Barbara Ivanov Freight Systems Division Director Washington State Department of Transportation Truck Freight Benefit Evaluation Methodology for Highway Projects American Association of State Highway and Transportation Officials (AASHTO) Subcommittee on Highway Transport (SCOHT) July 10, 2013 Lynn Peterson Secretary of Transportation Katy Taylor Chief of Staff

The Washington State Freight Mobility Plan The Washington State Department of Transportation (WSDOT) will complete the MAP-21-compliant State Freight Plan in December Freight Plan Goals: The Washington State Freight Mobility Plan will develop and prioritize freight transportation system improvement strategies that support and enhance trade and sustainable economic growth, safety, the environment, and goods delivery needs in the state. The State Freight Plan will guide capital and operating investments in the state’s freight systems. The Freight Plan will integrate existing state plans into a single state freight plan to address all modes in the state system: truck, freight rail, waterway, and air freight. 2

Washington State Freight Plan Freight Plan Objectives: Urban goods movement systems that support jobs, the economy, and clean air for all, and provide goods delivery to residents and businesses. Washington’s competitive position as a Global Gateway to the nation, and the state and national Export Initiatives. Rural economies’ farm-to-market, manufacturing and resource industry sectors. Today, we’ll focus on one of the Freight Plan’s new deliverables related to truck freight. WSDOT has developed and tested a truck freight benefit evaluation methodology to evaluate and prioritize state truck highway improvement proposals. 3

MAP-21 recommends that states analyze the economic impacts of projects with freight benefits Excerpt from MAP-21 Interim Guidance on State Freight Plans (Oct. 2012) “9. The State’s Decision-Making Process The (USDOT) Department encourages States to conduct economic analysis as part of the State Freight Plan, including analyses of benefits and costs of various improvements....” 10. The State’s Freight Improvement Strategy..a State Freight Plan must include a description of the strategies the State is employing to address freight mobility issues…. Each…. strategy would…include: An analysis of how proposed improvements will affect specific supply chains and industries that have been identified as important to the State….”

What are the desirable elements of a method to evaluate truck freight economic impacts? 1.Transparency – We want to be able to explain exactly how the economic impact evaluation results were produced. 2.Control when the economy changes – WSDOT Freight Systems Division needs to adjust model variables for various circumstances and scenarios and update them when there are significant changes in the economy. 3.Comparable results across the agency – WSDOT is moving toward a standard economic impact analysis for both passenger and truck freight benefits. The final method must address both issues. 4.Cost effective – Which approach provides the highest value at the best cost?

WSDOT Truck Freight Highway Project Benefit Evaluation Process WSDOT worked with three technical teams to prioritize the state’s six truck freight performance goals. The methodology evaluates five of the high-priority freight benefits: Travel time Direct truck operating costs Truck emissions The truck freight project benefit evaluation process uses these models: Travel demand models (TDM) – The method uses existing travel demand models from Washington State Metropolitan Planning Organizations to calculate changes in network travel times. Washington doesn’t have a state travel demand model. Economic impact models – WSDOT tested the Washington State IMPLAN model (IMpact analysis for PLANning) and the Washington State Regional Computable General Equilibrium Model (CGE) to evaluate truck-related economic impacts. Emissions model – The process uses the Motor Vehicle Emissions Simulator (MOVES 2010) model developed by the U. S. Environmental Protection Agency (EPA) to estimate the change in truck emissions. Network resiliency Economic output

Truck Freight Project Economic Impact Analysis Workflow Project Specific Data Inputs (e.g. amount of capacity added) Travel Demand Model Section 1: Modeling Freight Transportation Related Benefits Section 2: Modeling Economic Impacts Using Regional CGE Input-Output Benefits from: Travel Time Savings Operating Cost Savings Emissions Changes Employment Changes Regional Economic Output OUTPUTS INPUTS MODEL FRAMEWORKS

WSDOT Freight Systems Division tested the method on several highway projects Present Value of Benefits2010 Dollars Start Year 2020 End Year 2040 Benefit Category Light Truck Travel Time Benefits $ 16,870,448 Medium Truck Travel Time Benefits $ 3,734,396 Heavy Truck Travel Time Benefits $ 5,813,874 Light Truck Operating Cost Benefits $ 27,414,479 Medium Truck Operating Cost Benefits $ 6,156,708 Heavy Truck Operating Cost Benefits $ 10,074,584 Light Truck Emission Impacts ($ -1,020,024) Medium Truck Emission Impacts ($ -6,223,976) Heavy Truck Emission Impacts $ 21,129,964 Total $ 83,950,454 The first step in the method is to evaluate a project’s direct truck benefits with a regional TDM. Here are the results for an example project.

Why is the emissions benefit a negative value? Light and medium truck emission impacts were negative though the traffic performance was improved after the investment due to vehicle emissions increasing with higher operating speed. For example, medium truck NOx emission rates in 2020 drop while operating speed increase from 0 to 30 mph, and grows again when the speed raise from 30 mph to 60 mph.

