Friday, June 15, 2007
Notes on the Car Society: First, Kill All The Subsidies?
by Tom Bozzo
Rob Zaleski has a pretty interesting article in the Cap Times describing how U.S. Highway 12 was expanded from two to four lanes along a 17-mile stretch between the far west side of Madison and Sauk City without turning it into a sprawl magnet. I think the jury is out on near-Madison sprawl — that depends, for instance, on the fate of the to-be-heavily-subsidized and comically named Tribeca Village development proposed to occupy a chunk of ex-open space on the Middleton fringes.
The Highway 12 project went ahead despite concerns about the amount of land it consumed along the route, etc., in part because of strong support from Tommy "King of Pavement" (*) Thompson and the political implications of the amount of money to be spent — $130 million. That's $1.91 million per lane-mile. (**)
One major way our transportation policies are screwed up is that transit projects are criticized (usually) from the right for failure to cover their costs. Apologists for sprawl often suggest that people are still voting with their feet in favor of suburbia, and some barely stop short of suggesting that suburbia and the accompanying automobile use is the natural economic ordering of things. I wouldn't object under the principle of 'if you pay the full cost of what you're doing I'm happy to be a libertarian.' But, as even us liberal economists will tell you, incentives matter, and less commonly aired is whether plain-old roads cover their costs and thus if sprawl is at least partly a response to subsidies.
Short answer: The car society requires roads that are, at best, funded by a tangle of cross-subsidies from very heavily-trafficked roads to feeder routes that can't pay their own way. In practice, motoring is heavily subsidized by general tax revenues and not-entirely-voluntary contributions of resources from motorists themselves.
The Highway 12 project provides a good example. Servicing the construction cost runs about $300 per lane-mile per day. That assumes a 30-year life of the road, 4% cost of funds, and does not include interim maintenance. If you think of the route's "revenue" as the tax on the gas burned by the traffic, that works out to about 2 cents per vehicle-mile (combined federal and Wisconsin tax) assuming 25 mpg. It follows directly that the break-even traffic is about 15,000 vehicles per day per lane.
The DOT helpfully provides traffic projections (PDF) for the stretch heading out of Madison. Only the sections (near Madison) with the heaviest traffic have half that much traffic. More typically, U.S. 12 carries less than 1/3 the breakeven volume, even in the 2025 projection.
Yet, as the state's project page notes, "The [pre-construction] Average Daily Traffic (ADT) volume on this corridor was over double the average statewide volume for similar two-lane highways. The increasing volumes had caused the road to become congested and unsafe."
Indeed, Zaleski notes that accident rates have dropped dramatically since the new road opened, avoiding perhaps 130-140 accidents annually. If that saves $30,000 per crash (***) in avoided economic losses, the safety improvements make up much of shortage of traffic-generated revenue, though probably not all. Highway 12 is something of an exceptional case, since the old road was very dangerous. Major reconstruction of an existing road would tend to have negligible safety benefits.
The conclusion is that most roads become congested and/or unsafe long before they even get close to "paying for themselves" without tolls or congestion charges. To the question in the title, the subsidies arguably can't be killed off entirely, but there would be less mode-choice foolishness, perhaps, if people didn't act like we motor about under conditions that have, or would, arise under the "free market."
So, Susan Lampert Smith, next time you're sitting in Verona Road traffic and inclined to complain about city-dwelling smartypantses who aren't, just keep in mind that in doing so, you're not even paying for the costs your suburban motoring lifestyle. (****)
(*) Another byproduct of our spelunking in the state Democratic Party files at the Wisconsin Historical Society: back in the late 40s, the Democratic Organizing Committee's platform documents complained about the influence of the "concrete lobby" in the Republican-dominated politics of the time.
(**) Portions of the project re-used stretches of the old highway, so this is may be somewhat less than the average cost of totally new construction, even netting out state DOT expenditures on conservation easements along the route. The current phase of reconstruction of East Washington Avenue on the east side of Madison has a contract cost of roughly $1.8 million per lane-mile; weekday traffic along that segment is between 7,000-8,000 cars per lane-mile.
(***) The Wisconsin DOT's crash facts indicate some $1.7 billion in economic losses due to 60,000 rural accidents in 2005, for an average loss of $28,333.
(****) Driver of gas guzzlers pay for more of the road but lard on external costs that I haven't considered and which work in the opposite direction. And if you're inclined to object that roads at least could be construed as recovering some of their capital costs, I'll add that the external costs are massive.
