Freight Transportation: Strategies Needed to Address Planning and Financing Limitations
Published: 2003-12-19T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The strong productivity gains in the U.S. economy have hinged in part on transportation networks working more efficiently. The nation's ports, which handle 95 percent of overseas freight tonnage, are a key link in this network, and efficient intermodal links between ship, rail, and highways are vital to continued productivity gains. GAO was asked to address (1) the challenges to freight mobility, (2) the limitations key stakeholders have encountered in addressing these challenges, and (3) strategies that may aid decision makers in enhancing freight mobility. GAO's work was based on a synthesis of previous studies and a review of conditions at 10 ports and surrounding areas that handle almost two-thirds of all containers moving in and out of the country.
section_title: What GAO Found
paragraphs: The major challenges to freight mobility share a common theme--congestion. National studies point to such problems as overcrowded highways and freight-specific "chokepoints" that stifle effective intermodal transfer of cargoes. All 10 ports GAO studied faced similar congestionrelated problems. For example, many of the ports are in dense urban areas, limiting the ability to expand rail yards, roadways, and other infrastructure. Increased port security measures may exacerbate congestion if new controls drastically slow the movement of goods. Stakeholders encounter two main limitations in addressing freight mobility challenges. The first relates to the limited visibility that freight projects receive in the process for planning and prioritizing how transportation dollars should be spent. The planning process often lacks a comprehensive evaluation approach, such as a cost-benefit framework that might result in the implementation of freight improvements to better ensure that systemwide, multimodal solutions are considered and adopted where appropriate. The second relates to limitations of federal funding programs, which tend to dedicate funds to a single mode of transportation or a nonfreight purpose. Two strategies may help address these limitations. One is to ensure that transportation planning cuts across modes and individual jurisdictions, includes coordination with freight stakeholders representing an intermodal perspective, and includes sound analytical approaches and meaningful data needed to compare the benefits of freight and passenger projects. The second is to develop a multifaceted funding approach that includes improved access of freight projects to existing funding sources and support for programs that emphasize better use of existing infrastructure. If integrated in these strategies, three principles could better assure that the freight infrastructure system provides the level of capacity and performance that makes the greatest contribution to the nation's economic well-being. These principles include promoting efficiency by embracing a "user pay" approach, establishing performance measures, and aligning incentives for planning agencies to adopt best practices.

section_title: Letter
paragraphs: Globalization has had a dramatic effect on the U.S. economy, resulting in a  greater reliance on international trade and the efficient movement of goods  within the United States.  Continued development and efficient  management of the vast transportation system of highways and rail lines  that connect seaports, airports, and intermodal facilities are all important  factors contributing to the nation’s economic growth and productivity.   Because more than 95 percent of our nation’s overseas trade tonnage  moves by water, container ports are key gateways for our nation’s imports  and exports and, therefore, play a particularly critical role in moving goods  into and across the country.  Increasing congestion at these seaports and  the surrounding metropolitan areas is a growing national concern and  represents a threat to the efficient flow of the nation’s goods.
Planning and funding of projects to improve the efficiency of freight  movement in the transportation system are becoming increasingly  important.  At the federal level, the Intermodal Surface Transportation  Efficiency Act of 1991 and its successor legislation, the Transportation  Equity Act for the 21st Century, establish much of the structure of federal  assistance for surface transportation projects.  Under this structure,  planning and funding of federally assisted projects is carried out primarily  by local metropolitan planning organizations and by state departments of  transportation.  Reauthorization of this legislation—an issue currently  before Congress—presents an opportunity to reexamine ways to enhance  planning and financing activities that improve freight movement at the  local level and to consider whether adjustments should be made in current  policies and programs.
This report responds to your request to provide information on issues  related to moving freight through the nation’s largest container ports and  surrounding metropolitan areas and federal efforts to assist and enhance  freight mobility efforts at these locations.  As agreed with your offices, we  identified (1) the national challenges to freight mobility and how these  challenges were evident at selected container ports and surrounding  metropolitan areas, (2) the existing limitations to effectively addressing  these challenges, and (3) strategies that may help public decision makers  improve freight mobility, including a discussion of relevant provisions of  selected proposals related to reauthorization of federal surface  transportation programs.
To identify the challenges to freight mobility, the limitations to advancing  freight improvements, and strategies to enhance freight mobility, we  conducted an evaluation synthesis of public- and private-sector reports,  studies, and proposals related to freight movement issues.  To determine  whether these challenges and limitations were evident at the nation’s  largest container ports and surrounding metropolitan areas, we conducted  site visits and interviews of a wide range of public and private  transportation officials in six metropolitan areas that collectively contain  10 ports that handle two-thirds of the containers moving in and out of the  country each year.   To identify strategies that may aid decision makers in  enhancing freight mobility, we analyzed the results of our review of the  challenges and limitations and built on the perspectives gained from our  past work in transportation and infrastructure systems and federal  investment strategies.  We assessed various reauthorization proposals  developed by key stakeholders, including the administration, within the  context of these strategies.  (See app. I for more information on the scope  and methodology.)  We conducted our work from October 2002 to  November 2003 in accordance with generally accepted government  auditing standards.
subsections: section_title: Background
paragraphs: The economic significance of gateway ports is related both to consumer  demand for imported products, which has fueled the United States’  increasing dependence on international trade, and to significant shifts in  business and logistics trends.  Businesses, to remain globally competitive,  have reduced costs by moving production facilities overseas and by  developing improved practices that highlight reliability, efficiency, and  quality of service.  For example, more companies are practicing  multinational production, which involves manufacturing or assembling  goods or components overseas and importing them into the United States.   Also, the time-dependent manufacturing practice, which minimizes  inventories to reduce warehousing costs, has resulted in the need for  smaller, more frequent shipments of goods.
Effective implementation of these new business practices is dependent on  an integrated, intermodal transportation system to provide efficient and  reliable freight movement.  Within the ports, quick movement of imports  and exports relies on ready transfer between ships and other  transportation modes, particularly highway and rail.  Outside the ports  themselves, freight shares the transportation system with passenger traffic.   However, the transportation system also includes some infrastructure that  is more freight-specific, such as rail yards, intermodal connectors, and  some exclusive rail rights-of-way that allow trains to move quickly without  contributing to congestion.
Freight infrastructure projects are essentially a joint enterprise of both the  private and public sectors and are typically intermodal in nature.   Virtually  all freight transportation carriers are private companies and conduct most  of the actual transportation of cargo.  Private sector players include  shipping lines, terminal operators, trucking companies, railroads, airlines,  and pipeline companies that often compete with each other for shipping  business.  These entities typically make key routing, operating, and  equipment investment decisions.  The public sector provides infrastructure  such as highways, waterside and upland port/intermodal facilities, harbor  development, channels, navigation aids, and locks and dams on inland  waterways.  For the most part, the supporting transportation infrastructure  for freight transportation is publicly owned, with the exception of rail  infrastructure.
The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) and  its successor legislation, the Transportation Equity Act for the 21st Century  (TEA-21), established federal funding and financing programs for surface  transportation projects.  Federal support for freight transportation  infrastructure projects mainly occurs through the federal surface  transportation programs, which include a number of programs targeted for  specific modes and purposes.  Other programs have been established at the  federal level to build, maintain, and operate inland waterways and enhance  and maintain harbors.
