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Posts from the "Transportation Policy" Category

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The Indiana Toll Road and the Dark Side of Privately Financed Highways

This is the first post in a three-part series on the Indiana Toll Road and the use of private finance to build and maintain highways. Part two takes a closer look at how Australian firm Macquarie manages its infrastructure assets. Part three examines the incentives for consultants to exaggerate traffic projections, making terrible boondoggles look like financial winners.

Who owns the Indiana Toll Road? Well, as of the bankruptcy filing in September, Macquarie Atlas Roads Limited (MQA Australia), which is joined at the hip to Macquarie Atlas Roads International Limited (MQA Bermuda) on the Australian stock exchange, has a 25 percent stake. Macquarie’s investment bank arm brokers the various transactions related to ownership of the road, collecting fees on each one. Welcome to the world of privately financed infrastructure. Graphic: Macquarie prospectus

In September, the operator of the Indiana Toll Road filed for bankruptcy, eight years after inking a $3.8 billion, 75-year concession for the road with the administration of Governor Mitch Daniels.

The implications of the bankruptcy for the financial industry were large enough that ratings agency Standard & Poor’s stepped in immediately to calm nerves. In a press release, the company attempted to distinguish the Indiana venture from similar projects, known as public-private partnerships, or P3s: “We do not believe this bankruptcy will slow the growth of current-generation transportation P3 projects, which have different risk characteristics.”

But the similarities between the Indiana Toll Road and other P3s involving private finance can’t be ignored. And as we’ll see, even the differences aren’t all good news for the American public. Once hailed as the model for a new age of U.S. infrastructure, today the Indiana deal looks more like a canary in a coal mine.

At a time when government and Wall Street are raring to team up on privately financed infrastructure, a look at the Indiana Toll Road reveals several of the red flags to beware in all such deals: an opaque agreement based on proprietary information the public cannot access; a profit-making strategy by the private financier that relies on securitization and fees, divorced from the actual infrastructure product or service; and faulty assumptions underpinning the initial investment, which can incur huge public expense down the line. Though made in the name of innovation and efficiency, private finance deals are often more expensive than conventional bonding, threatening to suck money from taxpayers while propping up infrastructure projects that should never get built.

For the parties who put these deals together, however, the marriage of private finance and public roads is incredibly convenient. Investors are increasingly impatient with record-low returns on conventional bonds, and are turning to infrastructure as an asset class that promises stable, inflation-protected returns over the long run.

Meanwhile, governments are eager to fix decaying infrastructure — but without raising taxes or increasing their capacity to borrow. On the occasion of yet another meeting intended to drum up investor interest, Transportation Secretary Anthony Foxx recently wrote on the U.S. Department of Transportation’s blog: “With public investments in our nation’s important transportation assets steadily declining, we need to find better ways to partner with private investors to help rebuild America.”

Those investors are lining up to get in the infrastructure game. According to the Congressional Budget Office, about 40 percent of new urban highways in America were built using the private finance model between 1996 and 2006. Since 2008, that figure has jumped to almost 70 percent.

In an attempt to get even more deals done, the current federal transportation bill ramped up funding for the TIFIA program — which offers subsidized federal loans and other credit assistance, often to projects that also receive private backing — by a factor of eight.

Major private investors have stepped up their lobbying efforts to close more of these lucrative deals. Meridiam North America recently hired Ray LaHood, Foxx’s predecessor as Transportation Secretary, and Macquarie Group — which orchestrated the Indiana fiasco — hired away a White House deputy assistant to “continue strengthening our relationships with key elected officials… while also exploring new investment opportunities.”

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The Parking Tax Benefit: A $7.3 Billion Subsidy for Traffic Congestion

Graph: TransitCenter/Frontier Group

Not only does the parking tax benefit pay people to drive during the most congested times of day, the whole system of commuter benefits functions as a gigantic transfer from poor workers to affluent workers, who have greater access to subsidized travel to work. Graph: TransitCenter/Frontier Group

The federal government spends billions of dollars a year on tax subsidies that make traffic congestion worse, according to a first-of-its-kind analysis by TransitCenter and the Frontier Group. The culprit is the parking commuter tax benefit, which costs taxpayers $7.3 billion in foregone revenue each year, all while adding more than 800,000 cars to rush-hour traffic on the nation’s roads each workday, the authors estimate.

