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62 Table 5.1. (Continued). Rail Benefits Port Benefits Cargo Handling Benefits Trade Change in Supply Attraction Employment Change in Measures of Asset Capacity Chain Congestion and Time to and Port Cargo Change in Regional Case Study Utilization Enhancement Benefits Reduction Market Volumes Volumes Employment Competitiveness Reno Transportation Rail Access Corridor (Nevada) Denver International Airport WorldPort (Colorado) Tchoupitoulas Corridor Improvements (New Orleans, Louisiana) Heartland Corridor Clearance Initiative (Columbus, Ohio) Port of Huntsville (Alabama) Inland Port Bayport Container Terminal (Houston, Texas) detail analyzed, and the performance metrics used) that are would increase corridor traffic from 14 to 24 daily trains, cre- appropriate for one scale of project (e.g., project- or site- ating increased safety risk at grade crossings, while contribut- specific) might not be adequate for larger scale (e.g., corridor ing to an escalation of road congestion. The City of Reno or multijurisdictional) projects. A third focus area of the therefore recognized the potential for significant impacts on team's evaluation was to assess the adequacy of the Freight ground transportation and developed the ReTRAC initiative. Evaluation Framework to assess costs and benefits of a The project consisted of the following three main com- variety of project types across a variety of geographic scales. ponents: 5.2 Case Study Results 1. Depressing of the UP mainlines running through the down- town area of the city; Case Study 1--Reno Transportation 2. Converting 10 existing grade crossings to overpasses above Rail Access Corridor (ReTRAC) the UP mainlines; and 3. Creating of a temporary "shoo-fly" track to limit the dis- Background ruption of corridor traffic during the construction phases This project was constructed earlier and has been fully of the project. operational since 2006. Union Pacific (UP) Railroad's Central Corridor between Oakland, California, and the Midwest runs The project area is located in the downtown district of through the downtown area of Reno, Nevada. The line is part Reno, Nevada. The project was performed on the UP Rail- of a shared-use corridor that serves both passenger and freight road's Central Corridor dual mainline between Oakland, trains. The downtown area of Reno is traversed by this rail California, and the Midwest. The corridor section of interest line, which divides the city. This was partially responsible for is the 2.3-mile line that follows Nevada State Route 647, disparate economic conditions in the city. The numerous grade between Keystone Avenue and Lake Street. The dual above- crossings between the UP tracks and city streets presented safety ground mainline is traversed by highway roads at 10 gated hazards, created highway congestion, and deterred pedestrians grade crossings. Each grade crossing allows for bidirectional from the downtown area. road traffic. The ReTRAC corridor location is depicted in In 1996, the City of Reno, Nevada, approved ReTRAC in an Figure 5.2. attempt to mitigate concerns from the 1995 merger of Union The ReTRAC Project consisted of two depressed main- Pacific (UP) and Southern Pacific (SP) railways. The merger line tracks, a temporary single line "shoo-fly" track adja-
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63 Source: Myra L. Frank & Associates, Inc., 2000. Figure 5.2. ReTRAC corridor location. cent to the UP tracks, and the reconstruction of 11 (10 exist- the conversion of 10 grade crossings into overpasses above ing and 1 approved but unbuilt) street crossings built as the depressed tracks. These grade crossings are located on street "bridges" across the top of the depressed trench. The Keystone Avenue, Vine Street, Washington Street, Ralston entrenched dual mainline was constructed to standards Street, North Arlington Avenue, West Street, North Sierra permitting maximum train speeds of 60 mph. The project Street, North Virginia Street, North Center Street, and Lake area and proposed freight infrastructure improvements are Street. illustrated in Figure 5.3. The 2.3-mile mainline is part of a shared use corridor on Period of Analysis, Discount Rate, which Amtrak runs its twice-daily service between Chicago and Key Assumptions and San Francisco. The project included the construction of a 1.75-mile-long, 54-foot-wide by 33-foot-deep trench The benefit/cost analysis considers the performance of trans- to contain the double rail lines. During construction, rail portation facilities given forecast traffic. Although the design traffic was diverted on an adjacent temporary shoo-fly track life of many facilities is 40 years or more, there are several rea- to limit service disruption. The project scope also included sons for selecting a shorter period of analysis (e.g., 30 years).
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64 Source: Information Delivery Service, 1999; Myra L. Frank & Associates, Inc., 2000. Figure 5.3. ReTRAC project extent. One reason is that with discounting, the relative magnitude nesses, and the project area community. For the purposes of benefit and cost streams in excess of 20 years is generally of this case study, groups identified as other stakeholders small and has limited impact on the analysis. Second, traf- were omitted from the benefit/cost analysis since a lack of fic is typically forecast for an out-year of the analysis and as data prohibited the assessment of their involvement in the the analysis extends beyond 30 years forecasts will be more decision-making process. It is important to note that since uncertain and less reliable. the freight infrastructure investment is a partnership between This benefit/cost analysis uses a 30-year period of analysis, public- and private-sector agents, stakeholders often hold from 2002 through 2031. In the first 4 years, the new facilities dual roles. will be under construction in the alternative case. During this time, highway users will operate on a similar roadway net- · Union Pacific owns the trackage rights and the area sur- work to the base case, while rail traffic will operate on a tem- rounding the Central Corridor. The infrastructure improve- porarily modified rail network. The analysis will, therefore, ment takes place directly on that main line in the down- take into account all disruption costs associated with the proj- town area of Reno, Nevada. UP has a direct financial stake ect construction in the alternate case. in the program since it provided about $58 million in cash The analysis was conducted for two different discount and in-kind contributions toward the completion of the rates: 3% and 7%. With the lower rate, benefits occurring in freight investment project. Following the construction out-years will have greater weight in the analysis. If the proj- phase, UP provides maintenance of way and traffic control, ect fails the benefit/cost hurdle (NPV > 0) with the 3% rate, and carries freight in the corridor. This qualifies UP as an it is likely that the project as planned is either ill-advised or its asset provider through its capital and financial investment, execution is too early. and as a service provider. · Regional governments will have a direct financial stake in the project, because they will provide a portion of the fund- Project Stakeholders ing for the construction and maintenance of the ReTRAC The study focuses on six stakeholders: UP Railroad, Washoe initiative. These governments include the State of Nevada, County, the State of Nevada, the City of Reno, regional busi- Washoe County, and the City of Reno. The funding will be
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65 collected from various sources at a national and regional increased roadway safety, reduced travel time, more pre- level. In addition, the public sector is responsible for the dictable trip time, and reduced vehicle operating costs. roadway work related to the project. This direct financial · The community surrounding the construction area will ben- stake qualifies the regional governments as asset providers. efit from an amelioration of its environmental quality. The The regional governments are a beneficiary of economic project will mitigate noise and vehicle emissions through the development benefits that flow from the project. Through removal of 10 grade crossings. By consequence, the commu- increased economic activity and property tax revenue, the nity surrounding the project area will become a major non- regional governments will have a stake in the initiative. financial stakeholder in the freight infrastructure investment. Consequently, these local governments are classified as This qualifies the community to become an other stake- other stakeholders through their ancillary stake in the proj- holder in the project. The region benefits from economic ect. The U.S. government provides finance to the project development that stems from the removal of a barrier to and benefits indirectly as the benefits to the region con- commerce and expanded opportunities for land use. The tribute to the strengthening of the national economy. This value of reclaimed land from the project and the redesigna- qualifies the federal government as an asset