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Transportation leadership you can trust. presented to Talking Freight Seminar presented by Michael Fischer Cambridge Systematics, Inc. December 12, 2007.

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Presentation on theme: "Transportation leadership you can trust. presented to Talking Freight Seminar presented by Michael Fischer Cambridge Systematics, Inc. December 12, 2007."— Presentation transcript:

1 Transportation leadership you can trust. presented to Talking Freight Seminar presented by Michael Fischer Cambridge Systematics, Inc. December 12, 2007 Economic Impacts of Large Scale Freight Investments

2 1 Overview Background and Purpose Economic Impact Analysis Framework Case Study – Baltimore Rail Tunnel Overview of Toolbox

3 2 What Is Economic Impact Analysis? Investments affect transportation system performance Transportation system performance affects business costs, output, and profitability – economic effects Economic effects impact general economy Output (GDP), employment, income – macro economy Geography of effects Incidence of effects Focus of guidebook is economic effects National scale of benefits – large scale Public vs. private impacts Logistics and supply chain effects – second order

4 3 Challenges for Evaluating Large Scale Projects Public benefit consideration National level significance Multiple modes of travel Allocation of costs and benefits among wide array of stakeholders

5 4 Cost and Impact Perspectives Freight Carriers (impact on delivery cost, access, performance) Freight System Users (impact on access to suppliers & customers) Public Interest (income for workers, prices for consumers, safety, security, government) Non-Freight Users (impact on Nonfreight Users (impact on passenger travel & nonfreight-reliant industries) Large Scale Freight Project (impact on transport capacity and performance)

6 5 Five-Step Framework Step 1 – Classify the Type of Project (Transportation Impact) Facility location – Local entry/access point, regional corridor, facility Modes involved – Air, water, rail, truck, combinations of modes Transport change – Capacity, access, speed/flow, and cost Investment – Expand existing facility, build new or alternative facility Step 2 – Define the Relevant Evaluation Issues (Economic Impact) National and international scale freight network capacity and level-of-service needs Economic competitiveness, growth, productivity, and trade Benefits to specific regions, modes, or industry-specific targets Allocation of costs and benefits among affected parties to assess equitable funding Step 3 –Tools for Calculation of Transportation Impacts Network analysis – Providing links, nodes, capacity, and performance – rail, highway Facility handling analysis – Capacity/Cost for ports, terminals, bridges, tunnels Logistics analysis – Ultimate cost implications of mode/facility choices

7 6 Five-Step Framework (continued) Step 4 –Tools for Calculation of Expected Economic Impacts Form of economic impact – Cost reduction, productivity, income generation, jobs Geography of impacted markets – Local, regional, national, international Distribution of economic impacts – Commodity and economic sector Models – Supply chain, regional economic growth, national productivity, int. trade Step 5 – Decision Methods Benefit/cost analysis Cost-effectiveness analysis Equity impact analysis Multicriteria weighting analysis

8 7 Basic Data Requirements Transportation impact data Network supply conditions Travel demand patterns Economic evaluation factors Economic performance measures Economic value of performance impacts

9 8 Transport Network and Origin-Destination Freight Flow Pattern (by Commodity, Mode) (B) Freight Transport Performance & Access Impact on Existing Freight Patterns: Time, Cost, Safety By Mode, Purpose Impact on Modal Access to: Rail/Hwy Intermodal Air, Sea Terminals (C) Economic Impact Industry Cost Impact: Users Reliant Sectors Market Access Impact: Access to Markets Int. Trade Ports (C) Impact on the Economy Interindustry Cost Flows Domestic Price/Cost Response Market & Int. Trade Growth Response (D) Benefit-Cost Analysis (D) Economic Impact Analysis Components Transport Models Network and terminal performance Logistics cost and mode share Economic Models User benefits Market access Econ. simulation Decision Support B/C Cost effectiveness Equity impact Multicriteria Personal & Environ Impact (A) Baseline Demand & Supply

10 9 Step 1: Define Project Type Functional Activities Facility Type Types of users and spatial scope of impact Transportation Improvement Categories Transportation Benefit Metrics

