Peak Car? China says "not yet".

Peak Car is more likely to be related to an automotive-ownership saturation level given a particular configuration of wealth, age and other demographic components.  In countries such as the US and UK and Australia that number hovers around .7 (700/1000 pop) and is currently flat. Some hope it will climb given an economic recovery, some pray for permanent decline or at least continued stagnation.  It does make sense that there would be a ceiling to automotive use—at least on a per capita basis. And something under .75, given the portion of a population under driving age or over driving capability, seems reasonable (as a guess, I mean, not for our cities).

Regardless of where such a ceiling might be, the rest of the world, (especially China) still wants to get to that lofty place. (more china news re traffic) Hence Two Billion Cars is the near-term prediction, hoping and praying aside.  If the Sperling-Gordon "doubling" prediction is off the mark, it will be off only by a couple of years.

Most of us think only about our car or the cars in our neighborhood or city. But the matter of automobility is much larger as it addresses a critical human and urban need. Wishing it would get fixed or go away won't make it so. You may personally have more or less use for an automobile.  You may arrange your life to use very little or over much. But world vehicle population will double—likely in less than 20 years.

The Five Faces of Public-Private Partnerships

A colleague from the D.C. area who is an expert in road finance wrote an insightful, concise and sobering note about Public-Private Partnerships. As I have written before about monetization of Toronto’s parking assets, and as I have found myself defending Ontario's 407, I found this valuable.

With Dan’s permission, I share this unaltered and unabridged.

Here is how Dan connected his work regarding what he prefers to call Public-Private Collaborations to my work in congestion pricing. I kept the original term to be sure his article is discovered by more people... 

"The relevance of the Many Faces of Public-Private Partnerships piece to road or congestion pricing is that many believe that P3s are the best way to implement road pricing on new alignment or HOT lanes. If so, it is best they understand the way certain detractors may use the negative rhetoric about P3s to undo worthy road pricing initiatives."

-----

THE MANY FACES OF PUBLIC-PRIVATE PARTNERSHIPS

Daniel L. Dornan, P.E. — 2012.07.21

Let me begin by noting that I am a strong supporter of public-private collaboration to help address the fiscal and infrastructure needs of our nation. However this support is predicated on having both public sector and private sector participants benefit from the arrangement relative to the degree to which they each contribute to its success. In addition, such an arrangement should be made in a fully transparent manner with the respective parties held accountable for their responsibilities and promised results.

When politicians and public officials turn to the private sector (including investment-banking firms and venture capitalists) to help them finance public use infrastructure as part of a public-private partnership (P3), it is prudent to understand the short-term motives and the long-term consequences of these deals before they are finalized.

This paper discusses the various ways in which P3s can be viewed, depending on the nature of the deal, the roles and responsibilities of all parties to the deal, and the point of view of those assessing the deal. Understanding these differing views can help private firms become better positioned to successfully compete in the emerging and rapidly changing marketplace for P3s.

P3s as White Knight

Public-private partnerships are often touted as a panacea for addressing the transportation infrastructure needs of states and municipalities facing fiscal challenges during the continuing Great Recession. Proponents of P3s point to enhanced access to private capital as a major benefit of these arrangements. They paint P3 teams as White Knights able to rescue needed but fiscal-constrained infrastructure projects by providing ready access to financing, innovative project delivery, and cost-effective life-cycle asset management. These are the major advantages of successful P3s. Unfortunately most public sector agencies are unable to apply these processes to gain these benefits for their constituents since their time horizons for infrastructure management are much shorter than the service lives of these assets.

P3s as Pied Piper

In some P3 contracts, the concessionaire teams are asked to provide a sizable up-front concession fee in return for assuming control of public use infrastructure assets through long-term leases supported by tolls or other revenues. These deals inevitably involve a long-term repayment schedule that is significantly more than if the sponsoring public entities financed the projects using tax-exempt public bonds. This is because private consortia will only do a P3 deal if they are relatively sure that the project can generate the level of proceeds to more than cover the up-front payment; their own capital, operating, and maintenance costs, and an acceptable rate of return on the investment made by the financing members of the P3 team. The revenue potential of the facility under private management must be significant since the rates of return on private capital are much higher than interest rates associated with tax-exempt bonds, typically by 300 to 400 basis points (for example 6.2% versus 10.0%).

Those who oppose P3s out of concern that the private sector will make a profit on the deal fail to realize that when it comes to private financing, the profit motive is what makes these deals possible.  In all but the most altruistic cases, the Pied Pipers of capital finance expect to be paid for their services.  

P3s as Robin Hood

A particular problem arises when the up-front proceeds from a P3 concession payment are diverted to other unrelated purposes. This occurred in 2006 when the City of Chicago leased its rights to the Chicago Skyway and it’s future toll revenues to a P3 consortium of Spanish and Australian firms for 99 years in return for an up-front cash payment of $1.83 billion. In this case, the only transportation-related use of concession proceeds was for the City’s Meals-on-Wheels program. None of the up-front payment was dedicated to any other transportation projects or services, except to pay off the remaining City debt on the Skyway itself.