provider and tion of land for higher-valued uses due to the project bene- other stakeholder. fit the regional economy. The region is an other stakeholder · The Reno ReTRAC Project enhances capacity and efficiency of the project. Table 5.2 identifies all of the stakeholders for on the corridor, thus allowing for increased throughput. The the Reno ReTRAC project by type. consignees of goods shipped through intermodal means are often manufacturers or distributors; for the purposes of this study they are both considered regional businesses. Benefits These local and regional businesses enjoy business bene- fits from the project (e.g., lower costs, more timely deliver- The project benefits can be grouped into three principal ies). Local and regional business will ship intermediate and categories: benefits from grade crossing removal, economic finished products using the services of the railroad. benefits, and railroad benefits, as shown in Table 5.3. Regional businesses are therefore classified as end user stakeholders due to their transient role and as other stake- Benefits from Grade Crossing Removal. holders due to their role as receivers of shipped goods. The · Safety benefits--The Reno ReTRAC Project eliminated 10 principal beneficiaries from the removal of at-grade cross- at-grade crossings, and thus effectively brought the pre- ings will be roadway users. These also are end users (pas- dicted accidents at the crossings to zero. The present value senger and commercial travelers who do not necessarily (PV) of safety benefits from the project are $4,004,490 using have a freight connection). These users benefit from a 3% discount rate and $2,085,172 using a 7% discount rate. Table 5.2. ReTRAC project stakeholders. Stakeholder Stakeholder Type Stakeholder Interest Union Pacific Railroad Asset Provider Direct Financial Stake Service Provider Washoe County Asset Provider Direct Financial Stake Other Indirect Stake State of Nevada Asset Provider Direct Financial Stake Other Indirect Stake City of Reno Asset Provider Direct Financial Stake Other Indirect Stake Regional Businesses End User Direct Business Stake Other Indirect Stake Businesses and Residents in Other Major Nonfinancial Stake Immediate Vicinity of Project Roadway Users End User Major Nonfinancial Stake The Region Other Direct Economic Stake The Nation Other Indirect Economic Stake
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66 Table 5.3. ReTRAC project stakeholders and benefits. Benefit Affected Stakeholder Type Affected Stakeholder Benefits from Grade Crossing Removal Elimination of Accidents at All Stakeholder Types All Stakeholders Grade Crossing Travel Time Savings End User Businesses and Residents in Other Immediate Vicinity of Project and the Region Vehicle Operation Cost End User Businesses and Residents in Savings Other Immediate Vicinity of Project and the Region Emissions Savings All Stakeholder Types All Stakeholders Noise Reduction Other The Region and Businesses and Residents in Immediate Vicinity of Project Reduction in Emergency All Stakeholder Types Union Pacific Railroad, Washoe Medical Services (EMS) County, State of Nevada, City of Response Time Reno, Businesses and Residents in Immediate Vicinity of Project, and the Region Economic Benefits Reclaimed Land All Stakeholder Types Washoe County, State of Nevada, City of Reno, Businesses and Residents in Immediate Vicinity of Project, and the Region Higher Value Land Use All Stakeholder Types Washoe County, State of Nevada, City of Reno, Businesses and Residents in Immediate Vicinity of Project, and the Region Railroad Benefits Lower Shipping Cost Asset Provider Union Pacific Railroad Service Provider Reduced Liability Asset Provider Union Pacific Railroad Service Provider · Travel-time savings--The removal of 10 grade crossings from the project is $331,313 using a 3% discount rate and in downtown Reno alleviates congestion, promotes timely $133,765 using a 7% discount rate. and efficient travel, and increases business productivity. · Noise mitigation--FRA's Rule on the Use of Locomotive The travel-time savings are a monetization of the passenger, Horns at Highway-Rail Grade Crossings requires trains to truck, and bus time delay that is eliminated with the proj- sound a horn when approaching a grade crossing. The ect. The PV travel-time savings benefits from the project is removed grade crossings for the project were located in the $75,520,910 using a 3% discount rate and $30,543,960 downtown commercial district of the city. The residential using a 7% discount rate. west end of the city was regularly affected by the noise cre- · Vehicle operational costs--The elimination of queuing at ated by train horns approaching the 10 downtown grade blocked crossings leads to a decrease in consumption of fuel crossings. There have been extensive studies on the effects and other vehicle operating costs realized in the base case. of transportation noise (mostly noise from aircraft) on All roadway users on the affected roadways experience this property values. These studies indicate that the effect of benefit. The PV of vehicle operational costs benefits from noise reduces property values by 0.05% for each decibel the project is $8,114,428 using a 3% discount rate and (dB) of noise. Assuming that the properties one-half mile $3,276,058 using a 7% discount rate. on either side of the track were affected by noise in excess of · Reduction of emissions--A reduction in idling time and 50 dB, then the affected area is 1.75 square miles in size. The speed cycling by road vehicles contributed to a decrease in study team estimates that the value of real estate in the emissions. The reduction of emissions is beneficiary to all affected area is $975 million, and concludes that the bene- stakeholders because environmental quality is an interest fit of noise mitigation from the project is about $14,636,160 for all stakeholders. The PV of reduced emission benefits at a 3% discount rate and $5,908,618 at a 7% discount rate.
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67 · Emergency vehicle response time--The blocked grade the project. The increase in property value over the period crossings prior to the ReTRAC Project caused delays to of the team's analysis amounts to $95.7 million using a 3% EMS vehicles, preventing them from effectively serving the discount rate and $38.7 million using a 7% discount rate. region. These benefits are difficult to quantify, but result in fewer deaths and better outcomes for those requiring Railroad Benefits emergency services. · Railroad operating-cost benefit--The project scope enabled freight trains to travel at a higher average speed Economic Benefits through the corridor with less speed cycling and more fuel · Reclaimed land--The ReTRAC Project reclaimed approxi- efficiency. The railroad can better manage rail traffic with- mately 120 acres of land used to develop numerous commer- out worrying about grade crossings. These effects should cial and residential facilities. The reclaimed land, according result in a decrease in its overall operating costs. These sav- to the City's report, is valued at $11.5 million.(10) ings are estimated at PV $5,300,000 using a 3% discount · Higher value land use--Through the residential and rate and $2,139,610 using a 7% discount rate. commercial revitalization of downtown Reno following · Reduced liability--By grade separating the rail and highway ReTRAC, property value increased in the study area. This modes, the project reduces the railroad's liability of opera- direct economic benefit of the project affects the local resi- tions in the corridor. These savings are estimated at PV dents, businesses, and governments. The case study esti- $2,300,000 using a 3% discount rate and $928,510 using a mates the value of real estate in the immediate vicinity of 7% discount rate. the project to be $975 million. Following the construction of the project, a new baseball stadium was built just adja- Table 5.4 outlines the benefit and stakeholder types. cent to the project, and a new entertainment district is planned. These developments would not have occurred at Costs this location without the project. Through the development of reclaimed land, as well as increased economic activity in Capital Costs. The construction costs for the Reno the downtown area, the case study analysis estimates that ReTRAC project are included in this benefit/cost assessment. property values will increase by 10% in the years following The construction tasks include the depression of a 1.75-mile- Table 5.4. Present value of benefits ('000 dollars). Infrastructure Provider Users Service Provider Public Benefit Metric 3% DR 7% DR 3% DR 7% DR 3% DR 7% DR 3% DR 7% DR Elimination of $4,005 $2,085 Accidents at Grade Crossing Travel-Time $75,521 $30,544 Savings Vehicle $8,114 $3,276 Operation Cost Savings Emissions $331 $134 Savings Noise Reduction $14,636 $5,909 Reclaimed Land $11,500 $11,500 Higher Value $95,754 $38,656 Land Use Operating Cost $5,300 $2,140 Savings* Reduced $2,300 $929 Liability* Notes: DR stands for discount rate. *UP is both the infrastructure provider and service provider of freight services on the corridor. The classification to stakeholder categories roughly corresponds to each of these roles.
