Monday, September 21, 2009

Transportation in Trouble

Starting next year, the State of Maryland will be spending less money on transportation projects than it did nine years ago. That’s right folks, you read that correctly. And if we do nothing, things will get worse.

The Maryland Department of Transportation’s latest draft Consolidated Transportation Program (CTP), the state’s six-year transportation spending plan, establishes a capital budget of $8.9 billion from FY 2010 through FY 2015. That’s well below the state’s peak of $10.6 billion in FY08-13, and even below the FY01-06 level of $9.5 billion.

Here’s the history of MDOT’s six-year capital spending plans from FY92-97 through FY01-06. Note how a strong economy and hikes in federal aid resulted in large increases in transportation funding near the end of this period.

Now look at what happened to transportation spending from FY00-05 through FY10-15. The six-year budget bounced around between $7.7 and $9.5 billion until FY08-13, when the special session’s tax hikes yielded $10.6 billion. However, the poor economy has evaporated those gains.

One factor explains the drop in transportation spending since FY01-06: declining federal aid. In the FY01-06 plan, federal aid totaled $4.2 billion and accounted for 45% of the state’s transportation budget. In the FY10-15 plan, federal aid totaled $3.2 billion – down 25% - and accounted for 36% of the state’s transportation budget. State funding rose by 15% but could not make up for federal stinginess.

Even though total transportation funding is down, transit funding is up. Money for Maryland Transit Administration projects has increased by 19% since FY01-06. WMATA capital support has risen by 9%. Road support has dropped by 12%. Much of this pattern is driven by the O’Malley administration, which has directed a greater percentage of resources towards transit than its predecessor.

Despite transit increases, new project construction is scant compared to the state’s needs. The chart below shows additions and subtractions from MDOT’s construction program since FY01-06. The only plan year that contained a big increase in construction additions was FY05-10, during which the ICC, I-95 improvements northeast of Baltimore and the Red Line were all added to the construction program. (The Red Line has $99 million of authorized right-of-way and construction spending while the Purple Line has zero.) The recession’s decimation of the special session tax hikes caused a gigantic retrenchment of minus $468 million last year. And of this year’s ten new projects (at a comparatively puny cost of $124 million), none are in Montgomery County.

So despite the state spending more of its own money on transportation, our capital spending plan is down 6% over the last nine years. But that understates the extent of our problem. The Bureau of Labor Statistics reports the following producer price increases in construction-related commodities between 2001 and 2008:

Construction Machinery: 24%
Ready-Mixed Concrete: 41%
Paints: 42%
Construction Sand, Gravel and Crushed Stone: 47%
Iron and Steel: 125%
Asphalt: 184%
Gasoline: 191%

Clearly, we are getting FAR less real product for our tax dollars today than we were nine years ago.

What about future revenues? MDOT says this:

The largest decrease in revenues continues to be seen in the titling tax as sales of light vehicles continue a downward trend. Nationwide 2009 light vehicle sales are projected to be down 20-24 percent from calendar year 2008. Most forecasters predict that light vehicle sales will reach the lowest point in the latter half of calendar year 2009 and then begin to recover.

In addition, consumers are continuing to shift away from purchases of SUVs toward smaller, less expensive and more fuel-efficient vehicles. This trend has recently increased with the federal CAR Allowance Rebate System (CARS) or “cash for clunkers” program. The CAR Allowance Rebate System (CARS) is a $3 billion government program that helps consumers buy or lease a more environmentally-friendly vehicle from a participating dealer when they trade in a less fuel-efficient car or truck. The program is designed to energize the economy; boost auto sales and put safer, cleaner and more fuel-efficient vehicles on the nation’s roadways. While the trend to smaller cars is positive with respect to transportation’s impact on the environment, it will result in significant decreases in revenue for transportation programs.
Translation: without a tax hike, the situation will get worse.

Why is all this so important? Consider the following facts reported by the state’s own transportation plan:

Our transportation system is increasingly inefficient due to traffic congestion and dispersed land use patterns. Over the next 20 years, Maryland’s 6.2 million acres of land will be home to 547,000 households, 762,000 jobs and more than 6.6 million people. Maryland’s growing population will increase demands on our land, water and air as well as demands on our man-made infrastructure. Developed land has consumed about 1.3 million acres of Maryland. Although it took 300 years to develop the first 650,000 acres in our State, it took a mere 30 years to develop the second.

The average household size is decreasing and therefore with the population increase statewide, it will take more houses to hold us. Fueled by improvements in transportation infrastructure and a differential in housing costs and consumer demand, residential development is increasingly dispersed and employment has followed.

By 2026, licensed drivers are expected to increase in Maryland by more than 23% and the number of registered vehicles is expected to increase by 40%.

Congestion is increasing as demand for the movement of people and goods increase.

Until last year, Vehicle Miles Traveled (VMT) has increased every year since WWII. In 2006, Marylanders drove 57 billion vehicle miles, an average of 10,000 miles per person. This represents a 40% increase from VMT in 1990, a growth rate that significantly outpaces growth in both population (17%) and new lane miles (8%) during the same time period.
This is an enormous challenge. Given the above facts about our transportation budget, can anyone believe we are ready?