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Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook (2007)

Chapter: Chapter 2 - Literature Review

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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
×
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
×
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
×
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
×
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
×
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
×
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
×
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
×
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
×
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
×
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
×
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Suggested Citation:"Chapter 2 - Literature Review." National Academies of Sciences, Engineering, and Medicine. 2007. Rail Freight Solutions to Roadway Congestion--Final Report and Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/14098.
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5This literature review addresses four issues relevant to rail freight solutions to roadway congestion: • Transportation needs or problems (including congestion and other planning issues where rail freight can be part of the problem or solution); • Methods to evaluate the alternatives; • Funding and implementation approaches; and • Approaches to developing guidebooks and tools. The review discusses major issues around six topic areas: • Rail and general freight economics; • Intermodal planning, including truck and/or rail freight; • Studies of congestion costs; • Rail relocation and road/rail conflict issues; • Benefit-cost assessment and modeling; and • Public-private partnerships. These areas are each covered in more detail below. For each area, an introduction presents several key themes or issues relevant to this project. 2.1 Rail and General Freight Economics 2.1.1 Themes A base of academic and operational literature documents the institutional opportunities for enhanced reliance on rail freight as a transportation solution. Several themes are evi- dent in this literature: 1. Logistics performance is important. Freight flows are deter- mined largely by customers concerned with minimizing lo- gistics costs, obtaining better materials, reaching broader markets, employing their logistics strategies as competitive tolls, and, in general, improving their business results. The di- rect costs of a transportation option, and its consequential costs in terms of the type of distribution system it supports and the degree of management oversight it requires, shape the decisions of customers. Customers generally do not con- sider the effects of their decisions on highway congestion, air quality, or other public concerns. 2. There are many different segments to freight trans- portation. In some segments, rail is dominant; in many segments, truck is dominant; and in some segments, rail and truck are competitive. Public action needs to address specific segments because of their discrete behavior (e.g., intermodal traffic originating or terminating within the region, automotive traffic, port traffic, bulk freight mov- ing to local industry, or bulk freight moving through the region). • Rail is not always cheaper and more fuel-efficient than truck. Rail will not be cheaper for light-density lines and rail will not be more fuel-efficient for very short trains and cumbersome switching moves. • Trucks provide superior service for most movements. Truck service is usually more flexible, faster, and more reliable than rail service; for many movements, truck is cheaper than rail, especially when the associated logis- tics costs are considered. 3. Infrastructure costs are markedly different for railroads and for highway users. Railroads, for the most part, own and maintain their infrastructure, while competing modes use infrastructure provided and maintained by the public. Railroads must pay for maintenance and rehabilitation as the work is done. Railroads themselves cause—and suffer from—the effects of railway congestion and track deteri- oration; they have an incentive as well as the responsibil- ity to invest in track and equipment based on the marginal effects on train speed, line capacity, and life cycle costs of the track structure. Trucking companies use highways where the causes and costs of congestion are borne by all C H A P T E R 2 Literature Review

users; most of the major highways are toll free, and the public is generally against the use of congestion pricing to reduce highway traffic during peak periods; equipment design is based on the structure of the user fees, taxes, and size/weight limits mandated by public agencies. 4. There are still opportunities for rail network rationali- zation. The rail infrastructure was largely designed and constructed before 1925. In many areas, the network is designed to serve customers who no longer exist or who no longer use rail; in other areas, the rail network does not well serve the traffic that does exist. The greatest problems are in urban areas, where it is difficult to change terminal locations, add routes, or even make substantial modifica- tions to existing routes. Rationalization in this sense does not mean merely reduction; it means alignment of the ge- ography of the network with the geography of the modern market. 5. Private decisions by railroads can have important pub- lic consequences. The location of intermodal terminals affects the volume of shipments that will move by rail and the vehicle-miles traveled in urban areas by draymen moving trailers and containers to and from the terminals. Line characteristics and freight volumes determine the marginal cost of and capacity available for commuter op- erations. Train size and routing decisions affect delays to highway users at grade crossings. 2.1.2 Railroads and Economic Development When first introduced, railroads transformed the world of business and changed the scale and dispersion of economic activity and the locus of population growth. Vance (1986) describes the evolution of the rail and highway systems of Europe and North America in terms of economic geography— new technologies provide better ways to overcome the geo- graphic barriers to trade and development. Cronon (1991) describes how rail technology and the benefits of rail networks allowed Chicago to become “Nature’s Metropolis,” the gate- way to the American west. Trucks and the interstate highway system have long since reduced the role of rail in shaping economic geography, but Cronon’s history still is highly informative about how details of transport cost and innova- tions in finance and marketing can lead to rapid growth in some locations while eliminating whole ranges of business activity in others. 2.1.3 Declining Marginal Costs Like many other transportation systems, railroads use a net- work to provide service to widely dispersed customers with many different service and handling requirements. Generally, in such systems, marginal costs decline both as the network expands and as traffic is added to the system. As the system grows, costs decline and, if there is competition, prices also decline. In fact, given that competition tends to push prices toward marginal costs, systems with declining marginal costs have an inherent problem. Unless they can somehow keep prices at or above average costs or find a way to keep reducing costs, the companies eventually go bankrupt—and bank- ruptcy was a common occurrence in 19th century railroading, even with no competition from trucks. To deal with this problem, railroads try to charge higher rates where possible, which leads directly to inequities in pricing; some customers receive rates that reflect marginal costs, while others face monopolistic rates—“what the market will bear.” Large-scale pricing inequities fuel political impetus for rate regulation. The U.S. rail industry was highly regulated from the late 1800s to the late 1900s. In the 1970s and 1980s, rail and truck transportation were “deregulated,” (i.e., substan- tially less regulated). However, the history of rail expansion, bankruptcies, robber barons, and regulation remains of great importance to public agencies. Locklin (1966) discusses in detail the logic for regulation and the history of the various public actions to regulate, assist, or restrict railroads in the United States. 2.1.4 Service Capabilities The service and cost capabilities of various approaches to moving containerizable freight have been well-documented in prior studies, including Temple, Barker & Sloane (1986); Smith (1990); Norris and Haines (1996); and Muller (1999). Kwon et al. documented typical trip times and reliability for three types of rail service: general merchandise moving in boxcars, grain and other commodities moving in unit trains of covered hoppers, and intermodal. This study used a ran- dom sample of car movements for 1991 to calculate average trip times and various reliability measures. One conclusion of the study was that rail service in 1991 was very similar to what had been found in studies of rail service 20 years earlier. A typical boxcar trip took about 8 days, with considerable variation in trip times. A unit train typically made a trip in just a few days, although longer time was needed to assemble full train-loads of grain. Intermodal trains were faster and more reliable than the other train services, but not so fast or reliable as commonly achieved by truckload carriers. Intermodal operations can provide fast, more reliable ser- vice than carload operations because motor carriers are much quicker in picking up and delivering trailers or containers to customers. Intermodal operations can be cheaper than truck operations because of the economies inherent in train opera- tions. Under ideal conditions, where there are high volumes of traffic moving in a well-defined corridor with restricted highway capacity, intermodal can be competitive for relatively 6

short trips. There is considerable interest in shuttle trains serv- ing ports and inland terminals. Ports are typically located within highly congested urban areas, so the possibility of mov- ing significantly more traffic by rail, if only for short distances, is very attractive. For example, Northwest Container Services moves 60,000 loaded and empty containers annually over the 170 miles between the Ports of Seattle, Tacoma, and Portland. In the Netherlands, the Betuwe Railfreight Line will run between the Port of Rotterdam and the border with Germany, connecting the port with the main freight lines of Europe. These cases are discussed in greater detail as part of Chapters 2 and 3. Intermodal service features few intermediate handlings and, under favorable conditions, can be fully the equivalent of over-the-road trucking. It mainly runs on schedules, some of them geared to the requirements and customer commitments of motor carriers. For many years, the huge trucking opera- tion of United Parcel Service was the railroads’ top intermodal client and had substantial influence on train time commit- ments backed by guarantees. More recently, the railways have struggled to keep up with the efforts of UPS to tighten transit time standards as part of the company’s product improve- ment (Wallace, 2006). Although UPS and other major truck lines remain among the leading users of intermodal trains, rail intermodal capacity seems to have gravitated toward the international container market, where service demands generally are less stringent. Rail carload service has always suffered from the difficul- ties of developing and implementing scheduled service. The typical move requires cars to be carried on three to five trains with classification at a similar number of freight yards. Given the variability inherent in processing, the difficulties of operating in all terrain around-the-clock, and the lack of a reservation system, it is not surprising that rail service tends to be unreliable for general freight. The best service typically is offered when railroads are guided by an operating/service plan and provide the resources necessary to implement the plan, even when traffic volumes fluctuate day-to-day and month-to-month. The worst service occurs when weather problems cause prolonged disruptions in service or when management fails to provide sufficient resources to move the freight. High-density shipping lanes, even at short distances, can support effective rail service, primarily when intermedi- ate handlings can be avoided. Short line rail carriers particu- larly have become adept at local service for traffic within their networks, through a favorable cost structure that makes the business attractive and a sharp focus on customer service for shippers along their routes. The road congestion relief this can produce is of limited scope, but it can be material for specific roads in an urban or other circumscribed areas. The late 1990s were a period of prolonged service disrup- tions for the major rail systems, as rising traffic volumes and declining infrastructure finally led nearly to gridlock when the system was stressed by the implementing of various large-scale mergers, most notably the UP/SP merger. Service was so bad for so long that it led to feature articles in the pop- ular press, before and long after the UP/SP merger (e.g., Machalaba, 1995; Whittaker, 1999). Substantial investments in equipment and in track allowed the railroads to recover to normal levels of reliability. The first part of the new century saw a widening movement to introduce scheduled carload operations as a way to elevate service. Some of the pioneer- ing work on this in the United States was undertaken by the Wisconsin Central, Ltd., (WCL) and adopted on a larger scale by the Canadian National, which purchased the WCL; other large railroads followed suit. However, to get further improvements in service, McCarren (2000, then with the WCL) believes that the industry must adopt a reservation system linked to car scheduling and terminal management systems. The Australian Department of Transportation, as part of a study to address the proper public role with respect to rail- roads, benchmarked performance of their railroads against railroads in other countries (Bureau of Industry Economics, 1995). Their report provides interesting contrasts concerning the types of traffic, levels of service, and costs of transportation for railroads around the world. 2.1.5 Truckload Competition Multiple market segments are served by the trucking in- dustry, not all of which are competitive with rail. Local and regional trucking accounts for most truck movements in urban areas, and rail is competitive for almost none of this traffic (high-volume moves of sand and gravel, road salt, coal, or oil products are the major exceptions). Rail and inter- modal are options for intercity traffic traveling several hun- dred miles or more. This traffic includes small shipments that are commonly shipped in less-than-truckload (LTL) amounts as well as truckload (TL) shipments. Rail/truck in- termodal is an option for both LTL and TL shipments, if the service is reasonably fast, reliable, and efficient compared with the trucking option. Rail carload must have rates that are low enough to offset the added logistics costs associated with the slower, less reliable service and the requirement for larger shipment size. There is no hard-and-fast distance that demarcates rail and trucking zones. Trucks provide some transcontinental ser- vice, while rail provides some local and regional services. However, the average rail shipment is more than 500 miles, whereas the average truck shipment is less than 300 miles. The better the rail service in comparison with truck service, the shorter the distances for which rail is competitive—and vice versa. 7

