Bacon's Rebellion

Democracy Thrives in Sunlight

More Questions about the U.S. 460 Upgrade

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by

James A. Bacon
in

U.S. 460 at daybreak. Photo credit: VDOT.

One more tale from the Virginia Bloggers Day event: I asked about the McDonnell/Bolling administration’s plans to build a super-U.S. 460 highway between Petersburg and Suffolk, a project that encompasses $1 billion or so in toll financing, a $500 million commitment of state transportation funds, $5 million a year in Port of Virginia funds far into the future, and $50 million in tax credits for industries locating in the U.S. 460 corridor. (See “Taking a Closer Look at the Jobs Governor’s Industrial Policy.”)

Herewith is an amalgam of answers from Lieutenant Governor Bill Bolling and Tucker Martin, McDonnell’s communications chief.

“Its a transportation initiative and an economic development initiative,” said Bolling.

Insofar as an upgraded highway would expedite hurricane evacuation from Hampton Roads, it’s a transportation initiative. But it’s mostly about economic development.

The driving force is the widening of the Panama Canal, which will allow larger, deeper-draft container ships to reach East Coast ports. Early on, thanks to its 50-foot channels, the port of Virginia will be the only East Coast port capable of accommodating the monster vessels. But other ports are working on improvements that would allow them to compete for the business. Big ships will drop off hundreds of thousands of containers yearly, only some of which can be handled by the railroads. Highway capacity will be a major bottleneck. If trucks can’t get in and out of the terminal, the port loses its competitive advantage.

The Q&A format allowed for limited follow-up. If I had had the time, I would have asked this: If the economics of the giant container vessels are so advantageous and if the Port of Virginia is so well situated to capture the big-ship traffic, why can’t shippers absorb the full cost of the U.S. 460 tolls? Why does the state need to buy down the tolls with $500 million in state funds?

What tolls will the trucks pay? What would they pay without a state subsidy? How much would the higher toll add to the cost of shipping containers through Hampton Roads, and how would that compare to the cost of shipping through other East Coast ports? What evidence do we have that the subsidy is required to accomplish the goal, which all Virginians want to see, of making the Port of Virginia the premier port on the eastern seaboard?

These are questions that legislators and members of the Commonwealth Transportation Board should be asking!

— JAB

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16 responses to “More Questions about the U.S. 460 Upgrade”

  1. larryg Avatar
    larryg

    If they ask those questions, it will set a precedent for future road proposals also.

    I do not think they have made the case for trucks over rail.

    where are these trucks headed after they leave 460?

    but way back to the beginning. Where did they get the 500 million number?

    why not 200 million or a billion or no money at all?

    where is THAT analysis?

    and why a new road instead of adding lanes to I-64?

    there are many, many, many unanswered questions for a project that proposes to use 500 million of all Virginian’s tax dollars.

  2. DJRippert Avatar
    DJRippert

    When the other ports catch up can we “unbuild” Rt 460?

  3. larryg Avatar
    larryg

    the more I think about this the more I realize that we don’t know much and when it comes to building roads for economic development purposes.. there is no analysis provided with respect to costs and benefits.. they just throw the economic development canard on the table like a dead fish and move on.

    and this proposal stinks to high heaven in that regard.

    here we actually have an opportunity to deal with the same issue that has been ongoing in the I-81 corridor with respect to moving goods by truck or by rail and whether I-81 should be upgraded or more rail added.

    I was always a bit skeptical about trying to influence the private transportation market … let them figure out if they want to ship by truck or rail and let the transportation companies compete.

    but here.. we have the State deciding winners and losers AND the bill is being sent to taxpayers.

    Do we REALLY want other roads like I-95 and I-64 between Richmond and I-81 to be chock-a-block with 18-wheelers like I-81 is right now?

    IN BR a few months ago, I believe, there was a discussion about ramping up rail to the midwest through Elliston near Blacksburg and tunnels all over the place were being upgraded to handle double-decker shipping container loads.

    I personally think it’s unacceptable to say that a road is for economic development and not provide the analysis to support it and even worse – say that taxpayers should pay for it.

