Monday, 25 April 2011

Nairobi toll road cancelled because of concessionaire

According to the Daily Nation of Kenya, the Nairobi Urban Toll Road project has been suspended because the World Bank is refusing funding.  The reason for the refusal is because the winning concessionaire -  the Austrian based Strabag Group - has apparently failed the bank's "compliance procedures".    As a result, the Kenyan government will have to commence negotiations with a new group, or seek alternative sources of financing.  The government is committed to the project, and the World Bank website (PDF) explains the justification for the project as follows:

There has not been any major road infrastructure improvement in the Nairobi area for over two decades and the basic network is still the one designed in the 1970s. The results are massive congestion soon expected to cause complete gridlock given the anticipated traffic growth. Decongestion of this main artery NC that passes through the middle of town and development of new infrastructure surrounding Nairobi is therefore paramount...Feasibility studies carried out under the NCTIP confirmed the viability of a toll road concession for a stretch of 77 km along the Uhuru Highway including the construction of a 29 km bypass.

The concerns are around meeting social and environmental conditions, particularly around land acquisition.  Business Daily Africa reports:

The project is the centre of a dispute between the government and property owners over intended demolition of buildings valued at billions of shillings while an alternative road can be designed to pass through a less built-up area.
 

Florida - toll roads for "sale" between authorities

Although in 2007 the Florida State Legislature passed legislation allowing state owned toll roads to be leased out, politics has prevented any serious moves to privatisation.  Instead, a rather odd series of efforts by the state and local authorities to take over various toll roads have eventuated.   Tampa Bay Online reports that the State is seeking to take over three regional toll road authorities including the Tampa-Hillsborough Expressway Authority.  By contrast, the Tampa-Hillsborough, Orlando-Orange County and Miami-Dade authorities are all seeking to take over state toll roads in THEIR areas, paying off the state to get local control.  It is a form of nationalisation - well on the state and local levels.  The state argues it could get economies of scale by having a single state wide toll road enterprise, but local politicians and authorities see them being able to get better control if they looked after toll roads in their areas.  

In both cases, those involved believe it would be a good investment, so there are no major fiscal hurdles (although a lot of borrowing would be needed).  That alone indicates the soundness of the toll roads as investments.  However, what it doesn't indicate is whether or how private sector and commercial imperatives might be used to improve the management of these roads.  Whilst other states and countries consider significant private sector involvement in their toll roads, Florida is looking at a strange blend of government ownership to gain efficiencies.  It is not impossible for government owned entities to operate very efficiently and be responsive to users, but it requires arms-length structures that are away from politics and the ability and freedom for management to do what is required to operate in a business like way.

Ohio Turnpike lease under further discussion

On 4 December 2010 I reported on how the new Governor of Ohio had proposed privatisation of the Ohio Turnpike, as he sought to realise some value from the asset to improve the state's fiscal position.  It was seen as at least being able to realise US$1 billion.

Ohio Turnpike map from website
Now Associated Press is quoted on Trucker.com as saying that it is more likely to be leased than sold and the Governor has said he is unlikely to approve of any deal worth less than US$2.5 billion.  There is also concern for tolls not to increase at a rate that would encourage traffic to divert onto parallel routes.  One early step mooted is conversion to electronic free flow tolling to reduce operating costs.    It is reported by the Ohio Transportation Director Jerry Wray that any net proceeds from a lease would be used to pay for highway improvements and "harbor dredging". 

Certainly I'd encourage Ohio to proceed with any form of privatisation it wishes, as long as it can get a good price and that the terms and conditions do not hinder the use and development of other assets.   There are great potential benefits in having such roads privately owned, as they can emphasise efficiencies and ensure a core piece of infrastructure is well run.  Concerns over monopoly profits can either be addressed by having price cap formulae and avoiding restrictions on parallel route development (although no subsidised parallel routes).   Obviously there are risks beyond getting a poor price and getting an owner interested in making money with minimal expenditure on service, but these can be managed. 

The bigger issue is whether the current investment climate will be keen to put so much money into one asset.  There are good reasons to consider a very long lease on such a strategic and potentially profitable asset, but the toll road concession sector has been burned badly in some cases with the recession.  It will take some convincing and advertising to show investors that this is a far better deal that relatively new toll roads in countries like Spain and Ireland (and yes, it does mean any residual xenophobia about foreign buyers will have to disappear if Ohio wants a good price).

