Council on Transportation

The Council on Transportation and the Rudin Center for Transportation Policy and Management gratefully acknowl-edge the foundation, corporate, and individual sponsors that make possible our efforts to promote progressive transportationpolicy, including the New York Transportation Journal.

ALSTOM Transportation

ARUP

Bear Stearns

Booz Allen & Hamilton, Inc.

CTE

Con Edison

Constantine Sidamon-Eristoff

DMJM + Harris

Edwards and Kelcey, Inc.

General Contractors Association of New York, Inc.

International Union of Operating Engineers

JP Morgan Chase

Jacobs Sverdrup

James Taylor

Laborers Fund of the AFL-CIO

N. Y. Waterways

New York Building Congress

Parsons Brinckerhoff Quade & Douglas, Inc.

Parsons Transportation Group

Rudin Foundation

STV

Skidmore, Owings & Merrill, LLP

The Real Estate Board of New York, Inc.

Transport Workers Union of America

URS

Washington Group International

Steve Greenfield, Chairman

Constantine Sidamon-Eristoff,Vice Chairman

Elliot G. Sander, Director Rudin Center for Transportation Policy and Management

Susan Kupferman, Co-DirectorRudin Center for Transportation Policyand Management

Richard T. Anderson

Regina Armstrong

Richard Aspinwall

Deborah Beck

Thomas E. Diana

John M. Dionisio

Beverly Dolinsky

William Fahey

John C. Falcocchio

Dall Forsythe

Michael Francese

Alan B. Friedberg

William Galligan

Lou Gambaccini

Sonny Hall

Jose Holquin-Veras

Mike Horodniceanu

Arthur E. Imperatore, Jr.

John Kaehny

James Kaufman

Brian Ketcham

Alan Kiepper

Robert Kiley

Carolyn S. Konheim

Floyd Lapp

Eva Lerner-Lam

Thomas P. Maguire

Richard Maitino

Frank McArdle

James Melius

Mitchell Moss

Robert E. Paaswell

Henry L. Peyrebrune

Steven M. Polan

Barnett Rukin

Gene Russianoff

Janette Sadik-Khan

Ross Sandler

Samuel Schwartz

Dom Servidio

James Simpson

Roy Sparrow

Jim Taylor

Marilyn Jordan Taylor

Ben Thompson

Michael Weiss

Donald Weisstuch

Robert D. Yaro

Michael Zetlin

Rae Zimmerman

Jeffrey Zupan

I n January, 1994, when MayorRudolph W. Giuliani took office,

transportation was not at the top of thelist of priorities. Crime, jobs, "quality oflife", and education were the issues theMayor knew he had to address, first andforemost. And then he discovered he hada $2 billion deficit to cover as well.

As Commissioner of Transportation forthe first two and half years of the admin-istration, I strongly supported those pri-orities. I understood that these were thegreatest challenges confronting NewYork City. Nonetheless, with Mayor

Giuliani’s support and a talented team atNYCDOT, we successfully managed theCity’s transportation system, implement-ing innovations like red light cameras,design/build construction, borough com-missioners, and the Adopt-A-HighwayProgram (to name just a few), and "didmore with less," absorbing some of thehardest budget hits of any line agency.And in between dealing with a plague ofpotholes from winter storms and a com-muter rail strike or two, we moved theParking Violations Bureau to the Depart-ment of Finance, allowing NYCDOT tofocus more clearly on its primary mis-sion of mobility and infrastructure main-tenance.

At the broader level of transportationpolicy, the Giuliani administration hasalso made important contributions. Whilesome disagree with the Mayor’s tone andremedy in dealing with the PortAuthority, few argue that he has raisedimportant issues regarding the PortAuthority’s core mission, the future ofthe airports, equity between New Yorkand New Jersey, and privatization. TheMayor’s support of CongressmanNadler’s rail freight crusade put thatissue on the regional agenda, and theMayor initiated the idea of extendingtransit service to support the develop-ment of Midtown West and LaGuardiaAirport.

But with a new occupant in GracieMansion in January 2002, now is thetime to frame the transportation agendafor the next administration. Due in nosmall measure to the success of theGiuliani administration in making NewYork City a better place to live, work,

and visit, transportation needs to be oneof the top priorities for the next Mayor.

Education and housing advocates willmake a compelling case to be at the topof the list as well. Criminal justice advo-cates won’t be shrinking violets either,making the compelling argument thatany backsliding in crime prevention isdone at the City’s peril. Mayors Ferrer,Green, Hevesi, Vallone (and should weadd Bloomberg or Sharpton?) clearlymust attend to the needs of these sectorstoo.

Nonetheless, the next Mayor needs toensure that the City’s transportation sys-tem is both managed well to respond topresent demands and is expanded tomeet the future needs of Gotham.Automatic pilot won’t do it.

First, the Mayor will need to work close-ly with the Governor and Legislature toensure that the landmark $34 billionhighway and transit program that waspassed last year is implemented. Thisprogram starts the Second AvenueSubway and LIRR Eastside AccessProjects and maintains a normal replace-ment program for our transit infrastruc-ture. It also provides adequate funding toimprove the pavement and structuralcondition of New York City’s highwaysand bridges, which while still safe totravel on, are in the worst shape of anyregion in the State.

Though failure of the bond act blewroughly a 10% hole in that program, it iswithin the capability of the Governor andLegislature to provide adequate funds toimplement the current program. The reallifting will occur with the next 5 year

To The Next Mayor: A Transportation Agenda

NEW YORKN E W Y O R K

Transportation JournalWinter/Spring 2001Volume V

Comparative Transportation Studies:What Have We Learned?

By Bill Shore 3

Interview with Robert Kiley,Commisioner of Transport, London

By Janette Sadik-Khan 8

Hong Kong Builds a New AirportBy Ed Seeley 10

Generator or Supporter: TransportInvestment and Economic Growth

By Joseph Berechman 14

New Jersey Link to the 21st Century:Maximizing the Impact of InfrastructureInvestment

By Robert E. Paaswell, Joseph Berechman, José Holguín-Veras, Raghavan Srinivasan, and Claire McKnight 20

Inside NYTJ

MTA Capital Program, 2005-2009, whenthe serious bills will come due for theSecond Avenue Subway and LIRREastside Access. Rough estimates arethat we’ll need a $22-24 billion MTAprogram to make that happen. Withoutthe next Mayor championing the causewith strong support from Albany andWashington, these critical projects won’thappen.

Second, the next Mayor will have to dealwith the issue of congestion in Midtown.Innovative pilot programs like the recentvalue pricing project involving in-carparking devices, re-invigoration ofNYPD’s Traffic Control Division, furtherprioritization of public transportation,and incentives to move traffic off-peakare clearly some of the items that need tobe considered.

Third, important advances can be madein the City’s bike and pedestrian net-work, the application of intelligent trans-portation systems, and the City’s use ofits waterways to move people andfreight. Priority will still need to begiven to maintain the City’s bridgereconstruction program, and to keep theroads, highways, and bridges in goodoperating condition and graffiti-free.

Fourth, the next Mayor will have todecide how to deal with the PortAuthority. New York is in a fierce com-petition to become the major hub port onthe East Coast, and demand on its air-ports will continue to grow exponential-ly. With an over-dependence on trucks tomove freight to NYC and Long Island,can the City of New York with its institu-

tional partners respond to these chal-lenges? Failure to do so will threatenGotham’s position as a world capital.

Fifth, some institutional reform may bein order as well. The City has a myriadof agencies dealing with transportation,like NYCDOT, City Planning, the Taxiand Limousine Commission, EDC, andthe Police Department. Solutions oftenrequire one or more of these agencies tocoordinate both amongst themselves andwith state agencies like the MTA, thePort Authority, and NYSDOT. A coordi-nating mechanism like a transportationsub-cabinet led by the NYCDOTCommissioner with support from CityHall might make a difference with morethan one project, not to speak of facilitat-ing a more cohesive strategy for dealingwith Albany and Washington.

If the next Mayor is looking for legacymaterial, either in a first or second term,he or she may want to explore develop-ing a dedicated source of revenue to helpfund some of the excellent transportationprojects and initiatives that have beenproposed in recent years. These include,in addition to the Second Avenue andLIRR Eastside Access projects, tunnelingthe Gowanus (which would transform alarge swath of Brooklyn), extending sub-way service out to LaGuardia Airportand extension of the #7 line to MidtownWest, creation of an extensive bike andpedestrian network, or as GeneRussianoff has pushed for, a significantreduction of subway waiting times inrush hour and provision of greater non-rush hour service.

In the past, tolling the East River andHarlem River Bridges was one of thethird rails of politics in Gotham.

With EZ technology, increasing conges-tion in midtown, the City of Londonembarking on a similar effort, and a listof excellent projects and initiatives thatwould be funded, an electronic toll sys-tem designed to limit single car entranceto Midtown in rush hour and encouragetruck deliveries off-peak would be aninteresting proposal to consider. Lastyear Congressman Nadler testifiedbefore the NY State AssemblyCommittee on Critical TransportationChoices in support of consideration of atoll system on the East River Bridgesfocused on trucks. While a full-blownEast River and Harlem River Bridge tollsystem might be a tough lift for a firstterm Mayor, a smaller scaled initiativemust at least be considered.

These are just some of the ideas that thenext Mayor should entertain. In the nextseveral months the Empire StateTransportation Alliance will be formulat-ting a transportation agenda to be pre-sented to all the Mayoral candidates.From a policy and political perspective,transportation must be high on the “ToDo” list for the next occupant of GracieMansion.

ª

Elliot G. Sander is Director of the RudinCenter for Transportation Policy andManagement at New York University. He is alsoa Senior Vice President at DMJM/Harris and isa Commissioner on the NYC Taxi andLimousine Commission

New York Transportation Journal

Graphics/ProductionRose Reichman, Reichman Frankle, Inc.Beck Towery, Reichman Frankle, Inc.Melissa Kaplan, Project CoordinatorRudin Center for Transportation Policy andManagement

The New York Transportation Journal is published by the Rudin Center forTransportation Policy and Management (RCTPM), in conjunction with RCTPM’sadvisory board, the Council on Transportation and the University TransportationResearch Center (UTRC).

The views expressed in the New York Transportation Journal are those of the authorsand not necessarily those of New York University, Polytechnic University, theInstitute of Public Administration, RCTPM, the Council on Transportation, UTRC ortheir funders.

Letters to the editor and other inquiries may be addressed to:Elliot G. Sander, Director, Rudin Center for Transportation Policy and ManagementRobert F. Wagner Graduate School of Public Service New York University, 5 Washington Square North, Room 42A New York, NY 10003,tel: (212) 998-7545, fax: (212) 995-3890email: elliot.sander@wagner.nyu.edu.

Editorial BoardJohn FalcocchioRobert PaaswellHenry PeyrebruneJanette Sadik-KhanBruce SchallerRoy SparrowJames Taylor

New York Transportation Journal

Elliot G. Sander, EditorDirector, Rudin Center for Transportation Policy and Management

Susan KupfermanCo-Director, Rudin Center for Transportation Policy and Management

2

stir over whether that should go forwardor not. I think it shouldn’t, that it needs tobe drastically changed before it can besensible. The good news is that there is ahuge public debate in the UK about trans-portation, which unfortunately we don’thave here in the US.

JSK: What are the barriers to privatiza-tion in the US and what can we learnfrom the UK? What are the downsides toprivatization in the UK and what canthey learn from models we have adoptedin the US?

RK: The most important thing aboutprivatizing an asset that is truly public isthat there needs to be public or govern-ment control maintained. You can’t everreally turn the management over com-pletely to the private sector. You can bringa private firm in and give them very sub-stantial responsibility and profit opportu-nities with respect to rehabilitation,investment, construction and engineering.But when it comes to actually runningsomething, these things have to be donewith surgical precision and care. It canwork, but the more public the asset is, theharder it is to pull off because publicmeans reacting to political considerationswhere your ability to earn raw profit ismitigated by public needs. For example,ensuring that the handicapped and dis-abled have easy access to transportationmodes is an expense that does not trans-late into profit. Or making sure thatschool children are able to travel, or thatthere is always some service availableeven to the remotest part of your region orat the oddest hours while essential politi-cal goals, may not turn into profit. Thatmeans some operations are in the publicinterest but that may not turn into privateprofit. You want the private sectorinvolved because they are very good atgetting things done faster and with maxi-mum productivity and the application ofthe newest technology. If there is going tobe any kind of public subsidy, direct orindirect, the public has to maintain truemanagement control over what is goingon or you will lose it in a flash. As anexample of that, it would be very easy toprivatize British Air because that can be

comfortably situated in a free market-place. It is a little more complicated toprivatize transportation in the U.S. systemand it is extremely complicated to priva-tize rail and subway operations. I like tothink that the higher up in the air, the eas-ier it is to privatize. You bring it down,you have more and more people whoactually depend on it for their daily breadand you can’t make it just strictly a crea-ture of the profit mode.