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68 Table 5.5. ReTRAC funding and financing summary. Total Funding Funding Sources (Millions) Notes Bond Proceeds $111.5 Revenue bonds backed by the City of Reno TIFIA Direct Loans $50.5 To be repaid from one-eighth cent sales tax and 1% hotel occupancy tax $5.0 To be repaid from lease income derived from UP properties $18.0 To be repaid from tax assessments from properties within downtown special assessment district Federal Grants $21.3 TEA-21 Railroad Contribution $17.0 Track and ballast work Other $56.6 Includes cash on-hand and interest earnings Total $279.9 long, 54-foot-wide by 33-foot-deep trench to contain double analysis is $731,680 using a 3% discount rate and $485,927 rail lines, the construction of an adjacent temporary shoo-fly using a 7% discount rate. track, and the conversion of 10 grade crossings into over- passes above the depressed tracks. These capital costs were Benefit/Cost Analysis and Other financed through a public-private partnership between UP, Performance Metrics the City of Reno, Washoe County, and the State of Nevada. The funding sources for the ReTRAC Project included Table 5.6 details the results of the team's analysis of the FHWA TIFIA loans, bonds issued by the City of Reno, TEA- Reno ReTRAC Freight Infrastructure Investment using the 21 federal grants, as well as cash and in-kind contributions by Freight Evaluation Framework. UP. These costs are expanded in Table 5.5. In the 4 years of construction, the project capital costs are $279.9 million. Risk Assessment Operations and Maintenance Costs. The project scope Table 5.7 provides the risk assessment results. The princi- did not specify the creation of a sinking fund to provide fund- pal risk drivers are growth rates of railroad and highway traf- ing for the operation and maintenance of the new infra- fic, which were assumed to vary (80% confidence) between structure. The operation and maintenance costs are shared 6% to 12% and 2.0% to 2.8% in the near term. between UP and the City of Reno. The track ballast is main- tained by UP. The drainage of the trench and the mainte- nance of city roads are handled by the City of Reno. It is esti- Case Study 2--Denver International mated that the City of Reno funds $100,000 annually for the Airport WorldPort operation and maintenance costs. In the study team's assess- Background ment, this cost is used starting year 5 of the assessment since it is the first year the new infrastructure is operational. The With capacity nearing its limit in 2000, Denver Interna- NPV of operation and maintenance costs for the period of tional Airport's (DIA) WorldPort LLC developed 100,000 Table 5.6. Benefit/cost analysis summary (thousands of dollars). Discounted Sum Category 3% 7% Total Costs $269,476 $255,619 Total Benefits $217,462 $95,172 B/C Ratio 0.81 0.37 Net B-C ($52,014) ($160,447)
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69 Table 5.7. Risk analysis results of total benefits (thousands of dollars). 90% 10% Probability of Exceeding Probability of Exceeding Total Benefits (3%) 96,950 399,600 Total Benefits (7%) 43,457 175,944 square feet of office and cargo warehousing space in order Period of Analysis, Discount Rate, to accommodate expected growth, which was forecasted to and Key Assumptions increase significantly through years of 2000 through 2010. The benefit/cost analysis incorporates the original forecasts The intended value proposition was to provide additional of expected cargo volume that were made through 2009. air cargo service in the Denver metropolitan area to capture However, to provide a more comprehensive view of the proj- future cargo that would likely be diverted to other airports ect, a 25-year period of analysis was used. Cargo forecasts because of the expected capacity constraints at DIA. The beyond 30 years have limited impact on the analysis because original plans for development included eight buildings for of uncertainty and the relative weight of discounting future a total of 495,000 square feet; however, the economic reces- costs and benefits. Construction was originally planned to sion of 20002001 and the effects of September 11 signifi- take place from 2000 to 2002. cantly reduced demand and the subsequent need for addi- A number of assumptions regarding savings from airport tional capacity at DIA. After the recession, several high-tech diversions were made in order to facilitate the analysis. These firms that heavily relied on air shipments went out of busi- include ness or were merged/consolidated with other companies outside of Colorado, which further decreased demand for · Truck time savings and operating-cost savings--Using air cargo. the same percentages of air cargo shipments at Hartsfield- WorldPort DIA is located south of the main passenger ter- Jackson Atlanta International Airport (H-JAIA) with minal, which is close to the dedicated freight operations of 36% of cargo volume domestic and 64% international, DHL, UPS, and FedEx, as well as the passenger airline Joint Los Angeles International Airport (LAX) and Dallas/Fort Use Facility. It is accessed directly from Pena Boulevard by Worth International Airport (DFW) were selected as viable way of 75th Avenue, as depicted in Figure 5.4. alternative airports because of the breadth of their interna- The WorldPort air cargo facility at DIA was originally tional destinations. Using a truck tractor-trailer opera- planned to be a total of eight buildings equaling 495,200 square tional cost per mile of $1.18 (based on the FHWA Truck feet near the air cargo section of the airport (Figure 5.5). Size and Weight Study, with cost/mile ranging from $1.03 DIA entered into a 30-year ground lease with WorldPort to to $1.38, depending on speed), a truck crew cost of $25.02 design, construct, and operate the facilities on 51 acres of per hour,(11) an average distance of 917 miles, and assum- land owned by the airport. The project was organized as a ing an average of five tons per truck (12)--the average cost PPP between the City of Denver, WorldPort at DIA Own- of transporting one ton of freight per trip equaled $292. ers LLC, and Lehman Brothers. It was originally planned to This represents the additional cost of transporting one ton be completed in 2002, and was intended to provide addi- to either airport, assuming that DIA is at its maximum air tional capacity to handle air cargo volume that was antici- cargo capacity and, therefore, unable to ship any additional pated to increase significantly from 1999 through the next air cargo freight. 10 years. Several high-tech and biotech firms within the · Alternative airport shipping rates--Since LAX is closer to Denver metropolitan area experienced rapid growth and Asian markets and DFW is closer to South American and increased their reliance on DIA for air shipments of their European markets, the cargo shipping rates were antici- products. A surge in purchases made through electronic pated to be slightly less expensive than rates from DIA. An retailing also contributed to the rising demand for air ship- average of $200 per ton was estimated to be the difference ments. It was believed, given current trends in growth and in international shipping rates between these airports and insufficient capacity, that WorldPort would provide ware- DIA, which lowers the overall benefit. house, distribution, cross-dock, and office space to meet · Belly versus dedicated cargo rates--With the decline of the rising demand. belly cargo space on passenger carriers, more shippers will
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70 Figure 5.4. DIA air cargo facilities. use dedicated air freight services. This change in carrier Average cost per air cargo-ton for dedicated airlines: type has two types of impacts. The first is that dedicated air $910 per ton; and freight is likely to be less expensive either because of its effi- Savings by shipping via dedicated airlines: $205 per ton. cient operations and volume or because of reliability. Belly The amount of cargo shipped in passenger carriers declined cargo on passenger planes is subject to external factors, at a rate of 14.6% per year from 2000 to 2009, reaching its such as time delays, baggage space, and other noncargo- lowest level at 54,500 tons in 2009 at DIA. This decline was related influences. The tradeoff is between time/reliability extrapolated through 2025. Since shipping by dedicated and cost. Therefore, the study team included the benefit of carriers has a savings rate of $205 per ton, this savings was additional cost of switching from passenger plane belly to applied to the actual and forecasted amount of belly cargo dedicated air cargo. Using data from Hartsfield Atlanta, the from 2003 to 2025. These assumptions were based on following estimates were made: information from the Hartsfield-Jackson Atlanta Interna- Average tons per employee: 85 (dedicated freight/num- tional Airport, and additional research efforts were made ber of employees); to verify cost comparisons. Frontier Airlines publishes the Average wage for passenger airlines: $94,851; rate of $1,500 per ton for domestic shipments on the 2010 Average wage for freight forwarders/area commercial cargo rate sheet listed on their website.(14) For UPS, an carriers: weighted-average wage was calculated based average 2-day shipment is quoted as $3,240 per ton, a dif- on the wage and number of employees in each type of ference of $1,740. However, rates could be substantially industry ($77,369); (13) lower through company account discounts, depending on Average cost per air cargo-ton for passenger airlines: the frequency of volume. Additional carrier contacts will $1,115 per ton; need to be made to verify the cost per air shipment.
