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Volume 101 Number 12
March 23, 2001
Executive Digest

Congress
Information
AASHTO
Details

Population, Congestion Growth to Strain Highway and Transit Systems

    The growth in population and increasing congestion in urban areas will present tremendous challenges for the nation's highway and transit systems, according to testimony before a House subcommittee this week.

    The House Highways and Transit Subcommittee on Wednesday focused on the outlook for the nation's highways and transit systems. Chairman Thomas Petri (R-WI) said it was the first of many hearings the Subcommittee will hold over the next two years on the implementation of the Transportation Equity Act for the 21st Century (TEA-21).

    Panelists before the Subcommittee said that significant challenges face transportation providers, given the fact that much of the urban and suburban systems are already congested. "Over the last 20 years, traffic volumes have increased faster than road capacity and the alternative modes have not provided the needed relief either because they are not extensive enough, or they are not used for enough trips," Tim Lomax of the Texas Transportation Institute testified.

    Consultant Alan Pisarski told the Subcommittee that, given the current state of congestion in the country's urban areas, states and localities will have to get more out of the current system by operating it better. At the same time, increases in current capacity must also be considered.

    "Better information about travel and better operations to squeeze all that we can out of existing capacity will be an essential prelude to building any new capacity," Pisarski said. "Only when we have demonstrated that we have done all that we can do with the existing infrastructure can we, in good faith, make the case for expanded capacity."

    Anthony Downs, a senior fellow at the Brookings Institution, acknowledged that congestion was getting worse, and that finding solutions will be difficult. Possible ways to reduce congestion include significantly higher gas taxes or peak-hour pricing, which he said would never be acceptable to the public and lawmakers. Rather, Downs called for changing land-use patterns by encouraging pedestrian-oriented developments and urban growth boundaries as a way to stem development patterns that encourage vehicle use.

    Lance Grenzeback of Cambridge Systematics discussed future trends in freight movement. He said that current capacity and congestion problems are eroding the effectiveness and productivity of the nation's freight system, which is moving larger numbers of smaller shipments. Steps need to be taken now to curb further constraints on freight movement, he said. He encouraged the Subcommittee to specifically address freight issues during the reauthorization of TEA-21, by giving special consideration to modal linkages, terminals and connectors.

    Additional Hearings to be Held

    Chairman Petri said that an April 4 Subcommittee hearing will feature Secretary of Transportation Norman Mineta. Other hearings will focus on driver distractions in vehicles, the project delivery process, and truck safety.

    In addition, a series of regional hearings across the country will be scheduled next year to gather comments on how TEA-21 has been implemented.

House Budget Committee Approves FY 2002 Budget Resolution

    On a party-line vote, the House Budget Committee approved a $660 billion budget resolution for FY 2002, which accommodates the authorized spending levels for the highway, transit and aviation programs as contained in TEA-21 and AIR-21.

    In its proposal, the Budget Committee stuck closely with the budget outline offered by President George W. Bush last month. Specifically, the Committee includes some $1.6 trillion in tax cuts, targeted spending increases for education and defense, and increases in spending for other discretionary programs equal to slightly over 4 percent. A detailed budget proposal will be offered by the Administration on April 3.

    For transportation (Function 400) the budget resolution includes some $61 billion in budget authority and $55.6 billion in outlays for FY 2002. The Committee notes that this level represents a 2.9 percent increase of $1.7 billion over 2001, and accounts for a deduction based on one-time earmarks included in the FY 2001 spending bill that equaled $2.8 billion.

    The proposal also fully funds the authorized levels for highways and transit at $32.3 billion and $6.7 billion, respectively, as provided under the Transportation Equity Act for the 21st Century (TEA-21). The Airport Improvement Program is fully funded at $3.3 billion, while other Federal Aviation Administration programs are funded at $6.9 billion for operations and $2.9 billion for facilities and equipment. These levels equal the authorized amounts included in the Aviation Investment and Reform Act for the 21st Century (AIR-21).

    The budget provides a $5.3 billion increase for the U.S. Coast Guard, a 17 percent increase, and fully funds the TEA-21 guaranteed levels for the Federal Motor Carrier Safety Administration and the National Highway Traffic Safety Administration.

    Next Steps

    With the House Budget Committee approving the FY 2002 resolution on a partisan vote, attention now turns to the Senate. The 50-50 split between Republicans and Democrats in the Senate, and on the Senate Budget Committee itself, weighs heavily on how the resolution will be considered from here. Chairman Pete Domenici (R-NM) has said he may bypass consideration by the Committee altogether and take the resolution directly to the Senate floor.

    Previous statements from Sen. Domenici indicate that the Senate resolution will closely mirror the Administration's proposal.

    Once Congress approves a budget resolution, it will be up to the Appropriations committees and subcommittees to determine how the funding should be divided among the separate programs.

