Framework and Tools for Estimating Benefits of Specific Freight Network Investments (2011)

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119 There are a number of distinct classes of benefit/cost analy- sis tools that correlate to the needs of different stakeholder types, study goals, and data resources. These tools provide diverse functions for use at different points in the freight project planning and development process. Descriptions of each set of tools are included in the following section and summaries describing each of the various tools are provided in Tables A.1 through A.7. A.1 Strategic Planning Tools These include tools used to assess long-term needs and deficiencies impacting the transportation system and the life- cycle costs of operating and maintaining transportation infra- structure (for asset providers), as well as longer-term market analyses, production, and site selection alternatives (for ser- vice providers and end users). A.2 Carrier Cost and Performance Analysis Tools These operational analysis tools, which estimate the oper- ational performance and cost of freight carrier operations under alternative scenarios to represent the impact of trans- portation projects, programs, or policies, are primarily used by freight infrastructure providers and carriers. A.3 Shipper Cost and Performance Models These tools estimate the cost and time characteristics of alternative freight mode and service options, and are intended to represent the total logistics time, cost, and safety/reliability tradeoffs available for a shipment so that optimal shipping decisions can be made. These tools are pri- marily used by end users (i.e., the businesses that generate outgoing freight or the consignees who receive the freight and ultimately pay the shipper cost). A.4 Transportation System Efficiency Models These tools, often defined as benefit/cost analysis systems, are intended to evaluate the benefit and cost streams over a specified period of analysis to determine whether a proposed investment will yield benefits in excess of its cost. A.5 Economic Development Impact Models These tools estimate impacts of transportation projects on income and jobs in the economy, and are primarily used by public-sector (local, regional, or state) transportation agencies to explicitly consider business productivity and economic development impacts that are not represented by transporta- tion system efficiency tools. A.6 Financial Impact Accounting Tools These tools, typically used by those who have a direct stake in the cost of a project, provide estimates on how the proposal will affect outgoing cost streams, incoming revenue streams, cash flow, borrowing or bond requirements, net profit or loss over time, upside/downside risk, and rate of return. A.7 Risk Assessment Tools These tools assist private-sector asset providers and end users in understanding and quantifying critical areas of uncertainty related to making investment decisions. A P P E N D I X A Traditional Benefit/Cost Tools

120 Tool Description Source Travel demand forecasting and network optimization tools The technology application to support forecasting and the strategic plans include data available from agency or company financial systems, operations management systems, and others. Forecasting, a central aspect of the planning process, is where infrastructure needs are determined, market estimations are made, and facility locations, equipment specifications, or carrier requirements are evaluated. Caliper (http://www.caliper.com/tcovu.htm) INRO (http://www.inro.ca/en/index.php) Citilabs (http://www.citilabs.com/) Tool Routing Tools Monitor truck movements that allow a unit to change routes for congestion avoidance, toll choices, and to improve overall fuel efficiency. On the end user side, product and transportation tracking allows a shipper to shift product quickly to an alternate point of sale while the goods are still in transit. TMW Systems (http://www.tmwsystems.com), ALK Associates’ PCMiler (http://www.alk.com/pcmiler), Manhattan Associates’ X-Suite (http://www.manh.com/solutions/x-suite-solutions) Railroad Operations Tools Estimate how a given rail infrastructure improvement would actually change volumes, speeds, and reliability. The source data include specific track, siding and yard conditions, plus road, local, and work train characteristics, and schedules that are proprietary to the railroads. Berkeley Simulation Software’s Rail Traffic Controller (http://www.berkeleysimulation.com/rtc/rtc.html), CANAC/Savage Industries’ RAILS 2000 (http://www.canac.com/index.php?page=products-rail2000), Systra’s RAILSIM (http://www.railsim.com), Federal Railroad Administration’s General Train Movement Simulator (http://www.decisiontek.com/Solutions/RailSafetyandCapacityAnalysiswithG TMS/tabid/72/Default.aspx) Airport Operations Tools Estimate the capacity of runway systems and the level of delay that they present when faced with alternative demand levels. Total Airport and Airspace Modeler (TAAM) system (http://www.jeppesen.com/industry-solutions/aviation/government/total- airspace-airport-modeler.jsp), Airfield Capacity Model (http://web.mit.edu/aeroastro/www/labs/AATT/reviews/acm.html), Federal Aviation Administration’s Airport and Airspace Simulation Model (SIMMOD) (http://www.faa.gov/about/office_org/headquarters_offices/ato/service_units/ nextgen/research_tech_dev/at_sys_con_dev/sim_analysis_team/models/sim mod) , Massachusetts Institute of Technology’s LMI Runway Capacity Model (http://web.mit.edu/aeroastro/www/labs/AATT/reviews/lmircm.html) Marine Port Operations Tools Typically account for passenger and freight traffic, recognizing local differences in types of freight (bulk, break bulk, and containers), mix of ship characteristics, water depth and wave motion, and positions of terminals. Typical port planning tools include computer simulation models for port operations, port terminal container handling, and terminal expansion and development (including investment in quays, quay cranes, and storage space). Aurigo (http://www.aurigo.com/Ports.aspx) PortOps (http://www.aecom.com/What+We+Do/Transportation/Ports+and+Marine/Po rt+Operations+Simulation) Flexsim (http://container-port-simulation.com/) Simio (http://www.simio.com/applications/port-simulation-software/port- simulation-software.htm) Description Source Table A.1. Summary of strategic planning tools. Table A.2. Summary of carrier cost and performance analysis tools.