Before the 1970s, trucking was highly regulated in terms of entry into particular markets and prices that could be charged. Most trucking firms were unionized and handled both TL and LTL freight. The average cost per ton-mile for all freight han- dled was much greater than the average cost of shipping by rail. Some people erroneously used average numbers to sup- port an argument for much greater reliance on rail. However, TL costs are much lower than LTL costs, and it is TL that is competitive with rail. TL costs of perhaps $0.05 per ton-mile for a full truckload shipment can be competitive with rail costs, assuming that TL services are offered at competitive rates by efficient carriers. Three factors led to the development of highly efficient truckload operators. First, the construction of modern turn- pikes and the Interstate Highway System allowed single drivers to travel 500 miles per day, at least doubling the reach of 1-day service. Second, owner-operators and other non-union drivers were willing to drive 100,000 miles or more per year in truck- load service. Third, the ICC allowed the so-called “Irregular Route Common Carriers” to offer highly specialized service, involving a few commodities moving over a few routes. These carriers obtained various operating authorities from the ICC, which allowed them to avoid empty backhauls and thereby achieve greater operating efficiencies. In the 1970s, when much of the national rail system was experiencing severe financial problems, these irregular route carriers flourished. Deregulation of truck service in 1980 accelerated the trend toward highly efficient truckload operators. By the mid- 1980s, advanced truckload firms such as J.B. Hunt Transport and Schneider National were strong competitors for long- distance intercity merchandise traffic because they were able to minimize operating costs, use wide-open networks, and provide excellent service (Corsi and Grimm, 1989). Each shipment was managed by the individual who booked it; each shipment was carried by an individual driver who normally had responsibility for it door to door; and each driver was monitored by a single dispatcher in communication with the booker. There were other advantages in addition to the tight, reliable performance this form of organization allows. These firms used non-union drivers; they minimized empty miles through careful load planning and direct marketing; and they used their size to reduce costs of truck acquisition, mainte- nance, and fuel. Contrary to the predictions of economists, there were economies of scale in trucking, and these large, low-cost firms kept pressure on rates for rail-competitive shipments of general merchandise. For most of the 1980s and 1990s, truckload rates remained at about $1 per mile for dry van, truckload movements of intercity freight (each year TTS published revenue per mile and other financial and operating statistics for trucking companies). Note that $1 per mile, the prevailing rate for more than a decade after deregulation (Roth, 1995), is $0.05/ton-mile for a 20-ton shipment. 2.1.6 Role of Technology Technology has always been a hallmark of rail systems. Evolution in technology for equipment, track, and signals and communications has steadily increased capabilities and reduced costs for nearly 200 years. Furthermore, as the first type of organization to require communications and cooper- ation over a national scale, railroads pioneered many of the innovations necessary to manage the modern corporation (Chandler, 1962). Track and Equipment Technology has continued to be a key factor in improving railroad performance over the past 30 years. Two areas where technology has been critical are heavy-haul railroading and double-stack container trains. Heavy-haul railroading refers to the use of larger cars, more powerful locomotives, and longer trains operating over better track to sharply reduce the costs of hauling coal, ores, grain, and other bulk commodities. Innovations in track have allowed the rail industry to increase the gross vehicle weight for bulk commodities from the 200,000 pounds standard in the 1960s to 286,000 pounds beginning in the early 1990s. Because the newer cars use alu- minum bodies, the gain in payload has been even greater. More than a decade of research and testing at the Trans- portation Technology Center in Pueblo has enabled the rail industry to improve track integrity through the use of better materials, better equipment designs, and advanced track components; with a stronger track structure, railroads have reduced the total costs of shipping bulk commodities on the order of 2 to 5 percent by allowing axle loads to be increased from 33 to 36 tons [i.e., to the so-called 286,000-pound car (gross vehicle weight)]. In fact, the advances in track tech- nology have allowed railroads to reduce track maintenance costs, despite handling more freight using heavier cars (Chapman and Martland, 1997 and 1998). The annual bene- fits from using heavier axle loads have been estimated to exceed one-half billion dollars per year (Martland, 2000; Kalay and Martland, 2001). However, the AAR studies have all cautioned against using the heavier cars on poorly maintained lines. Heavy cars can cause rapid deterioration of weak track structure and neces- sitate expensive upgrades to bridges. The costs of infrastruc- ture improvements may not justify the operating savings available for light-density lines. Still, two other factors must be considered. To the extent that the 286,000-pound car is an industry standard, short lines and their customers believe that they will be at a disadvantage if they are restricted to the use of smaller cars. They, therefore, have sought public funds to upgrade track to handle HAL (Heavy Axle Load) traffic. The costs to society of using trucks instead of rail on rural roads 8

may justify public investment in upgrading short lines to carry heavier loads. Also, it is possible to redesign equipment to gain nearly all of the HAL advantages without increasing axle loads: shorter, higher cars can increase the loading density of the train while retaining 33-ton (or even lower) axle loads. Chapman, Robert, and Martland (1997) recommend that the interest in HAL loads be broadened to a discussion of equipment design, especially if there are to be significant public investments to enable light-density lines to handle heavier loads. Investing in better-designed equipment might be a better option in some circumstances than investing in track and structures. While heavy-haul technology has provided savings in haul- ing coal, it has had fairly modest effects on mode choice. Rail has long been dominant in the bulk market, except for ship- ments where barge or coastwise transport is an option, and the same situation broadly prevails today as in 1980 or earlier. In the intermodal arena, technological innovation caused dramatic changes in handling general intercity freight. Double- stack trains cut the line-haul costs of rail intermodal services nearly in half, which made these services highly competitive with direct TL operations. Double-stack services were pro- moted by ocean carriers serving the Pacific Rim, who sought a faster way to reach eastern U.S. markets than by going through the Panama Canal. Once lightweight rail platform equipment was available, double-stack services quickly linked the major West Coast ports (e.g., Los Angeles, Long Beach, Oakland, Portland, and Seattle) with major Midwest and eastern desti- nations (e.g., Houston, St. Louis, Chicago, and New York). Seeking backhauls for their containers, the ocean carriers secured considerable domestic freight and soon a double-stack network was in place linking the major metropolitan areas of the United States. Coupled with the tremendous expansion of United States-Asian trade, the international container business became the primary driver of rail intermodal growth, leading to the intermodal sector overtaking coal as the top revenue generator for Class I railroads. Operating double-stack trains requires clearances well be- yond what was generally provided on rail lines. In the west, where double-stack services began, bridges and other clearance restrictions were much less of a problem than in the older and more populated east. In some locations, notably New York and Pennsylvania, public assistance helped raise the clearances re- quired to operate double-stack trains. Because of the history, public agencies may think of double-stack trains as a matter of international trade and port access. However, outside of the major port cities, double-stack trains are potentially much more important for domestic freight than for international trade, simply because there is so much more domestic traffic. Access to double- stack terminals is, therefore, a concern for any metropolitan area, not just for ports. These points notwithstanding, there is a second retardant to the domestic use of stack services that comes from the di- mensions and practical advantages of truck trailers versus containers. Intermodal services by definition have an on- road component; a container requires a wheeled chassis to go on road, and the separate pools of chassis equipment have to be maintained and managed. Truck trailers carry their wheels with them, but they cannot be stacked. Moreover, the containers normally favored for steamship operations have smaller cubic capacity than the trailers typical of domestic service, rendering them an inferior good for the cube-limited shipments that make up most domestic boxed freight. Do- mestic high-cube (53-foot) containers have taken hold in the industry to offset this disadvantage; however, they are oper- ated mainly for the intermodal services and are not blended into the regular over-the-road (OTR) networks of motor carriers1. This sacrifices various fleet and balance benefits, and yet the intermodal spine cars that railroads use to carry trailers do not have nearly the cost-efficiency of stack equip- ment. A newer technology that makes up some of the effi- ciency gap is the continuous moving platform successfully operated by CP Rail in Canada under the trade name Ex- pressway and known as the Iron Highway in earlier incarna- tions. Described in Chapter 3, Expressway has been able to attract short-distance highway business between Montreal and Toronto (337 miles) and between Toronto and Detroit (230 miles), carrying standard, non-reinforced highway trailers—including tank trailers, flatbeds, and units owned by private fleets. Equipment expense can be high, although CP has found ways to reduce it, and it is offset by lower ter- minal costs. (A U.S. application of Expressway technology was explored in the Virginia I-81 study, presented in the next chapter.) Information Technology Railroads have historically been heavy users of communi- cations and information technology. Customer service, equipment management, traffic control, service design, and maintenance planning have all benefited from information technology (IT) applications. Investment in IT has been justified by the ability to increase labor productivity (e.g., reduce clerks), to improve equipment utilization, or to reduce operating or maintenance costs. However, it is not always easy for railways to justify the costs associated with new IT, and the industry has generally 9 1The truck line that made the greatest investment in high-cube containers for domestic use—which it did for the sake of tapping stack train economies—was J.B. Hunt Transport. It did so with the original intention of running a blended network. However, this eventually was abandoned and the intermodal and OTR systems were separated, with the OTR component returning to conventional trailers.

