Intercity Passenger and Freight Rail: Better Data and Communication of Uncertainties Can Help Decision Makers Understand Benefits and Trade-offs of Programs and Policies
Published: 2011-02-24T00:00:00

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Highlights:
section_title: Why GAO Did This Study
paragraphs: Concerns about the weak economy, congestion in the transportation system, and the potentially harmful effects of air emissions generated by the transportation sector have raised awareness of the potential benefits and costs of intercity passenger and freight rail relative to other transportation modes such as highways. GAO was asked to review (1) the extent to which transportation policy tools that provide incentives to shift passenger and freight traffic to rail may generate emissions, congestion, and economic development benefits and (2) how project benefits and costs are assessed for investment in intercity passenger and freight rail and how the strengths and limitations of these assessments impact federal decision making. GAO reviewed studies; interviewed federal, state, local, and other stakeholders regarding methods to assess benefit and cost information; assessed information on project benefits and costs included in rail grant applications; and conducted case studies of selected policies and programs in the United Kingdom and Germany to learn more about their policies designed to provide incentives to shift traffic to rail.
section_title: What GAO Found
paragraphs: Although implementing policies designed to shift traffic to rail from other modes may generate benefits, and selected European countries' experiences suggest that some benefits can be achieved through these types of policies; many factors will affect whether traffic shifts. The extent to which rail can generate sufficient demand to draw traffic from other modes to achieve the desired level of net benefits will depend on numerous factors. Some passenger or freight traffic may not be substitutable or practical to move by a different mode. For example, certain freight shipments may be time-sensitive and thus cannot go by rail. Another key factor will be the extent to which sufficient capacity exists or is being planned to accommodate shifts in traffic from other modes. How transport markets respond to a given policy--such as one that changes the relative price of road transport--will also affect the level of benefits generated by that policy. Experiences in selected countries suggest that varying amounts of mode shift and some benefits were attained where decision makers implemented policies to move traffic from other modes to rail. For example, a road freight pricing policy in Germany resulted in environmental and efficiency improvements, and freight rail grants in the United Kingdom led to congestion relief at the country's largest port. Pursuing policies to encourage traffic to shift to rail is one potential way to generate benefits, and other policies may be implemented to generate specific benefits at a lower cost. Information on the benefits and costs of intercity passenger and freight rail is assessed to varying degrees by those seeking federal funding for investment in rail projects; however, data limitations and other factors reduce the usefulness of such assessments for federal decision makers. Applicants to two discretionary federal grant programs--the Transportation Investment Generating Economic Recovery program and the High-Speed Intercity Passenger Rail program--provided assessments of potential project benefits and costs that were generally not comprehensive. For instance, applications varied widely in the extent to which they quantified and monetized some categories of benefits. In addition, GAO's assessment of selected applications found that most applicants did not provide key information recommended in federal guidance for such assessments, including information related to uncertainty in projections, data limitations, or the assumptions underlying their models. Applicants, industry experts, and Department of Transportation (DOT) officials GAO spoke with reported that many challenges impacted their ability to produce useful assessments of project benefits and costs, including: short time frames in which to prepare the assessments, limited resources and expertise for performing assessments, poor data quality, lack of access to data, and lack of standard values for monetizing some benefits. As a result, while information on project benefits and costs was considered as one of many factors in the decision-making process, according to DOT officials, the varying quality and focus of assessments resulted in additional work, and the information provided was of limited usefulness to DOT decision makers.
section_title: What GAO Recommends
paragraphs: GAO recommends DOT conduct a data needs assessment to improve the effectiveness of modeling and analysis for rail and provide consistent requirements for assessing rail project benefits and costs. DOT, Amtrak and EPA provided technical comments, and DOT agreed to consider the recommendations.

section_title: Letter
paragraphs: Concerns about the weak economy, congestion in the transportation  system, and the potentially harmful effects of greenhouse gases and  airborne pollutants from transportation have raised awareness of the  potential benefits and costs of intercity passenger and freight rail relative  to other transportation modes. The U.S. economy and its competitive  position in the global economy depend in part on the nation’s  transportation networks working efficiently. In addition, factors such as  cost and time can impact passengers’ and shippers’ demand for a  particular transportation mode. Congestion delays that significantly  constrain both passenger and freight mobility can result in increased  economic costs to passengers, shippers and also to the nation. According  to the Texas Transportation Institute, in 2009 the yearly peak-period delay  per auto commuter was 34 hours, with a total cost of $115 billion.  Continued development and efficient management of the nation’s  transportation system is essential to accommodate the anticipated future  growth of the nation’s passenger and freight mobility demands. For  example, the Department of Transportation (DOT) forecasts that between  2010 and 2035 the freight transportation system will experience a 22  percent increase in total freight tonnage moved in the United States, from  12.5 billion to 15.3 billion tons. In addition, the transportation industry  continues to be one of the biggest energy users and contributors to  greenhouse gas emissions. According to the Environmental Protection  Agency (EPA), for 2008 the transportation sector accounts for 27 percent  of the nation’s greenhouse gas emissions. Because shifting intercity  passenger and freight traffic to rail from other more energy-intensive  modes is seen as a potential option to address some of these concerns,  there is a growing interest in investing in and enhancing rail capacity and  implementing policies that will encourage more traffic by rail.
The Passenger Rail Investment and Improvement Act (PRIIA), enacted in  October 2008, authorized over $3.7 billion for three different federal  programs for high-speed rail, intercity passenger rail congestion, and  intercity passenger rail service corridor capital grants. The American  Recovery and Reinvestment Act of 2009 (Recovery Act), enacted in  February 2009, appropriated $8 billion for the three PRIIA-established  intercity passenger rail programs. In addition, the Recovery Act authorized  new discretionary grants under the Transportation Investment Generating  Economic Recovery (TIGER) program. ), methane (CHWhile outside the scope of this study—the potential benefits of rail are not solely limited  to emissions, congestion, and economic development benefits that result from modal shift.   Improved or expanded rail service may simply increase the desire and ability of people to  travel or engage in trade, and to enjoy the subsequent benefits that flow from that  enhancement in mobility and access.
PRIIA and the Recovery Act created new responsibilities for Federal  Railroad Administration (FRA) to plan, award, and oversee the use of new  federal funds for intercity passenger rail. In response, FRA launched the  High-Speed Intercity Passenger Rail (HSIPR) program in June 2009 by  issuing a funding announcement and interim guidance, that outlined the  requirements and procedures for obtaining federal funds. Moreover, in  2010 DOT awarded over $2 billion in TIGER and $10 billion in HSIPR  grants. Both programs required applications to include information on the  costs and benefits of proposed projects, including information on such  benefits as reducing environmental impacts and congestion and  encouraging economic development.
One of the many considerations that can help inform transportation  decision making is determining which investment or set of policies will  yield the greatest net benefit (that is, benefits minus costs). While there is  some debate around the extent to which investment in rail or policies that  encourage shifting traffic to rail from other modes can help address  problems, such as congestion and greenhouse gas emissions, there are a  variety of analytical approaches, such as benefit-cost analysis and others,  that may be employed to help evaluate proposed transportation  investments. Tools such as these can provide decision makers with  information on the benefits and costs of alternative investments and policy  choices needed to make informed decisions. Given your interest in the  potential net benefits of intercity passenger and freight rail policies and  programs, we examined (1) the extent to which transportation policy tools  that provide incentives to shift passenger and freight traffic to rail may  generate emissions, congestion, and economic development benefits and  (2) how project benefits and costs are assessed for investment in intercity  passenger and freight rail and how the strengths and limitations of these  assessments impact federal decision making.
To address our objectives, we reviewed our prior work on rail and  transportation investment decision making and documentation from an  array of sources, as well as interviewing officials and various stakeholders  regarding methods to assess the benefits and costs of transportation  investments. Our interviews included discussions with officials from DOT,  EPA, and the National Railroad Passenger Corporation (Amtrak);  representatives from transportation coalitions and associations,  metropolitan planning organizations, and state DOTs; and other  transportation stakeholders. We also reviewed and assessed information  on potential project benefits and costs included in 40 rail-related  applications submitted to the HSIPR and TIGER grant programs—20 from  each program. We selected a random sample of applications that was  weighted to ensure approximately proportional representation of the  range of applications submitted to each program. Two GAO analysts  independently reviewed each selected application based on Office of  Management and Budget (OMB) guidelines on benefit-cost analysis, with  input from GAO economists and methodologists. We conducted an  extensive literature search to identify studies analyzing potential mode  shift and the impact of mode shift on selected benefits for intercity  passenger or freight rail projects and policies. We used the studies and  information we reviewed to inform our work and relied on multiple  sources of additional information, including testimonial evidence,  interviews, and case studies. We conducted case studies of selected  policies and programs designed to provide incentives to shift passenger  and freight traffic from other modes to rail in the United Kingdom and  Germany to learn more about their experiences with efforts to shift traffic  to rail in order to generate benefits. These two countries were chosen  based on a number of criteria, including their experience in implementing  such policies. While European intercity passenger and freight rail systems  are very different in size, structure, and scope than the U.S. rail system, the  experiences of countries such as the United Kingdom and Germany  provide illustrative examples of other countries’ experiences with policy  tools that provide incentives to shift traffic to rail. Finally, we conducted  our own computer simulation of transportation scenarios on mode choice  for freight shipments. See appendix IV for a discussion of the simulation  and appendix I for a detailed discussion of our scope and methodology.
We conducted this performance audit from December 2009 to February  2011, in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Passenger and freight rail are part of a complex national transportation  system for transporting people and goods. Currently, there are seven Class  I railroads and over 500 short line and regional railroads operating in the  United States. These railroads operate the nation’s freight rail system and  own the majority of rail infrastructure in the United States. Railroads are  the primary mode of transportation for many products, especially for such  bulk commodities as coal and grain. In addition, railroads are carrying  increasing levels of intermodal freight (e.g., containers and trailers), which  travel on multiple modes and typically require faster delivery than bulk  commodities. According to the Association of American Railroads (AAR),  based on ton-miles, freight railroads carried about 43 percent of domestic  intercity freight volume in 2009. In addition, according to DOT, the amount  of freight rail is expected to continue to grow with a projected increase of  nearly 22 percent by 2035. Intercity passenger rail service is primarily  provided by Amtrak. Amtrak operates a 21,000-mile network, which  provides service to 46 states and Washington, D.C., primarily over tracks  owned by freight railroads. Federal law requires that freight railroads give  Amtrak trains preference over freight transportation and, in general,  charge Amtrak the incremental cost—rather than an apportioned cost— associated with the use of their tracks. Amtrak also owns about 650 route  miles of track, primarily on the Northeast Corridor, which runs between  Boston, Massachusetts, and Washington, D.C.