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71 Completed buildings: #11 and #12: total of 100,000 sq ft Originally planned buildings: #9, 10, 13, 14, 15, & 16 Building Building 13 14 Figure 5.5. WorldPort at DIA, planned buildings. · Freight inventory and reliability--Passenger belly cargo is ronmental values of $.057 per mile for the cost of air pollu- thought to be less reliable than dedicated freight because of tion, and greenhouse gases per VMT were derived from the external factors and circumstances present from prior- FHWA (15) and Victoria Transport Policy Institute.(16) ity of passenger movements and baggage requirements. Although recognizing that there is a high likelihood of ben- Project Stakeholders efits by improved reliability, no current estimates for the reliability of belly cargo versus dedicated cargo have been The study focuses on four primary stakeholders: DIA made. However, shipping out of DIA instead of trucking (owned by the City of Denver), WorldPort at DIA Owners cargo to alternative airports provides a freight inventory LLC, cargo tenants, and regional businesses. All of these stake- and reliability savings measured using a freight logistics holders are classified by their respective roles in Table 5.8. factor, which represents the business opportunity cost of freight delay, including inventory cost to shippers, carriers · WorldPort at DIA Owners is a Delaware limited liability (dock handling), and/or those caused by overall schedule joint-venture company that was formed in 1998 for the disruption. (Freight logistics cost is estimated on the basis purpose of developing air cargo, warehousing, office, and of values assigned for recurring travel-time delay, based on distributional facilities at DIA. The joint venture includes literature review and interviews with DIA stakeholders.) subsidiaries of Aviation Development Services, Lehman The major commodity groups that are transported through Brothers Holdings, and the Neenan Company. At that time, the port have varying cost sensitivities per hour of delivery air cargo growth in Denver was expanding and expected to delay, which include major categories such as computers continue while the current facilities were approaching ($3.93/hour) and precision instruments ($5/hour). maximum capacity. Although the ground lease was con- · Safety and environmental benefits--Estimates are calcu- tracted with the airport, WorldPort provide the leasing and lated by applying travel volumes to a ratio of accidents to contract services for tenants and, therefore, is classified as vehicle miles traveled (VMT) and environmental costs per the private-sector asset provider. VMT. With the development of WorldPort, cargo is now · Cargo tenants include freight forwarders, cargo airlines, shipped out of DIA instead of being trucked to alternative and government agencies; all of which were identified as airports, which reduces VMT and provides accident and potential customers to lease the developed facilities. These environmental savings. Accident to VMT ratios default val- organizations provide goods movement service for ship- ues (accident rates per 100M VMT: property damage: 206, pers and, therefore, are classified as service providers. personal injury: 90, and fatality: 1.5) were based on informa- · The City and County of Denver operate DIA, which is the tion from the Bureau of Transportation Statistics and envi- 12th busiest airport in the world by passenger traffic.(17)
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72 Table 5.8. Stakeholder classifications. Private Public Service Shipper/ Other Asset Stakeholder Sector Provider End User Party Provider WorldPort at DIA Cargo Tenants City/County of Denver Regional Businesses Being owners of the land and enacting a ground lease with metropolitan area that rely on time-sensitive shipments for WorldPort at DIA qualifies the city and county as asset their products. providers, even though WorldPort performed that actual development. The city and county also provided a finan- Benefits cial asset with the issuance of special facility bonds, which are intended for privately owned projects yet exempt from The primary benefit measures due to the construction of federal taxes. This type of bond issuance lowers the overall WorldPort are the foregone costs that would have occurred, cost of capital and provides an incentive for development. if cargo was required to be shipped to an alternative airport However, no city or county taxpayer money was used or or transported via passenger cargo, instead of using dedi- pledged in the repayment of the bonds. Additional rev- cated cargo. The cost of shipment using an alternative airport enues from property, sales, and other tax mechanisms due includes the cost of trucking the cargo to the airport minus to increased business activity also categorize local and any difference in the air cargo rate. The difference between regional governments as other stakeholders. the passenger cargo rate and the dedicated cargo rate also is · WorldPort was developed with the transportation needs of considered to be a benefit due to the project at DIA. The fol- regional businesses in mind. Additional capacity for air lowing sections provide a more detailed description of the shipments benefits businesses that heavily rely on timely benefit measurements with a summary of all categories in shipments of either input components or their final out- Table 5.9. puts, which is why they are classified as end users. From an Despite an optimistic future outlook, not long after 2000, economic development perspective, providing operational the economy declined following the "Dot Com Era." The air cargo services to handle increasing volumes can be viewed events of 9/11 drastically reduced commercial flights. At the as an incentive to attract and retain business in the Denver same time, passenger airlines began rightsizing their aircraft-- Table 5.9. Present value of benefits (millions of dollars). 25-Year Timeframe Infrastructure Benefit Metric User Service Provider Infrastructure (in Millions of Dollars) (Shipper) Provider (WorldPort) Owner (DIA) Public Truck Travel-Time Savings $0-$39.2 Truck Operating $0-$39.8 Cost Savings Alternative Airport $0-$86.6 Shipping Rates Freight Inventory/ $0-$8.5 Reliability Accident Savings $0-$3.2 Emissions Savings $0-$4.5 Rental Revenues (Transfer) -$12.9 $12.6 $.3
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84 Average From From From Travel Norfolk, via Norfolk, Travel Norfolk, Travel Distance Heartland Using Distance Distance Using Distance Distance Reduction, Corridor Original Rt. 1 Saved Reduction Original Rt. 2 Saved Reduction per Route To Chicago 1,049 1,169 -120 -10% 1,251 -202 -16% -13% To Detroit 875 1,164 -289 -25% 1,078 -203 -19% -22% To Columbus 667 967 -300 -31% 1,038 -371 -36% -33% Figure 5.11. Freight rail routes from Norfolk, Virginia, to Columbus, Ohio. The research team used unit cost information from NS throughput. This, in turn, is expected to a create a number of to assess transportation savings on the corridor for the period other benefits, including the following: of analysis. The association of container volume to travel- ing distance to NS freight costs permitted an interpretation · Diversion benefits--Traffic diversion of containers from of transportation savings as a reduction in transportation truck shipping to rail is expected to relieve congestion on unit costs for NS, and not annual aggregate transportation adjacent highways because fewer trucks will be needed to savings. transport goods from Norfolk, Virginia, to points west. To assess the transportation savings, the research team used The container truck diversion will, therefore, allow road- a per ton-mile cost for single-stack shipping on the line in the way users to experience travel-time savings on previously base case. The per ton-mile cost to ship goods from Norfolk, congested roads. Virginia, to Columbus, Ohio, on a single-stack train is $0.05. · Reduced vehicle operating costs--The reduced conges- With the reduction of travel distance and the increase of tion on highways adjacent to the Heartland Corridor leads capacity in the alternative case, NS would experience trans- to a decrease in consumption of fuel and other vehicle portation savings of $0.02 per ton-mile for containers shipped operating costs realized in the base case. All roadway users on the Heartland Corridor. For all traffic growth scenarios, on the affected roadways experience this benefit. the per ton-mile cost to ship goods on the Heartland Corri- · Safety benefits--A decrease in volume of trucks on high- dor is $0.03 for double-stacked