Category Archives: Transportation

CTB Approves $4 Billion Interstate 64 Project

CTB approves $4 billion project to benefit Interstate 64, Hampton Roads Bridge-Tunnel

The CTB approved Option A, one of four options, to relieve chronic congestion on Interstate 64 and the Hampton Roads Bridge-Tunnel.

Wow! The Commonwealth Transportation Board  approved yesterday a $4 billion plan to expand the Hampton Roads Bridge-Tunnel and widen twelve miles of Interstate 64 from four lanes to six. Said Transportation Secretary Aubrey Layne after the vote: “Historic day for Hampton Roads and the state.”

The Virginian-Pilot provides these details:

The additional lane capacity in each direction would likely be high-occupancy toll lanes, which would require that a car carry three people to avoid a toll during peak hours. Vehicles with one or two people could choose to pay a variable toll based on congestion during peak hours. The Commonwealth Transportation Board will be able to weigh in later on the “managed lane” concept.

Buses would use the new lanes, too.

The existing lanes will remain free.

Funding will come from tolls and bonds, regional gas tax revenue, and federal loans.

Bacon’s bottom line: Northern Virginians have had to learn to live with HOT lanes, and now Hampton Roadsters will, too. Nobody likes paying the tolls, but the money to widen highways and build the tunnel has to come from somewhere.

Should Hampton Roadsters (or Virginians) pay higher gasoline taxes to improvements on Interstate 64? Nobody likes gasoline taxes either — especially if they’re not the ones benefiting from the project.

Should VDOT toll the new tunnel and its companion tunnels in order to lower the tolls? That, too, is a non-starter. No one likes paying a toll where they weren’t paying one before.

How about tolling just the new tunnel? That’s the plan! No one loses. If traffic is logjammed and you desperately need to get to the other side of the river, you can pay a toll (which will vary, depending upon demand) for an expedited trip. But you don’t have to pay the toll if you don’t want to. You can join the schlubs in the slow lanes, and you’re no worse off than before.

If you carpool or ride a bus, you’re better off. You can use the HOT lane for free, and you don’t wait in the schlub lanes.

Even if you’re a schlub, you’re probably better off. The slow lanes will be less congested than they would have been without the project. The HOT lanes will divert toll payers, carpoolers and buses who would have been clogging the slow lanes with you.

I haven’t seen how the deal or financing is structured, so I can’t comment on the soundness of the Interstate 64 plan. But construction of a HOT lane is both morally and politically defensible.

Tesla Scores Big Victory in Virginia

Tesla Model X

Tesla Model X — pedal to the metal in Virginia.

First Uber, then Air BnB, now Tesla. Free markets in Virginia’s “new economy” are making steady ground.

Uber and Lyft, the revolutionary ride-hailing companies, overcame the taxicab industry two years ago to win the right to compete in the Virginia transportation marketplace. Last year, the General Assembly legalized Air BnB, an online marketplace for short-term rentals of private rooms and homes, after creating a mechanism for homeowners to pay occupancy taxes on the same basis as hotels.

Then yesterday, the Department of Motor Vehicles handed Tesla Motors, a manufacturer of electric vehicles, a major regulatory victory by ruling that the company could open a company-owned store in Henrico County. State law prohibits an auto manufacturer from owning dealerships, unless it can be demonstrated that no independent dealer is available to sell its cars “in a matter consistent with the public interest.”

DMV Commissioner Richard D. Holcomb accepted the California company’s argument that no independent dealer in the Richmond area could profitably operate under its retail business model. Wrote Holcomb in his ruling:

Tesla’s business model differs from traditional car dealerships in many ways; but specifically, Tesla sells its vehicles at uniform prices whether a customer purchases through [its] website or at a Tesla store. Tesla could not or would not offer “dealer discounts” or “wholesale pricing” on new cars to a prospective dealership. VADA’s own experts agreed that it would be very hard or impossible for a dealership to be profitable unless Tesla offered their cars at wholesale prices. Although many of the dealers testified that they could eventually make a profit with a Tesla dealership, they admitted that it would not be from new car sales. Those dealers indicated they could make a profit through other departments; and those areas, like sales of parts and used cars or profits on service and financing mark-ups, run counter to the Tesla business model.