11 10 Table 3.1Examples of Projects by Category of Transportation Improvement Improvement CategoryProject ActionMode Capacity Expansion – LinkAdd general public lanesHighway Add truck-only lanesHighway Add trackRail Upgrade track (speed or weight)Rail Upgrade/eliminate grade crossingRail/Highway Upgrade locks/damsWater Navigable waterway improvementWater Tunnel upgradesRail Correct design deficienciesAll Capacity Expansion – TerminalChannel deepening – harborWater Air draft improvementWater Added lift capacityRail/Water Added terminal storage capacityRail/Water Added gate capacityRail/Water

12 11 Table 3.1Examples of Projects by Category of Transportation Improvement (continued) Improvement CategoryProject ActionMode Operational ImprovementsRoadway geometricsHighway Track alignmentsRail Signalization improvementsHighway Electronic controlRail Intelligent transportation systemsAll Information systems – scheduling/cargo visibility All LCV upgradesHighway Hours of operationAll ConnectivityIntermodal connector improvementsAll On-dock/near-dock railRail/Water Gap closureRail/Highway Short haul railRail

13 12 Table 3.2Transportation Benefits and Metrics by Project Type Project TypeModeTransportation BenefitsMetrics Add general purpose lanes HighwayCongestion – Travel time savingsTravel time Reliability – Reduced incident impactNonrecurrent delay Potential accident reductionAccidents Add truck-only lanes HighwayCongestion – Travel time savingsTravel time Reliability – Reduced incident impactNonrecurrent delay Potential accident reductionAccidents Add track/ new link Rail/HwyCongestion – Time savings/car cyclingTravel time, cycle time Potential reliability – Queue impactOn time performance Diversion to rail reduces congestionVolume, travel time Upgrade track (speed or weight) RailImproved travel time, railcar cycle timeNew weight/speed Potential reliabilityOn time performance Potential safetyAccidents Upgrade/ eliminate grade crossing Rail/HwyPotential speed/travel time savingsAverage speed Accident reduction – Reliability savings Accidents

14 13 Step 2: Define Evaluation Issues Identifying Issues and Audiences National and Local Issues Stakeholders: Incidence of Benefits and Costs Alternative Impact Metrics

15 14 Step 3: Transportation Impact Tools Identification of Transportation Efficiency Benefits Mode-Specific Performance Analysis Network and terminal performance Nontraditional metrics (e.g., reliability) Modal Diversion Analysis Treatment of Carrier and Shipper Costs – market relationships of costs and prices Final Analysis and Presentation of Results

16 15 Example Portrayal of Findings from Transportation Analysis TruckRailAirSea System Performance Impacts  Increased Vehicle Capacity (TEUs or tons per vehicle)  Increased Line or Terminal Capacity (vehicles per hour)  Increased Schedule Frequency  Reduction in Recurrent Interchange or Bottleneck Delays  Reduction in Nonrecurrent Incident Delays  Improved Safety System Throughput Changes  Predicted Change in Throughput Volume Shipper Impacts  Reduced Transport Costs  Reduced Logistics Costs  Improved Productivity  Improved Terminal Access  Enlarged Delivery Market Area Access

17 16 Step 4: Select and Apply Economic Impact Tool Screening: Overall Economic Benefit Industry Reorganization Effects Establishing National and Local Distinctions Selection and Application of Economic Models Final Analysis and Presentation of Results

18 17 Measuring the Economic Impacts of Transportation Projects InputOutputFinal Output National Economic Impacts  Reduced Transport Costs  Reduced Logistics Costs  Business Market Expansion  Exports and Imports  Total U.S. output  GDP (Value Added)  Personal income Local/Regional Economic Impacts  Change in local production costs a ; or  Change in final demand b ; or  Change in accessibility/ quality of rail, air/sea port, highway c  Total local output a,b  Output from new business attraction c  Local personal income a  Local GDP (value added) a  State and local tax revenue a  Value of externalities (discussed elsewhere)

19 18 Measuring the Economic Impacts of Transportation Projects (continued) InputOutputFinal Output Sector-Specific Economic Impacts  Change in production costs  Employment by freight carriers (by mode)  Output by freight carriers (by mode)  Profits by freight carriers (by mode)  Employment at logistics firms  Output and Profits logistics firms  Employment in nontransportation sectors d  Output in nontransportation sectors d  Profits in nontransportation sectors d a Denotes econometric model; b Denotes multiplier analysis; c Denotes business attraction model; and d Denotes stratification by North American Industrial Classification System.

