Trucking Along: A Future for Speed-Limiting Devices?

Senator Chuck Schumer (D-NY) has recently pushed for the Department of Transportation (DOT) to finalize a rule that would require electronic speed-limiting devices for large trucks and buses.  As DOT and other agencies prep for the incoming Administration and industry groups battle over the effectiveness of such a rule, it’s unlikely for the rule to be finalized in the waning days of the current Administration.  Under the next President and Transportation Secretary, could there be a final rule on this technology?   

Background on Speed-Restricting Technology

In August, DOT initially proposed a rule to implement technology within trucks and buses to limit their speeds at either 60, 65, or 68 mph.  The proposal would require all trucks weighing more than 26,000 pounds to be equipped with a speed-limiting device that would prevent excessive speed.   The rhetoric behind this device suggest limiting the speed of larger vehicles on the road can help prevent further accidents and even save lives.  When the rule was first announced, DOT Secretary Foxx said that the benefits to speed limiting devices also included a potential $1.1 billion in saved fuel costs and millions of gallons of gas saved annually, as slower speeds reduced fuel dependency.

The original proposal was developed by both the National Highway Traffic Safety Administration (NHTSA) and Federal Motor Carrier Safety Administration (FMCSA) within DOT.  After reviewing industry and consumer comments and once a final rule is set, the NHTSA would be responsible for establishing a new Federal motor vehicle safety standard to require the use of the device.  The standard would also need to record the settings of the device (dates and times of maintenance and when the device was installed), which would also need to comply with the diagnostic system of the vehicles.  The FMCSA would then be responsible for enforcing the standard.

The Benefits and Problems with Speed-Limiting Devices

The American Trucking Association (ATA), one of the trade groups that represents the trucking industry, has supported the proposed rule and noted that about 70 percent of trucking companies already use electronic limiters.  ATA also noted that speed is a contributing factor to nearly 29 percent of all fatal crashes.  Senator Schumer has been a proponent of the DOT proposal, highlighting during a press conference that in 2014 of the 10,742 police-reported large truck crashes in New York, 990 were related to unsafe speed.  Implementing this rule, Schumer said, would save nearly 1,000 lives each year.  

According to the cost-benefit analysis that accompanied the proposed rule, the reduced speed would cost industry per annum approximately $1.5 billion for those limited at 60 mph, $514 million at 65 mph, and $206 million for those at 68 mph.  However, these costs would easily be offset by the fuel savings benefits that would accompany lower speeds.  By also using the value of a statistical life to determine costs associated by fatalities on the road, as well as costs associated with injuries, damage, and insurance that accompany traffic collisions the proposal makes clear that the rule will be beneficial if implemented.

While the ATA already noted that many trucks and buses already have the speed-limiting devices in place, other industry groups are not in support of the proposed measure.  The Owner-Operator Independent Drivers’ Association (OOIDA), a group of independent truckers and smaller owners, believe the rule takes control out of the hands of drivers and actually puts them at risk on the road.  The trade association notes that “there is no clear evidence that the use of speed limiters will improve safety,” and notes that the rule would cause a variance of speed on the highway which studies have shown increase the risk of an accident.

The OOIDA highlights profit as an additional concern.  As the trade association representing independent and small business owners, the cost burden of compliance with equipping vehicles and delivery delays are serious issues.  The association asserts that driving below a 70 mph speed limit could cost drivers 50-55 miles per day, which equals $85.25 per day or $22,165 per year.  Instead of speed-limiting technology, small business owners and OOIDA support mandatory entry-level driver training programs to improve the quality of the drivers in large trucks.

Next Steps

This DOT proposed rule is merely one of dozens that remains on the chopping block for agencies as they enter the final weeks of the Obama Administration.  With new Cabinet-level and sub-cabinet leadership replaced in January it is highly unlikely for DOT to put forth a final rule within the last weeks of the Obama Administration, despite the best efforts of the soon-to-be Senate Minority Leader, Chuck Schumer.

President-elect Trump has tapped former Labor Secretary Elaine Chao to serve as the new Transportation Secretary under his Administration.  Chao, the wife of Senate Majority Leader Mitch McConnell, still needs Senate confirmation before she can begin managing the Department.  As Labor Secretary under President Bush, Chao received some criticism for her management of the Labor department when she was questioned by the Government Accountability Office for not pursuing labor violations.  Additionally, the mine disasters at Sago Mine and Crandall Canyon had highlighted lax enforcement of standards by the Mine Safety and Health Administration, especially since Chao had cut mine safety inspections prior to the disasters.

Despite her critics, Trump’s selection has been seen by many to reflect his seriousness in enacting one of his core campaign pledges for infrastructure development within his first 100 days.  As the longest-serving Secretary of Labor since Frances Perkins (1933 – 1945), Chao served the duration of the Bush administration and has served in many federal agencies prior to her service.  She would also be the first Asian-American to head the department, and the first with this background appointed by the Trump administration.

