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107 The analytical approach to calculating port benefits con- 4. Calculate total economic impacts (including multiplier sists of several key steps, described as follows: effects) from increased employment and wages, and changes in travel efficiencies. 1. Estimate reduced travel times and costs compared to alter- 5. Calculate improved access to markets derived from improve- native ports of entry or modes (i.e., highway or rail) based ments in freight logistics by applying elasticities to estimate on major freight markets. how reductions in travel time to major markets, along with 2. Estimate mode splits for traffic moving to/from the affected regional competitiveness effects, lead to broader economic port. A key factor that determines the total reduction in development opportunities. transportation costs from trade diversion is the mode split. The mode split will vary by commodity and market segment Impacts on the surface transportation system are estimated and will determine the volume of induced trade handled on using the framework for highway and rail investments. The the highway and rail systems (which present different per output of these analyses will feed into both the BCA and EIA. mile costs). The impacts of this increased surface transporta- tion volume is estimated using the highway and rail invest- 6.2 Key Elements of the Framework ment modules. with Examples of Use 3. Estimate industry-level and economywide effects by com- bining the effects arising from all of the relevant modes. In order to help illustrate how the Framework is used, a step- by-step description is provided for the key elements. Examples are drawn from the case studies to illustrate how each step Cargo Handling Facility Investments is implemented and the types of data and tools that can be Increasingly, states and local governments are being faced applied. with investment decisions related to cargo handling facilities, especially intermodal railyards. Sometimes these decisions are Step 1--Identify Project Type, Modes, based on a request by a private-sector freight stakeholder or and Geographic Scale developer; at other times the investments are being pursued as a catalyst for local or regional economic development. What- The first step in using the Framework is to identify the proj- ever the motivation of the project, it is important that public ect type, affected modes, and geographic scale of the project. policymakers undertake a rigorous analysis of the potential The project type and affected modes will determine which benefits, both public- and private-sector benefits. The poten- framework modules should be applied and the types of bene- tial for private-sector benefits will drive the demand for the fits that will need to be evaluated. The Framework classifies facility and in turn, the demand will drive the public sector project type by the following general categories: benefits (and in some cases, the disbenefits). As with port investments, investments in cargo handling facilities are likely Air impacting highway, to have spillover impacts on the highways and rail corridors Cargo handling facility, linking those facilities to markets. Thus, the evaluation of the Highway improvements, impacts of these facilities also should include an evaluation of Intermodal connector, the effects on the surface transportation system. The Frame- Rail improvements, work module used to assess cargo handling investment impacts Grade crossings; is presented in Figure 6.4. Port expansion, and The analytical approach to calculating cargo handling Barge services. facility benefits consists of several key steps, as follows: Other categorizations may be useful in recognizing that the 1. Estimate the size of economic activity arising from facili- primary purpose of identifying the project type is to determine ties by a combination of trade volumes forecasts as well as the type of improvements being made, the specific perform- findings from qualitative interviews with stakeholders ance improvements that are expected, the modes that will be (particularly shippers/end users) throughout the region. affected, the types of shipments/freight that will be impacted, 2. For the EIA, estimate the number of jobs at each location and the relevant stakeholders. Typically, large freight invest- based on case study analyses of other inland port/intermodal ments will fall into multiple categories and will affect multiple facilities throughout the United States. Jobs are distributed modes. For example, the Tchoupitoulas Corridor Improve- to industries based on trade activity (i.e., largely transporta- ment Project at the Port of New Orleans (described in the pre- tion, distribution center, and warehousing sectors). vious chapter) was primarily a highway improvement project 3. Estimate the direct user impacts for highway and rail users. that created a dedicated truckway increasing capacity accessing

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108 Cargo Handling Facility Module Highway Change in Access Productivity Rail Impact Impact to Major Freight Change in Module Module Markets Logistics Costs Change in Change in Trade Demand Transportation Related Economic for Facility Time/Delay Activity (Cargo Volumes) Elasticity of Elasticity of Industry Growth Economic Facility with Respect to Development Size of Cargo Employment Transportation Potential Facility with Respect to Access Cargo Volumes Regional Competitiveness Output Effects by and Redistribution Industry Effects Direct Economic Impacts Change in Net Output Effects Employment by by Industry Jobs, Income, Output Tax, Revenue Industry Total Economic Impacts Economic Output from Model Jobs, Income, highway Output Tax, Revenue and rail modules Figure 6.4. Cargo handling facility investment evaluation. the port. This also served as a critical intermodal connector of at-grade rail crossings. The project clearly affected highway, improving port access. In addition to the truckway, the proj- rail, and port modes, and would require use of each module in ect included the implementation of a chassis pool, warehouse the benefits evaluation. consolidation, and port expansion that increased port capac- The scale of the project in terms of the area over which ity; and rail track realignment that, in addition to providing investments are being made will affect the type of data and general rail operational improvements, eliminated a number tools that are needed to evaluate the project benefits. The scale

