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38 Because government agencies often act both as infrastructure 5. Project implementation--When final approval is obtained, providers and holders of the general public interest, they detailed construction plans are developed, and right-of-way often make decisions that reflect regional mobility goals (if necessary) and construction permits are acquired. and the safety, security, and environmental concerns of the communities that the agency represents. Within this process, public-sector stakeholders (e.g., infra- These differences in the types of benefits considered by dif- structure providers, state DOTs and impacted parties) typi- ferent stakeholders necessarily lead to different types of cally begin developing a detailed understanding of potential freight investment decision processes. The decision-making investment benefits only within the project programming and process employed by public-sector stakeholders is much project development stages. However, with the exception of a more "democratic," and focuses on building consensus on a handful of states (e.g., Washington State rail investment wide range of issues. In many situations, the number of stake- process), this benefit assessment occurs after a proposed proj- holders with a vote at the table is quite large; the multiple ect has entered the pipeline, and is generally used to decide objectives (and impacts) of a proposed freight investment among competing investments (both freight-related and non- often may be muddled; the funding sources and mechanisms freight-related) to build support for an investment or suite are numerous and complex; and the final decision to move of investments among impacted parties, and/or to allocate forward or not with any given proposal rarely rests with a costs and benefits across different stakeholder types. single agency or decisionmaker. This complex process has Among private-sector freight stakeholders (e.g., railroads, many positive aspects; for example, it has given many peo- shippers, and industrial site developers), potential investment ple a voice in what happens in their communities, and is benefits are assessed as a first step in the process. Railroads, for more "fail safe" than the early days of publicly funded trans- example, immediately assess a project's potential impact on portation investments. At the same time, this highly partic- operations and revenue, and calculate NPV of potential invest- ipatory process often drags out the timeframe for planning ments very early in the process. Similarly, one of the only fac- and implementation of any significant improvements, and tors a financial investor or concessionaire will consider within may ultimately kill a project or program through death by a the decision-making process is financial returns, typically via thousand cuts. due diligence studies that involve third-party confirmation of market demand and revenue assumptions. In comparison to the public-sector process, the private- This mismatch on when benefits are assessed within the sector process is much more narrowly focused on projects decision-making process can make it difficult for all types of that directly relate to business goals and objectives. The investment stakeholders to focus attention on freight invest- process is much less inclusive, and stakeholders and decision ments that might have benefits for all parties. makers are brought into the process only to address specific issues (e.g., permits, approvals) or to provide specific areas of support (e.g., funding, incentives). As opposed to the public 3.4 Existing Data and Tools process, the final decision to move forward or not with any There are a number of distinct classes of tools that corre- given proposal often rests with a single decisionmaker or spond to the needs of different stakeholder types and their collection of senior executives. decision-making processes. These tools provide different Benefits are assessed at different points in the process, functions at different points in time, as shown in Figure 3.6. using different types of tools. There are several classes of tools used by different stakehold- In addition, different stakeholders assess benefits at differ- ers to assess these types of benefits, including the following: ent points in the process. The public-sector process typically consists of five key steps: Strategic planning tools--These include tools used to assess long-term needs and deficiencies impacting the transporta- 1. Needs identification--When system needs and defi- tion system and the lifecycle costs of operating and main- ciencies are identified and potential approaches are taining transportation infrastructure (for asset providers), as identified; well as longer-term market analyses, production, and site 2. Plan development--When transportation vision, goals, selection alternatives (for service providers and end users). and strategies are documented; Carrier cost and performance analysis tools--These oper- 3. Project programming--When the process of actually ational analysis tools, which estimate the operational per- implementing transportation improvement projects begins; formance and cost of freight carrier operations under 4. Project development--When more detailed design and a alternative scenarios to represent the impact of transporta- more formal assessment of the necessary permitting and tion projects, programs, or policies, are primarily used by approval activities occurs; and freight infrastructure providers and carriers.

