"Bankruptcy Info for Colorado"
COLORADO TRANSPORTATION FINANCE 1. Governor Ritter‟s Blue Ribbon Panel on Transportation Finance and Implementation •Kicks off April 2007, for one year (?) •A result of Federal Act (below) 2. Federal National Surface Transportation Policy and Revenue Commission •Created under Section 1909 of the Safe, Accountable, Flexible, Efficient Transportation Equity Act—A Legacy for Users (SAFETEA-LU). •Future changes in mpg, VMT etc = revenue changes and reductions Albert G. Melcher MS, APA 3/24/2007 1 2 COLORADO TRANSPORTATION FINANCE We are in a non-sustainable situation •July 1, 1935: HUTF (purpose: farm-to-market)) •Built-in decisions (lobbying power) •We created a roadway monster demanding more and more “feed” •Infrastructure neglect •Ignoring externalities, especially sustainability of resources 3 The “Gap”: Statewide Transportation Funding, CDOT 2030 Plan Scenario: 25-year time frame Revenue Gap CDOT Forecast Revenue $28 Billion Others (Local gov.) Forecast Revenue $36 Billion Total Forecast Revenue $64 Billion CDOT Cost to Sustain $67 Billion $39 Billion Others Cost to Sustain $56 Billion $20 Billion Total Cost to Sustain $123 Billion $59 Billion CDOT Vision (Enhanced) Cost $94 Billion $66 Billion Others Vision (Enhanced) Cost >$73 Billion >$37 Billion Total Vision Cost >$167 Billion >$103 Billion 4 HOW DID WE GET HERE? • The following slide is from a study I did in 1998 after a Statewide Blue Ribbon Panel showed the needs- revenue gap for 1995. • I analyzed documents from my term as CDOT Commissioner to explore how 20-year highway needs gaps compared to population growth and to growth in Vehicle miles of travel, 1967 and 1995. 5 HOW DID WE GET HERE? GROWTH OF PROJECTED COLORADO HIGHWAY FUNDING NEEDS Ratio of 20-year 13.5 Projection of “A” : See Highway Needs to next slide for Population growth elements of relative Ratio VMT Growth growth of $ to Population Needs Growth 2.5 1.0 1967 Population Growth Rate 1995 Inflation-adjusted (Inflation multiplier) 1967-1995 = 4.91 6 “A”: Elements of Relative Growth of Projected Highway Funding Needs (Creating “Infrastructure Debt”) 1. Deferred expenses, primarily maintenance • Result: accumulating inadequate funding • Inadequate forecasting of needs) 2. Off-book and unrecognized liabilities • Safety (example: median barriers were just starting to be desirable, we are paying now) • Induced travel and induced growth creating future liabilities associated with congestion • Upgrading needed to higher geometric and other standards 7 “A”: Elements of Relative Growth of Projected Highway Funding Needs (Continued) 3. Abandonment of fully-amortized but economically cost-effective modes & facilities (result: “Vicious Circle”: highways low-density land use Exponential increase in VMT $ needs growth.) 4. Erosion of purchasing power of un-indexed revenue 8 How Do We Get Out of this Situation? •Moderate and Manage growth •Fiscal prudence as fiduciary agents (“Prudent Man” Rule) •Multi-purpose funding •Avoid unintended consequences & adverse side effects •Preserve existing infrastructure •Decisions for economic efficiency 9 SURFACE TRANSPORTATION FUNDING NEEDS “GROWTH MANAGEMENT” (Reduce the “Gap”) “B” : “Needs 13.5 Historic Management” ratio elements for Ratio 20-year moderating growth Projection of of relative growth of Highway Needs) $ Needs to Population growth: Historic “B” Trend, 1967-1995 Moderated growth of projected Highway funding NOW 2030 Needs Population Ratio VMT Growth Growth Rate to Pop. Growth 10 “B”: Elements of “Needs Management” to Moderate Projected Highway Funding Needs 1. Transportation Demand Management (TDM) • Ridership shifts to transit. • Car-pooling, telework, etc. 2. Land use • Density, TOD, infill. • Urban Growth Boundary policy on funds allocation; similar land consumption methods. 3. “Fix it First”: Do not build new infrastructure that cannot be maintained. 4. Use cost-effective decisions • Direct & Indirect Benefits & Costs. • Use the most cost-effective modes. 11 “B”: Elements of “Needs Management (Continued) 5. Economic incentives and disincentives: • Fuel costs at pump: fuel product increases and tax increases at pump. • Financial incentives for enhancing TDM. 6.Intelligent Transportation Systems (ITS) and Intelligent Transportation Drivers (ITD). 7. Continuity of funding with multimodal flexibility. 8. Secure high ratings („AA‟ or higher) for bonds such as TRANS and RTD. 9. Comply with Federal law on energy conservation. 10. Integrate National Environmental Policy Act with transportation/land use planning. 