BITRE | Working paper 74 market since ‘major financial institutions and their clients are expressing increasing willingness to invest billions of dollars in roads and airports’ (Mineta 2006). Mineta’s successor, Mary Peters, has upped the ante considerably on use of PPPs, suggesting that using such partnerships are necessary and not an option: 14 Attracting private sector participation and deploying market-based solutions to our transportation problems is not simply a laudable objective; it’s a necessity. And it requires us in the Federal Highway Administration to adjust the way we approach our Federal-aid mission (Yakowenko 2007, Slide 4). However, there are important trade-offs in policy application and private sector financial returns in private sector provision, whether that provision occurs through more traditional private toll roads The challenge of optimising the network is increased when PPP provision is adopted, as it alienates part of the network and reduces flexibility of network management. or whether it be the ‘innovative’ PPP projects. As we noted with the Dulles Greenway example, there is a major issue of applying PPP financing while also supplying a public amenity with politically-acceptable tolls. Flat tolls are one political and regulatory challenge; a much greater challenge arises when managing road usage with targeted instruments such as congestion charging. A specific complication (or sensitivity) is the variable charge, which is naturally set highest during periods of peak demand. In this context, the PPP seeks to protect public and private interests. While it may seem straightforward to create a contract between public and private sectors that allowed for variable charges, there are a number of difficulties: • With the cost and performance characteristics of the technology changing so rapidly, it is extremely difficult to draw up a contract that anticipates the range of likely outcomes and ensures that benefits of technological developments can be shared with the community. Few, if any, road authorities are in a position to confidently anticipate the developments in technology over the period for which the road segment is held in private hands. While renegotiation of contracts is always an option, this is invariably costly and not necessarily successful. In fact, renegotiation of contracts is widely regarded as a sign of failure of the original negotiation. • The benefits from congestion charging depend critically on the impact of the charges on the remainder of the network. If such charges encourage ‘rat running’, or diverting to uncharged andoften lower standard roads, then the community may be worse off. Optimising network use is quite challenging in itself when ownership is concentrated. However, the magnitude of the challenge increases significantly when part of the network has been alienated and is beyond the direct control of the road authorities. While contracts will usually be written with a view to ensuring coordination of the network, it is inevitable that all changes in circumstances cannot be fully anticipated. A policy issue, therefore, is that the use of PPPs for parts of the road network may constrain public authorities in adopting an optimal mix of road traffic management options (including congestion charging).
Chapter 2 | Prevailing strategies to manage congestion A case in point is 91 Express Lanes. Orange County had found itself powerless to prevent the deterioration of the alternative (free) SR-91 Freeway, adjacent to the private 91 Express Lanes. Through removing the facility from private ownership, Orange and Riverside County public officials are now able to adopt a network approach to the road facilities, coordinating improvements for both the toll road and the Freeway. Riverside County’s sales tax has been increased to pay for improvements in SR92 Freeway. Non-compete clauses have also been a feature of the road PPPs in Sydney and Melbourne. These can severely constrain road authorities attempting to take an integrated approach to management of the road network. An important downside of PPPs is that they constrain authorities in taking a coordinated network-wide approach to traffic management. 2.2 Better utilisation of the available space The performance of a road is not only a function of its physical capacity but also of how that capacity is utilised. For instance, the NSW RTA reports that reductions in travel time have been achieved in the urban Sydney area through intersection upgrades and improved access to major roads on corridors and at specific locations (NSW RTA 2006, p. 28). The appropriate application of technology can also be a major factor in the more efficient utilisation of existing capacity, thereby (effectively) expanding network capacity. 6 Intelligent transport systems (ITS) is the umbrella term applied to that technology. It can be used in both recurrent (excess demand based) congestion and in non-recurrent (caused notably by road accidents) congestion. Application of new technology The most significant factor in ensuring efficient utilisation of the network has been the continuing development and application of new technology, particularly intelligent transport systems (ITS). These systems cover a broad range but can generally be defined as follows: … the integrated application of computer, sensor, electronics and communications technologies along with transport management strategies to provide an integrated, safer, more efficient and more sustainable surface transport system (An Roinn Iompair 2006, p. 3) This generally refers to the technology developed to monitor traffic and network performance, to facilitate strategic responses by road managers and to enable realtime communication with impacted parties. For instance, the Sydney Coordinated Adaptive Traffic System (SCATS) is estimated to reduce ‘stops’ by 40 per cent and travel time by 20 per cent, resulting in an associated 12 per cent reduction in fuel usage. 7 6. While technology can be utilised to manage demand, such as through the imposition of charges, the focus in this section is on technology to effectively expand capacity. 7. For more details, see Tyco Integrated Systems (undated). 15