That doesn’t come close to describing all the innovations the company would bring to Virginia. Founder Elon Musk’s grand plan is to integrate electric vehicles, home solar power, and battery storage to move the country toward a environmentally sustainable energy economy. (See my post outlining that vision.)

The Virginia Automobile Dealers Association (VADA) has vowed to fight Holcomb’s ruling, either through the courts or in the General Assembly, so Tesla’s victory may be temporary.

From my perspective, VADA offers one legitimate argument: The EV manufacturer should be required to abide by the same consumer-protection measures that automobile dealers do. The company says that its practices are effectively equivalent to those of the auto dealers, but it is not bound to them by law.

Just as Uber and Lyft were required to adopt certain consumer-protection measures so they would not enjoy an unfair advantage over taxis, it is reasonable for Tesla to accept consumer-protection measures to compete on a level playing field with automobile dealers. Tesla and other manufacturers — China-based automaker Geely also plans to sell cars in the U.S. through a direct-consumer model, according to the Richmond Times-Dispatch — should compete on their ability to provide a better value proposition to consumers such as better pricing, a better service model, and superior customer relations. I expect the details will be worked out in the 2017 legislative session.

Privatization, Outsourcing and Risk

Privatization entails risks and rewardsIn negotiating a public-private partnership for building and operating improvements to the Interstate 66 corridor outside the Beltway, Transportation Secretary Aubrey Layne has created a new template for looking at privatization and outsourcing.

Traditionally, when government perceives a public need — building roads, educating children, running prisons — it undertakes to do the job itself. But government bureaucracies are prone to rigidity, bloat and overruns. As a corrective, Republicans and conservatives often propose outsourcing important functions to the private sector. But privatization is vulnerable to cronyism, favor-seeking and private enrichment at public expense.

A third way, Layne’s way, requires government to run more like a business — but not in the sense normally understood as a penny-pinching attention to costs. When businesses negotiate deals and contracts, they expend tremendous effort thinking about risks and contingencies. Government rarely does. That’s why privatization efforts often go awry. Private-sector negotiators take their public-sector counterparts to the cleaners by extracting concessions on obscure points in the contract that can lead to big payoffs down the road. Layne says government needs to develop a similar capacity to manage risk.

As I explained in the previous post, “How the McAuliffe Team Saved $2.5 Billion,” Layne adopted a new approach to project management for “Transform 66.” First, he developed a term sheet, a list of elements deemed essential from a public-policy perspective that could not be bartered away. In the case of I-66, these included park-n-ride lots, a mass-transit service, and future upgrades to the transportation corridor.

Then he established a baseline — what would it cost for the Virginia Department of Transportation to undertake the project itself? If VDOT could do the job for less, on a risk-adjusted basis, then there was no point in dishing off the work to the private sector. But if a private bidder could do the job for less, the public would benefit.

But those were just first steps. Layne analyzed transportation projects as a continuum of risks. For any large project, for instance, there is the risk that construction could run behind schedule or over cost. VDOT was once notoriously unreliable in delivering projects on schedule and on budget, although it has gotten much better. Also, there is O&M risk — the risk that operations & maintenance will cost more than assumed. This is particularly an issue if the condition of roads and bridges is to be maintained to specified performance standards. Then there is financial risk, critical in toll-financed projects. Financial models are predicated on assumptions of how many motorists will pay tolls and how much they will pay. If ridership and revenues fall short, the tolling entity, whether public or private, could wind up defaulting on its bonds — a highly visible event.

It is worthwhile noting that these risks exist whether VDOT explicitly recognizes them or not. For many years, construction delays and overruns were routinely buried in budgets that were impenetrable to the public. Maintenance costs were divorced from project costs and rolled into transportation district expenditures. No one bothered to check if actual ridership matched the projections that justified the project. If ridership fell short, there were no visible repercussions. Poor management might result in less money available for future construction projects, but it was invisible, so no one was held accountable.

Layne’s key insight is that different parties vary in their tolerance for taking different types of risk — for reasons often unknowable to the state. One player, for instance, might accept a lower return on investment in order to get a toehold in a strategic market. A corporation, facing zero-interest policies in the European Union, might wish to transfer assets to the U.S. Another player might have tax reasons for structuring an investment in a particular way.