Transportation may impose a variety of “external” costs that can result in  impacts such as health and environmental damage caused by pollution.
For example, in choosing to drive to work, a commuter may not take into  account the car emissions’ contribution to local pollution, which may  damage property or the health of others. Following are some negative  effects of transportation:    Greenhouse gas emissions, nitrogen oxide (NOX) and fine particulate  matter, and other pollutants: Based on estimated data from the EPA, from  1990 through 2008, transportation greenhouse gas emissions increased 22  percent. Carbon dioxide (CO) is the primary greenhouse gas associated  with the combustion of diesel (and other fossil fuels) and accounted for  over 95.5 percent of the transportation sector’s greenhouse gas  emissions. Based on 2008 data from the EPA, cars, light trucks, and  freight trucks together contributed over 80 percent of the transportation  sector greenhouse gas emissions (see fig. 1).
subsections: section_title: Investment and Policy Tools to Attain Benefits through Rail
paragraphs: While there are multiple approaches to address externalities in  transportation, policies that provide incentives to shift traffic to rail can be  appealing because they offer an option to address multiple externalities  simultaneously by changing behavior to favor rail over other modes. For  example, market-based policies that change the relative prices of the  modes are likely going to be the most cost-effective. Policies such as  increasing fuel taxes, imposing new fees such as a vehicle mile travel fee  or a congestion charge, investing in increased capacity in one mode, or  subsidizing travel in one mode can provide incentives to users to switch  travel from one mode to another, and can achieve both a reduction in  greenhouse gas emissions and alleviate congestion. Some stakeholders  also believe that investing in rail may help to stimulate economic  development. In order to obtain similar benefits without the goal of  shifting traffic to rail, it might be necessary to introduce a suite of policies,  each more directly targeted at a specific externality. For example, a  congestion pricing policy may reduce traffic during peak travel times, but  if it shifts traffic to nonpeak times, it may have a limited impact on overall  emissions. Conversely, providing incentives to purchase more fuel  efficient truck engines may do nothing to improve congestion or economic  development.
With respect to direct investment, the federal government typically has not  provided extensive funding for freight rail or for intercity passenger rail  outside of the Northeast Corridor between Boston, Massachusetts and  Washington, D.C. In addition, according to Amtrak officials, funding has  not been predictable, consistent, or sustained. However, recent legislation  has increased the federal role and funding available for investment in  intercity passenger and freight rail infrastructure. In 2008, PRIIA  authorized the HSIPR program. The program is administered through  DOT’s FRA, which has responsibility for planning, awarding, and  overseeing the use of federal funds for the development of high-speed and  intercity passenger rail. As of 2010, over $10 billion had been awarded  through the HSIPR program to fund high-speed rail projects. Moreover,  through the Recovery Act, Congress authorized the TIGER Discretionary  Grant Program for investment in a variety of transportation areas,  including freight and passenger rail. In 2010, DOT awarded over $2 billion  in TIGER funding. The TIGER program was designed to preserve and  create jobs and to promote economic recovery and investment in  transportation infrastructure that will provide long-term economic  benefits and assist those most affected by the current economic downturn.  The TIGER grants are multimodal, and criteria were developed for a  framework to assess projects across various modes. For more information  on the HSIPR and TIGER programs, see appendix III.
section_title: Assessment of Benefits and Costs in Decision Making
paragraphs: Decision makers may consider a number of factors in deciding between  various alternative investments or policies. These factors may include the  objective or goal of the proposed actions—for example, preserving and  creating jobs or promoting economic recovery or reducing an  environmental externality. Other factors, such as the benefits and costs of  alternatives, are also important to consider in decision making. Some  benefits are associated with reducing an externality and are part of the  assessment of whether policy alternatives for addressing the externality  can be justified on economic principles. Costs should also be accounted  for when considering various investment or policy alternatives. For  example, there are direct costs, such as construction, maintenance, and  operations, and less obvious types of costs, such as delays and pollution  generated during construction.
There are tools that can be employed in evaluating proposed  transportation alternatives, including benefit-cost analysis and economic  impact analysis. Benefit-cost analysis is designed to identify the alternative  with the greatest net benefit by comparing the monetary value of benefits  and costs of each alternative with a baseline. Benefit-cost analysis  provides for a comparison of alternatives based on economic efficiency,  that is, which investment or policy would provide the greatest net benefit  (i.e., greater benefits than costs). As we have previously reported, while  benefit-cost analysis may not be the most important decision-making  factor—but rather, one of many tools that decision makers may use to  organize, evaluate, and determine trade-offs of various alternatives—the  increased use of systematic analytical tools such as benefit-cost analysis  can provide important additional information that can lead to better  informed transportation decision making. Economic impact analysis is a  tool for assessing how the benefits and costs of transportation alternatives  would be distributed throughout the economy and for identifying groups  in society (for example, by region, income, or race) that are likely to gain  from, or bear the costs of, a policy.
The use of benefit-cost analysis information is not consistent across  modes or types of programs that provide funding to transportation  projects. Competitive programs such as TIGER and HSIPR and loan  guarantee programs such as TIFIA and RRIF require information on  benefits and costs. Formula programs (such as the Federal-Aid Highway  Program) do not necessarily require benefit-cost information. Federal  guidance exists for conducting benefit-cost analyses, including OMB  Circular No. A-94, OMB Circular No. A-4, and Executive Order No. 12893.  The directive and related OMB guidance outline a number of key elements  that should be included in the assessment of benefits and costs in decision  making, as described in table 1.
Specifically Executive Order No. 12893 and OMB Circulars Nos. A-94 and  A-4 indicate that benefit and cost information shall be used in decision  making, and the level of uncertainty in estimates of benefits and costs  shall be disclosed. Other aspects of the benefit-cost analysis should be  completed to the extent possible. For example, while the guidance  suggests that impacts should be quantified and monetized, to the extent  that this is not possible, qualitative assessments should be provided for  those impacts that are not readily quantifiable. As we have previously  reported in our work on transit investments, qualitative information can  help ensure that project impacts that cannot be easily quantified are  considered in decision making.
Both the HSIPR and TIGER grant programs required applicants to provide  information on proposed project benefits and costs. The type of  information required, however, differed between the two programs and,  for the TIGER program, depended on the level of federal funding sought,  as described in table 2. In addition, while requirements for assessment of  project benefits and costs were more specific for TIGER than for the  HSIPR program, officials for both programs considered whether project  benefits were likely to exceed project costs as part of their respective  application assessment processes.
section_title: Shifting Traffic to Rail from Other Modes May Generate Benefits, but Many Factors Will Affect Whether Traffic Shifts, and Policies Abroad Have Produced Mixed Results
subsections: section_title: Determining the Extent of Benefits That Can Be Achieved through Rail Is Complicated by Numerous Factors
paragraphs: In order to generate benefits—such as a decrease in the harmful effects of  transportation-related pollution—through mode shift, a policy first has to  attract sufficient rail ridership or rail freight demand from other modes  that have higher harmful emissions. In practice, the extent to which rail  can generate sufficient demand to draw traffic from other modes and  generate net benefits will depend on numerous factors. In addition to  mode shift, policies that produce price changes can prompt other  economic responses in the short run, such as the use of lighter-weight  materials or a shift toward more fuel-efficient vehicles; over the longer  term, there is greater potential for responses that will shape the overall  distribution and use of freight and passenger transportation services.
For intercity passenger rail, factors such as high levels of population  density, expected population growth along a corridor, and strong business  and cultural ties between cities can lead to a higher demand for intercity  passenger travel. In order for rail to be competitive with other  transportation modes, it needs to be time- and price-competitive and have  favorable service characteristics related to frequency, reliability, and  safety. Further, high-speed rail has more potential to attract riders in  corridors experiencing heavy intercity travel on existing modes of  transportation—particularly where air transportation has high traffic  levels and a large share of the market over relatively short distances—and  where there is, or is projected to be, growth in congestion and constraints  on the capacity of existing systems. For example, rail traffic in the densely  populated Northeast Corridor is highly competitive with other modes, and  Amtrak now has a 65 percent share of the air-rail market between  Washington, D.C. and New York and a 52 percent share between New York  and Boston. The potential for network effects are also an important  factor in the level of traffic that may shift to rail, as more riders are  attracted when the line is located where it can carry traffic to a wide  number of destinations or connect to other modes. For example, local  transit systems can serve as feeders to the success of intercity passenger  rail operations. Passenger modes can also work as complements, if, for  example, passenger rail service delivers passengers to airports. DOT has  indicated where passenger rail generally competes with other modes. For  example, for intercity distances of 100-600 miles, in corridors with  moderate population densities, high-speed rail competes with auto and  bus and at high population densities competes with air, as shown in   figure 2.
In freight markets, one mode may have a distinct comparative advantage  over another for certain types of shipments, thereby limiting the potential  for traffic to shift to rail. For example, carriage of bulk commodities (e.g.,  coal) relies almost entirely on rail and waterways, while carriage of high- value and very time-sensitive commodities is dominated by truck and  aviation. Conversely, modes often work as complements to complete a  shipment. Intermodal freight is designed to move on multiple modes, using  a container that can be moved from a truck to a train to a ship without  handling any of the freight itself when changing modes. In other cases, the  modes may be substitutable for certain types of trips and will compete  directly for shipments or for segments of shipments based on price and  performance. For example, some long-haul trucking and rail shipments  may be substitutable. DOT has produced some basic parameters that  influence competition across the modes for freight, as shown in figure 3.
The extent to which mode-shifting is possible in the United States is  difficult to estimate and will largely be determined by the types of  parameters discussed above, such as whether shipping is feasible by  another mode (e.g., rail lines may not be available for some routes), or  practical (e.g., sending heavy coal shipments long distance by truck or  time-sensitive shipments by rail may not be practical), and by the relative  prices and other service characteristics of shipping by different modes.