trains. ways due to container traffic diversion to freight rail reduces roadway safety hazards. Consequently, highway vehicle acci- Inventory Carrying Costs. The Heartland Corridor dents are reduced, creating a benefit shared among roadway Double-Stack Initiative reduces the average travel time for users adjacent to the Heartland Corridor. goods to travel between Norfolk, Virginia, and points west. In · Emission reductions--A reduction in idling time and doing so, the reduction in travel-time affects end users in speed cycling by road vehicles contributes to a decrease in their business decisions with regard to inventory. Quicker emissions. The reduction of emissions is beneficiary to all shipment of goods allows businesses to manage their inven- stakeholders because environmental quality is an interest tory levels in an attempt to make production scheduling for all stakeholders. more efficient. Usually, a quicker turnover of goods allows these organizations to maintain a lower inventory level, thus Economic Benefits. The total present values of benefits approaching an economic order quantity. The cost savings from the Heartland Corridor Double-Stack Initiative with stem from the reduction in inventory carrying costs, which 4% expected traffic growth are presented in Table 5.21. represents the cost of holding inventory. This includes rent, insurance, utilities, perishability, and opportunity costs. The Costs Heartland Corridor project will, therefore, allow business managers to more efficiently manage their inventory levels Capital Costs. The aggregate costs for this study take and allow these businesses to experience inventory carrying into account capital costs for the construction of the project costs savings as a benefit of this initiative. and operations and maintenance costs. Prior to 2005, NS pre- pared preliminary cost estimates that did not consider each Benefits from Container Traffic Diversion. The Heart- individual type of improvement and its location on the cor- land Corridor project is expected to generate numerous ben- ridor. Instead, it used a fixed unit cost for all construction efits for the railroad through improvements in capacity and work derived from another project. In this study's costing
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85 Table 5.21. Present value of benefits assuming 4% traffic growth (thousands of dollars). Infrastructure Provider User Service Provider Public Benefit Metric 3% DR 7% DR 3% DR 7% DR 3% DR 7% DR 3% DR 7% DR Reduced Shipping $738,630 $376,820 Cost Reduced Inventory $468,439 $228,852 Carrying Cost Travel-Time $1,191,735 $614,626 Savings Reduced Vehicle $16,631 $10,985 Operating Costs Safety Benefits $209 $ 91 Emissions Savings $1,996 $1,318 Note: DR denotes the discount rate. method, the research team looked at every type of modifica- Case Study 5--Port of Huntsville Inland Port tion to tailor a cost estimate for improvements for each inde- pendent location using prices from contractors currently per- Background forming similar work. The Port of Huntsville is a multimodal inland port located The majority of the infrastructure improvements in the at the Huntsville International Airport, nine miles south- project area occur on tunnels. Table 5.22 provides a break- west of Huntsville, Alabama, in Madison County. The port down of costs by modification type for each tunnel. Addi- is situated south of 565 and west of the U.S. Army Garrison tional infrastructure costs, such as non-tunnel clearance, are Redstone Arsenal (see Figure 5.12). The port offers rail and applicable to the total capital costs. Total capital costs for the air cargo transportation services through connections to duration of the project are estimated at $159.94 million. the NS rail line and Huntsville International Airport. It is composed of three entities: the airport (Figure 5.13), Inter- Operations and Maintenance Costs. Following the com- national Intermodal Center (IIC) (Figure 5.14), and Jetplex pletion of construction, maintenance costs are to be incurred, Industrial Park (Figure 5.15). The intermodal center also is and accounted for, in the freight investment benefit/cost a U.S. Customs port of entry that handles cargo via air, analysis. These costs are incurred by NS and calculated using highway, and rail. base case operations and maintenance costs on the 667-mile From 1991 to 1999, international freight/express cargo project area. The maintenance costs include the expenses to increased by 8.8% per year. International revenue ton-mile maintain way and structure. Maintenance costs will vary with (RTM) forecasts indicated 46% growth for international traffic growth in each of the scenarios described above. cargo by year from 1990 to 2011. From 1990 to 2000, cargo carrier activity at the Port of Huntsville increased by 116%. Benefit/Cost Analysis and Other With a goal of serving as a regional intermodal cargo center, Performance Metrics the Port of Huntsville identified the need to serve nonstop flights to Europe, Latin America, and other international des- Using the evaluation framework, the research team's analy- tinations. Exemplifying this growth, Panalpina was contract- sis of the Heartland Corridor Clearance Initiative generated ing 2 weekly flights in 1995, which grew to 11 flights in 2000. the following results shown in Table 5.23. Panalpina, which selected the Port of Huntsville as their North American air cargo hub, currently serves Asian and Risk Assessment African markets by connecting through its European hub in Luxemburg, but expressed a desire to provide direct service The risk assessment results are illustrated in Table 5.24. to Asia and the Pacific Rim to keep pace with shipper's The principal risk driver is the reduction in unit shipping cost demands and expand its marketplace. A rising trend in the air achieved through double-stacking intermodal freight in the cargo industry was the use of very large aircraft (e.g., the Boe- corridor. ing 747-400) that require long runways of at least 12,600 feet,
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86 Table 5.22. Tunnel modification costs. Liner/ Tunnel Name Milepost Removal Notching Daylighting Notes 1 Pepper N 305.4 $11,389,669 $5,441,884 N/A 2 Eggleston No. 1 N 316.2 N/A N/A N/A Realign to center 3 Eggleston No. 2 N 317.0 $2,512,371 $1,637,878 N/A 4 Pembroke N 319.8 $583,760 $288,145 $1,738,133 5 Cooper N 374.3 $3,078,317 $1,053,064 $7,788,322 6 West Vivian N 392.1 $3,075,166 $1,122,889 $5,118,276 7 Big Four No. 1 N 394.2 $2,849,517 $1,016,995 $5,686,980 8 Big Four No. 2 N 395.1 $780,143 $278,688 $631,009 9 Huger (No. 1 Main) N 395.6 $993,057 $116,454 N/A 10 Huger (No. 2 Main) N 395.6 $1,259,203 $499,347 N/A 11 Welch N 398.9 $5,788,835 $2,048,995 N/A 12 Hemphill No. 1 N 400.2 $3,871,754 $1,267,657 $5,831,760 13 Hemphill No. 2 N 400.4 $4,973,067 $1,364,149 $11,702,138 14 Antler No. 1 N 403.7 $2,671,095 $955,706 $4,181,886 15 Antler No. 2 N 405.1 $2,727,301 $953,093 $4,080,529 16 Twin Branch No. 1 N 407.7 $3,292,345 $1,092,696 $6,146,107 17 Twin Branch No. 2 N 408.1 $3,955,320 $1,400,227 $8, 897,175 18 Vaughn N 412.1 $4,945,145 $1,704,279 N/A 19 Roderfield N 413.1 $3,879,211 $1,105,460 $9,559,781 20 Laurel N 414.1 $3,463,048 $1,178,413 $4,023,981 21 Gordon N 415.1 $5,925,129 $2,112,911 N/A 22 Glen Alum N 439.5 $5,703,090 $2,052,831 N/A 23 Hatfield (No. 2 Main) N 462.1 $3,787,191 $1,656,798 N/A 24 Williamson N 471.6 $2,813,790 $1,128,773 $5,959,880 25 Big Sandy No. 1 NA 3.3 $9,305,782 $5,365,928 N/A 26 Big Sandy No. 2 NA 6.0 $1,161,241 $523,139 $1,189,727 Can bypass 27 Big Sandy No. 3 NA 6.8 $6,862,020 $3,347,961 N/A 28 Big Sandy No. 4 NA 12.7 $6,708,833 $2,545,644 N/A Table 5.23. Benefit/cost analysis summary. Discounted Sum Category 3% 7% Total Costs $203,809 $165,812 Total Benefits $2,417,639 $1,232,691 B/C Ratio 11.9 7.4 Net B-C $2,213,830 $1,066,879
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87 Table 5.24. Risk analysis results of total benefits (thousands of dollars). 10% Lower Mean 10% Upper 4% Annual Intermodal Traffic Growth Total Benefits (3% discount rate) $531,139 $1,343,082 $1,810,574 Total Benefits (7% discount rate) $263,273 $678,210 $904,766 6% Annual Intermodal Traffic Growth Total Benefits (3% discount rate) $661,931 $1,740,961 $2,310,995 Total Benefits (7% discount rate) $329,307 $857,737 $1,157,525 8% Annual Intermodal Traffic Growth Total Benefits (3% discount rate) $808,511 $2,225,677 $2,904,620 Total Benefits (7% discount rate) $415,192 $1,063,958 $1,423,059 Figure 5.12. Port of Huntsville. Figure 5.14. International Intermodal Center--air cargo operations. Figure 5.13. Huntsville International Airport and JetPlex facility.