JSK: Do privatized rail/bus lines in theUK make money or are they subsidized?We don’t hear criticism of corporate wel-fare as we do in the US.

RK: The last time I had the numbers,there are somewhere between 7,000 and8,000 buses that traverse the streets ofNYC every day. Half of them are ownedand operated by NYC Transit. The otherhalf are franchised out by the City of NewYork to half a dozen private operators,maybe two or three of which are domi-nant. That’s the rough equivalent ofwhat’s happened in the UK. I could makean argument that many of NYC Transit’sbus lines are better operated, make betterprofit margins, and carry more customersthan many of the lines operated by theprivate sector. The reason for that is thatthese private franchising outcomes canactually result in regulated monopolies.Not really competitive so you end up withquasi-public organizations. The worst ofboth actually. That is what most publictransportation was in the US throughWorld War II. When it was seen that itwasn’t working in New York, Boston andPhiladelphia and all over the east coast,all of these facilities which we take forgranted as being publicly owned andoperated, were run by private companies.They absolutely fell off the cliff and theygot taken over by the government betweensay 1950 and 1965. The IRT and theBMT were private companies.

JSK: How does capital project financein the US differ from in the UK?

RK: The UK has not discovered themunicipal bond as an instrument ofsecured cash which can be converted intoa vehicle for significant investment incapital goods. It just doesn’t happen there.That is one of the things I’m pushing hardon. I’m told the UK Treasury has a 250-

year history of this, and it’s not going tobe overcome in 250 days.

JSK: Do you see differences in the waysafety issues are treated with regard toaccidents?

RK: I think there is a lot of sensitivityin England to accidents and a long safetytradition, which is shared in the US. But Ithink confusion has followed privatizationon the above ground rail system. Theissue is who is responsible for safety andproper allocation of resources to it andwhat is priority in the minds of the peoplewho are at the upper echelons of all theorganizations that are responsible for safe-ty, Railtrack and the operating companies.It is really a mess at the moment.Therefore, risks have increased.

JSK: What drew you back to the publicsector from the nice life of running thePartnership?

RK: That’s a good question – not sure Ican answer it. I really enjoyed thePartnership and was getting tremendoussatisfaction out of it. I love the city andwe have many friends and the kids grewup here and they’ve either just left thenest or are about to leave. New York is avery hard place to leave, even temporarily.However, having run the Boston systemand the New York system, which are,respectively, number two and three in his-toric age, why not go to the oldest one ofthem all. The most venerable system, theLondon Underground, seems to need help.Pretty irresistible. And the other part ofthis is they are starting a new local gov-ernment and there has been a major con-stitutional change so it is very exciting,even at my long in the tooth point, to bepart of it. It makes you young again.

ª

Janette Sadik-Khan is President of Company39, an e-business subsidiary of ParsonsBrinckerhoff, an international engineering,planning and construction management organi-zation. She has also served as DeputyAdministrator at the Federal TransitAdministration. She currently serves on severalresearch panels for the National Academy ofScience, is a board member of the Women inTransportation Seminar and was recentlyselected as a Rockefeller Fellow for 1999-2000.

23

INTERVIEW

continued from page 9

Winter/Spring 2001

is important to understand that employ-ment in agriculture represented less than1% of total covered employment in thestudy area in 1997.

• All counties in the study area exceptHunterdon and Ocean lost manufacturingjobs consistent with the overall trend inthe state.

• All counties in the study area exceptHudson, Hunterdon, Passaic, and Union,had strong employment growth in thetransportation industry consistent with theoverall trend in the state.

• All counties in the study except Essexhad strong or moderate employmentgrowth in retail trade.

• All counties in the study area hadstrong or moderate employment growth inthe services industry consistent with theoverall trend in the state.

• A recent article in the New York Timesindicates that the pharmaceutical industryis consolidating in New Jersey. "Morethan 40 percent of all new medicinesapproved by the Food and DrugAdministration in 1999 were developedby companies based in New Jersey." Thistrend may lead to more jobs in this indus-try segment.

Development of the Land Use –Transportation ModelAnalysis of these trends based upon trans-portation investments will be made usinga battery of models. One, in particular,will use population and employment loca-tions and their influence by accessibility.Accessibility shall be measured by trans-portation network characteristics, includ-ing quantifiable costs of travel. The stepsleading to this model approach are sum-marized below.

The first step is to characterize and quan-tify the transportation system to be ana-lyzed and its environment. Figure 1 showsthe system and environment for this study.The study area has been arranged intotransportation analysis zones (TAZs) asshown in Figure 2. Finally, the highwayand rail network networks have beendefined as shown in Figures 3 and 4.These have all been put into a regionalGIS to link the transportation modelingcomponent with regional socioeconomiccharacteristics ( e.g., population density,

employment density), land uses ( e.g.,retail shops, sq.ft. of floor space), jobtypes ( by SIC code) and other importantcharacteristics.

The next steps, now taking place, and tobe reported in a subsequent paper,will show how the models are usedto predict economic impact. Datais also being collected on a studyof residents of Northern NewJersey who moved because of theinitiation of Midtown Directservice. This service eliminated achange at Hoboken for Manhattanbound riders on some NJT lines;the direct service saved time aswell as convenience and influencedhousing choice for a significant numberof residents in the impacted areas. It isclear that these changes are having amajor impact on activity location andtravel in Northern New Jersey. This studyhopes to capture and codify thosechanges.

The work was sponsored, in part, by thenew Jersey Department of Transportation,and U.S. Department of Transportation.

ª

Robert Paaswell is the former head of theChicago Transit Authority, and is current-ly the Director of the UniversityTransportation Research Center at CityCollege of New York. He has beeninvolved in transportation operations, pol-icy and management since the late 1960s,and has served as the Director of both theCenter for Transportation Studies andResearch at the State university of NewYork at Buffalo and the Director of theUrban Transportation Center at theUniversity of Illinois.

Dr. Joseph Berechman is currently aVisiting Scholar and Research Associateat the University Transportation ResearchCenter at City College of New York. He isan international consultant on transporta-tion investments. Dr. Berechman is cur-rently a professor in the Public PolicyProgram and Economics Department anda member of the faculty of Social Sciencesat Tel-Aviv University, Israel. In addition,he currently heads the TransportationManagement and Research Institute,Recanati School of BusinessAdministration at Tel-Aviv University.

Dr. Jose Holguín-Veras is AssistantResearch Professor in the CivilEngineering Department of the CityCollege of New York. His Research inter-ests are in the areas of freight transporta-tion modeling, transportation economics,inter-modal transportation, IntelligentTransportation Systems (ITS), transforma-tion planning and informational technolo-gy. He has received numerous awards forhis research including the Milton PikarskyMemorial Award in 1996 for his researchon inter-modal freight transportation

Raghavan Srinivasan is AssistantProfessor of Transportation at DowlingCollege.

Claire McKnight is Associate Professorof Civil Engineering at City College ofNew York.

New York Transportation Journal

Figure 4. The study areatransit network.

22

The Citizens Budget Commission asked: Are we competitivewith Tokyo, Paris and London (also Chicago and Los

Angeles) for talent, business leadership and jobs? The other twostudies also asked that among other questions.

The data collected didn’t answer the competitive question, andtransportation does not seem to be decisive in determining wherepeople work or locate businesses. All four of the "World Cities"studied are bursting with jobs and eager young people enjoyingurbanism. Nevertheless, New York should keep its eye on thecompetitive question. Three times in the last 40 years, most ofthe world pronounced New York dead. That cycle could comeagain. It keeps coming because, despite the tremendous magnet-ism of the City--the myriad of reasons why people want to behere-- there are a myriad of hassles and costs that make peoplefed up. Difficult and expensive travel is a large element on thecost side. As New York’s prosperity goes on, the jobs pile up inand near the center, but the expansion of transport capacity isthreatened or delayed by financial gimmickry. Hassles couldagain outweigh the magnetism.

Though data from the comparisons is not decisive on whetherour transport is as good as the other cities’ now, we see Paris andTokyo continuing to build modern public transportation andlocate jobs, services and housing so people will use it. As of1998, Tokyo was building 72.5 km of new commuter rail lines,61.6 km of new subway lines and 28.4 km of new monoraillines. Paris was building (in addition to the newly-openedMeteor line, below) 4 km of RER and 1.4 km of metro. Theroads they build are expensive toll roads or paid for by develop-ers who will benefit. Tokyo tolls are approximately 60 cents amile! London, though lagging in transit as New York is, recentlyopened a new subway extension following a new light rail lineand is speeding bus service with traffic priorities and electronicguidance. London elected as its first metropolitan mayor a manwho made a reputation favoring public transport—and then hiredKiley to underscore his seriousness. All three of these cities andthe European Union are consciously trying to reduce driving.They seem to know where they’re going.

We are not idle. New Jersey’s building a 32.8-km light rail line,partly opened, serving fast-growing riverfront development.

Subway connections from Queens through the 63d Street tunnelare being completed along with train-to-the-plane connections inJamaica (to Kennedy) and along the Amtrak-NJ TransitNortheast Corridor line (to Newark).

Is New York competitive? Lifting our eyes from the numeroustables and charts of these studies, we can see it is. Will it be?

What Can We Learn?The studies do spotlight differences that might show New Yorkbetter ways to run our transport and settlement pattern if weinvestigate how they do it.

Operationally:

On time subway service in Tokyo was phenomenal despitecrowding: 98% of all trips arrive within one minute of scheduledtime--compared to Paris’ 87.5% within 3 minutes in peak periodsand 6 minutes off-peak; London’s 85% no more than 5 minuteslate and New York’s 80% within 5 minutes. Though The FourWorld Cities study didn’t get on-time data from Tokyo’s com-muter railroads, they, also, are reputed to be precise.

Speeding buses. London and Paris provide electronic bus guid-ance to control bus flow and to inform passengers at bus stopshow long they must wait. London created "Red Routes," clearedof parked cars for uninterrupted bus travel. On some routes, traf-fic lights turn green when a bus approaches. Failure of localcommunities to cooperate has limited the effectiveness, but thatwas before London had a metropolitan government with a trans-port-oriented mayor.

Efficiency. New York’s bus operating cost per passenger milewas twice London’s (1995 NY, 1997 London) and two-thirdsgreater than Paris’—and even 40% more than Los Angeles’ aswell as slightly higher than Chicago’s. Cost per vehicle mile alsowas higher in New York—except for Paris: NY: $7.91; London:$4.10; Paris: $9.32; Chicago: $6.88; Los Angeles: $6.89. Higherpassenger/mile costs reflect New York’s late night operations;higher vehicle/mile costs reflect street congestion and condi-tions, though the huge difference in London suggests other caus-es as well.

Comparative Transportation Studies:What Have We Learned?

By Bill Shore, Senior Associate, Institute of Public Administration

Recently, New York’s transportation system has beencompared twice to Tokyo’s and Paris’ and three times to London’s. London obviously benefited from the comparison, hiring Robert Kiley torun its bus and Underground system. What can we get out of the comparisons? Are We Competitive?

3

On rails, New York did no better. Vehiclemile operating cost of commuter railroadswas 15% higher in New York than Tokyo,40% than Paris. Passenger mile cost:Tokyo’s was less than half New York’s(they pack them in!), but the other cities’were about the same as New York’s.

Subway vehicle mile cost in New Yorkwas nearly 25% greater than in Londonand slightly higher than in Chicago, butbelow Paris’ and less than half Tokyo’s.Passenger mile cost in New York was25% higher than Tokyo’s and two-thirdshigher than Paris’—reflecting New York’slow passenger volume overnight whenonly New York’s transit operates. Even so,the New York subway passenger mile costis very little higher than London’s andbetter than Chicago’s. And in this 24/7economy, all-night subway service addsvalue to a New York City location.