12 SUSTAINABILITY "Sustainable development: Development that meets the needs of the present generation without compromising the ability of future generations to meet their needs." - - World Commission on Environment and Development (Brundtland Report). "The problems we face today cannot be solved at the same level of thinking we were at when we created them" - - Albert Einstein. "Then I say the Earth belongs to each (succeeding) generation during its course, fully and in its own right. The second generation receives it clear of debts and encumbrances, the third of the second, and so on. For if the first could charge it with a debt, then the earth would belong to the dead and not to the living generation. Then no generation can contract debts greater than may be paid during the course of its own existence." - - Thomas Jefferson, September 6, 1789. 13 SUSTAINABILITY • Our present transportation system is not sustainable: – Economically and financially. – Functionally. – Environmentally and in resources. 14 Develop Institutions, Policies & Practices that “Connect The Dots” in our decisions. Essential for •Long-term Sustainability •Avoiding “Law of Unintended Consequences” •Avoiding adverse side effects Global Resources & Land Use & Travel Environment Generation Policies & Institutions Equity Transportation Funds: Transportation Revenues & Technologies & Fuels Allocations Albert G. Melcher MS, APA 3/24/2007 15 American Planning Association: Criteria for Funding 1. Revenue sources must have long-term continuity and stability because capital and operating costs cannot be subject to short-term political processes. 2. The mix of public sources at all governmental levels and of private sources must be maintained. 3. Funding must improve and not damage equity, community integrity, and sustainability. 4. True multimodal flexibility in use of funds is essential. 5. Cost effectiveness of both capital and M&O costs, and not predetermined highway mode, must determine project choice. 16 Transportation and other infrastructure are all in trouble and are competing for limited dollars, with future “Infrastructure Debt” to be paid by future generations. National, 1962-2007 17 AVOIDING INFRASTRUCTURE DEBT From “PUBLIC WORKS, PUBLIC WEALTH - - - NEW DIRECTIONS FOR AMERICA‟S INFRASTRUCTURE” A Report of the “Center for Strategic and International Studies” Public Infrastructure Project (Nov. 2005) “But the risk of under investment is only part of the equation. Of equal or greater concern is the prospect that the investments we make are not the right ones. Our nation's infrastructure policy favors new construction even when maintenance, renovation, and improved management offer better responses to the problem. Infrastructure policy favors politics over sound investment principles. It ignores emerging needs - - while securing funds for programs whose objectives have largely been met, such as the interstate highway system.” Albert G. Melcher MS, APA 3/24/2007 18 AVOIDING INFRASTRUCTURE DEBT FIDUCIARY and PRUDENCE CONCEPTS • A fiduciary agent is a person or organization acting on behalf of and/or with the authorization of another person. • The fiduciary is required to invest trust assets as a "prudent man" would invest his own property with the following factors in mind: the needs of beneficiaries, the need to preserve the estate (or corpus of the trust) and the amount and regularity of income (“net benefits”). 19 FIDUCIARY and PRUDENCE (Continued) • Assume that a public official responsible for public monies is a fiduciary agent. • Assume, therefore, that our official wants to give the public the biggest and longest-lasting bang for the buck. • Also, to avoid “hidden” and “indirect” costs, such as more people in the hospitals, many at public expense. • Our official calls this “fiscal prudence.” 20 FIDUCIARY and PRUDENCE (Continued) • Assume that our public officials have (for simplicity) two acceptable alternatives for mobility, both with feasible and comparable capital investment. • #1: a 20 year-life of the initial project, committing to a second phase of new construction at a very high total cost, with a net life cycle Benefit-to-Cost Ratio of O.8 to 1.0. • #2: a 50-year life with no second phase needed, same mobility result, but a net life cycle Benefit-to-Cost Ratio of 1.3 to 1.0. 21 FIDUCIARY and PRUDENCE (Continued) • Money is not unlimited; there are competing public needs for funds. • Methods for finding full direct and indirect benefits and costs exist. • Assuming a responsible and informed public, which alternative would the officials and the public select? • Obviously: Alternative 2 as fiscally prudent and economically efficient. 22 23 WHITHER? • Given: – The need for economic, resource and environmental sustainability – The need for fiduciary prudence – The effective bankruptcy of the present system 24 WHITHER? • How do we develop a system of transportation to improve mobility and ensure economic, ecological and equitable sustainability? • We cannot accomplish this with “Business as Usual.” • New approaches are essential - - - - NOW. • Otherwise, We Are Creating Tomorrows’ Transportation Financial and Functional Problems Today! 25 WHITHER? 26