Rail Mergers Focus of Hearing

    During a hearing of a Senate subcommittee this week, the chairwoman of the Surface Transportation Board said it is finalizing a change in its approach to rail merger proposals.

    Linda Morgan, chairwoman of the Surface Transportation Board (STB), on Wednesday outlined the proposed revisions for the Senate Surface Transportation and Merchant Marine Subcommittee. She said last March, the spate of rail mergers and subsequent service disruptions compelled the Board to place a 15-month moratorium on any pending merger. The Board since then has been working on new rules governing large rail merger proceedings.

    The new rules will take into account "many lessons learned" from previous mergers, Morgan said. Specifically, under the proposed rule issued in October, 2000, the STB will look to "raise the bar for approval" by requiring applicants to bear substantially heavier burden in demonstrating that a merger is in the public interest and will enhance competition and service. In addition, applicants will be held more accountable for benefits projected by the merger and show that the benefits could not be achieved without the merger taking place. Finally, more details will be required up front about the service to be provided, along with contingency plans should disruptions arise.

    The STB will hold a public hearing on the proposed rule on April 5, and is planning to publish the final rule by June 11, 2001, the end of the current moratorium.

    Subcommittee Chairman Gordon Smith (R-OR) noted that the STB is among several federal agencies under its jurisdiction that are up for reauthorization. The others include the Rail Safety Program, the Hazardous Materials Transportation Program, the Federal Maritime Commission and the U.S. Maritime Administration. Future hearings will be held on the rail industry, including its financial condition, capacity and long-term capital infrastructure needs, along with hearings on rail shipper concerns regarding service reliability, rates and competition.

Bill Prevents Action on Hours of Service Proposal

    A bill (H.R. 1008) has been introduced in the House of Representatives to prevent the Department of Transportation from finalizing, implementing, or enforcing its proposed rule on hours-of-service regulations for motor carriers.

    The Federal Motor Carrier Safety Administration last May introduced a comprehensive overhaul of regulations concerning how long motor-carrier drivers can drive without rest periods. The proposed rule was met with skepticism by the trucking industry and Congress last year. As a result, language was included in the FY 2001 transportation appropriations bill barring the Department of Transportation from finalizing the regulations, although it allowed the Department to proceed with rulemaking.

    Rep. Lee Terry (R-NE) introduced a bill with similar provisions on March 13. It has 28 co-sponsors. The bill prevents the Department from finalizing, implementing or enforcing the proposed rule. It states that the Federal Motor Carrier Safety Administration can proceed through the stages of a rulemaking, including issuing a supplemental notice of proposed rulemaking. Any proposed rule can only take effect 180 days after the proposal is transmitted to Congress, according to the bill.

    The bill has been referred to the House Committee on Transportation and Infrastructure.

Hearing Held on Amtrak's Future

    Amtrak officials expressed confidence during a House subcommittee hearing on Wednesday that the rail company would meet its goal of becoming self sufficient by 2003, despite concerns raised about a surge in expenses.

    The House Transportation Appropriations Subcommittee heard testimony on the current status of Amtrak and its future during a hearing held on March 21.

    Testifying before the committee, George Warrington, President and CEO of Amtrak, noted that although it will be difficult for Amtrak to achieve operational self-sufficiency by fiscal year 2003, he remains optimistic that the passenger rail company can achieve this objective. He stated that Amtrak has reduced its federal operating grant by nearly eighty percent, from $318 million in fiscal year 1999 to $59 million this year. At the same time, the railroad achieved a record level of ridership and revenue.

    Phyllis Scheinberg of the General Accounting Office expressed her concern that Amtrak may not attain operational self-sufficiency by the congressional deadline. She stated that Amtrak needs to make more progress on controlling expense growth.

    On a more positive note, Scheinberg went on to note that there were numerous benefits to creating a coherent intercity passenger rail system. Among these benefits are reducing congestion and increasing travel choice. Scheinberg contends that intercity passenger rail service can work best if it is contained in a densely populated corridor and the travel distance is less than 200 miles.

    Also appearing before the subcommittee was Kenneth Mead, Inspector General of the U.S. Department of Transportation. Mead testified that Amtrak's passenger revenue grew to a new record level of $1.2 billion in 2000, ten percent higher than in 1999. At the same time, non-passenger revenue increased fifteen percent in 2000 to $886 million. Non-passenger revenue is becoming increasingly important and now accounts for over forty three percent of Amtrak's total revenue.

    The inspector general went on to note, however, that Amtrak has not been successful at curbing expense growth. In 2000, cash operating expenses increased by 8.6 percent over the 1999 level. The interest payments associated with Amtrak's increased debt level resulting from new equipment purchases are a major component of this expense growth. In 2000, interest expenses stood at $86 million, but are projected to rise to $164 million in 2002.

