Multi-State Freight Transportation Organizations (2001)

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Multi-State Freight Transportation Organizations 3-1 3.0 Understanding the Legal Framework of Multi-State Organizations As changes in the economy create a demand for new and better freight corridors and smoother transitions between modes, stronger institutions that by design have a proper perspective on these issues and the power to implement desired outcomes will be needed to ensure a more efficient and competitive freight system. This section examines the legal issues associated with establishing a multi-state freight organization having the authority to implement improvements to the freight transportation system and coordinating operations across jurisdictional lines. The analysis assumes that a multi-state freight organization would focus primarily on the public sector elements of the freight transportation system, specifically on better coordination of activities traditional to government such as: building roads, ports and public rail facilities; providing better cross-modal transfer facilities; rationalizing the location of new corridors; providing information on traffic conditions; coordinating maintenance actions and related services along freight lanes; and establishing more productive relationships with private freight providers. It is anticipated that the organization would have a limited mandate and a narrower scope of responsibilities and powers than an established state department of transportation, and that it would not offer services in direct competition with private sector freight transportation providers. The analysis also anticipates that a multi-state freight organization would have a stream of income—whether through grants, pooled funds, or fees for service—and a mechanism for equitable allocation of benefits, costs, and risks among jurisdictions and between the public and private sectors. Within these general guidelines, the analysis examines three potential models: multi-state freight organizations organized and incentivized pursuant to federal grant conditions administered by a federal project office; organizations created through interstate compacts; and organizations enabled as federally charted corporations.

Multi-State Freight Transportation Organizations 3-2 3.1 MULTI-STATE FREIGHT ORGANIZATIONS ORGANIZED AND INCENTIVIZED PURSUANT TO FEDERAL GRANT CONDITION ADMINISTERED BY A FEDERAL PROJECT OFFICE Under the first of the three models, a multi-state freight organization could be established under federal legislation authorizing a multi-state freight program administered by a federal project office. The multi-state freight program might address a specific freight transportation system such as the National Highway System (including its intermodal connectors and intermodal transfer facilities) or it could more broadly encompass the staging, movement, and intermodal transfer of freight across all freight systems. The specific scope of the program is not addressed in this analysis, but it is assumed that whatever the dimensions of the program, it would include creation of a federal freight project office to administer the program. The freight project office would likely be housed within the U.S. Department of Transportation. The freight project office would implement the federal law establishing the program, issue appropriate regulations and guidance, monitor eligibility for grant funding, and provide general program oversight and assistance. The federal project office would provide incentives in the form of grants and impose grant conditions requiring the establishment of multi-state freight organizations. The conditions would define the necessary cooperation among the participating states and could include requirements that they be given appropriate power, staff, and funding to carry out the duties set forth in the federal program. The grant conditions could be imposed on the use of the grants themselves or tied to a larger grant program such as the Federal-Aid Highway program. Metropolitan planning organizations (“MPOs”) are examples of organizations created through a federal program and project office.2 MPOs carry out transportation planning processes for urbanized areas with population exceeding 50,000 individuals.3 Since the 1962 Federal-Aid Highway Act, federal authorizing legislation for the expenditure of highway project funds has required metropolitan area transportation plans and programs to be developed by MPOs through a “continuing, cooperative, and comprehensive” planning process.4 2 23 U.S.C. §§ 134, 135. With nearly 50 years of precedent, MPOs provide a general model upon which a federal project office charged with the planning and implementation of a coherent freight transportation system responsive to the needs of a multi-state region could be based. 3 Id. at § 134(d). 4 Id. at § 134(c)(3).