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39 Decades Years Months Days Strategic Tactical Daily Tool Functions Demand Production Routing Forecasting Planning Inventory Facility Operations Scheduling Location Planning Incident Risk Performance Management Evaluation Assessment Operations Figure 3.6. Benefit assessment spectrum. Shipper cost and performance models--These tools esti- Financial impact accounting tools--These tools, typi- mate the cost and time characteristics of alternative freight cally used by those that have a direct stake in the cost mode and service options, and are intended to represent the of a project, provide estimates on how the proposal total logistics time, cost, and safety/reliability tradeoffs avail- will affect outgoing cost streams, incoming revenue able for a shipment so that optimal shipping decisions can be streams, cash flow, borrowing or bond requirements, net made. These tools are primarily used by end users (i.e., the profit or loss over time, upside/downside risk, and rate businesses that generate outgoing freight or the consignees of return. who receive the freight and ultimately pay the shipper cost). Risk assessment tools--These tools assist private-sector Transportation system efficiency models--These tools, asset providers and end users in understanding and quan- often defined as benefit/cost analysis systems, are intended to tifying critical areas of uncertainty related to making invest- evaluate the benefit and cost streams over a specified period ment decisions. of analysis to determine whether a proposed investment will yield benefits in excess of its cost. These tools have varying degrees of importance to different Economic development impact models--These tools esti- stakeholders, as shown in Table 3.6. mate impacts of transportation projects on income and jobs The following sections describe the types of analysis tools in the economy, and are primarily used by public-sector within each of these categories used by freight stakeholders (local, regional, or state) transportation agencies to explic- to evaluate freight investments. Specific attention currently is itly consider business productivity and economic develop- given to tools that are sensitive to features of freight transporta- ment impacts that are not represented by transportation tion, and public-private sector interaction that is inherent in system efficiency tools. multimodal freight planning and policy. Table 3.6. Importance of analysis tools to freight investment stakeholders. Tool Types Carrier Shipper Transportation Economic Stakeholder Strategic Cost and Cost and System Development Financial Risk Types Planning Performance Performance Efficiency Impact Impact Assessment Asset Provider Service Provider End User Impacted Party Less Important More Important.

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40 Strategic Planning Tools are determined, market estimations are made, and facility loca- tions, equipment specifications, or carrier requirements are Strategic planning occurs on a long time horizon (20 to evaluated. From the public freight planning perspective, this is 30 years for asset providers and 2 to 5 years for service where the greatest opportunity lies for developing the environ- providers), and is the place where the most costly investment ment that will attract or deter freight and supply chain facili- decisions are made. Strategic planning extends beyond 5 years ties to locate or expand in a particular area. This is the time in for public-sector agencies and entities, as well as for large the product lifecycle where the private sector will evaluate all freight service providers or end user companies with stable of the data that it has available, not only in terms of potential markets. Long-term strategic planning horizons also are typi- markets, but also considering operating history, financial per- cal for those asset providers making right-of-way or new formance specific to an area, and future development plans capacity investments. not only for the company but also within an operational zone Strategic planning for public-sector agencies is typically or location. accomplished through the development of the long-range transportation plan, which describes the vision, goals, and associated policies to guide investment in the statewide or Carrier Cost and Performance regional transportation system over a 20-year timeframe. This Analysis Tools document is normally updated every 3 to 5 years. However, Systems and metrics for operations are one of the most there are other important strategic planning activities in which important investments made in the private sector relative to these agencies, particularly state DOTs, are engaged. For service networks and supply chains. These are the technolo- instance, cost-effective management of transportation infra- gies, equipment, and software that measure cost and revenue structure is an increasingly important activity of public-sector that define the utilization of capital in a variety of forms. transportation agencies, particularly as some key infrastructure Private-sector entities are motivated to manage two things: components (roadways, bridges, locks, and dams) are nearing the utilization of assets (which drives revenue) and the reduc- the end of their useful lives. Most states have developed long- tion of operating costs. range asset management strategies to help ensure the smooth Operations tools are employed to manage asset investments, and cost-effective movement of passengers and goods. Many and through that capability they also predict performance and of these strategies entail specific designs, operations, and main- the quality of opportunities. These tools are used in each of the tenance budgeting activities. In addition, many states are time horizons described earlier in Figure 3.6. Historical data beginning to pay close attention to bond rating scores from are important to the planning process and these tools also pro- the nation's credit rating services, such as Moody's, Standard vide input to daily tactical decisions of shippers and carriers in & Poor's, and others. To ensure top ratings, states are paying response to short-term needs that are revealed via the metrics. close attention to long-term stability of the revenue streams, In general, there are separate types of tools and models for cost-effective management strategies, maintenance activities, each transportation mode--railroad, aviation, and trucking and public support for transportation investments. operations--although a common