Therefore, it is critical to bring as many players bidding on a project as possible, and not to settle upon a given approach right away. When discussing the I-66 project, five different consortia submitted five different design-build proposals (in which they would design and build the project, then turn it over to VDOT), five design-build-operate projects (leaving bond-financing and ridership risk with the state) and three outright concessions (in which the private parties would assume operational and financial risks).

Negotiations with multiple parties also creates what Layne calls “price discovery” — the state gains new insight into the economics of the project that allows it to push for better terms. Private consortia suggested opening HOT lanes to trucks to generate additional revenue. The idea added value to the deal, and Layne accepted it. Continue reading

How the McAuliffe Team Saved $2.5 Billion

The I-66 public-private partnership will save Virginia $2.5 billion

Location of the Transform 66 outside-the-beltway project. Map credit: Virginia Department of Transportation

Transportation Secretary Aubrey Layne makes a strong case that Virginia’s overhaul of the public-private partnership law made possible $2.5 billion in savings on Interstate 66.

On Nov. 3, Governor Terry McAuliffe made the audacious claim that his administration had saved taxpayers $2.5 billion on the Interstate 66-outside-the-Beltway project thanks to 2015 reforms to the Public-Private Partnership (P3) law.

The original proposal brought to Commonwealth by the former Office of Transportation Public-Private Partnerships indicated that the state would have to subsidize the construction of 25 miles of general-purpose lanes and express lanes by between $900 million and $1 billion — and the concessionaire would contribute nothing toward bus mass transit or future corridor improvements.

By the end of a revised, 16-month procurement process, the state struck a 50-year deal with a consortium of Cintra, Meridiam, Ferrovial Agroman US and Allan Myers VA, Inc. Express Mobility Partners agreed to pay Virginia $500 million up front, invest $800 million towards transit operations, and make $350 million in future corridor upgrades.

The I-66 corridor improvements, both inside the Beltway and out, are the signature transportation projects of the McAuliffe administration. After cleaning up the fallout from the Norfolk-Portsmouth Midtown-Downtown Tunnel project and the botched U.S. 460 Connector, the heat was on Transportation Secretary Aubrey Layne, to get I-66 right. While aspects of the inside- and outside-the-Beltway projects have been controversial, Layne can reasonably say one thing: He has saved the state $2.5 billion.

P3 projects have not always worked out well in Virginia, as Layne knows better than anyone. I wondered how it was possible to negotiate a deal that, on the surface at least, was so vastly superior to what the state had been considering. I sat down recently with Layne and Deputy Transportation Secretary Nick Donohue to get their story.

The starting point for understanding the McAuliffe administration’s approach to P3s is the continuum of risk associated with highway mega-projects. One approach, as the Virginia Department of Transportation (VDOT) did for decades, is to assume the risk for everything: cost overruns, construction delays, operations & maintenance, and the risk of financing, in particular, that toll revenues will suffice to pay bond obligations.

During the previous administration’s flirtation with P3s, an infatuation with concept of “privatization” inspired the state to dish off all the risk to the private sector. (Layne, a Republican, rarely mentions the McDonnell administration by name.) But Layne found that no more acceptable than keeping a project in-house with VDOT regardless of cost. Instead, Layne started with no preconceptions about the best way to structure a deal. Getting the best deal depended upon the situation, knowing the risks the state was comfortable assuming, and knowing the risks it was comfortable dishing off.

Back to the drawing board. Early in the administration, in 2014, the old P3 office delivered a proposal for I-66 for submission to the Commonwealth Transportation Board (CTB) for approval. “The P3 office had no idea what it was doing,” says Layne. “It was embarrassing.”

At the risk of delaying a high-priority project, Layne spiked the deal. He didn’t present it to the CTB. Rather, he waited for the General Assembly to enact major reforms to the P3 process so he could start over. The problem with the old process, he says, was that after soliciting proposals, VDOT selected one private consortium to negotiate with. Under the guise of protecting the partner’s proprietary information, VDOT conducted the negotiations out of the public eye. When a product emerged, the CTB had no choice but to vote it up or down without amendment. “I don’t know how anyone could have set up the process to be more biased,” says Layne.