Tool Description Source Modal Diversion Models Forecast how freight movements shift in response to changes in the availability, cost, and/or time performance of available modal alternatives. Most modal diversion models used in transportation facility planning are focused on truck-rail-intermodal options, due in large part to the tradeoffs that shippers face when considering ground transportation options for medium- and long-distance travel. IHS Global Insight Intermodal Diversion Model (http://www.ihsglobalinsight.com/ProductsServices/ProductDetail1025.htm) Intermodal Competition Model (http://www.fra.dot.gov/downloads/Policy/ITIC- IM%20documentation%20v1_0.pdf) Total Logistics Cost Models Predict how shippers respond to changes in the costs of modal and service alternatives. They actually estimate the total logistics cost of shipping, including direct transportation expense and inventory cost associated with modal lot sizes and service profiles. SAP (www.sap.com) Intermodal Transportation and Inventory Cost (ITIC) Model Attempts to calculate the logistics cost and decision tradeoffs seen by shipper logistics managers, and then assigns the truck/rail diversion to alternatives that minimize total logistics cost. Federal Railroad Administration (http://www.fra.dot.gov/rpd/freight/1543.shtml) Spreadsheet Logistics Model Estimates the truck/rail mode choice for 48 typical types of customers. This is done on the basis of given customer characteristics (use rate and trip length), commodity characteristics (value/pound), and mode characteristics (e.g., price, trip time, and reliability) for rail, truck, and intermodal options. Massachusetts Institute of Technology (http://stuff.mit.edu/afs/athena/course/urop/uic/www/uic- TRF.PBTS.2002.revised.pdf) Market Share Models An alternative predictor of freight shipper choices based on a statistical correlation between modal performance factors and traffic capture (revealed preferences), and project traffic swings when relative performance changes. IHS Global Insight (http://www.ihsglobalinsight.com/ProductsServices/ProductDetail1025.htm) The Uniform Rail Costing System (URCS) Model Estimates changes in shipper productivity associated with rail system performance changes. The model uses data on average carrier cost and performance measures to estimate the cost of providing service, so it can estimate how a change in facility capacity or speed (affecting rail cars per day) would translate into average shipper dollar savings per ton-mile. Surface Transportation Board (http://www.stb.dot.gov/stb/industry/urcs.html) Tool Description Source Cal-B/C Spreadsheet model for benefit/cost analysis of highway and transit projects in a corridor that already contains a highway facility or a transit service. California Department of Transportation (Caltrans) (http://www.dot.ca.gov/hq/tpp/offices/ote/benefit_cost/models/calbc.html) MicroBENCOST Tool designed to analyze seven types of highway improvements in a corridor: (1) capacity enhancement, (2) bypass construction, (3) intersection or interchange improvement, (4) pavement rehabilitation, (5) bridge improvement, (6) highway safety improvement, and (7) railroad grade crossing improvement. National Cooperative Highway Research Program (http://www.dot.ca.gov/hq/tpp/offices/ote/benefit_cost/models/microbencost.html) Surface Transportation Efficiency Analysis Model (STEAM) Model designed to assess multimodal urban transportation investment and policy alternatives at the regional and corridor levels. Federal Highway Administration (http://www.fhwa.dot.gov/steam) Highway Economic Reporting System (HERS) System-level optimization framework for analyzing investment strategies to maintain and improve an existing highway network. Federal Highway Administration (http://www.fhwa.dot.gov/infrastructure/asstmgmt/hersindex.cfm) StratBENCOST Strategic-level evaluation method to analyze investment alternatives for expanding and improving a highway system. This tool represents an upgrade from previous analysis methods by incorporating cost calculations from MicroBENCOST and HERS, and adding consideration of risk and uncertainty. National Cooperative Highway Research Program (http://www.dot.ca.gov/hq/tpp/offices/ote/benefit_cost/models/stratbencost.html) BCA.Net Tool compares and evaluates alternative highway improvement projects (e.g., preservation, lane-widening, lane additions, new alignments, addition of traffic control devices, intersection upgrades). “ Projects ” for comparison in benefit/cost analyses. Federal Highway Administration (http://www.fhwa.dot.gov/infrastructure/asstmgmt/bcanet.cfm) GradeDec.Net Tool is a Web-based system for evaluating the safety impacts and the benefit/cost of improvements to highway-rail grade crossings in a corridor or region. Federal Railroad Administration (http://gradedec.fra.dot.gov/Default.aspx) Highway Freight Logistics Reorganization Benefits Estimation Tool Tool measures second-order benefits that come about when firms direct the money saved on logistics expenses away from maintaining inventory and toward other more productive uses. These benefits can then be added to those estimated through BCA to arrive at a complete picture of total benefits. Federal Highway Administration (http://ops.fhwa.dot.gov/freight/freight_analysis/cba/index.htm) Table A.3. Summary of shipper cost and performance models. Table A.4. Summary of transportation system efficiency models (benefit/cost systems).

122 Tool Description Source Input-Output Model (IMPLAN or RIMS II) Regional impact systems trace how changes direct the flow of purchases or sales of one industry lead to broader indirect and induced changes in purchases and sales (and ultimately jobs and income) in other industries in that region. That makes them very useful for estimating the local impact of industry openings, closings, expansions, and contractions. Minnesota IMPLAN Group (MIG) (http://IMPLAN.com/V4/Index.php), Bureau of Economic Analysis (https://www.bea.gov/regional/rims/index.cfm) Regional Simulation Models (Computable General Equilibrium [CGE] Models) Models have a spatial component that tracks transportation connections (and travel times) and trade (industry product flows) among regions, and an industry component that tracks the cost of freight transportation, by commodity group, between regions. The CGE element estimates the economic impact of transportation projects and policies through a process that first calculates their impact on interregional freight transport cost, effective labor supply, value of capital stock, and overall factor productivity. ASTRA (spatially limited to major regions within Europe), PINGO (spatial CGE model for Norway) Regional Simulation Models (REMI Policy Insight) REMI models share many of the features of the spatial CGE Model, combining interindustry IO equations with transport price response and additional impacts on labor supply/demand and migration rates. The models have an ability to assess economic impacts, benefits, and costs of transportation network alternatives at a statewide level. Regional Economic Models, Inc. (http://www.remi.com/) Major Corridor Impact- Business Analysis System (MCIBAS) MCIBAS is an example of an analysis system that provides a more useful interface for use of REMI Policy Insight macroeconomic models. They have an ability to assess economic impacts, benefits, and costs of transportation network alternatives at a statewide level. Cambridge Systematics Inc, Economic Development Research Group, Inc, Indiana DOT (http://www.edrgroup.com/pdf/mcibas-system-intro.pdf) BEST BEST is an example of an analysis system that provides a more useful interface for use of REMI Policy Insight macroeconomic models. This particular tool is spreadsheet-based and was developed for the Michigan DOT to perform corridor analysis. Michigan DOT (http://www.michigan.gov/documents/mdot/MDOT_economicbenefitreport_202828_7.pdf) HEAT (Highway Economic Analysis Tool) Custom-built, modular system that integrates a statewide highway network model and a statewide economic impact model together through a geographic information system (GIS) providing graphical map-based information on: (1) economic conditions among communities, (2) transportation dependence and commodity- specific impacts among industries, and (3) commuting and freight flows along highway networks. Cambridge Systematics, Inc, Montana DOT (http://www.camsys.com/pro_planpro_heat.htm) Regional Simulation Models (TREDIS with CRIO-IMPLAN) CRIO-IMPLAN combines an interregional IO model with trade flows, together with a time series framework for estimating economic growth forecasts over time, and “a series of econometrically derived functions relating transportation access and travel cost changes to shifts in local industry output and employment growth. ” The access factors included same-day truck delivery, labor market and intermodal air, rail, marine, and truck freight terminal access. (http://www.tredis.com/product-info/modules-and-structure/economic-adjustment- module.html) Global Insight Economic Model Provides highly detailed responses to changes in transport costs by mode and commodity. It utilizes