feature of all of these mod- On the private-sector side, the planning horizon may be els is the estimation of speed, reliability, capacity, and cost for shorter, particularly for service providers who must respond to operating a given modal freight service, under alternative conditions created by their end users and their asset providers scenarios for infrastructure capacity and usage rules. or those operating in markets with high degrees of fluctuation. Typical tools include the following: The useful lives of many freight assets extend beyond these ranges; certainly for connector links and activity hubs, and for Routing tools for truck movements that allow a unit to many kinds of mobile equipment as well. Although financial change routes for congestion avoidance, to make toll choices, evaluations allow for this, fleets, service networks, and supply and to improve overall fuel efficiency. On the end user chains are adjusted frequently, and assets are moved into side, product and transportation tracking allows a shipper secondary markets (right-of-way being the most illiquid). to shift a product quickly to an alternate point of sale while Typical tools used in strategic planning include travel the goods are still in transit. Tools of this sort are very pow- demand forecasting and network optimization. The technol- erful in the tactical realm. ogy application to support forecasting and the strategic plans Railroad operations tools that estimate how a given rail include data available from financial systems, operations man- infrastructure improvement would actually change vol- agement systems, and others. These are the tools that are used umes, speeds, and reliability. The source data include spe- to make long-range investment decisions. cific track, siding and yard conditions, plus road, local and Forecasting is a central aspect of the planning process for all work train characteristics, and schedules that are proprietary types of freight stakeholders. This is where infrastructure needs to the railroads. Nevertheless, such data have been forth-

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41 coming in cooperative ventures, and there are some gener- able for shipments, so that optimal shipping decisions can be ally recognized software tools that work with the data. Rail made. Tools include the following: Traffic Controller (Berkeley Simulation Software), RAILS 2000 (CANAC/Savage Industries), and RAILSIM (Systra) Modal diversion models that forecast how freight move- are all forms of simulation systems used by railroads to ments shift in response to changes in the availability, cost, prioritize routing of trains through the network, identify and/or time performance of available modal alternatives. conflicts, and measure effectiveness. Besides the simulation Most modal diversion models used in transportation facil- systems, there also has been some work on parametric rail ity planning are focused on truck-rail-intermodal options, capacity models that develop capacity curves for various because there are very real tradeoffs that shippers face when operating characteristics, and identify areas with capacity considering ground transportation options for medium- constraints.(2) In addition to these tools, FRA has developed and long-distance travel. On the other hand, air and marine a General Train Movement Simulator (GTMS) designed to options focus more exclusively on long-distance shipping support evaluations of new Positive Train Control (PTC) and offer more distinctly different cost, performance, and systems and capacity enhancements. As a newly available availability features. These tools are of interest primarily to tool, GTMS is being tested by Class I railroads, and should be public-sector entities. available for general use soon for public- and private-sector Total logistics cost models predict how shippers respond to stakeholders. changes in the costs of modal and service alternatives. They Airport operations tools that estimate the capacity of run- actually estimate the total logistics cost of shipping, includ- way systems and the level of delay that they present when ing direct transportation expense and inventory cost associ- faced with alternative demand levels. These include Total ated with modal lot sizes and service profiles. The models Airport and Airspace Modeler (TAAM) System, the Airfield assume that customers (shippers) select the lowest cost Capacity Model (ACM) from MITRE Corporation, the option, and they depend on information about logistical fac- FAA's Airport and Airspace Simulation Model (SIMMOD), tors in transportation and industry. Shipments are assigned and the LMI Runway Capacity Model from the Massa- to one mode or another, while allowing for probability chusetts Institute of Technology (MIT). There also is uncertainty associated with inventory risk, carrier perform- the Airport Capacity Analysis Through Simulation (ACATS) ance, or unmeasured factors. Sometimes, these models are model, which is an attempt to improve on the ACM based on detailed commodity-specific data. Other times, the framework.(2) models may be simple spreadsheet tools to estimate tons Marine port operations tools, many of which have been switching mode and resulting cost and travel-time differ- refined by university researchers, typically account for both ences under different project assumptions. passenger and freight traffic, recognizing local differences Intermodal Transportation and Inventory Cost (ITIC) in types of freight (bulk, break bulk, and containers), mix Model is a freight mode choice model from FHWA's Office of ship characteristics, water depth and wave motion, and of Freight Management and FRA. It attempts to calculate positions of terminals. Typical port planning tools include the logistics cost and decision tradeoffs seen by shipper computer simulation models for port operations, port logistics managers and then assigns the truck/rail diversion terminal container handling, and terminal expansion and to alternatives that minimize total logistics cost. It is based development (including investment in quays, quay cranes, on an earlier model developed for FRA in 1995. and storage space). Newly developing models are attempt- Spreadsheet Logistics Model developed by MIT esti- ing to integrate traditional performance measures--such as mates the truck/rail mode choice for 48 typical types of time savings, safety, and operating costs--with wider meas- customers. This is done on the basis of given customer ures that include the cost of vehicle emissions and mone- characteristics (use rate and trip length); commodity char- tized health benefits. acteristics (value/pound); and mode characteristics (e.g., price, trip time, and reliability) for rail, truck, and inter- modal options.