Lessons learned from using regional TDM models to estimate direct truck freight benefits: 1.Not all TDM modelers are experts. Thus analysts need to understand the assumptions, inputs and parameters of the TDMs. Meanwhile, the TDMs’ outputs need to be verified. 2.The assumptions of land use, household and employment growth rate of each TDM should be examined to ensure comparability among different models. 3.The length of the project analysis periods of each evaluated project must be the same to ensure comparable results, e.g. 20 years. 4.Appropriate local data (value of truck travel time, operating cost and emission rates) of different types of truck and time period should be investigated before calculating the direct freight benefits. 5.More than one year of TDM outputs allow more realistic analyses, having at least the first and last year is recommended.

WSDOT Freight Systems Division then tested two economic impact models 1. Input-Output (I-O) Model: IMPLAN Pros: Fixed price I-O models are relatively simple to implement, computationally easy to calculate, and are considered reliable for short-run applications. Cons: I-O models only capture a partial equilibrium response because all relative prices in the economy are fixed and substitution of inputs is not possible, therefore a shock to the economy (higher taxes, increased subsidies, changes in production technology, etc.) results in an economic response that never changes the ratio of inputs (labor and capital). 2. Computable General Equilibrium (CGE): Washington State CGE Model Pros: CGE models can calculate changes in industry productivity. They don’t contain restrictive, fixed-price assumptions and provide a more realistic real- world result. CGE models are flexible, allowing relative prices to change.

What are truck freight economic benefits? Infrastructure improvements change the state of the interactions of the actors within the economy. The economic benefits measure changes in the economy that occur as a result of the direct truck benefits, and therefore can’t be added to the direct benefits. Changes in employment and output represent the vertical value of the step and are characterized as the employment or output change in a single year. This is not a forecasting model, so the model is not projected forward.

Results of WSDOT’s freight economic impact analyses of the example project Statewide ResultsRegional (KKPS) Results Employment ChangeOutput ChangeEmployment ChangeOutput Change SectorCGEI-OCGEI-OCGEI-OCGEI-O AGFOR $ 2,434,388$863, $ 458,833 $ 162,220 MIN $ 163,883$54, $ 81,161 $ 24,809 UTIL $ 609,093$118, $ 282,394 $ 82,423 CONST $ 297,974$1,691, $ (220,120) $ 1,765,154 MANUF $20,710,000$8,407, $26,940,775 $ 7,287,183 WTRAD $ 1,349,171$806, $ 1,217,588 $ 828,811 RTRAD $ 1,137,063$1,427, $ 856,045 $ 1,421,375 TRAWAR $ 301,464$476, $ (1,972,232) $ 619,333 TRUCK $ 150,264$863, $ (443,142) $ 846,983 INFO-1.62 $ 387,011$988, $ (1,770,518) $ 1,449,344 FININS $ 1,855,827$1,189, $ 1,576,007 $ 1,266,748 REAL $ 2,695,406$1,602, $ 1,846,269 $ 1,582,808 PROTEC $ 1,373,595$855, $ 865,956 $ 987,127 MANAG $ 737,807$358, $ 1,188,807 $ 455,877 ADMIN $ 630,411$352, $ 382,313 $ 412,955 WMAN $ 109,365$120, $ 63,573 $ 84,163 SOCSER $ 2,097,184$1,360, $ 1,538,130 $ 1,466,137 ARTS $ 177,371$184, $ 124,164 $ 219,494 FOOD $ 530,516$619, $ 321,379 $ 649,390 OTHR $ 2,284,771$1,561, $ 1,460,538 $ 1,551,574 Total $40,032,564$23,903, $34,797,920 $23,163,908

What do the WSDOT example project’s economic impact results mean? The trucking industry (TRUCK) will have a negative change in employment, job loss, when the project is built. Productivity has increased and fewer drivers and equipment are required. This confirms previous WSDOT research showing that the trucking sector responds to increased congestion (that reduces productivity) by adding trucks and drivers. Manufacturing, agribusiness, and retail trade, all highly-freight-dependent industries, are more productive. They add jobs and produce more economic output. As the freight-dependent sectors become more efficient, consumer goods cost less and consumers may have more to spend on services. So the service sectors experience a positive effect.

What did WSDOT learn from testing these economic impact models? The I-O model can compute the change in demand, but isn’t able to fully account for the improved productivity of the trucking industry, and therefore cannot accurately model how the trucking sector meets increased demand. The CGE model is able to directly model increased productivity of an industry and is therefore is able to model the entire economy-wide reaction to the infrastructure improvement that is a result of decreased operating cost and travel time. WSDOT is moving toward a standard economic impact analytic method for both passenger and truck freight benefits. The final method chosen will be informed by this work, and address both issues.

We are very interested in your ideas and feedback. What’s most useful for you in this approach? What are we missing? For more information, please contact: Barbara Ivanov, Director WSDOT Freight Systems Division