Transportation leadership you can trust.
presented to
Canada/U.S. Transportation Border Working Group
presented byStephen Fitzroy, Economic Development Research Group
Andreas Aeppli, Cambridge Systematics, Inc.April 13, 2010
Economic Impacts of the Border on Transportation
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Presentation Overview
Project Summary
Case studies
Application of model on a real situation
Some thoughts for further action
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Economic Impacts on Transportation of the United States/Canada Border
Main objective was to determine the economic consequences of delay at the US/Canada border, including:• impacts at specific border facilities or regions• macroeconomic effects for entire border• impacts of policy alternatives
Some key questions:• What are the impacts of freight versus passenger delay?• What commodities/industries are affected most?• How does the transport sector respond?• What role does reliability play?
Study ElementsOverview of Transborder Trade Data• Collect data and identify trends
Literature Review• Summarize relevant work• Identify advantages and limitations of applied methodologies
Develop Analytic Methodology• Logical approach• Compare to methods from literature review• Data requirements• Define three sample scenarios that reflect range of potential
model application
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Literature ReviewMost relevant studies:• HDR|HLB (2006) – San Diego/Baja Border• Taylor et al. (2003) – US/Canada Border• DAMF (2005) – US/Canada Border (impacts to trucking firms)
Two broad approaches:• macroeconomic – measure supply and demand elasticities of response to time
delay• microeconomic – measure costs at vehicle-level, determine how costs “flow”
through economy
Room for improvement:• “delay” is not the only cost of crossing border• address travel time variability• add commodity dimension• recognize multiple freight carrier types
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Key Considerations for MethodologyMany types of costs
• travel time and variability• operating costs (fuel, capital, maintenance, labor, etc.)• administrative costs
Costs affect many economic players• passenger (commute, leisure, on-the-clock)• freight carriers (own-account, for-hire, common carriers)• freight shippers (bulk, mixed freight, small package, JIT firms)
Many possible responses to costs• Vehicle: mode/ route/ time-of-day• Firm: inventory management/ production technology/ site location• Household: tourism, employment, residential location
Data
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Overview of analytic approachScenarios:• Changes in fees or charges• Change in processing time• Change in inspection policy• Change in hrs of operation• Change in security procedures
Facility Capacity Response:• Change in processing time• Change in idle time• Change in reliability• Change in tolls
Demand Response:• Change in crossing demandby trip purpose• Change in vehicle/freight mix• Change in crossing location• Change in crossing time of day
Change in user costs by vehicle
Analyzing Border Delays
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Methodology blends micro- and macro- approaches
Veh. Costs:• Trucks• Cars Vehicle Users:
• Households• Industry (pass.)• Freight shippers• Freight carriers Users’ Responses:
• Travel demand• Traveler spending• Carrier response• Shipper response Regional Impacts:
• Employment• Output• Value Added• Wages
microeconomic elements
macroeconomic elements
Overview of Methodology
Flow of Model Interactions
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Figure 1. Overview of Model for Estimating Delay Impacts at U.S./Canada Border Crossings
Time Cost Factors Passenger Time Crew Time Freight Time Buffer Time
Vehicle Cost Factors VOC/mi-Congested VOC/mi-Free Flow VOC/hr-Idle
Travel Demand Factors Vehicle-Trips VMT (VKT) VHT Congestion Level Buffer Time Average Crew per Vehicle Average Pass per Vehicle Average Freight per Vehicle Freight Commodity Mix Average Toll/Fare per Trip Average Passenger Spending Local Portion of Trip Ends
Input Variables
1 – Travel Savingsby Cost Type
Passenger Time Cost Crew Time Cost Freight Time Cost Reliability Time Cost Toll/Fare Cost Vehicle Operations Cost
2 – Travel Savingsby “User” Type
Households-Time Households-Out-of-Pocket Vehicle Operator (carrier) Industry-Freight (shipper) Industry-Nonfreight
3 – Travel Savingsby NAICS Industry
4 – Direct Industry Impacts (output)
Transportation Sectors (481-485) Other Industry Sectors
Expanded Industry Production Changes in Final Demand
5 – Total Industry Impacts
All Industry Sectors Direct + Indirect + Induced Employment Output Value Added Wage Income
Industry Factors Modal Utilization Production Elasticities Output Multipliers Passenger Spending Patterns
Detailed Border Crossing Methodology (BCM)
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ImplicationsAddresses limitations of surveyed approaches• Vehicle based• Incorporates industry and macroeconomic responses• Includes travel time variability• Recognizes different truck carrier types• Impacts revealed at industry level
Additional features• Benefit/Cost analysis
Challenges• Appropriate data• Demand responses to cost changes
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Three Sample Scenarios to Test BCM