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109 of freight investments can range from high-level systems proj- ect to be done (for example, a rail project that has tremendous ects, such as the Heartland Corridor case study, down to com- value to the community and state based on associated eco- munity-level projects, such as the Tchoupitoulas Corridor nomic benefits may not ever be developed if the railroad that Improvement case study. In the case of a high-level systems owns the line has no interest in the project--even if the public project, benefits are estimated in terms of system-level VMT sector is willing to pay all of the costs). Therefore, the first part and VHT impacts and can make use of aggregate measures of of this step involves identifying the critical benefit types and impact and project use, which may be obtainable from national metrics and their relationship to specific stakeholder types. data sets. For example, in the case of the Heartland Corridor, Table 6.2 presents recommended benefit types, metrics, and data on corridor usage levels, potentially divertible truck traf- the stakeholders for whom these benefits are important. fic, and shipper inventory reduction costs all can be obtained from data sets such as the national commodity flow databases Data and Tools and national industry inventory cost data. In the case of a community-level project, more detailed assessment of project Presented below is a summary of some of the commonly impacts using local traffic models (both travel demand models used data and tools for assessing some of the most common and traffic operations models), along with interviews with local categories of benefits in freight projects. In general, there are shippers and carriers, is necessary to get an accurate picture of many existing benefit/cost analysis and economic impact benefits that exist at a much smaller scale. analysis tools that provide monetization factors for converting standard transportation user benefits into dollar values. Exam- ples include Step 2--Identify Stakeholder Types This is an important step in the Framework and one that Guidance that recently has been issued for the U.S.DOT distinguishes it from many other approaches to benefit/cost Transportation Investment Generating Economic Recovery analysis and project evaluation. Understanding who all of the (TIGER) Grant Program. stakeholders are helps focus the analysis on measurement of FHWA has published benefit/cost analysis handbooks for appropriate benefits and also determines who has an interest highway evaluation projects that are accessible through the in the project when it comes time to allocate cost responsibil- FHWA website. ity. As described earlier, the Framework identifies the follow- Many state DOTs require benefit/cost analysis for highway ing broad categories of stakeholder types: asset providers, and other transportation projects and have compiled their service providers, end users, and other impacted parties. own tools and monetization factors. These often provide a Freight projects often involve varied and complex stake- library of source citations that can be used for further holder interests that can extend beyond the immediate proj- research into monetization factors. ect boundaries. Since understanding who the key stakeholders FRA's GradeDec.Net System includes BCA tools for grade are is an important first step in identifying the critical benefit crossing analysis. metrics that need to be considered, some care should be taken FHWA's ITS Deployment Assessment System (IDAS) is with this step. An example is provided by the ReTRAC case a benefit/cost analysis tool developed primarily for the study. The case study focused on six stakeholders: Union Pacific analysis of ITS investments but does include a library of (UP) Railroad, Washoe County, the State of Nevada, the City data for monetizing many standard transportation system of Reno, regional businesses, and the project area community. benefits. It is important to note that since the freight infrastructure TREDIS Multimodal Benefit/Cost Module is a proprietary investment is a partnership between public- and private-sector benefit/cost analysis tool that is a product of Economic agents, stakeholders often hold dual roles. Development Research Group and was used in several of the case study analyses described in this report. Step 3--Identify and Assess Benefits Examples of other data and tools that have been used to ana- As noted earlier in this section and in Chapter 4, the analy- lyze project benefits for a wide range of projects are described sis of benefits of freight investments needs to focus on those in detail in Appendix A. A summary of some of the common benefit categories and metrics that are most important to each data used to assess benefits is summarized below. stakeholder group because these are the benefits upon which decisions will be based. Determining the relationship between Travel-Time Savings. To estimate route-specific delays in benefits and stakeholder types also is important when project a highway network, travel demand models often are used decisions involve allocation of cost responsibility or when the because they can provide forecasts of changes in VHT as a mea- participation of particular stakeholders is essential for the proj- sure of delay reductions. It is not always necessary to use a travel