(Another installment in an occasional series of posts.)
Rob Zaleski has a pretty interesting article in the Cap Times describing how U.S. Highway 12 was expanded from two to four lanes along a 17-mile stretch between the far west side of Madison and Sauk City without turning it into a sprawl magnet. I think the jury is out on near-Madison sprawl — that depends, for instance, on the fate of the to-be-heavily-subsidized and comically named Tribeca Village development proposed to occupy a chunk of ex-open space on the Middleton fringes.
The Highway 12 project went ahead despite concerns about the amount of land it consumed along the route, etc., in part because of strong support from Tommy "King of Pavement" (*) Thompson and the political implications of the amount of money to be spent — $130 million. That's $1.91 million per lane-mile. (**)
One major way our transportation policies are screwed up is that transit projects are criticized (usually) from the right for failure to cover their costs. Apologists for sprawl often suggest that people are still voting with their feet in favor of suburbia, and some barely stop short of suggesting that suburbia and the accompanying automobile use is the natural economic ordering of things. I wouldn't object under the principle of 'if you pay the full cost of what you're doing I'm happy to be a libertarian.' But, as even us liberal economists will tell you, incentives matter, and less commonly aired is whether plain-old roads cover their costs and thus if sprawl is at least partly a response to subsidies.
Short answer: The car society requires roads that are, at best, funded by a tangle of cross-subsidies from very heavily-trafficked roads to feeder routes that can't pay their own way. In practice, motoring is heavily subsidized by general tax revenues and not-entirely-voluntary contributions of resources from motorists themselves.
The Highway 12 project provides a good example. Servicing the construction cost runs about $300 per lane-mile per day. That assumes a 30-year life of the road, 4% cost of funds, and does not include interim maintenance. If you think of the route's "revenue" as the tax on the gas burned by the traffic, that works out to about 2 cents per vehicle-mile (combined federal and Wisconsin tax) assuming 25 mpg. It follows directly that the break-even traffic is about 15,000 vehicles per day per lane.
The DOT helpfully provides traffic projections (PDF) for the stretch heading out of Madison. Only the sections (near Madison) with the heaviest traffic have half that much traffic. More typically, U.S. 12 carries less than 1/3 the breakeven volume, even in the 2025 projection.
Yet, as the state's project page notes, "The [pre-construction] Average Daily Traffic (ADT) volume on this corridor was over double the average statewide volume for similar two-lane highways. The increasing volumes had caused the road to become congested and unsafe."
Indeed, Zaleski notes that accident rates have dropped dramatically since the new road opened, avoiding perhaps 130-140 accidents annually. If that saves $30,000 per crash (***) in avoided economic losses, the safety improvements make up much of shortage of traffic-generated revenue, though probably not all. Highway 12 is something of an exceptional case, since the old road was very dangerous. Major reconstruction of an existing road would tend to have negligible safety benefits.
The conclusion is that most roads become congested and/or unsafe long before they even get close to "paying for themselves" without tolls or congestion charges. To the question in the title, the subsidies arguably can't be killed off entirely, but there would be less mode-choice foolishness, perhaps, if people didn't act like we motor about under conditions that have, or would, arise under the "free market."
So, Susan Lampert Smith, next time you're sitting in Verona Road traffic and inclined to complain about city-dwelling smartypantses who aren't, just keep in mind that in doing so, you're not even paying for the costs your suburban motoring lifestyle. (****)
(*) Another byproduct of our spelunking in the state Democratic Party files at the Wisconsin Historical Society: back in the late 40s, the Democratic Organizing Committee's platform documents complained about the influence of the "concrete lobby" in the Republican-dominated politics of the time.
(**) Portions of the project re-used stretches of the old highway, so this is may be somewhat less than the average cost of totally new construction, even netting out state DOT expenditures on conservation easements along the route. The current phase of reconstruction of East Washington Avenue on the east side of Madison has a contract cost of roughly $1.8 million per lane-mile; weekday traffic along that segment is between 7,000-8,000 cars per lane-mile.
(***) The Wisconsin DOT's crash facts indicate some $1.7 billion in economic losses due to 60,000 rural accidents in 2005, for an average loss of $28,333.
(****) Driver of gas guzzlers pay for more of the road but lard on external costs that I haven't considered and which work in the opposite direction. And if you're inclined to object that roads at least could be construed as recovering some of their capital costs, I'll add that the external costs are massive.
Labels: Economics, externalities, Trains Planes and Automobiles
