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Freight: Are Innovative Solutions the Answer?: 

Freight: Are Innovative Solutions the Answer? Pamela Bailey-Campbell Vice-President Public-Private Initiatives September 18, 2007 PB Presentation to the Ohio Conference on Freight

Topics: 

Topics National and global freight picture Recent freight improvements from around the US The challenge of financing freight projects Solutions for Ohio

The big picture: 

The big picture

The continuing explosion in freight demand,…: 

The continuing explosion in freight demand,… AASHTO Freight Transportation Bottom Line Report, 2006

…propelled by robust underlying trends,… : 

…propelled by robust underlying trends,… Growth in consumption patterns Changes in logistic practices Growth in Chinese imports Increased in cross-border trade

…combined with current capacity shortages already apparent in our nation’s infrastructure,: 

…combined with current capacity shortages already apparent in our nation’s infrastructure,

…implies an enormous funding challenge for a national transportation system approaching deficit spending: 

…implies an enormous funding challenge for a national transportation system approaching deficit spending $450 billion gap to maintain $1.2 trillion gap to improve 3.7 trillion to “maintain” 4.5 trillion to “improve” 3.3 trillion in Resources Source: Based on Future Highway and Public Transportation Finance Study, US Chamber of Commerce (2005)

Freight interests are ascending in the federal infrastructure funding agenda.: 

Freight interests are ascending in the federal infrastructure funding agenda. SAFETEA-LU went further than previous federal bills in providing for freight interests explicitly Industry groups are pushing freight issues to the forefront in the next federal transportation program Coalition for America’s Gateways and Freight Corridors’ Freight Transportation Fund (FTF) ARTBA’s “Critical Commerce Corridors” AASHTO’s “Transportation Future”

But funding challenges persist for needed projects across the US. Ohio is no exception.: 

Potential new rail intermodal Facilities? But funding challenges persist for needed projects across the US. Ohio is no exception. Cincinnati and Columbus and Toledo freight bottlenecks Improved Port and Air Cargo Landside Connections Expansions of Lake Erie Ports Highway expansions to accommodate increasing truck traffic of I-70/71

Freight feasibility is driven by global dynamics.: 

Freight feasibility is driven by global dynamics. Changes in maritime patterns Panama Canal expansion Efforts to provide additional capacity on the West Coast Efforts to mitigate congestion at national and regional bottlenecks such as Chicago

Example of integrating global trends in developing investment strategies: The Panama Canal: 

Example of integrating global trends in developing investment strategies: The Panama Canal Far-reaching analysis of international markets Shifted focus from managing physical infrastructure to “right-sizing” the investment Examined factors such as: Rapid rate of globalization Manufacturing shifts to low cost locations: China, Cambodia, and Vietnam Shipper logistics requirements to meet growth in demand Increases in ship sizes Established financial, environmental and operational implications to drive a capital investment plan and financial model

Public policy at all levels has a pervasive impact on all freight modes.: 

Public policy at all levels has a pervasive impact on all freight modes.

Solutions from around the US: 

Solutions from around the US

What are states doing to improve intermodal links?: 

What are states doing to improve intermodal links?

The context for freight Public-Private-Partnerships is framed by how responsibilities are distributed.: 

The context for freight Public-Private-Partnerships is framed by how responsibilities are distributed.

Freight PPP Finance models: 

Freight PPP Finance models Source: Based on USDOT FHWA Report Financing Freight Improvements, January 2007

Freight Finance Cases: Alameda Corridor: 

Freight Finance Cases: Alameda Corridor Project cost $2.4 billion Port access, highway rail-crossing elimination, rail construction Constructed by the Alameda Corridor Transportation Authority (ACTA) Completed 2002

Freight Finance Cases: Chicago’s CREATE: 

Freight Finance Cases: Chicago’s CREATE Project cost $1.5 billion (Phases I & II) Rail separation, highway crossing, rail rehabilitation & construction, upgrade signaling systems Sponsored by Illinois DOT, City of Chicago, METRA, Union Pacific, Burlington Northern Santa Fe, Norfolk Southern, Canadian National, Canadian Pacific, and CSX Project implementation has begun with limited funding

Freight Finance Cases: Heartland Corridor: 

Freight Finance Cases: Heartland Corridor Project Cost of $309 million Vertical clearances, intermodal facilities, rail relocation Sponsored by Norfolk Southern, Virginia DOT, Ohio Rail Development Commission Construction starting Connections to Rickenbacker

Freight Finance Cases: German High Speed Rail: 

Freight Finance Cases: German High Speed Rail Germany’s state-owned rail (Vorsprung durch DB) Hartmut Mehdorn (CEO) turned chronic loss-making railway into powerful international business Next year offer 30% of shares to public World-class logistics company Key: control of 90% of rail network & freight

The challenge of financing freight projects: 

The challenge of financing freight projects

One barrier to freight projects is sheer complexity.: 

One barrier to freight projects is sheer complexity. Multitude of stakeholders and interests Multi-state and multi-jurisdictional issues Complicated planning & environmental process

Another challenge is translating public and private benefits analysis into a workable financing plan.: 

Another challenge is translating public and private benefits analysis into a workable financing plan.

Understanding stakeholder interests: railroads: 

Understanding stakeholder interests: railroads Will pay for improvements when they see clear business benefits Challenged to earn cost of capital Cautious about receiving public assistance Have strong competitive interests

Understanding stakeholder interests: truckers: 

Understanding stakeholder interests: truckers Have rate structure allowing for fuel costs but not tolls Independent truckers have separate view from large shippers

Understanding stakeholder interests: businesses: 

Understanding stakeholder interests: businesses Can be powerful supporters of freight improvements if they Decrease congestion, Increase economic activity, and Lower transportation and logistics costs. Example: Dell’s ultimatum to Austin area

Understanding stakeholder interests: public agencies: 

Understanding stakeholder interests: public agencies Agencies are now being challenged to effectively incorporate freight into planning process Need to meet environmental and transportation objectives Economic development is also an objective in some cases

Understanding stakeholder interests: shippers: 

Understanding stakeholder interests: shippers Shippers are taking control of how routing decisions are made Wal-Mart Value for shippers can mean money for projects Time savings Increased service Reliability

Freight PPP Lessons: 

Freight PPP Lessons Educate stakeholders as to each party’s interests and goals Consider relative benefits compared to distributed costs Understand strings on funding Establish environmental process and issues early Deal with expectations in general

Opportunities for Ohio: 

Opportunities for Ohio

Ohio is a nexus for national freight movements: 

Ohio is a nexus for national freight movements

Ohio freight opportunities: 

Ohio freight opportunities Develop a model multi-modal freight system Expand air cargo hubs Expand ports to capture growing freight demand and international trade

Ohio freight opportunities (continued): 

Ohio freight opportunities (continued) Truck-only toll lanes Intermodal rail facilities being planned as part of Heartland corridor Rail improvements to relieve growing pressure on Chicago hub Air cargo development, possibly modeled on Alliance facility in Dallas Increased market share for Great Lakes / St. Lawrence Seaway system ports

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