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Cultivating Creative Leadership, Framing Emerging Issues

Cultivating Creative Leadership, Framing Emerging Issues. Georgia Institute of Technology. The Window of Opportunity is Open: Transforming Transportation Policy in the Age of Obama. Steve Van Beek, President/CEO Eno Transportation Foundation March 13, 2009.

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Cultivating Creative Leadership, Framing Emerging Issues

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  1. Cultivating Creative Leadership, Framing Emerging Issues Georgia Institute of Technology The Window of Opportunity is Open: Transforming Transportation Policy in the Age of Obama Steve Van Beek, President/CEO Eno Transportation Foundation March 13, 2009

  2. Top 10 Transportation Policy Developments to Watch 10. Air Traffic Control Modernization 9. Workforce/Labor Politics 8. A National Freight Policy? 7. Public Goods and PPPs 6. Intercity/High-Speed Rail 5. Climate Change 4. “User pays” and Trust Funds 3. State of Economy/Price of Energy 2. Economic Recovery Package/Stimulus 1. The Unexpected

  3. Macro Economic Indicators

  4. Gross Domestic Product (2005-2008)Percent, Adjusted to Annual Rates The U.S. economy has been in recession since the fourth quarter of 2007. Most economists now believe it will last at least until the end of 2009, perhaps into 2010. The recently passed stimulus bill should help.

  5. Cost of Jet Fuel:Weekly New York Harbor (in cents per gallon) The one bright spot with the current recession is the price of jet fuel (and other fuels) has plummeted since reaching a high of over $4 per gallon in the summer of 2008. While this has helped transportation providers on costs, it has been offset by the reduction of demand.

  6. Consumer Confidence (Conference Board)1985=100 With the slowing economy, growing unemployment, and reduced wealth, consumers are pulling back on spending dramatically, leading to reduced demand for a variety of goods, including transportation. (Consumers represent about three-quarters of the economy’s spending)

  7. Transportation: State of the Industry And Metrics

  8. Surface Transportation: Historic Declines in Vehicle Miles Traveled (December Base), U.S. DOT Percent Change in VMT Year Over Year VMT was down significantly in 2008. The number, and its effects on Highway Trust Fund revenues, will be closely watched in the coming year as Congress considers the surface transportation authorization bill.

  9. Surface Transportation: Vehicle Miles Traveled (VMT) Down Significantly for the year 2008 (U.S. DOT) VMT Use on Urban Highways (U.S. DOT) Average Daily VMT (Billions) VMT on all public roads are down 3.6%. This will have a negative impact on transportation funding as the HTF is funded by an 18.4¢ tax on gasoline and a 24.4¢ tax on diesel fuel.

  10. Surface Public Transportation Up Significantly with Gasoline Price Increases (APTA) Transit Data: APTA, % Change 2008 4Q vs. 2007 Public transportation use is up despite lower fuel costs, with riders taking over 2.6 billion trips from October through December, totaling 10.7 billion for the year. Fiscally strained state and local governments are causing budget problems at many properties at the very time when more passengers are turning to the mode.The public does not understand the farebox and funding challenges.

  11. Surface Transportation Freight: U.S. Domestic Rail TrafficJanuary 2009 vs. 2008 (AAR) U.S. freight rail traffic is down significantly over the last year, tracking declines in trucking (ATA index -11%)and air cargo (IATA global -13.5%)volumes. As freight and cargo are leading economic indicators, these portend a longer and more severe recession than predicted a few months ago.

  12. Aviation Traffic: Jan. – Nov. 2008 began a period of severe airline contraction, challenging airports and communities (BTS) Passenger levels dropped significantly during the end of 2008 (for December YOY domestic was -5.7%, international -5.6%).2009 will see further reductions as carriers attempt to align capacity with scheduled demand levels.

  13. Airline Traffic: Change in Scheduled Seats and Departures by Hub Size, June 2009 vs. 2008 (YOY) All size airports have lost significant numbers of departures and available seats. Combined with the tumultuous financial markets, this has caused the rating agencies to place the airport industry on a “Negative Outlook.”

  14. Airline Traffic: Change in Scheduled Departures by Hub SizeJune 2001-2009 vs. 2000 (each year compared to 2000) Airline departures, after a post-9/11 recovery, have declined precipitously over the last year. The large drops in air service for smaller markets is encouraging the President and Congress to look for solutions.

  15. Transportation Policy 2009

  16. The Scope of the Federal Role: Bush Administration’s Attempted Retrenchment Mineta/Peters USDOT (2001-2009) “I think the federal government should collect and keep only that portion of the gas taxes that we’re collecting that meets those federal interest requirements, and the rest of it we should either give back to the states or never collect from the states to begin with so that it doesn't become federalized income,” (Mary Peters) • According to Peters “federal interest requirements” include maintaining interstate highways and other arterials, projects of national and regional significance, regulating highway safety and some research. • No increase in gas taxes or other revenues • Focus on private sector replacing public as a source of funding • Little support for federal planning and leadership. Solutions will “bubble up” The private sector plays a role where there is a dedicated or forecast funding stream. Even public commercial airports use bonding to finance the majority of their capacity. Peters’ formula, however, leaves out many of the public parts of our system that cannot be funded exclusively through the farebox, with fees, or with other revenue streams.