Privatization—an Experimentto be WatchedBus operating costs were cut in half whenservice was privatized in London—butwas this increased efficiency or just suc-cessful pressure to reduce wages? If wagedepression, were wages unreasonably

high before the reduction? The startlingcost reduction is certainly worth examin-ing. A government agency supervisesservice standards within urban London,but outside—in the suburbs and exurbs—bus service is completely free enterprise.

London’s exact reversal of New York’scommuter railroad reorganization is farfrom proven—but worth watching. In the1960s and ‘70s, the New York Regionconsolidated seven private commuter rail-road services into two public systems, NJTransit and the MTA (with Metro-Northand Long Island Rail Road subsidiariesand some responsibility by ConnecticutDOT). In the 1990s, London split a singlegovernment national railroad agency intoseven private companies, which providenational as well as London regional serv-ice. A quasi-governmental corporationowns and maintains the track and a gov-ernment agency supervises the standards.

Tokyo is hedging its privatization bets.Tokyo Metropolitan Government operates30% of the subway lines and is building anew line; it operates 10% of the bus lines,none of the railroads. Private companiesin Tokyo and Paris are building toll high-ways.

Improved transit technologiesAll the new subway lines opened recentlyhave glass doors in the stations, separat-ing waiting passengers from the tracks.Both Tokyo and Paris operate completelyautomated lines. Automation is importantbecause it allows high frequency off-peakservice without great expense. Other linesuse a single on-train employee, a driverwho can scan platforms via TV to openand shut doors.

Tokyo has a linear induction subway thatreduces the circumference of the tunnelneeded by eliminating high wheels. Tokyoalso has 37 kilometers of monorail. Paris’new Meteor line—fully automated, 12 _miles long through the center of the City--averages 25 mph with 18 stations and 85second headways.

Planning and implementingthe plans.Both New York and London have hadsevere failures in planning and imple-menting their plans. Paris and Tokyo havedeveloped ambitious transportationplans—and carried them out. Paris’ basicland-use/transport plan has survivedchanges in administration and politicalparties, perhaps because it was based onwidespread public participation.(However, its large-scale highway con-struction program has been substantiallycut back.) Much of Tokyo’s new rail con-struction is provided by private firms thatare developing and will profit from thenew towns the transport will serve.

London’s Jubilee line extension had alower benefit-cost ratio than two otherlines that had been considered. In 1989, aCentral London Rail Study recommendeda new line called CrossRail, estimated tocost 1.2 million pounds. The governmentof the time approved CrossRail. Privatefinancing and/or transfer of existing sub-way funds to build the line are now beingconsidered. In the meantime, the JubileeExtension was built instead, in partbecause the developer of Canary Wharfon the Docklands promised to pay part ofthe cost.

New York’s planning-implementationrecord is worse. In 1967, New York Statevoters approved a transportation bondissue that would have provided $600 mil-

New York Transportation Journal

4

and highway corridors through the north-east conurbations, and to its marine portswith good access to the hinterland west ofthe coast.

• The old industrial core of New Jerseywas predominantly in Essex County (cen-tered on Newark), Hudson County (JerseyCity), Union County (Elisabeth), and theeastern section of Passaic County(Paterson). These counties still retain amajor proportion of jobs and residentialdensity, but they are now largely slowgrowth areas (with the exception of thatpart of Hudson County that is along theHudson River). The new growth followsthe familiar pattern and general trend ofsuburbanization. This effects lower densi-ties spreading residences and jobs awayfrom the older centers. Population alsotends to be moving to the south; jobs havenot yet shown as strong a southwardmovement.

• There is a counter trend of growth ofjobs along the west shore of the Hudson,and particularly the Jersey City andHoboken areas in Hudson County. Muchof this growth results from developers and

businesses seeking less expensive land inNew Jersey while taking advantage ofproximity and good access (via PATH,NJT Rail, and the private ferries) toManhattan. The Hudson-Bergen Light railwill probably enhance this growth.

• In the past (1970 - 1990) there wassubstantial growth in the counties alongRoute 1 and the northeast rail corridorradiating from the older core throughMiddlesex and Mercer Counties.

• As these counties become more devel-oped and probably in response to higherland prices and congestion along Route 1,growth has moved to adjacent counties.Employment will continue to grow at ahealthy rate in Middlesex, but the adja-cent Counties of Monmouth, Ocean, andparticularly Somerset are predicted togrow rapidly also.

• Recent development in Northern NewJersey particularly along the Hudson-Middlesex-Mercer Counties tends to be inthe growth industries of high technologiesand services, which builds on the academ-ic institutions in the corridor of Rutgersand Princeton. An agglomeration growthcenter is the concentration of pharmaceu-tical companies in Northern New Jersey.

• The projected growth industriesthroughout the area are in business andhealth services; which is not that differentfrom the country as a whole. The countiesthat have a predominant growth in a dif-ferent industrial area are: Hudson -Securities (growth of back offices for theWall Street concerns); Essex - air trans-portation (reflecting the importance ofNewark Airport to the economy); Sussex -recreation (taking advantage of the hilly,undeveloped land); and Somerset - com-munications.

• The northwestern parts of the area(Sussex, Warren and Hunterdon Counties)are much more rural and less developedthan the rest of the area. These threecounties have the most acreage in agricul-ture. The terrain is rugged and recreationis a major industry. The open land mayinvite development, but the terrain maydiscourage it.

Employment Trends in the Study Area• In 1997, in the study area, 34.1% ofjobs were in the service industry; 18.9%of jobs were in retail trade; 16.6% of jobswere in manufacturing; 8.9% of jobs werein wholesale trade; 8% of jobs were infinance, insurance, and real estate; 5.4%of jobs were in the transportation indus-try; 3.9% of jobs were in construction;3.4% of jobs were in communication andpublic utilities; and, 0.8% of jobs were inagriculture. Comparing the employmentin the different industries, employment inservice, retail trade, and manufacturing isrelatively high, whereas the employmentin transportation, communications, con-struction, and agriculture is relatively low.Hence, strong or high growth in agricul-ture or construction may imply fewer jobsthan moderate growth in retail trade orservices.

• All counties in the study area exceptEssex and Hudson had strong employ-ment growth in agriculture consistent withthe overall trend in the state. However, it

Figure 2. The study area transportation analysis zones.

Figure 3. The study area highway network.

Winter/Spring 2001

21

New Jersey has undergone a significantinvestment in transportation infra-

structure during the last decade. Takentogether, projects including the KearnyConnection, Hudson Bergen Light Rail,access to the Northeast Corridor HSRfrom Newark Airport, and other plannedrail investments have changed the accessi-bility of Northern New Jersey. Many anec-dotal responses to this change have beennoted in Real Estate pages of New Yorkand New Jersey papers, citing new devel-opment in response to both the gain inaccessibility of Northern New Jersey andthe growing congestion and real estateprices in the core of Manhattan.

The University Transportation ResearchCenter at the City College of New Yorkhas begun a study for New JerseyDepartment of Transportation to investi-gate the co - influences of these invest-ments and economic development. Thisthree year study (now in year 2) willexamine the base line and trends of theseinteractions and develop a set of analytictools to be used by decision makers whenevaluating the impacts of transportationinvestments. This paper, the first of aseries of reports in this Journal will dis-cuss the initial conditions and some of thebackground of the study.

The Relationships betweenTransport Investment andEconomic DevelopmentThe fundamental assertion of this study isthat planned and in progress transportationinfrastructure investment projects in NewJersey have the potential to affect econom-ic development in the state. This economicdevelopment will be manifested primarilyin the form of land use activity changes,improved environment, and increasedemployment. These effects, in turn, willtranspire mainly from improved accessi-bility and from the non-transportationimpacts of the investments. For this studya key question is how to define and quan-tify these impacts and how to model thefunctional links between the investmentprojects and the resultant economic devel-opment.

Objectives1 To describe, quantify and assess thenature and impact of current and proposedtransportation infrastructure investmentsupon accessibility and economic develop-ment.

2 To review and quantify recent andproposed land-use changes and develop-ments, and evaluate such changes as aresponse to investment and accessibility.

3 To develop analytical tools to assessthe ties of investment to accessibility toassist in policy decisions concerningfuture infrastructure investments anddevelopment projects. These tools will beespecially useful to assess New Jersey'spotential for growth within the highlycompetitive region.

4 To conduct the above assessmentlooking at all modes, freight and passen-ger, understanding that both are essentialfor economic well being and that invest-ment strategies must examine means ofproviding both.

5 To study the above in a joint academ-ic-NJDOT setting, providing training andeducation for the professionals who willeventually be responsible for infrastruc-ture and land use planning and implemen-tation. Some may be agencies and firmstoday; others may be students, soon to beemployed by agencies.

To achieve these objectives, sever-al major phases in the study havebeen identified including theanalysis of population, employ-ment and land use trends innorthern New Jersey and thedevelopment of a land use-transportation model. Thework that has been complet-ed in these phases is summa-rized below.

Significant Socio-economicTrends in Northern New JerseyThe initial work examined a detailedset of socioeconomic data concerningpopulation and employment characteris-tics of the region, and to assess trends or

changes in these characteristics that couldinfluence or be influenced by transporta-tion investments. Noting that economicdevelopment concerns job creation andretention as well as increases in regionalproductivity, the study concentrated ontypes of employment as well as laborforce characteristics and their access toemployment. A report on the socioeco-nomic characteristics found:

• Although incomes vary widely withinthe study area, Northern New Jersey is arelatively high-income area; in 1989,Morris County had the highest householdincome in the immediate region, consider-ably higher than the U.S. as a whole.Since 1990, household incomes inSomerset and Hunterdon Counties havesurpassed Morris County.

• Northern New Jersey is a highly devel-oped, densely settled area compared toalmost anywhere else in the United States.Its past and continuing development owesa great deal to its proximity to New YorkCity, to its location between New YorkCity and Philadelphia along the major rail

New Jersey Link to the 21st Century:Maximizing the Impact of Infrastructure InvestmentBy Robert E. Paaswell, Joseph Berechman, José Holguín-Veras, Raghavan Srinivasan, and Claire McKnight

Figure 1. The study area and itsenvironment.

20

Winter/Spring 2001

lion from the State for the City’s subways.The federal government was expected tomatch that with $4 for every State dollar.In addition, New York City was regularlycontributing to the subways’ capital needs.Altogether, there was about $3 billion forsubway capital expansion. In 1968, theMetropolitan Transportation Authorityreleased a "Grand Design" for spendingthe money: 28 miles of new subway linein 10 years followed by 13 miles more.First, delays in designing the new linesduring a period of rapid inflation dissipat-ed some of the funds. Then one mayordiverted capital funds to operating subsi-dies (with congressional approval) to keepfrom raising the fare--for a very shorttime. Later mayors delayed constructionfurther to try to find less costly solutionsas the dollars bought less, further dissipat-ing the funds through inflation. The bestsubway use of the 63d Street tunnel wasstudied seven times; the best benefit-costanswer was continuously shoved asidebecause a neighborhood through whichthe proposed line would pass objected. Atno time was construction delayed by lackof funds. The result: short unconnectedholes under Second Avenue and, finally, anew Queens subway connection for onetube of the 63d Street tunnel and promiseof an East Side Long Island Rail Roadterminal at Grand Central through thelower tube in about 10 years—42 yearsafter the plan was approved.

Service and EnvironmentalQualityWaiting times. A small percentage (7%)of New York subway riders are the onlyones in the four cities who have to waitfive minutes or more during rush hoursfor a scheduled train. Actually, New Yorkand London commuters often wait longerbecause cars are jammed so they can’t geton the first train. Wait times for commuterrailroads are much less for Tokyo com-muters than for those in the other threecities. Off-peak, London subway ridersdon’t wait longer than five minutes, but15% of Paris and New York off-peak rid-ers have to wait up to 10 minutes and athird of Tokyo’s subway riders do.

Off-peak travel is important because thetransport problem for the CBDs is notsimply bringing masses of people in and

out but allowing them to come togetherduring the day.