As a kind of Robin Hood, the City of Chicago took the proceeds from the Skyway lease and distributed it to a wide variety of social programs and causes. At the time, residents of Chicago did not pay much attention to this deal, even when it promised to significantly increase tolls on the Skyway. This was because most users of the Skyway, who would pay these higher tolls, lived in Indiana. Like a commuter tax, Chicago effectively tolled the citizens of Indiana to pay for social programs benefitting the citizens of Chicago.

P3s as Alchemist

To public officials desperate for fiscal relief, P3s could appear like the alchemists’ dream of turning lead (i.e., current debt, deteriorated infrastructure) into gold (i.e., debt relief, rehabilitated or new infrastructure). The reality is that these deals generally rely on a transfer of future revenues to the private sector that is better able to take the risks and secure the benefits of long-term asset stewardship. Since the public sector is typically unable to generate these future proceeds from their maturing public-use infrastructure, today’s public officials are more likely to embrace P3s by swapping a much larger revenue stream that will take decades to accrue for a smaller but immediate capital infusion in the form of an up-front concession payment.

P3s as Trojan Horse

The history of transportation infrastructure is replete with examples of megaprojects predicated on overly optimistic projections of public use and benefits and grossly underestimated estimates of costs.  By the time the actual usage and costs are known, these projects are too far along to be stopped. Another 10-15 years must elapse before the induced economic development spawned by these megaprojects is realized.

Likewise, the negative consequences of P3 agreements generally only become apparent long after the dealmakers leave office. When these arrangements enable opportunistic officials to lease out existing public use infrastructure for many decades, future generations may be denied access to windfall revenues these assets might generate over the long term. In such cases, those public officials responsible for pushing through these quick cash-out deals, their current constituents, and their private sector partners may be the only ones who benefit financially from these agreements. Subsequent generations may be left to feel the gambler’s remorse resulting from these deals.

If P3s are Trojan Horses designed only to enable private interests to assume responsibility for public infrastructure assets where profit and return-on-investment are their primary concern, we may see the wholesale transfer of the nation’s most critical and strategic highways to international consortia accountable only to their investors or stockholders. As the saying goes, Beware of Greeks Bearing Gifts.

Conclusions

Pubic stakeholders will be better served if they fully understand the nature and details of these agreements as they evolve over the short term and mature over the long term. The public will be best served when P3 contracts are developed and executed in a fully transparent manner, with all participants held accountable for their respective contractual commitments throughout the terms of these agreements.

Private sector firms interested in pursuing P3 opportunities in this country will be better prepared and more successful if they understand how different stakeholder groups view P3s. It is only by first understanding the diverse and sometimes contrary perspectives of both advocates and detractors of P3s that private sector firms can take the appropriate actions to be successful in pursuing these innovative financing and project delivery approaches over the long term, to the mutual benefit of the public and private enterprise.

Daniel L. Dornan, P.E.

Dornandaniel at gmail…

+1 703-625-2152

Driverless journalism

Added on 2012.09.13
     Pro: Kiss Your Bus Goodbye

     Con: Will driverless cars abolish buses?

People are starting to note a lot of positive implications for the self-driving vehicle (SDV) that is resonating on either side of the car-anti-car divide. In the WSJ, Brooking’s Clifford Winston wrote: Paving the Way for Driverless Cars: Instead of focusing on an enormously expensive high-speed rail system, government should promote modern highway design for cars of the future. (2012.07.17)

While Winston is half right that "a much better technological solution [than high speed trains] is on the horizon", the comparison is off-base since the sweet-spot trip for heavy rail vs that for the SDV are widely separated. Kind of like saying a baby stroller is equivalent to a mountain bike, since both move children. I wish he had written: “a much better technological solution [than today’s car] is on the horizon". But he was more using the SDV story as an excuse to diminish heavy rail and promote private investment in transport infrastructure. (While appreciating a role for rail, I whole-heartedly support private investment.)

Winston is also half right to claim: No worries about rush hour, vacation congestion, bad drivers, speed traps and accidents." Urban rush hour trauma and congestion would be reduced. The cessation of bad driving (on whose definition?) will take a long period of attrition, but one interesting idea might be to suspend driver licenses for “bad drivers” for a year constraining such drivers to a SDV for that year. Perhaps onerous to some it would be life-changing and even life-saving for others. The same with “no accidents”. There would be fewer—many fewer, eventually—but zero would be unlikely. When I saw “speed traps” listed among the bad bits such as "rush hour", "congestion", "bad drivers" and "accidents", I first recalled the Sesame Street jingle: "One-of-these-things-don't-belong-together…", then I wondered if that provides us with a hint of an opportunistic attribute of Winston’s own driving?