Before soliciting private-sector proposals, Layne determined the essential elements from a public policy perspective the project needed to have. In other P3s, the state allowed the private party to chip away at public-interest protections, refusing to fund public transit in the transportation corridor, for instance, or penalizing the state for investing in projects that might drain traffic from toll revenues.

Layne next drew up a term sheet based on the “must have” attributes, and then asked VDOT to determine how much it would cost to deliver the project in-house. Just taking this obvious step would have saved $1.5 billion. The 2015 “public option” cost roughly $500 million less than the previous private sector proposal, thanks in large measure to the state’s ability to tap tax-free public financing, plus VDOT would put $800 million into transit and $350 million into future corridor improvements. Continue reading

Stick a Fork in Virginia Beach Light Rail. It’s Done.

The Tide light rail in Norfolk won't be extended to Virginia Beach any time soon. Image credit: Railfan Guide

The Tide light rail in Norfolk won’t be extended to Virginia Beach any time soon. Image credit: Railfan Guide

The vote didn’t get much attention outside of Hampton Roads, but one of the big losers in state-local elections yesterday was Virginia Beach light rail. Voters decisively renounced a proposed extension of The Tide rail from Norfolk to Virginia Beach’s Town Center in an advisory referendum: 57% opposed the project, as opposed to 43% in favor.

While that vote did not bind Virginia Beach City Council, Transportation Secretary Aubrey Layne announced yesterday that he was pulling the plug on $155 million to help pay for the $243 million project, reports the Virginian-Pilot.

Wrote Layne in a letter to Virginia Beach Mayor Will Sessoms:

As demonstrated by yesterday’s referendum results, and comments made by you and other City Council members, there is no political or local financial support forthcoming for the project. We respect this outcome.

These monies have been tied up for over two years while the City Council debated action on this project. There are many other pressing transportation needs in the Commonwealth that can immediately move forward with these funds. A further delay in reprogramming these monies is not justified.

Virginia Beach light rail is not dead, but it is on life support. The state had allocated the funding for the project before implementing its Smart Scale methodology which prioritizes transportation projects on the basis of safety, congestion reduction, accessibility, land use, economic development and the environment. Now the project will have to undergo the same scoring process as all other transportation proposals — if it doesn’t die a quiet death first.

Virginia Beach owes the state $20 million granted to help purchase the proposed light-rail corridor. Layne told Sessoms that he’s giving the city six months to explore mass-transit alternatives such as Bus Rapid Transit that could make use of the right-of-way before asking for the money back.

Bacon’s bottom line: Transportation policy will go down as one of the great positive legacies of the McAuliffe administration. Virginia has shifted from a politically driven approach for allocating transportation construction dollars to a metrics-based approach. When McAuliffe was elected, I feared that he would bring his wheeler-dealer style to transportation policy. But the governor has stayed out of the fray, empowering Layne, the sole Republican in his cabinet, to implement a technocratic regime for setting spending priorities.

From now on, all transportation projects must be scored. A governor advocating a low-scoring project for political reasons will find it much harder to win the approval of the Commonwealth Transportation Board, which has the final say-so.

Let Tesla Open in Richmond

Tesla's Model3 is expected to be the electric car company's first mass-market vehicle.

Tesla’s Model 3 is expected to be the electric car company’s first mass-market vehicle.

By Stuart C. Siegel

Tesla’s electric vehicles are often described as disruptive to the motor-vehicle industry, and understandably so. The U.S.-based company’s all-electric vehicles are well designed, transparently priced and environmentally friendly, and the company is setting high standards for other car makers to follow.

Tesla’s sales model is disruptive, too. The company has never been part of the auto dealer-franchise system that is now entrenched in the modern marketplace. This direct-sales strategy has irked Virginia’s car dealer lobby, but it’s indisputably good for the car-buying public.

And that’s precisely the measure by which existing Virginia law allows for a car manufacturer to sell directly to consumers, rather than through a designated middle man. The commissioner of the Department of Motor Vehicles has the authority to allow Tesla to operate its own store in the Richmond area, and he should approve the company’s application.