The parking tax benefit allows people to claim up to $250 in parking expenses as tax-free income per month. It originated in the late 1970s, when, in the name of fairness, Congress prevented the IRS from taxing the free parking perks that employers gave their workers, without any thought to the effect on transportation. The new report shows that not only does the parking tax benefit have a disastrous effect on traffic, it’s not even fair to car commuters — amounting to a gigantic transfer to the most affluent drivers.

Most advocacy efforts centered on commuter tax subsidies attempt to raise the transit benefit — currently capped at $130 per month. Last week, for instance, two members of Congress pledged to fight for an equal commuter benefit for transit and parking. TransitCenter and the Frontier Group argue that this is the bare minimum to strive for. The real impact lies in simply getting rid of the parking benefit.

The transit benefit, they write, is a “relatively inefficient tool for motivating changes in transportation behavior” and “only weakly counteracts the negative impact of the parking tax benefit” — and should be thrown out, as it were, with the bathwater. If commuter benefits are retained, however, they recommend some key reforms: equalizing the transit benefit, and mandating that employers who offer parking benefits also provide the option of receiving a cash equivalent instead.

TransitCenter and Frontier Group estimate that while most people don’t change their commuting behavior based on the incentives created by these tax benefits, about 2 percent do — and that 2 percent drives 4.6 billion additional miles per year.

To make matters worse, they do that extra driving at peak hours, in crowded downtown areas, worsening congestion that the country’s transportation policy is supposedly oriented toward fixing.

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NACTO to Take Safer Street Designs to Developing World Cities

Last year, the National Association of City Transportation Officials brought us the Urban Street Design Guide, and now it’s going global.

A Delhi traffic jam. Photo: Wikipedia

A Delhi traffic jam. Traffic collisions kill about 250,000 per year in India. Photo: Wikipedia

During the organization’s national conference in San Francisco last Thursday, NACTO chair and former New York City transportation commissioner Janette Sadik-Khan announced that it will be developing a “Global Street Design Guide” to help developing nations set standards for safe, livable streets.

Executive Director Linda Bailey said the guide will take principles from NACTO’s Urban Street Design Guide and adapt them for cities in places like India and East Asia. Streets and travel patterns in those nations are very different than in America, with much higher levels of walking and scooter use, for instance, as well as the looming threat of rapid growth in private automobiles.

“The U.S. is already influencing heavily many developing countries,” Bailey said. “The idea is to try to skip over any lag time… Under the same principles as the Urban Street Design Guide, how does this work in a country that has a very different mode split?”

The organization hopes to release the guide in early 2016. NACTO will also be working with a group of selected global cities interested in implementing safer street designs, much like the organization has done in the U.S., Bailey said. NACTO noted that 1.2 million people die globally from traffic collisions and that the guide is seen as an international public health tool.

“One of the things that’s exciting about working in an international context is you already have a high pedestrian mode share,” said Bailey. “Just making things more comfortable for pedestrians could make a huge difference.”

The design guide is being supported in part by the Bloomberg Initiative for Global Road Safety.

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WaPo Transpo Forum: America’s Mayors Aren’t Waiting for Washington

Atlanta’s BeltLine of bike and pedestrian trails is raising property values in every place it touches. Denver’s new rail line will create a much-needed link between Union Station downtown and the airport, 23 miles away. Miami is building 500 miles of bike paths and trails. Los Angeles is breaking new ground with everything from rail expansion to traffic light synchronization. And Salt Lake City’s mayor bikes to work and, by increasing investment in bike infrastructure, is encouraging a lot of others to join him.

At this week’s Washington Post forum on transportation, five mayors from this diverse set of cities spoke of the challenges and opportunities they face as they try to improve transportation options without much help or guidance from the federal government.

Speaking of the feds:

Atlanta Mayor Kasim Reed.

Mayor Kasim Reed of Atlanta is tired of Congress not doing its job. “Cities don’t get to kick the can,” he said. And even if the feds aren’t ready to make big investments, private and foreign investors are reportedly itching to get a crack at U.S. infrastructure, but there’s been no good process for doing so. Reed wants the federal government to play a convening role, bringing mayors together with private investors they can pitch projects to.