I think Winston’s concern that “one-third of the nation's highways are still in poor or mediocre condition” is both exaggerated and in no way a showstopper with respect to the SDV. The SDV’s lead designer, Sebastian Thrun has admitted that the work is not done—specifically listing the challenges of driving in snow, construction zones and “avoiding a mattress on the roadway”. I am certain he or someone will solve the pothole problem. Thrun started on this in 2005 and has accomplished a lot in eight years (actually the early vision of the SDV goes back to the 1939 World’s Fair, and was electric, no less). Thrun has been clear that the “car will be ready when the car is ready”, so he and Google (and several other competitors) will not rush-to-release a technology that would be unsafe or trip on potholes—nor would they be allowed to do so. Nonetheless, the SDV will suffer from the same problem as does commercial air carriers—while far safer than human operated cars, they will be held to a far higher standard. And Thrun knows that, too.

Winston’s proposal to build a whole new infrastructure is alarming. Any scheme that puts two different roadbed compression strengths in adjacent lanes is especially misguided as a simple lane departure of a heavy vehicle could cause tremendous damage. If his intention is that such lanes be physically grade separated, then flexibility would be greatly reduced and the tiny portion of the network that would then avail to SDVs would greatly restrict their movement. If we can’t get people to buy EVs with restricted ranges why would they buy SDVs with restricted routes? Sounds like the bus to me. And to imagine that because of this separation “driverless cars … would not have to distinguish between cars and trucks” is a terrifying idea. Would you agree to be whisked along in a robotic car that could not distinguish among vehicle sizes, one of the simplest of robotic vision feats? Count me out.

The illustration accompanying Clifford Winston's article is misleading.
This shows a car on a guided runway, not an autonomous vehicle.

The SDV will operate on the existing infrastructure and an internal map can keep if off any parts of the network that would put vehicle or rider(s) at risk. Even the signal timing problems can be addressed partly by fixing some critical parts and adapting the vehicles to others. Consider that as the SDV fleet grows, learning algorithms that use massive quantities of trip data (such as do those used by INRIX to map country-wide congestion in near-real time) can get very smart. They could easily prioritize which of the signal timings need most urgent fixing.

The frontier benefits of the SDV will accrue during 2022-2042 as special, restricted applications such as replacing mostly-empty and oversized urban buses, expensive and poorly driven taxis and shared cars. Here is where I would like to see Winston’s call for private funding focused: urban fleets of self-driving jitneys to replace every form of motorized shared vehicle (bus, taxi, street car, shared car, vanpool) from the front door of your home or work right up to the light-rail and heavy-rail transit station and vice versa. Replace them all. Then by 2045, maybe the US Congress will be able to pass another Surface Transportation Reauthorization Bill in plenty of time to eulogize the last of the personally-operated SOVs and fix the last of the traffic signals in time to remove them all, because they will no longer be needed

Not to lose sight of the key value of Winston’s message, however, he is 100% right that more would be achieved per SDV dollar than per heavy rail dollar, although both are needed.

Use revenue from parking reform rather than tax property

The Stintz - De Baeremaeker “OneCity” plan for Toronto Transit got a B+ from former Toronto chief planner Paul Bedford and urban designer and author Ken Greenberg. On a story by the Star’s Tess Kalinowski on 2012 07 06, “Bedford thinks OneCity is still too reliant on senior governments to provide two-thirds of the projected $30 billion cost."

“Much of the controversy … is based on its funding proposition—raising property taxes 2 per cent and applying the money to a dedicated transit fund.”

Ken Greenberg’s understatement: “The politics that could thwart the latest and among the boldest transit visions to come before the city in years, are inevitable,” is correct. And this is unfortunately to be expected in the merry-go-round transportation conversation we have going for the GTHA.

According to a Globe article on 2012 06 28, “For the average Toronto homeowner, OneCity would add $180 to the annual tax bill by the time the plan is fully phased in in 2016. All the money would go to transit.”

That’s 50 cents per homeowner per day.

Proper parking reform—and I am not referring to the cost-of-living increase on the GreenP machines that is expected soon—could easily cover half of that, while reducing urban congestion at the same time. Increasing property tax increases land rents, and that tends to discourage people from moving closer to the center as some urbanists think they should do. Anything that moves or keeps people farther from the center increases the use of automobiles.

“Why should my parking money fund transit?” demands my neighbor. One could think of increased transit use as a way to increase existing roadway capacity, since congestion reduces performance.

Whether we use parking revenues or fuel-tax revenues to fund roads or transit, either is better than being heavily reliant on property taxes.

Toronto New York Vilnius - Styles differ re War on Cars

Toronto's Mayor Ford can can pick up some tips about the War on Cars, here...

http://blah-city.tumblr.com/post/25654653342

…while being careful to watch for the rise of anti-parking ticket rebels, here.

http://www.kickstarter.com/projects/1404309186/tyco-parks-the-car