Tesla already operates a store in Tysons Corner, where I serviced my all-electric Model S sedan and more recently purchased a Model X. The experience, like the car, was unlike any other I’ve encountered because the company is committed to educating customers about the vehicle and its innovative technology, rather than rushing to make a sale.

Since opening that store, Tesla has witnessed more demand elsewhere in Virginia. In a free market, a company should be able to make its own business decisions about how and where it serves its customers. Tesla wants to do so by opening a showroom and service shop in a vacant furniture store at Broad Street and Stillman Parkway. Henrico County’s Board of Supervisors has approved the company’s use of the site, and county officials recognize the potential for Tesla to help revitalize that area, bolster the local economy and create dozens of new jobs.

The Virginia Automobile Dealers Association has overreacted by trying to block Tesla’s application. The lobbying group, long known for doling out hefty campaign contributions, has been spreading false information for months in an underhanded attempt to manipulate regulators and legislators. The association even filed a lawsuit against Tesla and the DMV. The case, and every allegation made by VADA, was recently dismissed by a circuit judge in Fairfax.

VADA exists, above all else, to protect dealer franchises. Its claim that Tesla shouldn’t be allowed to sell directly to the public because independent dealers want to sell Tesla products is a clear signal that the lobbying group’s argument has crossed into fantasy.

Dealers must make a profit to stay in business. An independent dealer can’t profit off Tesla sales because few, if any, car buyers would pay a dealer’s marked-up price when they could walk out of the store and order the car for the lower, fixed price available at tesla.com. And dealers wouldn’t be able to recoup a profit on the back end through pricey service needs because, unlike a combustion-engine vehicle, a Tesla has no oil, gasoline or traditional transmission. Its battery pack carries an eight-year, unlimited-mile warranty.

Numerous studies and news reports have shown traditional car dealers offer a less satisfying consumer experience than Tesla. Some also were found to steer buyers away from electric vehicles and into gas-powered cars, even when those buyers expressed interest in purchasing an electric vehicle.

That’s particularly worrisome for a growing manufacturer such as Tesla. Its Model S has racked up industry awards, and its Model 3, a smaller sedan set to start at $35,000, will begin production next year.

Sales staff must be able to answer questions with specificity and accuracy about a Tesla’s innovative technology, batteries and warranties, charging and maintenance, and other incentives, none of which is applicable for the sale of a gas-powered vehicle.

And unlike the bigger manufacturers, Tesla doesn’t make gas-powered vehicles that customers can be diverted toward on a dealer’s lot and still record a sale. The company is exclusively focused on building powerful, stylish, electric cars, and helping consumers learn about them and find the proper model is its mission.

Industry research and Tesla’s own track record suggest the company can sell its cars more effectively, and at a lower cost, than traditional car dealers, and it can give customers the service and attention that they deserve. Hopefully that can happen soon in Richmond.

Stuart C. Siegel is a Richmond resident and Tesla owner.

Tesla’s Grand Plan

The Tesla Model 3. Is this the breakout model that will create a mass market for electric vehicles and transform the electric grid?

The Tesla Model 3

Tesla Motors, which wants to expand its retail presence in Virginia, is more than a manufacturer of high-end electric vehicles. It’s part of Elon Musk’s quest to transform the electric grid.

by James A. Bacon

Richmond businessman Stuart Siegel loves his Tesla Model X. The SUV is loaded with luxury options and its electric motor is as quiet as a mouse. After he recharges his car battery at night, the car holds enough juice to run 280 miles more than enough for daily needs rarely exceeding 50 miles. If he ever wanted to drive to Maine or Florida, he says, the car monitor shows the location of hundreds of Tesla recharging stations around the country. Twenty minutes with a supercharger — not much longer than it takes to grab a coffee or take-out at a nearby restaurant– gives him enough power to drive another 175 miles.

Selling luxury electric vehicles is not the only thing that endears Tesla to Siegel. The company is redefining how an automobile manufacturer sells and services cars. Unlike traditional manufacturers, who work through auto dealer franchises, Tesla controls the customer experience from start to finish.

