VMT in the news: A warning to investors, a policy lesson for Congress, a reality check on climate policy, and charts

By Eric Sundquist

Flat-to-declining highway transportation demand has been with us for about a decade, and consensus is building for the position that it is not a historic aberration but rather a durable trend. A roundup of recent VMT-related news:

VMT data has prompted Fitch Rating to caution toll road investors about revenues. Fitch, an international credit rating firm, said:

The revenue of some toll roads may come under pressure if the driving decline trend continues for the long run, according to Fitch Ratings. Americans have driven less each year since 2004 and those ages 16 to 34 have reduced their driving more than any other age group.

Toll roads with meaningful un-tolled competition, especially those designed to relieve congestion, could be vulnerable because their value would diminish with slower traffic growth.…

In our view, these trends could have an impact given the U.S.’s current dependence on the user-fee infrastructure development model. If these reductions persist, greater public subsidies would be required to fund still-needed new projects and provide credit stability.

Meanwhile, U.S. DOT is emphasizing the VMT trend as a fundamental reason for federal transportation revenue shortfalls. Testifying before a subcommittee of the House Transportation and Infrastructure Committee, Undersecretary Polly Trottenberg said:

It is generally recognized that the decline in VMT, and the corresponding decrease in fuel tax revenue between 2007 and 2009, was partially a reflection of fewer people and goods moving on our Nation’s highways as economic activity slowed. However, evidence suggests that the flattening or decline of VMT is a long-term trend independent of the recession, as VMT has generally continued to decline annually since 2009 when the economy began to recover.

The most recent moving 12-month VMT figures from FHWA show that total VMT was down by 0.2 percent for the period ending May 2013 compared to the period ending May 2012. Per capita VMT was down 0.9 percent over the same time.

While the decline is reducing fuel tax and toll revenues, it also is creating environmental benefits. For example, compared to business as usual—the period 1997-2003—VMT in the period 2007-13 is down 12 percent, far exceeding the most optimistic scenarios in a 2007 EPA “wedge analysis” of policy options to reduce greenhouse gas emissions. The most ambitious scenario in that report involved gradually accelerating policy changes to achieve VMT that is 15 percent below business as usual by 2050.

Finally, from the University of Michigan comes a report examining the decline in driving light-duty vehicles. Figure 1, for example, shows U.S. VMT four ways.

VMT chart - multi factorsThe report concludes:

Although the report also presents trends in the absolute distances driven, of primary interest were the distances driven per person, per licensed driver, per household, and per registered vehicle. All of these rates reached their maxima in 2004—four years prior to the beginning of the current economic downturn—and decreased by 5% to 9% by 2011. These reductions likely reflect, in part, noneconomic changes in society that influence the need for vehicles (e.g., increased telecommuting, increased use of public transportation, increased urbanization of the population, and changes in the age composition of drivers). Because the onset of the reductions in the driving rates was not the result of short-term, economic changes, the 2004 maxima in the distance-driven rates have a reasonable chance of being long-term peaks as well. An exception is the rate per registered vehicle. Should the numbers of vehicles per person, per driver, and per household continue to fall,…it is possible that the distance driven per vehicle would eventually start to increase and thus this rate has a better chance in the future of surpassing the 2004 maximum.

Eric Sundquist is Managing Director of SSTI.