Call for electronic free flow for New Jersey Turnpike Authority

Map of the two New Jersey toll roads
The advantages of electronic free flow tolling over manual tolls are obvious.  On heavily used toll roads such manual booths are obvious bottlenecks which can create long tailbacks and delays to motorists.  However, a growing issue is cost.  According to the Gloucester County Times, New Jersey (USA), 90% of toll booth staff of the (state owned) New Jersey Turnpike Authority (responsible for the New Jersey Turnpike and Garden State Parkway) are earning US$65,000 per annum (which compares well to the US GDP per capita average of around US$47,000).

That means that moving to electronic free flow tolling not only would remove the cost of delays through time and wasted fuel, but also administrative costs.   Apparently 70% of trips now use the electronic EZ-Pass system that avoids this, no doubt mostly being locals who prefer to get past the queues where the toll plazas widen.   However, there is every good reason to go further and fully automate toll collection.

The paper reports how the Turnpike Authority is to vote on Wednesday 27 April whether to privatise the collection and operation of the toll roads, which would allow any company responsible to adopt whatever techniques it wishes to deliver such efficiencies.  The Gloucester County Times supports it, as so it should.  Electronic free flow tolling is not cutting edge, it is proven technology.  As long as New Jersey has access to the enablers to make it work, it should proceed so that New Jersey toll roads are no longer working with 19th century technology.

Saturday, 9 April 2011

Delhi congestion charge?

Delhi loses about 420 million work hours a month due to congestion.  As the Indian economy grows it faces ever increasing gridlock.  11.2 million vehicles exist in the "National Capital Region" (NCR) which is metropolitan Delhi and neighbouring states.   Delhi has built many large highways including tolled roads, as well as an expanding metro network and well established bus system.   However, discussion about congestion charging has been happening for some years.  It now appears the government is looking seriously at the idea following a report that a "Delhi High Court appointed Special Task Force (STF), headed by former Chief Secretary Rakesh Mehta, has reportedly recommended that it be implemented". 

According to Indian website Mid-Day, two concepts are being floated.
One would be a central Delhi congestion charge, being a cordon/area charge similar to London or Stockholm.  Another would be for vehicles not registered in Delhi (which would include those from other states in the NCR) to be subject to a charge, effectively regulating demand for those travelling towards the city (in the hope that some may timeshift and others use the rail system).    Clearly the latter concept could potentially have the greatest impact. 

Many vehicles use the city as a transit point but "once the western periphery expressway also known as Kundli-Manesar-Palwal Expressway (KMP) is ready, those vehicles which just use the city as transit point will not enter at all. So, those who enter the city for day-to-day work will be the only ones to be taxed".  

Hopefully if Delhi proceeds it uses an intelligent approach, aligned to Singapore more than London, but it will need to think of more options that just cordons.  It needs flexibility and to target congestion when and where it occurs, not adopt blunt tools.

Mid Day makes a few other useful points about Delhi traffic:
* Even as the national (India wide) average figure is eight private cars per 1,000 population, in Delhi the number is 85.
* During the past decade the city has added 3,500 km of road length, but the number of vehicles has increased from 3.37 million in 2000-01 to 6.8 million in 2010-11.
* A total of 1087 vehicles are registered every day In Delhi, of which 1021 are personal vehicles. Nearly 365,000 vehicles are registered annually.
* Around 45 million sq m of land is needed for parking of already registered vehicles in the Capital
* Traffic congestion in Delhi causes an overall loss of Rs 8,400,000,000 per month (US$190 million).

Tuesday, 5 April 2011

LA takes the first bold step towards congestion pricing

For those of us who have worked in the road pricing/tolling field for some time, the economics behind pricing road space to manage congestion are obvious. The tools to enable it to be done efficiently have long been in operation, when one wants to charge for individual points on the network (as in Singapore) or create inner city cordons or areas (like Stockholm and London). For higher density cities with intensive public transport and busy city centres, such approaches to congestion charging can deliver substantial benefits. However, for cities where employment and traffic patterns are far more dispersed, it is quite different. 

Such is Los Angeles. 3% of employment is located in the downtown CBD, so most commuting patterns involve people travelling by car in a criss cross of motions between residential and commercial locations across the metropolis. A LA has grown as a city, this has become the typical pattern of there NOT being patterns and dominant origin/destination pairs.  

