freight: are innovative solutions the answer? pamela bailey-campbell vice-president public-private...
TRANSCRIPT
Freight: Are Innovative Solutions the Answer?
Pamela Bailey-CampbellVice-President Public-Private Initiatives
September 18, 2007
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Presentation to the Ohio Conference on Freight
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Topics
• National and global freight picture• Recent freight improvements from around the US• The challenge of financing freight projects• Solutions for Ohio
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The big picture
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The continuing explosion in freight demand,…
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2005 2015 2025 2035
Trillion Freight Ton Miles
Air
Other
Water
Rail
Truck
AASHTO Freight Transportation Bottom Line Report, 2006
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…propelled by robust underlying trends,…
• Growth in consumption patterns
• Changes in logistic practices
• Growth in Chinese imports
• Increased in cross-border trade
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…combined with current capacity shortages already apparent in our nation’s infrastructure,
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…implies an enormous funding challenge for a national transportation system approaching deficit spending
Cummulative National Highway and Transit Needs and Revenues (2008-2020)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Cummulative Needs Existing Sources of Revenues
Yea
r o
f E
xpen
dit
ure
Do
llars
(B
illio
ns)
$450 billion gap to maintain
$1.2 trillion gap to improve
3.7 trillion to “maintain”
4.5 trillion to “improve”
3.3 trillion in Resources
Source: Based on Future Highway and Public Transportation Finance Study, US Chamber of Commerce (2005)
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Freight interests are ascending in the federal infrastructure funding agenda.
• SAFETEA-LU went further than previous federal bills in providing for freight interests explicitly
• Industry groups are pushing freight issues to the forefront in the next federal transportation program
– Coalition for America’s Gateways and Freight Corridors’ Freight Transportation Fund (FTF)
– ARTBA’s “Critical Commerce Corridors”
– AASHTO’s “Transportation Future”
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Potential new rail intermodal
Facilities?
But funding challenges persist for needed projects across the US. Ohio is no exception.
Cincinnati and Columbus and Toledo freight
bottlenecks
Improved Port and Air Cargo
Landside Connections Expansions of
Lake Erie Ports
Highway expansions to accommodate
increasing truck traffic of I-70/71
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TradeTrade
Patterns
Patterns
ConsumptionConsumption
PatternsPatterns
Capac
ity
Capac
ity
Infrastr
ucture
Infrastr
ucture
Modal
ModalTime/Cost
Time/Cost
Econ
Econ
Global
Global
Patterns
Patterns
Shipping
Shipping
Intermodal
Intermodal
Ship. Data
Ship. Data
Freight feasibility is driven by global dynamics.
• Changes in maritime patterns
• Panama Canal expansion
• Efforts to provide additional capacity on the West Coast
• Efforts to mitigate congestion at national and regional bottlenecks such as Chicago
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Example of integrating global trends in developing investment strategies: The Panama Canal
• Far-reaching analysis of international markets
• Shifted focus from managing physical infrastructure to “right-sizing” the investment
• Examined factors such as:– Rapid rate of globalization
– Manufacturing shifts to low cost locations: China, Cambodia, and Vietnam
– Shipper logistics requirements to meet growth in demand
– Increases in ship sizes
• Established financial, environmental and operational implications to drive a capital investment plan and financial model
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Public policy at all levels has a pervasive impact on all freight modes.
Freight Modes Policy/Regulatory Focus Potential Impacts on Freight Costs, Speed
Trucking Size and weight restrictions
Emissions controls
Hours of service rules
Limited payloads/rerouting
Higher vehicle costs
Reduced driver productivity
Rail/Intermodal STB – rates, service regulations
Intermodal connections
Funding/subsidy/credit support
Rail abandonment, operational issues
Rail mode share
Rail investment
Maritime / Port Operators Labor regulations
Container security
Throughput, service interruptions, labor costs
Higher terminal costs, reduced throughput
Air Cargo Environment – noise restrictions Limits development of new air cargo hubs
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Solutions from around the US
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What are states doing to improve intermodal links?
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The context for freight Public-Private-Partnerships is framed by how responsibilities are distributed.
