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Freight: Are Innovative Solutions the Answer? Presentation to the Ohio Conference on Freight Pamela Bailey-Campbell Vice-President Public-Private Initiatives – PowerPoint PPT presentation

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Title: Freight:%20%20Are%20Innovative%20Solutions%20the%20Answer?

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

  • 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 continuing explosion in freight demand,
AASHTO Freight Transportation Bottom Line Report,
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 nations infrastructure,
implies an enormous funding challenge for a
national transportation system approaching
deficit spending
4.5 trillion to improve
1.2 trillion gap to improve
450 billion gap to maintain
3.7 trillion to maintain
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.
  • SAFETEA-LU went further than previous federal
    bills in providing for freight interests
  • Industry groups are pushing freight issues to the
    forefront in the next federal transportation
  • Coalition for Americas Gateways and Freight
    Corridors Freight Transportation Fund (FTF)
  • ARTBAs Critical Commerce Corridors
  • AASHTOs Transportation Future

But funding challenges persist for needed
projects across the US. Ohio is no exception.
Highway expansions to accommodate increasing
truck traffic of I-70/71
Potential new rail intermodal Facilities?
Cincinnati and Columbus and Toledo freight
Improved Port and Air Cargo Landside Connections
Expansions of Lake Erie Ports
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
  • 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
  • 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.
Freight Modes Policy/Regulatory Focus Potential Impacts on Freight Costs, Speed
Trucking Size and weight restrictions Emissions controls Hours of service rules Limited payloads/rerouting Higher vehicle costs Reduced driver productivity
Rail/Intermodal STB rates, service regulations Intermodal connections Funding/subsidy/credit support Rail abandonment, operational issues Rail mode share Rail investment
Maritime / Port Operators Labor regulations Container security Throughput, service interruptions, labor costs Higher terminal costs, reduced throughput
Air Cargo Environment noise restrictions Limits development of new air cargo hubs
Solutions from around the US
What are states doing to improve intermodal links?
The context for freight Public-Private-Partnership
s is framed by how responsibilities are
Sector Infrastructure Operations
Water Public / Private Private
Rail Private Private
Truck Public Private
Freight PPP Finance models
Model Example
Public sector provides up-front funding through grants and loans private sector repayment is through user fees Shellpot bridge
Investment fully paid by the public sector private sector provides in-kind contributions North Carolina Railroad Improvement Program
Public-private funded funding shares agreed to between each sector ReTRAC
Concessions private sector financing and long-term lease or ownership Texas Pacifico Rail Line
Source Based on USDOT FHWA Report Financing
Freight Improvements, January 2007
Freight Finance Cases Alameda Corridor
Funding Source Amount (M)
US DOT Loan 400
Port of LA / LB 394
Los Angeles Metropolitan Transit Authority 347
Federal / state / interest Income 130
Revenue bonds backed by container fee 1,160
  • 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 Chicagos CREATE
Funding Source (Phase 1 Commitments) Amount (M)
FHWA 100
Illinois DOT 100
City of Chicago 30
Railroads 212
  • Project cost 1.5 billion (Phases I II)
  • Rail separation, highway crossing, rail
    rehabilitation construction, upgrade signaling
  • 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

Freight Finance Cases Heartland Corridor
Funding Source Amount (M)
Federal 110
VA Rail Enhancement Fund 48.2
Governors Transportation Funds 5
VA Match to Federal Funds 3.7
ORDC grant 0.8
Norfolk Southern 49.8
  • Project Cost of 309 million
  • Vertical clearances, intermodal facilities, rail
  • Sponsored by Norfolk Southern, Virginia DOT, Ohio
    Rail Development Commission
  • Construction starting
  • Connections to Rickenbacker

Freight Finance Cases German High Speed Rail
  • Germanys 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
One barrier to freight projects is sheer
  • 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.
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
  • Have rate structure allowing for fuel costs but
    not tolls
  • Independent truckers have separate view from
    large shippers

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 Dells ultimatum to Austin area

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

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
  • Educate stakeholders as to each partys 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
Ohio is a nexus for national freight movements
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)
  • 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