To further explore the potential for mode shift, we used a computer model  developed by DOT to simulate the short-term change in VMT resulting  from a 50-cent increase in per-mile truck rates. We simulated two  scenarios: one using the model’s default assumptions and one in which the  assumptions pertaining to truck speed, reliability, and loss and damage  were adjusted to make truck relatively more costly than rail. Under both  scenarios, the 50-cent increase in truck rates (an increase of roughly 30  percent) resulted in less than a 1 percent decrease in truck VMT. Although  both the default scenario and the alternative scenario produced similar  estimates, these simulations are only suggestive, rather than definitive, of  the impact that an increase in per-mile truck rates might have on  VMT reduction. While the results of our simulation suggest that a 50-cent  increase in per-mile truck rates would have a limited impact on diversion  of freight from truck to rail, data limitations prevent us from making  precise predictions with a high level of confidence. See appendix IV for a  more detailed description of our modeling efforts, data quality issues, and  a full list of assumptions in the model.
In both the United States and in other countries we visited—where freight  and passenger traffic generally share the same rail infrastructure— the  potential benefits of a policy designed to shift freight traffic to rail are also  affected by the amount of capacity available or planned on the rail  network to accommodate a shift in traffic, as well as the capacity available  or planned on competing transportation modes. For example, freight rail  officials we met with in the United States indicated that in heavily  congested corridors, such as in the Northeast, there is limited capacity  available to accommodate both planned freight rail projects and proposed  intercity passenger rail traffic, because the rail line is already congested.  Plans for new dedicated high-speed rail lines would eliminate some of  these capacity sharing issues and could potentially create the capacity  needed to accommodate both freight and improved or expanded  passenger service but must be weighed against the costs associated with  constructing and maintaining new equipment and infrastructure, as well as  acquiring rights of way for the track. Furthermore, significant investment  and improvements to operations for highway infrastructure or airport  infrastructure could offset the impact of policies designed to shift  passenger or freight traffic to rail. For example, the FAA is currently  pursuing modernization of the air transportation system to create  additional capacity and efficiencies. If, as a result, flights become more  efficient and travel times decrease, then travelers originally expected to  shift to rail as a result of the implemented policy may not do so. In  contrast, the existence of other policies in place concurrently may also be  a contributing factor to improvements in environmental or congestion  benefits, as separate policies may work together and lead to greater  cumulative benefits. In either case, it can be difficult to distinguish the  impact of a given policy due to these other factors.
Following are descriptions of how shifting traffic to rail can address  externalities and produce benefits, as well as some of the factors that  affect the extent to which those benefits may materialize:  Reduced greenhouse gas emissions and increased fuel efficiency: Rail  emits fewer air emissions and is generally more fuel efficient than trucks.  For example, a report by the American Association of State Highway and  Transportation Officials (AASHTO) cites that the American Society of  Mechanical Engineers estimates 2.5 million fewer tons of carbon dioxide  would be emitted into the air annually if 10 percent of intercity freight now  moving by highway were shifted to rail, if such traffic has the potential to  shift. A recent study conducted by FRA comparing the fuel efficiency of  rail to freight trucks calculated that rail had fuel efficiencies ranging from  156 to 512 ton-miles per gallon, while trucks had fuel efficiencies ranging  from 68 to 133 ton-miles per gallon. According to Amtrak officials, their  intercity passenger rail service has also been shown to be more energy  efficient than air or passenger vehicle traffic. In addition, passenger and  freight rail can be electrified to eliminate even current emissions  generated by rail transport, as alternative power (e.g., hydro or nuclear)  may be used to generate electric propulsion. For example, many of the  routes in the United Kingdom are electrified, and efforts are under way to  continue to electrify additional segments of the rail network in order to  reduce emissions. While rail generally provides favorable emissions  attributes and fuel efficiency in comparison with highway and air travel,  there are many factors that could affect the extent to which environmental  benefits are achieved. These factors may include the type of train  equipment, the mix of commodities being transported, the length of the  rail route versus the truck route for a given shipment, traffic volume, and  capacity. In addition, if the current transportation system is not designed  to facilitate rail transport, it may be necessary to invest in additional  capital infrastructure or build new rail yards closer to urban areas, which  could have additional environmental costs and may diminish the extent of  potential net benefits. Furthermore, how transport system users respond  to a given policy will also impact the extent to which the policy generates  any benefits. For example, a policy that changes the price of road  transport by tolling could result in a freight hauler responding by changing  the load factor of existing road shipments by consolidating shipments or  increasing return loads to decrease the number of empty return trips. A  similar policy could also lead to reduced transport volumes due to reduced  demand for the product being shipped. According to DOT officials,  correctly pricing usage of the transportation system is an ongoing  challenge, as incorrect pricing can lead to inefficiencies and misallocation  of resources beyond what market conditions would otherwise allow.  Other policies aside from mode shift can more directly target  environmental externalities. More targeted policies—such as increasing  fuel taxes or implementing a carbon pricing scheme—may encourage  drivers to purchase more fuel-efficient vehicles or make fewer vehicle  trips, without shifting significant traffic to rail.
Congestion: Where passenger or freight rail service provides a less costly  alternative to other modes—through more timely or reliable transport— individuals and shippers can shift out of more congested modes and onto  rail, thus alleviating congestion. For certain goods, a train can generally  carry the freight of 280 or more trucks, relieving congestion by removing  freight trucks from the highways. Similarly, an intercity passenger train  can carry many times more people than the typical passenger vehicle.  Consequently, if fewer vehicle miles are traveled, then there is less wear  and tear on the highways and less cost to the public for related repairs and  maintenance. However, congestion relief will vary based on specific  locations, times of day, types of trips being diverted to another mode, and  the conditions of the corridors and areas where trips are being diverted.  For freight, long-haul shipments might have the most potential to shift to  rail, but diversion of these trips to rail, while removing trucks from certain  stretches of highway, may do little to address problems at the most  congested bottlenecks in urban areas. Similarly, Amtrak officials noted  that aviation can provide travelers’ alternative options for travel in high- density corridors which may help relieve congestion at capacity- constrained airports. If high-speed rail can divert travelers from making an  intercity trip through congested highway bottlenecks or airports at peak  travel times, then there may be a noticeable effect on traffic. However, any  trips on a congested highway corridor that are diverted to another mode of  travel, such as rail, may at least partially be replaced by other trips through  induced demand. For example, since congestion has been reduced on a  highway, making it easier to travel, more people may respond by choosing  to drive on that highway where faster travel times are available, limiting  the relief in the long-run. Other policies can be implemented that are  designed to more directly address congestion where it is most acute, such  as congestion pricing (e.g., converting high-occupancy vehicle lanes to  high-occupancy toll lanes) or other demand management strategies.
Safety: While safety has improved across all transportation modes over  time, both passenger and freight rail may have a comparative advantage  over other modes. Shippers and passengers who use rail in lieu of other  modes may accrue measurable safety benefits because rail traffic is, for  the most part, separated from other traffic. Because most rail accidents— both injuries and fatalities—involve traffic at limited locations such as  grade crossings or on railroad property, safety benefits can be expected  when more traffic is moved via rail. On a per-mile basis, passenger and  freight rail are substantially safer than cars or trucks. For example,  according to Amtrak, there were 8 passenger fatalities between 2003 and  2007. In addition, in 2007 most freight accidents occurred on highways— over 6 million—as compared with rail, which accounted for approximately  5,400 accidents. Between 2003 and 2007, freight rail averaged 0.39 fatalities  per billion ton-miles, compared with 2.54 fatalities per billion ton-miles for  truck. There are a variety of policies and regulations that directly address  safety concerns for each mode (e.g., safety standards and inspections for  rail, vehicle safety features, etc.). for these calculations, while the Bureau of Transportation Statistics uses a different  estimate of ton-miles. some cases, these types of impacts may reflect transfers of economic  activity from one region to another and thus may not be viewed as benefits  from a national perspective, or these impacts may already be accounted  for through users’ direct benefits. As such, there is much debate about  achieving these wider economic impacts and a number of challenges  associated with assessing these types of impacts. While high-speed rail  may have wider economic impacts, the impact varies greatly from case to  case and is difficult to predict. Estimates of benefits vary, as one study has  suggested that wider economic benefits would not generally exceed 10 to  20 percent of measured benefits, while an evaluation of another proposed  high-speed rail line estimated these benefits to add 40 percent to direct  benefits. There are a variety of other policies that could be implemented  to help stimulate economic development without mode shift.
section_title: In Selected European Countries, Experiences Suggest That Policies Intended to Produce Mode Shift May Lead to Varying Amounts of Mode Shift and Some Benefits
paragraphs: Based on experience in the United Kingdom and Germany where decision  makers made a concerted effort to move traffic from other modes to rail  through pricing policies, targeted grants, and infrastructure investments,  these policies resulted in varying amounts of mode shift. The full extent  of benefits generated from these policies is ultimately uncertain, though  benefits realized included environmental and efficiency improvements or  localized congestion relief. Foreign rail officials told us it was difficult to  determine the full extent of the benefits due to complicating factors (as  described throughout the previous section). While some benefits were  attained through implementation of policies designed to shift traffic to rail,  these benefits were not necessarily achieved in the manner originally  anticipated or at the level originally estimated. Furthermore, it is uncertain  whether the benefits attained were achieved in the most efficient manner,  or whether similar benefits could have been attained through other  policies at a lower cost.
Road freight pricing policies: In 2005, the German government  implemented a Heavy Goods Vehicle (HGV) tolling policy on motorways to  generate revenue to further upgrade and maintain the transportation  system and to introduce infrastructure charging based on the “user pays”  principle by changing the relative price of road transport relative to rail.  The HGV tolling policy was also designed to provide an incentive to shift  approximately 10 percent of road freight traffic to rail and waterways in  the interests of the environment and to deploy HGVs more efficiently.  According to German Ministry of Transport officials, while the HGV toll  policy did not result in the amount of mode shift originally anticipated,  some level of environmental benefits and road freight industry efficiency  improvements were realized. These benefits are attributed to a more fuel- efficient HGV fleet making fewer empty trips. For example, officials told  us that, in response to the tolling policy, trucking companies purchased  more lower emission vehicles, which were charged a lower per-mile rate  in order to decrease their toll. For the most part, German freight  shipments continued to be made primarily on trucks, and trucks’ mode  share has not changed appreciably since instituting the policy. Findings in  a study conducted for the Ministry of Transport also indicated that  transport on lower emission trucks has increased significantly, totaling 49  percent of all freight operations subject to tolls in 2009. According to  German transport officials, the share of freight moved by rail has only  slightly increased during the last decade. However, this increase cannot be  clearly attributed to a particular policy tool, such as the HGV toll.