  17. The 2008 Election: A Realignment? Realignments 1800 1828 1860 1896 1932 1964 1980 • re'a·lign'ment n • Crisis/galvanizing event • Sweeping electoral change • Mandate for new approach • New governing coalition • Coalition proves successful • Wins reelection New governing coalitions deliver new policy change (e.g., New Deal, Great Society, Reaganomics). These political environments are not status quo and offer the prospect of new policy paradigms, including for transportation.

  18. Transportation Policy: January 2009 • Policy is a Failure: Today’s policy architecture is flawed and is widely viewed that way (e.g., congestion, “bridge to nowhere”). We lack an explicit understanding of what a policy should achieve. • Issue Saliency: Transportation as an issue is getting greater attention than in any time in at least a decade. Attention very high at the local and state levels, getting more attention at the national levels. • Transportation as Stimulus: Infrastructure seen as an attractive method of providing jobs and stimulating the economy. Sponsors of“ready-to-go” projects across the system have an opportunity. • Funding: The Airport and Airway and Highway Trust Funds, as well as our fiscal policy, are under severe strain and are unsustainable. • “Transportation” Definition: Increasingly linked with other non-mobility issues, including climate change and energy independence (joining issues such as land-use, clean air and water, and equity). • Building Consensus: Saliency and connections to other policies mean that building coalitions is more complex than ever.

  19. New Governing Coalition and Issues:Differences with Bush Administration • Public Transportation (mass transit, rail) • Infrastructure Spending (legitimate national role) • Climate Change (cap-and-trade and Copenhagen) • Organized labor and workforce issues (controllers, screeners, firefighters, NMB, liberalization) • Fresh look at air traffic control modernization (schedule, acquisition) • Skepticism about slot auctions and congestion pricing(New York) • Review of Department of Homeland Security/TSA(role of contractors, focus on non-aviation modes)

  20. 2009: An Agenda Bursting with Political, Policy, and Transportation Challenges • Obama and the First 100 Days • Economic Recovery/Stimulus 1st round, 2nd to come? • Executive Agency Transitions and Appointments: Other DOT/FAA to quickly follow A bit delayed • February:FY2010 budget submitted to Congress • March 6: FY2009 DOT appropriation expires • March 31: FAA Authorization expires • And… • September 30: SAFETEA-LU (surface authorization) expires • November/December: COP 15 Copenhagen, UN Climate Conference • What I’ll be Watching • Transition Actions: Regulatory moratoria, executive orders, appointments offer clues to direction of policy Ongoing • White House/Agencies: How much discretion will DOT Secretary have? What is the role of the other inter-government agencies? A bit early to tell

  21. Recovery and Reinvestment (aka Stimulus)Major Assumptions, Principles and Components Shift Back to Keynesian Economic Recovery: Little left in the monetary tool box with rates near zero and financial institutions still reluctant to lend. With consumers and businesses retrenching, federal stimulus last resort. Infrastructure Investments Translate to Benefits: Consensus that public investments in societal interest and, if properly designed, can help the economy and provide jobs. Extraordinary shift in saliency and elite opinion from a year ago. Performance/Accountability: No earmarks, transparent process portends well and sets the stage for second-stage stimulus and significant authorization efforts. Existing programs and “ready-to-go” projects the priority: Policymakers insisting that portions of projects be contracted out and started quickly to ensure they stimulate the economy in 2009. Reforms will await authorizations and other major policies:Shifts to a more sustainable transportation era only marginal now, will await the major decisions to come.

  22. Economic Recovery Bill:Surface Transportation Funding Highways ($27.5 billion): For construction provided through State and Metropolitan Transportation Improvement Plans. Intercity/High-Speed Rail/Amtrak ($9.3 billion): • $8 billion for intercity corridors, high speed rail. Secretarial discretion (Surprise of the legislation) • $1.3 billion for Amtrak (no more than 60% for NE Corridor) Transit/Public Transportation/Amtrak/High Speed Rail ($8.4 billion) includes • $6.9 billion for transit : 80% urbanized formula, 10% rural, 10% growing states/high density systems • $750 million fixed guideway systems. • $750 million for new starts/small starts Intermodal Surface Transportation ($1.5 billion): Competitive grants across the modes for a project deemed to be in the national or regional interest. $200 million in additional TIFIA authority.

  23. Economic Recovery Bill:Aviation Funding Airport Improvement Program ($1.1 billion): Discretionary monies provided with 100% federal funding. Explosive Detection Systems/Checkpoints ($1 billion): Competitive monies to be allocated by risk for procurement and installation of equipment. Facilities and Equipment ($200 million): $180 million for FAA needs, $20 million for airport lighting, navigation and landing equipment. NASA Aeronautics ($150 million): Monies for research and development, including for development of NEXTGEN. Solid support for transportation-related projects in stimulus legislation. Once Congress has greater confidence in the plan and requirements for air traffic control modernization, it could receive additional support in any second round of stimulus.