Niagara Falls Peace Bridge improvements: • Analyze options for operational improvements to more
efficiently handle traffic
Detroit – Windsor tunnel: • Assess the impact of the Western Hemisphere Travel
Initiative (WHTI) on cross-border travel
Pacific Highway border crossing:• Examine the impact on travel times from expanded FAST
implementation
Niagara Falls Peace Bridge Improvements
Problem: Assess proposed post-9/11 physical and operational improvements to approaches and processing plazas
Criteria/Needs to be addressed:• Inspection/Security• Safety• Structural Improvements/Renovations• Capacity/Reliability (during and after structural
improvements)• Environmental/Externality Issues
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Modeled Economy-Freight Relationship
Economic Change
Freight Flows
• Taxes, Fees• Regulations• Facilities Investment• Services Affected Speed, Cost
ProductivityMarket Access
• Industry Output• Profit • Value Added• Jobs & Wages
Freight-Focused Project or Policy
• Commodity Value• Import/Export• Tonnage• Containers/
Vehicles
ConnectivityThroughput
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Niagara Falls Peace Bridge Solutions
Multi-criteria investment evaluation• More than one “solution” must be implemented and tested
in combination with others• Extended construction and interaction effects must be
addressed• Costs and responses vary over time and differentially affect
user segments and markets served• Timing, regional scale and industry impacts vary by
policy/investment configurations and duration of activity
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Detroit – Windsor Tunnel
Problem: Assess impact of WHTI on cross-border travel and the corresponding impacts on business sales, employment, tax revenue, wages, and output.
Criteria/Needs to be addressed:• Effect of current border crossing policies and restrictions on
economy of Detroit and Windsor− Local spending (especially tourism)
• Effects of labor markets and market access− Labor productivity impacts
• Impacts on both US and Canadian economies
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Modeled Economy - Passenger Relationship
Economic Impacts
Travel Decisions
• Regulations• Facilities Investment• Security Procedures
Speed, CostProductivityMarket Access
• Industry Output• Profit • Value Added• Jobs & Wages
Alternative Border Policies
• Value of Time• VHT/VMT Savings• Household
Spending
ConnectivityThroughput
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Modeled Passenger-Economy Relationship
Key issues to be addressed:• Benefits and costs of tunnel approach improvements• Procedural innovations to respond to alternative security
levels• Robustness of procedures to respond to security alerts *and
costs associated with implementing these procedures• Overall economic impacts of Detroit/Windsor region• Key employment and retail sectors believed to be affected• Effects of tunnel connectivity (and options – both capital
and operational)
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Detroit-Windsor Tunnel Solutions
Assessment must address:• Full range of regional economic impact measures
− Ability to assess local, metro (two cities) and regional scales
• Assessment of benefits and costs for multiple scenarios• Scenarios that include both policy and capital investment
solutions− Include parking and traffic management at bridge approaches
• Assess differential impacts by trip purpose
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Pacific Highway Border Crossing
Problem: Assess proposed post-9/11 physical and operational improvements to approaches and processing plazas and evaluate effects of options to take advantage of current FAST “excess” capacity
Policy responses to be addressed:• Increase FAST enrollment• Mutual recognition of FAST enrolments for empty vehicles
(73% of southbound moves are empty)• Use of pricing to allow non-FAST users to “purchase”
unused FAST lane capacity when GP lane is congested• Convert FAST lane to: a) Priced lane; or b) GP lane• Retain FAST lane and convert one of two GP lanes to priced
lane
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Modeled Economy-Freight Relationship
Economic Change
Freight Flows
• Taxes, Fees• Regulations• Facilities Investment• Services Offered
Speed, CostProductivityMarket Access
• Industry Output• Profit • Value Added• Jobs & Wages
Freight-Focused Project or Policy
• Commodity Value• Import/Export• Tonnage• Containers/
Vehicles
ConnectivityThroughput
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Pacific Highway Border Crossing Solutions
Assess differential effects of user segments:• Relationships between delay reduction on commercial and
passenger crossings
Evaluation of industry-specific market effects • Does commercial traffic increase, and if so, for which
industry groups/commodity shippers
How do benefits move through economy:• How are operator cost savings passed through to shippers• How do shipper savings affect operations and markets
served• What are the effects of non-commercial relay reductions on
household expenditures
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Application of BCM in Actual Situation
Analysis of fiber optic network installation at Vermont’s Derby Line/Highgate Springs Border Crossing
Problem: Assess impacts of pre-processing fully-laden trucks to reduce queuing times for all border traffic.