been unwilling to adopt technology for technology’s sake. The industry has been criticized by both IT experts and by public officials for moving too slowly to adopt new IT, espe- cially in the area of train control. (Given the fate of the high- technology companies over the past few years, the railroads should perhaps be congratulated for their prudence rather than chastised for their backwardness.) The train control issue deserves some elaboration, given that this is a topic raised by public officials and the press whenever there is a serious train accident. Interest in communications-based train control began in the late 1970s, when an industry group began formulating standards for what was then called Advanced Train Control Systems (ATCS) (Moore-Ede, 1984). The basic ingredients of ATCS were a digital communications link between trains and head- quarters, on-board computers linked to various sensors in the locomotive, and a positioning system. In principle, the train and headquarters could both know the location and speed of the train, so that it would be possible to slow or stop the train if it were in danger of going too fast or exceeding its operat- ing authority. There are multiple approaches to advanced train control, and the digital communications link can serve many business purposes as well as potentially reduce acci- dents (e.g., reducing the load on dispatchers or making it fea- sible to transmit new switching assignments to local train crews). Advanced train control systems offer the potential for eliminating wayside signals, which can lower costs and, in some circumstances, improve capacity. For example, instead of the fixed blocks defined by signal locations, a communica- tions-based train control system can maintain what are known as “moving blocks.” Each train would have authority over a section of track that would continuously be updated as it progresses down the track. Minimum headways would therefore be determined not by the signal system, but by the terrain, train speed, and braking characteristics. With mov- ing blocks, trains can generally follow more closely, which will increase line capacity; although the same effect can be achieved by using short signal blocks, the communications- based approach would be much cheaper. It is unclear how much benefit can actually be achieved from rolling blocks (or shorter signal blocks). Route capacity is more often limited by terminal capacity or meet/pass requirements than by headways, so that the benefits of shorter headways may be most useful in special circumstances (e.g., recovery from dis- ruptions in service related to accidents or track maintenance). In the late 1980s, the Burlington Northern Railway decided not to implement an advanced, communications-based con- trol system, despite the potential for achieving some im- provements in service. An extensive analysis of the costs and benefits was undertaken, which indicated that marketing and business benefits could justify the investment expense. How- ever, the marketing benefits were perceived as too “soft” to justify the $1 billion investment. A good summary of the issues is available as a case from the Harvard Business School (Hertenstein and Kaplan, 1990), while more detailed papers describe the manner in which better communications and dispatching enable faster and more reliable trains (Smith, 1990), which translates into more reliable terminal perfor- mance (Martland and Smith, 1990). Public interest in ATCS persists because of the potential for safety improvements, given that these systems can prevent certain kinds of colli- sions and overspeed derailments. The costs of the systems have proved to be a stumbling block. For example, a con- gressionally mandated study of train control’s potential for improving safety concluded that the safety benefits alone could not justify the multi-billion dollar investment that would be required (Office of Safety, 1994); this same report includes an excellent introduction to signaling and commu- nications for railroads. The federal government has invested heavily in research on Intelligent Transportation Systems, most of which relates to highway technologies. The range of applications includes traf- fic control, use of transponders to allow vehicles to avoid lines at toll booths, weigh-in-motion scales, predicting traffic condi- tions, and facilitating emergency response. It is now feasible to collect tolls without requiring traffic to stop. In Toronto, cam- eras capture the license plate, character recognition software reads the license, the license is linked to the owner, and the owner of the car receives a bill as part of their phone bill. The technology for much more extensive use of tolls and congestion pricing is available, although little has yet been implemented. Fuel Efficiency Railroads, on the whole, are more fuel-efficient than trucks because of the inherent efficiency of the steel wheel on the steel rail and the use of gentle grades on rail routes. However, fuel use varies greatly with the commodity and the car type, and public agencies need to be able to go well beyond “average gallons per ton-mile for rail versus truck.” Heavy trucks operating on good roads may, in fact, be more fuel-efficient than very short trains operating on poorly maintained, circuitous routes. Detailed assessments of en- ergy and environmental factors are available for freight (e.g., Abacus Technology, 1991), with a major EPA study exam- ining fuel efficiency in great detail, especially for trucks (ICF Consulting, 2001). 2.2 Intermodal Planning Including Truck and/or Rail Freight Conferences over the last decade have provided a wealth of material on intermodal capabilities and intermodal partner- ships, including the National Conference on Intermodalism 10

(1994), the Intermodal Freight Terminal of the Future (1996), and the Partnership to Promote Enhanced Freight Movement at Ports and Intermodal Terminals (2000). There is a base of planning reports at state, metropolitan, and local levels that show how truck and rail freight alternatives and solutions can be, and in fact have been, successfully included in transportation planning, evaluation, and implementation practice. The major themes are as follows: 1. Intermodal transportation at its best combines the effi- ciency of rail with service levels normally associated with trucks. 2. There are many intermodal options for moving freight, including bulk and break bulk transfers, as well as the transloading of trailers and containers. There are many sup- ply chain options for the size and location of warehouses, the source of supplies, and the nature of markets served. Changes in supply chains made by remote companies can affect local freight flows significantly. 3. Intermodal transportation is rapidly growing, but there are potential problems in providing sufficient capacity. 4. Even if intermodal transportation doubled, there would be only a minor reduction in truck traffic. 5. The location of intermodal terminals is critical: termi- nal location is a major consideration in customer use of this mode as well as a major determinant in the nature of drayage flows within a region. Terminal location therefore affects the extent to which intermodal trans- portation affects air quality, energy consumption, and congestion. 6. There are several types of intermodal terminals, including major facilities serving local pickup and delivery, inter- change terminals, port support terminals, and terminals where trailers and containers are transferred from one train to another. Larger terminals often serve multiple functions, and there is considerable flexibility concerning how traffic is or could be routed between terminals. Although railroads have traditionally tried to provide direct, single-train service, there are also possibilities for creating more of a hub-and-spoke network. The nature and location of hubs could be much different than for other kinds of intermodal terminals. 7. Public support could conceivably lead to intermodal shuttle systems aimed specifically at alleviating congested portions of the highway network. Various simple models can be used to estimate the costs and service levels associated with intermodal transportation. Sim- ple analytical models can be used to provide quick estimates of cost (e.g., Martland and Marcus, 1987); such models have been used to estimate the effects of providing double-stack service to the Port of Boston and options for relocation of in- termodal terminals within eastern Massachusetts. New planning techniques are being developed that make ex- tensive use of traffic flow data and graphical analysis for inter- modal freight planning. These techniques have been applied, for example, in Pennsylvania (Gannett Fleming, 1999), New York State (Erlbaum, 2001), and Ohio (Gad, 2001). New technology, especially information technology, can be very useful in coordinating intermodal operations. A study conducted for the National Commission on Intermodal Transportation summarized the technological opportunities for improving rail/truck coordination (A&L Associates, 1994). Research sponsored by the AAR identified ways that infor- mation technology can be used to increase the capacity and reduce the cost of terminal operations (Zhu and Martland, 2002). This study found that investment in IT on the order of $1 million could increase capacity by 5 to 10 percent, while providing net operating benefits on the order of $3 to 7 million. The study called for greater cooperation among terminal operators, carriers, customers, and public agencies in using IT to coordinate movement of trains and trucks to and from intermodal terminals. The information require- ments for economic analysis were addressed during a TRB conference (TRB, 2000). 2.3 Studies of Congestion Cost The central purpose of this report is the potential for mov- ing more freight by rail so as to reduce truck traffic on con- gested roads, especially in urban areas. Most of the literature on congestion, and most of the measures for dealing with congestion, deal with peak-period automobile traffic gener- ated by commuters, which does address the costs of conges- tion. However, it is otherwise of limited use for examining the ways that truck traffic contributes to and suffers from highway congestion. Also that rail freight can contribute to congestion in any location where trains use routes with grade crossings warrants consideration. Some major themes can be identified with respect to con- gestion cost: • Congestion costs are typically calculated using the value of time for the people caught in traffic, including commuters, other automobile users, bus riders, business travelers, local truck drivers, and intercity truck drivers. • Consequential costs can extend well beyond time value. A truck that misses a 15-minute delivery window can (1) disrupt the production or merchandising of goods by the recipient; (2) interfere with other trucks maneuvering into tight spaces and scheduled door capacity at customer docks; and/or (3) be held outside or turned away—and in the latter case, the VMT of local delivery is tripled, as the truck departs 11

for a holding point and returns later. Chronic and variable delay makes modern logistics strategies less effective. • Congestion is a phenomenon where marginal costs can be much greater than average costs: a user encounters average delays that depend on the time of day, but causes incre- mental delays to other users that in the aggregate can be many times greater. Congestion tolls can reduce peak use of facilities by encouraging some users to make fewer trips or to shift trips to other modes, other time periods, or other destinations. Despite the effectiveness of congestion tolls, they have rarely been implemented because of lack of public acceptance of the concept, although recent years have seen the level of interest rising. For commercial traffic, there is also a question as to how directly the incentive bears on the point of decision. While freight recipients normally set the delivery schedule, responsibility for paying the bill usually rests with the ship- per. Thus if a truck line wishes to recover the cost of tolls, the charge goes to the shipper—not to the party who controls timing. • Adding highway capacity to handle peak loads is very ex- pensive because the incremental capacity is needed only for a small fraction of the typical week. • Urban freight is adversely affected by congestion because it takes longer to reach customers and drivers can make fewer pickups or deliveries per day. The costs of congestion for trucks will, for high-valued freight, include the time value of the freight. • Truck movements do not follow the same patterns as other traffic; trucking companies and their customers have some flexibility in when they use congested facilities, and truck fleets actively make an effort to operate off peak. As a rule, a commercial vehicle traveling at peak hour is obligated to be there by its customer and schedule. • The composition of truck traffic exposed to delay varies by time of day, because of the diurnal shipping cycle. Morning peak will have a relatively large number of vehicles at the end of their runs and making deliveries—with looming appointments and no cushion left in their schedules. The quantity of vehicles traveling empty may be relatively high mid-day as trucks move from delivery point to the next pick-up point. • Restrictions on truck movements have been implemented in some cities and discussed in others. Such restrictions do not necessarily affect congestion, given that more people may drive, but restrictions certainly will increase costs of moving freight within the city. Studies generally show that the costs to truckers and their customers outweigh the benefits to commuters. Congestion increases both the average time and the variabil- ity of time required for trips. As traffic flows approach capacity, congestion rapidly increases and accidents or bad weather can lead to gridlock. In congested conditions, the marginal delays can be many times higher than the average delay. Each addi- tional vehicle not only suffers from slower speeds and long delays at intersections, it increases the delays to subsequent vehicles. Likewise, diverting a vehicle from a congested route will have benefits much greater than the average travel time along that route. Large trucks have a much bigger effect on congestion than automobiles because they are longer, less maneuverable, and underpowered compared with typical automobiles. They accel- erate more slowly; need larger gaps, more lane width, and more time to make turns; and may slow down on long grades. Thus a single truck is equivalent to several cars in terms of capacity. Methods for estimating the effects of trucks on highway operations are given in the Highway Capacity Manual pub- lished periodically by TRB. The larger the truck, the greater the effects, assuming similar equipment design and opera- tions; a special TRB report investigated the ways in which larger combination vehicles affect highway and intersection capacity (TRB, 1989). On a level, multi-lane highway, a large truck is equivalent to 1.7 passenger cars [i.e., a large truck equals 1.7 “passenger car equivalents (PCEs)].” If there are steep grades or sustained grades, the trucks will slow down and represent 8 PCEs on freeways or even more on 2-lane highways where passing opportunities are lim- ited. At intersections, a large truck can represent 3 to 4 PCEs. Increasing the percentage of trucks in the general mix of traffic therefore can cause a marked reduction in ca- pacity. For example, if 10 percent of the vehicles are heavy trucks on a route with signaled intersections, capacity will drop 20 to 25 percent. To look at this another way, if this route is operating close to capacity at rush hour, diverting the trucks would allow approximately 50 percent more automobiles on the road. An NCHRP study of congestion costs (Weisbrod and Vary, 2001) focused a major element of its analytic work on urban freight deliveries. This study included case studies, of Chicago and Philadelphia, that provide useful insights. 2.4 Rail Relocation and Road/Rail Conflict Both the rail and the highway networks evolve in response to changes in economic geography, transportation needs, and competitive capabilities of the various modes. As traffic volumes grow, as traffic shifts to new routes, and as new customers ship more freight, there are bound to be increasing pressures for network improvements. Where traffic is 12