    In order for the rail carrier to attain self-sufficiency, Mead contended that Amtrak must accomplish the following three goals:

    • Fully implement high-speed rail service in the Northeast Corridor.
    • Expand its mail and express business. Amtrak projected that total revenues from these services will reach $402 million by 2003.
    • Make significant progress on curtailing its expense growth.
    Warrington insisted that Amtrak has undertaken numerous cost cutting measures, and is seeing some very positive results. For example, to deal with the rising cost of diesel fuel, Amtrak initiated a hedge program that saved the organization over $5 million this year, he said.

    Also crucial to Amtrak's success is its ability to obtain adequate capital funding. Mead stated that Amtrak will require between $900 to $950 million each year just to maintain the current system. Even if Amtrak is successful in reaching operating self-sufficiency, it will continue to need significant and sustained capital funding beyond 2003. Amtrak estimates that its total annual capital requirement is about $1.5 billion for addressing general capital needs, beginning to address a backlog of needs in the Northeast Corridor, and paying its share of developing high-speed corridors.

    When asked to comment on the Amtrak Reform Council's recommendation about the future of Amtrak, the panel was unanimous in stating that it was premature to discuss the breakup of Amtrak this far in advance.

    Warrington noted that although the railroad has much hard work ahead, they "are focused on achieving the congressional mandate to become operationally self-sufficient by fiscal year 2003."

Amtrak Reform Council Recommends Structural Changes

    The Amtrak Reform Council on Tuesday released its Second Annual Report to Congress and recommended that Amtrak's structure be "fundamentally changed" in order to reach operational self-sufficiency.

    In its report, the council attributes Amtrak's poor performance to institutional flaws, and recommends the following changes be made to its structure:

    • Separate Amtrak's commercial functions from its government functions. The council found that Amtrak has difficulty operating as a business, given that the agency is dependent on annual appropriations that are heavily based on political considerations.
    • Separate Amtrak's train operations from the ownership and maintenance of infrastructure facilities in the Northeast Corridor. The council notes the Northeast Corridor will require $20 billion in capital funding over the next 20 years.
    • Consolidate current government responsibilities for Amtrak into a single government entity that would administer and oversee federal funding programs for rail passenger service. The council points out that government responsibility for Amtrak currently resides in the Federal Railroad Administration, U.S. DOT Office of Inspector General, the General Accounting Office, and Amtrak itself.
    • Allow Congress to provide a stable and adequate source of funding for the capital needs of the Northeast Corridor and other rail-passenger infrastructure. The council recommended three possible funding options, including federal appropriations, a dedicated rail-passenger transportation fund (possibly financed by a penny-a-gallon increase in the federal gasoline tax), and bonding authority.

FHWA Releases Landmark Highway User Survey


Administration Says Energy Crisis Threatens


    The nation faces a potential economic crisis spurred by a shortfall in domestic energy production, according to the Bush Administration.

    Concerns about the nation's energy woes were voiced both by President George W. Bush and Energy Secretary Spencer Abraham this week, as Bush's cabinet-level energy task force held its first meeting. The task force is expected to make recommendations in the next few months on expanding the nation's energy supply.

    Addressing the U.S. Chamber of Commerce on Monday, Abraham said that the energy problem in California is "not isolated, not temporary and it will not fix itself." He asserted, however, that the nation's energy problems can be resolved. He charged that America's network of generators, transmission lines, refineries and pipelines is "woefully inadequate," and that failing to address the problem will jeopardize the nation's economic prosperity and national security, "and literally alter the way we live our lives."

    In a similar vein, President Bush noted that no new refining capacity has been built in the country in 25 years. He said that the energy crisis requires "long-term thinking" and efforts to both increase supply and decrease demand.

    Meanwhile, anticipating a drop in worldwide demand the Organization of Petroleum Exporting Countries agreed to lower production by one million gallons a day. Energy officials indicated that gasoline stocks are 6-7 percent lower than normal as the nation enters the heavy driving season of summer. The reduction in OPEC production should not affect the U.S. market for six to eight weeks, analysts say.

Boeing Announces Plans to Move Headquarters Operations from Seattle

    The Boeing Corp. this week announced plans -- to the shock of residents at its 85-year home base of Seattle -- to move its corporate headquarters functions to another city, naming Denver, Chicago and Dallas-Fort Worth as contenders.

    The announcement, made by the aircraft-maker's Chairman and Chief Executive Philip M. Condit, would not affect the location of Boeing's huge commercial aircraft unit, which would remain in Seattle.

    Wednesday's announcement took Seattle and Washington State officials by surprise and triggered pleas for reconsideration, plus expressions of shock and anger.

    Quoted in the New York Times, local economist Dick Conway ruefully said, "Well, it has made us forget the earthquake all of a sudden," referring to the February 28 Seattle-area seismic event.