Other countries have had similar experiences implementing pricing  policies to provide incentives to shift traffic to rail. For example, the Swiss  government implemented a HGV fee in 2001 on all roads to encourage  freight traffic to shift from road to rail. This policy similarly resulted in  improved efficiency because the trucking industry adapted its fleet and  replaced some high emission vehicles with new lower emission vehicles.  According to Swiss Federal Office of Transport documentation, HGV  traffic through the Swiss Alps also decreased compared with what it  would have been without introduction of the fee. However, to fully assess  the magnitude of benefits of these types of tolling policies, these  improvements would need to be weighed against the costs of  implementing the policy, and this type of analysis has not been conducted.
Freight rail operations and capital support: The United Kingdom’s  Department for Transport uses two grant programs providing financial  support for specific rail freight projects to encourage mode shift and  provide congestion relief, based on the view that road freight generally  does not pay its share of the significant external costs that it creates. The  department’s Mode Shift Revenue Support scheme provides funding for  operational expenses and the Freight Facilities Grant program  supplements capital projects for freight infrastructure. The British  government’s experience with these policies—which draw from a  relatively small pool of annual funding and are intentionally designed to  serve a targeted market—led to localized benefits for particular segments  of the freight transport market in specific geographic locations such as  congested bottlenecks near major ports. An evaluation of the Freight  Facilities Grants program found that the program funding played an  important role in developing or retaining rail freight flows, traditionally  focused on bulk commodities. According to officials we met with, the  grants from the Mode Shift Revenue Support scheme encourage mode  shift principally for the economically important and growing intermodal  container market and have been successful in reducing congestion on  specific road freight routes because the program focuses on container  flows from major ports (in which rail now has a 25 percent market share).  These officials noted that, out of approximately 800,000 truck journeys  removed from the road as a result of the grants from the Mode Shift  Revenue Support scheme, between 2009 and 2010, 450,000 trucks were  removed from England’s largest port—the Port of Felixstowe. Therefore,  officials said the grants appear to have led to a decrease in truck traffic  concentrated in specific locations for a particular segment of the freight  transport industry.
Intercity passenger rail infrastructure investments: Few  postimplementation studies have been conducted to empirically assess the  benefits resulting from investment in high-speed intercity passenger rail.  Based on our previous work, some countries that have invested in new  high-speed intercity passenger rail services have experienced discernable  mode shift from air to rail where rail is trip-time competitive. For example,  the introduction of high-speed intercity rail lines in France and Spain led  to a decrease in air travel with an increase in rail ridership, and Air France  officials estimated that high-speed rail is likely to capture about 80 percent  of the air-rail market when rail journey times are between 2 and 3 hours.  For example, with the introduction of the Madrid-Barcelona high-speed  rail line in February 2008, air travel dropped an estimated 30 percent. In  France, high-speed rail has captured 90 percent of the Paris-Lyon air-rail  market. While discernible mode shift has been observed, the extent to  which net benefits were achieved is unclear. Factors such as the  proportion of traffic diverted from air or conventional rail versus newly  generated traffic affect the extent of benefits. Furthermore, quantifying  any resulting environmental benefits, such as reduced greenhouse gas  emissions, or assessing the extent to which these benefits exceed the costs  associated with developing these new high-speed rail routes is difficult.  Some evaluations have been conducted in Spain and France and have  indicated that net benefits were less than expected due to higher costs and  lower than expected ridership, although, in France, the evaluations still  found acceptable financial and social rates of return.
Policies that provide incentives to shift passenger and freight traffic to rail  offer the opportunity to attain a range of benefits simultaneously, but a  variety of complicating factors can have a significant impact on the extent  to which these benefits may be attained. In addition, if these policies are  unable to generate the ridership or demand necessary to shift traffic from  other modes to rail, the potential benefits may be further limited. While  officials from some European countries we visited indicated that they have  attained benefits from policies intended to shift traffic to rail, gains have  been mixed, and the extent of benefits attained has depended on the  specific context of policy implementation in each location, as the benefits  realized are directly related to the particulars of each project.  Furthermore, it is not always clear that the policy goals were feasible to  begin with or that mode shift would have been the most cost-effective way  to achieve the benefits sought. Some officials and stakeholders we met  with told us that it is very difficult to attribute causation and draw  conclusions regarding the effectiveness of transportation policy tools  because so many factors are at play and may change simultaneously. In  some cases, officials cannot determine the full extent of benefits or link  impacts to a given policy with certainty, making it difficult for decision  makers to know what to expect from future policies being considered or  developed.
In the next section, we look at two recent U.S. investment programs that  awarded grant funding to freight and intercity passenger rail projects.  Although neither of these programs were adopted for the specific purpose  of shifting passenger or freight traffic to rail, both programs do seek to  attain benefits, such an economic development and environmental  benefits, by investing in rail. As previously noted, the degree to which  benefits can be generated depends on a variety of factors, including the  ability to attract riders or freight shipments either through mode shift or  new demand. We discuss how applicants assessed the potential benefits  and costs of their specific projects, based on the particular circumstances  of each project, and the usefulness of those assessments for federal  decision makers in making their investment decisions.
section_title: Grant Applicants’ Assessments of Project Benefits and Costs Are of Varying Quality and Usefulness to Decision Makers
subsections: section_title: Grant Applicants’ Assessments of Project Benefits and Costs Were Not Comprehensive in Many Respects
paragraphs: According to DOT officials from both programs, as well as our assessment  of 40 randomly selected rail-related TIGER and HSIPR applications,  information on project benefits and costs submitted by applicants to the  TIGER and HSIPR programs varied in both quality and  comprehensiveness. While a small number of analyses of project benefits  and costs were analytically strong—with sophisticated numerical  projections of both benefits and costs and detailed information on their  data and methodology—many others (1) did not quantify or monetize  benefits to the extent possible, (2) did not appropriately account for  benefits and costs, (3) omitted certain costs, and (4) did not include  information on data limitations, methodologies for estimating benefits and  costs, and uncertainties and assumptions underlying their analyses.
First, the majority of applications we assessed contained primarily  qualitative discussion of project benefits, such as potential reductions in  emissions, fuel consumption, or roadway congestion, which could have  been quantified and monetized. For instance, while 36 of the 40  applications we assessed included qualitative information regarding  potential reductions in congestion, 20 provided quantitative assessments  of these benefits, and 13 provided monetary estimates. This pattern was  consistent across categories of benefits we assessed; however, some  categories of impacts, such as safety and economic development, were  even less frequently quantified. While federal guidelines, including  Executive Order No. 12893, allow for discussion of benefits in a qualitative  manner, they note the importance of quantifying and monetizing benefits  to the maximum extent practicable. However, in some cases, certain  categories of impacts may be more difficult to quantify than others and  qualitative information on potential benefits and costs can be useful to  decision makers.
Second, common issues identified by DOT economists in the applications  they assessed included failure to discount future benefits and costs to  present values or failure to use appropriate discount rates, double  counting of benefits, and presenting costs only for the portion of the  project accounted for in the application while presenting benefits for the  full project. Similarly, 33 of the 40 applications we assessed did not use  discount rates as recommended in OMB Circular No. A-94 and OMB  Circular No. A-4. Further, DOT economists who reviewed assessments of  project benefits and costs contained in selected TIGER applications stated  that many applicants submitted economic impact analyses—which are  generally used to assess how economic impacts would be distributed  throughout an economy but not for conducting benefit-cost analysis of  policy alternatives. Economic impact analyses may contain information  that does not factor into calculations of net benefits, such as tax revenue  and induced jobs, and do not generally include information on other key  benefits that would be accounted for in a benefit-cost analysis, such as  emissions reduction or congestion relief. Applicants’ focus on economic  impacts in their assessments of project benefits may have stemmed from  additional funding criteria that DOT identified for both programs related  to job creation and economic stimulus, as well as decision makers’ focus  on these issues at the state and local levels.
Third, important costs were often omitted from applications. In many  cases, applicants would estimate a benefit, but not account for associated  costs, such as increased noise, emissions, or potential additional accidents  from new rail service. For instance, applicants often counted emission  reduction benefits from mode shift to rail as a benefit but did not include  corresponding increases in emissions from increased rail capacity and  operation in their calculations of net benefits. Our assessments of TIGER  and HSIPR applications found that of the applicants who projected  potential safety or environmental benefits for their projects, only three  applicants addressed potential safety costs, and only four applicants  addressed potential environmental costs.
Finally, we also found that analyses of benefits and costs in many  applications consistently lacked other key data and methodological  information that federal guidelines such as OMB Circular No. A-94 and  OMB Circular No. A-4 recommend should be accounted for in analyses of  project benefits and costs. Notably, the majority of the applications to  the TIGER and HSIPR programs that we reviewed did not provide  information related to uncertainty in projections, data limitations, and the  assumptions underlying their models. While a small number of  applications we assessed provided information in all of these areas, 31 out  of 40 did not provide information on the uncertainty associated with their  estimates of benefits and costs, 28 out of 40 did not provide information on the models or other calculations used to arrive at estimates of benefits and  costs, and 36 out of 40 did not provide information on the strengths and  limitations of data used in their projections. Furthermore, of those that did  provide information in these areas, the information was generally not  comprehensive in nature. For example, multiple applications provided  information on the models or calculations used to quantify or monetize  benefits, but did not do so for all the benefit and cost calculations included  in their analysis.
section_title: Short Time Frames, a Lack of Clear Standard Values, and Data Limitations Contributed to the Inconsistent Quality and Limited Usefulness of Assessments of Project Benefits and Costs
paragraphs: Applicants, industry experts, and DOT officials we spoke with reported  that numerous challenges related to performing assessments of the  benefits and costs of intercity passenger or freight rail projects can  contribute to variation in the quality of assessments of project benefits and  costs in applications to federal programs such as the TIGER and HSIPR  programs. These challenges include (1) limited time, resources, and  expertise for performing assessments of project benefits and costs; (2) a  lack of clear guidance on standard values to use in the estimation of  project benefits; and (3) limitations in data quality and access. These  challenges impacted the usefulness of the information provided for  decision makers, and, as a result, changes have been made or are being  considered for future rounds of funding.