declining, there is pressure to reduce maintenance or abandon certain line segments. Where traffic is growing, there is pres- sure to add line or terminal capacity. Where traffic is shifting to new locations, there is pressure to add new routes or new terminals. Wherever there are grade crossings, growth in either highway or rail traffic leads to greater highway conges- tion and pressure for restricting rail operations, grade separa- tion, or closing the crossings. Thus, a number of standard planning issues relate to the structure of the rail network as shown in Table 2-1. 2.4.1 Rationalization of Rail Facilities Rationalization involves restructuring the network so as to reduce costs, reduce conflicts between rail and highway traffic, improve service to rail customers, and free land for redevelopment. In the 1970s, following the collapse of the Penn Central, extensive public debate focused on two major types of rationalization: abandonment of light-density lines and railroad mergers. At that time, both processes were under the jurisdiction of the ICC. Rail abandonments were highly contentious—the railroads emphasized their finan- cial losses while customers and local governments empha- sized the effects on local communities. In general, the ICC approved most merger and abandonment applications, but the railroads thought that the proceedings dragged on too long [Sloss]. As they pushed for more rapid abandonment, the public resisted. Eventually, as part of the legislation cre- ating Conrail, abandonment was put on a more rational footing. Railroads were allowed to abandon lines unless cus- tomers, local or state agencies, or someone else covered the railroad’s operating losses; federal funds were allowed for states to use to keep light-density lines in operation. Gradually, the emphasis shifted from abandonment to the transfer of light-density lines from the large railroads to short-line and regional railroads, some of which were owned or supported by the states [Levine]. The impetus for divest- ing light-density lines was that the smaller railroad would not be bound by the same labor contracts and would have closer contact with customers, thereby eliciting more freight. 13 Table 2-1. Standard planning issues for rail network structure. Planning Issue Port access Commuter rail Redevelopment potential Access to rail/truck intermodal terminals Rail clearances (vertical) Highway clearances (lane width, corners, intersections) Highway connections to service area Rationalization of center city rail network Facilities suitable for through as well as local traffic Rail clearances Line capacity Rail freight and rail passenger Capacity and schedule effects Commuter rail effect on highway congestion Rail and highways Improved protection Enforcement Rail operations during rush hour Grade separation and closing of grade crossings Conflicts among traffic flows Intermodal, merchandise, and bulk trains on high density rail lines Terminals Capacity for growth Centralized versus dispersed facilities In-town versus perimeter facilities Location and highway access Intermodal issues Equipment Containers versus trailers Potential for non-standard technologies Closure of crossings with low highway traffic Protection for crossings with high road traffic volume Grade crossings Effects of rail routing changes on roadway congestion Rail service to industrial parks and large potential customers Provision of sidings and support yards for potential customers Service to industry Rail inclusion in economic development planning Axle load limits for track structure Weight limits for bridges Heavy-haul railroads Assistance to short line and regional railroads Upgrade tracks and bridges for common Class I trains Factors

The results, not unexpectedly, have been mixed. Where lines had a reasonable traffic base and some prospect for growth, without major capital requirements for continuing operations or heavy debt service, then lower costs and better marketing have helped the short lines to succeed. Where the traffic base was declining, because firms were moving or mines were closing or markets were changing, the added benefits of short-line operation could not postpone the in- evitable decline. An example of the latter case is the Lamoille Valley Railroad, which was upgraded with approximately $20 million in support in the 1980s from the state of Vermont, but which had no traffic at all by the end of the 1990s. A study commissioned by the Northeastern Vermont Development Association (Martland and Wong, 1997) concluded that the best use of the railway would be as a recreational trail, which would allow four-season use of the route while preserving the right-of-way for possible resurrection. A lesson from this ex- perience, and indeed from the entire experience with state support of light-density lines, is that investing substantial public money in rail facilities does not necessarily create a competitive advantage for rail, nor does it mean that the rail system will be used. 2.4.2 Redevelopment of Urban Rail Facilities The rail system was largely constructed in the 19th century, long before trucks offered competition with rail or suburbs offered competition with city centers. The rail network was necessarily dense, because it served numerous industrial sidings and port facilities. Given that many railroads served each major city, a vast complex of classification yards, inter- change yards, and industrial support yards developed in all the major cities of the east and the Midwest. As trucks became available, the scale and density of the urban rail networks were clearly inconsistent with the de- mand for rail. Trucks could handle most port and regional traffic more quickly and efficiently than rail, so many of the urban facilities were underused. Railroads responded in part by consolidating yards, freeing valuable urban space for redevelopment. Many notable buildings, centers, and parks are built on former rail freight or passenger termi- nals, including the Prudential Center in Boston, the Crystal City development opposite Washington National Airport, and various waterfront developments in New York and New Jersey. After the Penn Central Railroad went into bank- ruptcy in 1970, the Penn Central company survived in part because of the value of its extensive holdings of obsolete rail facilities. Today, there is still a common interest among railroads, public agencies, and railroads in restructuring the urban rail system so as to improve land use. Railroads no longer need the extensive inner city terminals, but may have difficulty in assembling land in the suburbs for facilities closer to their current customers. Public agencies have difficulty in deter- mining whether or not a particular terminal is well-sited for rail or whether better opportunities exist where real estate is cheaper. Beacon Park Yard in Boston is an example of current dis- cussion about land use. The site, which is under long-term lease to CSX, is next to the Massachusetts Turnpike and is conveniently located with respect to the urban road network. It is also located strategically between Boston College and Harvard University and a new biotechnical industrial center. In the early 1990s, the site was owned by the Massachusetts Turnpike Authority, which was very interested in moving the intermodal operations to another site so as to allow re- development of the real estate. MassPike commissioned a study of possible alternative locations, but, because of the local geography and development patterns, was unable to find a large enough site that had good highway and rail ac- cess, that was relatively close to Boston, and that did not have unique environmental features. MassPike did not pursue the matter, and the site was sold by the Turnpike Authority to Harvard University. CSX retained its lease, but a new study was launched subsequently by the Massachusetts Executive Office of Transportation and Construction, now considering how to balance railroad requirements and regional trans- portation objectives with Harvard’s need for educational facilities expansion. 2.4.3 Location of Intermodal Terminals The location of intermodal terminals is essential to the ef- fectiveness of intermodal operations in reducing local truck traffic. A study of intermodal terminal movements in the Los Angeles basin found that having multiple terminals through- out the region allows significant reduction in truck-miles traveled on local streets (Frazier et al., 1996). Conversely, cen- tralization of intermodal operations in a single terminal would likely increase truck-miles traveled, even if the termi- nal were centrally located. Locating terminals at the periph- ery of the region would certainly increase truck-miles moving containers and trailers to and from the facility. Shut- tle systems that move containers between major hubs and downtown terminals can reduce drayage, but may increase operating costs for the railroads. Minor subsidies might enable shuttle systems to be operated, thereby retaining the air quality and congestion benefits of rail for central business districts (CBDs). Moving intermodal operations to remote hubs would also reduce the land required for terminals in expensive urban areas. There is a trend toward locating new intermodal terminals away from the central cities, which will affect both highway traf- fic and future development. Norfolk Southern located a new 14