econometric (statistical) equations that are sensitive to changes in transport costs per ton for transporting a wide range of commodities by all available freight modes. Also includes detailed information on freight flows by commodity and mode and forecasts changes in wages, prices, and spending patterns. IHS Global Insight (http://www.ihsglobalinsight.com/ProductsServices/ProductDetail1081.htm#solutions) University of Maryland spatial econometric model Models the effect of highway projects on the level of economic activity and growth in a zone, based on a wide variety of transportation indicators. Includes network density and spatial agglomeration, as well as changes in access times to airports, intermodal rail/truck freight terminals and rail transit, and the size of labor, consumer, and supplier markets. University of Maryland (http://www.econ.umd.edu) LEAP (Local Economic Assessment Package) Shows how costs (of land, labor, energy, and taxes) interact with transport costs and access (including ground access time to intermodal rail, air and marine ports, and highways) to differentially affect the attraction of various industries to an area. Economic Development Research Group, Inc, Appalachian Regional Commission (http://www.leapmodel.com) TREDIS (Transportation Economic Development Impact System) Modular framework operating through a Web-based server to integrate various tools for travel impact analysis, spatial access impact analysis, regional economic impact analysis, and benefit/cost analysis. Economic Development Research Group, Inc. (http://www.tredis.com) Table A.5. Summary of economic development impact models.

123 Tool Description Source Fiscal Impact Models Calculate impacts on public tax and fee revenues, as well as requirements for increasing expenditures to serve new population and economic growth that may result from the projects (including public safety, education, and other municipal and state services). Fishkind Fiscal Impact Model (http://www.fishkind.com/fiam/home.html) Many others developed in house by public agencies Pro Forma Models Calculate risk and rate of return associated with proposed, new investment projects. A due diligence study (involving third-party confirmation of market demand and revenue assumptions) is commonly required for private-sector financing. Typically developed by private entities for each project Tool Description Source Due Diligence Tools (Economic Demand Estimation and Forecasting ) Economic demand estimation is a statistical tool that allows for determining the level of demand for a service or good based on a host of independent variables. Variables to forecast a dependent variable such as truck volume may include local demographics, fuel prices, tolls, regulations, and local shocks and events. DecisionTek Risk Analysis Engine(http://www.decisiontek.com/Home/tabid/37/Default.aspx) Ad hoc spreadsheet tools for probability distributions Due Diligence Tools (Technical Advisory) In the case of private concessionaires, a technical advisor may review documentation and perform on-site inspections of physical infrastructure and facilities to understand the state of good repair standards that, in turn, contribute to the overall understanding of costs associated to maintenance, rehabilitation, and replacement. By thoroughly reviewing all factors related to operations and maintenance, costs can be optimized, and the quantitative product of a technical advisory exercise may include a cost model that feeds into the private party’s financial model. DecisionTek Risk Analysis Engine (http://www.decisiontek.com/Home/tabid/37/Default.aspx) Ad hoc spreadsheet tools for probability distributions Due Diligence Tools (Financial Model) A financial model combines the economic and technical aspects for developing a baseline scenario, which provides measures of the feasibility and health of a project. A key indicator from the financial model is the internal rate of return (IRR), which is the discount rate that sets the Net Present Value (NPV) of all cash flows equal to zero. DecisionTek Risk Analysis Engine (http://www.decisiontek.com/Home/tabid/37/Default.aspx) Ad hoc spreadsheet tools for probability distributions Risk Evaluation Tools Risks are allocated and quantified to clearly describe the various scenarios, costs, and responsibilities involved. Areas of concern may include insurance, permitting, design, and construction among others. Ad hoc risk allocation matrices, typically developed in house Table A.7. Summary of risk assessment tools. Table A.6. Summary of financial impact accounting tools.