Background Research Material for Freight Facility Location Selection: A Guide for Public Officials (NCFRP Report 13) (2011)

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56 Case Studies of Freight Logistics Facilities This chapter is focused on detailed case studies of the categories of freight facilities identified in Chapter 3 and includes the following sub-sections:  A framework to assess the economic and transportation impacts of freight facilities;  An introduction to the case studies including information on how the case studies were selected;  Seven detailed case studies of freight facilities; and  Summary findings of the case studies with a comparison with the key site selection factors identified in Chapter 5. Part 1: Framework for Assessing the Economic and Transportation Impacts of Freight Facilities This section provides a comprehensive evaluation framework of benefits, costs, and economic impacts of freight logistics. The objective is to increase the public understanding of the impacts of different types of freight logistics facilities and provide an analytical framework to clearly account for the key impacts. It is important to keep in mind that the overarching private sector objective in the location of freight facilities is to reduce costs and increase productivity and efficiency for freight logistics companies and carriers. The broader transportation, economic and societal effects of freight facilities will vary depending on the type of facility, the modes used at the facility, and the geographic perspective of stakeholders (local, regional, state, national). In order to quantify and analyze the impacts of a freight transportation project, including freight facilities, the US Department of Transportation4 Impacts of freight facilities fall into several different categories and, while there are a large number of potential impacts, not all of them will apply to each type of logistics center. The major impact categories include: outlines a five-step analytical process. These steps are to: 1) define the project type and its expected transportation impacts, 2) define the expected economic impacts, 3) determine the transportation impact tools to measure modal and performance impacts, 4) define the economic impact tools to measure economic impacts and incidence, and 5) determine the decision methods to portray benefits and costs. This framework is designed to assist in the completion of this five-step process to analyze the economic and transportation impacts of freight facilities.  Transportation Impacts – including mode choice & traffic volumes, direct travel impacts, supply chain logistics impacts, environmental impacts, and safety/security impacts; and  Economic Impacts – including construction impacts, direct economic activity, multiplier effects, and economic development/business attraction. Importantly, this evaluation framework is more focused on measuring the categories of impacts of freight facilities rather than focusing on a formal benefit-cost analysis framework. One reason for this is that the costs of a freight facility are often led by private sector freight companies (e.g., trucking, rail and distribution 4 “Guide to Quantifying the Economic Impacts of Federal Investments in Large-Scale Freight Transportation Projects,” Office of the Secretary of Transportation, US Department of Transportation, August 2006.

57 companies). And the impacts or benefits of a facility will vary greatly depending on geographic perspective. For example, because benefit-cost analysis is most frequently conducted from a national or societal perspective, it typically does not include economic impacts from building or operating a facility (as those impacts would likely occur somewhere else in the US). However, from a local perspective, the private sector investment in buildings and equipment as well as permanent jobs at a facility are a very real economic gain for a city or county. It is completely feasible to conduct a benefit-cost analysis of freight facilities, especially if public dollars are helping to develop a freight facility, but the analyst is cautioned to carefully consider the incidence of benefits and costs to properly match up impacts to their geographic or jurisdictional perspective. As mentioned above, while impacts occur primarily to the freight provider and in the area immediately surrounding the facility, impacts often extend to the state and nation given the long-distance nature of goods movement. For example, a warehouse is located in a specific town. The town will feel the impact in terms of potential jobs and employment, as well as additional traffic servicing the warehouse with the inbound goods necessary for inventory and the outbound transport of goods to receivers and final users. In addition, the region or metropolitan area surrounding the town will also feel the impact, as there will be better access to goods through the distribution center, and closer proximity to the retail outlets may have impacts such as potentially lowering costs due to the reduction in transportation costs. Moreover, the state and the rest of the country will also be impacted, but to a lesser extent based on how this facility impacts shipping routes, traffic volumes on trade corridors and modal choice. The presence of a new facility generally signifies the market demand for more goods movement and distribution. It is possible for some benefits to be negative or not applicable to a particular type of freight facility. Primary cost categories when discussing freight logistics facilities relate to capital for facilities, connecting infrastructure, and operations/maintenance. In order to measure the impacts of a freight facility, there must be a comparison between a scenario with the facility and a baseline with current conditions where the facility is not built. The challenge is that this “no build” condition is not always easily defined, especially in terms of the transportation logistics that would occur without a facility. For example, a new intermodal rail facility may help increase the share of goods arriving to a region by rail with short-distance truck trips (dray) to final destinations. The “no build” condition would likely result in more freight shipped by truck longer distances (either from shipper to receiver or from a more distance intermodal facility). As another example, an analysis of a new Dollar General warehouse in Tampa, Florida would examine transportation costs both with and without the newest facility. This would include examining transportation impacts associated with moving products to the new distribution center and to the final retail outlet as compared to moving to the closest existing distribution center and the retail outlets that would be served by the alternative distribution center site. 8.1 Transportation Impacts5 These impacts relate specifically to the transportation aspect of the logistics facility and those impacts that accrue from changes in the movement of goods. These impacts include the benefits from modal shifts due to 5 Concepts for the impacts and benefits are taken from the following studies: “Development of an Integrated Logistics Center in Winter Haven, Florida” for CSX Real Property, Inc., Prepared by HDR|HLB Decision Economics, Inc.; “Economic Assessment of A Roanoke Region Intermodal Facility” Prepared by HDR for Virginia DRPT, November 2007; “South Sound Logistics Center Market Analysis” Prepared by Chabin Concepts Team for the Port of Tacoma and Port of Olympia, December 2007; “Socioeconomic Conditions Technical Report: Proposed Gardener Intermodal Facility, Johnson, Kansas” for BNSF Railway, June 2008.