facility outside Atlanta in Austell, Georgia (Norfolk Southern, 2001); UP decided to add capacity outside of Chicago in Rochelle, Illinois (Union Pacific, 2001). Ideally, truck transload facilities will be located close to the rail intermodal terminal. UPS has constructed major sorting centers in Jacksonville and in Chicago in locations next to the rail facility, thereby minimizing drayage costs and highway effects. 2.4.4 Grade Crossings and Grade Separation Grade separation will eliminate highway delays at rail crossings and reduce the risk of crossing accidents. Closing crossings where there are low volumes of highway traffic is an alternative way to reduce the risk of accidents; however, travel times for some highway users may increase. A study conducted by Florida DOT estimated the potential to eliminate as many as 19 rail-highway at-grade crossings in the Sarasota-Bradenton, Florida Urbanized Area. The elimi- nations would require consolidation of trackage operated by the Seminole Gulf Railway (SGLR), lessee of CSX Trans- portation branch lines in the area. Consolidation of opera- tions of CSXT predecessors Atlantic Coast Line and Seaboard Air Line after their merger resulted in two separate, but parallel, tracks serving the immediate study area with a con- nection in downtown Sarasota. One track had few rail users, with most of the railroad’s freight traffic in the area being generated on the second line. Two means of consolidating the trackage were considered and designed. The preferred alternative involved a new connection, which required a grade separation of very heav- ily traveled U.S. 301. Rail traffic and operating data were obtained from the railroad and highway data from the FDOT national railroad-highway grade crossing inventory for the existing crossings. Highway traffic counts were obtained from FDOT for the proposed grade-separated crossing, and exist- ing rail users located on the line segment to be eliminated were interviewed. Construction estimates were prepared, and a benefit-cost analysis performed. Benefits were as follows: • Highway user vehicle operating and maintenance costs were avoided; • Vehicle occupant time delays were avoided; • Grade crossing crashes were avoided; • Railway operating savings accrued; • Railway and crossing maintenance savings accrued; and • Track material and right-of-way salvage value accrued. These benefits were reduced by the cost of relocation of one rail user who would have to be relocated. The results of the study were presented to the Sarasota/Manatee MPO in September 1993. The MPO accepted the report, but recommended that FDOT not pursue any improvements at that time because the MPO did not believe that the proposed project would “neces- sarily represent a great benefit to the community at large.” Elimination of grade crossing delays has been a major moti- vation for some notable examples of public investment in rail facilities, including the Alameda Corridor in Los Angeles/Long Beach and the Sheffield Flyover in Kansas City; these two proj- ects are examined among the case illustrations in Chapter 2. 2.5 Benefit-Cost Assessment and Modeling State and local transport planners may be called on to con- sider various issues related to changes in rail systems and the resulting effects on such public concerns as highway conges- tion and land use. A number of themes run through these considerations: • Public agencies must demonstrate that total benefits of a project are sufficient to justify the costs of the project, taking into account the time value of money in order to compare current and future costs and benefits. • Both costs and benefits may include much more than financial matters, and many ways have been used to quan- tify non-monetary factors. • There are various methodologies for assessing projects with multiple categories of costs and benefits. Many types of weighting schemes have been used or proposed, but weighting schemes still require political input in establish- ing the weights. • Public agencies also are concerned with equity—how are costs and benefits distributed? Major public projects must ultimately be approved by a political process. • Public policies are often subjected to vigorous debate concerning what types of projects should be considered, how projects should be structured, and whether or not regulations or other public actions may be able to reduce the need for public investment. MPOs or other public agencies may be asked to carry out a study involving several distinct steps: 1. Identify the effects of proposed investments in rail facilities or changes in rail operations on rail cost and performance; 2. Predict the effects of the anticipated changes in rail per- formance on highway traffic flows; 3. Estimate the effects of the predicted changes in traffic flows on congestion and air quality; 4. Predict the effects of the proposed rail investments on land use, employment, economic growth, and economic justice; 15

5. Evaluate the effectiveness of proposed rail investments rel- ative to other • Investments in the rail system, • Investments in the transportation system, and • Approaches to reducing congestion and improving air quality. The first two steps are likely to cause problems for public officials, given that such officials are not generally familiar with the details of rail systems or the mechanisms of freight competition. Public officials will also need help with the last step, which requires an understanding of the options for freight investments. Railroads contemplating major investments in a metro- politan area will—in theory—go through similar steps, espe- cially if they are seeking cooperation from local governments. Like the state agencies, railroads will be able to deal well with some steps, but will need help with other steps. Railroads will be able to predict the effects of investments on their performance and their competitive position, and they will be able to consider alternative rail investments. They would ordinarily be interested in their own costs and benefits rather than the public issues addressed in Steps 3 and 4; however, if railroads are seeking to cooperate with public agencies, then railroads will be interested in using public benefits to justify improvements in the rail system. Both railroads and public agencies will need help in finding alternatives to any proposed investment. 2.5.1 Examples of Intermodal Freight Planning Studies I-35 Trade Corridor Study: Recommended Corridor Investment Strategies The FHWA and the state DOTs in Texas, Oklahoma, Kansas, Missouri, Iowa, and Minnesota combined their ef- forts to conduct a study of Interstate Highway 35 (I-35) from Laredo, Texas, to Duluth, Minnesota (HNTB & WSA, 1999). The study assessed the need for improved local, in- trastate, interstate, and international transportation services in the 1-35 corridor and defined a general strategy to ad- dress those needs. The base case was a “Do Little Scenario” that included maintenance of pavement and bridges, com- mitted highway and transit improvements, demand man- agement, ITS, and growth management. The three best of five initial alternatives to the base case were studied in greater detail: • Highway Upgrade with a Partial NAFTA Truckway, • Highway Upgrade within Existing ROW, and • Highway Upgrade with Rail Implementation. Based on a full analysis, the Highway Upgrade with a Partial NAFTA Truckway strategy was recommended be- cause it provided the best overall movement of traffic in the corridor and the highest benefits, taking into account travel times, accident costs, environmental impacts, and benefit- to-cost ratios. This alternative included special provisions (i.e., a separate truckway facility or a truckway within the existing I-35 right-of way) to accommodate the high- volume truck traffic between the Dallas-Fort Worth area and Laredo. In contrast, the Highway Upgrade with Rail Implementation strategy promoted cooperative rail services between Kansas City and Laredo in order to decrease freight traffic on I-35. The study did not find this to be a promising strategy: “A limitation on the Highway Upgrade with Rail Implemen- tation strategy relates to the reliance upon shifting significant freight to rail service. Even with a high proportion of shifted freight, there is a rather small change in the requirements for I-35 improvements, and the capability of rail companies to accommodate those increased volumes on rail is uncertain.” National I-10 Freight Corridor Feasibility Study This study addressed the issue of increased truck traffic and intermodal freight along an existing interstate corridor of international, national, regional, state, and local significance. I-10 stretches from California to Florida, passing through 8 states and 17 major urban areas. It is connected to key inter- national ports, including the nation’s largest container and bulk ports and all U.S./Mexican border gateways. The Texas DOT served as the contracting agency for the I-10 Corridor Coalition (i.e., California, Arizona, New Mexico, Texas, Louisiana, Mississippi, Alabama, and Florida). A comprehensive evaluation of the overall transportation system was researched in order to assess the need for, and the feasibility of, developing a broad range of alternatives to facilitate the movement of goods along the I-10 Corridor. Among the scenarios to be evaluated was the use of rail to alleviate congestion. The study examined freight traffic growth along the corridor and identified traffic streams that could be served by rail. The study measured the effects of rail service on the I-10 facility (e.g., capacity and operations) and determined that conventional approaches to rail service would not significantly delay construction or reduce delay on a corridor basis. The National I-10 Freight Corridor Study was divided into three time frames: short-range, 2008; mid-range, 2013; and long-range, 2025. Short-term solutions were project specific and most of those solutions identified were state specific consisting of physical components in urban areas, including additional lane miles as well as operational (ITS/CVO) meas- ures. Mid-range and long-term solutions were for the corridor 16

as a whole and focused on innovative technological and oper- ational solutions, including the feasibility of dedicated truck lanes in certain segments of the corridor. The Potential for Shifting Virginia’s Highway Traffic to Railroads Virginia DOT (VDOT) was directed by the Common- wealth’s legislature to examine the potential for diverting traffic from highways to rail. Interstate 81 was cited as an “acute example” as its current traffic consists of as much as 40-percent trucks, although it was designed to carry no more than 15 percent. The purpose of the study was to determine if (1) the potential existed to divert enough high- way traffic from I-81 to rail transport to significantly affect the need for planned improvements, and (2) the effects over time would justify public expenditures for rail improvements. Various analyses were performed for the study. First, the various truck traffic flows contained in the various databases were examined and assigned to the highway system. The trucks that would use I-81, all or part of the length in Virginia, were identified by route segment (VDOT, 2001; WSA et al., 2001). A diversion potential of around 10 percent of trucks with dry van semi-trailers moving in excess of 500 miles was used as a reasonable expectation. Trucks with those charac- teristics constituted approximately 70 percent of all trucks on the corridor. Highway effects were estimated using the Highway Economic Requirements System (HERS). HERS is a com- prehensive highway performance model used to prepare the U.S. DOT’s biennial report to Congress on the “Status of the Nation’s Surface Transportation System.” The study found that the planned improvements to I-81 would have to proceed, and, in fact additional capacity improvements should be considered. Even with additional capacity im- provements, the removal of trucks (diverted to rail) affects the amount and timing of those improvements. An analysis of the present value of the benefits that would be attributa- ble to the diversion of trucks over the 22-year study period was conducted. The results revealed that at a 10-percent di- version level, almost $400 million worth of benefits were generated. The study concluded that public investment in rail improvements in the I-81 Corridor should be considered based on the potential to accrue public benefits. Its recom- mendations led to a subsequent market assessment project that surveyed customer requirements, evaluated the appeal of conventional and unconventional rail products, and reviewed the related public investment proposals of railroads in the re- gion. Results of the market assessment are presented among the case illustrations in Chapter 2. Wilmington-Harrisburg Freight Study This study investigated strategies for safer and more effi- cient movement of freight along the Wilmington-Harrisburg Corridor. Originally conceived as an analysis of strategies to divert Port of Wilmington traffic traversing the Corridor to other routes and modes, it was expanded after discover- ing that the Port generates less than 10 percent of the Corri- dor truck volumes. Most of the freight traffic was either originating or terminating (and often both) in the counties along the Corridor (i.e., New Castle, Chester, Lancaster, and Dauphin). Two scenarios addressed the potential for divert- ing long-haul through traffic either to railroads or to the Pennsylvania Turnpike. Two other scenarios focused on enhancing the efficiency of freight flows necessary to support local businesses. The rail scenario included improvements to the Norfolk Southern route into Delaware, construction of a Triple Crown terminal in New Castle County, better use of the Brandywine Valley Railroad, and the effects of the Shellpot Bridge repair. The conclusion was that investments in the rail system offered some potential to divert existing truck freight to rail. The shipper scenario discussed different operating strate- gies that could be used to reduce congestion. These included off-peak pick-ups/deliveries, increased use of warehouses and distribution centers, and alternate routes and modes. The shipper scenario also presented the results of a shipper ques- tionnaire. The primary concern of the shippers was roadway congestion between Lancaster and Wilmington. Many of the shippers supported construction of a bypass. The study there- fore examined proposed enhancements to the Corridor, specifically Route 41 and U.S. 30 bypasses and managing the flow of freight through truck bans, traffic calming, and en- hanced enforcement initiatives on Route 41. A U.S. 30 bypass would have a significant positive effect on freight flows by pro- viding an appropriate route for trucks passing through the re- gion. By working with area shippers, it could be possible to shift some local freight activities to the U.S. 30 bypass by con- structing warehouses or distribution centers. A Route 41 truck ban and traffic calming would adversely affect businesses in Chester, Lancaster, Dauphin, and York counties. A truck ban on through traffic where “through” was defined to be west of Harrisburg/Carlisle would not affect local businesses as much and was deemed worth further exploration. The study also explored strategies to move trucks off of the Corridor and onto the Pennsylvania Turnpike. A value pric- ing study determined that about 30 trucks per day would di- vert to the Turnpike if toll discounts were offered between Exit 23 (Downingtown) and Exit 19 (Harrisburg). Allowing longer combination vehicles (LCVs) on the Turnpike and connecting roads had the potential to divert a significant number of trucks from the Corridor. This proposal faced 17