Revenues collected and disbursed through the surface transportation  program are derived mainly from user tax receipts credited to the Highway  Account of the Highway Trust Fund.  The user taxes include excise taxes  on motor fuels (gasoline, gasohol, diesel, and special fuels) and truck- related taxes on truck tires and sales of trucks and trailers.  FHWA  distributes highway program funds to the states through annual  apportionments according to statutory formulas that consider a variety of  factors, including vehicle miles traveled on the interstate system and motor  fuel usage by each state’s highway users.  The federal share for project  funding is usually 80 percent but can vary among programs, road types, and  states.  State and local governments then match federal funds from other  sources, such as state and local revenues.
States have primary responsibility for selecting projects and for building  and maintaining roads.  Innovations in ISTEA and TEA-21 allowed states  more flexibility to use federal funds for freight projects, established public- private partnerships, and allowed the expenditure of federal aid on  nonhighway freight projects in certain circumstances.  For example, with  the passage of ISTEA, it was possible through the Congestion Mitigation  and Air Quality program (CMAQ) for states to fund intermodal freight  projects that included improvements to rail lines and port facilities.  With  the passage of TEA-21, public-private partnerships were made possible  through programs like the Transportation Infrastructure Finance and  Innovation Act (TIFIA), a loan and loan guarantee program.  However,  because surface transportation infrastructure is mainly funded through  highway user fees and is based on a user-pays principle, revenues  generated from these fees generally are targeted for highway or transit  projects.
section_title: Challenges to Freight Mobility Center on Congestion
paragraphs: Congestion-related challenges are among the dominant constraints for  freight mobility.  Congestion on our nation’s highways and at intermodal  connectors to rail lines, terminals, and port facilities threaten the efficiency  and reliability of the freight transportation system, both locally and  nationally.  Locally, the most acute impacts of congestion are traffic  slowdowns, noise, and air pollution, which threaten freight and passenger  mobility alike.  Just as significant is the impact that an inefficient,  congested transportation system has on the national economy and on  international trade.  For example, the ports of Los Angeles, Long Beach,  and Oakland together account for over 40 percent of the container traffic  coming into and going out of the United States; over half of the cargo  coming into those three ports is destined for locations throughout the  nation, including New York City and Atlanta.
Several major sources of congestion can impede efficient freight flow.  (See  fig. 1.)  One is the current high level of traffic on roadways and rail lines,  which is particularly severe in metropolitan centers near gateway ports for  international trade, and which shows no signs of abating.  Moreover,  freight-specific chokepoints exist at rail crossings and roads connecting  intermodal terminals, seaports, and airports.  In urban areas, limited  expansion potential and infrastructure deficiencies, such as poorly  designed access roads and insufficient rail and roadway clearances for  bridges and tunnels, further contribute to congestion and impede the  efficient flow of goods.  Tighter security measures being adopted in and  around large gateway seaports may also directly impact the efficient flow  of goods.  While security measures adopted thus far have not apparently  disrupted the efficient flow of goods to and from seaports, the impact of  future security measures on goods movement, such as stricter container  inspections and tighter access controls to port facilities, is largely unknown  and is a growing concern of freight industry stakeholders.
subsections: section_title: Current Levels of Congestion Are Already Significant and Will Likely Grow with Increasing Traffic Volumes
paragraphs: One major challenge to freight mobility is the existing high demand on the  transportation infrastructure, which is increasing in large urban areas near  international gateway ports.  Overall, highway congestion for passenger  and commercial vehicles traveling during peak driving periods doubled  from 1982 through 2000.  Freight traffic is adding to this congestion at a  faster rate than passenger traffic.  For example, from 1993 through 2001,  truck traffic on urban highways increased more than twice as much as  passenger traffic.   This is particularly relevant for freight mobility, since  trucks carried over 70 percent of all tonnage and must share the highways  with other road users.  (See fig. 2.)
As a group, the six regions we studied had varying degrees of highway  congestion.  According to a study by the Texas Transportation Institute,  driver delay times for the locations we visited ranged from 26 hours per  year in Charleston, South Carolina, to nearly 140 hours per year in Los  Angeles—the latter representing more than twice the average of 62 hours  for the locations included in the study.  Officials in the large gateway ports  we visited cited numerous examples of how congestion affects the  movement of freight in and around the ports and surrounding urban areas.   (See fig. 3.)
While congestion affects roads, it was also present on other transport  modes.  In Southern California, for example, rail freight operations move  along the main lines of two railroads; parts of these tracks are shared by  both commuter and intercity passenger rail.  Currently, freight trains are  experiencing daily delays on the lines averaging about 30 minutes per train.   In 2000, these lines handled up to 59 freight trains per day.  Unless more  tracks are added and key at-grade rail crossings are eliminated, the average  delay per train will likely escalate because the number of freight trains is  projected to increase to as many as 130 per day by 2025.
section_title: Specific Intermodal Chokepoints Exacerbate Congestion as Traffic Volumes Increase
paragraphs: While the freight industry shares many congestion problems with other  users of the transportation system, some sources of congestion have a  more severe impact on freight mobility.  In large urban gateway areas,  severe freight congestion regularly occurs at roads connecting main  highway and port landside facilities and where rail lines and highways  intersect.  These bottlenecks or chokepoints are an important indicator of  those locations where the transportation system has reached capacity.
Chokepoints on highway intermodal connectors and access roads are a  major source of congestion and concern among freight stakeholders.   Examples of such connectors include exit ramps from major highways, as  well as local access roads that link highways to the port facilities and  intermodal yards.  Although these connectors represent less than 1 percent  of total National Highway System (NHS) mileage, they provide critical  connectivity between highways and primary roadways, rail yards, airports,  and seaports.  According to FHWA officials, investment to improve  intermodal connectors is expected to be a key component in reducing  freight chokepoints.  Because these connectors were not originally  designed to handle large volumes of freight traffic, they typically have  higher rates of deterioration than other roads and highways.  Further, the  size of current equipment (e.g., trucks and trailers) has often surpassed  what the connectors were designed to handle, with the result that  roadways are too narrow, turning radii are tight, and turning lanes are  lacking.  (See fig 4.)  All of these factors slow freight movement and cause safety and operational problems along these connectors.  Improving the  condition of many of these connectors is not being addressed by local  transportation departments because other passenger-oriented roadways  often have a higher priority.
Another major chokepoint for freight mobility often occurs where the  railroads meet highways.  At-grade rail crossings, where rail lines intersect  with roadways, can be especially problematic.  (See fig. 6.)  At-grade  crossings have a double effect on both trucks and trains.  At these  locations, automobiles and trucks must often stop to allow a train to pass,  but trains must often slow down as well.
Officials at some of the locations we visited view at-grade rail crossings as  a serious freight transportation problem and are putting forth considerable  effort and resources to develop solutions.  For example, around the ports  of Seattle, Tacoma, and Everett, officials have targeted the elimination of  key at-grade crossings as part of a large project to address freight mobility  needs in the area.  (See fig. 5.)  Phase 1 of this project is implementing a  total of 15 infrastructure improvements, 11 of which are rail/highway  separations.