  4. Peter Galuszka Avatar
    Peter Galuszka

    I agree with the corporate welfare point but if the Panama traffic comes (and that’s not a certainty), trucks will not have good access across Hampton Roads on I-64. Is there a viable plan for a third crossing? Rail could be a solution, but the endpoint is almost always via truck.

  5. Hydra Avatar
    Hydra

    Japan spent 119 billion yen building the “dinosaur” bridge. They figure the economic benefit will pay for the bridge in 6 years. Some say the government estimate is conservative, time being especially valuable in Tokyo, with 35 million people. The bridge will service a new container port, and carry 32,000 vehicles a day.

    Talk about a bridge to nowhere: it goes to a man made island. If you did not build the island, you don’t need the bridge.

    The difference in how they figure values, compared to us, boggles the mind.

  6. James A. Bacon Avatar
    James A. Bacon

    Hydra, The Dinosaur Bridge is an interesting case. Assuming 77 yen to the dollar, the construction costs roughly $1.5 billion. The bridge will carry 32,000 vehicles per day, saving nine minutes per trip, according to press accounts. What makes the bridge a viable economic proposition is that it serves a container port, meaning that as many as half of the vehicles could be trucks. The authors of the 2011 Urban Mobility Report value the time of commercial trucks at roughly $110 per hour. Assume 16,000 trucks use the bridge daily and save nine minutes per trip. That’s $9 time savings per trip, worth $144,000 daily, or $53 million yearly. Assume the time-value savings amounts to $15 million for individual motorists, and you get total time-value savings of $66 million. That represents a Return on Investment of about 4.4%. That might be justifiable, but I’d bet Japan’s private sector could generate a significantly higher return.

  7. larryg Avatar
    larryg

    I would challenge any claim that any bridge or highway is an economic gain if the analysis does not show real dollars as well as a willingness on the part of those who are said to have “saved” money to have some actual skin in the game.

    9 minutes was mentioned. In some cases on I-95 45 minutes to an hour are mentioned (for those in HOV).

    what I’ve never heard is what 9 minutes or 45 minutes is worth in terms of dollars and cents.

    when we say that saving time is saving money but we never actually quantify it – then what have we done.

    for instance…. multiple 30,000 cars per day that save 10 minutes and tell me what that is worth and tell me if people are willing to pay for what they say the 10 minutes are worth.

    1. James A. Bacon Avatar
      James A. Bacon

      LarryG, I’ve got an article coming out in a few days that will address this very issue in the context of the Charlottesville Bypass.

  8. Hydra Avatar
    Hydra

    They figure to pay for it in six years, which by my calculations means 16.6% per year, or 250 million dollars. at 32,000 vehicles per day, that works out to $21.40 per trip, in conomic benefit. The time savings of the trucks is only part of that economic benefit. they are saving nine minutes per trip, which isnt true, since the entire conatiner port did not exist prior to the bridge.

    You are calculating this as if only the congestion reduction counts, but the Japanese apparently have rightfully considered the total economic benefit.

    If a truck charges $5 a mile and averages 45 MPH then he is charging $225 an hour and his costs are half of that, or around $110/per hour, so the savings yo umentioned apply.

    But if that truck is carrying $200,000 worth of goods then saving nine minutes makes yoo 21.40 per trip at an interest rate of 6.2%. At current low interest rates, you still save $3.40 per trip, on the contents of the truck.

    And that accepts your nine minute estimate. In fact, in this case the entire trip would not even exist. But it isn’t very much of a stretch to figure that trip is worth $21.40 in total benefit, to someone, somewhere.

    1. James A. Bacon Avatar
      James A. Bacon

      At least the Japanese did an economic cost-benefit calculation. For the most part, we don’t do that in Virginia. The U.S. 460 study was a rarity, and it only discussed positives.