Transport policy in Los Angeles has gone through several eras.  Of course it is the location of the so-called Great American Streetcar Scandal, which is itself controversial (as some say it was only a matter of time anyway).  Until the late 1970s, Los Angeles followed a "predict and provide" model for roads, building an extensive freeway network to connect the metropolis.  However, this could not keep pace with demand, and the second strategy - public funding of public transport came next, with LA Metro rail both in subway and light rail forms.  That also had next to no impact and suffered colossal budgetary overruns.  So the strategy now is HOT lanes.
LA HOT lane trial

Tollroadsnews has an excellent article summarising where this project has got to.  Two significant stretches of highway are involved.  The I-10 will use an existing HOV lane and the hard shoulder to create two lanes in each direction. The I-110 already has this as HOV lanes.   Pricing will be distance based, according to crossing set points on these highways, at prices ranging from 25c to $1.40 per mile.

The lanes will be dynamically priced in real time to maintain a minimum speed of 45 mph, with the use of a DSRC based tag system for ALL users of the lanes (including high occupancy vehicles).   It is curious that all those involved in the design and development seem rather new to this type of system, I wonder how they will manage the risks.

Buses will be free and trucks will not be allowed to access the lanes, which is a shame, but probably reflects the I-10 lanes being substandard for wider vehicles.

Full details of the project are on the official website here with maps.

Tollroadsnews is supportive of this step as "Fuel taxes have got us where we are today - wasting billions of hours and dollars sitting in traffic. The taxes as a a major financing mechanism are the problem.

The solution is in making highways self-financing, direct-charge operations, managed one by one for efficient operations by operators forced to make a living selling a road service. In a small but important way that's what LA's toll lanes are experimenting with
".

However, another perspective is from Streetsblog Los Angeles, which tends to be a environmentalist/anti-car view.  It doesn't like it because " there is nothing in the congestion pricing plan that encourages people to drive less.  The plan removes no current drivers from the current car pool lane, even "HOV-2" vehicles at any point.  Then taking the "congestion" out of congestion pricing, the lane will actually be closed to paying vehicles during the most congested periods.  In other words, this plan will not effect traffic during the most congested periods."

Certainly this project wont fix LA's congestion, but it is seen as a pilot trial for something that could be extended across much of the LA freeway network.  HOV lanes have had their day and I've never been a strong supporter of them, as they do not reward much other than fortuitous multiple occupancy of vehicles (families etc).   My answer to Streetsblog is that the HOV component of this should be phased out over time.  If prices at the maximum level don't do the job, I'd argue that the HOV threshold should be raised to  3+ and 4+ (and progressively until it is effectively only giving buses a free ride).  The choice remains, and the benefits to users will be obvious.  It means those who value time can choose a fast trip, while others can take their chances with the existing route.  This will dissuade motorists and reduce congestion.  However it will disappoint Streetsblog LA because it isn't designed to discourage driving, but to get more efficient use of the road network.  That does mean rationing of HOV users in due course as the only ones not price sensitive.

Some Streetblog commentators think LA should have a London/Stockholm style congestion charge, which of course simply wouldn't work.  The long term solution is to shift from fuel tax to distance, time and place based charging.

What this project will demonstrate is how pricing can work.  Despite socialist and conservative critics, the untolled lanes remain as a choice.  The HOT lanes offer people a choice to avoid congestion either by having three passengers or paying, and it should guarantee a minimum level of service so for the first time, two LA highways will actually have trip reliability built into their operations.  That is a significant step forward.   

A network of toll lanes would be a major leap forward in changing how LA transport works, because the choice offered would be a premium service that will meet needs that will vary from day to day.  

It wont fix congestion, as this will remain on the parallel lanes and on roads that cannot be feasibly segregated, but that is for another day.  That is for a more widespread revolution in how Californians pay for road use.

For now, it is relieving congestion for those willing to pay on two key routes.  Let's hope it is a stunning success, as it provides one approach, particularly well suited to lower density new world cities, which have the space to build or convert lanes on major highways to tolled use.

Monday, 4 April 2011

France's Heavy Vehicle "Ecotax" to go to appeal

I reported some weeks ago here and here, that the tender for the proposed French heavy vehicle "ecotax" had been frozen because of a French court intervening regarding irregularities in the procurement.