Sector Infrastructure Operations
Water Public / Private Private
Rail Private Private
Truck Public Private
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Freight PPP Finance models
Model Example
Public sector provides up-front funding through grants and loans; private sector repayment is through user fees
Shellpot bridge
Investment fully paid by the public sector; private sector provides in-kind contributions
North Carolina Railroad Improvement Program
Public-private funded; funding shares agreed to between each sector
ReTRAC
Concessions: private sector financing and long-term lease or ownership
Texas Pacifico Rail Line
Source: Based on USDOT FHWA Report Financing Freight Improvements, January 2007
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Freight Finance Cases: Alameda Corridor
• Project cost $2.4 billion
• Port access, highway rail-crossing elimination, rail construction
• Constructed by the Alameda Corridor Transportation Authority (ACTA)
• Completed 2002
Funding Source Amount ($M)
US DOT Loan $400
Port of LA / LB $394
Los Angeles Metropolitan Transit Authority
$347
Federal / state / interest Income
$130
Revenue bonds backed by container fee
$1,160
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Freight Finance Cases: Chicago’s CREATE
• Project cost $1.5 billion (Phases I & II)
• Rail separation, highway crossing, rail rehabilitation & construction, upgrade signaling systems
• Sponsored by Illinois DOT, City of Chicago, METRA, Union Pacific, Burlington Northern Santa Fe, Norfolk Southern, Canadian National, Canadian Pacific, and CSX
• Project implementation has begun with limited funding
Funding Source
(Phase 1 Commitments)
Amount ($M)
FHWA $100
Illinois DOT $100
City of Chicago $30
Railroads $212
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Freight Finance Cases: Heartland Corridor
• Project Cost of $309 million
• Vertical clearances, intermodal facilities, rail relocation
• Sponsored by Norfolk Southern, Virginia DOT, Ohio Rail Development Commission
• Construction starting
• Connections to Rickenbacker
Funding Source Amount ($M)
Federal $110
VA Rail Enhancement Fund
$48.2
Governors Transportation Funds
$5
VA Match to Federal Funds
$3.7
ORDC grant $0.8
Norfolk Southern $49.8
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Freight Finance Cases: German High Speed Rail
• Germany’s state-owned rail (Vorsprung durch DB)
• Hartmut Mehdorn (CEO) turned chronic loss-making railway into powerful international business
• Next year offer 30% of shares to public
• World-class logistics company
• Key: control of 90% of rail network & freight
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The challenge of financing freight projects
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One barrier to freight projects is sheer complexity.
• Multitude of stakeholders and interests
• Multi-state and multi-jurisdictional issues
• Complicated planning & environmental process
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Another challenge is translating public and private benefits analysis into a workable financing plan.
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0% 20% 40% 60% 80% 100% 120%
Percent Paid by Railroads
Tota
l Pro
ject
Cost
s ($
Millions)
CREATE22,812,500 cars
Alameda2,007,500 cars
Sheffield flyover11,406,250 cars
Argentine Connection3,650,000 cars
Shellpot358,000 cars
ReTRAC1,095,000 cars
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Understanding stakeholder interests: railroads
• Will pay for improvements when they see clear business benefits
• Challenged to earn cost of capital
• Cautious about receiving public assistance
• Have strong competitive interests
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Understanding stakeholder interests: truckers
• Have rate structure allowing for fuel costs but not tolls
• Independent truckers have separate view from large shippers
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Understanding stakeholder interests: businesses
• Can be powerful supporters of freight improvements if they – Decrease congestion,– Increase economic activity, and – Lower transportation and logistics costs.
• Example: Dell’s ultimatum to Austin area
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Understanding stakeholder interests: public agencies
• Agencies are now being challenged to effectively incorporate freight into planning process
• Need to meet environmental and transportation objectives
• Economic development is also an objective in some cases
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Understanding stakeholder interests: shippers
• Shippers are taking control of how routing decisions are made– Wal-Mart
• Value for shippers can mean money for projects– Time savings– Increased service– Reliability
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Freight PPP Lessons
• Educate stakeholders as to each party’s interests and goals
• Consider relative benefits compared to distributed costs
• Understand strings on funding
• Establish environmental process and issues early
• Deal with expectations in general
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Opportunities for Ohio
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Ohio is a nexus for national freight movements
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Ohio freight opportunities
• Develop a model multi-modal freight system
• Expand air cargo hubs
• Expand ports to capture growing freight demand and international trade
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Ohio freight opportunities (continued)
• Truck-only toll lanes
• Intermodal rail facilities being planned as part of Heartland corridor
• Rail improvements to relieve growing pressure on Chicago hub
• Air cargo development, possibly modeled on Alliance facility in Dallas
• Increased market share for Great Lakes / St. Lawrence Seaway system ports