  9. Hydra Avatar
    Hydra

    What would be the negatives, other than the cost of construction?

    larry’s argument shows that he is still stuck on the idea that the USERS should pay the entire cost. By NARROWING the base, this makes it harder to make any project justifiable. The Japanese appraoch considers, among other things, the congestion decrease benefit of those who never use the bridge: beneficiaries other than users.

    What is really requires is something far more complicated than w ever do: a cradel to grave systems analyis that consider all [reasonably identifiable] costs and all [reasonably identifiable] benefits over the lifetime of the system. Among other things, that means you have to pick a discount rate that is agreeable to all parties, and one that will be used for all other similar projects. It means you consider how many people will get killed and maimed building and using this project, versus how many will get killed and maimed using the alternative.

    Then, once you know and understand the costs and benefits, youcan consider whether the distribution of them is fair, including the distribution of benefits and costs to future generations. If yuu can then arrange the payment and funding plan so that the losers get compensated and the winners still win, THEN you have a plan that is economically viable AND fair.

    But that does not mean that any yahoo 200 miles away who thinks he can dream up some social disbenefit that he values at an infinite price gets to have veto or infinite delay power over the project.

    We have almost come to the point where we have allowed some groups to sell the idea that nothing (as in conservation of everything existing) is more valuable than proceeding with any kind of constructive work other than organic agriculture and historical preservation.

  10. Hydra Avatar
    Hydra

    I would challenge any claim that any bridge or highway is an economic gain if the analysis does not show real dollars as well as a willingness on the part of those who are said to have “saved” money to have some actual skin in the game.

    =================================================
    Why limit this argument to bridges and highways? Why not ANY social eneterprise, like conservation efforts?

    Larry is close though. Here is the simple answer to whether a projct is cost effective or not: can the winners compensate the losers and still come out ahead. If you can do that,the economic viability problem is solved.

    You still have another problem. Assuming you have two projects that meet this criteria, how do you prioritze them?

  11. Hydra Avatar
    Hydra

    Supppose I am prevented from building a home that represents a half million dollar asstet to me, by people who claim they will save money if I don’t build it. Shouldn’t they have some skin in the game?

    Unless the 60,000 people inthe county think they are going to save $8.33 each [ 0.0000000075] on the tax rate, over 20 years], their argument is a social loss leader. If they each send me 41.6 cents a year, they still come out ahead, because they have most of that money for most of the 20 years, up front, and I don’t.

    So what you have is a few curmugeons like TMT and Larry making the claim that I have no right to cost them ANYTHING, not even 41 cents per year, while that argument is costing me, or someone like me a half million dollars, IF I do the labor and I support the financing, of which costs they have NONE.

    So yes, I like Larry’s argument, provided it is enforced EQUALLY.

  12. larryg Avatar
    larryg

    ” larry’s argument shows that he is still stuck on the idea that the USERS should pay the entire cost. By NARROWING the base,”

    I think you’re going to have a lot of trouble making to case to pay to non-users unless users have some skin in the game also.

    you could argue perhaps on how to allocate costs but the user has to have something at stake also and willing to pay if he wants infrastructure to use.

    AND he has to convince the others who don’t actually use the road that it is worth it for them to pay also.

  13. Hydra Avatar
    Hydra

    I think you’re going to have a lot of trouble making to case to pay to non-users unless users have some skin in the game also.

    ==================================================

    We agree then, Everybody should have skin in the game.

    As the Governor says, it is a core government function.

    All we need now is a good enough cost benefit analysis to determin who is really getting skinned, and who is getting the emperors new clothes.

    My only point was theat the Japanese apparently have a dfferent [more comprehensive] vision of who gets benefits, and who should pay.

    My second claim is that once you start doing this properly, you will establish both a precedent for doing it, and a template or procedure for doing it, that may very well be similarly applied to other programs or projects.

    As long as the template or procedure is viewed as being fair and unbiased, there will [eventually] be less concern about the results. At one time people did not trust hand caclulators or spreadsheets, either, but eventually thay came to accept the black box, as long as it is not misused.

  14. larryg Avatar
    larryg

    re: skin in the game…. how do you get “skin” from those who do not use?

    how do you prove to them what their share is?

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