And either way, he said, if the federal government is providing less funding to cities for transportation, “we think they need to have a little less say” — except when it comes to safety. But Denver Mayor Michael Hancock says there’s an upside to the gridlock in Washington: “Cities are being more creative.” And Salt Lake City Mayor Ralph Becker says the Obama administration has been a great partner — pointing especially to the TIGER program and the HUD/DOT/EPA Partnership for Sustainable Communities.

New projects:

Los Angeles Mayor Eric Garcetti.

Los Angeles Mayor Eric Garcetti is excited about intelligent transportation technology, like the traffic signal synchronization his predecessor, Antonio Villaraigosa, pioneered. And LA’s Expo line — which he dubbed the Beach-to-Bars line — opens soon, turning a two-hour slog through traffic into a 45-minute pleasure cruise. He says it’ll open up access to the Philharmonic and sports venues that, these days, are often avoided because the trip is too hellish.

But Garcetti is already on to the next thing. To him, that thing is autonomous cars. He thinks LA will be a natural home for those. In fact, he openly acknowledges that his push to build BRT lanes is all in the interest of turning them into autonomous vehicle lanes a few years down the road. That’s right — despite the visionary strategic plan LA just released, Garcetti wants to turn road space over from efficient modes to less efficient ones.

And he does think driverless cars are just a few years away — he estimates that one in every 100 cars will be self-driving in 10 years, and five years after that they’ll be “absolutely mainstream.”

Denver’s Mayor Hancock is especially excited about the “Corridor of Opportunity” between the airport and Union Station because he lives out by the airport — one block inside the city limits, just enough to run for mayor, he admits. He currently drives to work, but he says he’s excited for the chance to take the train instead. “What we’ve decided to do is Denver is create a more multimodal approach to our transportation challenges,” he said. “Not only do you need to plan transit, but you need to plan for bicycles, you need to plan for pedestrian-friendly communities.” (And more lanes on the highway.)

Miami-Dade Mayor Carlos Gimenez.

Carlos Gimenez, mayor of Miami-Dade County, says they don’t really have a rail transit “system” at all, just one line (with a little detour to the airport). They’re still waiting for a rail link to the beach. The county’s new 10-year transportation plan has been lambasted by advocates as “complete fluff with no substance, future transit vision, or measurable goals.”

Once these projects get going, they have a way of multiplying. Salt Lake City has built 140 miles of urban rail in 15 years, and Mayor Becker says that even the skeptics wanted a light rail line of their own the minute the first line opened. What they still need to do, Becker said, is flesh out the bus system — “we invested in rail to the detriment of a really strong bus system,” he said — and fill in the gaps in the bike trail network.

On financing:

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DOTs Now Have No Excuse for Ignoring Changing Transportation Trends

As report titles go, you could hardly get less sexy than “NHCRP Report 750: Strategic Issues Facing Transportation, Volume 6: The Effects of Socio-Demographics on Future Travel Demand.” But buried within this wonky new document from the Transportation Research Board are ideas that can — and should — upend the way local, state, and federal officials plan for future transportation needs.

Two different scenarios foretell two very different futures for the Atlanta region. Image: NCHRP

Two different scenarios foretell two very different futures for the Atlanta region. Image: NCHRP

It’s no secret that our current transportation models have done a lousy job of accounting for the recent decline in driving in the United States. The most glaring example is the U.S. Department of Transportation’s biennial “Conditions and Performance“ report to Congress, which has repeatedly forecast a return to rapid growth in driving that has repeatedly failed to materialize.

Bad forecasts lead to bad decisions – specifically, the investment of vast amounts of public resources in new and expanded highways that we probably don’t need (e.g. in Wisconsin).

At first, the transportation policy establishment chalked up the decline in driving to the economic recession and assumed it was only temporary. That is despite the fact that, as Robert Puentes and Adie Tomer from the Brookings Institution pointed out as early as 2008, the drop in per-capita driving began well before the recession. And it’s continued during the recovery.

Over time, however, experts have come to recognize the multiple factors – including changes in the composition of the workforce, an aging population, technological changes, and shifts in housing and travel preferences among Millennials – that have contributed to the recent fall in driving and that make further stagnation in vehicle travel likely.