Multi-State Freight Transportation Organizations 3-3 MPOs, however, do not have sufficient authority to oversee and operate a multi- state freight system. Federal legislation to create a federal project office and implement multi-state freight organizations could be based on the MPO model, but modified to give freight organizations certain powers to carry out freight- related policy, planning, capital investment, operations, and regulatory activities. The scope of the powers could be very broad or limited to a very specific set of activities in a few areas. The shape of the organization itself would depend on the federal law establishing the program. For MPOs, the organization includes a governing board consisting of representatives of local governments and transit operators, and the state transportation department. In multi-state areas, the board has representatives of this type from all of the states covered by the urban area and all of the transportation departments. The board is supported by a professional staff funded by federal, state, and local transportation funds. One could imagine a similar structure for a multi-state freight organization. Representation from local officials, marine and airport authorities, and affected freight industries would also be appropriate and desirable. A professional staff would be a necessity. The organizational and operative requirements for a multi-state freight organization could be very detailed. The statute and regulations requiring the establishment of MPOs, for example, provide considerable detail about how these organizations are established, which entities must be represented, the competence of the staff, and the procedures used to develop the plan. The MPOs are also instructed by the regulations as to what must be considered during the planning process, how to communicate with the public and interested agencies, and how often their transportation plans must be reevaluated. As with MPOs functioning in a multi-state area, multi-state freight organizations would require Congressional consent to operate on a multi-state basis under the United States Constitution.5 This consent is provided by the statute requiring the establishment of MPOs.6 Federal law alone would not suffice in establishing these organizations or authorities. Each participating state would have to create the authority to participate in the federal program. The enactment of such legislation in each state is by no means a foregone conclusion. The likelihood of this occurring expeditiously could well depend on the size of the federal grant program supporting the establishment of the requisite entities. It would be more likely if the grant program itself was large or if the grant conditions were tied to a large program. For example, although MPOs get a relatively small amount of federal A similar provision would have to be included in the statute for the multi-state state freight program. 5 Article I, Section 10, Clause (3). 6 23 U.S.C. § 134(f)(2)

Multi-State Freight Transportation Organizations 3-4 aid directly (in relation to the overall Federal-Aid Highway Program, not in relation to their operational needs), the grant condition is tied to the award of any federal-aid highway and federal transit fund in the urban area. The federal project office model presents a very viable approach to formation of a multi-state freight organization,7 • Legislative time and effort. Crafting legislation and gaining the necessary federal and state legislative approvals for a freight program and freight office will likely take considerable time and effort. The federal project office would oversee a fairly complicated multi-state freight system requiring significant federal oversight of the multi-state freight organizations and the use of federal grant funds. A federal program and project office of such broad scope would require clearly defined parameters delineated at the outset. Thus, careful and comprehensive legislation creating the federal project office would be required. but there are significant challenges: • Federal role. It is somewhat unlikely that in today’s political climate there would be strong interest in another new federal program. However, interstate freight transportation is a critical federal interest and fundamental to the economic well being of the nation, so there might be support for a carefully crafted program. Additionally, because states would be free under this approach to avoid grant conditions by simply refusing federal aid, the federal project office might be perceived as a less-coercive exercise of federal authority over state prerogatives, making it more politically palatable for those concerned with expanding federal authority. The need for a national freight program and the shape of the federal program would be of considerable interest to and heavily influenced by the freight industry. • Funding. To create sufficient incentive for meaningful state participation, a large grant of funds might realistically be required. Lack of a reliable, consistent funding source would make implementation of a new grant program difficult. Alternatively, the grant conditions could be added to an existing federal transportation program, but that too would present considerable legislative hurdles. • Balancing benefits, costs, and risks. A key rationale for establishing multi-state freight organizations is to provide a mechanism to allocate and balance the 7 Another closely related approach to creation of multi-state freight organizations would be the direct exercise of federal authority to create a federal freight agency. There are two reasons why we did not choose to examine this approach. First, it is contrary to the way in which transportation infrastructure has been built and operated in the United States. Traditionally, the federal government has provided grants to states for the implementation of transportation projects, and puts conditions on those grants to achieve a myriad of federal purposes. Creation of a federal agency to plan, make improvements, and otherwise directly participate in the operation of the freight transportation system would be a clear departure from established practice. Second, under the Constitution, the federal government cannot directly require states to participate in a federal program. That would violate basic state sovereignty. Instead, the whole program would have to be run by federal officials, which is unlikely and probably impractical.