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88 Project Stakeholders The study focused on four primary stakeholders: the Port of Huntsville, regional governments, cargo carriers/freight forwarders, and regional businesses, all of which are classified by their respective roles in Table 5.25. Figure 5.15. Jetplex Industrial Park. · The Port of Huntsville is organized as an Alabama public corporation governed by a five-member board made up to provide nonstop service to international destinations within of local citizens and business representatives called the a range of 7,000 nautical miles. To meet Panalpina's request, Huntsville Madison County Airport Authority. The prin- a runway extension from 8,000 feet to 12,600 feet was pro- cipal funding of the port's operating revenues comes from posed. This extension was expected to increase payload both passenger and air cargo operations, which were capacity, operational efficiency, and activity. $17 million and $3.5 million, respectively, in 2005. The air- Industries in the Huntsville region that rely on air shipments port collects landing, handling, and other cargo processing include chemicals, automated equipment, technology, com- fees for carriers that ship and receive product through their puters, well drilling, aeronautics, helicopters, and automotive facilities. By building and maintaining the runway, and suppliers and manufacturers. The region has developed a leasing cargo space and handling facilities, the Port of strong base of auto assembly and parts facilities that include Huntsville is classified as the public-sector asset provider. companies such as Hyundai, Mercedes-Benz, Toyota, and · Regional governments are beneficiaries of the economic Volkswagen. Often, German companies such as Mercedes- development benefits that the project provides due to Benz and Volkswagen will fly in needed parts or will send car increased business activity, which generates revenues from prototypes back to Germany for inspection and testing. property, sales, and other tax mechanisms. Since regional governments have a beneficiary interest in these types of projects, they are classified as other stakeholders. Period of Analysis, Discount Rate, · Cargo carriers/freight forwarders who use the facilities at and Key Assumptions the port are the organizations that provide the actual freight The benefit/cost analysis incorporates FAA terminal area movement and transportation services for shipping cus- forecasts (TAF) for cargo volume from 2000 to 2023, which tomers and, therefore, are classified as service providers. were extended to 2025 using the TAF growth rate of 4.3%. Time savings due to the reduction in fueling stops because Although recent economic volatility has resulted in less of the runway extension translate into cost savings. cargo volume than forecasted, the research team believes · Regional businesses that rely on air shipments for their that the trend will be corrected in the long run and will be products or for critical input components for their produc- in line with FAA estimates. Cargo forecasts beyond 30 years tion cycles are classified as end users. The runway exten- have limited impact on the analysis because of uncertainty sion provides access to additional international destina- and the relative weight of discounting future costs and ben- tions and also increased volume capacity which benefits efits. Construction of the runway started in 2000. Because regional businesses. From an economic development per- the runway was completed in May 2004, representing only spective, additional service destinations and volume can be 41% of the year, 2003 was used as the construction end date viewed as an incentive to attract and retain business in the for the analysis. Huntsville metropolitan area. Table 5.25. Stakeholder classifications. Public Private Sector Asset Service Shipper/ Other Asset Stakeholder Provider Provider End User Party Provider Port of Huntsville Regional Governments Carrier/Freight Forwarders Regional Businesses
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89 Benefits schedule in 2000 was nine weekly international flights, which was forecasted to increase to 24 flights in 2023 (and trended out The primary benefit measures due to the extension of the to 2025 using the annual growth rate of 4.3%). Based on inter- runway are the reduced operational costs and the increased views with Panalpina, the newer 747-400 was estimated to han- payload capacity per plane. Based on interviews with the dle 81% of future operations while the 747-200 was estimated Port of Huntsville, elevation and temperature conditions in to transport the remaining 19% of freight. Both of these air- Huntsville during parts of the year affect the lift factor, which plane models reflect the appropriate aircraft fleet mix since requires weight limits for shorter runways, necessitating addi- block hour operational costs vary by aircraft type. tional fuel stops instead of direct-destination flights. Extend- Freight inventory and reliability savings are measured ing the runway to accommodate larger aircraft eliminates using a freight logistics factor which represents the business additional time needed to refuel and is considered a benefit. opportunity cost of freight delay, including inventory cost to Increasing the cargo capacity with a larger aircraft allows shippers, carriers (dock handling), and/or those caused by additional cargo and corresponding revenue for relatively the overall schedule disruption. (Freight logistics cost is esti- same operating costs. This increase in overall productivity mated on the basis of values assigned for recurring travel- also is considered a benefit of the runway extension. The fol- time delay from HEAT documentation, based on literature lowing sections provide a detailed description of the benefit review and additional research by Cambridge Systematics, measurements and a summary of all categories in Table 5.26. Inc. and EDR Group.) The major commodity groups that are transported through the Huntsville airport have varying cost Time Savings. During the summer months, the eleva- sensitivities per hour of delay; assumptions for total value of tion and average temperatures in Huntsville reduce the air lift delay in this study (derived by the TREDIS model) include factor, which requires limitations on fuel weight that, in turn, computer equipment ($3.93/ton-hour), transportation equip- force aircraft to make additional fuel stops to reach their final ment ($1.69/hour), and machinery ($3.93/ton-hour). destination. These conditions during this season are esti- mated to occur during approximately 20% of the year. Large Productivity. The length of the runway and the climate aircraft with heavier fuel loads are able to fly directly to more also place restrictions on the aircraft cargo weight, and this distant markets, and this reduces overall cargo ton-hours. To prevents payload maximization. According to interviews with measure the value of time savings, block hour operating costs Panalpina, when climate conditions are factored into operat- were used, which were estimated by the FAA.(24) The Boeing ing capacity, shipments from Huntsville average 85% of their 747-400 and 747-200 airplane models were selected as most capacity. The difference between the actual aircraft capacity representative of the types of aircraft used by Panalpina for and the potential capacity was used to determine how much shipping goods to Huntsville. After adjusting for inflation, additional cargo could be shipped out of Huntsville with an the block hour operating costs for the Boeing 747-400 were extended runway. Freight rates were estimated by compiling $11,311 and $8,695 for the 747-200. and applying a composite rate from markets in Houston, Panalpina estimated the time interval between fueling stops Memphis, and Atlanta that included handling, transfer, and lasted between 90 to 120 minutes, however a conservative esti- fuel surcharges. The composite shipping rate was estimated mate of 30 minutes was used in the analysis based on the con- to be $2.64 per kilo based on a 1,000-kilo shipment. The stan- servative estimate of a sensitivity study commissioned by the dard aircraft payload volume for the Boeing 747-400 was esti- port. Panalpina's forecasted operations were based on FAA TAF mated at 120 tons, or 109 metric tons, and volume for the activity and the current cargo market in Huntsville. Panalpina's Boeing 747-200 was estimated at 100 tons, or 91 metric tons. Table 5.26. Present value of benefits (millions of dollars). 25-Year Timeframe Benefit Metric User Service Infrastructure (in Millions of Dollars) (Shipper) Provider Provider Public Air Travel-Time Savings $19.6 Air Operating Cost Savings $111.7 Freight Inventory/Reliability $0.70 Accident Savings $0.0 Emissions Savings $0.0
