goals. The MPO plans may include transit expansion, congestion pricing, parking constraints, capacity limits, and other local policy options. The forecasts in HPMS may not similarly account for these effects.

As discussed in Chapter 7, the travel demand elasticity features in HERS mimic the effects that these types of Transportation Demand Management (TDM) programs would have. (See the Q&A box in chapter 7). As shown in Exhibit 9-1, HERS predicts that if current funding levels were sustained, user costs in large urbanized areas would increase, reducing VMT growth from the 1.86 percent rate projected in HPMS to an average annual growth rate between 1.66 percent and 1.70 percent. The 1.68 percent growth rate obtained from the MPO survey falls within this range. This appears to be logical since the MPO forecasts have to factor in funding availability, while HERS assumes HPMS forecasts are not funding-constrained, and that they represent the level of travel that would occur only if investment is high enough to maintain a constant level of service.

Prior to the addition of travel demand elasticity features into the HERS, the HPMS forecasts for sections in large urbanized areas were manually reduced to make them consistent with the MPO projections. This adjustment was necessary, since the model could not simulate the effects that TDM policies would be likely to have on future travel growth. Since travel demand elasticity has been added to HERS, this adjustment is no longer required, and has been discontinued in this report. This change is discussed in more detail in Appendix G. Chapter 10 explores the effect that reducing the projected VMT growth rate in large urbanized areas would have on the overall investment requirements.

Q What are the implications of the higher VMT growth rates under the Cost to Improve Highways and Bridges?

A The HERS analysis suggests that the MPO travel projections are consistent with current funding levels. If highway investment were to rise substantially, VMT growth could be higher than the MPOs are accounting for in their plans to meet Clean Air Act requirements. This might require States and MPOs to invest a greater share of resources in congestion mitigation and air quality programs, and/or to take more aggressive measures in regulating emissions from vehicular and non-vehicular sources with what would occur If total investment requirements rose.

Historic Travel Growth

Exhibit 9-2 shows annual VMT growth rates for the 20year period from 1977 to 1997. The average annual VMT growth rate over this period was 2.84 percent. Travel growth varied significantly in individual years, ranging from a decline of 1.01 percent in 1979 to an increase of 5.45 percent in 1988. Highway travel growth is typically lower during recessions, or periods of slow economic growth, and higher during periods of economic expansion. VMT growth was below average during the 1980, 1981_1982 and the 1990-1991 recessions. From 1983 through 1989, annual VMT growth was higher than 3 percent every year. Exhibit 9-2 shows that travel has grown more slowly during the current economic expansion, than in the 1980s, reflecting a long term trend towards lower VMT growth rates.

Exhibit 9-2. VMT Growth Rates, 1977-1997

Overall Projected Travel, Year-by-Year

The future travel growth projections in HPMS indicate future levels of VMT, but don't provide any information as to how travel will grow year-by-year within the 20-year forecast period. The 2.16 percent overall average annual projected travel growth derived from HPMS is well below the 1997 growth rate of 2.61 percent, or the 2.84 percent average annual VMT growth rate from 1977 to 1997. Rather than assuming that VMT growth will suddenly drop to 2.16 percent in 1998, and remain constant for the next 20 years, the HERS model now assumes that VMT growth rates will gradually decline over the 1997 to 2017 period. The model accomplishes this by assuming that VMT growth will be linear, and will grow by a constant amount annually, rather than growing by a constant rate. For example, if travel grows at an average annual rate of 2.16 percent, this would result in an increase in travel between 1997 and 2017 of 1.37 trillion vehicle miles. The HERS model would assume that VMT will increase by 1/20 of this amount, 68.4 billion vehicle miles, during each of the 20 years. As VMT grows each year, the fixed annual increase will represent a smaller percentage of the existing VMT base.

Exhibit 9-3 shows projected year-by-year VMT derived from HERS for five different funding levels. If average annual investment were to reach the Cost to Improve Highways and Bridges level, VMT would be expected to grow to 4.2 trillion in 2017. If average annual investment remains at 1997 levels in constant dollar terms, VMT would grow to only 3.9 trillion.

Note that projected travel growth for each of these funding levels is well below the historic growth rate over the last 20 years.

Exhibit 9-3. Annual Projected Highway VMT at Different Funding Levels

Q If future travel growth doesn't slow as quickly as the forecasts assume, how would this affect future investment requirements?

A If travel growth is higher than expected, additional investment would be required to maintain and improve highways and bridges. Chapter 10 shows what would happen to the investment requirements if average annual VMT growth for the next 20 years matched the 2.84 percent rate observed over the last 20 years.

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Page last modified on November 7, 2014