Houston Strategies

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The Chronicle recently published an Associated Press article "Inflation taking toll on infrastructure projects", listing huge cost increases for all types of infrastructure projects and reporting that the roughly 25% increase in highway funding in the recent federal infrastructure bill has already been consumed by inflation.

Building public transit trains and tunnels in the United States had become absurdly expensive even before the recent inflationary surge. Tory recently mentioned the 78% increase in the estimated cost of Austin's planned light rail, from $5.8 billion to $10.3 billion, with the tunnel section now projected to cost $978 million per mile. Other crazy-expensive projects include a rail tunnel extension in San Jose projected at $1.5 billion per mile, $521 million per mile for a mostly-elevated rail line in Honolulu, and Maryland's Purple Line light rail which is 4.5 years behind schedule and sustained a $1.4 billion cost increase to $210 million per mile.

Let's take a closer look at the costs and inflation for some transit and highway projects in Houston.

Overall Cost vs. Construction Cost

The desired metric for cost evaluation is overall project cost, including not only construction but also environmental studies, engineering, project management, utility adjustments, and right-of-way acquisition. Press reports normally include overall cost for transit projects. For highways, only construction cost is typically readily available. Highway project development (pre-construction) cost has historically been in the range of 20 to 25% of construction cost, but has recently risen to 29%. (Item 7A in May 2022, 1:43) I'll use the 29% cost factor to estimate the overall cost of highway projects.

Metro Light Rail

The original Red Line, which had good pre-Covid ridership, opened in 2004 and now seems like an unbelievable bargain at $44 million per mile, especially since it included complicated sections through downtown and the medical center. Around 10 years later, cost had exploded to $143 million per mile for the 2013 Red Line North extension (328% higher) and $153 million per mile in 2015 for the new Green and Purple Lines (351% higher), all having much lower ridership than the original Red Line.

There is no recent data for Houston since there have been no major transit projects since 2015. In 2018 the cost of new light rail was averaging around $202 million per mile nationally, and is surely higher now. Extension of the Green or Purple Line to Hobby Airport is included in the MetroNext Plan. A 2018 plan document listed the project at an unrealistically low $881 millon for 7.3 miles, $120 million per mile, for the Purple Line option and $900 million for 6.4 miles, $141 million per mile, for the Green Line option.

The Hobby Airport extension for the Green and Purple lines is now listed in the most recent H-GAC document (May 2022) at $2.678 billion. Length is listed at 7.4 miles, which would be $362 million per mile (page 70). However, the length seems suspicious, since I come up with 10.6 miles, which would be $252 million per mile. The planned Red Line 5.9 mile north extension was listed in the 2021 document (page 77) at $1.561 billion but is now listed in the 2022 document (page 70) at $1.098 billion for 5.9 miles, $186 million per mile, which seems low. These numbers are in the column for year-of-expenditure cost, which is inflated to the project construction year, and both are listed for year 2040, which seems too far in the future. While we can't make any per-mile cost comparisons from the H-GAC numbers, it is safe to conclude that the cost is going up and will be much higher than the numbers used to get approval of MetroNext.

Silver Line Bus Rapid Transit

Houston's first BRT line opened in August 2020 with a reported cost of $192.5 million, which presumably includes the $57 million elevated connector along the West Loop and the nicely landscaped reconstruction of Post Oak. Funded by the Uptown district, it is built to high standards to enhance the area's image. Tory and I are proponents of BRT as an alternative to light rail because BRT provides all the benefits of light rail with far greater flexibility (for example buses can use it and then proceed onto HOV lanes) and at a much lower cost, around one-quarter to one-third of light rail. Cost-wise, the Silver Line delivers, coming in at $46 million per mile. But it had bad timing of opening during the Covid-induced public transit ridership collapse and its ridership, most recently 741 boardings per weekday, is far below projections. As Tory has mentioned, it is preferable to have a low-cost ridership bust instead of the high-cost bust that we have with the Green and Purple lines light rail.

University Line Bus Rapid Transit

The anti-highway Chronicle was quick to report on cost increases for NHHIP in the May 2022 H-GAC 4-year transportation plan, but (no surprise) they did not mention a large cost increase for the University Line.

The 25.3-mile bus rapid transit University Line is a priority project for Metro. Estimated at $1.56 billion in a 2018 Metro document, is now listed at $2.135 billion (page 12), up 37% to $84.4 million per mile, which is 84% higher than the premium-design Silver Line. (The official Metro page has no cost information.)

This cost is shocking considering the simplicity of two-lane BRT construction. Around 8 miles will be built on the clear strip of land adjacent to the Westpark Tollway, about as simple as it gets, and the rest will run on streets like the Silver Line on Post Oak, which will involve more complexity and street rebuilding. As we'll see below, TxDOT can build major freeway expansions for around $60 million per mile and smaller freeways for around $30 million per mile.