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110 Table 6.2. Benefit metrics by benefit and stakeholder type. Other Public Service Shipper/End Impacted Private-Sector Benefit Type Benefit Metric Sector Provider User Party Asset Provider Capacity Transportation Cost Savings Safety Crash Reductions Environmental Emission Quality Reductions Scheduling/ Reliability Reliability Improvements Facility Pavement/Track Maintenance Maintenance Savings Costs Loss and Pavement/Track Damage Conditions Productivity Asset Velocity Economic Jobs, Income, Industry Development Output Tax Revenue Tax Base Impact Facility Capital Facility Costs Costs demand model to estimate delay reductions resulting from an crossing separations and applied to the volume of trains and improved facility. In some cases, it may be possible to use cur- length of trains experiencing the delay. rent conditions to calculate speeds without the project and esti- In cases where a new cargo handling facility is being con- mate future free-flow speeds on the improved facility by structed, an important benefit may be greater accessibility to applying a forecast of cargo volumes. The difference between a particular cargo market. In this case, estimating the amount the future free-flow speeds and existing conditions can be used of affected cargo and the average distance/travel time to the to estimate delay reductions. new and alternative cargo handling facilities can be used to For rail projects, the general approach is to estimate an estimate travel-time savings. average speed on a route based on general track rating (aver- age rated speed), train type, and route distance multiplied by Vehicle Operating Cost and Shipping-Rate Savings. In addition to travel-time savings, projects also may produce either the number of trains or the tons per train to get travel operating cost savings that are a function of reduced VMT. times with and without the project. This may be a function of Energy costs are an example of costs that may be a function of current values (which can be observed or obtained from par- mileage rather than time. Energy use per mile can be calculated ticipating railroads) and the project design standards. In a based on average fuel economy by mode. There are a variety of more detailed analysis, train operations can be simulated to sources that can be obtained from DOE and EPA to calculate obtain changes in train delays. these savings. ATA and the Association of American Railroads For grade crossing projects, a significant benefit is the (AAR) provide sources for truck and rail operating costs. reduced delay to vehicles queued at the rail crossing. There In a number of the case studies, if shipping from an alterna- are a number of standard formulas for computing delay tive port or airport was the goal of a project (either by expand- based on gate downtime (which is itself a function of average ing capacity at a local port/airport or by improving access to a speed through the crossing and train volumes and lengths). nearby port/airport) it may be possible to survey the alternative FRA's GradeDec.Net tool provides calculation algorithms facilities to obtain rates to/from typical origins/destinations to and data for making these calculations. Grade crossings also obtain an assessment of potential changes in shipping costs at may result in reduced delays for the operating railroad, par- the new or expanded facility. ticularly if a number of grade crossings are addressed along a corridor. In this case, benefits would be calculated based on Inventory and Reliability Savings. Reduced delays asso- the operating speeds allowed with and without the grade ciated with delivery uncertainty can translate into reduced

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111 inventory carrying costs. Various benefit/cost analysis tools capacity or operations. The emission factor models have the approach the estimation of reliability benefits differently, but ability to estimate emission rates as a function of average in the case of highway projects, reliability often is estimated as speed or speed bins. EPA also has published data on railroad a function of congestion levels (speed or VMT being the emission rates per ton-mile assuming a particular duty cycle appropriate indicator as both can be estimated with a standard (or mode of operation). These also do not take into account travel demand model). New techniques are being developed potential operational improvements that could result from a that measure buffer time, or the amount of time that must be freight investment. A more sophisticated analysis of railroad built into a trip to ensure on-time arrival for a desired percent- emissions benefits would take into account the change in age of trips. By examining speed variability at different locations duty cycle and average speed that could be obtained by as a function of congestion levels, it may be possible to develop upgrading track or increasing average running speed and a predictor of buffer time. Several studies have made an attempt reducing speed cycling. Data on emission rates by power level to estimate the value of inventory costs associated with non- for different locomotives have been published in various EPA recurrent delay as a function of the type of commodity being sources. shipped. One such approach that was cited in a number of the case