(3) Shipper Cost and Performance Models Market share models are an alternative predictor of freight These tools, typically used to approximate the aggregate shipper choices. They do not estimate logistics costs. Instead, decisions made by end users (freight shippers, consignees, or they are based on a statistical correlation between modal their agents) include various forms of shipping choice, sup- performance factors and traffic capture (revealed prefer- ply chain, or total logistics cost models. In general, these tools ences), and they then project traffic swings when relative estimate the cost and time characteristics of alternative freight performance changes. Stated-preference models have mode and service options. They are intended to represent the similar purposes, but are developed statistically from total logistics time, cost, and safety/reliability tradeoffs avail- structured interviews with freight transportation buyers

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42 about the tradeoffs they would make if faced with hypo- transportation systems and direct beneficiaries of improve- thetical choices. A statistical process is then applied to these ments in freight movement. Externality impacts on the responses to infer decision points and probable traffic diver- environment (primarily air quality impacts) are sometimes sions in response to changes in competitive service offerings. also added as a broader societal impact. Typical tools are For instance, one such model estimates truck-rail diversion described in the following sections. based on a combination of the (1) Uniform Rail Costing System, (2) TRANSEARCH commodity-flow database, and (3) a demand elasticity model calibrated from his- Traditional Benefit/Cost Tools torical carrier price and volume data. The elasticities dis- There are several modeling tools that are widely used to tinguish price sensitivity by traffic type, geographic assess transportation system efficiency impacts (in terms of region, and commodity group, and the model forecasts traveler benefits) for highway investments. They share com- the specific freight flows that would likely be diverted to mon features--the valuation of travel-time savings for differ- rail, given changes in railroad or intermodal service char- ent classes of travel, as well as vehicle operating costs, safety, acteristics. and air quality impacts. Commonly used benefit/cost tools The Uniform Rail Costing System (URCS) Model (Sur- include the following: face Transportation Board) can estimate the changes in shipper productivity associated with rail system perfor- Cal-B/C, developed by the California DOT (Caltrans), is a mance changes. The URCS model uses data on average car- spreadsheet model for benefit/cost analysis of highway and rier cost and performance measures to estimate the cost of transit projects in a corridor that already contains a high- providing service, so it can estimate how a change in facility way facility or a transit service. Highway projects may capacity or speed (affecting rail cars per day) would trans- include high-occupancy vehicle (HOV) and passing lanes, late into average shipper dollar savings per ton-mile. interchange improvements, and bypass highways. Transit improvements may include enhanced bus services, light Transportation System Efficiency Models rail, and passenger heavy-rail projects. Default data are given (Benefit/Cost Systems) for California conditions. MicroBENCOST is designed to analyze seven types of high- These tools are intended for use by public-sector (local, way improvements in a corridor: (1) capacity enhancement, regional, or state) transportation planners. They are defined as (2) bypass construction, (3) intersection or interchange benefit/cost analysis systems, intended to evaluate the benefit improvement, (4) pavement rehabilitation, (5) bridge and cost streams over a specified period of analysis to deter- improvement, (6) highway safety improvement, and (7) rail- mine whether a proposed investment will yield benefit in excess of its cost (after monetizing all streams and dis- road grade crossing improvement. Highways may contain counting to present value). In current practice, benefits are HOV facilities. This tool was originally developed by most commonly defined in terms of transportation system NCHRP as a computerized implementation of recom- efficiency, reflecting estimated savings in travel time, safety, mended practice set out by AASHTO.(4) Surface Transportation Efficiency Analysis Model and vehicle use costs that a project can provide for vehicle movement through the transportation network. These sav- (STEAM) is designed to assess multimodal urban trans- ings are typically defined in terms of the savings accruing to portation investment and policy alternatives at the regional vehicle owners, drivers, and passengers. and corridor levels. Transportation system alternatives may The public-sector benefit/cost tools grew out of the urban include up to seven modes. Peak and off-peak periods and transportation planning process and, accordingly, they tend multiple trip purposes may be considered. The model is to focus on road and transit systems with greatest detail on closely linked to outputs from the four-step urban trans- passenger movements. For instance, the handling of car and portation modeling process. transit travel typically includes an accounting of the number Highway Economic Reporting System (HERS) is a system- of riders and trip purposes. On the other hand, the handling level optimization framework for analyzing investment of freight vehicles seldom includes any information on either strategies to maintain and improve an existing highway net- the type of cargo or amount being carried. The direct benefit work. New highway construction is not considered. The calculation in these tools is often referred to as a measure of user program automatically generates candidates for highway cost savings, although freight planners often prefer the improvements, which may be combined with user-specified label traveler cost savings to highlight that these calculations improvements. It then determines the best combination of include costs associated with travelers and vehicles, but not projects. HERS is closely linked to the Highway Performance shippers and consignees, who are the true users of freight Monitoring System (HPMS).