Other rail challenges identified at the gateway container ports we visited  include a lack of alternative train routes to prevent train blockages on  major roadways, substandard crossing warning devices, and the need for  rail upgrades to handle heavier cars.  For example, in some locations the  rail industry has increased the load capacity of rail cars from 263,000 to  286,000 pounds on main rail lines.  Officials in Charleston said that this has  affected their dockside short rail—requiring upgrades so they can  withstand the heavier cars.
section_title: Much Inadequate Infrastructure Has Limited Expansion Potential
paragraphs: Infrastructure that is old and inadequate—such as underpasses or tunnels  with insufficient clearance—often carries limited expansion potential;  thus, mitigating this source of congestion and enhancing the efficiency of  goods movement by accommodating newer, longer, and heavier freight  configurations becomes more difficult.  According to the Transportation  Research Board (TRB) and FHWA, insufficient and aged infrastructure is a  major contributor to freight congestion and bottlenecks on U.S. freeways  and highways and on the connectors to area ports.  Even when expansion  is possible, the growing costs of infrastructure projects, stagnant highway  spending, and long delivery times (5 to 15 years) for completing  infrastructure projects have slowed the development of infrastructure and  prevented it from keeping up with demand.
Officials at the metropolitan area ports we visited pointed to many  examples where there are few alternatives for expansion due to  geographical constraints or surrounding development.  (See fig. 6.)  Port  and rail terminals are often located in densely populated urban areas,  where space is already at a premium and where commercial developers are  competing for available space.  Additional space for piers, container  storage, railroad tracks, and truck roads is being pursued and developed,  but slowly and at a high cost.
section_title: Heightened Security Concerns Also Must Be Taken into Account
paragraphs: Security concerns are one additional matter that needs to be considered in  addressing congestion challenges.  Many of the studies included in our  evaluation synthesis were conducted in 2001 or earlier and did not raise  security as a major issue.  However, since the terrorist events of September  11, 2001, security has become an important consideration, particularly to  the transportation infrastructure in and around ports.  The likely impact of  disrupting this infrastructure—either to the economy generally or to  military deployments—is substantial.  For example, the Brookings  Institution has reported that if a weapon of mass destruction were shipped  into a port by container and successfully discharged, the immediate  damage and the resulting disruption to the economy could cost as much as  $1 trillion.
Security and freight mobility are not mutually exclusive goals, but they can  potentially conflict, adding to congestion.  Access in and out of ports  represents perhaps the highest potential for conflict between these two  goals.  Based on value, the Office of Intermodalism estimates that about 90  percent of world water commerce moves by intermodal cargo container.   Ensuring that containers do not contain weapons of mass destruction or  other dangerous materials requires comprehensive security inspections of  these cargoes.  Thus far, security measures taken to control port access and  to evaluate containers have not materially slowed freight movement to and  from seaports, according to officials at the locations we visited.  However,  developing and effectively implementing future solutions that can  accomplish security goals while still allowing efficient movement of goods,  particularly at ports, is a matter of substantial concern for many freight  industry stakeholders we interviewed.
Protecting our nation’s transportation network against attacks is a  formidable challenge because our land and maritime transportation  systems, in particular, are designed to be open and accessible.   Unfortunately, these systems concentrate freight flows in ways that can  make them vulnerable to terrorist attacks.  Moreover, the sheer size of the  network presents a daunting security challenge.  Given the enormity and  accessibility of this network, protecting it through traditional means, such  as guards, guns, and gates, seems unlikely.  Rather, transportation experts,  such as TRB, believe that transportation security can best be achieved  through well-designed security systems that are integrated with  transportation operations.  Opportunities for such integration can occur  in many forms.  For example, during the design of new facilities—such as  bridges and intermodal facilities—or the remodeling of existing ones, cost- effective protective features can be incorporated.  These features could  include improved lighting, blast-resistant structures, emergency evacuation  routes, and open spaces that provide broad fields of vision.  Where free  access is not required, such as at a rail yard, fences, police patrols, and  other perimeter protections can be added.  Also, the application of certain  technologies, such as cameras and sensors that detect chemical and  biological agents, can further strengthen overall security of transportation  infrastructure.  Taken together, elements such as these can provide a  multitiered security system that not only deters and protects but also  improves safety, thus potentially making the system more efficient.  Such  integration will require the concerted and coordinated efforts of federal,  state, and local law enforcement authorities, the many public and private  entities that plan, develop, own, and operate transportation infrastructure  and assets, and various federal agencies responsible for port and border  security and freight movement.
We and others are involved in separate ongoing studies of numerous public  and private efforts to develop and implement transportation security  enhancements.  Because of these ongoing studies and the enormity and  complexity of evaluating the security issues involved in protecting the  transportation system, in this report we did not address barriers that  agencies and others face to implement sound security measures or evaluate  options offered by others or efforts under way to strengthen transportation  security.  These issues will be more fully addressed as part of other ongoing  and future studies.
section_title: Planning and Financing Limitations Pose Difficulties in Addressing Freight Mobility Challenges
paragraphs: Studies examining freight mobility point primarily to planning and funding  issues as the main limitations in efforts to help address challenges to the  system, and our work has confirmed their relevance at the ports and  surrounding areas we visited.  (See fig. 7.)  On the planning side, the  limitations center on two areas.  First, consideration of freight  improvement projects as part of the local planning process is limited  because the process is oriented to projects that clearly produce public  benefits, such as passenger-oriented projects.  While freight projects also  may produce public benefits by reducing freight congestion, generally,  public planners are wary of providing public support for projects that  directly benefit the private sector.   In addition, the planning process often  does not consider the regional nature of freight mobility and is subject to  long lead times to plan and implement projects, factors that deter valuable  private sector participation in the process.  Second, the planning process  often lacks a comprehensive evaluation approach, such as a cost-benefit  framework, that might result in the selection and implementation of freight  improvements and to better ensure that systemwide, multimodal  solutions—as opposed to a focus on a single transportation mode—are  considered and adopted where appropriate.  On the funding side, even  when freight projects rise to the level of warranting public-sector  involvement, federal assistance can be hampered by difficulties in  accessing funding sources because federal programs are often structured  such that they dedicate funds on a modal basis.  Freight projects have these  difficulties because they are frequently intermodal, while most federal  funding sources are focused on one mode, and because the projects may  have private benefits, raising questions about whether and how to provide  public support.
subsections: section_title: Freight Priorities Have Difficulty Competing in the Transportation Planning Process
paragraphs: According to several studies examining freight mobility, the transportation  decision-making process does not lend itself well to regional freight  mobility planning.  Under ISTEA and TEA-21, much of this planning  process takes place at the local level through metropolitan planning  organizations (MPOs) and at the state level through state departments of  transportation.  These planning agencies focus on the needs and issues  within their areas of jurisdiction.  Although the transportation planning  process is set up to address freight transportation improvements and  include private-sector freight interests, in practice, freight projects have  difficulty competing with other projects for a number of reasons.  For one,  the public planning process by its nature focuses largely on projects that  clearly produce public benefits.  Although reducing freight congestion may  also produce a collateral public benefit, public planners are wary of  providing public support for projects that would also yield direct private  benefits.  Within this focus, public-sector attention tends to be directed to  freight-related projects only when there is considerable public benefit as  well.  For example, a project that adds lanes to a crowded freeway is likely  to help both passengers and freight haulers, while a roadway enhancing  freight access to a port facility would likely be perceived as having limited  public benefit.