Criteria/Needs to be assessed:• Introduction of ITS to speed pre-approval and processing of
laden trucks• Affect of delay and reliability at crossing and on I-89 and I-91• Impacts on passenger cars, buses and empty trucks
Derby Line/Highgate Springs Border Crossing
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Canadian Customs
Canadian Queue
US-Canadian Border
US Queue
US Customs
Derby Line/Highgate Springs Profile
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I-91/ Derby
I-89/ Highgate Totals
Total Exports $0.50 $2.86 $3.36Exports Originating in Vermont $0.04 $0.67 $0.72% Originating in Vermont 8.80% 23.50% 21.30%Total Imports $2.12 $4.53 $6.66Source: WiserTrade, 2009; (in $ billion)
Derby Line/Highgate Springs Border Crossing
Data Available:• Available vehicle entry data (USDOT, Customs and Border
Protection, OMR database, December 2008)• DHS Survey of vehicle border crossing times (2008)
Analysis Approach:• Synthesize queuing distributions using current data• Estimate new queuing distribution(s) assuming:
− 5-minute reduction in laden-vehicle median crossing time− average queue mix of passenger cars, laden trucks, empty
trucks, and passenger buses− Minimum, average and standard deviation of processing time for
each vehicle type
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Modeled Economy-Freight Relationship
Economic Change
Freight Flows
• Taxes, Fees• Regulations• Facilities Investment• Services Offered
Speed, CostProductivityMarket Access
• Industry Output• Profit • Value Added• Jobs & Wages
Freight Project or Policy
• Commodity Value• Import/Export• Tonnage• Containers/
Vehicles
ConnectivityThroughput
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Derby Line/Highgate Springs Queuing
Average delays of 15 minutes propagate through peak queues and result in more than 5% of trucks experiencing 30-minute delays
Reductions of 5 minutes in median crossing produces 3-minute reduction in minimum times; reduction in standard deviation of 4 minutes; and results in less that 5% of trucks experiencing 20-minute delays
Inputs to model developed using queuing simulations of the build and no-build scenarios and comparing the differences
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Derby Line/Highgate Springs Economic Impacts
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Economic Development Benefit DirectIndirect & Induced Total
Jobs 2,700 2,400 5,100 Output ($ Millions) 276$ 229$ 505$ Value Added ($ Millions) 138$ 125$ 263$ Wages ($ Millions) 97$ 85$ 182$
Sources: Calculated by EDR Group from EDR-LEAP and IMPLAN modeling packages. Indirect and induced benefits are Vermont-wide; (in $ million)
Derby Line/Highgate Springs BCA
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FactorsPresent Value
Border Queuing 265.0$ Safety 0.3$ Congestion Reduction 1.5$ Fuel and Emissions Reduction 0.1$ Benefits 267.0$ Costs 77.5$ NPV 189.4$
BCR 3.44Source: EDRG, 2009; (in $ million)
Derby Line/Highgate Springs Benefits
Border Queuing• Time savings for all vehicles (commercial and passenger)
attributable to queue reduction at border
Safety• Crash reduction - injuries, property damage
Congestion Reduction• Value of congestion reduction on I-89 and I-91 throughout
Vermont
Fuel Used and Emissions Reduction• Savings in fuel costs and reduced emissions costs
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Border Crossing Model Advances and Limitations
Sensitivity of BCM to Transportation Factors Affecting Cross Border Trade
Spatial Coverage/Geographic Range of Impacts
System Output and Results