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43 StratBENCOST is a strategic-level evaluation method to granularity--the amount of trucks among total traffic over the analyze investment alternatives for expanding and improv- period of analysis. ing a highway system. This tool represents an upgrade from previous analysis methods by incorporating cost calcula- GradeDec.Net tions from MicroBENCOST and HERS, and adding con- sideration of risk and uncertainty. A particular strength This tool, sponsored by FRA, is a Web-based system for of this model is its explicit consideration of the random evaluating the safety impacts and the benefit/cost of improve- nature of input parameters. New highway projects, as well ments to highway-rail grade crossings in a corridor or region. as improvements to existing highways, may be considered. The tool is freely accessible over the Internet, and requires no Nonhighway modes are not considered. The program is user-installed software other than a Web browser. The tool used to compare an investment alternative to a base con- has been used by DOTs, railroads, MPOs, and consultants for dition, which may be another investment alternative. The projects in dozens of jurisdictions. The benefits considered by program can perform either a single-segment analysis with GradeDec.Net include the array of highway user costs (travel or without induced traffic, or a network-level evaluation time and vehicle operating costs), safety effects for highway with traffic diversion; the latter typically requires linkage to and rail users, and environmental impacts. the four-step transportation modeling process. From a freight planning perspective, it can be important to consider the fact that growth in railroad traffic near rail- highway intermodal facilities and large railroad traffic diver- BCA.Net sions due to system improvements often result in more This system was developed for the FHWA Office of Asset frequently blocked crossings and blocks of longer duration, Management as a Web-based tool for benefit/cost analysis of which are a focus of GradeDec.Net. Congestion and environ- highway projects. The tool is freely accessible over the Internet, mental effects due to queued vehicles at crossings are a major and requires no user-installed software other than a Web concern when considering rail system upgrades to accommo- browser. The tool compares and evaluates alternative highway date increased flows of freight in the vicinity of metropolitan improvement projects (e.g., preservation, lane-widening, lane areas. GradeDec.Net includes a number of features for evaluat- additions, new alignments, addition of traffic control devices, ing the benefit/cost of roadway capital improvements at cross- intersection upgrades). Projects for comparison in BCA.Net are ings (i.e., grade separations, approach improvements) and multiyear, full lifecycle investment and maintenance strategies. traffic management mitigating measures (i.e., one-way restric- Work zone costs (e.g., user costs associated with construction- tions, redirection of traffic to adjacent crossings, signal synchro- related delay) are included in the calculation of net benefits. nization). The tool permits the specification of percentage of The benefits considered by BCA.Net include highway user trucks in the traffic mix. GradeDec.Net allows for the evaluation costs (travel time and vehicle operating costs, safety) and envi- of multiyear capital improvements in a corridor. GradeDec.Net ronmental impacts. Benefits in BCA.Net are calculated based has built-in risk analysis capabilities and benefit/cost calcula- upon changes in traffic flow, given improvements in volume tors. Intermediate results can be viewed in charts and reports and capacity relationships as defined in Highway Capacity as probabilistic ranges. Manual 2000.(5) User cost calculations (given average hourly traffic, speed, and roadway parameters) are based on the HERS FHWA Highway Freight Logistics Reorganization model (not MicroBENCOST, as has been reported elsewhere). Benefits Estimation Tool BCA.Net includes the calculation of costs and benefits due to induced demand. BCA.Net has built-in risk analysis capabili- This tool seeks to quantify certain freight improvement ties, and benefit/cost and intermediate results can be viewed in benefits that are not captured in traditional benefit/cost charts and reports as probabilistic ranges. analysis (BCA). The FHWA tool seeks to measure the second- In BCA.Net, the user specifies forecast demand in the base order benefits, that come about when firms direct the money year and rates of growth in the near term and long term. For saved on logistics expenses away from maintaining inventory, three user-defined years in the period of analysis, users specify and toward other more productive uses. These benefits can time-of-day distribution of traffic (e.g., peak, peak shoulder, then be added to those estimated through BCA to arrive at a off-peak) and traffic mix by vehicle type (e.g., auto, truck, bus). complete picture of total benefits. In a BCA.Net analysis, users divide the year into as many sea- Beginning with a national estimate of highway freight sonal traffic patterns as required. If roadway saturation limits demand to delay (i.e., the price), the analysis then estimates are reached in peak periods, BCA.Net will spread traffic to peak national second-order benefits that would arise out of high- shoulder and off-peak periods. From the freight perspective, way freight improvement projects. Finally, these results are BCA.Net accounts for the impact of trucks on traffic flows and disaggregated for use in local and regional highway investment benefits, while permitting users to specify--at a high level of studies to provide accurate estimates of second-order benefits

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44 for smaller areas, such as MPOs or states, and encapsulated opment impacts that are not represented by the transporta- within a spreadsheet model. The Highway Freight Logistics tion system efficiency tools. They are sometimes referred to as Reorganization Benefits Estimation Tool consists of the fol- models of wider economic impacts or economic develop- lowing four basic components: ment impacts. In general, they estimate impacts of trans- portation projects on income and jobs in the economy. 