When ordering his Model X, Siegel went online to pick all the options — color, interior, wheels, seating configuration, size of battery. A few m0nths later, Tesla delivered a vehicle to Tesla’s retail outlet in Tysons, manufactured to his exact specifications. He couldn’t get that degree of customization with any other car, he says.

If the car needs maintenance, Siegel doesn’t go to Tesla, Tesla comes to him. When he had a problem with a door latch, the company dispatched a “ranger” from the Washington area to his house in Richmond. “This guy showed up in a white van,” he recalls. “Everything he needed to fix a car was in that van. He put on a new latch, and an hour later he was gone.”

Tesla also provides tech support. When he picked up his Tesla X at the Tysons sales center, a delivery specialist spent two hours showing him how to drive the car, Siegel says. “He took me through everything. He gave me his card.” One day, when the car monitor went dark, Siegel called a tech support number. The technician told him exactly what to do, and the monitor came right back on. “I love the car. It’s unlike any other I’ve ever owned.”

As Tesla expands its product offering from the sporty Tesla S sedan ($85,700 sticker price) and Tesla X utility vehicle ($106,200 sticker price) to electric vehicles in the $35,000 range, it needs to ramp up its retail footprint. Due to the unique nature of how it interacts with customers, however, the company is unwilling to outsource the relationship to independent auto dealerships.

Tesla’s corporate philosophy has caused a rift with the Virginia Automobile Dealers Association (VADA), which maintains the company should abide by the same automobile-franchise and consumer-protection laws as every other auto manufacturer. After negotiating a deal that allowed the company to set up a retail outlet in Tysons two years ago, Tesla now wants to add one in the Richmond area.

Following lengthy hearings, a Department of Motor Vehicles hearing examiner recommended yesterday rejection of Tesla’s request.  Tesla had argued that there are no independent automobile dealers in the Richmond area capable of profitably selling its cars. But at least 11 dealers had expressed an interest to sell and service Tesla’s cars, noted examiner Daniel P. Small. The case goes to DMV Commissioner Richard Holcomb for a final decision.

Holcomb’s decision, driven by a consideration of Virginia’s auto dealership laws, could have profound implications for the future of Virginia’s electric grid. Tesla is but one component of a larger vision by California entrepreneur Elon Musk to move the world toward a more environmentally sustainable economy.

In Musk’s view, selling more electric vehicles helps the world by cutting gasoline combustion and the carbon dioxide emissions implicated in global warming. But EVs need electricity, most of which comes from burning fossil fuels. So Musk has announced his intention to merge Tesla Motors, his EV company, with SolarCity, another company he has founded, creating what he calls “the world’s only vertically integrated sustainable energy company.” His ultimate goal is to make solar the primary energy source for the electric grid, using Tesla’s battery technology to store excess electricity produced during peak sunlight hours for use during periods of peak demand later in the day.

While the three main components of Musk’s empire — generation, storage, EVs — can work independently of one another, Diarmuid O’Connell, Tesla’s vice president of corporate development told Bacon’s Rebellion, “It’s best if they all work together.”

A Tesla outlet for selling EVs eventually will become “a single retail touch-point for the customer,” O’Connell says. “We’re trying to pull the pieces together with one offering in the market. The best possible case in Virginia is to modify our existing retail footprint so we can offer the full package” — electric vehicles, solar panels and energy storage.
Continue reading

Where Have All the Riders Gone?

by James A. Bacon

Where have all the riders gone? That’s the question transit agencies are asking nationally, but nowhere more urgently than in the Washington metropolitan area. Rail and bus ridership for the Washington Metropolitan Area Transit Authority (WMATA) fell 6% in the fiscal year ending July 31, a decrease of 20 million trips. Ridership had been forecast to increase slightly, according to the Washington Post‘s Martin Di Caro.

The fall-off in Metro rail traffic, which tumbled 7%, is at least comprehensible. Metro has been plagued by accidents, delays, interruptions and maintenance backlogs that have left many commuters disgusted with the service. But ridership on WMATA’s bus lines declined, too, while New York, Chicago, Los Angeles and other cities with large mass-transit systems have seen falling ridership.

It wasn’t supposed to happen this way.  This decade was supposed to experience a great mass transit revival as growth and development shifted back to the urban core, and as Millennials and Empty Nesters gravitated to walkable, mixed-use communities served by commuter rail. Millennials were supposedly abandoning the idea of car ownership in favor of walking, biking and transit.