subsections: section_title: Time, Resources, and Expertise
paragraphs: Performing a comprehensive assessment of a proposed project’s potential  benefits and costs is time and resource intensive and requires significant  expertise. According to experts, a detailed and comprehensive benefit-cost  analysis requires careful analysis and may call for specialized data  collection in order to develop projections of benefits and costs. The short  time frames for assembling applications for the TIGER and HSIPR  programs—which were designed to award funds quickly in order to  provide economic stimulus—may have contributed to the poor quality of  many assessments. In addition, according to DOT officials, many  applicants to the TIGER and HSIPR programs may not have understood  what information to include in their analyses. The recent nature of federal  requirements for state rail planning means that states are still building  their capacity to perform complex analyses to assess rail projects and, in  many cases, rail divisions within state departments of transportation are  very small. State rail divisions often face funding and manpower issues  since there is typically no dedicated state funding for rail services, and  state transportation planning has historically focused more on highway  projects. As a result, some applicants to competitive federal grant  programs may have more capacity to perform assessments of project  benefits and costs than others. For example, according to DOT officials,  freight railroads have more resources to devote to developing models and  estimating potential project benefits and costs.
section_title: Valuing Benefits
paragraphs: Standard values to monetize some benefits are not yet fully established,  which can create inconsistency in the values used by applicants in their  projections. While DOT has published guidance on standard estimates for  the value of travel time and the value of a statistical life—which can be  used to estimate the value of congestion mitigation efforts and safety  improvements, respectively—values for other benefits are less clear. For  instance, according to DOT officials, uncertainties associated with  analyzing the value of time for freight shipment prevents DOT from issuing  specific guidance in this area. In addition, there are substantial  uncertainties associated with analyzing the value of many benefits, such as  reduction in greenhouse gas emissions. While mode shift to rail may  reduce pollution and greenhouse gas emissions, experts do not agree on  the value to place on that benefit. DOT has issued guidance on values for  use in calculating the social benefits of pollutant emissions, however  according to modeling experts we interviewed, disagreement regarding  how to value different benefits can lead some analysts to limit their  assessments of benefits and costs to only that which can be monetized,  while others may include all categories of benefits and costs in their  assessment. As a result, some TIGER and HSIPR applicants may have used  differing values to monetize projected benefits and costs, while others did  not monetize benefits at all. Without clear guidance to applicants on  preferred values for use in assessments of project benefits and costs, DOT  decision makers may be hindered in their ability to compare the results of  assessments of benefits and costs across projects or across modes. A  standard set of values for key benefit categories may enable transportation  officials to more readily compare projects and potentially place more  weight on the results of assessments of project benefits and costs in their  decision-making processes.
section_title: Data Quality and Access
paragraphs: According to DOT officials, historically lower levels of state and federal  funding for rail compared with other modes of transportation have  contributed to data gaps that impact the ability of applicants to project  benefits and costs for both intercity passenger rail and freight rail projects.  For instance, lack of data on intercity passenger travel demand made it  difficult for some applicants to the HSIPR program to quantify potential  benefits for some new high-speed rail lines. The lack of data may be  related to cuts to federal funding for the Bureau of Transportation  Statistics resulting in a decreased emphasis on the collection of rail-related  data. Multiple state and association officials stated that previous state and  national surveys of travel behavior did not capture traveler purposes for  intercity travel and did not have a sufficient number of intercity traveler  responses for use in travel modeling. In addition, lack of access to  proprietary data on goods movement made it challenging for some  applicants to the TIGER program to quantify benefits that might be  associated with freight rail. According to officials from the California  Department of Transportation (Caltrans), when performing analyses to  estimate project benefits and costs, Caltrans employees had to manually  count freight trains for a 24-hour period in order to gather data for use in  their analyses. Furthermore, state transportation officials we spoke with  indicated that the quality of data available for use in projecting benefits  and costs of a project is often inconsistent. Officials we interviewed stated  that data included in assessments of project benefits and costs are often  from different years, contain sampling error, and may be insufficient for  their intended use. These limitations lessen the reliability of estimates  produced to inform transportation decision-making, as available data  provide critical inputs for travel models.
Modeling and forecasting limitations also make it harder to project shifts  in transportation demand and related benefits and costs accurately.  Benefit-cost analyses of transportation projects depend on forecasts of  projected levels of usage, such as passenger rail ridership or potential  freight shipments, in order to inform calculation of benefits and costs.  Limitations of current models and data make it difficult to predict changes  in traveler behavior, changes in warehousing and shipper behaviors for  businesses, land use, or usage of nearby roads or alternative travel options  that may result from a rail project. Since transportation demand modeling  depends on information on traveler or shipper preferences in order to  inform predictions, the lack of good intercity traveler and shipper demand  data greatly impacts the quality of projections, particularly for new  intercity passenger or freight rail service where no prior data exists to  inform demand projections.
section_title: Usefulness of Assessments of Benefits and Costs
paragraphs: As a result of the limitations described above, DOT officials stated that the  assessments of benefits and costs provided by TIGER and HSIPR  applicants were less useful to decision makers than anticipated. In general,  the majority of rail-related applications we reviewed that were forwarded  for additional consideration for the TIGER program contained  assessments of project benefits and costs that were either marginally  useful or not useful to DOT officials in their efforts to determine whether  project benefits were likely to exceed project costs. Overall, 62 percent  of forwarded rail-related applications had assessments of benefits and  costs that were rated by DOT economists as “marginally useful” or “not  useful,” and 38 percent had assessments that were rated as “very useful” or  “useful” (see fig. 4). However, DOT officials noted that railroads generally  did a better job with their benefit-cost analyses in their applications than  other modes.
While applicants to the HSIPR program were not required to conduct a  benefit-cost analysis, the Federal Register notice for the program stated  that information on benefits and costs provided by applicants would be  used by DOT to conduct a comprehensive benefit-cost analysis for  projects. However, according to FRA officials, the quality of the  information provided prevented DOT from being able to use the  information in this manner.
While it is possible to offset the impact of the limitations described above  and improve the usefulness of assessments of benefits and costs to  decision makers by providing clear information on assumptions and  uncertainty within analyses, as we stated above, very few TIGER and  HSIPR applicants did so. Without information on projection  methodologies and assumptions, DOT officials were not able to  consistently determine how demand and benefit-cost projections were  developed and whether the projections were reasonable. As a result,  officials for both programs focused on simply determining whether project  benefits were likely to exceed project costs, rather than a more detailed  assessment of the magnitude of projects’ benefits and costs in relation to  one another. See app. IV for a discussion of the challenges related to  assumptions and uncertainty we encountered during our attempt to use a  model to predict freight mode shift from truck to rail.
The varying quality and focus of assessments of project benefits and costs  included in both TIGER and HSIPR applications resulted in additional  work for DOT officials in order for DOT to be able to determine whether  project benefits were likely to exceed project costs. For example, DOT  officials stated that DOT economists for the TIGER program spent 3 to 4  hours per application examining whether it contained any improper  analysis techniques or other weaknesses, seeking missing information, and  resolving issues in the analyses. For the HSIPR program, a DOT economist  with subject matter expertise reviewed the demand forecasts provided by  selected Track 2 applicants, devoting significant time to assess the level  of risk the uncertainty in these projections was likely to pose to the  ultimate success of the project.
section_title: Recent Changes and Improvements to Program Guidance
paragraphs: In order to improve the quality of applicant assessments of project  benefits and costs, DOT economists identified limitations of the benefit- cost analyses submitted during TIGER I and used that information to  develop guidance for TIGER II. In the Federal Register notice for TIGER  II, DOT provided additional information to applicants regarding what  should be included in assessments of project benefits and costs. This  guidance included information on the differences between benefit-cost  analysis and economic impact analysis, assessment of alternatives in  relation to a baseline, discounting, forecasting, transparency and  reproducibility of calculations, and methods of calculating various benefits  and costs. As part of its guidance on assessing costs, DOT noted that  applicants should use life-cycle cost analysis in estimating the costs of  projects. For example, DOT guidance states that external costs, such as  noise, increased congestion, and environmental pollutants resulting from  construction or other project activities, should be included as costs in  applicants’ analyses. Furthermore, applicants should include, to the extent  possible, other costs caused during construction, such as delays and  increased vehicle operating costs.
FRA also plans to alter HSIPR requirements in order to increase the quality  of information on project benefits and costs provided by future applicants.  According to FRA officials, while applicants to the second round of HSIPR  funding were presented with similar guidelines for assessing project  benefits and costs as those provided in the first round, future HSIPR  applicants will be required to provide more rigorous projections of  ridership, benefits, and costs and to revise their assessments of project  benefits and costs based on their improved ridership projections. Officials  noted, however, that the process will be iterative and anticipated that  models for the high-speed rail program will improve as domestic historical  data on ridership becomes available over time. In addition, officials stated  that FRA plans to take steps to encourage consistency in the  methodologies grant applicants use to project demand, benefits, and costs.  For instance, FRA is currently in the preliminary stages of developing a  benefit-cost framework for states and localities, which represent the  majority of applicants to programs such as TIGER and HSIPR, to use in  assessing rail projects. Officials stated that FRA plans to issue guidance on  performing assessments of benefits and costs for passenger rail projects  when the framework is fully developed but did not provide a timeline for  its development.
While DOT officials for both programs have taken steps to improve the  quality of benefit-cost information and associated analyses in the short  term, other steps are necessary to improve quality over time. Some of  these additional steps, such as developing historical data for intercity  passenger rail demand, making improvements to forecasting and  modeling, and increasing accessibility and quality of key data, may take  more time. Nonetheless, improving the quality of benefit and cost  information considered for programs such as TIGER and HSIPR could  simplify the decision-making process and lend more credence to the merit  of the projects ultimately selected for funding.
section_title: Conclusions
paragraphs: Difficult and persistent problems face the U.S. transportation system  today. Our system is largely powered by vehicles that use fossil fuels that  produce harmful air emissions and contribute to climate change. Our  existing infrastructure is aging and, in many places, is in a poor state of  repair. Demand for freight and passenger travel will continue to grow, and  the growing congestion in urban areas and at key bottlenecks in the  system costs Americans billions of dollars in wasted time, fuel, and  productivity each year. Adding to these problems, expanding or improving  the efficiency of our existing road and air transportation networks has  proven difficult, costly, and time-consuming. Both the HSIPR and TIGER  programs provided a new opportunity to invest in rail—a mode that has  historically been underrepresented in the U.S. transportation funding  framework. Some see investment in rail infrastructure, along with other  policies designed to shift traffic to rail, as important to addressing these  problems, pointing to rail’s advantages over cars and freight trucks in  terms of energy efficiency, safety, and lower emissions. While investments  in rail or policies designed to shift traffic to rail may generate some  benefits—as occurred to some degree in the United Kingdom and  Germany—benefits must be weighed against direct project costs and other  costs (e.g., noise) to determine whether an investment or policy produces  overall net benefits. Further, close attention must be paid to the extent to  which freight and passenger travel can actually shift to rail from other  modes, given the choices available to, and the preferences of, travelers and  shippers.