The "Ecotax" is intended to be essentially a distance based toll system to apply to national highways in France - that being all major highways that are not currently tolled/owned by private concessionaires.  In effect, the proposed distance charge (which would also vary by vehicle size) would address issues of diversion from tolled routes to untolled routes, but was primarily intended to generate additional revenue whilst heavily incentivising a shift towards trucks with cleaner engines.  The "Ecotax" is intended to apply to all freight vehicles over 3.5 tonnes and 12,000 km of national highways (and 2,000 km of secondary highways that would otherwise face diversion from the national routes).  An estimated 600,000 French and 200,000 foreign trucks are expected to have accounts and the system is intended to be operational by 2013.


Thierry Mariani, Secretary of State for Transport has confirmed that the government has appealed the decision to the Conseil d'Etat, although it is understood this will delay development by some months.

The winning consortium was called Atlantia, on the basis of a 13 year contract worth 2 billion euros.  Atlantia comprises:
- Italian toll road owner/operator Autostrade (70%)
- French electronics manufacturer Thales (11%)
- French railway operator SNCF (10%) (which raises interesting issues of cross-modal competition)
- French Mobile phone operator SFR (6%) and
- French IT provider Steria (3%).

However, the issue was that one of Autostrade's past advisors - RAPP Trans - was acting as advisor to the French Government meaning the decision to award the tender to the consortium was against "the principle of transparency and the principle of inviolability of applications" according to the administrative court in Cergy-Pontoise.

A Dutch (language) website indicates that apparently the annual revenue estimated for the proposed "Ecotax" was 1.2 billion revenue of which two-thirds was intended to be hypothecated for the government infrastructure agency AFITF.   The average charge is intended to be 8-14 Euro cents per km, with discounts of up to 25% for more remote parts of the country.

One thing is for sure, Europe's likely second largest truck tolling system will be delayed and consultants will have to be particularly cautious about ensuring real and apparent conflicts of interest are addressed.  Certainly RAPP-Trans's activities around this project will be under the spotlight in the coming months.

UPDATEAppeal successful
SECOND UPDATE: More details on France's truck Ecotax here

Friday, 1 April 2011

Nevada prohibits toll roads!

Proposed Boulder City Bypass route
The Las Vegas Sun reports about a proposed Boulder City bypass and the point that while it could possibly be funded through tolls, toll roads are not allowed in Nevada. Nevada has a reputation for being quite free and open about businesses of many kinds, but obviously not for tolls. One website indicates that Nevada had many toll roads,  but this was in the era before the internal combustion engine. 

It appears that the Interstate Highway programme in the 1950s killed toll roads in Nevada. The report in the Las Vegas Sun indicates that perhaps the entire US$400 million cost of the Boulder City Bypass could be funded through tolls with a PPP.   I'm surprised Nevada has maintained such strong opposition to tolling.  Given the current economic climate (and that the road would still allow untolled use of the existing route), it seems timely for Nevada to reconsider its opposition to tolling.

Jamaica's toll concession vs railway reopening

Jamaica wisely decided some years ago that a major highway upgrade from Kingston to Montego Bay and Ocho Rios would be commissioned as a PPP concession using tolls. The resulting highway – Highway 2000 – has had 46km completed so far, with another 85km under construction or subject to land acquisition. The total project will be 233km long and form the backbone to the country. It is being tolled with DSRC technology and cash at toll plazas. Clearly, electronic free flow systems were not thought to be worthwhile for Jamaica, or perhaps Bouygues (with little experience) took a cheap, low risk approach.

The first phase has a very positive cost/benefit ratio, the second does not but is more about economic development. However, the Jamaican government has a problem. The concessionaire Bouygues included in its contract that no competing mode can be established to compete directly with the toll road. This, of course, should have been restricted to roads, as it may be seen to restrict aviation, but the issue is not that. It is rail.

Jamaica’s railways have been long neglected and mothballed. However, they are also being revitalised, with passenger services expected this year according to Go Jamaica. I’m not going to express a view on whether that is a good idea or not, but it does raise one issue toll concessionaires often want reassurances over – competition. My view is that as long as competition is not state subsidised, then it should not be restricted. Private roads shouldn’t be seen as a right to a perpetual monopoly. Nevertheless, it does seem that Jamaica’s government might want to have a more integrated approach to transport policy.