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Sensitivity of BCM to Transportation Factors Affecting Cross Border Trade
Advantages and Modeling Innovations• Network operations (delay/Reliability)• Pricing and cost pass-through structures• Vehicle/load characteristics
Limitations• Differing detail on commodity flow information (O/D and
routings) on US versus Canadian networks
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BCM Spatial Coverage/Geographic Range of Impacts
Advantages and Model Innovations• Details on sub-state and sub-provincial economic data
Limitations• Interactive effects of macro-economic shifts/responses must
be exogenously or iteratively addressed
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BCM System Output and Results
Advantages and Model Innovations• Flexible reporting structure and consistent outputs• Addresses concerns of US DOT on methods and practices
Limitations• Sensitivity analysis (risk and uncertainty) associated with
inputs and responses
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Some Further Thoughts
Develop Comparable Cross-Border Economic Interaction Models
Integrate Cross-Border Commodity and Freight Routing Algorithms
Develop Financial Modeling and Accounting for Revenue and Innovative Financing Evaluation
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Development of Provincial & Sub-Provincial I/O
Enhanced Social Accounting Structure• Stats Canada I/O• IMPLAN
− Commodity flows and wage structure
Industry and commodity interactions for detailed industry impacts• Industry spending on labor
and materials
Wage payments to employees for induced economic impacts
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User Responses
Provincial Impacts
Statistics Canada
I/O Multipliers
IMPLANCommodity
& Wage Structure
Tax Impact Analysis
Tax impacts for federal and state/local govt.
Contribution from households & businesses
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TAX IMPACT REPORT ($mil)Tax/FeeCollector Tax/Fee Description
Taxes/Fees Paid by:Totals
Households Businesses
Service Operator Tolls & Fees 97.09 446.49 543.59
Federal Government
Motor Fuel Tax 0.45 9.49 9.94
Income/Profits 526.97 494.33 1,021.31
Social Insurance Tax (FICA) 420.76 398.62 819.38 Miscellaneous Fees & Taxes - 139.88 139.88
Total Federal Government 948.18 1,023.34 1,971.52
State and Local Government
Motor Fuel Tax 0.33 12.66 12.99
Motor Vehicle License Fees 8.36 6.77 15.12 Income/Profits 155.30 106.57 261.87
Sales tax not available not available 370.67 Property Tax 3.34 294.09 297.43
Social Insurance Tax 1.29 5.15 6.43 Miscellaneous Fees & Taxes 60.30 70.26 130.56
Total State & Local Government 228.92 470.18 1,069.76 Grand Total 1,177.09 1,493.52 3,041.28
Revenue & Cost Sharing Analysis
Input public & private sector responsibilities for construction, operation, maintenance, revenue collection
Internal rate of return (ROI), payback period, revenue/cost ratio
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REVENUE & COST SHARING REPORT
Cost or Revenue Description Government Private Totals
Project Costs ($m)
Capital Costs 1,450.00 250.00 1,700.00
Operations - 55.30 55.30
Maintenance - 75.20 75.20
Lease/Contract Costs - 750.00 750.00
Project Cost Totals 1,450.00 1,130.50 2,580.50
Project Revenues ($m)
Tolls 918.25 1,836.50 2,754.75
Lease/Contract Revenues 750.00 - 750.00
Project Revenue Totals 1,668.25 1,836.50 3,504.75
Revenue to Cost Metrics
Payback Period 12 years 7 years 7 years
Internal Rate of Return 11.5% 26.3% 19.9%
Revenue/Cost Ratio 1.15 1.62 1.36
Questions?