While an assessment of benefits and costs is only one factor among many  in decision making regarding these investments and policies, a decision  maker’s ability to weigh information depends on the quality of benefit and  cost information provided by project sponsors—regardless of whether this  information is provided in a benefit-cost analysis or a more general  discussion or enumeration of benefits and costs. We found that many  TIGER and HSIPR applicants struggled to provide the benefit-cost  information requested or to use appropriate values designated for their  respective program. The lack of consistency and completeness in the  benefit-cost information provided makes it more difficult for decision  makers to conduct direct project comparisons or to fully understand the  extent to which benefits are achievable and the trade-offs involved. While  the shortened time frames of the programs and resource limitations among  project sponsors were key causes of the varying quality of analyses, data  limitations (including a lack of historical data—particularly with respect to  high-speed rail), data inconsistencies, and data unavailability also  accounted for some limitations in applicants’ benefit-cost information and  will continue to impact these analyses in future funding rounds. Until data  quality, data gaps, and access issues are addressed for the data inputs  needed for rail modeling and analysis, projections of rail benefits will  continue to be of limited use. In addition, almost no applicants discussed  limitations in their analysis, including the assumptions made and levels of  uncertainty in their projections. Only when assumptions and uncertainty  are conveyed in assessments of benefits and costs can decision makers  determine the appropriate weight to give to certain projections.
To its credit, DOT has provided more explicit guidance to TIGER  applicants in its second round of grant applications on how to meet  federal benefit-cost analysis guidelines. While such guidance should result  in improved quality of benefit-cost information provided for this program,  this guidance neither ensures consistency across analyses in terms of  common data sources, values, and models, nor will it have any impact on  how benefits and costs are evaluated across programs that invest in other  modes (such as the Federal-Aid Highway Program) which do not have a  benefit-cost analysis requirement. Providing more standardized values for  calculating project benefits and costs and developing a more consistent  approach to assessing project benefits and costs so that proposed projects  across modes may be more easily compared with one another can have  numerous benefits. For instance, standardized values and a consistent  approach allow for more confidence that projects and policies chosen will  produce the greatest benefits relative to other alternatives, give more  credence to investment decisions across programs and modes, and limit  DOT officials’ need to invest time and resources in order to use the  information as part of the decision making process. If benefit-cost  considerations are ever to play a greater role, DOT will need to look at  ways it can improve the quality and consistency of the data available to  project sponsors.
section_title: Recommendations for Executive Action
paragraphs: To improve the data available to the Department of Transportation and rail  project sponsors, we recommend that the Secretary of Transportation, in  consultation with Congress and other stakeholders, take the following two  actions:    Conduct a data needs assessment and identify which data are needed to  conduct cost-effective modeling and analysis for intercity rail, determine  limitations to the data used for inputs, and develop a strategy to address  these limitations. In doing so, DOT should identify barriers to accessing  existing data, consider whether authorization for additional data collection  for intercity rail travel is warranted, and determine which entities shall be  responsible for generating or collecting needed data.
Encourage effective decision making and enhance the usefulness of  assessments of benefits and costs, for both intercity passenger and freight  rail projects by providing ongoing guidance and training on developing  benefit and cost information for rail projects and by providing more direct  and consistent requirements for assessing benefits and costs across  transportation funding programs. In doing so, DOT should:   Direct applicants to follow federal guidance outlined in both the  Presidential Executive Order 12893 and OMB Circulars Nos. A-94 and  A-4 in developing benefit and cost information.
Require applicants to clearly communicate their methodology for  calculating project benefits and costs including information on  assumptions underlying calculations, strengths and limitations of data  used, and the level of uncertainty in estimates of project benefits and  costs.
Ensure that applicants receive clear and consistent guidance on values  to apply for key assumptions used to estimate potential project  benefits and costs.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided copies of our draft report to DOT, Amtrak and EPA for their  review and comment. DOT provided technical comments and agreed to  consider the recommendations. Amtrak and EPA provided technical  comments, which we incorporated as appropriate.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, the Secretary of Transportation,  the Administrator of the Federal Railroad Administration, Amtrak, EPA,  the Director of the Office of Management and Budget, and other interested  parties. The report also will be available at no charge on the GAO Web site  at http://www.gao.gov.
If you or your staff members have any questions about this report, please  contact me at (202) 512-2834 or flemings@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff who made major contributions to this  report are listed in appendix V.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: To better understand the potential net benefits of intercity passenger and  freight rail, we examined (1) the extent to which transportation policy  tools that provide incentives to shift passenger and freight traffic to rail  may generate emissions, congestion, and economic development benefits  and (2) how project benefits and costs are assessed for investment in  intercity passenger and freight rail and how the strengths and limitations  of these assessments impact federal decision making.
subsections: section_title: Interviews
paragraphs: We conducted interviews with the Department of Transportation (DOT),  the Environmental Protection Agency (EPA), and Amtrak. We also  interviewed representatives from transportation coalitions and  associations, metropolitan planning organizations, state DOTs, and  transportation consultants. Interviews with officials were in regards to  methods to assess the benefits and costs of transportation investments  and the limitations and challenges to assessing benefits. We also  conducted interviews with officials from the High-Speed Intercity  Passenger Rail (HSIPR), the Transportation Investment Generating  Economic Recovery (TIGER), and Transportation Infrastructure Finance  and Innovation Act (TIFIA) programs to gather insights into the usefulness  of the cost-benefit study information in decision making. In addition to  interviews with agency officials, interviews were conducted in three rail  corridors (California, Midwest, and the Northeast) to ascertain additional  information on challenges associated with conducting and communicating  findings from benefit and cost assessments to decision makers. These  interviews involved applicants and other corridor stakeholders who had  applied to either or both the HSIPR and TIGER grant programs. Similarly,  some of our interviews with organizations in the rail corridors included  consultants such as Cambridge Systematics and Parsons Brinckerhoff  which were involved in the development of studies for corridors.  Following is table 3 with a list of selected organizations whose officials  and representatives we interviewed.
section_title: Study Review
paragraphs: We reviewed our prior reports and documentation from an array of  sources, including the DOT Inspector General, Congressional Research  Service, and Congressional Budget Office. In addition, we identified  studies through our interviews with stakeholders and conducted an  extensive systematic search of literature published in the last 15 years. We  reviewed this information to identify studies that analyzed the benefits and  costs of intercity passenger and freight rail, mode shift to intercity  passenger or freight rail, or the potential net benefits that could be  attained through mode shift. In general, we did not find a sufficient  number of available studies that adequately addressed our researchable  questions, had an appropriate scope, or utilized empirically reliable  methodologies. As a result, we used the studies and information we  reviewed to inform the engagement as a whole and provided examples and  illustrations of the potential costs and benefits that may be attained from  policies that provide incentives to shift traffic to rail. In addition, we  conducted case studies in the United Kingdom and Germany and asked  officials to synthesize their experiences based on their professional  judgment and data. Officials we met with also confirmed that it is difficult  to causally link policy interventions to specific outcomes.
section_title: Assessment of HSIPR and TIGER Applications’ Cost and Benefit Information
paragraphs: We reviewed and assessed information on potential project benefits and  costs included in selected applications to the HSIPR grant program and  the Grants for TIGER grant program—20 applications from each grant  program. We selected a nongeneralizable random sample of 40  applications from a larger pool of HSIPR and TIGER applications that we  identified as including components related to intercity passenger rail or  freight rail. For HSIPR, we included all applications submitted under  Track 2 of the program, which focused on intercity passenger rail projects,  in our selection pool, while for TIGER, we included all applications  requesting more than $20 million that included components related to  intercity passenger rail or freight rail in project descriptions provided by  DOT. Twenty applications from each grant program were randomly  selected for our review. The random sample of applications was weighted  to ensure approximately proportional representation of applications from  both programs that were awarded funding by DOT to those that were not  awarded funding by DOT and, for the TIGER program, weighted to ensure  approximately proportional representation of applications that were  selected by DOT for additional review during DOT’s application review  process to those that were not selected by DOT for additional review.
Information pertaining to project benefits and costs in each of the 40  randomly selected applications was independently reviewed by two of our  analysts based on Office of Management and Budget (OMB) guidelines for  benefit-cost analysis and input from our economists and methodologists.  Application information assessed by our analysts included whether  benefits and costs related to congestion mitigation, emissions reduction,  and economic development were assessed qualitatively, quantitatively, or  were monetized. In addition, analysts identified whether applications  included information on a number of key methodological elements  identified by OMB and in our prior work. Any discrepancies in findings by  the two analysts were reconciled for the final assessment.
section_title: International Case Studies: The United Kingdom and Germany
paragraphs: We conducted case studies of selected policies and programs in the United  Kingdom and Germany to learn more about policies to address concerns  about emissions, congestion and economic development. These two  countries were chosen based on a number of criteria, including experience  in implementing capacity enhancing and demand management policy tools  in order to encourage mode shift to rail and attain potential benefits. We  reviewed studies and reports on policy tools used in these countries and in  the European Union. We interviewed officials from the United Kingdom’s  Department for Transport and Germany’s Ministry of Transport, Building  and Urban Development. In addition, we interviewed officials in the  German Federal Ministry of Finance and Ministry for the Environment,  Nature Conservation and Nuclear Safety, as well as the United Kingdom’s  National Audit Office. We also met with representatives from rail industry  organizations and rail companies and stakeholder groups from these  countries. For more information, see appendix II.
section_title: Computer Simulations of Freight Diversion from Truck to Rail
paragraphs: We conducted our own simulation of transportation policy scenarios on  mode choice for freight shipments. Disaggregated data from the Freight  Analysis Framework (FAF) was analyzed to obtain the distance traveled  for shipments across commodity and truck types. Then this data from  FAF, along with aggregated data on underlying assumptions, were used as  inputs into the Intermodal Transportation and Inventory Cost Model  (ITIC). This model estimates mode choices for each shipment under  baseline conditions and various policy scenarios. See appendix IV for  additional discussion of the simulations.