Another factor that can limit consideration of freight improvements is that  local planning bodies may not sufficiently address key freight needs that  extend beyond their local areas.  Addressing freight infrastructure needs  often involves projects along a freight corridor that cut across the  jurisdictions of several transportation planning agencies and, in many  cases, even states.  Although state departments of transportation work to  address freight mobility challenges on a statewide basis, many corridors  cross state boundaries and, unless states are part of a multistate coalition,  states do not usually address projects that involve multijurisdictional  corridors.  According to reports issued by FHWA, getting the cooperation  of and coordinating with multiple agencies and communities—each with its  own priorities—to address freight projects within a relatively large area  presents a challenge that makes the planning and implementation of this  type of freight project difficult.  Some MPOs and states, for example, may  view a highway connector project for freight movement as benefiting only a  small segment of their constituent population, with most of the benefits  dispersed outside their jurisdiction.  The New York and New Jersey region  and the Southern California region serve as examples of the difficulties  associated with addressing freight issues within a jurisdiction when the  benefits extend beyond the jurisdiction.  For example, officials  representing the New York and New Jersey region are exploring the  possibility of shifting some of the cargo from the highly congested  roadways to railroads. However, the infrastructure limitations of rail  tunnels in Baltimore, Maryland—outside of the jurisdiction of the states of  New York and New Jersey—are a significant impediment to doing so.  In  Southern California, freight projects that would clearly have benefits  beyond the jurisdiction of the MPO, such as addressing the congestion on  the I-710 corridor, have more difficulty competing for funding against more  localized projects that clearly benefit the constituents within the  jurisdiction.  At the locations we visited, we did find some examples in  which officials found ways to deal effectively with projects that crossed  jurisdictional boundaries.  As we will discuss in more detail later, they  formed multistate, multijurisdictional, and private- and public-sector  coalitions outside the conventional public planning process to identify  regionally significant freight transportation improvement projects.   However, we found that few such coalitions exist.
Finally, certain aspects inherent in the local planning process can deter  participation by the private sector stakeholders in the process.  According  to transportation studies, private sector participation can help local  planners identify and address needed freight transportation improvements  and provide expertise and data to make informed decisions.  According to  state and local officials, one reason for limited participation by the private  sector stems from their perception that freight projects proposed through  the transportation planning process do not offer sufficient benefits to  warrant their involvement.  This is not to say that private-sector freight  interests were totally disengaged from the planning process.  There were  notable examples—discussed later in this report—in which the private  sector became involved in planning for freight projects because the project  held a clear, direct, and tangible benefit for the freight industry.  However,  public officials indicated that, even when freight-related projects were  being considered by transportation planners, if the private sector did not  perceive that the projects would meet their specific needs or the benefits  were not clearly defined, private sector participation in the conventional  transportation planning process was not as evident.
Another factor that can also limit participation by freight interests involves  the differing planning horizons of the public and private sectors.  According  to FHWA, the public-sector process for planning and delivering freight  improvements is slow and inflexible compared with private-sector needs  and expectations.  According to these same studies, private firms operate  in a faster-paced, competitive environment that is subject to fluctuations in  demand for its services because of economic conditions.  Similarly,  ongoing business mergers sometimes make it difficult for private-sector  officials to predict their company’s infrastructure needs in 15 to 20 years  because they are unsure whether their company will be active at that time  in particular markets.  Several MPO officials told us that their planning  horizons extend over longer-term periods, sometimes as much as 20 years  and that such a planning time frame is necessary to conduct impact studies  or obtain funding.  Several MPO and state department of transportation  officials said that even when private-sector interests initially express a  willingness to work with the public sector, they soon lose interest or  become frustrated because of these long horizons.
The experience of ports and surrounding areas we reviewed generally  mirrors the limited private-sector participation noted in studies of the  larger transportation network.  (See fig. 8.)
section_title: Better Analytical Methods and Sufficient Data Needed for Transportation Planning at the Local Level
paragraphs: Transportation research recognizes the importance of using a sound  evaluation approach, such as a cost-benefit framework, to take a more  systemwide, multimodal approach to transportation planning.   However,  our review at the locations we visited showed that many state and local  transportation planners were not consistently and systematically applying  analytical methods as part of their investment decision-making process to  evaluate freight-specific and other transportation projects. They also  lacked sufficient data to identify and define current and future freight  transportation problem areas and potential solutions to address them.   Lack of data and sound evaluation techniques reduce the likelihood that  the relative merits of freight transportation proposals can be adequately  judged with passenger projects—a potentially serious consequence for  freight projects, which already tend to receive low visibility.  Also, without  good cost-benefit studies, transportation planners may find it more difficult  to determine the extent that public investment is required and to  understand trade-offs and relationships among alternative solutions  involving different transportation modes.  More focused federal direction  and support for states and MPOs could better ensure that sound evaluation  approaches are incorporated into the local investment decision-making  process for freight projects and that meaningful data are collected and  used.
subsections: section_title: State and Local Planners Are Not Consistently Applying Sound Analytical Methods and Evaluation Approaches
paragraphs: Our past work on best practices for capital decision-making found that  establishing a decision-making framework that is supported by proper  financial, technical, and risk analysis is a critical factor in making sound  capital investment decisions.  Transportation experts have echoed the need  for such a framework.  Key elements we and others have defined as being  important for evaluations used in the public decision-making process are  shown in table 1.
In recent studies, TRB and FHWA have noted that in making freight-related  investment decisions, local MPOs and state DOTs are not applying many of  these evaluation elements.  For example, FHWA said that planners lack  the tools to evaluate freight projects with nonfreight projects.  TRB  studies have shown, in general, that evaluation procedures for setting  project priorities for state highway programs throughout the United States  are often defined in terms of engineering criteria rather than economic  criteria.  According to TRB, an important change needed to improve  intermodal freight efficiency involves conducting better evaluations of the  direct benefits of transportation improvements.  These evaluations—which  are now largely absent at the local level—would entail applying proper  methods of identifying needs for connectors to ports and other intermodal  terminals.  Also, government transportation agencies do not routinely  consider facility management alternatives to physical expansion as a  means to increase capacity, according to TRB.
Our case study work generally confirmed these findings and demonstrated  unevenness in the application of sound methods and evaluation  approaches across the country.  Most locations we visited use some form of  cost-benefit analysis, but the sophistication and elements used in the  analysis differ significantly.  For example, an MPO official in Charleston  told us that they do not conduct formal cost-benefit analyses on  transportation projects because they do not have access to those tools or  resources.  In contrast, the Houston MPO conducts a variety of cost-benefit  analyses using economic criteria, travel delays, and vehicle miles traveled  reductions.  The Puget Sound Regional Council (the Seattle MPO) utilizes a  cost-benefit approach for evaluating freight projects separate from  passenger projects but is working on a more sophisticated approach.
Other locations often relied on a variety of methods to evaluate and  prioritize freight and other passenger-related projects, such as weighted  systems that assign additional points if the project benefited freight  mobility.  Weighted systems allow freight projects to better compete with  passenger-oriented projects under consideration.
While many of the sites we visited performed cost-benefit studies to some  degree, the specific elements of the analysis varied considerably.  For  example, some of the locations include low cost or cross-modal  alternatives and external costs—two key best practice elements in our  capital decision-making framework—during the decision-making process.   However, while many locations considered these elements, MPO  stakeholders typically did not apply these elements in a consistent and  systematic manner.  Instead, elements were considered in general through  a process of negotiation among MPO stakeholders.  Furthermore, none of  the locations conducted retrospective evaluations.  Some of the MPO  officials stated they would like to conduct retrospective evaluations, and  others said they did not have the data nor the resources to do so.