numerous obstacles, including strong opposition from the Pennsylvania Turnpike Commission. A Multimodal Transportation Plan for Wisconsin Wisconsin DOT (WisDOT) developed a multimodal trans- portation plan for Wisconsin called “Translinks 21” (WSA and Reebie Associates, 1996). The intercity freight planning effort began with the development of a county-level com- modity flow data set for all modes. The databases consisted of information obtained from state, federal, and private industry sources. Trend commodity forecasts were developed for truck, rail, waterborne, and air shipments using employment and productivity factors through the Year 2020. Several future scenarios were developed for each mode. A Freight Expert Panel made up of Wisconsin industry and transportation leaders and a set of subcommittees representing individual modes reviewed the scenarios, databases, and traffic forecasts used in the study. A truck-rail transportation scenario was identified as the most promising freight alternative. Translinks 21 called for making improvements to the state’s rail system to be funded through the creation of a revolving low-interest loan program supported by state bonds with debt service to be paid from the State Transportation Fund. The following types of improvement projects were identified: • Primary corridor tracks that need to be upgraded so that entire segments operate at the same speed—a key for effi- cient service; • Secondary tracks that need to be upgraded in areas that demonstrate a need for improved service levels; • Track improvements needed to allow for higher speeds within urban areas (this could include consolidating some lines or closing some rail-highway crossings); • Operating signal improvements needed to increase rail efficiency; • Track and bridge upgrades needed to increase the weight capacity of rail corridors that may be required to accom- modate heavier car loadings; and • Two active program activities—the preservation of low- volume rail lines and upgrades on rail lines preserved by public ownership—that would continue. To improve intermodal shipments using rail, the following types of improvements were also cited: • Needed intermodal facility improvements, including terminals, intermodal yards and storage facilities, pulp loading sites, and bulk transfer facilities; • Track improvements needed to accommodate higher speed intermodal movements; and • Clearance improvements necessary to accommodate double-stack movements. 2.5.2 Performance Models for Specific Types of Services Public policy must be based on costs and performance for particular locations and types of operations, not on averages. Simple models of rail costs for intermodal, general merchan- dise, and bulk service can be used to frame many policy ques- tions; more sophisticated models can be used as necessary. Spreadsheet models can differentiate performance for the major classes of rail service (e.g., unit train, general freight, automobiles, chemicals, and intermodal) and of truck oper- ations (e.g., truckload, LTL, drayage, and long-haul versus short-haul). Models can also reflect economies of scale, pro- ductivity (of equipment, facilities, and labor), unit costs, and service levels. The decision-making process is ultimately political, in the best sense of that word. Decisions will require some weight- ing of financial, environmental, land use, and equity factors. Weighting schemes, which may be helpful in some cases, can- not replace the need for a political decision, because it is sel- dom possible to agree on an objective basis for any weighting scheme. The process therefore can build on two principles: (1) assess the entire range of relevant costs and benefits and (2) require comparisons with other ways of achieving the same benefits. A previous section outlined the many types of investments that could be considered as a way to reduce rail/road con- flicts, including the following: • Improved access to intermodal terminals, • Development of new terminals, • Grade separation, • Adding tracks to mainlines, • Adding customer sidings, and • Building transfer facilities. The relevant rail and freight options can be identified for various minor, medium, and major projects. The intent is to give public agencies, carriers, industries, and others a better understanding of what is likely to be important in each type of improvement. It is important to distinguish among projects that are of purely local significance and those of regional or national significance. Providing sufficient capacity for growth in inter- modal traffic is essential for a region—but not for any point within that region. Adding a siding for a customer or eliminat- ing a grade crossing will have local effects; creating a multi-track grade-separated corridor for rail movement through a major rail hub may have national significance. The Guidebook in this publication supplies a framework for evaluating rail initiatives, from a scoping analysis to a comprehensive assessment, and for small and large projects. 18

Presented below are other resources that can be used to sup- plement, or in conjunction with, the Guidebook. 2.5.3 Guidebooks Overview A plethora of “guides” and “tools” address various as- pects of multi-modal project evaluation, impact analysis, and benefit-cost analysis. Some of them provide insight and applications that are potentially applicable for parts of this study, although they are presented in forms that specialize in other types of applications. Some of the guides and tools focus on transit versus highway planning for passenger travel, without consideration of the special issues associated with rail freight. Others provide sophisticated analytical models that require data not commonly available for rail freight applications. A useful general reference that specifically treats the inter- relation of the freight rail and highway systems is the AASHTO Freight Rail Bottom Line Report, released in 2003. Although designed as a policy document, the report provides a survey of the function and state of the rail industry and is rich in illustrations. The policy challenges and choices it poses are helpful as well for framing the issues of public rail invest- ment in a strategic context. A synopsis of the table of contents, presented below, offers a good overview of its subject matter. Among the many other prior studies and reports are these: • NCHRP 2-23: Update to the AASHTO Redbook; • NCHRP 2-18(4): StratBENCOST; • NCHRP 7-12: Microcomputer Evaluation of Highway User Benefits; • NCHRP 20-29(2): Computer Model for Multimodal, Multi- criteria Transportation Investment Analysis; • NCHRP 25-10: Estimating the Indirect Effects of Proposed Transportation Projects; • NCHRP 25-19: Guide for Addressing Social and Economic Factors; • NCHRP Synthesis 302: Mitigation of Ecological Impacts; and • NCHRP Report 462: Quantifying Air-Quality and Other Benefits and Costs of Transportation Control Measures. Several of these are discussed in the following subsection to illustrate how guidebooks may differ in terms of the breadth of their concerns and the depth of their coverage. Example NCHRP Guidebooks and References NCHRP Project 25-10 and its continuation NCHRP Proj- ect 25-10(2) addressed “Estimating the Indirect Effects of Proposed Transportation Projects” and resulted in NCHRP Reports 403 and 466 (The Louis Berger Group, 2002). 19 AASHTO Freight-Rail Bottom Line Report I. Rail's Role in the Intermodal System The Evolution of the Nation's Freight System Goods Movement Today Freight-Rail Services Today Freight-Rail Benefits Today The Freight-Rail Business Today II. Alternative Futures for the Freight-Rail System Economic and Logistic Drivers of Freight Demand Freight Forecasts and Transportation System Impacts Alternative Freight-Rail Growth Scenarios Assessment of Freight Corridors III. Creating the 21st Century Freight-Rail System Choices and Vision Public-Private Partnership Opportunity The Bottom Line IV. Appendices Private Sector Rail Issues and Challenges Public Sector Rail Programs Public-Private Rail Financing Strategies

NCHRP Report 466, a “desk reference,” is structured to serve as training materials for practitioners who must complete en- vironmental impact statements for transportation projects. The 99-page report is divided into 10 course modules, each of which has an overview, a discussion of relevant considera- tions or methods, a summary, and references: 1. Introduction to Indirect Effects Analysis 2. Review of Case Law on Indirect Effects Evaluation 3. Step 1 – Initial Scoping for Indirect Effects Analysis 4. Step 2 – Identify Study Area Directions and Goals 5. Step 3 – Inventory Notable Features 6. Step 4 – Identify Impact-Causing Activities of the Pro- posed Action and Alternatives 7. Step 5 – Identify Potentially Significant Indirect Effects for Analysis 8. Step 6 – Analyze Indirect Effects 9. Step 7 – Evaluate Analysis Results 10. Step 8 – Assess the Consequences and Develop Appro- priate Mitigation and Enhancement Strategies A set of slides, published in PDF format, as NCHRP Web- Only Document 43, is available from the TRB website. The report builds on surveys of more than 350 govern- ment agencies, university researchers, and other groups; it synthesizes regulatory framework, case law, published literature, and the contents of environmental impact state- ments; and it provides a typology of indirect effects of trans- portation projects. The first chapter includes a succinct 5-page literature review; additional references are included at the end of each module. This report offers a concise introduction to an important aspect of transportation planning where three decades of experience offer many po- tential examples and methodologies. The report benefits from several brief case studies of state programs, thorough categorization of possible effects, listing of data sources, and a well-structured review of planning questions and analyti- cal methods. NCHRP Synthesis 302 is a more narrowly focused study concerned with mitigation of ecological impacts of trans- portation projects. The body of the report is only 30 pages, including a chapter on the regulatory framework, ecological impact assessment, and ecological mitigation assessment. Seven case studies illustrate best practices (e.g., a public- private approach to banking wetlands in North Carolina and NYDOT’s proactive approach to improving the environment as a normal part of transport projects; 56 pages of documents provide the details on these programs). The bibliography includes more than 50 references, including a mix of journal articles and agency reports. NCHRP Report 462 is concerned with analytical issues related to quantifying air-quality and other benefits and costs of transportation control measures. Only the body of the study is published in the 61-page report; three appen- dices, five interim reports, and three NCHRP research results digests are available on a CD enclosed with the report. Given that this report discusses technical issues related to estimat- ing the effects of TCM on air quality, most of the material relates to modeling approaches and calibration issues. It includes good summary charts showing the range of effects to be considered and the types of TCM strategies that are possible. This report is an incremental step toward improv- ing analytical techniques within a mature transportation planning environment. Other Resources Relevant reports of other agencies include the following: • Guide to Economic Impact Assessment (TRB Circular 477); • Handbook for Planners to Maximize Economic Benefits of Highways (Appalachian Regional Commission); • Guide to Measurement of Highway Impacts (FHWA); • Guide to Measuring Economic Impacts of Public Transit (APTA); and • Major Corridor Investment-Benefit Analysis System (Indiana DOT). The American Railway Engineering and Maintenance- of-way Association (AREMA) publishes an engineering man- ual that is updated annually. The AREMA manual, in addition to highly technical information, includes some discussion of the types of costs and benefits that should be considered when eval- uating various restructuring decisions. Hay (1982) presents the technical information in a far more readable format. Although his textbook is now 20 years out of date with respect to the details of track and vehicle technology, it still provides a useful introduction to railway engineering concepts. There are many texts and examples of project evaluation in a transportation systems context. Roberts and Kresge were among the first to show how to use models of cost and service to evaluate multi-modal transportation options. Their study of freight options for Columbia is well-documented, thor- ough, and accessible. Mannheim (1972) was the first to pub- lish a text for transportation systems planning. Like Roberts and Kresge, he emphasized the use of planning models and the consideration of different perspectives—carrier, public agency, abutters, and the general public. Wilson’s text (1980) describes the economic issues associated with freight. A more recent text (Sussman, 2000) provides a contemporary view of transportation systems issues, with chapters that provide gen- eral background on rail operations and logistics costs. Economists and public agencies often use sophisticated econometric analysis in support of public policy decisions. 20