The new TRB report (which we could refer to by the catchy acronym SIFTV6:TESDFTD, but won’t) explicitly acknowledges these fundamental changes, identifying eight socio-demographic trends that will influence demand for vehicle travel through 2050. Of those eight trends, only one (changes in the nation’s racial and ethnic mix) is expected to contribute to an increase in per-capita driving, while at least five (the “graying” of America, technological change, workforce change, the “blurring of city and suburb,” and slow growth in households) will tend to reduce per-capita driving. (The impacts of the other two trends are ambiguous or unspecified.)

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A Bipartisan Policy Breakthrough That Could Save Local Economies

Beth Osborne was deputy assistant secretary for policy, and then acting assistant secretary, at the U.S. Department of Transportation from 2009 until March, when she joined Transportation for America.

Members of Congress love to talk about local control. And with good reason: American voters tell pollsters over and over again that they trust the elected officials closest to them more than any others.

Local communities do a good job channeling limited federal funds into small-scale, big-impact projects like this streetscape project in Bayonne, New Jersey. Photo: ##http://images.ta-clearinghouse.info/1-Ped-Bike-Facilities/Bayonne-StreetscapeBayonne-NJ/##TrADE##

Local communities do a good job channeling limited federal funds into small-scale, big-impact projects like this streetscape project in Bayonne, New Jersey. Photo: TrADE

Not only that, but most Americans live in cities, towns and suburbs, with 85 percent in metropolitan areas, according to recent census estimates. And 90 percent of gross domestic product — the economy — is generated in those places.

So why is rhetoric so far from reality when it comes to transportation funding?

When the federal transportation program was up for renewal two years ago, members of Congress from both parties repeatedly invoked “local control” as a goal. But the resulting law, MAP-21, actually reduced local latitude over transportation spending.

Pots of money that had been available to fix local bridges, provide alternatives to congested corridors, make better connections to transit or address safety issues for kids on their way to school — as just a few examples — were consolidated and shrunk. When all was said and done, local communities had access to less than 15 percent of the money in the bill. Metropolitan areas over 200,000 — where 65 percent of Americans live — got only 8 percent, according to federal data.

As a result, the one small pot of discretionary money available to local communities — the TIGER program — has been wildly oversubscribed, as I saw firsthand as one of the leaders at the U.S. DOT overseeing the program from 2009 until last March.

My time at DOT taught me two big lessons: First, the innovative solutions are coming from locals. And second, they have nowhere near enough resources to implement them.

Across the country, communities and regions are developing forward-looking plans to squeeze efficiencies out of transportation networks expected to move growing numbers of cars, pedestrians, transit riders, bicycles and freight. They are struggling to fund unmet repair needs. They worry that the economic potential they see will evaporate unless they can invest in a high-quality transportation network.

That’s why the bipartisan Innovation in Surface Transportation Act (HR 4726) is so important. The bill, introduced by Representatives Rodney Davis (R-Illinois) and Dina Titus (D-Nevada), would make good on the MAP-21 authors’ promise of more local control by reserving a share of each state’s federal dollars for grants to local entities. It would ensure that at least an additional $5 billion of the roughly $50 billion sent to states each year will be used to support local priorities.

Grants would be awarded by a committee of state and local officials along with a range of stakeholders, based on the strength of the proposal: Will the project yield a strong return on investment? Does it improve safety and reliability? Does the community have its own funds committed to the plan?

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Will DC’s Streetcar-Weary Council Embrace the Ambitious MoveDC Plan?

How much does the moveDC plan relieve congestion? Not much, actually. Image: DDOT

How much does the moveDC plan relieve congestion? Not much, actually. The map on the left assumes moveDC is implemented; the map on the right is the baseline. Image: DDOT

Yesterday, we ran the first part of my conversation with some of the architects of moveDC, the new long-range plan from the District Department of Transportation. MoveDC calls for the implementation of congestion pricing, 69 miles of high-capacity transit in addition to the 22 miles of streetcar already planned, a new downtown Metro loop, 72 miles of protected bike lanes, 136 miles of painted bike lanes, and 135 miles of off-street trails over the next 25 years.