The incoming Administration has said it would issue a temporary moratorium on new agency regulations that are not compelled by Congress or by public safety to eliminate ‘intrusive regulations.’  Under this regulatory environment it seems a final rule on speed-limiting technology will not be a DOT priority with a Trump Administration.  Yet, with Chao’s prior bureaucratic experience and a campaign pledge for infrastructure reform, there may be a future for speed-restricting devices under Secretary Chao and President Trump.

Image source: Associated Press

Hyperloop vs. Maglev: Which of these disruptive technologies will be the future of intercity travel?

Imagine being able to leave your house in Los Angeles at 8:15 and be at a meeting in San Francisco at 9, or leave DC at 5 and be in New York for dinner by 6. When it comes to the future of transportation, you won’t be asking, “Are we there yet?” but rather, “Should we take the Hyperloop or Maglev?” These two new technologies could fundamentally change the way people and goods are transported around the country. As the technology becomes more and more viable, public policy will become more at issue for the pioneers at Hyperloop and Maglev.

If you haven’t been following the development of these technologies, here’s a quick recap: Hyperloop is a technology that uses vacuum tubes and pneumatic air to propel pods, which can contain passengers or cargo, up to speeds of 600 mph. Maglev—short for a magnetic levitation trains—uses superconductive magnets to hover train cars above an electric track, traveling up to 373 mph.

Recent breakthroughs in Maglev and Hyperloop make the potential for both technologies a real possibility. In November 2015, the Hyperloop Technology Corporation (HTC) secured $80 million dollars in Series B funding from private venture capital to begin initial tests and design. In December of 2015, HTC announced that they began construction on a test track in Las Vegas. The announcement was followed by the Hyperloop Pod Design Competition, which was held at Texas A&M University this past January. HTC and its visionary, Elon Musk, are confident that the Hyperloop will be a reality by 2020.

Maglev has seen developments as well. In late 2015, The Northeast Maglev, the company that’s trying to bring the technology to the U.S., completed an environmental impact study on a line between Washington DC and Baltimore. The Maglev seems to be gaining political traction as well, as the federal government issued Maryland a $27.8 million grant for a feasibility study. Governor Hogan of Maryland seems to be on board, as well as the Prime Minister of Japan who offered to help the U.S. cover some of the construction costs associated with Maglev.

Which technology will succeed, or will both? One way to analyze this question is to look at the regulatory and policy hurdles that both technologies will have to overcome in order to operate successfully.

Right of Way

Right of way might be a major hurdle for Hyperloop, which has to figure out if its tunnel will be above ground or below. The co-founder of HTC, Brogan BamBrogan (yes that’s his real name) seems to prefer below ground. Regardless of where it’s tunnels will be, HTC will have to navigate the tricky land politics associated with the development of new transportation infrastructure. One way Hyperloop could get around this issue is by renting existing right of way from freight train or power-utility companies that own the rights to the land where a tunnel could be built. Hyperloop could then build its tunnel on these valuable tracts of land without having to purchase it for a new right of way, which might be politically fraught and costly.

Maglev might have an advantage over Hyperloop in this regard, as the company has already engaged with federal and state governments on the issue of right of way. Its support in Maryland and DC governments seem to signal that Maglev is being considered to replace Amtrak’s aging and slow trains in the Northeast Corridor, which is the biggest passenger train market in the country. Acquiring existing rights of way from freight operators or Amtrak would be the most efficient way for Maglev to construct a new track, and less intrusive than burying a tunnel underground.

Real Estate Investments

Both technologies will have to invest in expensive real estate to provide their service to the public. Public infrastructure will most likely play a role, as new stations will be have to be built to connect passengers to the service. While a Maglev station could be easily implemented into existing train stations, the Hyperloop might require its own station. If so, the cost of constructing new stations that link to the city’s existing transportation network might be prohibitive and necessitate public investment by city or state governments.

Freight Factor

Unlike traditional rail, the Hyperloop and Maglev operate at tremendous speeds. Both technologies must consider carrying freight cargo, given how lucrative the freight market is in the United States. Carrying freight would also help both technologies convince the government to invest in new infrastructure as well. In order for Hyperloop to carry freight, engineers would have to design freight-specific pods, which would be considerably larger than passenger pods. A larger pod might need a larger tunnel to pass through, which would have to be built separate from the tunnels that contain passenger pods. Maglev would have the same problem, considering the speed of its trains might limit the size of its freight cars (due to excessive air friction when traveling >300 mph.)

