You are here

Tolling Points

The Future of Highway Funding in Uncertain Times

Bill Cramer

It’s hard enough to accurately predict future trends when you have good reason to think the recent past will predict the next five, 10, or 20 years.

It’s a lot more challenging when something as simple as a nifty, new adult scooter could do its part to skew the market for automobiles, adding yet another twist to the long-term projections that drive highway planning and tollway financing.

Transportation planning has always had to cope with complexity, and the sudden arrival of a bunch of new variables doesn’t mean the end of highways as we know them. (Not nearly.) It does point to the need for more thoughtful analysis, and for a lot more caution about simple declarations in any direction—whether the suggestion is that the sky is falling, or that there are no problems on the horizon.

What Are Millennials Thinking?
Much of the recent discussion in the tolling industry has focused on the Millennial generation and its approach to living arrangements, driving habits and car ownership.

We’ve heard that Millennials don’t want to live in suburbs.

That fewer of them ever intend to own a car.

That many of them are even disdainful of the need to own a driver’s licence.

Oh, and by the way, that they are the biggest generation ever by population, they are already in the work force and they are transforming life as we know it.

Standard & Poor's rating services is out with a new report on how "millennials are creating unsafe conditions on U.S. roads - but not in the way you may think." The analysis explains that millennials are driving less than older motorists did when they came of age and are usually driving smaller, more fuel-efficient cars than their elders. "This, in turn, has curbed revenues from the federal gasoline tax, the primary source of funding for the Federal Highway Trust Fund, which is the backbone of the country's surface transportation infrastructure," the report says. "This drop in funds available to construct and repair the country's infrastructure could ... weigh on growth prospects for U.S. GDP, as well as states' economies, and, in some cases, where states and municipalities choose to replace the lost federal funds with locally derived revenues, could hurt credit quality."

Business As Usual to the Rescue
Some analysts “have embraced the dubious notion that Millennials won't buy cars or houses, and certainly won't migrate to the suburbs as they marry and have families,” writes NewGeography.Com Executive Editor Joel Kotkin.

“But those notions are rapidly dissolving as Millennials do all those things. They are even shopping at Walmart, and in greater percentages than older cohorts. They are moving to the 'suburbiest' communities, largely on the periphery, where homes are cheaper, and often schools are better.”

Too Many Variables
Kotkin tells a hopeful story for highway operators if it means the assumptions behind past capacity projections will hold true into the indefinite future. But the reality is that neither extreme tells the story—as Facebook might say, “it’s complicated.” And far more chaotic than any one blog post (ours or Kotkin’s) can sort out.

Here’s a quick, incomplete inventory of near-term developments—not all of them likely, but some of them a virtual certainty—any or all of which would shift the ground under today’s assumptions:

  • Continuing twists and turns in settlement patterns, including more limited financial means in the bargain-basement suburbs Kotkin describes
  • Multi-generational housing
  • Higher population densities in core-area condo communities
  • Greater awareness of climate change and other assorted environmental crises, leading to a consumer ethic that emphasizes thrift over consumption
  • Ever-more enthusiastic embrace of a conserver ethic as households realize they can live better and save money (unlike their parents, but just like their Second World War-vintage grandparents or great-grandparents)
  • Shifts in car ownership patterns, driven by mobile services like Uber or RideScout
  • Closer integration between transportation modes
  • Teleworking
  • Autonomous vehicles.

And how about that adult scooter? Last week, Politico Morning Transportation reported on the nearly tenfold increase in souped-up scooters sold to adults over the last five years. “I see that as part of a larger trend of young people moving away from cars and falling in love with urban centers again and a more urban lifestyle,” said Carlton Calvin, founder and president of Razor USA.

“We are not creating this trend. It is organic, I think relating to people’s disenchantment with automobiles.”

Expect the Unexpected
The important thing to remember about all of these trends is that none of them comes with a guarantee…but that any of them, alone or in combination, could shift the customer expectations and buying habits that drive demand for transportation. At IBTTA’s 2015 Summit on All-Electronic Tolling, Managed Lanes and Interoperability, participants engaged in a series of breakout sessions [page 11-12] that came up with future scenarios that were as wild, diverse, and likely or unlikely as the ones we’ve discussed here.

So how do tolling agencies cope with such a monumental level of uncertainty? Same as they ever have—by keeping their eyes wide open, engaging in the contingency planning, smart market assessment of data and demographics and day-to-day risk management at which they’ve always had to excel.

The one caution is not to put all your focus and planning in any single prediction—because with so many variables on the horizon, no one source is likely to come back with a complete picture.

For several possible snapshots of the industry’s future, download the results of the breakout discussions at IBTTA’s 2015 Summit on All-Electronic Tolling, Managed Lanes and Interoperability.


Be the first person to leave a comment!