**Statement of Jeffrey N. Shane**

**Under Secretary of Transportation for Policy**

**Before the**

**Committee on Transportation and Infrastructure**

**Subcommittee on Highways and Transit**

**U.S. House of Representatives**

**January 24, 2007**

**The Surface Transportation System: Challenges for the Future**

Mr. Chairman, Ranking Member Duncan, and Members of the Subcommittee:

Thank you for the opportunity to testify before you today on the Surface
Transportation System: Challenges for the Future.

You have asked us, in preparing for this hearing, to take the long view,
and to look ahead 50 years to examine what kind of economy we will have
in 50 years, and what kind of surface transportation system we will need
to serve that economy. Our analysis of this long-term prospect is not
yet complete, but enough of the work has been completed for us to see
the broad outlines of the task that lies before us.

Over the next 50 years, we expect the U.S. population to rise by over 60
percent, and for the Gross Domestic Product (GDP) to quadruple. As our
population grows, and as incomes rise, the demand for transportation
will grow accordingly. When people have more money, they want to buy
more goods, which need to be transported, and they want to travel more.
So we expect the demand for both freight and passenger transportation to
increase by about two-and-a-half times over the next 50 years.

There are likely to be shifts in the kinds of transportation demands
that we will face. It is no secret that the economy is becoming
increasingly dependent upon global sources of supplies, but exports have
grown as well. Since 1970, exports as a percentage of GDP have almost
doubled, and imports have tripled. Moreover, the U.S. manufacturing base
is increasingly shifting to high-value, high-tech products like
pharmaceuticals and instruments, in which we retain a comparative
advantage. These high-value products require an expedited transportation
system that relies increasingly on overnight truck and air freight
delivery. Our increasing reliance on imports of lower-value manufactured
goods (and parts for domestic manufacturers) places a growing reliance
on key ports of entry, such as the San Pedro Bay ports of Los Angeles
and Long Beach, and the Puget Sound ports of Seattle and Tacoma.
Landside connections to these ports, linked to an efficient domestic
intermodal rail and truck freight transportation system, will be
important to keeping the delivery costs of these commodities low.
Overall, the shift in GDP from goods production to services production
will cause freight vehicle-miles traveled (VMT) to grow more slowly than
GDP, but the growth will still be large.

On the passenger side, the growing globalization of the world economy
will result in increasing demand for international air travel as
business people fly abroad to conduct international business
relationships, and as international leisure travel increases. That in
turn will increase the demand for land-side connections at our key
international airport hubs. An aging population will increasingly
challenge our transportation system. The percentage of the population
over 65 will almost double, from 12 percent to 21 percent of the
population. These older people -- the people just graduating from
college today -- will expect a high level of mobility, and we expect the
percentage of VMT by older people to grow appreciably. Drivers in their
late 70's have triple the fatality rate (per VMT) of drivers aged 30 --
65, and for drivers in their 80's it is even worse. So we will face a
serious safety challenge in providing for the safety of an aging
population.

Also, our dynamic economy results in uneven economic growth in different
regions. Almost two-thirds of all VMT growth over the next 25 years will
take place in only six states, so that even if we keep up with
transportation demands on the average, it will be difficult to keep up
with these demands in the high-growth states where demands are growing
most rapidly. Migration among regions in the U.S. is dominated by
immigrants and young college graduates, who often move to central cities
and increase demands for transit. We expect demand for urban transit
(measured in passenger-miles traveled, or PMT) to almost double by 2050.
Within metropolitan areas, non-work-related trips will become a larger
percentage of all trips, as the population ages and the percentage of
population in the workforce declines. Some of this non-work-related
travel will take place during peak commuting hours, as workers engage in
trip-chaining on their way to and from work. Some will take place
outside of traditional peak commuting hours, contributing to the
spreading of the peak traffic hours over the entire day.

Overall, we can anticipate an economy in the year 2050 four times as
large, with surface transportation demands increasing by perhaps
two-and-a-half times. How will our transportation system handle these
demands? We certainly do not plan to more than double the number of
lanes-miles of highways. Lane-miles of highway have increased by only
5.3 percent over the past 24 years, and an extrapolation to 2050
suggests that highway capacity will only increase by 10 percent by that
year. So we can anticipate that transportation capacity will not keep up
with transportation demand, and that congestion in our transportation
system will grow.

