Archives for August 2020

Future of Travel: Transportation’s Pandemic New Normal

[3 minute read]

As the pandemic rages and certainty on almost everything is a daily moving target, one thing appears certain: we will not be returning to ‘normal’ anytime soon. And that means, the way we travel, commute, and vacation, at least in the medium-term, has changed.

WHAT’S ‘NORMAL’ ANYWAY?   

While the world waits for a vaccine, travelers and commuters are increasingly hesitant to use traditional modes of transportation. A June 2020 survey of 11,000 people released by Dynata, a global online market research firm, found that:

  • 30% surveyed do not feel comfortable flying until restrictions are lifted
  • 40% surveyed no longer use taxi or rideshare services
  • Public transportation usage is at only 60% of normal levels

Additionally, >80% of respondents indicated they would ‘definitely not’ plan a vacation during the pandemic.

Figure 1

SAME ROADS, DIFFERENT VEHICLES

Reluctance to engage in air travel, public transit, taxi / ridesharing, and traditional vacation-planning has led consumers to seek alternative modes of transportation. This shift in behavior has resulted in an unprecedented shortage of bicycles and RVs. In April, U.S. bicycle sales (including accessories) hit $1 billion, up 75% from previous years. As of late-June, RV dealers have seen a 170% jump in RV turnover compared to the previous year. RV rentals have increased 1,600% since April.

These trends are a by-product of an overwhelming belief that private vehicles are safer. In another April survey by consultancy, Capgemini, 75% of people indicated ‘greater control of hygiene in a vehicle I own’ as a key-driver for a car purchase.

Figure 2

IMPLICATIONS ABOUND

So, what are some potential implications of these trends? Severe bicycle shortages with record sales and spiking rentals indicate a ‘back-to-basics’ transportation approach for many. Travelers eschewing traditional vacation plans in favor of domestic travel in RVs and campers will mean vacationers hitting the highways and heading to (presumably) outdoor attractions. Increased private vehicle usage coupled with decreased ridesharing and public transit will potentially create congestion issues for commuters. Decreased public transit use will also mean a sizeable fare, toll, and dedicated tax revenue loss. An analysis of New York’s M.T.A. finances by consultancy McKinsey & Company projects losses as high as $8.5B by end of year.

SHIFTING GEARS

With this confluence of implications, how can transportation planners adapt? Planners in some of the hardest hit cities around the world from Paris to Oakland to Montreal have quickly pivoted to expanding bicycle and pedestrian options. In Paris, a plan to implement more than 400 miles of brand-new pop-up bike lines is already underway. Oakland has committed to making ~10% of streets car-free for the foreseeable future. Montreal is adding 70 extra miles of new bicycle and pedestrian paths. In Milan, a radical plan to shrink a major four-lane car road to only two, will support an effort to install six-foot wide bike lanes and pedestrian walkways.

CHANGING LANES

Ultimately these planners hope to not only adapt to the new travel implications, but to catalyze a paradigm shift in transportation. And while encouraging a shift to bike and pedestrian lanes will not address all pandemic-related transportation implications, a failure to do so could certainly aggravate conditions. And these changes will have to be implemented quickly. Former commissioner of NYC Transportation Department, Janette Sadik-Khan has stated that, “what might have been a 2030 plan is now a 2020 plan.” The U.K. has committed $2.6B to walking and cycling projects in the country, with $315M already fast-tracked for new bike and pedestrian infrastructure.  

DRIVING A NEW FUTURE

While the future is far from certain, what we do know is that the future of travel is changing. What is required of transportation planners, now more than ever, is an ability to quickly adapt and collaborate. Technology will certainly play a key role in this. Especially as we remain sequestered at home waiting for a vaccine. Even once a vaccine has been approved, it may be some time before the threat of the virus is eradicated, if ever. What we can confidently say here at EcoInteractive is that we are with you, and we have your back. As transportation planners plan for a shifting future, our technology and transportation expertise are here to help in any way we can. Have thoughts? We’d love to hear from you. You can reach us at [email protected].

Local Taxes and Investors Fund Transportation During COVID-19

[5 minute read]

As Capitol Hill continues to haggle over the final form of federal aid in the next stimulus bill – state and municipal transportation agencies are taking matters into their own hands to meet the significant budget shortfalls they’re potentially bracing for 2020 and 2021.

COST CONTAINMENT

State DOTs have prepared budget revisions or draft requests that reflect cuts to capital investment plans where appropriate. Municipal and transit agencies facing sharper revenue declines have implemented furloughs or voluntary buyouts to more aggressively cut costs.

While politically and financially difficult to pass everywhere during a public health crisis, some regions are raising local taxes or putting tax measures up for vote on the November ballot to plug revenue shortfalls.  

LOCAL TAXES

In San Francisco, city supervisors just passed a $40 million sales tax measure to help shore up the battered regional commuter train Caltrans’ finances, where ridership dropped 97% as a result of COVID-19.

In a bolder move, the Portland Metro Council unanimously voted in July to refer a historic $5 billion tax measure to the November ballot that would make significant investments in regional transportation infrastructure for roads and transit routes.    

FRIENDLY MUNICIPAL BOND MARKET

Some agencies are finding that voters may be not be the only ones willing to invest in transportation. One unexpected bright spot lately in government financing has been tapping the capital markets at relatively affordable rates to sell transportation bonds.

Investment managers responsible for leading taxable municipal bond sales have reported strong demand from investors for the foreseeable future. Transportation bonds still present a value buy for many yield-starved investors, compared to other more expensive government debt with higher risk profile.

Strong investor appetite thus far has ensured that newly issued transportation debt from state or local agencies are purchased quickly. The broader market rally driven by the enormous financial support from the Federal Reserve since March has benefited government-backed bonds as well– providing a much-needed source of financing for transportation and transit agencies.

In the next several weeks, more than $14 billion in municipal bonds are expected to be sold. These include the Texas Transportation Commissions’s ~$1 billion taxable general obligation bonds, the Michigan Department of Transportation’s $3.5 billion bond for road repairs, and Alaska’s $88.9 million bond for highway and rail line projects.

Some state legislatures see not only the need to support transportation infrastructure, but also the job creation benefit of transportation investments during an economic recovery. The Massachusetts Senate recently approved a $17 billion transportation bond bill to invest in major infrastructure projects including construction, regional initiatives, traffic congestion and transportation network company data sharing. Connecticut approved $650 million in state borrowing for transportation improvements among other aid initiatives.

While broad-based investor enthusiasm continues for the foreseeable future, state and local transportation agencies vested with borrowing authorities should quickly take advantage of low borrowing rates by selling new bonds. As second waves of COVID-19 potentially threaten nascent economic re-opening in certain regions, it is prudent for agencies to secure capital while it is abundantly available to future-proof against the uncertainties of fighting COVID-19, or fickle investor sentiment.

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