Multi-State Freight Transportation Organizations 3-5 benefits, costs, and risks of improvements to the freight system among and across states, an essential political function when freight investments in one state serve the interests located primarily in other states. The MPO model does not provide an entirely satisfactory precedent for handling this situation. MPOs plan transportation facilities, which are then built by state and local transportation agencies. When facilities cross state lines, costs are not shared directly because of the actions of the MPO, but because the involved transportation agencies have agreed to work with each other. That may or may not be a problem under this the federal project office approach. The federal grant or incentive program could be large enough and flexible enough to allow it to provide funds that could soften the effect on a state not directly benefiting from the project. If the multi-state freight organization has its own direct authority to construct projects, then it would have a central budget that would allow for allocation and balancing of impacts among states. • Jurisdictional gaps or overlaps. The roles, responsibilities, and jurisdictions of the federal and state governments differ with respect to freight transportation, and likewise, the roles, responsibilities, and jurisdictions of state departments of transportation, port authorities, and economic development agencies dealing with freight transportation vary among the states. The legislation would have to address and resolve gaps and overlaps within the scope of activities assigned to multi-state freight organizations. • Modifications. Finally, the multi-state agencies that would be established under the federal law would be entirely new institutions in an area that has had relatively little government involvement in the past. Thus, it is likely that these agencies would have evolving responsibilities and could change considerably over time. Federal legislation could have a negative effect on this kind of growth simply because it would have a statutory standard in place that may prove difficult to modify. Despite these considerations, establishing a multi-state freight organization under federal legislation authorizing a multi-state freight program administered by a federal project office is easily envisioned because the federal government often takes the lead in establishing new transportation programs. A central federal role could ensure consistency of approach and provide a useful degree of oversight; moreover, it would maintain program momentum simply because there would be a program office with continual focus on multi-state freight issues. 3.2 MULTI-STATE FREIGHT ORGANIZATIONS CREATED THROUGH INTERSTATE COMPACTS A second model would be to establish a number of separate multi-state freight organizations through interstate compacts. Interstate compacts among states are provided for in the U.S. Constitution and most states have commissions on

Multi-State Freight Transportation Organizations 3-6 interstate cooperation to address them.8 Since most of the specifics of an interstate compact are subject to negotiated agreement, the functions and powers of compacts vary widely from one instance to another. Some compacts create an organization and a full range of operational functions, while others simply provide agreements about how the states will work together. Under this approach, states would have wide flexibility to tailor the roles, responsibilities, and jurisdiction of their multi-state freight organization to the specific needs and conditions of the freightshed or freight corridor. These compacts are negotiated by the states and then enacted in identical form by each state that desires to be part of the compact. Congress must then approve the compact before it can go into effect (except in cases where the compact is deemed to have no impact on federal responsibilities, it may go into effect without congressional approval). Although congressional approval would be required, this approach is differentiated from the federal project office approach described above because the initiative to form a multi-state freight organization through interstate compact would come from the states, not from the federal government. Interstate compacts can have the authority of state and federal statutes as well as contracts. They are statutes because the compacts are normally adopted by state legislatures and Congress as part of the enactment process. However, interstate compacts also are contractual agreements between the signatory states and the federal government. States take on certain obligations as a result of entering into an interstate compact and such obligations can be legally enforced by the other parties to the agreements, including the federal government. Given interstate compacts’ dual statutory-contract nature, both bodies of law apply to interpretation of interstate compacts.9 Such an organization would likely consist of the establishment of an institution, whose governing board would be comprised of representatives from each participating state. Supporting the board would be a professional staff that carries out the authorized duties and activities of the institution. The central purpose of the institution could vary from planning, with member states being responsible for implementation, to direct participation in the development and regulation of freight management systems including construction and operations. This provides the advantage of security by ensuring that the participating states are committed and cannot unilaterally remove themselves from the project. An example of this type of organization is the Port Authority of New York and New Jersey. The Port Authority was established by a bi-state, congressionally- 8 U.S. ACIR, The Challenge of Local Governmental Reorganization, Report A-44 (U.S. Government Printing Office, February 1974), p. 169. 9 For example, see Carchman v. Nash, 473 U.S. 716, 105 S.Ct. 3401, 87 L.Ed.2d 917 (1985); and California Tahoe Regional Planning Agency v. Jennings, 594 F.2d 181 (9th Cir. 1979)