studies was the Freight Logistics Factor from the Highway Step 4--Identify Cost Categories Economic Analysis Tool (HEAT). and Estimate Costs Modal Diversion. Modal diversion can lead to logistics The costs of a constructed facility or implemented technol- costs savings for shippers who realize savings by being able to ogy to the owner include both the initial capital cost and the ship by a less expensive mode, but also may result in savings subsequent operation and maintenance costs, as described in reduced pavement maintenance costs, reduced emissions earlier. Although there are many sources of costs, it is critical per ton-mile, and reduced highway congestion. There are a to calculate both capital costs (i.e., the expenses related to the variety of techniques for estimating potential truck-rail diver- initial establishment of a facility) and operations and main- sion. Most require some knowledge of commodity shipments tenance costs (i.e., costs that accrue over the entire project by truck and major origin-destination (O-D) pairs within the lifecycle). corridor of interest and at least some estimate of the capacity The Heartland Corridor case study in the previous chapter for the new modal service to expand its market share for a par- provides a useful illustration of how cost components are cal- ticular commodity/O-D pair. One tool is U.S.DOT's Inter- culated and included in the analysis. Norfolk Southern had modal Transportation and Inventory Cost (ITIC) Model, prepared preliminary cost estimates prior to 2005, which did described in Appendix A. not consider each individual type of improvement and its loca- Safety Benefits. In the case studies, estimates of safety tion on the corridor. Instead, it used a fixed-unit cost derived benefits were generally provided for highway projects and from another project for all construction work. In the costing grade crossing separation projects. In the case of grade cross- method included within the Freight Evaluation Framework, ing projects, a simple approach is based on assuming that cur- every type of modification is considered to tailor a cost estimate rently reported accidents of various types will drop to zero if for improvements for each independent location using prices the grade crossing is separated. An accident rate per train from contractors currently performing similar work. hour at the gate can be estimated from current year data and can be used with forecast train volumes to estimate potential Step 5--Risk Analysis future benefits of the grade crossing separation. In the case of highway safety benefits, a variety of sources As described in Chapter 4, the Freight Evaluation Frame- provide average crash rates per VMT (for example, these data work includes explicit analysis of risk impacts on the invest- are available for national averages from BTS). Alternatively, ment decision. Assuming that the risk profile does not suggest route-specific estimates of crash rates can be estimated from the potential for catastrophic failure of the project, the risk local data sources based on comparable facilities. analysis techniques that should be used will simulate the range of potential outcomes of the benefit/cost analysis given Emission Reduction Benefits. A variety of sources can a set of risk scenarios. The major types of risks that will typi- be used to estimate an emission factor or rate per vehicle cally be considered are market risks (demand for the project mile to estimate highway emission changes as a function of does not meet expectations, thus reducing project benefits) changes in VMT. These factors are available from standard and cost risks (cost overruns or other causes of cost increases emission factor models, such as EPA's MOBILE model. A relative to initial estimates). In either case, the downside risk more sophisticated analysis would take into account changes will result in lower benefit/cost ratios that might not meet the in vehicle speeds that result from improvements in highway investment decision hurdle established for the project.

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112 The basic technique is to define a set of risk scenarios that port tonnage and the cargo mix at the port shows consider- bound the likely range of variation in the key risk variables, able year-to-year variation over the past 15 years. Therefore, assume a probability density for this key input variable, and there is a risk of insufficient benefit due to uncertainty in then run various probability-based simulations to determine future port growth. Uncertainty can come from certain the probable range of outcome variation. Risk variables are events such as 9/11 or Hurricane Katrina, or be classified as usually developed around a key demand growth rate, cost cyclical and random risk (e.g., business cycles, exchange rates, escalation variable, or other demand and cost variables. or industry fluctuation). An example from the Tchoupitoulas Corridor Improve- In 1996, after the major section of the truckway was built, ments case study is illustrative of this approach to risk analy- cargo volume was 10 million tons. Since volume decreased down sis. The element of risk is included in the analysis due to to 6 million in 2008 and was forecasted to rise back up to 1996 uncertainty in future port growth. A close look at the base levels in 2019, a very small growth rate estimate of 0.1% was used case benefit analysis indicates that the benefits from the proj- in the analysis. To account for fluctuations and uncertainty of ect depend on both the volume and mix (container versus cargo growth, a range of 0.1% to 3.0% was used to calculate the break bulk split) of port activity. An examination of historic upper and lower bounds, as was described in Chapter 5.