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14 Public and Private Sector Interdependence in Freight Transportation Markets Non-transportation decisions affecting the behavior of freight system users, such as environ- mental or land use regulations, are public sector led. Public Sector Decision Making Public sector freight decision making requires the consideration of many factors that can influence or constrain the course of action. The factors that affect public decision making reflect the fact that there are many competing demands on public agencies for attention and funding. Policy, planning, and regulatory decisions made in the public sector today have important consequences for the freight system tomorrow. The public sector also influences freight system operating decisions related to highways, waterways, and airways directly, and other modes through the regulatory impacts on operating decisions made by private firms. Drivers Affecting Public Sector Decision Making Critical freight decisions that have great impact on the private sector include those involving safety, the environment, land use, economic concentration within the industry, and the opera- tion of the system. Investment and Financing: Taxes, Fees. Financing public sector programs and projects is always a primary concern of public officials, and almost all decisions have a financial aspect to them. Obtaining funding required for public sector investment is a recurring problem for public officials. Sources of public revenue include local, state, and federal taxes and fees assessed on com- panies and system users. The ability to collect revenue and the behavior influenced by assessing fees are fundamental in influencing public sector decisions. Taxes and fees also influence private sector decision making, which is therefore a consideration in public sector financing decisions. Economic Regulation. Economic regulation of freight transportation can strongly influence the use of the freight transportation system. Federal and state law gives the public sector great power over the character of the private portions of the freight transportation system. Providing and Maintaining Infrastructure: Highways, Tracks, Ports, Air. The provision, operation, and maintenance of infrastructure are the most basic of public sector functions with respect to freight transportation. With the exception of most railroad infrastructure, the freight network is largely a result of decisions made by the public sector. The connectivity of the infrastruc- ture system is also almost entirely a result of public sector decisions. The adequacy of capacity and the condition and performance of infrastructure are key to public freight transportation decisions. Land Use: Facility Location and Access. The availability, location, and access to land for freight facilities are critical to the freight system's long-term ability to adapt to changes in demand. Local public agency control of land use and policy objectives can have significant conse- quences for transportation decision making. Local land use issues are complicated at times by fed- eral issues such as military base closures or national initiatives like the "rails-to-trails" right-of-way preservation program.3 Environmental Issues. The public sector employs a combination of regulations, mitigation programs, fees, and taxes to protect the environment. All these rules and programs affect freight 3 A federal program to encourage the banking of abandoned rail right-of-way through conversion to trail use.

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Freight Transportation Decisions and Considerations 15 transportation decision making and planning. The National Environmental Policy Act and other federal and state laws have significant impacts on decisions about the operation and expansion of the freight transportation system. Safety. Public sector protection of worker and traveler safety extends from construction and operation of transportation infrastructure to the regulation of the manufacture and sale of equip- ment used for freight transportation. There are financial and operational consequences from government safety regulations. The regulations can even affect the structure of the freight trans- portation system by influencing the relative cost of operations between modes of transportation. Operations. Public sector operation and maintenance of infrastructure such as highways serves demands from passengers as well as from freight transportation. Since so much of the infrastructure for freight transportation is shared with passenger transportation, operational and cost assessment considerations unrelated to freight can affect freight transportation decisions. Public sector decisions concerning operations extend beyond the roadway network to airports and waterways. Jobs and Employment. In the public sector, most political leaders understand the impor- tance of jobs related to trade and transportation but they do not always recognize the importance of freight in protecting jobs in other sectors of the economy. This partial appreciation of the role of freight transportation in the economy has led to decisions that give less attention and support The U.S. freight for policy and program development of freight transportation than are warranted by the actual industry is subject to importance of this sector to the economy. regulation across many aspects of the Regulatory Decision Making business at federal, state, and local levels. Public regulation of freight transportation impacts the system comprehensively. Agencies at different levels affect transportation modes differently. Trucking, the most pervasive mode of transportation, is impacted in more areas by the greatest number of agencies (see Table 3). Conflicts between different levels of Cutting across the various factors affecting decision making are the existence of several differ- government affect ent levels of government, each with its own priorities, constituencies, revenues, and budgets. Apart decision making and from differences with the private sector, public agencies also frequently must make decisions in outcomes. the context of conflicts with other jurisdictions. Table 3. Primary government level of responsibility by function and mode. Inland Pipeline Rail Truck Deep Sea Air Water Safety Federal Federal Federal Federal Federal Federal Federal/ Economic Federal Federal State/ Federal Federal Federal Local Federal/ Federal/ Environmental Federal Federal Federal Federal State State Land use Local Local Local Local Local Local Federal/ Federal/ Operations Federal State/ Federal Federal Federal Local Local