Railroads and consultants are much more apt to use engi- neering economic models. The econometric approaches are best suited to situations where there is good system-level data for a variety of operations with different characteristics and traffic volumes. Econometric analysis is particularly useful at demonstrating such things as economies of scale, economies of density, elasticities of demand, and other issues that could affect public policy. The engineering economic approach is used when detailed analysis of options for a particular site or a particular movement are being investigated. Braeutigam (1999) reviews various approaches to costing for transporta- tion systems. Button (1985) reviews approaches to costing for railways. As computers and data sources improve, researchers are trying to link transportation and economic development within a common modeling framework. The basic notion is that economic activity and population will shift in response to changes in the transportation system: producers will seek locations where their costs are lower and people will seek lo- cations where wages are higher. Hence, building a major bridge or upgrading a highway to superhighway status should lead both to lower transport costs and to measurable shifts in economic activity. The theory was summarized by Bröcker (2000) at a conference on integrated transportation and eco- nomic modeling (ITEM). 2.6 Public-Private Partnerships Major transportation initiatives almost always involve some kind of public-private initiative. As a minimum, public action is needed to assemble land for rights-of-way and ter- minals and to authorize the construction of new facilities. Public action may also be needed to specify who will build or operate particular facilities, under what conditions (safety and environmental regulation), at what prices (economic regulation). Public powers of eminent domain and land use control have been necessary to construct both the highway and railway networks, as well as the major airports and sea- ports. Even when the operations are fully private, there is a legacy of public action that created the infrastructure that the carriers use and a remnant of law and regulation that affects costs, prices, and competition. Likewise, there is almost always some private involvement in any major transportation endeavor, even if it is just the construction of infrastructure or operating a terminal under a short-term lease or other arrangement. Following are sev- eral of the themes affecting these relationships: 1. Public costs could be an important consideration in freight investments. Railroads and trucking companies ordinarily will invest in equipment and facilities based on a financial analysis that includes costs and benefits to carriers and their customers. They do not ordinarily consider the effects (good or bad) of their decisions on congestion, the environment, communities, or regional economic development. Adding in these public benefits could result in different size and location of terminals, dif- ferent routings of through traffic across cities, higher capacity mainlines, and further rationalization of the rail network in metropolitan areas. 2. Public investments must be justified in the context of the specific situation. Increases in capacity, changes in net- work structure, additions of terminals, and any other in- vestments must clearly lead to changes in traffic flows or reductions in conflicts. It is possible to spend a small amount of money and achieve significant benefits, just as it is possible to spend a large amount of money without achieving any benefits at all. Also, because railroading is a service, investments in plant have to be protected with competitive operations sustained over time. 3. Criteria for success. Public-private initiatives can be judged to have been successful when (1) the public investment or support is sufficient for the private carriers and customers to justify more use of rail and less use of highway transport, (2) the public benefits are sufficient to justify the public portion of the investment, and (3) there were no clearly superior means of achieving similar results. 2.6.1 Brief History of Public-Private Relationships with Rail Industry Land Grants and the Transcontinental Railroads There are many examples in the United States of public- private partnerships for the construction and operation of railroads. The construction of the transcontinental railways is a well-known example, in which land grants, loans, and loan guarantees allowed private companies to build networks across the west. Ambrose (2000) has written an enjoyable his- tory of the creation of the first transcontinental railroad from Omaha to Sacramento, California, via Ogden, Utah. Several interesting approaches were used to finance this ambitious project. The railway was authorized to issue bonds with in- terest payments guaranteed by the federal government in order to raise funds required for construction. As construc- tion proceeded, more bonds could be issued. Land grants were also important to the private companies, given that they received what amounted to half of a 20-mile-wide strip along the route of the track (the government owned all of the land in the west and retained ownership of alternate sections of land on either side of the railroad). It is important to separate the mythology from the history of this project. The railroad companies were caught up in some major financial shenanigans known as the “Credit Mobilier 21

Scandal,” and the land grants are periodically cited by anti- railroad writers as evidence that the railroads have long enjoyed federal subsidies. Even Ambrose is swept up in the wonder of the construction, and devotes very little text to the importance of and ultimate effect of the project. The interest in the build- ing process, the allure of the financing scandals, and the debate over the vast “gifts” to the railroads can overshadow the fun- damental fact that an innovative public-private partnership successfully completed a 2000-mile construction project over difficult, largely uncharted terrain within a few years. Land grants were used extensively during the 19th century to encourage the rapid construction of railroads to enable de- velopment of the west. Railroads were given more than 130 million acres, while the government received the right to reduced rates for its freight. Rates charged the government were generally one-half the rates charged the private sector, a benefit that was used until 1940 for general government traffic and until 1946 for military traffic. Locklin (1966) com- pared the benefits to the railroads from the land grants and the benefits to the government from reduced rates. Both sets of benefits were large, but Locklin concluded that the value of reduced rates was much greater than the value of the land grants. The government did not “give away” the land, but in fact structured a successful financial incentive for the railroads to construct new lines very rapidly, providing enor- mous development potential, while delivering as well a fair long-term financial benefit to the public. Other railroads were constructed with public assistance, and the railroads were not shy in the 19th century about, in effect, blackmailing towns into supporting the construction costs to avoid having the railroad routed through another town. That the funds were provided was indicative of the tremendous de- velopment value of having a railroad for transportation as op- posed to a horse and buggy. Public involvement was common because the public benefits were so obvious. Rationalizing, Rehabilitating, and Reviving the Railroads in the Late 20th Century With the invention of the truck and the paving of the high- ways, railroads lost their dominant position. As described above, the rail industry spent the last three-quarters of the 20th century downsizing and adjusting its network in recog- nition of the reality of highway and later air competition. The collapse of the Penn Central in 1970 ushered in a new type of public-private cooperation. In its bankruptcy proceedings, the Penn Central identified the following strategic problems that led to its bankruptcy: • The high costs of light-density line operations, the need to sharply reduce the size of the network, and the delays in acquiring permission from the ICC to abandon lines; • The high costs of labor, based on both pay scales and restrictive work rules; • The mounting deficits of passenger operation; • The sluggish response of the ICC in allowing rate increases to keep up with inflation. Following extensive studies and public debate, congress structured the process that led to the creation of Conrail as a publicly controlled company. The federal government ac- quired portions of the bankrupt railroads (several smaller rail- roads in addition to the Penn Central), invested billions in upgrading the equipment and track structure, and covered much of the cost of labor protection, allowing Conrail to reduce its labor force dramatically. During the late 1970s and early 1980s, Conrail made rapid improvements in productiv- ity and eventually achieved profitability. In 1999 it was sold to Norfolk Southern and CSX for a total of $10 billion. The high costs of saving Conrail led in part to the deregula- tion of the rail and trucking industries. The notion was that deregulation would allow the railroads greater freedom in ra- tionalizing their networks, more pricing flexibility, and room for marketing and operating initiatives. The federal govern- ment did not step in to save the Rock Island, which was dismembered with the best lines sold to other railroads, nor did it create a “Farm Rail” involving the Chicago & North- western, the Milwaukee Road, or other troubled lines in the Midwest. Instead, the Staggers Act allowed and encouraged further rail mergers that ultimately produced four major systems by the beginning of the 21st century. Deregulation may not seem like a public-private partner- ship, but in a certain sense it was. The government changed the rules of the game and the private sector responded with innovations in marketing, operations, and technology. The main dilemma of deregulation is that the fundamental eco- nomics of network systems have not changed. When marginal costs are lower than average costs, as they are for most of the rail system, then competitive pressures cause prices to decline and financial problems to mount. A recent study estimated that the U.S. rail industry had achieved productivity gains equivalent to more than $20 billion per year by 1996—but given almost all of it back to customers in the form of lower prices (Martland, 1999). From a public policy perspective, this is quite a nice deal. From a railroad perspective, it suggests a continuing problem; despite two decades of rapid productiv- ity growth, the industry was little better off than in the 1960s. State and local governments have also partnered with the railroads in projects such as the following: • The development of double-stack services in New York and Pennsylvania; • Public ownership of rail rights-of-way in and around Boston; 22