Multi-State Freight Transportation Organizations 3-7 approved compact. The geographic district of the Port Authority and its roles and responsibilities are set forth in the compact. The Port Authority consists of twelve commissioners, six from each state that are appointed by their respective governors and confirmed by their respective state legislatures. Voting rights for the Port Authority are set forth in its bylaws, not the compact. Except for certain procedural votes, for a motion to pass it takes a majority vote by the commissioners appointed by each state. So, for example, if twelve commissioners are present (six from each state), it takes four ‘yes’ votes by the New York commissioners and four ‘yes’ votes by the New Jersey commissioners. The governor of each state retains the right to veto the actions of commissioners from his or her own state. A multi-state freight organization with a broad mandate could be set up with similar, tightly defined voting rights to ensure that it acts only on issues and projects of critical importance to the states; conversely, an organization with a narrow mandate and role could be set up with simpler, majority rule provisions. Establishing a central institution focusing on freight transportation through an interstate compact is a viable and proven approach. It would meet the goal of creating a mini-department of transportation with limited powers that can operate across state lines, but as with a federal project office approach, there are significant challenges: • Time required. A potential disadvantage of the interstate compact is the multiple layers of approval required and the delay that those approvals may entail. An initial agreement must be negotiated between at least two of the states interested in a multi-state freight organization. Each state must draft and enact substantively identical legislation. The compact would then have to be passed by Congress. Obtaining the approval of both state legislatures and Congress could add years to the development of the institution. Obtaining the approval of multiple states, which would be necessary to provide effective coverage of most freight corridors or freightsheds could be an extended effort. However, as demonstrated by the Port Authority of New York and New Jersey, interstate compacts can establish effective multi-state freight organizations. • Funding. Revenue is an important consideration in this model because it is presumed that the compacts are established by state initiative, not compelled or incentivized by the availability of a federal grant stream. The Port Authority is a financially self-supporting public agency that receives no tax revenues from any state or local jurisdiction and has no power to tax. The Port Authority works because it has been able to capture a significant and reliable revenue stream. It relies almost entirely on revenues generated by facility users, tolls, fees, and rents. Thus, the Port Authority is virtually autonomous and its operations are largely business-like. Its initial task was to overcome the high costs of having most of the port’s docking facilities in New York while most of the rail terminals were in New Jersey—thereby increasing the port’s competitive position among East Coast ports. But once

Multi-State Freight Transportation Organizations 3-8 it got started, the Port Authority expanded its scope of activities to highway bridges and tunnels, a consolidated bus terminal in Manhattan, a containerized marine terminal, arterial highways, rail transit, the region’s airports, and the World Trade Center. Its success inspired other multi-state organizations.10 • Balancing benefits, costs, and risks. Any model must equitably share the costs and benefits of a multi-jurisdictional system that provides for the planning and implementation of a coherent system responsive to the needs of the country or multi-state region. The interstate compact model has certain advantages including the ability of the member states to directly negotiate and structure the agreement to fit the specific needs of the geographic region involved. The Port Authority of New York and New Jersey again provides an example of a successful self-sustaining institution that benefits both participants to the compact. Given the realities of limited state budgets, it would be difficult to assume that states could fully fund their multi-state freight organizations. This implies that freight organizations would have to be able to derive adequate revenue from their operations to be successful. Multi- state freight organizations established by interstate compact could receive federal funds, but are not predicated on a federal grant program. • Jurisdictional gaps or overlaps. The required Congressional consent transforms an interstate compact into federal law. This may, in and of itself, address any gaps between state and federal jurisdiction. Less frequently, the federal government may also become a party to the compact (which is then designated a federal-interstate compact), and Congress enacts authority for the appropriate federal participation. In any event, the institution contemplated by the interstate compact would be charged with operating in accordance with federal requirements and the flexibility to negotiate specific terms and requirements for Congressional approval provide ample opportunity to address any gaps or overlaps between state and federal jurisdiction. The powers of the institution would be established by the participating states and made effective across state lines by Congressional enactment. One of the advantages of having a congressionally approved interstate compact is that, to the extent it is recognized as federal law, the interstate compact will supersede inconsistent state laws. • Modifications. The existence of an interstate compact would limit flexibility in further modifications to the powers and operations of a multi-state freight organization once the compact is approved. While the compact may provide specific procedures for amendments, absent a clear provision to the contrary, courts typically find that compacts cannot be unilaterally modified or nullified; instead each member state must approve the amendment. 10 Jameson W. Doig, Empire on the Hudson: Entrepreneurial Vision and Political Power at the Port of New York Authority (New York: Columbia University Press, 2001).