1. Estimation inputs, which gather data from the user The drivers of these economic impacts may be changes in describing the specific highway segment under considera- spending patterns, changes in the relative costs of trans- tion, initial (pre-improvement) conditions, and anticipated portation, or improved market access. As part of their analy- changes due to the improvement. Initial conditions data sis process, these models can recognize business productivity include standard transportation performance measures impacts related to logistics, production, and agglomeration (such as annual truck-miles on the corridor, percentage of economies, as well as trade and business attraction effects trucks in the traffic mix, and average speeds), as well as that are not included in the transportation system efficiency estimates of the value of time, freight vehicle operating tools. On the other hand, they typically exclude the value of costs, and travel-time reliability. Anticipated changes personal time savings or environmental effects to the extent involve expected savings in operating costs and travel that they are valued, but do not affect the flow of money in times, and changes in reliability of travel time. For multi- the economy. state projects, users can select a two-state model configu- An important aspect of economic impact tools is that they ration, which utilizes input data from both states. Users trace economic impacts of transportation projects by industry. can opt for predefined values for the various parameters, They generally translate impacts on travel time and operating or they can override the predefined values with their cost into commodity-specific freight flows and industry- own inputs. The predefined values are based on research specific income flows as a necessary step in the process of and may be state specific, national averages, or calculated calculating impacts on the flow of money between industries, from other inputs. workers, and households. To varying degrees, most of these 2. Conventional BCA freight benefits input, which allows tools also incorporate measures of access and connectivity, users to input the freight benefits estimates from a con- including labor markets; truck delivery markets; airport serv- ventional highway cost/benefit analysis into the tool. ice areas; and access to intermodal rail/truck terminals, air- These would be the freight-specific benefits, which begin ports, marine ports, and border crossings. to accrue in a certain year (defined by the user), and con- From the viewpoint of freight investment decisionmakers, tinue through the total number of years in the analysis. these economic impact tools are particularly important because The tool can accommodate any type of monetized units they also can cover productivity effects that span carrier, ship- (e.g., thousands, millions, or billions of dollars) in either per, and consignee impacts. In some models, these effects are nominal or real terms. added together in the calculation of overall economic impact, 3. Summary of results, which summarizes the results of so that the allocation of impact among the various classes of the analysis as calculated based on the input values, and stakeholders may not be well distinguished. However, there are requires no user input. The screen provides charts and exceptions where business productivity effects are explicitly tables showing generalized truck travel cost and truck shown. From the viewpoint of local and statewide decision- transport demand before and after the improvement, makers, wider economic impact analysis tools can also help and the additional benefit obtained through firms reor- answer questions from constituents that benefit/cost analy- ganizing their logistics processes. It therefore shows the sis fails to address--particularly the extent to which a pro- total additive benefits associated with an improvement posed project may positively or negatively affect the overall (i.e., conventional cost/benefit estimates plus firm reor- business environment of a community and resulting changes ganization benefits). in jobs and income. They may further assist economic devel- 4. Summary of inputs, which provides a summary of all the opment agencies to identify how proposed projects may data inputs used in the analysis, which is useful for record- affect their efforts to diversify the area economic base and keeping in case analysts need to enter future updates for a attract target industries--shifting the quality and pay level of specific project. available jobs, reducing dependence on declining industries, or improving business stability by enhancing supporting and complementary activities. Economic Development Impact Models Economic impact models are discussed in terms of two These tools are intended for primary use by public-sector aspects--the core economic model and the analysis frame- (local, regional, or state) transportation agencies that desire to work that translates freight-related transportation impacts explicitly consider business productivity and economic devel- into economic model inputs.

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45 Input-Output Models (CGE) models of the economy for large regions and nations. Typically, these models have a spatial component that tracks Input-output (I-O) models have limited application for transportation connections (and travel times) and trade transportation impact analysis. In the United States, the two (industry product flows) among regions, and an industry most widely used I-O tools are IMPLAN and RIMS-II. Both component that tracks the cost of freight transportation by are regional impact systems built on the basis of the same commodity group between regions. The CGE element esti- national U.S. Department of Commerce accounting system, mates the economic impact of transportation projects and and trace how direct changes in the flow of purchases or sales policies through a process that first calculates their impact of one industry lead to broader indirect and induced changes on interregional freight transport cost, effective labor sup- in purchases and sales (and ultimately jobs and income) in ply, value of capital stock, and overall factor productivity. other industries in that region. That makes them very useful This can include effects of changing travel times, congestion for estimating the local impact of industry openings, closings, levels, reliability, accident rates, and operating costs. The expansions, and contractions. macroeconomic response is then estimated as changes in As a result, both IMPLAN and RIMS-II are widely used to industry growth and associated changes in commodity show the job and income impacts of operating or expanding trade between regions. A notable example for large-scale airport and seaport facilities. However, neither tool can esti- impact estimation is ASTRA--a systems dynamics simula- mate the impact of changes in costs or market access, which tion model that also models commodity movements in a are the two key impacts of most freight rail and highway proj- multimodal context but is spatially limited to major regions ects. For such applications, it is necessary to utilize an external within Europe. ASTRA has been used to estimate economic methodology or tool to translate changes in transport costs or growth effects of projects proposed for the Trans-European access characteristics into direct impacts on the behavior of Network (TEN), a Europe-wide program for developing transportation system users before an I-O model can be used new multimodal trade corridors across the continent. For to assess broader impacts. that analysis, the ASTRA model was implemented with the In practice, the necessary front-end tool can take three forms. TIPMUC (Transport Infrastructure and Macroeconomic) First, a market study can be conducted to estimate how a new process that calculated effects of proposed projects on gen- access route will lead to direct changes in ongoing industry eralized transportation costs by industry.