• Public assistance in improving highway access to ports and intermodal facilities; and • Public assistance to short lines and regional railroads. There are a number of more recent case studies where private-sector freight providers (e.g., railroads and trucking companies) have worked successfully in partnership with government agencies to fund and implement needed infra- structure or policy/operations changes. The Alameda Corri- dor Project is perhaps the largest example of a public-private effort devoted to improving freight operations, but there are many other examples of successful projects, including those described in various conferences (e.g., TRB, 1994; Commit- tee on the Intermodal Challenge, 2001; FHWA, 2001). 2.6.2 Intermodal Case Studies— Public-Private Partnerships In 1994, the Office of Intermodalism and the various modal administrations within the U.S. DOT sponsored a national conference to discuss how to promote intermodalism (TRB, 1996). The conference featured case studies and policy discus- sions. For freight, the case studies included discussions of the following major projects, all of which involved public-private partnerships. Although the conference is now some years past, several of the projects are more recent in implementation, and the report is useful in describing the objectives, institutional arrangements, financing, and elements of a number of inter- esting initiatives aimed at improving the rail, intermodal, and highway systems. • Tchoupitoulas Corridor Project, New Orleans, LA. This $63 million project created a freight access road to ports on the Mississippi River, thereby removing approximately 1,500 trucks per day from three truck routes formerly routed through residential neighborhoods. • Full Freight Access Program, New York, NY. This $300 mil- lion program involved several types of improvements to the rail system to allow modern rail freight equipment to gain access to the city. The project was coordinated with propos- als for bulk transfer facilities, warehouses, and other indus- trial facilities. The major elements of the program were – Increased clearances between Albany and the South Bronx; – Elimination of size and weight restrictions on the equip- ment able to move over the Long Island Railroad; – Acquisition of and increasing clearances on the Bay Ridge branch to allow intermodal traffic to reach the waterfront in Brooklyn; and – Terminal improvements and construction. • Double-stack Clearance Project, Pennsylvania. Described at greater length in Chapter 2, this $81 million program cleared 163 obstacles in order to allow double-stack trains to reach Philadelphia via Conrail from Ohio and via Canadian Pacific from New York State. The Commonwealth and Conrail each contributed nearly 50 percent of the cost, with Canadian Pacific contributing the rest. The benefits were expected in terms of lower transportation and logistics costs, increased traffic through the Port of Philadelphia, and more than 6,000 direct and 15,000 “spinoff” jobs by 2000. The conference also highlighted intermodal freight plan- ning activities at the MPO level. These cases all noted that public transportation officials need better education and in- formation concerning freight transportation and inter- modalism. Some of the cases identified specific opportunities for public-private actions: • Capital District Transportation Committee, four counties surrounding Albany, NY. The MPO was beginning to in- tegrate freight concerns into its planning activities. Five initial deficiencies in the intermodal system were identi- fied, two of which related to rail: – Railroad grade crossings. There was a need to “dramati- cally” reduce at-grade crossings, primarily through closing little-used crossings; and – Clearances and bridge load limits were problems for rail double-stack access. • Puget Sound Freight Mobility Program. This $200,000 per year planning activity was supported by the Puget Sound Re- gional Council with help from the private-sector Regional Freight Mobility Roundtable. • Northern New Jersey Transportation Planning Authority. A 1993 intermodal coordination study identified various defi- ciencies in the intermodal system, including the following: – Inadequate highway access to marine and rail terminals and – Rail access, clearances, and capacity. Other resources include reports such as NCHRP 2-14: Public/Private Partnerships for Financing Highway Im- provements. 2.6.3 Perspective on Public-Private Investments With this review of public-private relationships in the rail industry, the current interest in public-private investments can be put in a clearer perspective. The country no longer needs or believes in the Conrail approach to rail problems. Conrail required substantial federal investment and, after a number of years, was returned to the private sector—but Congress, the industry, and the public all sought easier and cheaper means of supporting the railroads and other 23

transportation companies, namely deregulation and other changes in transportation laws. After two decades of experi- ence with deregulation, there is recognition that a deregu- lated, profitable, private-sector rail industry either will not or cannot play the role that the public wants it to play. At the same time, the rail industry is beginning to realize that it cannot expand in size or profitability without help from governments in adjusting the network and in providing equitable treatment of all modes. Thus, the opportunity and the need for more limited, more focused private-public partnerships are emerging (Scheib, 2002). Based on the various cases cited in this section, it is pos- sible to identify barriers that must be overcome and the types of local factors that will help ensure ultimate success for these ini- tiatives. Barriers such as the following must be acknowledged: 1. The railroads do not want the acceptance of public money for a particular project to be used as a reason for future re- strictions or taxes on rail activities in the future. They want to discuss projects on a stand-alone basis. 2. Given that the railroads are privately owned, some local and state governments are restricted from direct investment. 3. The railroads have a regional or national perspective that is much different from the focus of local agencies; a rail- road may be dealing with dozens of states and MPOs, whereas the public agencies are only dealing with a couple of railroads. 4. Rail costs are complex and rail costing is relevant to cer- tain public policy issues, notably track charges related to passenger use of freight lines and freight use of the North- east Corridor. 5. The scale of and justifications for public investment are much more complex than what is used by railroads; rail- roads think small, are extremely concerned with return on investment, and focus on direct operating impacts. Gov- ernment agencies have very large projects (especially high- way) that are justified in terms of broader concepts of economics, environment, and equity. Success factors can also be identified: 1. It helps to have a clear transportation problem where the public and private benefits can easily be understood. 2. A public agency may be able to justify devoting a portion of its transport investment to rail projects, so long as the public benefits are similar to those obtained from other transport investments. The standard for investment is not what the board of directors would want, but what the City Council and State Legislature would want. Ensuring com- petitive service, relieving congestion at the waterfront, and promoting attractiveness of the region for development may be convincing to the public and to public officials. 2.7 Concluding Observations There are many examples of projects indicating that it is feasible to justify public-private projects that result in mov- ing more freight by rail, and ample methods available for evaluating them. There are also an increasing number of pub- lic investigations into such projects, some but not all of which support investment in rail. Benefits can be found, but the po- tential for rail with the clearest economies is high-volume or long-distance shipments, implying that a great volume of truck traffic will remain whatever is carried by rail. Shorter distance opportunities involving heavily concentrated point- to-point or confluent flows, or tapping unconventional tech- nology, might enlarge the railroad potential but are not widely treated in the literature. Either way, planners must choose projects carefully and assess the potential shifts in traf- fic flows for particular market segments. 2.8 References Abacus Technology Corporation, “Rail vs. Truck Fuel Efficiency: The Relative Fuel Efficiency of Truck Competitive Rail Freight and Truck Operations Compared in a Range of Corridors, U.S. Department of Commerce Report PB91-233619, April 1991. A&L Associates, “An Assessment of Technologies and Research Needs in Intermodal Transportation”, Final Report to the National Com- mission on Intermodal Transportation, Cambridge MA, June 1994. Ambrose, Stephen E., “Nothing Like it in the World – the Men Who Built the Transcontinental Railroad 1863-1869”, Simon & Schuster, NY, 2000. American Association of State Highway and Transportation Officials, “Freight-Rail Bottom Line Report”, Washington DC, January 2003. AREMA, “Manual of Railway Engineering”, American Railway Engi- neering and Maintenance-of-Way Association, Washington DC (up- dated annually). Braeutigam, R.R. (1999) Learning About Transport Costs. In: Essays in Transportation Economics and Policy: A Handbook in Honor of John R. Meyer (J. Gómez-Iban~ez and W.B. Tye, ed.), Chapter 3, pp. 57–97. Brookings Institution Press, Washington, DC. Bröcker, J. (2000), “Assessing spatial economic effects of transport by CGE analysis: state of the art and possible extensions”, paper presented to the First International ITEM Workshop, Montreal, Canada. Bureau of Industry Economics, “Rail Freight 1995: International Bench- marking”, Australian Government Publishing Service, Canberra, De- cember 1995. Button, K.J. and D.E. Pitfield (1985). International Railway Economics, Gower Publishing Company, Brookfield, VT. Chapman, J.D. and C.D. Martland (1997). Railroad Track Productivity: A Historical Perspective. Transportation Quarterly, Vol. 51, No. 3, 105–118. Cambridge Systematics, “Quantifying Air-Quality and Other Benefits and Costs of Transportation Control Measures”, NCHRP Report 462, National Academy Press, Washington DC, 2001. Chapman, J.D., W.E. Robert, and C.D. Martland (1997). Factors Influ- encing Optimal Axle Loads for Heavy Haul Operations. AAR Affili- ated Lab Working Paper 97-1, Center for Transportation Studies, MIT, Cambridge, MA. 24

Chapman, Jeffrey, and Carl D. Martland, “The Effects of Fixed Plant and Rolling Stock Technology on Railroad Track Costs”, Proceed- ings, American Railway and Maintenance-of-way Association, Sep. 1998. Chandler, Alfred D. Jr., “Strategy and Structure: Chapters in the History of the American Industrial Enterprise”, The MIT Press, Cambridge, MA, 1962. Cronon, William, “Nature’s Metropolis: Chicago and the Great West”, W.W. Norton & Co., New York and London, 1991. Committee on the Intermodal Challenge: Freight Transportation Issues for the 21st Century, “Global Intermodal Freight: State of Readiness for the 21st Century”, Report of a Conference, National Academy Press, Washington, DC 2001. Corsi, Thomas M. and Curtis M. Grimm, “Advanced Truckload Firms: Driving Owner Operators into the Sunset”, Journal of the Transportation Research Forum, Vol. XXIX, No. 2, 1989, pp. 285–290. 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Gad, Suzann, “Freight Impacts on Ohio’s Transportation System”, Pre- sentation to Freight Planning Symposium “Uncovering Freight Trends, Gaining Market Advantage”, Reebie Associates, Cambridge, MA, October 16-17, 2001. Gannett Fleming Inc., “Freight Movement in the Commonwealth”, Report Prepared for the Pennsylvania State Transportation Advisory Committee, April 1999. Hargrove, M.B., T.S. Guins, and C.D. Martland, “Economics of Increased Axle Loads: FAST/HAL Phase II Results”, Report LA-007, Association of American Railroads, Pueblo CO, October 1996. Hay, William W., “Railroad Engineering”, 2nd edition, John Wiley & Sons, 1982. Hertenstein, Julie H. and Robert S. Kaplan, “Burlington Northern: The ARES Decision (A)”, HBS Case 9-191-122, Harvard Business School, Cambridge MA, 1991. HNTB Corporation and Wilbur Smith Associates, “I-35 Trade Corridor Study: Recommended Corridor Investment Strategies”, prepared for the Texas Department of Transportation/I-35 Steering Committee, September 1999. ICF Consulting, “Options for Improving Ground Freight Fuel Effi- ciency”, Draft Report Prepared for the US EPA, November 21, 2001. Kalay, Semih and C.D. Martland, “Five phases of HAL research bring billion dollar savings”, Railway Gazette International, June 2001, pp. 407–410. Kresge, D.T. and P.O. Roberts, Systems Analysis and Simulation, Tech- niques of Transport Planning, Vol. 2, The Brookings Institution, Washington, D.C. Kwon, O.K, C.D. Martland, J.M. Sussman, and P. Little, “OD Trip Times and Reliability of Rail Freight Services in North American Railroads”, Transportation Research Record, No. 1489, pp. 1–8, 1995. Locklin, D. Phillip, “Economics of Transportation”, Richard D. Irwin, Inc., Homewood, IL, sixth edition, 1966. 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TRB's National Cooperative Highway Research Program (NCHRP) Report 586: Rail Freight Solutions to Roadway Congestion-Final Report and Guidebook explores guidance on evaluating the potential feasibility, cost, and benefits of investing in rail freight solutions to alleviate highway congestion from heavy truck traffic.

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