1. SPECULATING ABOUT THE FUTURE OF SURFACE TRANSPORTATION Presentation by C. Kenneth Orski Editor/Publisher of Innovation Briefs New York Metropolitan Transportation Council Program Finance and Administration Meeting September 21, 2006

2. Three predictions/speculations: Use of tolls and variable road pricing as tools of augmenting transportation revenue and managing travel demand will continue and may even accelerate; Private sector and private investment capital will assume a more prominent role in construction, financing and operation of transportation facilities – both new and existing; Both these trends may profoundly influence the federal role in surface transportation.

3. Growing interest in tolling no longer in dispute. “23 states have plans to build toll facilities. Of these, 16 states already have toll roads and are planning additional toll facilities and 7 are planning their first toll facilities (toll roads or toll lanes) “Highway Tolling Has Reached the “Tipping Point:” Over 50 documented announcements and news items concerning tollroad and toll lane projects since March 2006 “Interest in tolling is rising because of its potential to meet multiple objectives: augmenting existing gas tax revenues, financing new road capacity and managing congestion “Widespread reluctance to raise fuel taxes at state and federal level contributing to the acceptance of tolling “Priced lanes becoming increasingly accepted by the driving public because they are offering a tangible option to getting stuck in traffic “Toll revenue and toll-financed bonding have come to be viewed as a logical means of meeting shortfalls in transportation budgets which many states currently experience.

4. Conclusion: It is quite conceivable — even likely— that toll facilities with variable pricing will constitute the bulk of all future additions to the nation’s highway capacity.

5. Toll facilities of the 21st century will bear little resemblance to the toll roads of our parents’ generation. HOT lanes Express toll lanes Truck only toll (TOT) lanes “Virtual Fixed Guideways”

6. Common denominator “Use of pricing not only to generate revenue but also to manage demand; “Use of electronic toll collection and dynamic pricing to allow control of traffic flow in real time and keep toll lanes congestion-free; “Use of toll lanes as “virtual fixed guideways” for high-volume Bus Rapid Transit; “Built in partnership with the private sector.

7. Growing Private Sector Participation “Chicago Skyway (99-year concession of an existing toll road, $1.8 billion) “Indiana Toll Road (75-year concession of an existing toll road, $3.85 billion) “Dulles Greenway, Northern Virginia (purchase of an existing toll road, $533 million) “Capital Beltway and I-95 HOT lanes in No.Virginia (construction & long-term concession of new toll lanes) “TransTexas Corridor (TTC-35) (construction & 50-year concession of a new toll road) “South Bay Expressway (SR 125) ( construction & 45-year concession of a new toll road, $635 million) “Pocahontas Parkway (VA) (99-year concession of existing toll road, $611 million)

8. “Fanning the spread of public-private partnerships are visions of highway projects built entirely with private funds and prospects of multi-billion concessionary cash payments that could jump-start ambitious transportation improvements years in advance of their planned execution.” “ Innovation Briefs, March/April 2006

9. "Virtually every major financial institution on Wall Street has created — or is in the process of creating— an infrastructure fund with transportation as a major component. They correctly recognize the enormous potential in American infrastructure. And it is imperative that future transportation decision-makers continue to foster this interest, not take steps to discourage it." Transportation Secretary Norman Y. Mineta

10. Conclusion: We may be on the verge of a fundamental change in our approach to funding new highway infrastructure— an approach where private capital rather than tax dollars becomes the chief source of financing new road capacity.

11. Changing Federal Role With toll revenues flowing directly to the states and to private toll concessionaires, the federal fuel tax would cease to play a dominant role in financing new highway construction. The federal-aid highway program would focus primarily on the vital mission of preserving and enhancing the Interstate system and on funding other national priorities Conclusion: This would mean a partial de facto devolution of the Federal program to the states.

12. Prediction is very difficult, especially about the future!