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90 Table 5.27. Benefit/cost analysis summary. Category Discounted Sum (3%) Discounted Sum (7%) Total Benefit $132M $80M Total Cost $30M $32M B/C Ratio 4.33 2.51 Net B-C $102M $48M Costs. The capital costs to extend the runway by 4,600 · Worker wages: + $12.2 million/year; and feet were approximately $27 million ($33.7 million in 2008 · Long-term jobs (recurring): + 262. dollars) over 3 years (from 2000 to 2003) and included a paral- lel taxiway extension of 750 feet. Operations and maintenance The present value of the long-term (25-year) time stream of of the runway and taxiway were estimated to be approximately wider economic impacts and costs also was calculated, using a $120,000 ($150,036 in 2008 dollars) per year, growing at a discount rate of 3%. The results were that the present value of rate of 3% per year. future gross regional product (GRP) is projected to increase by $96 million and the present value of project costs is projected Benefit/Cost Analysis and Other to amount to $30 million, representing a GRP/cost ratio of Performance Measures 3.14. These impacts were calculated using the TREDIS frame- work, employing the cost response input-output (CRIO) eco- Using a discount rate of 3% and 7%, and a time horizon of nomic impact forecasting model, together with the IMPLAN 25 years, the total discounted benefits, costs, and benefit/cost multiregional trade flow model. ratio are shown in Table 5.27. Other Performance Metrics. Other important compo- nents of the project include cost and performance measures Other Performance Metrics that describe the estimates and assumptions that went into Economic Impact. The Huntsville project leads to regional the project analysis. Summaries of these categories also are economic growth through two mechanisms: (1) an increase in listed in Table 5.28. They include the following: profitability and productivity for area producers and shippers due to transport time, cost and reliability savings; and (2) an · Jobs at the port--The 2008 economic study (25) indicated increase in local transport and freight forwarding employment that there were 761 jobs at the airport and that these jobs due to the increase in the volume of freight flowing through were filled by employees of the airport, airlines, shippers, Huntsville. If air cargo activity increases over the next 15 years intermodal services, and concessions. Jobs specifically at the forecast average growth rate of 4.3% per year, then devoted to cargo were not highlighted. regional economic impacts are projected to reach the fol- · Airport capacity--In May 2009, an air cargo building meas- lowing levels in the year 2025: uring 92,000 square feet was opened, and this increased the air cargo capacity of the International Intermodal Center · Business output (sales volume): + $44.3 million/year; (IIC) by 30%.(26) According to the Port of Huntsville web- · Gross regional product (value added): + $17.9 million/year; site, there currently is 300,000 square feet for receiving, stor- Table 5.28. Other performance metrics. Performance Measures Pre-Project (1999) Post-Project (2008) Jobs at Port N/A 761 Airport Capacity (Square Feet) N/A N/A Airport Volume 48,200 tons 73,500 tons Operations Revenue N/A $22.9 million per year Operations Cost N/A $11.7 million per year
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91 Table 5.29. Risk analysis results of total net benefits (`000 dollars). 10% Lower Mean 10% Upper Total Net Benefit (3%) $98,100 $102,120 $109,880 Total Net Benefit (7%) $45,053 $47,263 $51,415 ing, transferring, and distributing domestic and interna- of Bayport, 80% of the containers moving to and from Texas tional air cargo.(27) In discussions with port officials and were handled at Barbours Cut, amounting to 50% of the freight forwarders, there were no indications of any con- Gulf's total containers. By 2004, the facility was handling 1.4 straints or bottlenecks due to lack of facility space. million TEUs, up from 700,000 in 1995--20% more than its · Operating revenue and costs--Operating revenues for capacity. Often, every berth at Barbours Cut was occupied, both passenger and air cargo operations at the airport resulting in as much as an additional day at sea for waiting totaled $22.9 million and operating costs were $11.7 mil- vessels. lion in 2008. For a time, the Galveston Terminal, a two-berth container terminal, was used by POHA to alleviate the strain on Bar- bours Cut. However, given that approximately 55% of con- Risk Assessment tainers received at POHA facilities are bound for Harris The element of risk is included in the analysis due to uncer- County or surrounding locales, even a 45% rate reduction tainty in the future airport cargo growth. Uncertainty can failed to make up for additional land transportation costs. come from certain events such as 9/11 or Hurricane Katrina, Figure 5.17 depicts the location of the Galveston terminal rel- or be classified as cyclical and random risk (e.g., business cycles, ative to Harris County and the City of Houston. POHA exchange rates, or industry fluctuation). Table 5.29 provides allowed the Galveston Terminal lease to expire after volumes the lower and upper bounds of the risk assessment in reference remained low despite significant discounts. to the mean based on the cargo growth range of 2% to 7%. The Bayport, situated less than 10 miles south of Barbours Cut, TAF of 4.3% provides additional confirmation that the growth was conceived as a long-term solution to the port's capacity range is a reasonable guess of future growth. shortfall (see Figures 5.17 and 5.18). Bayport was master planned for implementation between 2007 (opening of Phase 1) through 2030. Eventually, the facility is expected to attain Case Study 6--Bayport Container Terminal 526 acres, offer 7 berths, and include a 123-acre intermodal Background facility. Phase 1 is shown in Figure 5.19 and is composed of 65 acres featuring 2 berths sharing 6 cranes. In addition to a The Port of Houston is a 25-mile-long public-private mar- three-berth cruise terminal (not currently operating). Bayport itime industrial complex located along the Houston Shipping is able to handle significantly larger vessels than Barbours Cut: Channel, a few hours' sailing time to the Gulf of Mexico. As of 2008, the port was first in the United States by foreign ton- nage, and seventh by containers, with approximately 1.8 mil- lion total TEUs. The Port of Houston Authority (POHA) owns the port's container terminals, Barbours Cut Container Terminal (Barbours Cut), and, more recently, Bayport Con- tainer Terminal (Bayport). Barbours Cut (Figure 5.16) lies 3.5 hours north of the Gulf of Mexico, and offers six container ship berths (6,000 feet of quay), and is serviced by 13 container cranes. The facility also features a roll on-roll off (Ro-Ro) platform, a lighter aboard ship (LASH) dock, and a single-berth cruise termi- nal. Barbours Cut is accessible by 26 truck lanes (15 scales) leading to 4 gates as well as an intermodal railyard with 4 working and 5 storage tracks (162,000 TEU/year capacity). The marshaling area is 230 acres, and storage can accommo- date almost 25,000 grounded TEUs. Before the development Figure 5.16. Barbours Cut container terminal.
