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How bad roads cost us billions

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Robert Puentes of Brookings Institution

How do we build the roads of tomorrow when most cities can’t patch the potholes of today?

In an interview conducted with CarInsurance.com, Robert Puentes, senior fellow and director of the Metropolitan Infrastructure Initiative at the Brookings Institution in Washington D.C., suggests that the country resurrect the Build America Bonds (BAB) program to help cash-strapped cities and states cut the cost of borrowing to fund new bridges and roads.

The Great Recession dealt a severe blow to traditional tax-exempt municipal bond sales used to pay for public infrastructure.  Borrowing costs doubled.  The original BAB program, part of the 2009 stimulus bill, used the option of a federal subsidy or tax credit to help finance $182 billion in infrastructure improvements in all 50 states plus Washington, D.C., and Puerto Rico, keeping schools, roadways and public transit systems humming and pumping billions into local economies. The program expired in 2010.

A revised BAB program, Puentes says, would decrease the amount of the federal subsidy but widen the pool of potential investors, many of whom can’t take advantage of the tax exemption of traditional muni bonds.

Below, Puentes explains why continued investment is critical not just to keep the economy moving but to limit the costs of traffic congestion -- a factor that can frustrate efforts to improve international trade, drive away skilled labor and drive up car insurance rates.

Q: Can you give us an example of the economic impact of substandard roads or bridges?

A: Probably the clearest examples are when it comes to freight and goods movement. The border crossing that connects Detroit with Windsor, Ontario, is one of the most important trading corridors on the planet, yet there is consensus that because there are few crossings (of the Detroit River) the freight traffic is hindered. The need for additional roadways there is so pervasive that the Canadian government has agreed to pay for the new bridge and for the access roads on the Canadian side.

The federal highway administration publishes a Conditions and Performance report that describes general costs and benefits of the highway network and the costs of poor conditions, etc.

Intuitively, we know that increased congestion does lead to slower, more variable journey times, which does impact economic efficiency. However, in the U.S. the economic implications of congestion are under-studied. Most of the U.S. research focuses on the benefits of highway investments, not the costs of congestion. Yet important analysis does exist and shows that the costs of congestion have the greatest impact on high-value-added, skilled-labor occupations.

Additional work has been done in specific metropolitan areas. One recent study for greater New York, for example, finds a net loss in regional economic output of at least $3.2 billion to $4 billion annually due to congestion. Combined business costs, lost revenues and lost productivity mean that there are 37,000 to 52,000 fewer jobs created in that metropolitan area each year.

Q: Should investment in technology for smart roads be a priority over outright capacity?

A: (That is) tough to answer in the abstract, but given the difficult fiscal situation in many states and metropolitan areas we need to squeeze every efficiency out of the existing system. The U.S.’s transportation network could be outfitted with technology much better to collect tolls, provide traveler information, manage traffic, clear incidents, provide emergency services, etc. These advancements in telecommunications, computer and other control devices have proven low-cost benefits that result in cost and time savings, and obviate the need for building new infrastructure in many cases.

But overall, maintaining and modernizing the existing system is an enormous priority for the U.S. It is generally agreed that we've neglected the existing system at the expense of new investments for years, and we cannot do that much longer. Many elements of our nation's infrastructure have reached the end of their useful life -- many parts of the interstate highway system are over 50 years old and simply need to be maintained. 

Q: Is there a consensus on how new roads in, say, 2030 might differ from ones built in 1980?

A: There is definitely no consensus, but I do believe they will be more technologically outfitted than they are now. Imagine smarter infrastructure that 'talks' to vehicles in order to warn drivers of hazardous conditions (e.g., work zones), or about advertising and marketing for stores and restaurants coming up, or congested highways, etc. I also believe much of the new roadway capacity will be tolled, and tolls will be electronically collected.

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