58 a new facility, including reduction in truck vehicles miles traveled (VMT). In situations where no modal shift occurs, it is also possible that the new facility will reduce the travel time or distance trucks need to travel to deliver the goods to their final destination. Mode Choice and Traffic Volumes Mode choice and traffic volume related impacts reflect changes – increases or decreases – in truck, rail, ship, and air volumes due to the selection of transportation mode. The primary impact tends to be to highways as most freight travels by truck for at least a portion of their trip. The following subcategories reflect the impacts of mode choice and traffic volumes:  Traffic  – The location of the facility will change traffic patterns in the immediately surrounding area. This may result in increased truck traffic to/from the facility, though the impacts vary greatly depending on highway access and local traffic patterns and access. Facilities that promote the use of other modes, may help keep longer distance trips on more efficient and cost-effective modes thus reducing overall truck VMT on local, regional and national highways. Reducing truck VMT can reduce travel time, and a modal shift and/or reduction in traffic could also increase reliability which offers congestion relief benefits. Vehicle Miles Traveled (VMT) Direct Travel Costs – if the facility is set in an ideal location to improve transportation connectivity, there will be a reduction in the distance traveled for delivery. For example, the siting of a new warehouse or distribution facility near an expanding population center will reduce the distance merchandise must travel to the new store locations. Also, a modal shift to non-highway modes will result in a decrease in truck VMT and thus reduce vehicle operating costs. An example of this would be the location of an intermodal facility closer to a population center that would bring in goods by rail where they would otherwise be shipped by truck. Fewer truck miles traveled also lead to a reduction in highway pavement maintenance costs. Direct travel costs are those costs that are incurred from the actual movement of the goods, based on the distance of travel and factors that may delay or otherwise impact delivery of a product. The following reflect direct costs:  Mileage-based costs  – depending on the length of the trip for freight, costs will vary. Additional miles travelled create additional costs for vehicles – in terms of fuel, oil, maintenance and repair, and depreciation. And the per ton mile costs of shipping also vary so that freight facilities that influence the use of modes will impact shipping costs. For example, per ton mile costs by rail and barge are generally lower than by truck. Congestion  – congestion on roads, rails, air and sea can cause delay in goods reaching their destination – be it an intermodal facility, warehouse, distribution center, or final retail outlet. When congestion causes vehicles to move slower than they otherwise would, this delays the delivery of goods and also has financial impacts, potentially increasing shipping costs. Time – the time spent moving freight has a direct cost in terms of labor, inventory, insurance and equipment costs. The time spent in transit or storage may impact the value of the good (e.g., perishables with a short shelf-life).