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92 Figure 5.17. Bayport in context. Figure 5.19. Bayport Phase 1. 18 wide, expandable to 22, as opposed to 13, with an air draft of 120 feet. riers and freight forwarders, and regional businesses (see Table 5.30). Period of Analysis and Key Assumptions · The Port of Houston Authority is headed by seven com- Phase 1 of the Bayport Container Terminal opened in missioners. Two each are appointed by the City of Hous- 2007. Since the objective of the current analysis is to assess the ton and the Harris County Commissioners Court. POHA's benefits of projects that have been implemented, the study day-to-day operations are managed by a CEO, who is time period is 20072009. This allows for the testing of key appointed by these two government bodies. The Harris assumptions and analytical tools used to conduct the pre- County Mayor and Councils Association and the City of construction projection of benefits. In addition, results from Pasadena (Bayport's host city) each appoint one commis- an analysis are presented that project the benefits to 2030, sioner. The port both leases and operates berths and equip- based on the lessons learned in the post-construction period ment within the new Bayport terminal. analysis. Cargo forecast for the long-term analysis on the · Local and regional governments control POHA through build-out forecast from the POHA incorporates the most the appointment of leadership and derive tax income and recent economic downtown and subsequent fall in cargo. The jobs through the port's activities. The primary benefit to the remaining assumptions are based on data derived from real- local and regional governments is increased port revenues ized benefits to date. and tax-base expansion through land development and business attraction based on close proximity to the port. Project Stakeholders · Carriers and freight forwarders are the direct users of the port's cargo facilities, and benefit from the port's ability to The study identified five primary stakeholders: the Port handle large vessels with less wait time. For trucking com- of Houston Authority, local and regional governments, car- panies and freight forwarders, this translates to faster, more reliable pick-ups and drop-offs due to both reduced terminal congestion and improved roadway connections. For railroads, the additional port capacity translates to increased volumes. · Local and regional businesses benefit from reduced ship- ping costs due to greater certainty experienced by carriers and shippers. In addition, local developers benefit from increased opportunities to attract shippers, warehousing and distribution, and other industrial and commercial opportunities. Benefits The primary benefit measures attributable to the addition of the Bayport Container Terminal are (1) greater carrying Figure 5.18. Bayport--Houston Shipping Channel. capacity and more reliable unloading windows for ocean going
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93 Table 5.30. Stakeholder classifications. Public Sector Service Shipper/ Other Private Asset Stakeholder Asset Provider Provider End User Party Provider Port of Houston Authority Local and Regional Governments Carrier/Freight Forwarders Local and Regional Businesses vessels; (2) greater gate reliability and reduced on-terminal The following sections provide a detailed description of the time for truckers, both of which should result in lower costs for benefit measurements with a summary of all categories in local and regional businesses; and (3) local land development Tables 5.31, 5.32, and 5.33. opportunities. Other benefits include reduced maintenance costs due to the use of 30-year pavements (at a premium of Time Savings and Reliability 4%), increased safety from improved highway access, and · Ocean-going vessels (OGV) are expected to save a full day reduced emissions due to the diversion of long-haul truck trips between dwell time savings (due to advanced equipment (after the intermodal facility opens at a later phase). and reduced terminal congestion) and berth congestion at Table 5.31. Project attributes and benefit categories by party. Project Attributes Benefit Categories Affected Party Phase 1: 2 additional berths, Container volumes, reliability, POHA, shippers, warehousing, 4 additional cranes productivity, efficiency, security, businesses/industry, consumers, jobs, tax revenues workers Roadway enhancements and Travel times, reliability, vehicle Trucking companies, railroads rail access maintenance costs, mode shift (subsequent phases), businesses, public ISO 14001, mitigation (e.g., Emissions, ecological systems, Adjacent residents, the public, sight and sound berms), land public health, worker health workers conservation Land development in areas in Business attraction, construction Land developers, land owners, local close proximity to the port activity, jobs, tax revenue and state governments, workers, businesses Table 5.32. Present value of benefits (20072009). Benefit Metric Millions (2009 Dollars) Travel-Time Savings $29.5 Vehicle Operating Cost Savings $26.9 Logistics Cost Savings $25.7 State of Good Repair $0.9 Emission Benefits $5.7 Safety Benefits $14.6 Indirect and Induced Benefits $68.3 Total Benefits $172.3
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94 Table 5.33. Present value of benefits (20072030). Benefit Metric Millions (2009 Dollars) Travel-Time Savings $565.4 Vehicle Operating Cost Savings $532.3 Logistics Cost Savings $498.87 State of Good Repair $16.6 Emission Benefits $109.8 Safety Benefits $282.7 Indirect and Induced Benefits $1,320.3 Total Benefits $3,325.8 Barbours Cut. A total of 969 and 809 ships called on Bar- provides improved connectivity for both terminals to SR bours Cut in 2007 and 2008, respectively. A total of 97 and 146. Also, there are plans for on-dock rail access at Bayport 225 ships called on Bayport during those years. That that will further improve transit times and turnaround. equates to 2,100 days saved for OGVs. · The pickup/drop-off times for trucks have decreased from Environmental 60 minutes or more to 3040 minutes. Drayage operators · Emissions reduction--A reduction in truck idling time confirmed the information provided by POHA authorities on terminals and on congested roadways contributes to and said that average cost per drayage trip has decreased by reduced emissions. In addition, reduced OGV dwell time an average of $15$20. and on-dock rail capabilities will reduce emissions. · Shippers and carriers were interviewed to assess the impact · Reduced fuel consumption--The reduced wait time for of reliability enhancements. Although it was recognized OGV and reduced idling for trucks also give rise to fuel sav- that travel times and turnaround times had improved, there ings. This also provides private benefits in terms of reduced were no measurable reliability impacts. The congestion did vehicle operating costs. not lead to unreliable turnaround times, just longer ones. In terms of reliability for OGVs and port tenants, no Safety · Improved roadways--Widening from four to six lanes discernable benefits could be isolated. This is primarily because at about the same time that the Bayport terminal and reduced congestion lead to fewer accidents and safety came on-board, the Houston Port Bureau, a private port benefits. research firm, introduced a vessel tracking and monitoring system that allows port users to know exactly when a ves- Costs sel will be docking and alerts of any delays. In terms of enhancing reliability and resulting monetary benefits, the The capital costs for Phase 1 have amounted to about $400 stakeholders agree that this technology far outweighed any million, and final costs at build-out are expected to be $1.2 bil- benefits accruing as a result of the new terminal itself. lion. Operations and maintenance costs were approximately $6.2 million for the 20072009 time period and are projected Capacity to be $71.3 million for the time period of 20072030. · Barbours Cut was operating at or above capacity in 2007 when Bayport opened. With the Houston region projected Benefit/Cost Analysis and Other to grow by more than 4 million people, cargo bound for the Performance Measures region would have had to be diverted to gateways farther away, increasing the cost of delivered goods. In addition, Using a discount rate of 3%, the total discounted benefits significantly larger (post-Panamax) OGVs can now be and costs are estimated for both time periods. As shown in unloaded at POHA facilities, enabling shippers to take Table 5.34, the benefit/cost ratios range from 0.41 for the advantage of lower transit costs. 20072009 timeframe to 2.62 for the 20072030 timeframe. · There also have been increases in surface transportation This illustrates the importance of considering long-term ben- capacity. Surrounding roadways, including access to the efits and costs in completing an assessment of freight invest- Bayport Terminal and Barbours Cut have been built and/or ments. It also demonstrates that initial estimates of the bene- expanded. In addition, TxDOT has completed a flyover that fits may be overstated due primarily to the fall in cargo levels