Manhattan and Paris have by far the mostsubway stations in their CBDs, minimiz-ing walk time. Manhattan offers a moreimportant advantage: density— 2 timesthe CBD employment density of Londonand Paris, 50% denser than Tokyo’s CBD.There are more than 1.2 million jobs inMidtown Manhattan, about three squaremiles—almost a million of them between3d and 7th Avenue, 42d and 57th— a halfsquare mile with the farthest points lessthan 1 mile apart. Even at congested streetspeeds and local subway speeds (includ-ing waiting time) of about 6 mph, that’sonly 15 minutes between those farthestapart.

Taxi service is important for the kinds ofpeople the four CBDs cater to, i.e.,tourists as well as high-level businesspeople and diplomats. London has themost cruising taxis—22,800, Paris thenext, 14,900, compared to New York’s12,200. London also has 45,000-80,000taxis licensed to pick up passengers oncall, compared to New York’s 29,000-31,000.

Convenience. One-seat rides or easytransfers also are important to commuters,as we learned from the unexpectedly largeresponse to NJ Transit’s MidTOWNDirect service. Both Tokyo and Paris haveemphasized connections, allowing sub-ways and commuter rails to share tracksand providing the Paris RER, which com-bines the qualities of commuter rail and

subway, e.g., a line running through theCity center from one major airport to theother. Commuter railroads in the otherthree cities have many stations in theirCBDs compared to our 2—14 in Paris, 16in London, and 17 in Tokyo.

Access to other cities. All the other citiesprovide high-speed rail service from air-ports to their CBDs —London with aspectacular 15-minute service fromHeathrow--baggage check-in at theLondon station.

London’s Heathrow handled 54 millionpassengers in 1995 compared to Tokyo’sHaneda airport’s 46 and JFK’s 30.Kennedy, however, handles 1.6 milliontons of freight compared to Heathrow’s1.1 million. Looking at all airports in eachmetropolitan area, London’s handled 82million passengers in 1995, New York’s80, Tokyo’s 70 and Paris’ 55. In freight,New York’s handled 2.6 million, Tokyo’s2.3, London’s 1.4 and Paris’ 1.1. Pressureon airports is relieved in Paris and Tokyoby very high-speed intercity trains.

Tunneling. All of the other metropolitanareas are putting highways and parkingunderground—to protect neighborhoodsand, outside Paris, to save a forest. NewYork is debating the value of a tunnel thatwould save several highly populatedneighborhoods from a decade of trafficturmoil, permanently improve their envi-ronment and open the waterfront to publicenjoyment.

5

New York Transportation Journal

More Use of CommuterRailroadsIn New York City outside the CBD (withHudson County, NJ, but without StatenIsland), there are 39 commuter rail sta-tions. In a comparable area of London,there are 305, in Paris 265, in Tokyo 235.Not surprising, a much smaller percentageof trips in our zone are on commuter rail-roads than in the other cities. That part ofthe New York Region has an unusuallylow ratio of jobs to population: 32% com-pared to 35% in comparable London, 42%in Paris and 62% in Tokyo. Locating jobsaround existing or new commuter railroadstations there could accommodateemployees from both City and suburbs,

and recentralizing jobs in New York’souter boroughs would promote use oftransit and walking. The railroads wouldincrease efficiency by carrying morereverse commuters in trains now almostempty, particularly from Atlantic terminalthrough Brooklyn to, say, Jamaica,Queens.

Promoting commuter rail service from theouter edges of these boroughs also mightattract more Manhattan employees to livein the City. Subway service is tediousfrom the outer edges of the City com-pared to commuter rail service. Adjustingfares and schedules, improving walkingaccess from apartments to stations, build-ing new apartments near existing or newstations and making new connections,e.g., to Co-op City, are the steps needed.

Disciplining the AutoPublic policy. London, Paris and Tokyoas well as the European Union havedeclared it to be public policy to restraingrowth in auto use. Auto ownership perperson has been rising in those three met-ropolitan areas—very rapidly between1980 and 1990 (though it went down a bitin the outer areas of Tokyo, 1990-94). In

the whole U.K., traffic rose 60% since1981. U.K. planners and transport peopleexpress concern that the countryside isplagued by sprawl. There are shoppingcenters attached to highways here andthere, but through most of England, citiesand towns remain compact and distinctfrom the countryside. Leave centralLondon on a train and in 40 minutes yousee sheep on the hills and no random sub-divisions. Cordon counts of autos enteringcentral London have been essentially sta-ble since 1981 while the number of vehi-cles entering the Manhattan CBD on atypical business day has risen from679,000 in 1981 to 808,000 in 1997,19%--the highest ever recorded. Londonis talking about congestion pricing for

driving throughout central London and isenforcing 32 km/hour traffic calming inneighborhoods with speed bumps andstreet narrowing.

Traffic safety was greatly improved inLondon between 1984 and 1995. Tokyomaintained a low fatal accident rate,1984-96—but only because there was lit-tle driving in the City. New York had byfar the most fatalities within the City.Even when compared with the number ofcar miles driven, London had only 3/4thsas many fatalities as New York.

Public participation. Almost everywhere,auto trips are increasing--even in Pariswhere transport is good and trips areshort. People in all four cities object tothe increase in traffic but add to it them-selves; our personal choices conflict withour community choices. In none of thefour countries is the issue confrontedopenly for public discussion and for con-scious resolution.

I have found in over 40 years of fightingsprawl 18 important benefits of centers-and-communities over sprawl—social,economic and environmental benefits.These are not considered when an individ-ual chooses to buy and use a car, but that

personal choice threatens the 18 benefits.Unless governments or civic organizationsarray these 18 values and demonstrate tothe public how these values are threatenedby sprawl, individual decisions will con-tinue to move the whole world towardautos for every trip.

Paying for TransportWhat people pay to travel. Is travel a pub-lic good deserving subsidy? Global warm-ing and low travel costs’ inducement ofsprawl suggests it is not. On the otherhand, the needs for a well-greased urbanregion in which low-income householdsare not barred from the wide opportunitiesa large urban region affords argue maybe.

Travel is far less subsidized in London,where public transport revenues morethan cover operating costs. In 1995,London’s subway revenue was $1.36 forevery dollar of operating cost, Tokyo’s$1.15. In that year, New York subway rid-ers were paying 92 cents, Paris’ 82 centsper dollar of operating cost.

Tokyo commuter rail riders paid $1.18 perdollar of operating cost; Paris’ commuterrail riders paid $1.19, New York’s 58cents. Chicago riders paid only 45 cents.

London buses made a 6-cent profit perpassenger mile, Paris had a 6-cent deficit,and New York had a 30-cent deficit perbus passenger mile.

U.K. gasoline taxes are at least threetimes New York taxes—making up half ofthe cost of London’s petrol. (Only 40% ofour retail gas price is the tax.) Tokyo driv-ers also pay about three times New York’sgasoline taxes. However, many of the carslodged in the Tokyo CBD are companycars. French employers must pay half oftheir employees’ public transit commutingcost. As in the U.S., parking in the outly-ing parts of metropolitan London is freeto motorists. U.S. employers may giveemployees $155 a month worth of parkingcost tax free but only $65 a month fortransit travel to work.

If transit subsidies are to be diminished,drivers should be billed for more of thepublic costs of driving. The Sierra Clubfound seven studies on subsidies tomotorists and 11 sources the studies used.The conclusions ranged from subsidies ofabout $3 a gallon of gasoline to over $7.

London buses made a 6-cent profit per passenger mile,

Paris had a 6-cent deficit, and New York had a 30-cent

deficit per bus passenger mile.

6

Winter/Spring 2001

regional economic policy, which influ-ences firms’ location, labor market condi-tions and land market economies; lastly,general public policy making whoseessential task is to resolve conflictsamong stakeholders. In Western democra-cies, the ability of governments to coordi-nate their activities and design comple-mentary policies to gain maximum eco-nomic development effects from theircapital investments, by and large, is fairlylimited. Paradoxically, however, it is onlyin democratic societies that economicdevelopment reaches its maximum poten-tial.

ConclusionsDo transportation infrastructure invest-ments generate national and regional eco-nomic growth? This question remains animportant policy issue as planners andpolicymakers repeatedly provide a strongaffirmative answer that is based on popu-lar writings and basic intuition. But realityis not that simple, as the empirical evi-dence on the causality link between trans-port investment and growth, at best, isequivocal. What then have we learnedfrom the discussion in this article? Thefollowing are key conclusions.

First, while at the national or state levelcapital stock expansion seems to be corre-lated with economic growth, transporta-tion development is carried out incremen-tally, by the implementation of individualprojects. Hence, it is at the project levelthat a link must be established betweenthe project’s primary accessibility benefitsand economic growth. It is for this reasonthat a careful microeconomic analysismust be done to ascertain causality.

Second, transportation capital projectscan be justified only if they generate suffi-cient transportation benefits. If not,

attempts to rationalize their implementa-tion on the basis of alleged economicgrowth benefits is fundamentally wrongand is likely to lead to the execution ofinferior transportation projects. Put alter-natively, transportation investmentsshould be carried out, first and foremost,on the basis of the social rate of returnfrom their primary transportation benefits.Expected economic growth is a secondarydecision criterion that cannot replacetransportation output evaluation.

Third, by and large, transportation capac-ity investments serve as supporters ofregional economic growth, which almostuniversally is spurred by non-transporta-tion factors. It is only when certain condi-tions, related to the impact of accessibilitybenefits on market externalities, are metthat transportation development canpotentially generate economic growth. Ifsuch conditions cannot be shown, the fre-quently used practice of adding up acces-sibility benefits with other non-transporta-tion benefits, amounts to double counting.

Fourth, even when positive externalitiescan be ascertained, critical policy condi-tions must prevail in order for growthbenefits to materialize. This is particularlyimportant at this time and age when majorpolicy and logistic efforts are made to de-couple economic growth from furtherincreases in passenger traffic and freightmovement.

ª

References

Anas, A., Arnott, R., and Small, K., 1998,"Urban Spatial Structure", Journal ofEconomic Literature, 36 (September), 1426-1464.

Banister D., and Berechman J., 2000,Transport Investment and EconomicDevelopment, University College LondonPress.

Berechman, J., and Paaswell, R, 1983, "RailRapid Transit Investment and CBDRevitalization: Methodology and Results",Urban Studies, 20(4), 471-486

Bruisma, F., Pepping, G., and Rietveld, P.,1996, "Infrastructure and Urban Development:The Case of the Amsterdam OrbitalMotorway", in Batten, D., and Karlsson, C.,(eds), Infrastructure and the Complexity ofEconomic Development, Berlin: SpringerVerlag, pp 231-249.

Fogel, R. W., 1964, Railroads and AmericanEconomic Growth: Essays in EconometricHistory, Baltimore.

Garrison, W., and Souleyrette R., 1996,"Transportation Innovation and Development:The Companion Innovation Hypothesis",Logistic and Transportation Review, 32, 5-37.

Giuliano, G., 1995, "Land use impacts oftransportation investments: Highway and tran-sit", in S. Hanson, (ed.), The Geography ofUrban Transportation, Second edition, 305-341. New York: Guilford Press.

Gordon, P., and Richardson, H., 1994,"Congestion Trends in Metropolitan Areas", inCurbing Gridlock: Peak Period Fees to RelieveTraffic Congestion, Volume 2, TransportationResearch Board, Special Report 242, 1-31.

Mohring, H., 1993, "Maximizing, measuring,and not double counting transportation-improvement benefits: A primer on closed-and open-economy cost-benefit analysis",Transportation Research B, 27(6), 413-424.

Pieda, 1994, Heathrow Terminal 5: Assessmentof Employment Impact, 1991-2016, Reading:Pieda, BAA/1201.

Dr. Joseph Berechman is currently a VisitingScholar and Research Associate at theUniversity Transportation Research Center atCity College of New York. He is an interna-tional consultant on transportation invest-ments. Dr. Berechman is currently a professorin the Public Policy Program and EconomicsDepartment and a member of the faculty ofSocial Sciences at Tel-Aviv University, Israel.In addition, he currently heads theTransportation Management and ResearchInstitute, Recanati School of BusinessAdministration at Tel-Aviv University.