59 Supply Chain Logistics (Production Process) These impacts relate to production efficiencies gained when a freight facility is physically located in an area that offers the opportunity to:  Optimize volumes  – A well-located facility maximizes the volume of freight handled by a facility, and increases operational efficiency, allowing for larger volumes; Reduce logistics costs – The properly situated facility will reduce logistics costs for the company beyond direct travel costs. This includes reduced inventory costs due to larger regional distribution hubs which are a benefit to just-in-time shippers;  and Improve Market Accessibility Environment, Emissions and Energy – A well situated facility will improve market access to suppliers and final shipments for the company/companies located there, thus leading to a potential expansion of operations at these facilities and increased economic competitiveness. These impacts relate to changes in pollution that occur with freight facilities that change the distance traveled and/or the modes used for transport. Changes in fuel consumption and emissions levels, as well as noise and vibration changes, are the most commonly measured environmental impacts.  Fuel Consumption (Energy Intensity) – Shorter trips and less congestion means improved fuel efficiency and lower levels of fuel consumption. Additionally, energy consumption per ton-mile varies by mode, with air having the highest consumption and maritime the lowest.6  A modal shift away from highways also reduces the gallons of truck fuel consumed. Air Quality Safety and Security – When freight trips are shorter, fewer pollutants (NO2, CO, CO2, NOX, SO2, PM, VOC) are released into the atmosphere, as emissions are a product of mode and distance travelled. Additionally, modal shifts (e.g., truck to rail via an intermodal terminal, or an increase in the distance on rail versus truck) would also result in a change in emissions. Further, newer intermodal facilities are often equipped with technology improvements to reduce truck idling and this can lead to further emissions reductions. These impacts include the reduction in accidents due to changes in truck VMT, as well as a change in criminal activities in a secure facility.  Safety  – Changes in the number of trucks on the road and or the distance they travel leads to changes in accidents typically grouped into property damage, injury and fatal accidents. This impact is typically considered a societal or welfare effect based on valuations of life and other factors. Security 8.2 Economic Impacts – Logistics centers can reduce criminal acts and smuggling with security and other measures. These efforts reduce losses to shippers and receivers and provide a higher level of security in the area around the facility. While this can be an important benefit, it is not frequently quantified. Economic impacts include jobs, income, wages, and property value and are often estimated in terms of direct, indirect and induced effects of a facility. The economic impacts typically vary based on short-term 6 “The Geography of Transport Systems,” http://people.hofstra.edu/geotrans/eng/ch8en/conc8en/energy_freight.html

60 construction effects and long-term operations and the potential to attract other businesses near a freight facility. Direct effects are those that are directly related to the facility, including short-term construction activity when the facility is built and long-term operations once the facility is up and running. Indirect effects are those that result from purchases by local firms that supply the companies that are directly affected. Induced effects are changes in local consumer spending activity resulting from increased jobs and income in the area. The US DOT guide on economic impacts of freight investments (cited earlier) provides much greater detail on these categories of economic multiplier effects. Near-Term Construction Effects Building the facility and necessary infrastructure connections requires short-term construction activity with both direct effects and broader multiplier effects. These impacts are commonly measured using input-output models, such as IMPLAN or RIMS II, based on allocating construction spending to relevant industry categories. Economic metrics often include:  Business output  – This measures the increase in total sales by industries at the local, state and national level; Employment  – The creation of the new facility will generate direct, indirect and induced employment related to construction and operation; Value added  – This is a measure of the contribution to GDP by an individual producer, industry, or sector. It is measured as the difference between the total output and the cost of intermediate goods for the industry or establishment; Labor Income  – Measures the labor income, comprised of wages, benefits and proprietor income, resulting from direct, indirect and induced jobs related to the facility; and Tax Revenue Direct Economic Activity at the Freight Facility – The construction of the facility will generate direct and indirect tax revenue from property taxes, sales tax and income tax, both during construction and due to the operation of the facility. Direct economic activity relates to the direct impacts caused by the new freight facility. This includes the number of people employed at the facility, their wages and salaries, changes in revenue (business output) due to the facility, and any developments directly related to the facility. Multiplier Effects of the Freight Facility Operations Multiplier effects are impacts that extend beyond the impact of the actual facility itself. These impacts are a result of the revenue change caused by the facility. For example, an employee at the new warehouse receives wages that he otherwise would not have received. These wages are spent on goods that he otherwise would not have purchased, from which the retailer uses the revenue to purchase further goods or services in the area, and the impact of the facility thus expands into the community, state and country. Economic Development/Business Attraction Freight facilities can be a catalyst for economic development, as seen in case studies for the Virginia Inland Port, Alliance, Texas, and others. These benefits include the economic growth related to redevelopment of existing properties, as well as the economic benefits from the location of new businesses and new residential development. As exemplified by the case studies, these economic development impacts can be far greater than the direct activity at freight facilities. The size and timing of economic development/business attraction effects can vary greatly by facility based on local land use and zoning policies, economic development