Economic Impacts of Large Scale Freight Investments

1. Economic Impacts of Large Scale Freight Investments Transportation leadership you can trust. presented toTalking Freight Seminar presented byMichael FischerCambridge Systematics, Inc. December 12, 2007

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

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

6. Five-Step Framework

7. Five-Step Framework (continued)

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

9. Analysis Components Transport Network and Origin-DestinationFreight Flow Pattern (by Commodity, Mode) Impact on Existing Freight Patterns: Impact on Modal Access to: • Time, Cost, Safety • By Mode, Purpose • Rail/Hwy Intermodal • Air, Sea Terminals Industry Cost Impact: Market Access Impact: • Users • Reliant Sectors • 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 (A) Baseline Demand & Supply • 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 (B) Freight Transport Performance & Access (C) Economic Impact Personal & Environ Impact (D) Economic Impact

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

11. Table 3.1 Examples of Projects by Category of Transportation Improvement

12. Table 3.1 Examples of Projects by Category of Transportation Improvement (continued)

13. Table 3.2 Transportation Benefits and Metrics by Project Type

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

15. 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. Example Portrayal of Findings from Transportation Analysis

17. 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. Measuring the Economic Impacts of Transportation Projects

19. Measuring the Economic Impacts of Transportation Projects (continued) a Denotes econometric model; b Denotes multiplier analysis; c Denotes business attraction model; and d Denotes stratification by North American Industrial Classification System.

20. 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.

21. Classification of Shipper Types Low External Spend High External Spend Commodity Service Price Taker Price Maker Asset Intense Labor Intense Few Locations Many Locations Source: Boston Logistics Group, Inc.

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

23. 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. Benefit/Cost Results Source: Baltimore Rail Studies by PB Consult for Maryland DOT and Cambridge Systematics, Inc.

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

27. For More Information • Copies of the guidebook are available at: http://www.dot.gov/freight/guide061018/index.htm • Contact: Michael Fischer, Cambridge Systematics, mfischer@camsys.com