The use of cost-benefit analyses and the application of best practices  evaluation elements at the state level mirrored the MPO experience for the  most part.  Most states we visited conduct some form of cost-benefit  analysis, but in varied forms.  For example, California conducts a number  of cost-benefit analyses based on economic, safety, and highway  maintenance information, while other states, such as such as New Jersey  and Texas, mainly conduct cost-benefit analyses as a component of their  environmental studies.  Some states did not consistently look at cross- modal or low cost noncapital alternatives.  For example, officials in Texas  said they had not advanced to the point of evaluating management  alternatives, although they were beginning to consider alternative financing  mechanisms and user fees.  Officials from New Jersey and New York said  they have discussed user fees and tolls, but these discussions usually have  occurred outside the planning process.
section_title: Transportation Planners Lack Sufficient Data to Evaluate Freight Investment Decisions
paragraphs: Transportation studies by us and by others have found that sufficient data  and information systems are essential to make sound investment decisions.   However, according to recent TRB and FHWA studies, state and local  transportation planners do not have data to sufficiently evaluate freight  infrastructure proposals.  Some transportation companies may consider  data on private freight movement to be proprietary.  However, such data  can often be used to identify heavily traveled highways and intersections  and possible measures to mitigate intermodal freight bottlenecks.  TRB  case studies of transportation projects show that planning agencies  sometimes lack data and proper modeling techniques to compare the  benefits of alternative solutions—such as operations and management  alternatives—with proposals for physical expansion, such as adding new  roadways or highway lanes.  According to these studies, data are also  needed that would allow state and local planners to evaluate forecasts of  transportation demand, forecasts of the effect a project would have on  diverting traffic to or from other transportation modes, or estimates of a  project’s effect on congestion or pollution.
At the locations we visited, most state and local planners confirmed that  they did not have sufficient data to accurately and effectively evaluate  freight projects as part of the planning and investment decision-making  process.  Table 2 summarizes the types of data being collected by each  location and additional data needed.
While many MPOs struggle to obtain sufficient data to make freight  mobility planning decisions, some state and local planners are working  toward collecting and maintaining databases to better evaluate freight  projects.  The New Jersey Transportation Planning Authority (an MPO in  New Jersey), for example, in cooperation with the International Intermodal  Transportation Center (IITC) at the New Jersey Institute of Technology  (NJIT) has undertaken a comprehensive data gathering and research  initiative designed to strengthen the evaluation process for freight planning  and decisionmaking.  As part of this initiative, IITC developed goods  movement indicators and a freight planning framework and modeling  program to forecast the impact of selected freight mobility strategies for  northern New Jersey region.  For example, the model can be used to  forecast the decrease in truck delay resulting from a strategy that considers  adding truck-only lanes to selected highway segments.  Also, IITC has  summarized data collection practices used by selected MPOs throughout  the United States.
section_title: Federal Efforts to Encourage Sound Evaluation Procedures Have Been Limited
paragraphs: The variation in local planning evaluation approaches and data gathering  among MPOs is not surprising given the wide latitude that planning  jurisdictions have under the law and the limited guidance provided at the  federal level by DOT and its various transportation agencies.  Under TEA- 21 and existing regulations, MPOs and state departments of transportation  have a great deal of latitude in how they evaluate projects and make  investment decisions.  DOT officials told us they viewed their role in this  regard as facilitators rather than being prescriptive in dictating an  evaluation process.  For example, FHWA officials said they try to enhance  consideration of freight issues through such efforts as the Freight  Professional Development Program, which includes seminars by industry  experts; technical assistance through peer exchanges and an online list of  experts; and the FAF database program, which can be used to estimate  trade flows and identify areas of potential improvement.  DOT officials said  their limited oversight efforts are directed at ensuring that states and MPOs  keep broad goals in mind in designing their process, such as choosing  projects that support economic vitality, increase safety and accessibility,  promote efficiency, protect the environment, and promote energy  conservation.
Although DOT’s approach is consistent with giving planning bodies wide  latitude in how to operate, there are strong signs from the planning bodies  themselves that they would prefer more guidance and support in this area.   State and MPO officials with whom we talked said they would welcome  more help in designing an evaluation approach for making transportation  investment decisions for a variety of reasons.  One official, for example,  said more specific policies and procedures were needed to better ensure  that they were in compliance with planning requirements.  Almost all of  the officials said they wanted more help in obtaining sufficient data for  evaluating transportation proposals.  Much of the available freight data,  they said, are usually at a macro level, privately held, cost-prohibitive to  acquire, and of limited use because of proprietary and reliability concerns.
Other groups have also urged DOT to do more.  Several transportation  studies have noted the limited amount of guidance and oversight and the  need for better evaluation approaches and have recommended that DOT  take steps to provide better guidance and support in this area.  The TRB,  for example, has recommended that DOT actively promote states’ use of  economic evaluation methods in transportation programs that receive  federal aid, particularly highway aid programs.  TRB also recommended  that, as a means of promoting more useful evaluation at the federal and  state levels, Congress establish a clearinghouse within DOT devoted to  evaluation methods, so that DOT program agencies and local and state  governments could share and compare methods and examples of  evaluations.
section_title: Intermodal Nature of Freight Projects and Access Limitations to Federal Programs Can Hamper Planners in Funding Freight Improvements
paragraphs: A variety of factors in the way federal transportation programs are  structured and used as funding sources for infrastructure projects hamper  MPOs and states in advancing freight improvement projects.  For one,  freight improvement projects are more complicated to fund than  traditional, modally oriented projects, both because of the intermodal  nature of most freight projects and the challenge in balancing public and  private benefits.  For example, a traditional, modally oriented project, such  as a project to widen a highway, typically involves only one mode and  yields public benefits.  This makes the planning and development of  traditional transportation projects fairly clear-cut—there is a single  sponsor (e.g., an MPO) and a clearly defined funding source (e.g., one of  several highway programs).  In contrast, freight improvement projects tend  to be more complicated because they are frequently intermodal, which  means that a clear sponsor for the project may not exist, discussions  among multiple sponsors are usually required, and it may require  consideration of multiple sources of funding.  Also, the project can result in  private benefits, which raises questions about whether and how to provide  public support for private infrastructure.  For example, an intermodal  connector linking a port to an intermodal rail yard has no clear sponsor.   Such a project may be viewed as the responsibility of the port, the railroad,  or even the MPO.  When such a project becomes the responsibility of the  MPO, the project must also overcome the limitations to advancing freight  improvements in the planning process described earlier.  Moreover,  because federal programs are often structured such that they dedicate  funds on a modal basis, MPOs may make decisions based on the mode  eligible for federal funding, which puts freight projects at a disadvantage.
Aside from the greater complexities associated with funding intermodal  freight projects, gaining access to funding sources more specifically  targeted for freight projects is often difficult as well.  For example, two  programs—the National Corridor Planning and Development Program and  the Coordinated Border Infrastructure Program (hereafter referred to as  the Borders and Corridors programs)—were created by TEA-21 to better  address freight transportation needs.  They are federal grant programs that  share an annual funding allocation of up to $140 million.  Although  considered a good source of funding for freight projects, the most  significant limitation with these programs is that they are oversubscribed,  and much of the funding for these programs is allocated to congressionally  designated projects, according to FHWA.  Two other credit programs  established in TEA-21—TIFIA and the Rail Revitalization and Improvement  Funding program (RRIF) provide loans, loan guarantees, and lines of credit  for projects.  The TIFIA program, for example, can leverage federal funds  by attracting additional private investments in infrastructure projects.   However, according to stakeholders, the eligibility criteria for the TIFIA  program limit some freight projects, as the program does not allow  assistance to privately owned facilities, such as privately owned rail  infrastructure.  Further, to qualify for assistance, TIFIA projects must be  valued at over $100 million, which, according to many stakeholders, may  exclude many freight projects that are valued at less than this amount.  In  addition, stakeholders have indicated that shortcomings with the RRIF  program include the up-front fee applicants must pay in order to receive  the loan and the length of time applicants must wait before receiving a  decision.  These shortcomings have proven to be a disincentive to use the  program, according to DOT.   Table 3 shows the federal programs  established in ISTEA and TEA-21 that are available as funding sources for  freight projects.
Because of private ownership and other issues, certain freight  transportation projects are especially difficult to fund or finance through  federal programs, even when they are identified as priorities within the  transportation planning process.  For example, rail projects in particular  are difficult to fund even when considered a priority in the public planning  process largely because rail infrastructure is privately owned.  According  to a report issued by FHWA, although public support under existing  programs can be used to fund or finance rail, the projects are usually only  eligible for purpose-oriented programs, such as CMAQ, or through  financing programs such as RRIF.  However, even with these programs,  there are certain restrictions.  For example, in the case of CMAQ, unless a  project has a positive impact on air quality in a nonattainment or  maintenance area, it would not be eligible for CMAQ funds.  In the case of  TIFIA, a project must be publicly owned, which excludes many rail  infrastructure projects as rail infrastructure is often privately owned and in  the case of RRIF, applicants must pay an up-front fee in order to qualify,  creating a disincentive to use the program.
One example that typified the complexities associated with funding freight  projects under existing programs occurred recently on a major project  undertaken at the Port of Tacoma (Washington).  This project, the D Street  overpass, which involved widening a road and relocating rail tracks to  better facilitate road and rail freight flow, was delayed because the project  involved two different modes, and the funding for one was available but  funding for the other was not.  Highway funds were available for the road  portion, but private-sector funding for the rail portion was not readily  available.  Financing limitations such as this can delay needed freight  improvement projects or prevent them from occurring all together.
section_title: Two Key Strategies Could Help Address Freight Planning and Financing Limitations
paragraphs: The upcoming reauthorization of TEA-21 provides an opportunity to  consider ways in which federal policies and programs might be adjusted to  help address the planning and funding limitations described above.  Using  the work of transportation experts and our own experience in evaluating  transportation mobility projects, we identified two key strategies that  hold promise for addressing the planning and financing limitations that  surfaced from our work.  The first strategy addresses planning limitations,  and the second strategy addresses financing limitations.  In addition, we  identified certain overarching, economic and management principles for  consideration as the Congress and other transportation decision makers  develop and implement strategies to enhance freight mobility.  (See fig. 9.)
The administration and system stakeholders have developed a variety of  reauthorization proposals to address the planning and financing  limitations.  (See apps. II–IV for an overview of proposals made by  different freight stakeholders.)  For example, to address planning  limitations, most of the proposals seek to improve coordination, encourage  private sector involvement, and/or improve data and analysis tools to  evaluate freight projects.  In the area of financing, most of the proposals  seek to either expand the eligibility of federal programs to include specific  freight projects, encourage the use of alternative financing, or allow for the  use of nonbuild tools to reduce congestion.  While all of the proposals  address planning and financing limitations—and involve at least some  aspects of our two strategies—a balanced strategy that addresses the broad  range of limitations we identified will likely be required to significantly  advance freight mobility.  (See app. V for a summary of how stakeholder  proposals relate to our two broad strategies.)  Optimum results could be  furthered if three overarching principles are applied in the development  and refinement of reauthorization provisions.  These include promoting  efficiency by embracing “user pay” principle, maximizing a performance- based program, and aligning the incentives for planning agencies and other  decision makers to focus on efficiency and results.
subsections: section_title: First Strategy: Emphasizing a Systemwide Approach to Transportation Planning
paragraphs: Our past work has shown that planning should be viewed from a  systemwide perspective.  Such a perspective includes taking multiple  transportation modes and jurisdictions into account—rather than  considering each one separately—to better ensure the involvement of  freight stakeholders in the private sector.  In addition, such a perspective  includes developing meaningful data and sound analytical methods for  making decisions about how best to apply available resources and to  determine the extent of public involvement.
subsections: section_title: Coordination Across Transportation Modes and Jurisdictions
paragraphs: As one means to ensure that freight perspectives are included in public  planning and programming decisions, coordination across the various  transportation modes and planning jurisdictions is important.  Intermodal  freight movements involve such matters as moving goods from ships to  trucks or railroad cars for distribution throughout the country.  Freight  improvement projects must address congestion at these transfer points as  well as congestion on the roads and railroad tracks that carry freight  throughout the country.  At the same time, extensive coordination between  multiple sets of stakeholders representing the various modes is needed  because of the intermodal nature of projects.  When such projects affect  not only multiple transportation modes, but also areas that extend beyond  the jurisdiction of a single local planning body, the amount of coordination  becomes even more complex.  Our case studies showed that successful  intermodal projects involved a high degree of intermodal and cross- jurisdictional coordination.  For example, the FAST project in Washington  state, a series of related but independent projects intended to improve  freight mobility in the Everett-Seattle-Tacoma region, crossed multiple  jurisdictions and modes and involved multiple stakeholders.  The program  included port access improvements and railroad grade crossing  improvements to improve safety and increase mobility.  While funding for  the project comes from various public sources and the private railroads,  the FAST members selected and prioritized projects for funding.  The  coordination of projects and the cooperation of the multiple stakeholders  have resulted in the elevation and acceleration of freight improvement  projects along the corridor.
Such coordination is not automatically a part of the transportation planning  process; in fact, our reviews of successful projects like the FAST Corridor  program found that they typically occurred outside of the conventional  transportation planning process for several reasons.  First, it is easier to  address freight improvements when they do not have to compete with  nonfreight projects in the transportation planning process.  Also, it is easier  to build consensus among the multiple stakeholders when the focus is  solely on issues of freight mobility.  As our review revealed, attempts to  advance freight improvements within the conventional process are often  hindered by limited cross-modal communication and limited cross- jurisdictional coordination.  Thus, ensuring that a freight strategy includes  sufficient modal coordination and stakeholder participation, and  cooperation continues to be a challenge for public-sector decision makers.
A number of proposals developed by stakeholders are directed at greater  coordination across modes and jurisdictions.  For example, the  administration’s 2003 surface transportation reauthorization proposal  (hereafter referred to as the administration’s proposal) encourages MPOs  to coordinate their planning process with officials responsible for other  types of planning activities that are affected by transportation.  The  administration’s proposal also encourages states and other jurisdictions to  work together to develop plans for multimodal and multijurisdictional  transportation decision making through allocations for planning studies.    This approach, which encourages more cooperation, but does not  specifically place requirements on the parties in the planning process, is  consistent with the premise of ISTEA and TEA-21 that states and MPOs are  best positioned to make decisions on transportation planning and project  selection to best address local concerns.  However, while ISTEA and TEA- 21 have encouraged an emphasis on freight in the planning process for over  a decade, our review highlighted the many disincentives for such a focus  with the result that MPOs typically have not used their transportation  resources on projects that benefit areas outside of their jurisdictions.
section_title: Ensuring That Private-sector Stakeholders Are Effectively Involved
paragraphs: Since a systemwide approach to transportation planning will require more  focus on issues that cross jurisdictions, securing the participation of the  private sector, which tends to have a more national and global view of the  transportation system than public-sector planners, will be necessary.   Greater participation by the private sector can also be helpful in supplying  necessary data for making informed decisions and expertise to effectively  identify and implement improvements across modes and jurisdictions.   However, our work has shown that participation by the private sector in  the public planning process is often limited.
Several of the projects we studied offer insights as to how the private  sector might be effectively engaged in the planning process.  For example,  the Alameda Corridor project in Los Angeles serves as an example of a  project that involved private sector participants in the planning and  implementation phases of the program.  Specifically, the project  consolidated port traffic from four separate branch lines into a 20-mile  railroad express line connecting the ports of Los Angeles and Long Beach  to the transcontinental rail network east of downtown Los Angeles.  The  express line eliminated approximately 200 street-level railroad crossings,  relieving congestion and improving freight mobility.  This project  succeeded because state and local stakeholders, the ports, and the  railroads all had a financial incentive to relieve congestion and the  commitment and ability to bring the necessary financial resources to bear.
Our review also showed that when the particular needs or interests of the  private sector were not addressed, private-sector participation could be  limited or absent altogether.  As noted earlier, the FAST Corridor and the  Alameda Corridor projects are examples of bringing diverse stakeholders  together to forge a partnership to advance needed freight projects.  Both  projects yielded benefits for the stakeholders.  The Alameda Corridor East  project, however, serves as an example of what could happen when a  project yields limited private benefits.  This proposed project, extending  east from Los Angeles through the San Gabriel Valley, focuses on safety  improvements and congestion relief for the surrounding communities by  providing grade separations at rail and highway crossings along the route.   Unlike the original Alameda Corridor project, this project provides no new  track capacity for the rail carriers and would not materially speed freight  movement along the route.  Therefore, according to MPO officials, the rail  carriers see little benefit for them and currently are not actively involved in  or committed to the project.
Several of the proposals made by freight stakeholders would address  private-sector involvement.  For example, the Freight Stakeholders  Coalition has recommended the formation of a group composed of freight  transportation providers from all modes, as well as shippers and state and  local planning organizations, to provide industry input to DOT.  Providing  a national perspective through such a group could provide information that  would help to identify critical freight bottlenecks within the nation’s  transportation system and options to balance the state and local  perspective.  Further, the Freight Stakeholders Coalition has suggested that  states and MPOs receive additional funds for expert staff positions  dedicated to freight issues.  Hiring and training professional freight  planners could ultimately result in improved coordination of resources and  better transportation investment decisions leading to improved freight  mobility.  The administration’s proposal also addresses private-sector  involvement through a program that would address freight transportation  gateways and intermodal connections.  This program would require states  to designate a freight transportation coordinator responsible for fostering  public and private sector collaboration needed to implement solutions to  freight-related problems.  However, unless states are able to overcome the  limitations to private-sector participation, this type of provision may do  little in garnering private-sector participation.
section_title: Applying Sound Analytical Approaches and Collecting Sufficient Data
paragraphs: As part of a systemwide approach to planning, standard evaluation  methods and sufficient data will also be needed to support public  transportation investment decisions.  Methodologically sound evaluations  and basic freight-related data are both necessary to support public  transportation investment decisions; to evaluate viable alternative  solutions, including facility management alternatives; and to ensure that  intermodal solutions to enhance freight mobility are considered and  adopted where appropriate.  Transportation experts with whom we  collaborated on past mobility work cited the importance of considering all  modes and travel types in addressing mobility challenges—as opposed to  focusing on a single mode—to achieve desired results.  Sound evaluation  approaches, such as a comprehensive cost-benefit framework, are a  necessary prerequisite for doing this.
Various proposals have been made for strengthening this part of the  process.  For example, the administration’s proposal includes a  modification to the planning provisions that would require states to  address data issues by targeting part of the state apportionments for state  planning and research.  This set-aside is intended to be used for the  collection and reporting of strategic surface transportation data to provide  information about the extent, condition, use, performance, and financing of  the nation’s highways for passenger and freight movement.  This set-aside  represents somewhat of a departure from current core transportation  legislation, which leaves such decisions on the use of federal  transportation funds to states and MPOs; however, it might increase freight  data collection efforts and elevate freight issues in the planning process.   The TRB proposed a different approach involving recommendations at  both the national and MPO levels.  At the national level, TRB recommended  the creation of a clearinghouse devoted to evaluation methods, which DOT  program agencies and local and state governments could use for sharing  and comparing methods and examples of evaluations.  At a more localized  level, TRB recommended that programs in successor legislation should  contain requirements for evaluating the performance of programs and that  state and local governments should conduct evaluations to test the  economic rationale for both existing projects and proposed projects  requiring new government involvement in transportation investments.
section_title: Second Strategy: Providing a Wider Range of Funding and Related Options
paragraphs: The second strategy addresses the other main limitation identified by our  own reviews and other researchers as a common obstacle to progress in  resolving freight and overall congestion issues—financing and funding.  In  the current budgetary environment, along with long-range fiscal challenges  confronting the country, substantial increases in current funding sources  for all transportation projects will require a high level of justification.  Yet,  as our work has shown, intermodal freight projects that involve both public  and private interests and may help foster both economic efficiency and  growth have difficulty competing for limited transportation resources.   Therefore, determining how federal policies and programs might be  adjusted to address the limitations to funding freight projects raises the  fundamental policy question of defining the appropriate scope of  government involvement in freight improvements.  When public  subsidization of freight projects is determined to be appropriate through  proper analysis, approaches such as expanding eligibility guidelines for  existing federal programs, developing or expanding the range of funding  and financing mechanisms that appropriately blend public and private  funds to match public and private costs and benefits, and making  maximum use of low-cost “nonbuild” approaches could be considered to  address limitations in advancing freight improvements.
subsections: section_title: Determining the Appropriate Federal Role and Apportioning the Cost Burden among Beneficiaries
paragraphs: Transportation experts generally agree that determining the appropriate  scope of government involvement and level of subsidization in freight- related and other projects is an important step in making transportation  investment decisions.  The underlying principle guiding the scope of  government involvement is that such involvement should occur only to the  degree that the private sector will not undertake a project needed to  improve transportation mobility, and yet the project is deemed to be  economically viable.  There are a number of reasons why the private sector  may not participate in such projects—for example, they may generate  significant external or social benefits associated with reducing congestion  and air pollution from which those in the private sector who would make  the investment would receive no economic benefits.
Determining the scope of government involvement entails three basic  steps: (1) determining that the project is worthwhile by applying a rigorous  cost-benefit study; (2) justifying that government involvement is necessary  based on known criteria; and (3) deciding on the level of subsidization  required by the public sector reflecting the interests and benefits on a local,  state, regional, or national level.  As we have discussed previously, cost- benefit frameworks that transportation agencies currently use to evaluate  various transportation projects could be more comprehensive in  considering and quantifying a wider array of social and economic costs and  benefits to determine whether public support is justified.  Developing  sound justifications and determining appropriate subsidy levels can be  undermined by an absence of rigorous evaluation approaches, and there is  broad consensus among transportation stakeholders that state and local  planners need to improve their evaluation capabilities.
Justifying government involvement for freight transportation infrastructure  projects involves having clear guidelines specifying the conditions under  which public involvement is warranted.  TRB has provided such guidelines  in two recent reports.  According to TRB, public support for freight  infrastructure projects must be established on a project basis to determine  if the project possesses certain characteristics, such as reducing the  external costs of transportation, yields efficiencies in the transportation  system beyond those recognized by the private sector, and/or meets some  public safety need.  TRB contends that if government involvement cannot  be justified on one of these grounds, the private sector should undertake  the project.