(67) On a much activity. Second, it can just be assumed (rather naively) that all smaller scale, another European example is PINGO-- transport cost changes translate into corresponding percentage a spatial CGE model for Norway with 20 regions and growth in income and output for those industries. Third, an 10 commodities. external cost-elasticity response tool may be employed. All three REMI Policy Insight--In the United States, the REMI Pol- methods have been used outside the United States and Western icy Insight Model emerged during the 1980s as a structural Europe, where I-O models are the only available economic simulation model for regional and statewide estimation of impact analysis tools. However, in the United States and economic impacts. It shares many of the features of the spa- Europe, the norm is to rely on economic impact simulation tial CGE model, combining inter-industry I-O equations models that have inputs representing changes in transport cost with transport price response and additional impacts on and market access. labor supply/demand and migration rates. To estimate impacts of transport projects or policies, there are REMI Pol- icy Insight inputs, including generic transport cost and over- Regional Simulation Models all business operating cost by industry. Changes in effective These are tools that forecast future changes in jobs, distance between regions also can be used to calculate income, value added, and business output by industry. These changes in generalized transportation costs by industry, models are set up for single or multiple regions and often which then can affect interregional trade. REMI Policy track the flow of jobs, income, and business activity between Insight is flexible and can be built for relatively small areas regions. They are like I-O models, in that they incorporate (counties) or for larger regions. In practice, REMI Policy representation of inter-industry and interregional flows to Insight also needs a front-end tool to translate freight-related show effects of spending changes, but they also add a capabil- transportation impacts into economic model inputs. One ity to show time series impact of changes in transport costs. option is REMI TranSight. TranSight directly links results of Regional simulation models used in current practice include a road network and travel demand model to the REMI Pol- the following: icy Insight macroeconomic model. This front end, used in Oregon and Connecticut, allows the user to change inputs Computable CGE models--In Europe, there has been sub- to the transportation model (affecting car/transit mode split, stantial effort to develop computable general equilibrium vehicle volumes, speeds, or distances) to represent alternative

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46 future scenarios. However, the modal choices are limited to modity and mode. The model forecasts changes in wages, highway modes and rail transit; there is no separate freight prices, and spending patterns. This model option currently rail mode and no ability to differentially affect truck versus is available at a state or multistate level, working with the rail impacts on either transport cost or effective distance. TREDIS front-end system. Over the past decade, a variety of other analysis systems have emerged that provide a more useful interface for use Spatial Access Impact Models of REMI Policy Insight. They all share a greater ability to assess economic impacts, benefits, and costs of transporta- These are tools that forecast impacts of local changes in tion network alternatives at a statewide level and include transport access and connectivity on future attraction of busi- the following: ness activity to an area. They originated in the economic MCIBAS (Major Corridor Impact-Business Analysis development field as regional business attraction analysis System)--A system developed for Indiana DOT for tools, and have since migrated to mainstream transportation corridor analysis; planning. Examples of relevance to freight transportation HEAT (Highway Economic Analysis Tool)--A system planning are discussed below. developed for Montana DOT for corridor analysis; and BEST (Benefits Estimation System for Transportation) The University of Maryland spatial econometric model spreadsheet tool--A methodology developed for Michi- estimated, at the zip code level, the effect of highway proj- gan DOT for corridor analysis. ects on the level of economic activity and growth in a zone, TREDIS with CRIO-IMPLAN--Web-based tools for small based on a wide variety of transportation indicators. These area transportation impact analysis emerged in 2007 with included network density and spatial agglomeration, as the CRIO-IMPLAN model, offered as part of the TREDIS well as changes in access times to airports, intermodal system. CRIO-IMPLAN follows the concept of Occam's rail/truck freight terminals and rail transit, and the size of Razor as "a reduced form regional model that adds a strong labor, consumer, and supplier markets. This model was set of features for estimating the incremental effects of trans- used to analyze expected impacts of a proposed highway portation improvements at the local and regional levels, but corridor development in Maryland. shaves off broader macroeconomic factors that do not nor- LEAP (Local Economic Assessment Package) was origi- mally come into play for these types of situations."(8) It nally developed by the Appalachian Regional Commission combines an interregional I-O model with trade flows, for business attraction analysis in the 13 Appalachian states. together with a time series framework for estimating eco- It explicitly showed how costs of land, labor, energy, and nomic growth forecasts over time, and "a series of econo- taxes interacted with transport costs and access (including metrically derived functions relating transportation access ground access time to intermodal rail, air and marine and travel cost changes to shifts in local industry output and ports, and highways) to differentially affect the attraction employment growth."