We reviewed technical documentation associated with both of these  models. We also conducted interviews with officials at DOT to better  understand any data limitations or reliability issues with the model and  data inputs. For more information see appendix IV.
section_title: Appendix II: International Case Study Summaries: The United Kingdom and Germany
subsections: section_title: The United Kingdom
subsections: section_title: Background
paragraphs: The United Kingdom’s Department for Transport sets the strategic  direction for the railways and Network Rail owns and operates Britain’s  rail infrastructure. Network Rail is a private corporation run by a board of  directors and composed of approximately 100 members—some rail  industry stakeholders and some members of the general public. Freight  and passenger operators pay access charges to Network Rail for access to  the rail tracks. In the United Kingdom, freight and passenger rail share  many of the same tracks. The system is open to competition through  passenger rail franchises and through “open access” provisions for freight  and other new passenger services.
section_title: Transportation Project Planning Process
paragraphs: The Department for Transport’s current approach to transportation policy  planning emphasizes the assessment of a range of options driven by the  desire to push transportation as a means to improve general economic  performance, as well as environmental and societal goals. The Department  for Transport plans and develops freight and intercity passenger rail  projects based on a 5-year planning cycle, referred to as a Control Period.  The last Control Period covering 2009-2014 resulted in plans to invest £6.6  billion (at 2010/2011 prices) in capacity enhancements for the passenger  and freight rail system and strategic rail freight network. The 5-year cycle  is intended to identify, develop, and prioritize policy interventions and  investment decisions, reflecting the long-term nature of the transportation  sector. The Department for Transport publishes High Level Output  Specifications and Statements of Funds Available, reflecting what types of  rail projects the government wants to buy based on the government’s  transport goals and objectives and how much money it has to spend on  those projects. Network Rail selects and implements projects to meet the  High Level Output Specifications and outlines planned projects in a  detailed delivery plan. All potential United Kingdom transportation  projects are required to undergo standardized assessment processes to  evaluate benefits and costs through the Web-based Transport Appraisal  Guidance, which includes guidance on benefit-cost analysis for major  transportation projects, including information on comparisons of  proposed projects to alternatives, data sources for use in analyses, and  methods for quantifying benefits and costs and performing sensitivity  analysis.
section_title: Selected Policy Tools
paragraphs: The Department for Transport has developed and implemented a range of  policies to encourage a shift to rail transport. We explored some of these  policies—in figure 5 below—during our site visits in the United Kingdom.
Recent and planned high-speed rail projects (HS1 and HS2)—The  Channel Tunnel Rail Link—referred to as HS1—is the United Kingdom  portion of the route used by the Eurostar services from London to Paris  and Brussels and was completed in 2007. The 109-kilometer Channel  Tunnel Rail Link was the first major new railway to be constructed in the  United Kingdom for over a century and the first high-speed railway. In  2009, the government began to develop plans for a new dedicated high- speed passenger rail line—HS2. The current government plans to begin a  formal consultation process in 2011 and hopes to begin construction on  the new high-speed line by 2015.
Mode shift revenue support scheme—This program provides funding to  companies for operating costs associated with shipping via rail or inland  water freight instead of road. It is intended to facilitate and support modal  shift, as well as generating environmental and wider social benefits from  having fewer freight shipments on Britain’s roads.
Freight facilities grants—These grants provide support for freight  infrastructure capital projects such as rail sidings or loading and unloading  equipment. Funding is granted on the principle that if the facilities were  not provided, the freight in question would go by road. Applicants must  predict the type and quantity of goods that will use the proposed facility  and demonstrate that the freight facility will secure the removal of freight  trucks from specific routes. The program has been available since the  1970s, and it has a long history of providing funding for capital  infrastructure.
section_title: Germany
subsections: section_title: Background
paragraphs: In Germany, the Federal Ministry of Transport, Building and Urban  Development (Ministry of Transport) is responsible for financing the  development and maintenance of the country’s intercity passenger and  freight rail network. Germany has the largest rail network in Europe, and  both the intercity passenger and freight rail systems are open to  competition. The majority of the rail system in Germany is managed by a  single infrastructure provider—Deutsche Bahn. The German government  provides Deutsche Bahn with approximately €3.9 billion a year in  investment grants for infrastructure renewal, upgrades, and new projects;  freight and passenger operators pay access charges to Deutsche Bahn for  access to the rail tracks. In addition to serving as the railway  infrastructure provider, Deutsche Bahn also provides much of the intercity  passenger and freight logistics service in Germany. Passenger and freight  rail usually share the same track in Germany which, according to German  transport officials, can enhance the efficiency of the network. However,  sharing the same network also impacts the overall capacity available to  accommodate new passenger or freight traffic.
section_title: Transportation Project Planning Process
paragraphs: The Ministry of Transport develops a Federal Transport Infrastructure  Master Plan approximately every 10 years to set the long-term strategic  policy direction for both passenger and freight transportation. These  infrastructure plans describe projects required to cope with the forecast  traffic development. The goals and objectives of these long-term plans are  then translated into 5-year plans—Federal Transport Infrastructure Action  Plans—which are then used to develop new projects. After determining  short-term transportation priorities and developing action plans intended  to align with long-term goals, all potential rail projects undergo  standardized assessment processes to evaluate benefits and costs. As the  primary infrastructure manager for the rail network in Germany, Deutsche  Bahn maintains rail data sets that allow officials to generate consistent  estimates of project benefits and costs with confidence, facilitated by  centralized data collection. The rail infrastructure planning process is  currently under way, and officials at the Ministry of Transport have just  reviewed requirement plans for rail infrastructures projects—a process  that occurs every 5 years—in order to complete and release an updated  Action Plan.
section_title: Selected Policy Tools
paragraphs: Germany’s Ministry of Transport has developed and implemented a range  of policies that may encourage a shift to rail transport. We explored some  of these policies—in figure 6 below—during our site visits in Germany.
Upgrade and maintain the rail network—The German government has  committed to investing annually in projects to upgrade and renew the  existing high-speed and passenger rail network. Each year, the German  government invests approximately €3.9 billion to renew the existing rail  infrastructure and to construct, upgrade, or extend rail infrastructure.
Vehicle mineral oil (fuel) tax—Between 1999 and 2003, the German  government began to implement routine, annual increases in the vehicle  fuel tax for the explicit purpose of curbing car use and promoting the  purchase of more fuel-efficient vehicles. Diesel is now taxed at  approximately 47 euro cents a liter, and gas is taxed at 65 euro cents a  liter, generating approximately €39 billion in revenue in 2009 for the  general tax fund.
Heavy Goods Vehicle (HGV) tolls—Germany implemented a distance- based HGV toll in 2005, in part to support an explicit goal of shifting a  portion of freight traffic to rail. The policy generated approximately €4.4  billion revenue in 2009, which was primarily used to maintain and upgrade  the road network. This policy was viewed as imposing additional costs on  the business community, and the new government has said it will not raise  the toll rates or expand the tax to passenger vehicles in this legislative  period.
section_title: Appendix III: HSIPR and TIGER Discretionary Grant Program Information
paragraphs: The American Reinvestment and Recovery Act of 2009 (Recovery Act)  provided $8 billion to develop high-speed and intercity passenger rail  service, funding the Passenger Rail Investments and Improvement Act  (PRIIA), which was enacted in October 2008. The funding made available  is significantly more money than Congress provided to fund rail in recent  years. The Federal Railroad Administration (FRA) launched the high-speed  and intercity passenger rail (HSIPR) program in June 2009 with the  issuance of a notice of funding availability and interim program guidance,  which outlined the requirements and procedures for obtaining federal  funds. and in January 2010 FRA announced the selection of  62 projects in 23 states and the District of Columbia.
FRA allowed applicants to the HSIPR program to submit applications to be  evaluated under four funding tracks. See table 4 below.
Applications were evaluated by technical evaluation panels against three  categories of criteria: (1) public return on investment across categories of  benefits including transportation benefits, economic recovery benefits,  and other public benefits; (2) project success factors, such as project  management approach and sustainability of benefits, as assessed by  adequacy of engineering, proposed project schedule, National  Environmental Policy Act compliance, and thoroughness of management  plan; and (3) other attributes, such as timeliness of project completion.  Projects were rated on a scale of 1 point to 5 points, with 1 point being the  lowest, and 5 points being the highest, based on the fulfillment of  objectives for each separate criterion.
Using the best available tools, applicants were required to include benefit  and cost information for the following three general categories of benefits:    Transportation benefits, which include improved intercity passenger  service, improved transportation network integration, and safety benefits;   Economic recovery, which includes preserving and creating jobs  (particularly in economically distressed areas); and   Other public benefits, such as environmental quality, energy efficiency,  and livable communities.
Final project selections were made by the FRA Administrator building  upon the work of the technical evaluation panels and applying four  selection criteria specified in the Federal Register notice: (1)  region/location, including regional balance across the country and balance  among large and small population centers; (2) innovation, including  pursuit of new technology and promotion of domestic manufacturing; (3)  partnerships, including multistate agreements; and (4) tracks and round  timing, including project schedules and costs.
The Recovery Act also appropriated $1.5 billion for discretionary grants to  be administered by DOT for capital investments in the nation’s surface  transportation infrastructure. These grants were available on a  competitive basis to fund transportation projects that would preserve and  create jobs and provide long-term benefits, as well as incorporate  innovation and promote public-private or other partnership approaches. In  making awards, the legislation required DOT to address several statutory  priorities, including achieving an equitable geographic distribution of the  funds, balancing the needs of urban and rural communities, prioritizing  projects for which a TIGER grant would complete a package of funding,  and others. In December 2009 Congress appropriated $600 million to DOT  for a “TIGER II” discretionary grant program, which was similar to the  TIGER program’s structure and objectives.
Eligible projects included highway or bridge projects, public  transportation, passenger and freight rail projects, and port infrastructure  projects. The TIGER program established three categories of project  applications based on the amount of federal funding sought and three sets  of criteria to determine grant awards in each project application category:    Primary selection criteria: Long-term outcomes, such as state of good  repair, evidence of long-term benefits, livability, sustainability, safety, and  job creation and economic stimulus.
Secondary selection criteria: Priority to projects that use innovative  strategies to pursue long-term outcomes and those that demonstrate  strong collaboration among a broad range of participants. Secondary  selection criteria were weighted less than primary selection criteria in the  application review process.
Program-specific criteria: Program-specific information was used as a tie  breaker to differentiate between similar projects. This information was  only applied to projects in the following categories: bridge replacement,  transit projects, TIGER-TIFIA payment projects, and port infrastructure  projects.
section_title: Appendix IV: Computer Simulations of Freight Diversion from Truck to Rail
paragraphs: In general, quantifying benefits that may be attained through rail can be  challenging, in part, because of data limitations. In order to both estimate  the extent to which freight shipments might be diverted from truck to rail  under various scenarios and identify challenges related to making such  estimates, we conducted simulations using a computer model developed  by DOT. We sought to estimate the number of diverted truck freight  shipments under scenarios that increased the price or decreased the speed  of freight shipments by truck as compared with rail.
subsections: section_title: ITIC Model
paragraphs: The Intermodal Transportation Inventory Cost (ITIC) model is a computer  model for calculating the costs associated with shipping freight via  alternative modes, namely truck and rail. The model can be used to  perform policy analysis of issues concerning long-haul freight movement,  such as diversion of freight shipments from truck to rail. DOT provides  the ITIC model framework as a useful tool for ongoing policy studies, and  shares the model, along with some internally developed data, for this  purpose. We chose to use the ITIC model to simulate mode shift from  truck to rail because of its federal origins and its direct applicability to  freight shipments.
The ITIC model—of which we used the highway freight to rail intermodal  version—predicts diversion from truck to rail by assuming that shippers  will select the mode of transportation with lower total shipment cost. The  model replicates the decision-making trade-offs made by shippers in  selecting which transportation mode to use for freight shipments. The  model estimates the total cost—including both transportation and logistics  costs—required to ship freight by both truck and rail for a given type of  commodity and a given county-to-county route. Transportation costs  include the costs associated with the actual movement of commodities,  such as loading and unloading freight, and logistics costs represent a range  of other costs, such as loss and damage of the freight, safety stock  carrying cost, and capital cost on claims (see fig. 8 for the components of  these costs).
In order to estimate diversions of freight shipments from truck to rail, the  ITIC model runs in two steps. First, the model establishes a baseline that  can be used for comparison against each of the simulated scenarios. To do  this, the ITIC model requires input data on actual truck freight shipments  that it uses to calculate total cost to ship each type of commodity for each  county-to-county pair for both truck and rail. After generating a base case,  diversion of freight from truck to rail can be estimated for various  scenarios by changing the input assumptions to the model. As these  assumptions are changed, the model reestimates the transportation and  logistics costs for both truck and rail and determines whether these  estimated changes have made rail a lower cost option for any of the  shipments that were originally sent by truck. The model assumes that  shipments will switch from truck to rail if the total cost for making a  shipment by rail is lower than the total costs for making a shipment by  truck.
section_title: Reliability of Model Inputs
paragraphs: A lack of reliable data for a number of major ITIC model inputs at the  national level prevented us from fully assessing the uncertainty associated  with estimates of freight diversion from truck to rail. As a result, we are  unable to report on the confidence levels of the results of our simulations.  The ITIC model is based on 26 inputs (see table 6 for a complete list of  ITIC model inputs). For our national analysis, empirical data were  available for 9 of the inputs; accordingly, we had to rely on the  preprogrammed model assumptions for the remaining 17 inputs. Using  these 26 inputs, the model made 24 calculations (see table 7 for full list of  ITIC model calculations), 22 of which relied on at least one of the model’s  17 default assumptions (see table 5 below).
To determine whether the available data and model assumptions were  reliable for our purposes, we considered some important factors for  assessing data reliability, including their relevance, completeness,  accuracy, validity, and consistency. We found that the data and the basis  for assumptions used in the ITIC model vary in terms of the following  factors.
Relevance: The 26 ITIC model inputs are relevant for the purposes of  determining total transportation and logistics costs. These inputs have  been shown to be conceptually important because they reflect economic  theory underlying shipper choices, include a range of factors specified in  the literature on freight shipments, and provide default assumptions based  on theory and professional expertise.
Completeness: Completeness refers to the extent that relevant records are  present and the fields in each record are populated appropriately. We were  unable to obtain complete national data for 20 ITIC model inputs. Of these  20 inputs, partial data were available for 3. For the remaining 17 inputs,  we were unable to obtain any empirical data and consequently relied on  the default assumptions that are provided in the model itself. However,  without a reliable source of available data against which to judge the  accuracy and validity of these assumed values, we could not determine  how much uncertainty the assumptions added to any estimates produced  by the model.
Accuracy: Accuracy refers to the extent that recorded data reflect the  actual underlying information. Of the 26 ITIC model inputs, we were  unable to verify the accuracy for 20, including all 17 assumptions, as well  as available truck rate data and 2 inputs (weight per cubic foot and value  per pound of each commodity group) provided by FRA. FRA officials  stated that they originally generated these input values using empirical  data, but were unable to provide documentation of their analysis. We were  therefore unable to judge the accuracy of the resulting data, or the level of  uncertainty associated with estimates produced from FRA’s data.
Validity: Validity refers to an input correctly representing what it is  supposed to measure. Of the 26 ITIC model inputs, we were unable to  verify the validity for 18, including all 17 default assumptions and available  truck rate data. For the latter, we used the source of data previously used  by the Federal Highway Administration, a proprietary collection of truck  rates from 2006 for 120 city pairs. Documentation of the collection  methods was unavailable, and we were not able to validate or assess the  data for reliability, and thus could not estimate the uncertainty associated  with per-mile truck rates. Because this value is a primary driver of total  transportation and logistics costs, the uncertain reliability of truck rate  data was a major limitation to using the model’s estimates.
Consistency: Consistency is a subcategory of accuracy and refers to the  need to obtain and use data that are clear and well defined enough to yield  similar results in similar analyses. Of the 26 ITIC model inputs, we  identified consistency issues for 7 data inputs. For example, truck rate  data were collected in 2006, and data on truck shipments were from 2002,  making it problematic to compare these figures. For the other 6 inputs, we  encountered different levels of data aggregation for data that we had  otherwise deemed reliable. For example, the FAF collects regional data,  while the FRA lookup tables for certain truck and rail origin and  destination miles are collected at a county level. In order to use both  sources of data, the FAF data had to be disaggregated for use at the county  level, and our disaggregation method adds additional uncertainty to our  estimates.
section_title: Reliability of Model Estimates
paragraphs: In order to better understand the impact of uncertainty in the ITIC model’s  estimates caused by use of assumptions and data of questionable  reliability, we examined how the model’s estimates change when key  underlying assumptions were varied. In particular, we used the model to  simulate the impact that a 50-cent increase in per-mile truck rates would  have on vehicle miles traveled (VMT) under two scenarios: the first  scenario uses the model’s default values for all assumptions, including  truck speeds of 50 miles per hour, freight loss and damage as a percentage  of gross revenue equal to 0.07 percent, and a reliability factor equal to 0.4;  the second scenario changes these three assumptions to respective values  of 40 miles per hour, 0.10 percent freight loss and damage, and reliability  factor equal to 0.5. Each of these changes creates a higher total cost for  trucks, potentially leading the model to predict some additional diversion  to rail. However, for these sensitivity analyses, we are more concerned  with the impact of changing truck rates under the alternative scenarios  than we are with the individual impacts of changing assumptions.
For a 50-cent increase (approximately 30 percent of per mile truck rates)  in the first scenario, the model estimates a reduction in VMT of about 1.02  percent. For the same reduction in rates in the second scenario, the model  estimates a reduction in VMT of about 1.04 percent. Figure 7 shows the  estimated percentage reduction in VMT associated with increased per-mile  truck rates for the two scenarios. Under either scenario, the impact of  increasing per-mile truck rates by approximately 30 percent results in  decreases of roughly 1 percent of VMT. This result suggests that we can  have some degree of confidence that the model will consistently predict  that changing per-mile truck rates will have a minor impact on total VMT  traveled.
In spite of the results of our two scenarios, the estimates of VMT diversion  based on the ITIC model are still subject to limitations. As a result, these  estimates are only suggestive, rather than conclusive, of the impact that an  increase in per-mile truck rates might have on VMT reduction in actual  policy scenarios. First, the issues of completeness, accuracy, validity, and  consistency of our data negatively impact their reliability and increase the  uncertainty of our estimates. Second, because of resource constraints, our  analysis only varies 3 of the 17 default ITIC model assumptions and  considers only one change in these values, instead of varying a larger  number of assumptions for a wider range of scenarios (see table 6 for a  full list of assumptions). Therefore, we cannot conclude that the model  results are robust to all plausible variations in all of the model  assumptions. Therefore, while the results of our simulation suggest that a  50-cent increase in per-mile truck rates would have a limited impact on  diversion of freight from truck to rail in the short-term, we do not have  enough confidence in the quality of data inputs to make precise  predictions that would be reliable enough to inform policymaking  decisions. Reliable data for model inputs would be necessary in order to  produce estimates of changes in VMT with confidence.
section_title: Implications for Future Simulations
paragraphs: Sufficiently reliable data were not readily available for producing national  estimates of mode shift under specific policy scenarios. As a result, it was  necessary to rely on assumptions and data of undetermined reliability  when conducting national simulations, which may result in unreliable  estimates of freight diversion and an inability to fully quantify the  uncertainty of the estimates produced. Our simulations suggest that a  large increase (approximately 30 percent) in per-mile truck rates results  could result in a relatively small (approximately 1 percent) decrease in  VMT, even when multiple assumptions related to truck freight cost are  changed. Despite this, limitations in the reliability of our data and ability to  conduct further sensitivity analyses reduce our confidence in these  estimates. While reliable data may be available at state and local levels for  use in simulations of mode shift, the importance of communicating the  uncertainty underlying projections to decision makers remains.  Assessments of data reliability and assumptions, along with quantification  of uncertainty, are necessary to enable the comparison of the risk of  inaccurate results against the potential value of the estimates produced  and would improve decision makers ability to reliably interpret these  estimates and compare estimates across projects. In order to accomplish  this and produce reliable estimates of freight diversion and uncertainty at  the national level, it would be necessary to obtain complete, accurate, and  valid data that are collected consistently for the model’s relevant inputs.
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Andrew Von Ah, Assistant  Director; Mark Braza; Caroline Epley; Tim Guinane; Bert Japikse; Delwen  Jones; Brooke Leary; Steven Putansu; Max Sawicky; Sharon Silas; and  Maria Wallace made key contributions to this report.