By Chris McCahill
Fitch Rating—the third largest credit rating agency in the U.S.—acknowledged earlier this month that we may be entering a new era in travel demand, which will likely have a major impact on transportation infrastructure spending. In a recent commentary article, they point to record transit use and multi-family home construction as two key trends affecting this change. From the article:
In our view, the transportation needs of the next 50 years will be markedly different from those of the past 50 years. U.S. policymakers must begin adapting their current decisions to these future needs. If these trends persist and meaningful policy changes are not made, the risk to the public transportation system would have negative implications for the entire economy.
As Fitch points out, these new trends are still in their early development. But some transportation agencies are already seeing exceptionally low demand on recent projects, which has important implications for past and future spending decisions. As reported in the Philadelphia Inquirer, tolling agencies in Delaware and Pennsylvania anticipated substantial traffic growth to help pay for multi-million dollar highway expansion projects completed in the past decade or so. Traffic on those facilities has either stayed flat or declined. Traffic has dropped by 10 percent since 2005 along the New Jersey Turnpike, which is currently being widened at a cost of $2.5 billion. Similarly, traffic on Seattle’s Alaskan Way Viaduct dropped by more than 40 percent, just as WSDOT began construction on a $3.1 billion replacement project.
According to the Inquirer, James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, attributes these lower traffic numbers largely to changing habits and demands among the millennial generation, which is driving considerably less. This is true but, as SSTI reported, the shift appears to be due to a much larger range of factors including a saturated automobile market, constrained travel time budgets, and growing preference for walkable lifestyles among many age groups. Whatever the reasons, these changes are forcing (or will soon force) agencies to rethink how they will generate revenues and how they will prioritize investments to meet changing demands in the coming decades.
Chris McCahill is a Senior Associate at SSTI.