Congestion already imposes heavy costs on our economy. The Texas
Transportation Institute has estimated that, in 2003, highway congestion
cost \$63 billion per year, but this estimate leaves out several
important factors. It leaves out productivity losses, costs of delayed
freight shipments, costs of unreliable freight and passenger travel trip
times, and safety and environmental costs. We estimate that, if all
these other costs were included, the total costs of highway congestion
would be about \$170 billion per year. Moreover, congestion has been
growing faster than GDP. Since 1982, the costs of congestion have been
growing at 8 percent per year, more than double the growth rate of GDP.
In 2003, congestion costs were about 1.5 percent of GDP. If congestion
costs continue to rise at this rate, by 2050 they would be over \$6
trillion, more than 14 percent of GDP.

How can we meet these challenges?

First, we need to find ways to use our existing surface transportation
system more efficiently.

Intelligent Transportation Systems (ITS) technology holds great promise
for reducing congestion. We have invested billions of dollars in ITS
technology since ISTEA created the program in 1991, and we have
developed a wide range of technologies that can address congestion
problems. On toll highways, Electronic Toll Collection can speed the
flow of traffic where previously it was stopped for manual toll
collection. Automatic Incident Detection can alert highway managers to
non-recurring congestion and speed emergency response vehicles to clear
problems. Variable Message Signs and other forms of traveler information
systems can alert drivers to congestion problems and give them an
opportunity to divert to alternative routes. On arterials, adaptive
traffic signal controls can adjust traffic signal timing in response to
changes in traffic levels, speeding traffic on its way. Signal priority
for transit buses can make bus service more like rapid transit,
enhancing the attractiveness of transit and reducing congestion.

But deployment has been slower than anticipated. Even in cities where
deployment of ITS technology is considered to be high, barely half of
freeway miles might be instrumented to detect traffic breakdowns. One
major city has installed almost 5,000 traffic signal detectors, but
almost half of them are out of service. Many cities do not even manually
update the timing of their traffic lights regularly, much less install
adaptive traffic signal controls that can adjust traffic signal timing
automatically. Moreover, as GAO pointed out in a report last year, even
where ITS technology has been deployed, sufficient operating funds have
not always been committed to pay for staffing of traffic management
centers. So we have quite a challenge in deploying ITS technology
everywhere that it is needed.

A second proven approach to using our transportation system more
effectively is by using congestion pricing. While congestion pricing may
still be controversial to some people, it is not controversial to people
who have tried it. In Southern California, where State Route 91 has been
using congestion pricing for 10 years, support for congestion pricing is
widespread, and the reasons are obvious. Experience with congestion
pricing on SR-91 shows that congestion pricing doubles the throughput on
the congestion-priced lanes as compared with the unpriced lanes right
next to them. With each priced lane handling twice as much traffic as a
comparable unpriced lane, there is less traffic on the unpriced lane,
and congestion is reduced for all travelers on the road. While
lower-income people do not use the congestion-priced lanes as often as
higher-income people, even lower-income people value the flexibility of
a congestion-priced lane when they absolutely, positively have to get
somewhere on time. In fact, about 70 percent of lower-income people in
Southern California support congestion pricing. In Minnesota, 64 percent
of lower-income people support the MNPass High-Occupancy Toll lanes.

Congestion pricing is something that we can do in the short run to
reduce congestion. In the longer run, congestion pricing provides one of
the best signals that we have of the need for new capacity. If people
are willing to pay a high price to travel on a particular corridor, that
gives us a good signal that capacity expansion in that corridor is money
well-spent. It clearly is unlikely that we will be able to build enough
capacity to keep up with the increases in transportation demands that we
have forecasted. That means that we have to be extremely strategic about
the capacity expansions that we do undertake -- we need to make sure we
spend our investment dollars in those places where the demand is the
greatest and the impact on congestion reduction is clearest. If people
are paying 50 cents or a dollar per mile to drive on an uncongested
lane, that is a pretty clear signal that the demand for capacity
expansion on that route is high, and that an infrastructure investment
on that route will pay substantial returns in congestion reduction.

There are no magic bullets in solving the congestion problem. The
approach that will work best is a multi-faceted, comprehensive approach
that takes advantage of the complementarities among multiple strategies.
That is the approach that we have taken in planning the Secretary's
Congestion Initiative. We have emphasized four complementary strategies
-- congestion pricing, expanded transit capacity, greater use of ITS
technology, and more widespread use of telecommuting and other forms of
flexible work scheduling.

We have already discussed congestion pricing -- it works, and people
like it when they get a chance to use it. But congestion pricing cannot
do the job all by itself, and it is more difficult to use on arterials
that are not limited-access.