Freeways, Tollways, and Streets

TxDOT has detailed online data for the highway cost index which is updated monthly. The chart below from the official page shows that the Texas Highway Cost Index has increased slowly over the last 10 years. At the end of 2021 the index was up 28.3% since 2012, a compound annual rate of 2.5%, only a little higher than the CPI rate of 2.1% during this period. This relatively low rate of highway cost inflation has kept highway construction affordable. However, we can see a very strong upward trend in recent months, consistent with the press report mentioned at the top of this post. No Houston projects have been adversely affected so far, but projects in Austin, El Paso, and San Antonio sustained big increases.

For its financial planning, TxDOT uses a highway cost inflation rate of 4%, which is close to the observed rate for the period from 1998 to 2017, which had highway cost inflation of 4.3% per year compared to the CPI of 2.2%.

For TxDOT projects, there has not been much work on freeway main lanes in Houston in recent years, but of course drivers on the Gulf Freeway always see orange barrels, like they've been seeing since the freeway opened in 1948. Projects around Houston are used to determine typical freeway costs.

Let's start with a regular street project financed by Harris County, all-new construction of Gessner to the standard design with 4 lanes and a median between West Road and Fallbrook Drive. Estimated cost is $8.1 million per mile.

The extension of the Fort Bend Parkway toll road is the simplest freeway/tollway possible, 4 lanes and no frontage roads. The overall cost may be inflated due to right-of-way acquisition. Overall cost is $27.1 million per mile.

TxDOT recently completed rebuilding and widening of 12.5 miles of Interstate 45 south of Huntsville. The estimated overall cost is likely higher than the actual cost since there was negligible right-of-way acquisition for this project.

Work is just underway on a major expansion in Huntsville to widen Interstate 45 to 10 main lanes and rebuild the frontage roads. Estimated overall cost is $59.7 million per mile.

There are six contacts in progress on the Gulf Freeway between NASA 1 and the causeway (1 2 3 4 5 6). The estimated cost of $61.6 million per mile is probably higher than the actual cost since these projects had very little right-of-way acquisition.

Construction of the new SH 146 freeway through Seabook and Kemah is a complicated project with very long elevated structures and a new high bridge over the Clear Lake channel. This project had substantial right-of-way clearance, so the estimated overall cost of $71 million per mile could be lower than the actual cost.

NHHIP

Of course, NHHIP is going to be much more expensive than the typical projects mentioned above. NHHIP is not just a freeway, but also an urban improvement project (sinking two miles below ground and retiring the Pierce Elevated) and it includes the managed lanes which will be used for public transit. NHHIP involves substantial right-of-way acquisition, highly complex utility and excavation work through downtown, very complex interchanges, widening throughout the corridor, and has $2.1 billion in property compensation and remediation (page 10). With the current cost estimate of $9.7 billion, the 26.4-mile project (EIS page 3-14) averages $367 million per mile. At a 6/24 H-GAC meeting, TxDOT Houston manager Eliza Paul warned that we can expect more cost increases. While this is expensive, it provides a tremendous amount of infrastructure compared to transit projects. Compare any section of NHHIP to a light rail line or BRT line, and the amount of end product provided by NHHIP completely dwarfs any transit project. Trips served will also dwarf transit. And NHHIP has managed lanes, which will likely carry more transit patrons than light rail lines.

Conclusion

And the winner for best value is...freeways! If we estimate the current cost of light rail at $200 million per mile, major freeway expansion at around $60 million per mile costs only about 30% of the cost of light rail. Medium-size freeway expansions and small new freeways or tollways (e.g. Fort Bend Parkway) cost about $25 to $30 million per mile, around 15% of the cost of light rail. The Silver Line bus rapid transit, $46 million per mile, delivered good cost savings compared to light rail (albeit with low ridership so far), but the estimated $84 million per mile cost of the University Line is high.

The freeway/tollway value proposition is hugely enhanced by the number of trips served, with busy freeways generally serving between 100,000 to 300,000 trips per day at any single point, and the busiest freeways such as the Katy Freeway over 300,000 at any point. The most recent data from Metro for May 2022 reports weekday boardings (entire line, not a specific point) at 29,841 for the Red Line, and the still cringe-worthy low ridership for the Green Line at 3483 and Purple Line at 3307. The Silver Line BRT had 741 daily boardings.

The highway construction cost index grew at a rate of only 2.5% per year over the last 10 years, with longer-term increases back to the 1990s around 4% per year. While there's no readily available statistic for transit construction costs and we don't have any recent data for Houston, there was a tripling of light rail cost between 2004 and 2015 (a compound rate around 12% per year). Severe cost escalation of transit projects around the country indicate an ongoing serious inflation problem with major transit projects.

Now, we just need to hope the recent infrastructure inflation surge is short-lived.