Although there are plenty of theories about what’s happening, no single explanation has emerged as decisive. Ridership was down across all time periods, days of the week, and nearly all individual stations, although losses were especially severe in off-peak periods,” states one WMATA document cited in the article. Di Caro summarizes the possible explanations:

Demographic changes, the rise of telework, the proliferation of transport alternatives such as Uber or Capital Bikeshare, the economic downturn and reductions in federal spending, constant weekend track work over the past five years – all have combined with consistently poor rush hour service to drain Metrorail ridership.

Mass transit authorities across the country are focusing on the dramatic ridership gains by Uber, Lyft and other “e-dispatching taxis.” Their effect seems to be most pronounced late at night and early at morning when transit service is spottiest. But there is no research to support a conclusion that the Uber revolution is capturing millions of commuter trips.

Demographic changes should be favoring mass transit, not hurting it. So should the economy, which, though sluggish, is growing. As for Capital Bikeshare, total ridership ran about 2 million last year. Any increase in ridership could have diverted only a tiny percentage of Metro passengers.

Bacon’s bottom line: I have no explanation for the decline, which I didn’t anticipate. I have never been a transit utopian, but I thought that social and economic trends did portend at least a modest shift from single occupancy vehicles to bus and rail. Clearly, I was wrong.

What set me apart from other transit advocates was a reluctance to spend heavily to build expensive new commuter-rail facilities that had no hope from the get-go of supporting themselves financially. Private developers, not government entities, should take the risk that notoriously unreliable traffic projections would pan out.

WMATA, already facing a multibillion maintenance backlog, now must divert millions of dollars slated for critical preventive maintenance to cover the the operating the revenue deficit. The authority is staring at a vicious cycle. Less maintenance = poorer service = fewer riders and revenue. The WMATA board is considering a fare hike to help cover the revenue gap. But higher fares drives off riders as well. The deficit could surpass $150 million this year.

Until the dynamics driving mass transit ridership are better understood, it would be advisable for Virginia localities to revisit their assumptions underpinning proposed projects like Virginia Beach light rail and Richmond Bus Rapid Transit. Their ridership and revenue projections are almost certainly flawed. The same applies to toll-funded highway megaprojects, such as the $2 billion in Interstate 66 improvements. Given the precarious condition of the global economy, the fragility of the sovereign debt bubble, and the vulnerability of Virginia to cutbacks in federal spending, we need to be more disciplined than ever with our capital spending.

Embrace the Uber-Enabled Mass Transit Revolution

Photo credit: Washington Post

Photo credit: Washington Post

by James A. Bacon

The Uber/Lyft revolution is beginning to transform public transportation around the country. Other than in Arlington County, where county officials are considering replacing under-utilized bus lines with subsidized Uber service, little of this dynamism seems to be seeping into Virginia, however. Too bad. We’re missing a major opportunity.

Reports Spencer Woodman with The Verge:

Both Uber and Lyft have been striking agreements with transit agencies, mostly for so-called “first-last mile” programs — meant to shuttle commuters to bus or train stations. Since last year, Uber has scored public transit agreements with San Francisco, Atlanta, Philadelphia, Cincinnati, and Pittsburgh among other cities. Uber and Lyft have been edging into niche public transportation services, like transit for disabled people or low-income residents who need rides to work or the grocery store. Last month, officials in Washington, DC proposed having Uber respond to some 911 calls for ambulances.

Even Google’s Alphabet, through its Sidewalk Labs program, has joined the transit bonanza. The company recently offered to overhaul transit in Columbus, Ohio, with a system that sets parking prices based on demand and funnels low-income commuters into subsidized ride-share vehicles.

These companies are arriving at an opportune time for cities, many of which are struggling just to fund existing transit service, much less expand it to meet the needs of growing numbers of urban commuters. Both Uber and Lyft tell The Verge that the past year has seen a surge in public officials interested in giving the companies taxpayer dollars for public transit contracts. … Given the pace at which these partnerships are coming together, it’s possible to imagine ride-hailing companies taking on the role of all-encompassing smartphone-driven public transit providers, one town at a time.