  24. Creating the Sustainable Transportation Era

  25. The Scope of the Federal Role: ISTEA (1991 – 2001) To develop a National Intermodal Transportation System that is environmentally sound, provides the foundation for the Nation to compete in the global economy and will move people and goods in an energy efficient manner. Intermodal Surface Transportation Efficiency Act of 1991 • Record funding levels • Flexibility, more support for transit • MPOs, state and local priorities • Donor/Donee (today 92.5%!) • Policy characterized by “disjointed incrementalism” • National interest secondary • Energy policy a failure • Growing interest in environmental values, incorporation of NEPA

  26. Roles and Responsibilities for Climate Change: National Policy Yet to be Really Engaged • International: United Nations Framework Convention on Climate Change’s Kyoto Protocol is the worldwide framework. U.S. hasnot signed the treaty. Kyoto expires at the end of 2012 to be replaced with a treaty to be considered at Copenhagen in December 2009. • International maritime and aviation emissions are “bunkered” and are handled by the International Maritime Organization and the International Civil Aviation Organization respectively. • National:No current national policy. President Obama’s FY 2010 budget promises to reduce 2005 levels of GHG emissions by 14% by 2020 and 83% by 2050. • State and Local: States such as California, and many cities (led by Seattle), have committed and are putting in place plans to reduce GHG emissions as well. The impending Copenhagen meeting will put pressure on the U.S., IMO, and ICAO to propose and enact serious climate change policies. The issue has become a diplomatic priority of “high politics.”

  27. Climate Change: Sources of U.S. TransportationGHG Emissions (CO2 Eq.), U.S. EPA United States The chart shows how the 28% transport share for GHG emissions breaks down by mode—includes domestic transport only. Total Light-Duty59.2% International Under the Kyoto Protocol, international emissions are bunkered and handled by the IMO (maritime) & ICAO (aviation).

  28. Climate Change: Flow of GHGs from sources to distributionMillion Metric Tons CO2 Equivalent (2007) ICAO, IMO downstream 28% upstream

  29. A Sustainable Transportation Era: The Debate for 2009 and Beyond Our Challenges Include: • Meeting mobility goals for passengers • Building a freight policy • Reducing the use of fossil fuels and converting to sustainable energy sources • Correlating use of transportation with revenue sources • Prioritizing intermodal connectivity by focusing on the interests of passengers and shippers • Providing for a secure and resilient transportation system • Shifting to a more performance-based system to ensure state, local and individual decision-making is consistent with national imperatives • Striking the right balance between the setting of national policy and empowering and incentivizing inclusive state, local and regional planning (including aviation, freight, and private providers of services).

  30. Federal tools to promote sustainable transportation TOOLS • Supporting federal research • Inventorying emissions • Adopting more inclusive planning • Reforming the criteria for federal funding and tax incentives • Stabilizing funding sources: • Raise gas tax • Urban congestion/road pricing • Migrate to “Green VMT” • Adopting GHG national target(s) • Taxing carbon and/or • Allocating emissions Easier Politics Harder

  31. Getting to the Sustainable Transportation Era in Six “Easy” Steps • Be Aggressive: we could be entering a reform cycle—old assumptions should be reviewed and challenged. The new model will take years to build (and more than one authorization), but here we should try to start. • Articulate the Benefits of Transportation Investments: emphasize job creation, benefits to U.S. competitiveness and environmental values. • Do Not Apologize for Transportation Spending: the lion’s share of transportation funding is provided by user-fees and does not contribute to structural problems in the nation’s deficits and fiscal policy. • Clarify Public and Private Roles: what responsibilities do we believe are fundamentally public or private? • New Revenue Models Are Necessary: whatever their form, new revenues must be created to adopt meaningful programs meeting long-term goals. • Make a Big Tent: passing a meaningful bill will be a great challenge. Don’t get distracted by peripheral issues in the policy debate. A coalition should be broad (including state and local governments, providers, shippers, labor, and environmental advocates), but not so broad as to dampen the breakout thinking by the quest for a common denominator.

  32. Recommendations to Transportation Interests Recognize the Opportunity: Toss out conventional wisdom and be aggressive. With priorities of stimulus, energy use and climate change public transportation is well positioned. Policy Context is Dynamic: Pressures to restore the economy and shift policy priorities will keep the window of opportunity open at least for a time. Define Projects for the Context: What contributions will your projects make to the new set of national priorities? What are the net contributions for GHG emissions, energy use, mobility, and job creation? Search for Wide Funding Sources: As the stimulus bill reflects, monies for projects may be available from non-traditional sources. Find them. Why is your project a good pilot for the new era? Help Educate Policymakers and Shape Authorization: Lots of misconceptions about transportation.

  33. For more policy discussions: http://transportation.nationaljournal.com/ Questions and Comments: Stephen D. Van Beek, Ph.D President/CEO Eno Transportation Foundation 1250 Eye Street, Suite 750 Washington, D.C. 20005 (202) 879-4711 svanbeek@enotrans.com

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