19

New York Transportation Journal

of firms and the formation of new sub-centers of business and employment. Byand large, other factors, such as availabili-ty of skilled labor, override high trans-portation costs. It appears that, in the longrun, the cumulative accessibility improve-ment impacts from transportation devel-opment tend to encourage more dispersedspatial patterns that may not be regardedas efficient. In general, available empiricalevidence cast a strong doubt on the effec-tiveness of specific transportation projectsto influence relocation decisions and landuse changes (Giuliano, 1995).

Empirical EvidenceAttempts have been made in recent yearsto validate and measure the impact of spe-cific transportation investments on eco-nomic growth mainly at the local andstate levels. In this section I very brieflyreview three studies of rail, highwayand airport development.

The Buffalo Light RapidRail Transit (LRRT) is amassive capitalinvestment project(about US$520million, in 1982prices) whoseexplicit objec-tive was torevitalize theBuffalo CBDby offeringhigh qualityrail accessi-bility, therebyencouragingeconomic devel-opment.Berechman andPaaswell (1983) havestudied this project andhave derived two main les-sons. First, that improved railtransit accessibility in a region with highquality highway access, is neither a neces-sary nor a sufficient condition for revital-izing the CBD. Second, the lack ofregional or citywide coordination of poli-cies to ensure the attainment of the LRRTobjectives was probably the most seriousthreat to the revitalization of the Buffalodowntown. Conflicting highway, parking,transit and zoning policies are examplesof this problem.

The highway example is the orbitalmotorway around Amsterdam, theNetherlands, completed in 1990. Thishighway is only 5 km. from the city cen-ter and diverts through-passing trafficfrom city streets. It was suggested thatthis project would have a major impact onoffice location and commercial develop-ment in the region. A study by Bruinsmaet al, (1996), however, has found no sig-nificant impact on office rents and loca-tions. In fact factors like building ameni-ties had greater impacton office locationdecisions thanimprovedaccessibili-ty had.

The air-port

develop-ment case study is the proposedterminal 5 at Heathrow Airport. Thegrowth and restructuring of domestic,European and intercontinental aviationmarkets have created a business opportu-nity for development at hub airports suchas Heathrow. Thus, Heathrow’s manage-ment believes that it would be commer-cially advantageous to expand the capaci-ty of Heathrow by constructing a new ter-minal alongside the four existing ones. A

key issue in the decision-making processis the role of the airport as a generator ofeconomic activity, mainly in the airport’sregion. Using employment as a keygrowth measure, studies by Pieda (1994)have raised some difficult questions onthe airport’s ability to boost employment.Most importantly is the fact that a size-able increase in total employment attrib-uted to the investment, is a direct functionof the expected increase in air traffic atHeathrow. This means that the real gener-ator of economic growth, in the form ofinduced employment, is an external factor

(i.e., growth in aviation traffic) and notterminal 5 investment per se. Thus, this

project is neither a necessary nor asufficient condition for economicdevelopment. Rather, the airport'scurrent capacity represents a con-straint on its ability to accommo-

date the expected increase in trafficat a desired level of service. It is

important to point out that without ter-minal 5 traffic may go to two other major

airports in the region (Stansted andLuton), which presently are underutilized,thereby improving traffic distribution inthe metro area.

Transport Investment andEconomic Growth: The Decisive Role of Policy Design

I have already emphasized theimportant role of policy-

making in effectuatingpotential economicgrowth from trans-portation investments.Quite often, variousstakeholders have con-flicting interests and

agendas, thus makingthe coordinated design andharmonious policies rather

difficult. Even if underlyingeconomic conditions are favorable,

political conditions will ultimately deter-mine the degree to which economicgrowth outcomes are attained.

Three types of policies are vital for theattainment of potential growth benefit.The first is investment policy, whichdetermines attributes such as mode type,investment’s scale, facility location andfunction in the larger network; second,

18

Winter/Spring 2001

The calculations included governments’out-of-pocket costs related to cars andtrucks, unpriced costs such as environ-mental degradation, accident costs notpaid by insurance, vibration damage tobuildings and infrastructure, and the valueof land used for parking and roads. Inaddition, there are indirect social costs ofauto dependence, e.g., isolating poor andold people from jobs and services,destroying sense of community, spreadingugliness, weakening health by discourag-ing walking and bicycling, raising publiccosts of infrastructure by spreading devel-opment and depriving people of a choiceof living near places they want to go tooften—since those places are scatteredand spread to accommodate the auto.

Connecting Land Use toTransportationFrom the four-city comparison, by far themost important lesson is the link betweenthe settlement pattern and transport modechoice. Both Japan and the U.K have justconsolidated their government depart-ments responsible for transportation andland-use. The principle is simple: only ifpeople are coming from the same generalarea and going to the same places canthey ride together. Paris and Tokyo growin real places that neighbors go to--sub-centers and new towns; New York growswith a scatter of jobs and services and aspread and scatter of housing. London hasdone a little of both and is wrestling withthe direction to take.

In the New York Region’s outer areas,everything is so spread and scattered thatwalking, bicycling, and even riding busesare all but impossible. Neighbors go indifferent directions to work, shop, recreateand pray, and they’re not living closeenough together to walk to the same busstops in sufficient number. Driving to abus or train is the only possibility of usingtransit, and that is limited by parkingrestrictions of the municipality where thebus or train stops. So from the New YorkRegion’s outer areas, only about 30% ofthe trips even to the CBD are on com-muter rail, while over 90% of Tokyo’sare—though nearly all New York railcommuters sit comfortably and get therefaster than their motoring neighbors whilemany of Tokyo’s suffer what they call"commuter hell," packed so tightly that

passengers cannot move arms or legs.

Tokyo has been building new rail accessto the CBD rapidly, reducing but noteliminating commuter hell. So Japan isresorting to land-use policy as well, mov-ing activities from the CBD to subcentersin the suburbs, even considering movingthe national capital to a subcenter.

While fewer than 1% of trips within NewYork’s outer ring (not to the CBD) are viatransit and less than 3% in the older sub-urbs, a third of the trips within Tokyo’ssuburbs and exurbs are on transit. AroundParis, 10% of the suburban-exurban tripsare on transit, though the total density inouter Paris is much lower than NewYork’s comparable area. The reason isthat jobs and housing are clustered andrelated to each other and to transit. In theprocess, Paris’ exurbs remain 82% farmsand forests. Within New York City, thereis an opposite story. Even outside theCBD, New Yorkers own fewer cars thantheir counterparts in Paris and Londonand use their cars less. Their public trans-portation is not better, but they are clus-tered at relatively high density aroundsubway and bus stops.

In the U.S., metropolitan areas typicallytry to relieve congestion by building cir-cumferential highways so drivers can skirtcongestion in the center. But developmenttypically forms around the circumferentialhighway, quickly clogging it. Then a sec-ond ring of highways and even a thirdring and fourth ring are contemplated orbuilt—achieving the same level of con-gestion because development follows.Residents near these highways plead forpublic transit instead of widening theroads, but there is no place that transit canserve that could remotely compete withthe automobile, even when autos arecrawling. Paris and Tokyo are buildingcircumferential rail lines as well as high-ways because they have real places toconnect—new towns and subcentersdeliberately placed so they can be con-nected both to the CBD and the other sub-centers around the center. (This was thepattern recommended for this Region bythe 1929 Regional Plan.)

Connecting transport and land-use in theNew York Region is difficult becausemunicipalities have the responsibility forland-use—and there are 780 of them in

this Region. State TransportationDepartments have responsibility for trans-port policy, on the whole. No one has theresponsibility for raising the joint land-use/transport issues for serious public dis-cussion except in New Jersey where aState plan provides a framework.

Where From Here?To benefit from the three studies:

1 Examine the mechanisms by which theother metropolitan areas are doing somethings better than we are—transit opera-tions and technology in all three cities,planning and national-metropolitan rela-tions that make Tokyo and Paris more satisfactory places to move around, andtraffic safety measures of London.Particularly, look at the settlement pat-terns that promote walking and publictransit: subcenters, new towns and build-ing on old communities rather thansprawl.

2 Continue the international relationsthat produced the data. Konheim &Ketcham produced New York’s data(www.transport-link.com), in large partwith its own funds. New York needs asource of funds to continue comparativedata.

3 The cities should work together onstrategies to achieve the conscious publicwill needed to discipline the auto—pre-senting the damages of growing autodependence and the community decisionsneeded to discourage unnecessary autotrips.

4 Take action now to keep transportationcapacity equal to the economic growth inand near our CBD. Otherwise the hassleof being here could again outweigh thebenefits, and the cycle will return to "NewYork is dead." The dependable planning/implementation processes of Paris andTokyo should be considered.

ª

Bill Shore is Senior Associate at the Institute ofPublic Administration and is Secretary of theRegional Research Consortium, which wasfounded by IPA in 1996. Mr. Shore has heldseveral senior positions with the Regional PlanAssociation including Information Director,Senior Vice President and Senior Fellow.

7

by Janette Sadik-Khan, President,Company 39, an e-business subsidiary of Parsons Brinckerhoff

JSK: You were very instrumental indeveloping five-year plans at the MTAand developing a stable operations andmaintenance funding program. Is therea comparable funding program in theUK?

RK: At the moment, there is nothing.And that’s the main reason, certainly oneof the most important reasons why theLondon Underground is in such a sorrystate. I’ve had a chance to be on theUnderground network now, three or fourtimes. And everywhere you look there arethe signs of deterioration and decay.There is a pretty heroic workforce tryingto pull it together but it’s a losing battle atthe moment. The financial reason for thatis they never know what next year’s budg-et for investment is going to be.

JSK: How do they decide what they aregoing to do?

RK: What happens is they barter foreach year’s grant from the government.Some years it might be significant andother years it may not be. As a result, theycan’t plan from year to year. Also it is acash accounting system for an April toMarch fiscal year. So you find out inFebruary finally what your number is andif you don’t get it committed, you lose it.This means you have limited ways tospend the cash. It means that you have toobligate funds quickly so they end uppainting a lot of things and maybe theycan replace some track. But it means thatthe longer-term initiatives, anything thattakes say two years or longer, they arenever able to do. And this expenditurepattern has now come to haunt them.

JSK: I think that the money manage-ment skill you brought to the NYC MTAwill be certainly something that they lookforward to. This brings me to anotherquestion. Another key element of yoursuccess in rehabilitating the New Yorksystem was changing work rules andrelationships with the unions. Are theresimilar changes that are required inLondon?

RK: I don’t know enough about thelabor contracts and work rules that mightpotentially be an impediment. I’ve metwith the unions and I’ve told them that.Since I came with this reputation forbeing tough on the unions, I said youshould talk to the Transport WorkersUnion and they’ll tell you we had a prettygood relationship. They had already donethat so it wasn’t a very tense meeting. Isaid let me give you an example of whatcan happen over time if you are not pay-ing attention to the real world of work. Ajob might have been defined as a perfectlygood one in year 1 but by year 20, whilenot exactly outmoded, it had become avery narrow job because technology andskill levels changed. So at the MTA werealized that was a problem early on,especially in the Transit Authority so wedid something called broad banding. Wetried to broaden the scope of individualjobs and reduce dramatically the numberof different job titles. The union at firstthought this was an effort to reduce theirmembership through attrition because wewere trying to streamline the number ofjob titles. What we were really doing wassaying that individual jobs can be morechallenging and exciting. We still need asimilar number of people. They may needsome upgrading in skills and they mayneed to accept more challenge but thejobs would be changed to fit the world welive in and that would fit modern trans-portation technology. They finally boughtinto that and I said in London we’ll prob-ably go through a similar exercise but it’snever going to be confrontational. We’llget there but we’re not going to do itwithout the unions.

JSK: At the Partnership you raised theissue of the need to develop new mecha-nisms to fund major capital projects sothat agencies can plan for those projectsthat may take 10-20 years. How can weget political leaders to focus on creatingfunding programs that address long-termneeds, particularly at a time when offi-cials have a short-term perspective?