For people who find charges on congestion-priced roads too high, we need
to provide transportation alternatives, and that is where expansion of
transit capacity comes in. Transit and congestion pricing complement
each other. Transit provides an alternative for those who choose not to
pay the congestion charge, so it improves the effectiveness of
congestion pricing by encouraging people to divert to another mode.
Likewise, congestion pricing improves the effectiveness of transit.
Transit buses get free access to congestion-priced freeway lanes, so
transit buses go faster with congestion pricing, providing the "rapid"
in Bus Rapid Transit. That rapid service both reduces costs for transit
authorities and encourages more people to use transit. The more people
use transit, the more schedule frequency can be increased, and the
better the quality of service. Congestion pricing sets off a "virtuous
circle" with transit, where demand increases, allowing an improvement in
service quality, which stimulates even more demand, which allows even
more improvements in service quality.

Congestion pricing is more difficult to implement on non-limited access
arterials. On these heavily used roads, ITS technology plays a
particularly important role. Adaptive traffic signal control technology
can make traffic on these arterials flow more smoothly. And again, there
are complementarities between ITS technology and transit. ITS technology
can include traffic signal priority for transit buses, helping them to
go faster. ITS-induced improvements in transit service quality can set
off the same "virtuous circle" as congestion pricing does -- increasing
transit demand, increasing service frequency, and increasing service
quality. Increasing transit use in turn reduces the congestion burden
that the ITS technology was deployed to deal with.

Finally, congestion is not a problem that government can solve by
itself. We need help from private employers. There are a number of
policies that reduce the extent to which vehicles have to use the
roadways during peak hours. These include flex-time -- allowing people
to come in before or after the peak hour \-- and cashing out parking
subsidies so that people get the same commuting subsidy whether they
drive a car or use transit. They also include telecommuting -- allowing
people to work at home at least part of the time. The Federal Government
has increased the number of employees telecommuting by ten-fold between
1995 and 1999, and then by more than three times from 1999 to 2003.
Private sector employers can do the same.

Other portions of the Secretary's Congestion Initiative will also help
to address the congestion problem**.** The Corridors for the Future
Program, for example, received 38 proposals in response to its Federal
Register notice in September, and we are now reviewing these proposals
with the intent of ultimately selecting up to five major transportation
corridors where substantial infrastructure investment could reduce
congestion. This program will leverage public and private resources to
accelerate infrastructure development on these corridors. The proposals
include strategies to use congestion pricing, truck-only lanes, and
accelerated deployment of ITS technologies. The Freight Bottlenecks
portion of the Congestion Initiative focuses on Southern California,
where we are working to sign a Memorandum of Agreement to accelerate the
completion of key capacity projects in the Ports of Los Angeles and Long
Beach.

We can make considerable progress on congestion even without building
new lane-miles. But we recognize that we will need to build some new
highway capacity. We cannot handle a two-and-a-half-fold increase in
demand without more capacity.

The question is, how can we get the most bang for the buck?

How can we get the most reduction in congestion, and improvement in
transportation services, from each dollar that we invest in
transportation infrastructure?

First, DOT believes that we need to move toward an environment in which
analysis by professional transportation planners forms the primary basis
for our transportation decisions, and politicians get involved only as a
last resort. Many of the projects that have been selected by the
political process have never been obligated because the projects were
not ready to move forward when the money was earmarked, and in some
cases the money was never spent because opposition to the project
developed.

That's not to say that transportation planners can't do a better job.
There is a wide range of analytically sophisticated transportation
planning techniques that are just beginning to come into use by
transportation planners. Techniques like benefit-cost analysis and
economic impact analysis help us to identify all the effects of a
project -- positive and negative -- so that we can make decisions based
on full information. We are also encouraging states and metropolitan
planning organizations (MPOs) to make greater use of performance
measures that would allow us to measure how well our improvements to the
highway and transit systems perform. We need to think about Federal
funding programs that reward states and MPOs whose investments are
successful in achieving their performance targets. We recognize that
there are important political considerations in the decisionmaking
process -- such as balancing regional needs for transportation
infrastructure -- but we need to work harder at basing our decisions on
sound analytical techniques.

So there are a variety of techniques that we can use to improve the
efficiency and performance of our investments in surface transportation
infrastructure. We need to make more widespread use of them.

Finally, let me close by saying that I look forward to hearing from the
witnesses from the National Surface Transportation Policy and Revenue
Study Commission. Speaking for Secretary Peters and Deputy Secretary
Cino, I can tell you that the Commission brings a wide variety of
viewpoints to the questions of what kind of transportation system we
need, and what kind we should have. The Commission has just received a
tall stack of issue papers, which its members are now examining. It is
making progress on defining surface transportation needs and identifying
workable strategies. The Commission still has a way to go before it will
reach consensus on these matters, but the members are hard at work, and
I know that the Secretary, the Deputy Secretary, and all the members of
the Commission are committed to providing a report to Congress that will
provide guidance as you move toward reauthorization of the surface
transportation system two years from now.

I appreciate your attention, and I welcome your questions.