Highway congestion is a major problem, especially in large metropolitan areas such as Washington, DC. The Texas Transportation Institute estimates that congestion alone costs Americans $78 billion per year. Commensurate with this economic impact is the cost of implementing the necessary infrastructure improvements to cope with a growing "transportation crisis." Despite a long awaited increase in federal funding, due in part to the enactment of the Safe, Accountable Efficient, Transportation Equity Act - A Legacy for Users (SAFETEA-LU), the nation continues to fall short of the resources necessary for making highway transportation improvements proportional to the demands imposed by aging infrastructure and a growing population.1 Many state and local governments, desperate to improve the situation, are feeling the pressures associated with an inability to fund and complete in a timely manner their roadway and bridge projects.
Funding for transportation is steady but it is not increasing. Revenue from fuel taxes, the main source of highway project funding, has leveled off and has not kept pace with highway program needs, while vehicle miles traveled continues to increase. A 2005 study by the U.S. Chamber of Commerce estimates a $23 billion annual shortfall in funding to maintain the nation's current highway system. Furthermore, an additional $48 billion in annual funding is required to facilitate improvements essential to meeting the demands of national transit. Most governments at all levels have come within an arms length of their debt capacity to fund transportation initiatives.
Ongoing projects and roadway life-cycle preservation are consuming a majority of federal, state, and local government resources. This growing gap between available funding and the intensifying transportation problem requires alternative solutions for delivering new highway infrastructure.
In order to enact change, governments and elected officials are confronting the option of straying from traditional methods of financing highway construction. While forecasted demands on transportation infrastructure outpace available resources indefinitely, state and local governments need an apparatus that will enable them to expedite project delivery and utilize creative financing mechanisms. Many current and proposed enhancements will require the collection of tolls and user fees, especially for those projects that involve concession agreements between the public and private sector.1 Agreements that involve leasing infrastructure to the private sector are new and somewhat controversial. However, many case studies conclude that these innovative approaches are successful in ameliorating fiscal pressures on the government. They also provide alternatives to levying new taxes and accelerate the delivery of highway projects.
As part of the Interstate Highway System, the Capital Beltway (I-495) is the busiest corridor that services commuters in the National Capital Region and is regarded as the second most congested roadway in the country. Despite the various improvements implemented since opening to traffic in 1964, this major transportation route has reached capacity and is in need of significant preservation and upgrade. Based on the growing needs of the region, experts anticipate commuter times will double by 2020. Researchers at George Mason University estimate that this will cost the local economy $5.5 billion per year, including delays, excess fuel, lost productivity, recruiting challenges, and added costs for shipments and deliveries. Given the extent of these demands and the existing financial constraints at all levels of government, it is likely that any sort of expansion to the Beltway will need to have an innovative and efficient method of project delivery.
Virginia and Maryland have been studying methods for improving mobility on the Beltway since the mid-1990's. Recently, Virginia partnered with Fluor-Transurban, Inc. to preserve and expand the existing highway and develop new High Occupancy Toll (HOT) Lanes on a 14-mile segment of the Beltway. Under this partnership agreement, Virginia will retain ownership of the new lanes while Fluor-Transurban will design, build, maintain, operate, and finance the project over a 75-year concession period. Maryland has conducted extensive studies of its 42-miles of I-495, which include similar congestion tolling options and partnering with the private sector. However, they continue to study the issue and have no firm plans to add capacity to the Beltway.
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1 A concession agreement is the grant of land or property by the government in return for services or use. Concession agreements between governments and the private sector for transportation infrastructure are normally part of a public-private partnership.