Jodie Misiak and John Porcari: Strengthening Multimodal System Coordination and Innovative Asset Delivery Considerations for Project Funding Decisions
January 23, 2018
Because of constrained resources, state and local transportation departments and agencies are frequently forced to make difficult trade-offs between funding different types of assets. Transportation investment trade-offs are influenced by many factors, and some of these factors are more directly aligned with long-term mobility and system needs than others.
Although greater emphasis on asset management planning and coordination is an excellent step in the direction of accounting for long-term system needs, it should be supplemented with additional criteria for investment decisionmaking processes. Specifically, asset management planning alone cannot ensure an efficient multimodal network approach to transportation infrastructure investment. Furthermore, standard asset management plans cannot ensure that a life cycle approach is fully funded and that the relevant contracts are implemented for assets’ long-term maintenance and operations. To address these areas of potential weakness, asset management and funding decisionmaking must also include criteria regarding the multimodal nature of transportation systems and the various financial and contractual arrangements that might be necessary to ensure that asset management plans are funded and implemented for the full asset life cycle. Ideally, criteria for project funding decisions would require a more thorough consideration of multimodal system coordination factors and would require a careful assessment of the life cycle implications of different innovative project delivery strategies.
Decisionmaking Criteria to Support Multimodal System Investment
Policies and decisionmaking procedures often favor a siloed approach to transportation project funding that is detrimental to the efficient delivery and operations of transportation systems. Asset management can maximize the effectiveness of existing systems through the analysis of more robust asset data. But when only one mode is considered in an asset management assessment, it provides a limited view of system mobility.
For instance, an asset management program that focuses on highway infrastructure is likely to ignore the ways other modes interface with existing or future highway assets. Similarly, asset management considerations for an aging rail transit system would benefit from a full understanding of the complementary and alternative transportation options available to the rail system ridership, including pedestrian access, personal vehicles, or other forms of mass transit, including bus and alternative rail options. When assets within each mode are viewed through a siloed lens, planning and finance decisions are less likely to represent a system’s true condition and investment needs. This defeats one of the main purposes of transportation asset management, which is to empower transportation professionals to make informed decisions about current and future investments.
As noted in “Cultivating a Strategic Project Portfolio through Transportation Asset Management,” the Federal Highway Administration and the Federal Transit Administration have issued requirements for developing and implementing asset management plans (Lew 2017). But departments of transportation and transit agencies currently have few incentives to coordinate their efforts across modal categories.
Some transportation departments and agencies are better positioned to avoid a siloed approach in transportation funding decisionmaking. Their organizational structures may already support a multimodal approach, and they may have already been cultivating strong systemwide coordination. Public entities that take a multimodal approach to decisionmaking are best positioned to consider systemwide trade-offs and to take advantage of the full benefits of an asset management program.
But other public-sector entities may only have a formal mandate for delivering projects within just one mode and have no incentive to incorporate a multimodal perspective into asset management planning. It will be more difficult for these public entities to develop effective asset management plans and investment decisions that account for a broad range of potential system outcomes.
For departments and agencies that do not have an existing process for multimodal asset management, criteria could be established for reviewing asset management data at a corridor or service area level, with a focus on the interplay between assets that are in close proximity to one another or are alternate routes to each other. This may require formal coordination with external entities if one department or agency is not directly responsible for all transportation assets within the corridor or service area. Interagency coordination is often easier said than done, particularly when various transportation components within a single corridor are funded, maintained, and managed in different ways by staff who rarely interact. Additionally, the metrics for measuring the condition of assets will vary considerably, which will make it more challenging for staff to find common ground and align all agencies’ interests. Despite all this, the potential benefits from a comprehensive approach to asset management should outweigh the challenges of coordinating across institutional divisions, but this is only possible if agency staff are empowered and encouraged by senior leadership to work outside their typical siloed areas of focus.
For a more multimodal approach to asset management and funding, it is important for public-sector decisionmakers to evaluate funding decisions against the following criteria:
- Do investment decisions reflect an understanding of the relationships between road, rail, public transit (fixed guideway and otherwise), port, and airport infrastructure that are within a similar corridor or service area?
- Do investment decisions reflect an understanding of how the relative condition of each asset affects the efficiency and effectiveness of other assets and the overall efficiency and effectiveness of the corridor or service area?
- Do investment decisions reflect an understanding of how the relative condition of each asset complements the efficiency and effectiveness of other assets?
- Do investment decisions reflect an understanding of how investment in one asset type may reduce the need for investments in other asset types? Do investment decisions reflect an understanding of how investment in one asset type may require more investment in nearby assets?
Asset management planning will fail to address long-term transportation system needs if these criteria are not fully incorporated into the funding decisionmaking process.
To be effective, transportation departments and agencies should have incentives to incorporate multimodal criteria into asset management processes, reporting, and planning. The federal government can provide incentives for informed multimodal solutions to transportation system challenges but only if federal funding programs are also encouraged to think outside of the preestablished modal silos. The US Department of Transportation’s (USDOT) Build America Bureau, which was established outside of the department’s modal framework, could coordinate efforts to develop department-wide criteria and incentives that encourage more efficient multimodal funding solutions.
Decisionmaking Criteria to Support Investment in Life Cycle Performance
Historical data, best practices, and projections for asset performance are critical elements of a robust approach to life cycle costing and long-range financial planning. Although a thorough accounting of anticipated asset needs is important, it cannot ensure that the agency can cover the costs of long-term life cycle requirements on the necessary schedules. Although implementing agencies may be aware that certain actions must be taken in specific years to ensure sustained asset performance, they may not have the resources or contracts for timely implementation of asset management plans. An asset management plan must be paired with a thoughtful, long-term vision for funding, finance, procurement, project delivery, operations, and maintenance. In addition, an asset management plan, particularly one that recognizes the multimodal nature of transportation service provision, provides transportation departments and agencies a fantastic tool for pursuing innovative approaches to value capture, contracting, and project delivery. This includes incorporating public-private partnerships (P3s) and other innovative project funding, finance, and delivery methods into long-term strategies for asset management.