Multi-State Freight Transportation Organizations 3-9 Depending on the particular situation, obtaining such approvals can be potentially as lengthy and arduous a task as negotiating the original compact. There are options to make the process of establishing an interstate compact easier. If an institution could be established that did not implicate federal responsibilities, Congressional consent might be avoided. However, given the large federal presence in transportation programs generally, and the implications for interstate commerce, this is unlikely. Congress could also be asked to provide consent in advance to form multi-state organizations, but without attaching that consent to a grant program. For example, states could be allowed to establish pilot programs for this purpose, as has been done in other contexts. Such consent might be easier to obtain and would only require a general description of the kinds of activities that a multi- state freight organization would undertake and authorities it might need. In spite of the difficulties establishing an interstate compact, this approach would allow participating states to create a multi-state institution that meets the participating states’ specific needs as contrasted with a federal top-down mandate. The approach also allows for multi-state freight organizations to be established when and where they are needed over time, which would have the benefit of allowing states to learn from each other. 3.3 MULTI-STATE FREIGHT ORGANIZATIONS ENABLED AS FEDERALLY CHARTERED ORGANIZATIONS A third model for creating multi-state freight organizations is to enable a federally chartered corporation or quasi-private organization that could draw on both federal and state funding sources. This independent, federally chartered corporation or organization would function like a service organization for implementing and operating freight transportation improvements across a group of states. The corporation could be set up as a single national entity or as a national umbrella entity with several regional organizations. Congress generally can create corporations to execute powers conferred to Congress by the Constitution,11 and Congress has a long history of chartering such corporations to perform governmental or public functions. Federally chartered corporations have allowed the government to create separate entities able to use commercial methods and conduct operations with certain freedoms not generally afforded to traditional federal agencies.12 11 See Charlotte, C. & A.R. Co. v. Gibbes, 142 U.S. 386 (1892). 12 See generally U.S. Shipping Board Emergency Fleet Corp. v. W. Union Telegraph Co., 275 U.S. 415 (1928).

Multi-State Freight Transportation Organizations 3-10 The National Railroad Passenger Corporation, commonly known as Amtrak, may serve as a useful model for structural and organizational purposes. Congress created Amtrak in 1970 to avoid the threatened extinction of intercity passenger trains in the United States.13 Legislation creating Amtrak set forth its structure and powers and outlined “procedures under which Amtrak [would] relieve private railroads of passenger service obligations and provide intercity and commuter rail passenger service itself.”14 Congress conceived Amtrak as “a for profit corporation.”15 To the extent that federal law does not provide otherwise, Amtrak is incorporated under the District of Columbia Business Corporation Act, D.C. Code Ann. § 29-301 et seq. Federal law does set forth Amtrak’s structure, providing for nine board members serving five-year terms. 16 In addition to the Secretary of Transportation and the president of Amtrak, the President of the United States appoints seven individuals to the Amtrak board, with the advice and consent of the Senate and after consulting with certain enumerated congressional leaders to ensure the board’s geographic balance.17 The Amtrak board of directors appoints a president and other officers.18 As another example, Congress created the United States Railway Association (“USRA”) in 1974 as a non-profit corporation tasked with handling the orderly bankruptcies and reorganizations of almost all of the private railroads in the northeast into the Consolidated Rail Corporation (“Conrail”). 19 The President of the United States, with the advice and consent of the Senate, appointed all eleven members of the USRA board of directors, eight of whom were private sector representatives and three of whom were federal officials.20 USRA consolidated eight bankrupt railroads into Conrail, which itself was a federally chartered corporation.21 In the case of multi-state freight corporations, Congress could establish a quasi- private, federally chartered corporation or corporations with the statutory authority to plan, improve, and operate multi-state freight facilities or system of facilities. The entity or entities could be set up on a regional basis, or could be a central service provider to multiple regions. In the corporation’s chartering Conrail re-privatized as a for-profit corporation in 1987. 13 See generally Lebron v. Nat’l R.R. Passenger Corp., 513 U.S. 374, 384-86 (1995). 14 Id., citing Rail Passenger Service Act of 1970, 84 Stat. 1328. 15 49 U.S.C. § 24301(a)(2). 16 Id. § 24302(a)(1). 17 Id. § 24302(a)(2). 18 Id. § 24303. 19 See generally 45 U.S.C. § 701 et seq. 20 See John E. Harr, The Great Railroad Crisis: An Administrative History of the United States Railway Association (National Academy of Public Administration, March 1978). 21 See 45 U.S.C. § 741, et seq.