In yesterday’s installment, I talked to Matt Brown, DDOT’s new acting director; Colleen Hawkinson, strategic planning branch manager at DDOT’s Policy, Planning and Sustainability Administration (PPSA); and Sam Zimbabwe, associate director of the PPSA, about the prospects for the most dramatic changes envisioned in the plan, the pitfalls of a focus on Complete Streets, and the reality that cars will not win every tradeoff anymore.

Here we pick up where we left off.

In the plan, there are two side-by-side maps (above) of future road congestion: with the changes laid out in the plan and without. And they’re very similar. Not identical, but very similar.

SZ: They’re not identical. But you have to remember, this removes a lot of vehicular capacity in exchange for some other things. So in order to create the space to provide more options, there was a need to manage the person-carrying capacity of the roadway system. And there were two principles that went along with that.

One is that there’s always a way to not pay the charge. The way we modeled it, it’s roughly equivalent to a round trip metro fare.

I thought that was interesting, to basically say you’re not going to pay any more to drive than to take the metro.

SZ: And carpools might be free. But everybody’s paying. District residents have to pay. And as we look at the whole system, we’re accommodating the same number of car trips in a day in 2040 as we are today, even as the District grows by 170,000 residents and a couple hundred thousand jobs.

CH: And we could have made these colors [on the map] pretty much whatever we wanted to. If we add more roads that would be tolled, like Massachusetts Avenue and Connecticut Avenue, we could get different colors in here. But it didn’t seem like we needed that to keep the network moving. This seemed to be a sweet spot in terms of the size of the cordon charge.

SZ: In the region, we’re starting to get experience with tolls. People ride the ICC [which is tolled and free-flowing]; they take 495 [which is free and congested]. They start to see what that means.

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“Every Street’s Going to Prioritize Pedestrians”: MoveDC’s Lovely Fine Print

Those dotted purple lines are protected bike lane the city plans to build. This is just the downtown zoom, but other maps show plans to build these lanes all over the city. Image: DDOT

Those dotted purple lines are protected bike lane DC plans to build: 72 miles of them, all over the city. This is just the downtown zoom. Other cities, be jealous. Image: DDOT

Livable streets advocates all over the country are buzzing about DC’s far-sighted new transportation plan, called moveDC. So yesterday Streetsblog sat down with some of the people responsible for writing and implementing the plan. I spoke to Matt Brown, the District Department of Transportation’s new acting director; Colleen Hawkinson, strategic planning branch manager at DDOT’s Policy, Planning and Sustainability Administration (PPSA); and Sam Zimbabwe, associate director of the PPSA.

MoveDC is an ambitious and wide-ranging plan that calls for overhauling streets to improve walking, biking, and transit. If you want to absorb it all, here’s the whole, massive document.

What’s your favorite part of this plan? What do you brag to other cities about and say, “DC’s gonna do this and it’s gonna be amazing”?

DDOT Acting Director Matt Brown. Photo: ##http://ddot.dc.gov/biography/matthew-brown##DDOT##

DDOT Acting Director Matt Brown. Photo: DDOT

MB: I’m struck by the comprehensive nature of it all. It speaks to new investments, but it also speaks to state of good repair for what we have, and really trying to maximize the road system we have so that it accommodates all choices of travel.

I don’t think it’s an all-or-nothing plan. I don’t think it’s: “We have a vision, we need whatever dollars and without that it’s going to fail.” Certainly there are dollars that are needed to implement, and we can’t realize the full capacity of the plan without doing that.

But I think this is a plan for the future of the District, and also for our agency. I mean, there are recommendations in here about how to prioritize sidewalk repairs better. One of the recommendations is to better prioritize how we make investments with the baseline money that we have.

So I guess it’s not one policy element I’m excited about. I’m excited there’s so much, and they’re interrelated but they’re not dependent on each other. We can make a big impact even if we can’t build a downtown metro loop, or pick your favorite infrastructure investment from the plan.

SZ: Or a downtown congestion charge!

[All laugh.]