RK: I wish I could answer that questionin a way that would be credible. That’sthe toughest question of them all becauseif there were a good answer for it, youwouldn’t be asking the question. As longas I’ve been in this business, this has beena perplexing question. My view is thatyou have to, whether it’s at the state orfederal level, or say in London at the citylevel or the national government level,you have to identify a permanent sourceof revenue that’s committed to transporta-tion and in a way where it’s understoodwhat the modal splits are for allocatingthe funds. The modal split part of it couldchange, say every four or five years, get-ting back to your question about the five-year plan. It needs to be predictableenough so that you can actually have acapital plan that makes sense and get thework done and utilize it for collateral andcoverage of debt service. And that’s nothappening in England right now at all.Also it’s really starting to collapse here inNew York because we have this unbeliev-ably debt-loaded plan which finallyalmost toppled with the interest load sonow they have to go back to the drawingboard. I think the economy is really slow-ing and this debt loaded plan is really notgoing to go very far.

JSK: Do you think tolling the EastRiver bridges is a politically feasiblesolution to the funding shortfall weface? What strategies can be developedto make such a plan feasible?

RK: First of all, I’ve always said that allthe ways into the central business districtshould carry a price with them becauseyou have to limit the number of automo-biles. Those who choose to drive, for

INTERVIEW: Robert KileyCommisioner of Transport of London, former President and CEO, New York City Partnership

8

Can we regard transportation developmentas economic generator in cases wherepositive market externalities can be ascer-tained? The answer is a "qualified yes"since we need to recognize that theamount of growth is a function of thedegree of improved accessibility producedby a project (see Figure 2). And given thatin well-developed economies, where thein-place transportation network is quiteextensive, additional accessibility, evenfrom a large-scale capital project, cannotbe significant. Additionally, even this eco-nomic growth is confined primarily totransportation intensive sectors whereaccessibility matters (e.g., retail, agricul-ture or food distribution). Since contem-porary economies are fueled primarily byinnovations in the information and dataprocessing sectors overall, the amount oftransportation generated growth is ratherlimited.

All in all there is plenty of evidenceshowing long-term regional economicgrowth despite the lack of any significanttransport investment. Apparently, manyother forces ranging from a sharp rise ininternational trade, technological innova-tions, human capital betterment to suc-cessful local economic policies that cansupport growth. Hence, in general trans-portation development serves as a growthsupporter and not as a growth generator.By and large, within a reasonable degreeof regional accessibility, growth isachieved by an assortment of forces andpolicies, not necessarily transportationrelated.

Some Conceptual andEmpirical Disputes Given the common view explicated aboveon the relationship between transportationdevelopment and economic growth, in thissection I discuss three misconceptionsthat frequently appear in the popular andprofessional literature.

1. Accessibility benefits and potentialgrowth benefits can be added to producetotal benefits from a transport capitalinvestment. It has been argued that in theevaluation of transportation capital proj-ects, only direct travel time and costs sav-ings should be regarded as benefits fromthe project, since all other alleged bene-fits, in fact, result from the capitalization

of these costs savings (Mohring, 1993).The inclusion of other effects, like poten-tial economic growth, as additional bene-fits amounts, therefore, to double countingof benefits. In the absence of positiveexternalities the welfare gains (actuallythe change in consumer surplus), resultingfrom the primary transportation benefitsrepresent total benefits from this project.

2. Transportation improvements are asso-ciated with long-term economic growth;hence they must also generate it. A num-ber of authors have found correspondencebetween the timing of major transporta-tion improvements and long-term cyclesof economic growth. They have deduced,therefore, that the former is a major causeof the latter (Garrison, and Souleyrette,1996). But what is the cause and what isthe effect? Can key transportationadvances underlie economic growth (the"generator" function) or a surge in interre-gional and international trade, whichstrains the capacity of the in-place trans-portation systems, requires new trans-portation improvements and innovationsto sustain this growth (the "supporter"function)? The empirical historicalresearch literature on this question is quiteequivocal. To illustrate, in a renownedstudy, Fogel (1964), has analyzed theimpact of railroad development on theAmerican economic growth during the19th century. He concluded that whilerailways had a primary impact on the

costs of transport and that social savingshave resulted from the movement of agri-cultural output by rail, "no single innova-tion was vital for economic growth duringthe 19th century". Economic growth wasprimarily a consequence of the knowledgeacquired in the course of the scientificrevolution and this was the basis for amultiplicity of innovations. Thus, raildevelopment in the US has helped shapegrowth in a particular direction but wasnot a prerequisite for it.

3. Transportation improvements produceefficient spatial patterns thereby generateeconomic growth. A common view holdsthat improved transportation will stimu-late efficient spatial patterns of house-holds and businesses, which, in turn, willspur economic growth. This inference issupported by a vast amount of theoreticalanalysis, the main conclusion of which isthat improved accessibility will encouragefurther activity decentralization and, at thesame time, will intensify agglomerationand urbanization economies (Anas et al.,1998). How valid is this view in light ofavailable empirical evidence on metropol-itan expansion? Gordon and Richardson(1994), for example, have found that inthe Los Angeles metropolitan area overthe last two decades average travel timesand congestion levels have declined eventhough no significant investments in trans-port infrastructure facilities were made.The main reasons are the decentralization

Winter/Spring 2001

17

allocation of resources in the economy.Traffic congestion is an example of nega-tive allocative externalities, whereasfirms’ agglomeration represents positiveones.

Transportation accessibility improvementscan potentially trigger several major posi-tive externalities, which are susceptible toaccessibility enhancement. In turn, theycan boost productivity, reduce productioncosts and promote more efficient use ofresources. Collectively, these changes canbring about economic growth as definedat the outset. And these benefits must bein addition to the primary accessibilityimprovement benefits and not merelytheir market capitalization.

To summarize, the main argument regard-ing economic growth ensuing from trans-port infrastructure development is that themechanism that transforms accessibilitybenefits into economic growth benefits isthe presence of allocative positive exter-nalities in specific markets, which areamenable to improved accessibility. Thescale, spatial and temporal distribution ofthese externalities will affect the magni-tude and scope of economic growth, giventhe transportation investment. Noticeableexamples are labor markets economies; aneconomy of industrial agglomeration andtransportation markets economies. Animportant example of the latter is whentwo disjoint networks are linked by anewly constructed facility, thereby open-ing up for trade previously non-trading

markets . Another example is when a newfreight terminal enables intermodality(say, between truck and rail), whichimproves "just in time production", there-by reducing inventory costs to producers.

Is Transport a Generator orSupporter of EconomicGrowth?The common view regards transportationas a sufficient condition for economicgrowth in the sense that its developmentgenerates growth. At times transportdevelopment is also regarded as a neces-sary condition in the sense that unless fur-ther transport investments are madegrowth will retard. Are these claims trueor they hold only in some very specialcases? My principal argument is thattransportation development is neither anecessary nor a sufficient condition foreconomic growth. As depicted by Figure2 it is only when positive externalities canbe established that transportation canpotentially generate growth.

In general, transportation infrastructureacts as a binding constraint on the localeconomy. That is, if transportation capaci-ty is rather limited, given the level of eco-nomic activity in an area, its furtherexpansion will enable the region tobecome more competitive relative to adja-cent regions. Can this improved competi-tiveness be regarded as a long-run eco-nomic growth? In an open economy theanswer must be negative as factor mobili-ty, mainly of capital and labor, and thefrequently used economic preferentialpolicies, like tax incentives, can perhapsmake such an edge significant, but only inthe short-run. On the other hand, to regardthis constraining characteristic of thetransportation system as unimportant orinconsequential is a serious mistake. Inmany regions (e.g., new York metropoli-tan area), regional competitiveness canvastly be enhanced if critical transporta-tion investments, in particular, those relat-ed to freight movement were implement-ed. Given budget constraints, as long asthe time and costs savings from trans-portation investments yield a positivesocial rate of return they should be under-taken regardless if economic growth fol-lows.

Proposed Linkage between TransportationInvestment and Economic Growth

InvestmentMultiplier

WelfareGains

Infrastructure Investment $$

Travel EffectsNetwork Accessibility

Allocate Externalities

Economic Growth

Externalities Activity SpatialRedistribution

Primary Benefits Travel Time and Costs;

Traffic Volume

Pecuniary

Agglomeration:Firm’s Cost Reduction –Spatial and Organizational

LaborMarket

TransportNetworkEconomies

Environmental

Relative Pricesand Land Rent

New York Transportation Journal

16

Figure 2

whatever reason, must pay to enable thegreat bulk of people, 85% of them, tocome in by other means in order to makeManhattan work. It also makes Brooklynwork. It’s not just one borough; it’s atleast two. So, no free lunch. Secondly,technology has really gotten to the pointwhere this can be done with true facilityand ease and with enough wisdom that ifthere are people who should be allowed tobring their cars in because for whateverreason they cannot use other forms oftransportation, you give them a break. Ifyou want to let seniors have some dis-count, you can do that because with theE-ZPass, and the technology that liesbehind that, we don’t need to have toll-booths and barriers. We can just get to afixed point on a route whether it’s over abridge or through a tunnel, or throughsome other means that’s not now tolled,you start paying when you enter the city.And you might pay one price at rush hourand another price at 1 o’clock in themorning if you’re a truck. There are allkinds of ways to do this which results incongestion management and you get morecapacity out of the existing road systemand better trip times on the one hand andon the other hand you develop financialresources by collecting revenues from thetolls and the prices to invest back into thesubway and bus systems.

JSK: You have seen the city from differ-ent perspectives over several years ashead of the NYC Partnership. From anefficiency perspective, would you reor-ganize transportation in New York Cityand New York State?

RK: I think we are at the point wherewe are truly regional in New Jersey andNew York and I would definitely addConnecticut as far as commuter move-ments are concerned. There needs to besome way of developing policy andimplementing transportation programsboth on the surface and underground (onthe rail or on the roads) that commit allthree states, and I think there needs to besome sort of organizational solution tothat problem. I wish I were wise enoughto outline it for you but it could be to takethe MTA and extend it a little bit. TheMTA has a contract service withConnecticut for MetroNorth rail opera-tions and now the bi-state Port Authority

has rail operations through PATH. Inaddition, you have an independent NJTransit. I think these rail operationsshould probably be under one broadumbrella. In order to have a constituentbasis that would take into account peo-ple’s needs and concerns, which would bemore democratic, you might even want toelect some of the members to the Boardof such an agency. The truth is that thethree states are heavily dependent now onnon-automotive transportation. Most peo-ple can’t get to work without access totransportation other than cars. That’s notjust people coming into the central busi-ness district but people traveling to com-mercial and job concentrations on theperiphery. They really need to be able totravel there through means other thantheir own cars. Also, you can make park-ing rates reflect these same concerns. Itshould be very expensive to park in highlycongested areas, Manhattan being themost obvious place. We are nowhere nearwhere we need to be on parking fees,charging people enough to build up ourtransportation resources.

JSK: We still had difficulty getting evenbasic commuter benefits to be equalizedin a parking versus transit debate in thelast legislative session. The Partnershiphas been involved in reviews of trans-portation issues (Airtrain, Access to theRegion’s Core, the freight tunnel proj-ect). Are there similar studies underwayin the UK? Are there representatives ofthe business community who are willingto be involved in such studies in the UK?

RK: There really is not one place that isdirecting the planning process and send-ing out signals about what is really need-ed. To some extent the MTA and the PortAuthority have played that role in ourregion, and while there is a lot to bedesired, it is a lot better than nothing. Inthe UK, it is very hard to know where thatplanning function is. In fact it has beenopposed in the national government untilnow. The thing to understand about what’shappened in the UK is that you havedevolution with new regional govern-ments in London, as well as in Scotland,Wales and Northern Ireland. So there isnow the potential through the organizationthat I will be running, to be the center ofthat activity. Since this is a new organiza-

tion, and there is nothing in place at themoment, it’s going to take awhile toorganize that. I have been impressed bythe awareness of the business communityin the three or four organizations thatreflect business concerns, one of which iscalled London First, which is a lot like theNYC Partnership. They have long rangeplanning at the top of their agenda, just aswe do here. They are pressing very hard,and they are actually an effective pressuregroup for change. I was pleasantly sur-prised to discover that. But today there isno overriding planning capability and tounderscore that, the Underground doesnot now have a true assessment of thecondition of their own physical plant.They are going through a process, whichthey call a public-private partnership,where they are going to divide theUnderground into segments and bid it outto consortium companies, to do the equiv-alent of the "state of good repair" programthat the MTA has been doing for the last25 years. These contracts are being bidagainst a very unsatisfactory base lineassessment of the condition of the plant.I’m not a fan of this effort and I’m tryingto get it to change. One of the reasons forchanging is that they’ve never gonethrough this process before.