Multi-State Freight Transportation Organizations 3-11 legislation, Congress could provide that this entity have the power to enter into cooperative agreements with states to operate freight-related facilities, such as roads, inspection facilities, terminals, or access to terminals. Alternatively, or in addition to these activities, the corporation could carry out specific tasks on behalf of the states on a fee for services basis (or with the revenues collected from its operations). This could include planning a multi- state freight system, working with local office and industry representatives, coordinating with other transportation systems, or any other activity. The corporation could even carry out services for federal transportation agencies having a role in freight and freight systems. Fees could be collected from each state individually or cooperatively through the federal government. Many agencies have the ability to pool funds with states and other entities. Pooled funds are paid into a federal account and then used for a common purpose. An example of a pooled fund provision is that for research, development and technology authorized by 23 U.S.C. § 502(b)(6). Intended to “promote effective utilization of available resources,” the pooled fund promotes cooperation between certain federal, state, and local actors in the funding of activities of mutual interest.22 By making state officials ex-officio board members of the federal corporation (and the regional organizations, depending on the structure), each relevant state could be ensured representation. By adding board members where appropriate, the federally chartered corporation could be established to allow the entity to expand should certain states decide to participate in national or regional corporations in the future. This approach might be a useful way to avoid state constraints on spending money out-of-state when the services performed are for the system, but beyond an individual state's boundaries. As a federally chartered corporation, this model would not result in a mini- department of freight transportation, but rather a quasi-private service provider. The national and regional corporations could more readily focus on gaps in the freight transportation system and form cooperative relationships with existing public and private transportation providers. As with all the other approaches, it would face several challenges: • Political consensus. While creation of a federally chartered corporation would certainly be easier than forming an interstate compact, this would be a wholly new and different kind of institution. The existing analogies have very different functions. Explaining the role of this institution might prove difficult or result in unpalatable legislative “safeguards.” It would take careful thought and considerable effort to build consensus for this approach among the states, the federal government, and the freight industry. 22 23 U.S.C. § 502(b)(6).

Multi-State Freight Transportation Organizations 3-12 • Funding. If Congress provides by statute that the corporation be self- sustaining through the collection of fees or taxes (such as motor fuel taxes or vehicle-miles of travel fees), then the corporation could be in competition with its constituent states and federal government for revenues. Some federally chartered corporations have fared well, but others such as Amtrak, have struggled to obtain adequate funding. • Regulatory powers. The corporation would likely not be able to exercise regulatory powers because federally enabled corporations are not expressly governmental and would not have the same powers as a federal agency or an interstate compact. This could, however, be a positive feature. It might be easier to build consensus for a federally enabled corporation that serves the needs of the states without requiring the states to relinquish their regulatory powers than to cobble together the political will necessary to form an interstate compact or federal freight project office with regulatory powers. • Balancing benefits, costs, and risks. In any multi-jurisdictional approach, inequities will arise with certain participating jurisdictions having to provide transportation facilities, but not receiving an equal share of economic benefit, while other jurisdictions enjoy a disproportionate share of the benefits. Any model must equitably share the costs and benefits of a multi-jurisdictional system that provides for the planning and implementation of a coherent system responsive to the needs of the country or multi-state region. In creating the federally chartered corporation, Congress would have broad powers to address these inequities through chartering legislation, potentially avoiding inefficient multi-party disputes over cost-sharing. Congress could also specify that the federally chartered corporation be self-sustaining through taxes and fees. Amtrak provides an intriguing, but heretofore fiscally challenged, model of a national interstate transportation system that balances state and regional operational and capital investment needs. • Jurisdictional “citizenship.” A federally chartered corporation is generally subject to the applicable laws of the state in which it conducts its business and holds property, unless Congress provides otherwise in its chartering legislation. However, where the performance of the federally chartered corporation conflicts with state law, the authority of the federal government generally preempts the state law.23 This preemptive effect lends a federally chartered corporation certain advantages over other organizational structures discussed herein. However, as compared to traditional state-chartered corporations, federally chartered corporations often receive less favorable jurisdictional treatment in the courts.24 23 See, e.g., Pittman v. Home Owners’ Loan Corp. of Wash., D.C., 308 U.S. 21 (1939). Federally chartered corporations no longer have preferred access to federal courts as a result of their federal 24 See generally, Paul E. Lund, Federally Chartered Corporations and Federal Jurisdiction, 36 Fla. St. U. L. Rev. 317 (2009).