The Uberization of transportation may prove to be a boon to mass transit. But it also raises ethical questions, notes The Verge. Catching a ride on Uber and Lyft requires two things that many poor people lack: a smart phone and a credit card. Shouldn’t subsidies be reserved for the poor,  not better-off passengers who can afford iPhones and Capital One cards? Should transit agencies restructure themselves to serve Yuppies at the expense of people for whom mass transit may be their only transportation option?

Those are legitimate concerns, but they shouldn’t slow down the Uber Revolution. The smart phone-driven ride-hailing industry is still in its early phases of entrepreneurial innovation. It is the natural progression of things for entrepreneurs to target the affluent market first because that’s where the money is. As companies gain experience and establish economies of scale, they will move down-market to less affluent riders. In fact, that is already happening with Uber’s shared-ride programs. At some point the technology behind Uber and Lyft will become so ubiquitous that we’ll see all manner of entrepreneurs targeting under-served niches. If large numbers of people lack smart phones and credit cards, entrepreneurs will find ways to serve them.

It’s going to be a wild ride, and no one is quite sure where it is heading. In addition the Uber-Lyft revolution, there is the driverless car revolution, and the transportation-as-a-service revolution. Everyone from Ford, General Motors, Mercedes, Google and Tesla has ideas of how to reinvent transportation. It’s as if the transportation industry is being hit by three tsunamis simultaneously, not just one.

Here in Virginia, transportation planners at the state, regional and local level are behaving as if none of this is occurring. The same old transportation mega-projects are lumbering down the same bureaucratic approval pathways. Even as Virginia government at all levels experience chronic fiscal stress, they seem sublimely unconcerned by the implication of saddling themselves with Big Infrastructure projects that they know can never be self-supporting financially, that they know will require ongoing subsidies.

Just wait until the next recession. How many jurisdictions will be able to maintain money-losing transit operations? How many will find themselves pruning money-losing routes? How well will the poor be served by the inevitable cutbacks? Shouldn’t we at least be considering the transportation-as-a-service alternative?

Integrating Uber with Mass Transit

Photo credit: Washington Post

Photo credit: Washington Post

by James A. Bacon

Arlington County is toying with the idea of replacing under-utilized bus lines in the northern part of the county with ride-sharing services provided by Uber Technologies Inc., and Lyft Inc. The service could offer rides to and from Metro stations at Ballston, East Falls Church and Courthouse

Subsidizing the ride-sharing services would be more cost-effective than operating full-service bus lines with low ridership,  Marti Reinfeld, the county’s interim transit chief, told the Washington Post

“What we would be supporting is picking up residents in their neighborhood and taking them to one or two designated stops, most likely a transit station,” Reinfeld said. “The county will subsidize that at some level.”

The idea is still conceptual, but Arlington officials confirm that they have held conversations with Uber and Lyft, both of which have sought similar partnerships elsewhere in the United States.

Bacon’s bottom line: Every transit operation in Virginia with money-losing routes ought to be thinking the same way.

The first step is to prune under-utilized and money-draining bus routes and concentrate resources into the most robust transportation corridors, offering greater frequency and reliability of service, in turn increasing ridership on those routes. This is what Houston famously has done, boosting ridership at no extra cost. The same consultants behind that transformation are working to rationalize the Richmond bus system.

The second step is to work with Uber, Lyft and anyone else with a bright idea to create a shared-ridership feeder system, in effect substituting vans and carpools for near-empty buses. Subsidies might be useful in order to stimulate the start-up of these services, but ideally they could be phased out over time as the concept takes hold and ridership builds to profitable levels.

A third step worth considering — requiring input from Uber, Lyft and others on what would be cost-effective — would be to invest in remodeling bus stops, rail stations and intermodal facilities to accommodate the easy ingress and egress of vans and carpools. The more seamless the connection between Uber-like services and mass transit, the more attractive the set-up is to passengers, and the more likely the idea is to succeed.

While I am no fan of subsidizing any mode of transportation, I acknowledge that there is no getting rid of money-losing transit operations, and we must do the best job with them we can. If subsidizing shared Uber rides instead costs less money, then there is a net gain to taxpayers.