Political Support

Most importantly, both Hyperloop and Maglev will need political support in order to get off the ground. The cost of a Hyperloop connection between LA and San Francisco, estimated to be $16-20 billion, would most likely need significant investment from the federal government in order to cover its initial sunk costs. Maglev might cost even more than the Hyperloop: some estimate that a Maglev train between Baltimore to DC would cost $10 billion alone. Expand that line to NYC, and Maglev’s costs could reach $100 billion.

Recent comments made by Transportation Secretary Anthony Foxx, President Obama, and other political leaders seem to suggest there is political support in both projects. Secretary Foxx attended the Hyperloop design competition in Texas this past January. The chairman of HTC, tech investor Shervin Pishevar has been in communication with President Obama on the progress of Hyperloop’s new test track. Governor Larry Hogan has expressed support for the Maglev, as have city councils in DC and Baltimore. While these signs are encouraging, considerably more support will be needed to turn the Hyperloop and Maglev dreams into reality.

super-maglev-train

The Maglev

Which technology will prevail?

It is too early to tell whether Hyperloop or Maglev will serve the public any time soon. Both projects face enormous regulatory, finance, and viability challenges. The technologies will have to fight to gain political and financial support from the government, which might be the ultimate decider on issues of right of way, public infrastructure, and safety. While the technology is there, public policy might be the deciding factor on whether or not you’ll be taking a Maglev or Hyperloop to your next meeting in San Francisco. Regardless of how you get there, it’s exciting to anticipate the future of intercity travel in the United States. For Hyperloop and Maglev enthusiasts, the hope is that policy can keep pace with both companies as they work hard to change how people get around this country.

Header image source: Wired

 

Federal Subsidies to Amtrak: Are They Worth It?

Are federal subsidies provided to Amtrak worth their cost to taxpayers? This is a fundamental question that politicians, economists, and the public have debated since 1970, the year the federal government created Amtrak by act of Congress. This question is of particular interest to people living in cities on the east coast, where Amtrak’s trains are most frequently used. Proponents of Amtrak argue that subsidies are justified because Amtrak provides benefits to the public. Opponents of Amtrak argue that it’s a waste of taxpayer money because a small portion of the public uses Amtrak.

Since its inception, Amtrak has had to rely on federal subsidies in order to operate. In 2014, Amtrak received $1.39 billion dollars in federal money to cover operating costs and fund capital projects. The federal government’s choice to subsidize Amtrak’s passenger rail service reflects it’s belief that Amtrak provides positive externalities to the public. Like with any other subsidy, the government’s believes that its investment of taxpayer money in this industry promotes public welfare.

Externalities and subsidies

In economics, an externality is a consequence of an economic activity on a third party, and can be either positive or negative. A subsidy is a form of financial aid or investment by a government that usually promotes some sort of economic or social policy. The federal government subsidizes thousands of ventures in hundreds of different industries within our economy with the goal of promoting economic or social benefits (i.e. schools, research grants, etc.).

Amtrak subsidies should be evaluated with externalities in mind. The fundamental question is, do positive externalities exist, and if so, what is their value in the marketplace? This will help determine how much the government should allocate to support these externalities.

Not all Amtrak routes are created equal

An empirical analysis of Amtrak and its finances indicate that Amtrak profits mostly from routes between Washington DC and Boston (referred to as the Northeast Corridor). These profits offset Amtrak’s losses from its less popular routes in other parts of the country. Demand for passenger rail service between DC, Philadelphia, New York, and Boston is relatively constant among business travelers, who often don’t have to personally fund their travel while on business. Outside of the Northeast Corridor, demand for passenger rail is much lower. Amtrak’s long-distance routes are its least popular service, as consumers typically prefer air travel for any journey beyond 200 miles.

Proponents of Amtrak argue that Amtrak’s service provides several positive externalities including energy efficiency, alleviation of traffic congestion, benefits to national defense and infrastructure, a transportation alternative during a national emergency, and contributions to national history and social welfare. Some of these externalities are examined in detail below.

Energy efficiency

Some argue that passenger rail is a more energy efficient mode of transportation than its competitors (car and airplane travel). Passenager rail travel is more energy efficient than car or rail travel, however not as efficient as bus travel. Rail is considerably more energy efficient when consumers chose it over air travel. Consumers rarely choose rail travel or air travel, however, especially in instances of travel over 200 miles The most energy efficient means of transportation is bus, which is a good substitute for rail travel between cities, especially in the northeast corridor. If consumers choose rail travel over bus travel, net energy efficiencies decrease.

Alleviation of traffic congestion

 Traffic congestion is considerably alleviated when consumers choose passenger rail over car or bus travel, particularly in the northeast corridor. As more consumers choose passenger rail over driving, interstates are less clogged with traffic. This positive externality is easily observable, especially in dense urban areas where traffic congestion is a major concern. This externality is less present in more rural areas of the country, where demand for passenger rail service is low.