Multi-State Freight Transportation Organizations 3-13 status. For purposes of diversity jurisdiction and access to federal courts, state-chartered corporations are “citizens” of up to two states: the state in which it is incorporated and the state in which it maintains its principal place of business. Courts have determined that many federally chartered corporations are national citizens only, lacking state citizenship for the purposes of diversity jurisdiction, and therefore limiting access to the federal court system. In creating any federally chartered organization contemplated herein, Congress should be cognizant of these issues and clearly define statutorily the citizenship of the organization for jurisdictional purposes. This approach offers advantages because it is the most flexible of the three models for establishing a multi-state freight organization. However, to make this approach work, there would have to be a set of defined activities that the corporation could carry out, not so much for a legal reason, but because more than the other organizational formats, this entity would require a clear income stream to function. Table 3.1 provides a summary of the general responsibilities and requirements, legal advantages and opportunities, and legal obstacles and challenges of each model.

Multi-State Freight Transportation Organizations 3-14 Table 3.1 Summary of Legal Frameworks for Multi-State Freight Transportation Organizations Model General Responsibilities and Requirements Legal Advantages and Opportunities Legal Obstacles and Challenges Examples Multi-State Freight Organizations organized Pursuant to Federal Grant Conditions Administered by a Federal Project Office • Congressional consent needed to operate on a multi-state basis under the U.S. Constitution • States required to create the authority to participate in the federal program • Implements federal law establishing the program, issues appropriate regulations and guidance for the program, monitors eligibility for grant funding, and provides general program oversight and assistance. • Ensures consistency of approach and provides a useful degree of oversight • Ability to maintain program momentum because of office with continual focus • Precedent for federal government taking lead in establishing new transportation programs • Significant legislative time and effort required to realize a complicated freight program of broad scope and reach • Little interest in new federal program • Large grant of funds may be required up front • Difficulty in balancing benefits, costs, and risks of implementation • Challenge in addressing jurisdictional gaps and overlaps • Statues may prove difficult to modify once federal legislation is in place • EPA Chesapeake Bay Program Office • Federally established MPO structure Multi-State Freight Organizations created through Interstate Compacts • Congressional consent generally required (if established without implicating federal responsibility, congressional consent might be avoided however this is unlikely) • Can have the authority of state and federal statutes as well as contracts • Purpose may range from planning with responsibilities for implementation to direct participation in development and regulation including construction and operations • Governing board comprised of representatives from each participating state, professional staff to carry out authorized duties and activities • Wide flexibility to tailor roles, responsibilities, and jurisdictions to specific needs and conditions • Ability to directly negotiate and structure the agreement to fit the specific need of the geographic region • Supersedes inconsistent state laws to the extent recognized in federal law • Potential to obtain advanced congressional consent but without attaching the consent to a grant program • Meets goal of creating a mini-department of transportation with limited powers, operating across state lines • Multiple layers of approval required for substantively identical legislation and the delay in obtaining the approval • Ability to derive adequate revenue from operations • Challenges to balancing benefits, costs, and risks of implementation • Need to address jurisdictional gaps and overlaps • Limited flexibility for modifications to the powers and operations of the institution once its approved • Port Authority of New York & New Jersey

Multi-State Freight Transportation Organizations 3-15 Model General Responsibilities and Requirements Legal Advantages and Opportunities Legal Obstacles and Challenges Examples Multi-State Freight Organizations enabled as Federally Chartered Organizations • Power to enter into cooperative agreements with states (if provided by Congress) • Ability to carry out specific tasks on behalf of the states for a fee • Subject to the applicable laws of the state in which it conducts business and holds property • In the case of a federal corporation, federal law preempts state law • Functions like a service organization for implementing and operating freight transportation improvements • Provides flexibility but a set of defined activities is needed • Ability to pool funds with states and other entities to use for a common purpose • Chartering legislation can address inequities to avoid inefficient multi-party dispute over cost-sharing issues • Potentially easier to build consensus for federal corporation than to cobble together political will for other models • Explaining the role of the corporation might prove difficult or result in unpalatable legislative safeguards • Could be in competition with constituent states and federal government for revenue • Unable to exercise regulatory power because federally enabled corporation is not expressly governmental • Difficulty in sharing costs and benefits of a multijurisdictional system • Federally chartered corporation often receives less favorable jurisdictional treatment in court • National Railroad Passenger Corporation (Amtrak) • U.S. Railway Association