    Both Seattle Mayor Paul Schell -- who said he was "totally blindsided," and Washington Gov. Gary Locke, who described himself as "surprised and deeply sorry," asked Boeing officials to reconsider the announced move of about 500 jobs to the new locale. About 80,000 employees work for Boeing in the Seattle area now, according to the Associated Press; Boeing has about 199,000 workers worldwide, with operations also in St. Louis and southern California.

    Condit said Boeing hopes to choose its new headquarters site by summer and be operating there by fall.

State Inspector General Alleges Complicity in Big Dig Cost Overrun Concealment

    New allegations of complicity by managers of the Boston Central Artery/Ted Williams Tunnel project -- and new allegations that Federal Highway Administration officials and employees of the state's management consultant on the project assisted coverups of massive cost overruns -- have prompted U.S. Secretary of Transportation Norman Mineta to order a U.S. DOT Inspector General probe into a Massachusetts Inspector General's charge, the Boston Globe reported Wednesday.

    Robert Cerasoli, the Massachusetts inspector general, on Wednesday issued a report titled "A History of Central Artery/Tunnel Project Finances 1994-2001". Cerasoli said "the full Big Dig story" has not yet been told, and called for an independent federal investigation by Congress into FHWA's alleged "role in downsizing the Big Dig cost estimate." The project is rebuilding more than seven miles of urban elevated highway through Boston below grade level and has completed a new airport-access tunnel under Boston Harbor.

    Massachusetts Gov. Paul Celluci suggested Cerasoli's report is motivated by "retaliation," terming some of it "pure fiction." In January, the governor's office proposed that the state inspector general's office be eliminated.

    In the 52-page report, Cerasoli alleges that project managers as early as 1994 knew that the price tag of the project -- to date the largest single infrastructure undertaking in U.S. history -- was going to be $14 billion, but schemed to hide some $6 billion in costs from the public and from bond investors.

    The state report further alleges that Celluci, who in 1994 was lieutenant governor and headed the task force overseeing the project in the administration of his predecessor, former Gov. William Weld, "likely knew" about the $14 billion cost prediction made by consultants. The report also says the president of Bechtel Corp. and "a key senior partner" told Weld directly, in December of 1994, that the consultants' cost forecast was for about $14 billion. Weld has previously acknowledged that the meeting took place, but has said he could not remember what number the Bechtel officials gave him, the Globe reported.

    Cerasoli said FHWA officials were aware of misleading accounting procedures starting in 1995, but joined in "a cooperative effort to maintain the fiction of an 'on-time' and 'on-budget' $8 billion project." Because FHWA was involved, Cerasoli said, the federal government should lift its current $8.5 billion cap on Big Dig funds, which followed criticism of continually rising project costs.

    Cerasoli also stated that officials of the project and the Weld Administration "submitted inaccurate bond disclosure documents for bond issues between 1996 and 1999, and not just the one in 1999 currently under SEC (Securities and Exchange Commission) investigation."

    The FBI and the SEC have been probing management of the project following disclosure of a $1.4 billion overrun early in the year 2000.

    Massachusetts State Treasurer Shannon O'Brien, responding to the report, said she will meet with project officials to see if further cost adjustments are needed.

American Airlines Purchase of TWA Assets Approved by Justice Department

    The U.S. Department of Justice quickly gave its blessing last week to the decision of a U.S. Bankruptcy Court judge to award the assets of Trans World Airlines, which had filed for protection from creditors under Chapter 11 of the federal bankruptcy laws, to American Airlines.

    The Washington Post reported that the Justice Department's antitrust division signed off on the merger in a short document that provided scanty information on how U.S. DOJ might view future airline mergers from a competitive perspective. The American-TWA merger will result in an airline that will carry nearly one-fourth of all U.S. passengers.

    The Department of Justice also is looking at a proposal by United Airlines to acquire US Airways, which would create an airline slightly larger than the one resulting from the American-TWA deal.

    American ultimately offered $742 million for TWA's assets. It outflanked Continental Airlines and Northwest Airlines in the bidding, along with financier Carl Icahn, who had owned TWA years earlier.

Burwell to Head STPP

    David Burwell has been named President and Chief Executive Officer of the Surface Transportation Policy Project.

    Burwell, who has directed the Rails-to-Trails Conservancy for 15 years, will have overall responsibility for the strategic direction and management of STPP and will also head the group's New Directions Initiative. Roy Kienitz will continue as the Executive Director of STPP.

AASHTO Appointments

    President Dean Carlson has announced the following appointments to AASHTO committees:

    Gene Conti, chief deputy secretary of the North Carolina Department of Transportation, appointed to the Standing Committee on Highway Traffic Safety for a four-year term, representing Region II; and

    J.T. Yarnell, chief engineer of the Missouri Department of Transportation, appointed to the Standing Committee on Highway Traffic Safety for a four-year term, representing Region III.



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