Transportation departments and agencies should be required to use detailed asset management plans to determine the appropriateness of certain long-term funding, finance, procurement, and contracting options, including value capture and P3s. The development and redevelopment needs of certain transportation assets may lend themselves more readily to certain funding streams and enhanced private-sector involvement. By making the asset management plan available to potential private-sector developers and by inviting those developers to submit unsolicited proposals for potential long-term asset solutions, an agency could identify new strategies for ensuring that asset management requirements for certain facilities are implemented on time and within the budget.
P3s for transportation assets can take many forms and can support many goals for public-sector infrastructure. Fundamentally, P3s are agreements between the public and private sectors that allow for greater private-sector participation in the design, construction, financing, operations, or management of public transportation projects. In a P3 agreement, appropriate risks and benefits are allocated in a cost-effective manner between the public and private partners. Core benefits of a well-structured P3 agreement, which often cover 20 to 40 years of an asset’s lifespan, include long-term cost certainty and enhanced discipline for life cycle management. A comprehensive P3 agreement should outline the asset’s performance indicators and the penalties to the private-sector partner if those indicators are not met. Typical key performance indicators include measurable criteria for transportation service operations, state of good repair, customer service, and physical appearance.
A strong P3 agreement can provide the public owner of the transportation asset certainty that the asset management responsibilities assigned to the private sector will be addressed on time and within the budget. This certainty allows the public entity to focus its time and resources on managing other assets that may not be appropriate for a P3 structure. As part of their approach to asset management, government agencies should consider the potential benefits of strategically using P3s for long-term transportation portfolio management.
Although a P3 approach is a finance and project delivery strategy, it is not a funding strategy. Regardless of whether a public-sector entity pursues P3s as a complement to its asset management plan, it must identify sufficient and reliable funding sources to cover an asset’s full life cycle costs. In some cases, funding for responsible long-term asset management may come from existing fees, taxes, fares, and tolls. In other cases, it may be necessary to identify additional sources of long-term funding. Although it may not be applicable for all assets, value capture can be a funding source for long-term asset costs, particularly for public transit infrastructure. This may include creating special assessment districts, implementing tax increment financing, selling or leasing air rights, or establishing development impact fees. Each of these strategies could generate long-term revenue streams that could offset infrastructure asset management costs well into the future.
When considering a life cycle approach for developing, operating, and managing assets over the long term, it is important for public-sector decisionmakers to evaluate funding decisions against the following criteria:
- Do investment decisions reflect an understanding of the anticipated life cycle costs of infrastructure assets in the public-sector portfolio, along with an understanding of how these costs vary over the life of the asset?
- Do investment decisions reflect an understanding of whether anticipated public-sector revenue streams support the stated plans for responsible long-term asset management, including variations in life cycle costs?
- Do investment decisions reflect an understanding of how the implementation of innovative funding, finance, and project delivery strategies for certain assets can advance asset management planning goals? If so, what steps, including legal and policy changes, may be necessary to pursue these innovative strategies?
Without a clear long-term strategy and criteria for addressing the full life cycle costs of major transportation facilities, an asset management plan is likely to fall short of its original intent. Transportation officials and staff should have incentives to use asset management planning for a more robust consideration of innovative strategies for funding and financing asset development, operations, and maintenance. Although innovative strategies, such as P3s and value capture, may not be appropriate for every transportation asset, they can make a significant positive impact for certain assets within the agency’s portfolio. The Build America Bureau, with its focus on promoting best practices in innovative funding and finance of transportation assets, can also serve a role by requiring project sponsors to incorporate such life cycle criteria into the evaluation of projects seeking federal credit assistance.
Real-World Example: Washington Metropolitan Area Transit Authority
There are many examples of transportation departments and agencies that are facing the overlapping challenges of asset management planning, coordinating multimodal investments, and covering the costs of long-term life cycle performance. The Washington Metropolitan Area Transit Authority (WMATA) presents a compelling example of what can happen when an agency has not addressed these challenges in a coordinated and timely fashion. According to the “Review of Operating, Governance, and Financial Conditions at the Washington Metropolitan Area Transit Authority” report, WMATA faces a $7 billion backlog of deteriorated Metrorail assets, with $1.1 billion in additional asset deterioration occurring in each subsequent year (WSP 2017). The Metrorail system has been open for just over 40 years, and during most of this time, there had not been a systematic and rigorous approach to asset management planning. The lack of emphasis on asset management planning, combined with funding constraints, underprioritizing of long-term capital investment, regional coordination obstacles, and governance challenges, have resulted in deferred maintenance and investment. WMATA is working to reverse decades of underinvestment, including efforts to improve its approach to asset management. Based on its history and anticipated future needs, WMATA’s asset management planning would benefit from investment decisionmaking criteria that promotes multimodal funding coordination and the consideration of innovative project delivery strategies designed to support full asset life cycle performance. The two sets of criteria questions presented earlier would provide a good starting point for this if WMATA staff have incentives to incorporate this enhanced approach to asset investment decisionmaking into standard agency processes.
Lew, Shoshana. 2017. “Cultivating a Strategic Project Portfolio through Transportation Asset Management.” Washington, DC: Urban Institute.
WSP. 2017. “Review of Operating, Governance, and Financial Conditions at the Washington Metropolitan Area Transit Authority.” New York: WSP.