20 19 Rough “First Cut” Estimate of the Supply Chain Benefit from a 10% Transportation Improvement Source:Boston Logistics Group, Inc. Note:These benefits are indicative and preliminary estimates only that are based on average companies in a broad cross-section of industries, including many that have little transportation cost and do not move physical product. More precise estimates that are targeted at specific Supply Chain Types™ should be developed using the tools referenced throughout this text. Infrastructural Benefit Supply Chain Impact Supply Chain Benefit Expressed As % of Operating Cost Supply Chain Benefit Expressed As % of Transport Cost 10% Transport Cost Reduction Lower material cost by substituting farther cheaper sources 0.1%1.5% Consolidate plants due to extended reach0.2%4.1% Switch modes and reduce shipment size, decreasing inventory 0.1%1.2% 10% Capacity Increase Less safety stock0.1%1.1% Rationalization of fleet and warehouse assets0.01%0.3% Secondary Effects Increasing service levelsNot quantified Converting cost savings into price reductionsNot quantified On demand supply chainsNot quantified

21 20 Classification of Shipper Types Source:Boston Logistics Group, Inc. FLOW/CONTINUOUSBATCH/CELLULAR Make to Plan Raw Material Source Vessel/RailcarTL/IMVessel/RailcarTL/IMLTL/Sm. Pkg/Air Consumer 1. Extraction 3. Discrete Manufacturing 2. Process Manufacturing Make to Stock 5. Distribution Assemble to Order Make to Order 4. Design-to-Order Manufacturing 6. Reselling Engineer to Order Low External Spend High External Spend CommodityService Price TakerPrice Maker Asset IntenseLabor Intense Few LocationsMany Locations

22 21 Step 5: Select and Apply Decision Models Alternative Views of Benefits Benefit-Cost Calculation and Presentation Incidence and Equity of Benefits and Costs

23 22 Case Study: Baltimore Rail Tunnel – Enhancing and Existing Economic Analysis Project Type (Step 1) – Link-level tunnel and track improvements to increase capacity and reduce delay Evaluation Issues (Step 2) Include national and state benefits Include highway user benefits along with freight users Include second order logistics benefits Transportation System and Economic Benefits (Steps 3/4) Reduced freight and passenger rail delay Mode shift (maintain mode shares) – shipper costs Supply chain benefits Full B/C Analysis (Step 5)

24 23 Benefit/Cost Results Benefit Scenario 1. 750/500 Scenario 2. 500/300 % Difference Freight Rail Operators Shipper Costs Highway Travelers Amtrak Users Supply Chain $270,229,331 $2,694,157,018 $625,621,147 $1,422,398,587 $2,013,629,007 $270,229,331 $1,655,796,822 $625,621,147 $873,653,722 $1,303,373,082 0.00% 62.70% 0.00% 62.80% 54.50% Total Benefits Total Costs $7,026,035,090 $3,046,338,138 $4,728,674,104 $3,046,338,138 48.60% – Benefit/Cost2.311.5548.60% Source:Baltimore Rail Studies by PB Consult for Maryland DOT and Cambridge Systematics, Inc.

25 24 Extending the Case Study Analysis Analyze commodity traffic and train types in rail simulations – refined user benefits estimates Service/cost-based modal diversion modeling Network travel demand model for highway user benefits Direct travel time savings Reliability Crashes Emissions Economic simulation (GRP/GSP, employment impacts)

26 25 Toolbox Freight Network and Terminal Performance Modal Diversion and Logistics Cost Models Cost and Access Benefit Calculations Economic Simulation Models Decision Support Tools

27 26 For More Information Copies of the guidebook are available at: Contact: Michael Fischer, Cambridge Systematics,

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