JSK: You talk about decentralization, itseems that in the UK on the one handthere seems to be more privatization anddecentralization but on the other handyou have more centralized regulationthan in the US. Could you comment onthat?

RK: They have in the UK this long tra-dition of a unitary central government thatholds all power. On the other hand, overthe last 20 years there is an accent on pri-vatizing activities, functions and organiza-tions that were basically governmentsponsored. It has worked in some cases asin British Air to use a very commonexample, and it seems to have spectacu-larly failed in another case, the privatiza-tion of British Rail. Almost everyone inEngland agrees that it absolutely has fall-en apart and they have the worst rail serv-ice since World War II. They are nowrevisiting the whole basis on which theyprivatize. Now there is a proposal to dosomething similar in privatizing theUnderground. I think there is this huge

Winter/Spring 2001

9continued on page 23

H ong Kong is a city of ten thousand legends, not all ofwhich are apocryphal.

One of the most recent concerns an eight year old boy makinghis first trip through Hong Kong's new international airport atChek Lap Kok on a sunlit afternoon some two months after itsJuly 6 opening in 1998.

He was standing all by himself on one of the broad entry rampsjust inside the south end of the airport terminal's vast departurehall, intently studying the full-sized model of a 1909 Farmanbiplane that hung in the open space next to the ramp. It was anexact replica of the primitive bamboo-and-canvas flyingmachine that had begun the Age of Flight in Hong Kong eighty-eight years earlier.

The boy had read newspaper stories about the biplane. Wantedto see it up close. But knew his parents would insist that therewasn't time to visit it on this trip. So he decided to check it outon his own, and managed to slip away unnoticed from his moth-er and father as they chatted with other grown-ups in the crowd-ed check-in line for the flight to Shanghai.

As he gazed at the fascinating old biplane, he became aware ofa beautiful woman standing near him on the ramp. Wearing atraditional jade-green Cheong Sam dress. With dramatic eyesand a face that looked as if it belonged in a book of Chinesefairy tales.

The woman smiled at him when he worked up the courage toturn and face her. He smiled back shyly. Then heard her begin totalk, in a strangely distant and musical voice. Telling him won-derful stories about the new airport.

• Like how it stands on a 4.8 square mile landfill platform nextto Lantau Island some 15 miles due west of Central HongKong, and incorporates the two small islands of Chek Lap Kokand Lam Chau....

• How its 121 acre passenger terminal contains nearly six mil-lion square feet of wide-open interior space. With 48 planegates, 288 check-in counters, 144 retail stores, 63 escalators, 54moving walkways, and an automated people mover runningalong its half-mile spine. Using tall glass walls and roof panelsto make maximum use of natural light. And gently slopingramps to connect its various levels....

• How the 21 mile Airport Railway speeds travelers to and fromsatellite air passenger terminals in downtown Kowloon andCentral Hong Kong in little more than twenty minutes. Intrains that depart every ten minutes. Whose interiors arearranged like Business Class in commercial airliners...

• How the 1.4 mile long Tsing Ma suspension bridge carriesthe rail line and the airport's 25 mile expressway system acrossthe broad Ma Wan Channel on the way to Kowloon....

• How Hong Kong built the airport, the rail line, the express-way system, the Tsing Ma Bridge, and two new tunnels underVictoria Harbor in only six years. For a cost of $21 billion (inU.S. dollars). Which turned out to be five percent less than itsoriginal cost estimate. But was still 30 percent more than thecost of the Channel Tunnel between England and France...

Fascinating stories full of facts and figures about what becameknown during the 1990s as "the world's largest constructionproject". Which left the boy spellbound...

HONG KONG BUILDS A NEW AIRPORTBy Ed Seeley

10

Total F u n d i n g S o u r c e sCost HK Gov. Private

(US$ Bill.) Gov. Corps. Firms

Program Total $20.9 $14.8 $3.2 $2.8*% of Program Total 100.0% 70.0% 15.3% 13.6%

Check Lap Kok Airport 9.6 5.9 1.7 2.0Airport Railway/Terminals 4.4 2.9 1.5 0.0Airport Expressway System 4.6 3.7 0.0 6.8New Land & Utilities 2.2 2.2 0.0 0.0

Airport Program: US$21 Billion

Total Site Number FloorCost Size of Bldgs. Space

(US$ Bill.) (acres) (Mill. F2)

New Towns Total $22.1 154.1 141 37.0

Hong Kong Central 3.4 14.1 5 4.5West Kowloon 6.5 33.5 23 11.7Olympic 4.2 39.6 25 6.8Tsing Yi 1.4 13.3 13 3.1Tung Chung (Phase One) 6.1 53.6 75 10.9

Hong Kong Disneyland $3.6 311 N.A. N.A.

Real Estate Developments: US$26 Billion

Winter/Spring 2001

I challenge the view depicted by Figure 1of the economic growth outcomes fromtransportation investment. To begin, asalready explained, economic growth is along-term phenomenon. Thus, to regardindirect multiplier effects as contributingto economic growth negates its basic defi-nition. Moreover, these effects ignore thespecific nature of transportation improve-ments and their unique effect on the eco-nomic behavior of firms and households.In general, various forms of governmentsponsored work programs, unrelated totransportation, can generate short-termincome, employment and other local eco-nomic effects.

Turning to the direct effects, I furtherchallenge the assumption implicit inFigure 1 that accessibility improvementsfrom transport capital investment neces-sarily promote economic growth. I presentthis argument in two steps. First, I notethe declining role of accessibilityimprovements in the contemporaryeconomies of cities and regions. I thenargue that several market conditions mustprevail in order for accessibility benefitsto potentially generate economic growthimpacts.

Because of key demographic, transporta-tion and economic trends, contemporary

Western economies are much less impact-ed by transportation improvements thanfew decades ago. To start with, there is amarked change in the relative importanceof work related trips, which traditionallywere the major cause of congestion, thusof capacity improvements. Data from theUK show that of the 8 major categories ofdaily trip purposes in 1994/96, work trav-el accounts for 18.6 percent of all trips,down from 22 percent twenty years earli-er. A similar phenomenon has beenobserved in the USA.

This trend is strongly related to anothermajor change, namely the development ofhighly dispersed employment pattern,mainly at the expense of the CBD. As aresult, commuting patterns have becomehighly complex, with cross commutingbecoming more important than travel tocity centers. Findings on auto commutingtrip times for the twenty largest USA met-ropolitan areas show that average triptimes have remained constant during the1980’s and 1990’s or were reduced.Apparently, the market operates throughthe relocation of firms and households toachieve the balance of keeping commut-ing times within tolerable limits.

The restructuring of the economy in thepostindustrial society is another major

structural trend. In today’s economy themain source of profits and market domi-nance is knowledge and information, amajor part of which is unrelated to trans-portation. New information and telecom-munication technologies are consideredmore vital to improved production anddistribution processes than transportationdoes.

The last structural change discussed hererelates to the effect of transportation onthe environment. In 1996 transport wasresponsible for over 25% of world pri-mary energy use and 23% of CO2 emis-sions from fossil fuel use, where devel-oped countries contribute the majority ofthis figure. Recently, environmental argu-ments have been linked to those of sus-tainability, connecting environmental con-cerns with those of economic develop-ment and equity. To achieve the objectivesof sustainable development, individualsand firms must carry out their daily activi-ties differently, mainly in ways that signif-icantly reduce travel.

In general, a large proportion of all trans-port investments is made to improveaccessibility and alleviate congestion,mainly for daily commuting and freightmovement. The simultaneous operation ofthe above trends lessens the alleged link-age between accessibility improvementsand economic growth as described inFigure 1. How then can transport invest-ments induce economic growth? Toanswer this question I now introduce analternative analytical framework, depictedin Figure 2.

Figure 2 highlights the idea that the mainoutput from a transportation investment, isnetwork accessibility improvement.Assuming a positive net value of theseeffects they also represent welfare gainsto households and firms. Subsequently,two additional effects may arise. First isthe impact of network accessibilityimprovements on activity location, whichif ensues, may improve spatial patternsand economic efficiency. Later I return tothis issue. The second potential result iseconomic growth. This effect is predicat-ed on the presence of certain market con-ditions, labeled in Figure 2 as "allocativeexternalities". These effects emanate fromthe non-compensatory action of one eco-nomic entity on the utility level of anoth-er, which in turn, can affect the efficient

Conventional View of the Effects ofTransportation Infrastructure Investment

Direct EffectsAccessibility Changes

Indirect Effects

Relocation,Land Rent, Urban Form

Consumer & Producer Surplus

Production andTransactionCost Savings

Externalities Technical Pecuniary

MultiplierEffects

Infrastructure Investment $$

15

Figure 1

This article examines the general ques-tion of whether, in advanced

economies, transport infrastructure invest-ments, can engender economic growth atthe regional level, or merely facilitate itsattainment when it transpires. This articlewill examine some key conceptual andanalytical issues that underlie this ques-tion and, with the help of some empiricalevidence, draw policy conclusions.

I begin by pointing to the prevalent beliefamong decision-makers and transportationanalysts that transportation developmentplays a vital role in enhancing economicgrowth by lowering production and distri-bution costs, improving labor productivityand stimulating private investments andtechnological innovations. Underlying thisconviction is the theory that the availabili-ty of fast, reliable and affordable trans-portation historically has been the build-ing block around which cities and regionshave developed and flourished. The abili-ty to move people and goods easily andeconomically is still used to explain therelative economic advantage of regionsand states.

Although I challenge this widespread per-ception, it is important to note its policyimplication. Proponents of this view tendto regard planned transportation infra-structure investments as a key policymeans for generating metropolitan,regional or national economic growth.Numerous statements by public officialsand policy makers support this opinionand its corollary that the lack of transportinvestments will necessarily impedefuture growth and productivity improve-ments. By and large, these views are heldas a "truism" even though the available

evidence on the subject is rather ambigu-ous. Moreover, in many cases thesealleged "economic growth impacts" areused to rationalize capital investmentprojects, even when it is difficult to acceptthem on the basis of their transportationeffects. Hence, the importance of thisinquiry into the nature of the relationshipbetween transportation improvements andeconomic growth.

In the present context I define "transporta-tion investment" as a capacity expansionor addition to an existing network ofroads, rail, waterways, hub terminals, tun-nels, bridges, airports and harbors. I fur-ther define "economic growth" as a con-tinuous process of annual increases in percapita income, factor productivity, nation-al, state or regional product and employ-ment. Mainly for practical reasons, inempirical analyses employment is themost well used measure of growth . I fur-ther recognize that transportation capitalimprovements are carried out incremental-ly, project-by-project over many years,and that each new facility constitutes buta segment of a larger network. Hence,while each new project needs to meetevaluation criteria, its primary transporta-tion impacts are appraised relative to thein-place network in terms of improvedtravel times, costs and traffic volumesover the network.

Given these definitions, is there a soundrationale for the above transportation-eco-nomic growth contentions? If so, what isthe underlying mechanism that links newtransport infrastructure investments witheconomic growth? How does this linkagemanifest itself in face of emerging formsof regional and national economies? If it

exists, how can we model and measure it?What does empirical evidence tell usabout the real-world impact of transportinvestments on growth? Given these ques-tions we also need to ask what are theimplications if these alleged linkages arerather loose or insignificant? Will it thenrequire a reassessment of the ways trans-portation projects are evaluated? Givenspace limitations in this article I willexamine these questions only very suc-cinctly, referring the reader to the book byBanister and Berechman (2000).

The Causality Question The common approach to the linkagebetween transportation investment andeconomic development suggests thattransportation investments generate twomajor effects: "indirect effects", mainlyeconomic multiplier and environmentalimpacts, and "direct effects" defined interms of accessibility improvementimpacts. The multiplier effect is a short-term phenomenon that results from thepublic-work nature of the investment as itgenerates employment and income in thelocal area, and that lasts only throughoutthe project’s implementation period. Thesecond category contains the transporta-tion benefits whose magnitude and spatialdistribution depend on the specific trans-portation facility (e.g., rail, port, or high-way), the network and various regionalfeatures. These benefits, in turn, areassumed to generate long-term growtheffects as they improve the economic per-formance of individuals and firms andgenerate more efficient locational pat-terns. Figure 1 depicts these alleged rela-tionships.

Generator or Supporter:Transport Investment and Economic GrowthBy Joseph Berechman Professor and Chairman, The Public Policy Program, Tel Aviv University, Israel and SeniorResearcher, University Transportation Research Center, The City College, New York.

This paper examines the general question of whether transport infrastructure investments can engender eco-nomic growth in well-developed economies. The paper first explains the nature of the problem and thenexplicates the possible linkage between transport investment and economic development. It concludes thattransportation mainly serves as a binding constraint on economic activity so that its expansion acts to facil-itate the achievement of externally induced economic growth. Only when some market conditions can beshown that accessibility improvements from transport investments can generate economic growth. But evenin this case the attainment of growth benefits is predicated on the design and enforcement of complementa-ry and supportive public policies.

14

The Airport Challenge A modern airport is one of the most important transportationfacilities for any metropolitan region that wishes to be a seri-ous player in the global economy. But it's often the most diffi-cult transportation facility to develop successfully.

An airport needs enormous amounts of open space and gen-erates lots of noise from its flight activities. This argues forlocating it in some distant corner of the metropolitan region withample amounts of vacant land and few residents to be botheredby noise. That's why Tokyo's Narita Airport is some 40 milesfrom the Ginza.

But most air travel activity is generated by the region's maincommercial and residential centers. If traveling between thesecenters and the airport is too time-consuming because of itsremote location, many potential visitors may avoid making busi-ness and vacation trips to the region. So "airport access traveltime" has to be minimized.

At the same time, a new airport can be a powerful economicdevelopment tool if these problems can be overcome. This isespecially true when the airport is designed as part of a true airtravel terminal complex that integrates airside facilities with theregion's major activity centers in ways that open up new develop-ment opportunities. All of which requires some fairly heroicurban planning.

But heroic planning has been the backbone of Hong Kong'sapproach to managing the development of its 423 square milemetropolitan region, where seven million people enjoy one of theworld's highest levels of per capita Gross Domestic Product. Soit's no surprise that the new air travel terminal complex centeredon Chek Lap Kok is as different from an old-fashioned big cityairport as a Boeing 777 is from that Farman biplane. Or that itsrail and expressway links also serve as the transportation spinefor new real estate development projects that are spectacular evenby Hong Kong standards.

To put all this in perspective, Hong Kong's per capita investmentin its US$21 billion airport development program would be

11

LANTAU ISLAND

Chek Lap Kok Airport$9.6B

Tung Chung$6.1B

75 Buildings

NEW TERRITORIES

HONG KONGISLAND

Hong Kong Central$3.9B

5 Buildings

Kai TakAirport(closed)

KOWLOON

Olympic$4.2B

25 Buildings

West Kowloon$6.5B

23 Buildings

Tsing Yi$1.4B

13 Buildings

Tsing Ma Bridge

"

#

Airport Railway$4.4B

Hong KongDisneyland

$3.6BAirport Expressway$9.6B

0 8 16 24

Miles

(and some other interesting things)

New York Transportation Journal

12

equivalent to the New York metropolitanregion spending nearly $70 billion on bet-ter air travel facilities during the next sixyears.

As the left-hand table on the title pageindicates, the program consisted of threemain investment packages.

1 $9.8 billion for the new airport atChek Lap KokIn its present form, the airport can han-dle 96,000 air travelers, 8,200 tonnes ofair cargo, and 500 landings and take-offs each day. But its landfill platform hasenough extra space for future expansion toraise these daily totals to 238,000 air trav-elers and 25,000 tonnes of air cargo.

Hong Kong's Airport Authority built andoperates the airport. The government fund-ed nearly two-thirds of its constructioncost through equity investments in theAuthority (which it owns), plus directspending for police, fire, and other publicfacilities on the airport site.

2 $4.6 billion for the AirportRailwayAs the fourth line of Hong Kong's state-of-the-art subway system, this high-speed rail line now carries 32 percent ofall those traveling between the airport'spassenger terminal and the rest of themetropolitan region.

Its satellite air passenger terminals inCentral Hong Kong and Kowloon serve asthe airport's downtown front doors.Travelers leaving Hong Kong can arrangetheir tickets at these terminals, receivetheir boarding passes, and check their bagsthrough to their destination airports beforeboarding express trains to reach theirflights at Chek Lap Kok.

The government-owned MTR Corporation(which operates the subway system) builtthe Airport Railway. Two-thirds of its costwas funded by new government equityinvestments in the Corporation, with MTRdebt and operating profits covering the rest.

3 $4.6 billion for the AirportExpressway SystemThe government's HighwaysDepartment built most of this system,including its three major highway links,the Tsing Ma Bridge, plus two otherbridges and a connecting tunnel on TsingYi Island. A private company built andoperates the system's 1.2-mile toll tunnelunder Victoria Harbor.

Hong Kong's government funded its 71percent share of the airport program'stotal cost without issuing any debt. Itfollowed its standard "pay-as-you-build"practice for funding large infrastructureprojects - generating $14.8 billion for the

airport program from its on-goingcapital revenues and operatingbudget surpluses. (During the pro-gram's six-year construction peri-od, these sources also funded thegovernment's $21 billion outlaysfor non-airport capital projects and$15 billion increase in its budgetreserves. But that's another story.)Most of the program's remainingfunds came from $3.2 billion indebt issued by the AirportAuthority and the MTRCorporation, plus $2.8 billion inprivate capital supplied by the

firms that built the toll tunnel plus the air-port's hotel, air cargo terminals, aircraftmaintenance depots, and certain otherfacilities.

The airport program's master plan intend-ed the new rail line and expressway sys-tem to form a transportation corridor for a

new group of large-scale real estate devel-opment projects. As the right-hand tableon the title page indicates, projects totalingUS$26 billion are currently under con-struction. They consist of:

1 The $22 billion package of five"New Towns"Hong Kong's real estate industry isfunding and building these high-risecommunities on 154 acres of landaround five stations along the AirportRailway. The MTR Corporation (which issupervising the projects) followed the air-port program master plan's guidelines inpreparing detailed plans for each commu-nity.

When these New Towns are completed in2007, their 141 buildings will contain 37million square feet of new floor space (40percent more than all existing floor spacein downtown Denver). This will providehomes for 86,000 Hong Kong residents,workspace for 123,000 jobs, 4,300 roomsfor travelers in seven hotels, and newstores for shoppers in six multi-level retailmalls.

2 The $3.6 billion "Hong KongDisneyland"This 311 acre theme park is being builtat Penny's Bay on Lantau Island, 7.5miles northeast of the new airport. Itwill be served by a new rail connectionfrom the Airport Railway.

Hong Kong Disneyland is example ofhow the government uses the immensewealth generated by its land and taxcollection monopolies to play a venturecapitalist role on behalf of the region. Itis providing nearly three-quarters of thecapital for the commercial corporation itcreated to build and operate the themepark. This is on top of $1.8 billion indirect government spending to prepare thepark site and build its roads, water andsewer systems, and other basic infrastruc-ture facilities.

The government is the principal owner ofthe theme park corporation, but (in the bestventure capitalist tradition) expects to sell aportion of its ownership to the investorpublic in the future. The Walt DisneyCompany holds a minority interest.

Why Hong Kong Needed ANew AirportHong Kong has been a key internationalair travel center since the 1930s, when itbecame the main Asian terminal for PanAmerican World Airways' trans-Pacificflying boat services and Great Britain'scolonial airline routes from Europe.

By the mid-1990s, half the world's popula-tion lived within five hours flying time ofHong Kong. Its annual air passenger vol-ume had reached nearly 30 million (aboutthe same as New York's JFK, which servesa metropolitan region with three timesHong Kong's population). Its 1.8 millionannual tonnes of air cargo made it one ofthe world's top generators of goodsshipped by air. More than 165,000 annualflights handled this air transportationactivity.

For 73 years, Hong Kong's commercialflights flew in and out of historic Kai TakAirport ("The Airport of the NineDragons") on the southeastern side ofKowloon. Like New York's LaGuardiaAirport, Kai Tak occupied a crampedshorefront site near Hong Kong's maincommercial centers and created seriousnoise problems for the 380,000 peoplewho lived in the surrounding communities.

By the end of the 1980s, Kai Tak was fastapproaching capacity and couldn't beexpanded to accommodate the air traveldemands of the 21st century. Governmentplanners studied several locations for areplacement airport and finally settled onthe Chek Lap Kok site off the north shoreof Lantau Island. The decision to proceedcame in September 1991, following dis-cussions between the British and Chinesegovernments over Hong Kong's 1997 tran-sition from a British colony to a largelyautonomous "special administrative regionof China".

Kai Tak ceased flight operations the nightbefore Chek Lap Kok opened. Its site willbe redeveloped into several large new resi-dential communities surrounded by land-scaped parks

Planning ConsiderationsHong Kong's government realized at theoutset that a new airport for the 21st cen-tury needed an environmentally-friendlylocation that could be closely linked withthe business centers generating most of theregion's air passenger trips and air cargotonnage. So the airport program's masterplan reflected the following considera-tions:

• The north shore of Lantau Islandoffered the best location for a new air-port. It faced the broad expanse of thePearl River Delta, allowing all landingsand take-offs to be made over water tokeep jet noise away from Hong Kong'sresidential areas.

• But Lantau was undeveloped and iso-lated, with access limited to ferry servic-es from Central Hong Kong andKowloon. So the airport would need newrail and highway connections to thesecommercial centers. As the map shows,their most logical route was along thenorth shore of Lantau, across the Ma WanChannel and Tsing Yi Island to the main-land, then down the west side of theKowloon peninsula and under VictoriaHarbor to Central Hong Kong.

• The rail link's stations in CentralHong Kong and Kowloon should bedeveloped into satellite air passengerterminals with a full range of landsideservices. Locating these services in thecommercial centers that generate most ofHong Kong's air passengers would smoothout check-in volumes during peak periodsand provide added conveniences for travelers.

• The airport's rail and highway linkswould also provide high-capacity trans-portation access for the first time toLantau Island and other undevelopedareas along their routes. These areascould provide badly-needed land to housethe region's growing population and eco-nomic activity. To develop this land in arational manner, planners sketched out thegeneral parameters for the five New Townsthat private developers are now building atstations along the rail link.

The end result of this master plan was anew benchmark for how air travel termi-nal complexes should serve urban soci-

eties. In the process of carrying out thisplan, Hong Kong generated a host of newideas for integrating commercial airportsmore effectively with the economic,social, and developmental realities of FirstWorld metropolitan regions. Many ofthese ideas can be adapted to help makeexisting airports work better.

Meanwhile, we left that eight year old boystanding on the ramp next to the Farmanbiplane at Chek Lap Kok, eagerly listen-ing to the woman in the jade-green dresstell him fascinating stories about the newairport.

Suddenly he heard familiar voices callinghis name. And saw his parents rushingtowards him up the ramp in a state ofhigh excitement. Before they could scoldhim for wandering off, he quickly assuredthem that he hadn't gotten lost. Thenturned to introduce his new friend.

But the woman was gone. And as his par-ents led him firmly away by the hand tocatch their flight, he tried to figure outhow she could have vanished so abruptly.

Several months later as the boy sat inschool back home in Hong Kong's spec-tacular New Town of Sha Tin, his teachertold the class about the Goddess of ChekLap Kok. According to legend, she hadrisen from the waters of the Pearl RiverDelta after a fierce typhoon long ago tobecome the guardian of Lantau's indige-nous fishermen.

The teacher's words made the boy remem-ber the woman in the jade-green dress.And he couldn't help wondering if theGoddess of Chek Lap Kok might havefound a new role for herself. As guardianof the 80,000 air travelers coming andgoing each day through Hong Kong'sstunning new airport.

There on the edge of Asia's dramatic"City of Life".

ª

Ed Seeley is a Brooklyn-based economist whospent 26 years in New York City government asa strategic planner and manager. This article isbased on material from the book he is currentlywriting on why Hong Kong has become one ofthe world’s most successful metropolitanregions.

Winter/Spring 2001

13