National defense and infrastructure

Another argument for Amtrak is its contribution to the national defense network of the United States. In times of war, passenger trains can be used to transport troops throughout the country. In the case of an attack on the homeland, interstates and highways might be damaged or destroyed, thereby limiting troop transport to rail or air travel. Passenger rail provides an alternative to interstate car travel and thereby strengthens the defensive infrastructure in our country.

Peak oil and transportation shortages

Similar to the national defense argument, some argue that Amtrak provides a viable transportation alternative to consumers during times of petroleum shortages or national emergencies. If the price of oil becomes prohibitively expensive, consumers will look for substitutes to car travel. As rail service is the second most energy efficient means of transportation, viable supply for passenger rail service would have to exist in order to meet consumer demand in these particular conditions. Given the low price of oil today, this is unlikely to be a concern anytime soon.

Existing externalities

Evidence from research conducted by the Congressional Budget Office suggests that most of the positive externalities mentioned above are concentrated in the Northeast Corridor and the California coast, where demand for Amtrak service is the highest. Amtrak does little to alleviate traffic or preserve energy in the Midwest, South, Southwest, or Northwest regions, where consumers rarely choose Amtrak service over air or car travel. Amtrak’s load factor is just under 50% (load factor measures usage by capacity), which suggests that excess supply exists in the marketplace for passenger rail in the United States. As such, federal subsidies to Amtrak should be adjusted to only fund its most profitable lines (the Northeast Corridor and California coast) and discontinue its least profitable lines. Such an adjustment would shift supply of passenger rail back to a market-equilibrium price and help eliminate the inefficiencies that currently exist in the marketplace.

Lessons from Hong Kong’s Transit System

Residents of Washington D.C. love to complain about the Washington Metropolitan Area Transit Authority’s subway system, referred to as “the Metro.” From single tracking to broken cooling systems, riders find much to grumble about. Needing a place to publicly vent, many Metro riders have taken their frustrations to Twitter, using the hashtag #UnsuckDCMetro.

The Metro seems even more flawed when it’s compared to public transportation in Hong Kong, which hosts the best transit system in the world. This system, managed by the Mass Transit Railway (MTR) Corporation, is the gold standard of public transportation. WMATA officials and city leaders in Washington can learn a lot from MTR, particularly when it comes to financing the world’s most efficient transit system.

Several metrics indicate that the MTR is the global leader in providing transit. In 2012, MTR produced revenue of $5 billion dollars while turning a $2 billion dollar profit. MTR’s farebox recovery rate—the rate in which its operating costs are covered by fares—is the world’s highest at 185%. In comparison, WMATA’s farebox recovery rate in 2014 was 67.5%, New York’s MTA was 51.2%, and Chicago’s CTA was 43%. The MTR offers clean and serviceable trains and buses that run on time, transporting passengers throughout an intricate and expansive system that spans the entire island. The stations are also state of the art: glass doors that block the tracks, touch and go fare payment, visible signage, first class cars, and handicap accessibility.

The success of the MTR is largely due to its unique financing system called “value capture.” This type of financing enables the MTR to turn a profit, which is a rare feat in public transportation. It is also unique to Hong Kong, which is one of the densest urban environments of the world. Due to the compact nature of the city, businesses rely on the MTR to transport customers to their stores to shop. In a city where car ownership is prohibitively expensive, the MTR plays a significant role in the commercial activity of the city’s passengers. In return for transporting customers to their stores, MTR receives either a percentage of the stores’ profits, enters into co-ownership with the commercial real estate owner, or receives a portion of property development fees. Since the majority of commercial stores are housed in shopping malls and skyscrapers located near or are attached to MTR stations, the system provides an enormous source of revenue to the railway. Additionally, MTR leases out retail space to in its stations, which essentially serve as shopping malls for many passengers.

While this system is incredibly successful in its own right, it’s difficult to compare the MTR to any other transit system in the world, much less to any system in the United States. MTR’s success is largely enabled by Hong Kong’s dense urban fabric. Without this, MTR’s financing system would be infeasible. Value capture is integral to MTR’s success: It allows the corporation to invest in new technologies, expand its workforce, and improve customer service without having to beg for public funds. Additionally, MTR doesn’t have to transport citizens from distant suburbs, which is a major source of difficulty for many transit systems, particularly in D.C.

Hong Kong’s Mass Transit Railway is a shining example of how public transportation can work well if properly financed. City leaders and transportation officials in this country can learn much from its success. While Washington D.C. doesn’t have the density of Hong Kong, city leaders could implement value capture financing where commercial real estate or retail is housed in or near Metro stations, such as in Metro Center, Pentagon City, or Union Station. As the Metro expands and more retail emerges in the city’s transit hubs, Metro could increase their revenue without having to rely on city subsidies. With the recent threat of federal takeover, Metro might have to seriously consider implementing value capture as one way to increase revenue and avoid rate hikes.