(8) The access factors include same- of various industries to an area. It was subsequently applied day truck delivery, labor market, and intermodal air, rail, by consultants to highway impact studies in a dozen marine, and truck freight terminal access. Interregional Appalachian states. A commercial version of LEAP also was trade (and associated costs) are represented by both com- incorporated into the Montana DOT's HEAT system and the modity code and mode, with alternatives for utilizing TREDIS framework as applied for regional freight access HIS/Global Insight's TRANSEARCH commodity flow data- analysis in Portland (Oregon), Vancouver (British Colum- base, FHWA's Freight Analysis Framework (FAF), or other bia), Chicago (Illinois), and Houston (Texas). freight flow data sources. It has been used with the broader TREDIS front-end system in Texas, Kansas, Wisconsin, Illi- Integrated Frameworks nois, Massachusetts, and 20 other states. Global Insight Economic Model--For state-level freight These combine economic simulation models, front-end policy studies, the Global Insight freight model provides a tools to translate travel model data into economic models, specialized economic impact analysis system. Leveraging the and back-end tools that translate the economic model results short- and long-term forecasting macroeconomic models of into information for freight project planning and decision Global Insight, this system provides highly detailed responses making. There are both low-end (general approach) and to changes in transport costs by mode and commodity. It uti- high-end (tailored approach) options. lizes econometric (statistical) equations that are sensitive to changes in transport costs per ton for transporting a wide Generic Approach: TREDIS--This is a modular framework range of commodities by all available freight modes. It also operating through a Web-based server to integrate various includes detailed information on freight flows by com- tools for travel impact analysis, spatial access impact analysis,

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47 regional economic impact analysis, and benefit/cost analysis. Another category of financial analysis tools deals not with The primary benefit of TREDIS is that it provides a flexible freight generation or freight flows, but rather with the eco- off-the-shelf methodology for regional or state agencies to nomic viability of transportation infrastructure projects and conduct economic impact and benefit/cost analysis in a con- the freight services that use that infrastructure. These tools are sistent manner spanning road, rail, air, and marine modes. It related to economic impact analysis tools only in the sense that has been applied with various combinations of road and (1) both are driven by common assumptions about the trans- pavement management systems, travel demand and net- portation project costs and demand response and (2) direct work models, land use models, commodity flow data- impacts on productivity and wider impacts on the economy bases, and economic models (the latter, including REMI, also will affect financial performance of stakeholders. How- CRIO-IMPLAN, and HIS/Global Insight). ever, they become particularly relevant for freight because of Tailored Approach: HEAT--This is a modular system that the involvement of private companies as developers and integrates a statewide highway network model and a operators of many freight facilities (particularly rail and port, statewide economic impact model together through a geo- but also increasingly air and highway facilities). Private com- graphic information system (GIS) to provide a high degree panies providing shipping services also are major users of of spatially detailed information. It is a custom-built sys- both publicly and privately operated freight facilities. tem, tailored to the needs of the specific state, providing There are several types of financial models: graphical map-based information on (1) economic condi- tions among communities, (2) transportation dependence For public agencies, fiscal impact models calculate impacts and commodity-specific impacts among industries, and on public tax and fee revenues, as well as requirements for (3) commuting and freight flows along highway networks. increasing expenditures to serve new population and eco- It also provides both economic impact and benefit/cost nomic growth that may result from the projects (including analysis results. However, it focuses specifically on highway public safety, education, and other municipal and state networks. Since the core access and economic impact mod- services). ules in TREDIS and HEAT are essentially the same, it is pos- For private entities, pro forma models calculate risk and sible for a state DOT to start using TREDIS and later upgrade rate of return associated with proposed, new investment to the GIS-based HEAT system for highway analysis. projects. A due diligence study (involving third-party con- firmation of market demand and revenue assumptions) is commonly required for private-sector financing. Financial Impact Accounting Tools For public-private partnerships, a combination of both These tools are intended for primary use for financial analy- types of models is necessary. These are commonly devel- sis by stakeholders that have a role in transportation project oped on an ad hoc basis to meet the needs of the specific development or ongoing operation, or that operate services situation. using the infrastructure. They may be public agencies, private operators, or public-private partnerships. They are commonly Risk Assessment Tools used as decision-support tools to assess how much alternative projects and scenarios will affect outgoing cost streams, incom- As described, risk assessment has been a critical component ing revenue streams, cash flow, borrowing or bond require- of private-sector investment decision-making for a long time ments, net profit or loss over time, upside/downside risk, and and has taken on more importance among public-sector agen- rate of return. cies given recent interest in utilizing public-private partner- The private sector utilizes a number of different financial ships or shared asset activities. Although infrastructure and tools that are centered on systems that feed general ledger and public projects do not fall into a standard process, the tools income statements. These tools are both commercially avail- used to determine private-sector investment benefits are fairly able or home grown and are often a combination of the two. generic and include due diligence tools and risk assessment The general ledger builds on input from the transactional tools, described below. systems such as receivables, payables, and the operating sys- tems that track cost items like fuel economy, maintenance Due Diligence Tools costs, production efficiency, network routing, etc. Systems are applied to determine the effectiveness of pricing strate- Due diligence tools include economic demand estimation, gies, risk management, and other ancillary functions. Often, technical review, and financial modeling. The common goal these systems include equipment investments for tracking, of these tools is to verify the information and potential of a process monitoring, and efficiency. Utilization of the physi- particular project. Typical types of tools or methods used cal assets and resources is reported via the financial data. include the following: