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The Innovative DOT: Revenue Allocation and Project Selection

Posted by Content Coordinator on Tuesday, January 20th, 2015


Note: this post represents one section of Smart Growth America’s publication, The Innovative DOT: A handbook of policy and practice

Innovative DOT: Area 2 - Revenue Allocation and Project SelectionScarce transportation dollars need to be spent where they do the most good. But making changes to long-standing practices, some of which are ensconced in law, can be difficult and present a hurdle to state departments of transportation (DOTs) looking to get the best bang for their buck. Pressing forward with revenue allocation and project selection reform represents a major way in which DOTs can deliver projects with greater impact more quickly. Many agencies are now reforming project selection and formula funding processes for sub-state units of government, often tying proposed spending to state, departmental, and/or local goals and objectives.

In this section:

  • Establish Revenue and Funding Flexibility: Mode Neutral Evaluation and Funding Distribution
  • Incorporate Asset Management
  • Develop a Performance- and Outcome-Focused Project Selection Process
  • Remove Barriers to Off-System Investment
  • Update Funding Formulas and Implement Competitive Fund Distribution for Smart Transportation

Establish Revenue and Funding Flexibility: Mode-Neutral Evaluation and Funding Distribution

The Opportunity
State and federal transportation revenues are often funneled into mode-specific pools and then distributed to projects of the same type. A dollar taken in from an auto toll facility is typically a dollar credited to additional roadway projects, while a dollar in transit fare is a dollar of transit offset. In fact, half the states have a constitutional or statutory provision that limits the use of state gas tax revenues exclusively to highway and road purposes.

This siloed approach ignores the integrated nature of the transportation system and exacerbates the highway and road focus in transportation funding. Improvements to roadway surfaces benefit transit riders, for example, and more efficient and attractive transit options benefit those who drive. Options such as system management, transit investments, technology improvements, and demand management may be less costly and more effective solutions to transportation problems than capacity projects. Segregating funds by mode does not allow states to prioritize projects that best serve the system as a whole; rather, it creates budget biases and false choices.

What Is It?
State DOTs can allocate funds efficiently based on system-wide needs, priorities, and performance by pooling resources into a multimodal fund, and then distributing funds using mode-neutral criteria. Under this approach, a DOT conducts a consistent cost-benefit analysis or a return on investment (ROI) calculation for each project regardless of mode, and the option with the lowest cost-benefit ratio or the highest ROI receives funding. This means that no option—road building, transit, or system management—is ignored in the project selection process.

Incorporate Asset Management

The Opportunity
From 2009 to 2011, 55 percent of state road funding went to expanding lane miles, but this work only represented 1 percent of total state-owned highway miles. That means the remaining 45 percent of funds went toward 99 percent of the road system. This average suggests that maintenance is often a lower priority, despite indications that existing roads are in desperate need of repair. The American Society of Civil Engineers gave U.S. roads a D and its bridges a C+ in its 2013 Report Card on America’s Infrastructure. One-third of the county’s roads rank in poor or mediocre condition. Postponing maintenance greatly increases its cost. The American Association of State Highway and Transportation Officials (AASHTO) estimates that every $1 spent to keep roads in good condition today allows a state to avoid spending $6-$14 to fix a road once it has significantly deteriorated.

At the same time, public scrutiny and suspicion of wasteful or excessive spending has increased. Limited public funds must be used in the best way possible, and voters are holding their public officials accountable. According to a survey by the Rockefeller Foundation, 86 percent of respondents favor a “fix-it first” policy that maintains existing assets before building new ones. Literally fixing every road before considering new capacity would be a crude form of asset management, but this poll shows an appreciation for the importance of system preservation.

Adopting an aggressive asset management program is an opportunity to optimize the use of scarce resources, encouraging more policy- and data-driven decisions when weighing big spending categories such as maintenance, construction, and operations, or when considering projects and design alternatives.

What Is It?
All states engage in some level of asset management with maintenance budgets; however, in recent years the term has expanded to include a targeted effort by states to keep infrastructure in good or better condition than at present, consider trade-offs in capital planning, and contain the costs of planning, construction, and operating new facilities.

Develop a Performance- and Outcome-Focused Project Selection Process

The Opportunity
Setting measures of success is not unique. Most transportation project selection processes consider the success of alternatives in addressing narrowly defined, project-specific transportation needs. However, in these cases, the transportation project is perceived as the “end,” not the “means,” to achieving broader objectives.

In order to achieve greater gains with limited dollars, some DOTs have begun selecting projects using criteria that consider the full spectrum of the state’s strategic goals, such as safety, economic development, transportation choice, community character, and resource conservation. This approach to evaluating performance ensures that states get more than successful individual projects—they get a transportation system that supports the economy and helps to address other state priorities. The approach also demonstrates the results of transportation investments to stakeholders and constituents, which can ultimately play a critical role in building public support for transportation funding increases.

What Is It?
Performance-based project selection is a data-driven process that gives transportation agencies the ability to evaluate the impact of projects using standard criteria and prioritize those that will produce the best results. Through this approach, agencies develop performance measures for the transportation system, collect data over time to assess progress, and allocate resources based on the results. It is most effective when agencies set specific, time-bound performance targets and prioritize investments based on progress toward achieving those targets.

Traditionally, transportation agencies evaluate performance with mobility-based measures, such as volume/capacity ratio or travel time between points, or system condition measures, such as pavement quality or bridge condition. Expanding the approach by evaluating project and system performance based on a more comprehensive set of indicators can help manage increasingly complex transportation systems with competing priorities.

Download full version (PDF): The innovative DOT: Focus Area 2 – Revenue Allocation and Project Selection

About Smart Growth America
Smart Growth America advocates for people who want to live and work in great neighborhoods. We believe smart growth solutions support thriving businesses and jobs, provide more options for how people get around and make it more affordable to live near work and the grocery store. Our coalition works with communities to fight sprawl and save money. We are making America’s neighborhoods great together.

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One Response to “The Innovative DOT: Revenue Allocation and Project Selection”

  1. jerry schneider says:

    A very welcome and sensible set of ideas for the reform of the DOT planning process
    A key factor is the transportation engineering consulting community that is often called upon to evaluate alternative solutions to particular transportation alternatives. They have a tendency to produce recommendations that involve minimal risk as they are conventional, not innovative. Until ways can be found to reduce the risk level faced by those in charge of investing public dollars, little innovation can be expected to occur. What is needed is an independent, objective participant that is focused on evaluation and risk reduction analyses that can aid the consideration of innovative solutions. It doesn’t exist now but could be devised.

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