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DC Region’s New Long-Range Plan Fails to Meet Its Own Climate Goals

Image: ##https://www.mwcog.org/uploads/committee-documents/YV1aVlhZ20131218092900.pdf##MWCOG 2013 Constrained Long-Range Plan##

While the Washington, DC region has set of a goal of reducing carbon emissions to 10 million tons by 2040, current transportation plans show emissions increasing to 26.5 million tons by then. Image: MWCOG 2013 Constrained Long-Range Plan

If sea levels rise just one foot in the Washington, DC, area, nearly 1,700 homes could be lost. Is the region’s transportation planning agency doing enough to stop that from happening? Several environmental and smart-growth organizations in the region are saying no. Seventeen groups have signed on to a letter, being delivered today, urging the agency to take action. The comment period on the agency’s latest long-range transportation plan closes tomorrow.

The Metropolitan Washington Council of Governments committed in 2008 to an 80 percent reduction in carbon emissions below a 2005 baseline by 2050. Two years later, the agency added a goal of 20 percent reductions by 2020. But according to its own analysis, the agency’s current transportation plan doesn’t get the job done.

The chart above is from last year’s long-range plan, but the picture hasn’t changed much with this year’s additions. While three of the 11 projects MWCOG has added for 2014 are streetcars and another two are commuter rail, the list also includes a new highway to Dulles airport, an interchange, two road widenings, and the removal of bus-only lanes.

The Coalition for Smarter Growth has asked MWCOG to reopen the plan and shift “significantly more funds to key transit projects,” said CSG Director Stewart Schwartz. He says MWCOG’s long range plans have an “artificial transit constraint,” since the plan can only include projects that have reasonably identified financial resources. However, existing funds could be shifted to transit projects. Schwartz would like to see more money go toward Metro’s Momentum 2025 plan to increase capacity.

MWCOG's ##http://www.mwcog.org/clrp/projects/highway.asp##2013 long-range plan## calls for spending significant resources on road expansions.

Major highway improvements in MWCOG’s 2013 long-range plan

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Let’s Do the Time Warp Again: U.S. DOT Fails to Get Travel Forecasting Right

The U.S. Department of Transportation seems to be stuck in a bizarre time warp.  For nine years in a row Americans have decreased their average driving miles. Yet U.S. DOT’s most recent biennial report to Congress on the state of the nation’s transportation system, released last Friday, forecasts that total vehicle miles will increase between 1.36 percent to 1.85 percent each year through 2030.

Times have changed. Why hasn't DOT gotten the memo? Image: ##http://www.flickr.com/photos/x-ray_delta_one/5124536635/##Flickr/James Vaughan##

Times have changed. Why hasn’t DOT gotten the memo? Image: Flickr/James Vaughan

Just how out of whack is that forecast? Consider the following:

  • Vehicle travel hasn’t increased by even 1 percent in any year since 2004. Yet the U.S. DOT assumes that driving will increase at a rate significantly faster than that every year on average through 2030.
  • The new report uses for one of its two scenarios the same flawed forecasting model that has overestimated vehicle travel 61 times out of 61 since 1999.
  • In a particularly absurd twist, the U.S. DOT forecast doesn’t even get the past right. The report “projects” (based on 2010 data) that Americans drove 5 percent more miles in 2012 than they actually did. To hit the DOT forecast for 2014, Americans would need to increase their driving by 9 percent this year alone.

Why should we care about all this? With transportation funds increasingly scarce — and especially with Congress due to reauthorize the nation’s transportation law — policy-makers need good guidance about where to invest. A sensible approach, especially given the recent decline in driving and increasing demand for transit, would be to plow a greater share of those limited resources into expanding access to public transportation and active transportation modes while focusing highway spending on fixing our existing roads and bridges.

Instead, the U.S. DOT’s travel forecast is used as justification to propose a dramatic increase in highway spending to fund all the new and expanded highways that the DOT presumes we’ll need to accommodate all of those imagined new cars and drivers. The agency asserts that the nation would need to spend between $124 billion and $146 billion each year to maintain and improve the highway system — numbers that are sure to find their way immediately into highway lobby press releases and be repeatedly cited in congressional hearings.

What makes the DOT forecast so bewildering is that the agency — elsewhere in the very same document — acknowledges the strong possibility that many of the factors that have caused the recent drop in driving may be long-lasting. The report states:

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