Once the justification is established for public involvement in freight and  other projects, the next critical decision involves deciding on the level of  public subsidy.  While in most cases, government involvement is often  assumed to mean subsidization of a project, such involvement need not  necessarily imply the need for, or appropriateness of federal subsidization.   For example, a government agency might plan a project to be entirely self- supporting from user fees and private sector participant contributions; in  this case, no government subsidy is involved.  However, when public  subsidization is being considered, particularly for freight infrastructure  projects, the appropriate scope of government involvement must carefully  be considered because of the public-private nature of these projects.
When public subsidization has been deemed appropriate, apportioning the  cost burden among participants, or the beneficiaries of the project is the  next critical step.  This means identifying the beneficiaries and determining  the level of benefits they are likely to derive from the project.   According to  TRB, “the candidates for paying for an intermodal freight transportation  project are users (through tolls or other fees), other direct beneficiaries  (e.g., owners of property adjacent to the development), the local public  (through subsidies from local general tax revenues or tax concessions), the  national public (through use of federal grants or tax-exempt bond finance),  or indirect beneficiaries (e.g., application of road user fee revenues to rail  transport on the grounds that rail use relieves road congestion).”  TRB  further noted that, for some projects, these beneficiaries should pay the  costs commensurate with the cost of providing the service to the user.  For  example, when users are the direct beneficiaries of the project, user fees,  which involve each user paying a fee for the cost of the service provided,  are the preferred method that should be considered for projects that  directly benefit the users.  On the other hand, when external benefits, such  as the reduction of pollution or congestion, result from a project, a case can  be made that public support be provided for the project, and the direct  users should pay the net cost of the use of the service after deducting the  public benefit.  Further, if public beneficiaries are largely local (e.g.,  reducing suburban congestion), efficiency principles would call for the  public subsidy to be at a local rather than federal level.  Again, as in other  aspects of the decision-making process, sound evaluations and the ability  of local planners to quantify the benefits and their distribution are critically  important to making good decisions.
section_title: Expanding Eligibility Guidelines for Existing Federal Programs
paragraphs: A concern voiced by national stakeholder groups and raised through our  evaluation synthesis was that federal program eligibility requirements do  not always lend themselves to certain types of freight improvement  projects.  For example, rail projects are eligible for federal aid funding or  grants only if the project has a positive impact on air quality in a  nonattainment area, involves modifying a rail line to accommodate a  federal aid highway project, or results in specified improvements in safety.   While carefully tailored eligibility assures only projects generating public  benefits receive subsidies, these programs do not appear to be sufficiently  fluid to allow support for the full range of freight projects, which might  generate substantial public benefits.  One way to address this concern  might be to expand eligibility criteria to cover a broader range of freight  projects—by adding specific types of freight projects to the guidelines of  existing programs—to make it easier for states and MPOs to fund freight  projects identified as priorities through the transportation planning  process.  However, unless a determination is made that the project meets  the criteria or characteristics that justify government involvement, public  support for freight projects may result in more significant needs going  unmet.
A number of proposals have been made to expand eligibility criteria to  include freight projects, including the following examples.  (See table 4.)
The provisions within the administration’s proposal to expand eligibility  generally leave decisions about whether to advance projects to the states  and MPOs.  The extent to which eligible freight projects actually received  support would depend on the priority they received in these local funding  decisions.  While there are specific implications of each suggested  modification, these options retain the basic funding flexibility framework  of ISTEA and TEA-21, which enables states and MPOs to determine their  needs and identify the projects that are needed.  This approach, however,  may not go far enough in overcoming the difficulties in advancing freight  improvements when their scope extends beyond the purview of individual  states or MPOs.  In such cases, many researchers and stakeholders have  observed that public planners are wary about giving priority to freight  projects when the costs are borne locally, but the benefits accrue  nationally.  Moreover, this approach does not recognize the intermodal  nature of freight projects, since existing funding mechanisms tend to be  modally focused.  In addition, the administration’s proposal contains one  provision that would establish a mandatory set-aside of NHS funds to  address intermodal connectors.  Since this would provide a dedicated pool  of funding for intermodal connectors, these projects would no longer have  to compete with other nonfreight priorities.  However, a set-aside runs  counter to the flexibility that ISTEA and TEA-21 allow to MPOs and states  and could result in other needs going unmet.
While expanding the eligibility of existing programs to cover a broader  range of freight projects has benefits, it would not, in itself, provide a  systemwide approach to addressing freight mobility improvements.   Another option, however, would largely mitigate this planning limitation— establishing a federally administered program to address freight projects of  national significance.  A federal program to address freight projects of  national significance offers another way to address freight corridors that  are regional in nature and achieve a systemwide approach for planning  freight improvements, taking multiple transportation modes and  jurisdictions into account.  This program could be structured either  through a “top-down” approach, under which a federal agency actively  identifies, develops, and evaluates freight projects, or a “bottom-up”  approach, under which local governments and private parties develop  proposals and compete for federal support.  This approach would provide a  dedicated pool of funding for freight projects and, thus, would reduce,  although not totally eliminate, the competition at the local level for  available funding with nonfreight projects.
In structuring such a program, suggestions have been made by various  stakeholders.  The Freight Stakeholders Coalition, for example, proposed a  tenfold increase in funding for the Borders and Corridors programs.  They  also proposed expanding the eligibility guidelines of the Borders and  Corridors programs to include gateways.  Therefore, prioritizing projects  based on a qualification threshold, such as volume and congestion, would  be needed to focus funding on critical corridors, gateways, and intermodal  infrastructure.  As noted above, to date, much of the funding for the  Borders and Corridors programs has been allocated to congressionally  designated projects, and the need has far surpassed the available funding  for the programs, according to FHWA.
FHWA describes a federally administered program as one that could  complement the decisions made at the state and local levels, not replace  them.  In other words, the program would not remove MPOs from  considering and approving freight projects within their respective areas of  jurisdiction; rather, it would augment the current process by addressing  those freight projects of national significance that crossed the boundaries  of local jurisdictions.  In terms of the revenue sources for such a program,  some have suggested a more indirect federal role in subsidizing the  program’s projects.  For example, TRB has said that the government’s most  effective role in subsidizing freight projects of national significance would  be as a provider of backup credit and as an absorber of risk rather than as a  source of grants.  This, according to TRB, would make the project  accountable for its performance and would tend to improve project  selection.  Also, FHWA suggests that such a program would need to be a  discretionary, as opposed to a formula-driven program, to allow greater  flexibility for the federal government to identify and fund projects as the  need arises.
section_title: Using Financing Mechanisms or Developing New Revenue Sources to Ensure a Blending of Public and Private Funds to Match Public and Private Costs and Benefits
paragraphs: Many stakeholders have argued that the level of transportation funding is  insufficient to adequately address the challenges to freight mobility  described earlier in this report.  While more funding might appear to be an  obvious solution, in the current budgetary environment, many stakeholders  believe that other methods must be explored.  One alternative would be to  expand support for alternative financing mechanisms to access new  sources of capital and stimulate additional investment in freight  improvements.  A closely related strategy involves raising new revenue  through tolling and pricing strategies.
Alternative financing mechanisms include techniques such as loans and  loan guarantees, providing credit assistance to state and local governments  for capital projects, and using tax policy to provide incentives to the private  sector for investing in freight improvements through, for example, bonds.   When public transportation investment decisions are made based on sound  evaluations, these mechanisms can lead to an appropriate blend of public  and private funds to match public and private costs and benefits.  Such  mechanisms, however, currently provide only a small portion of the total  funding that is needed for capital investment and are not, by themselves, a  major financing strategy for addressing freight mobility challenges.
The administration’s proposal, for example, seeks to expand the eligibility  of the TIFIA program, which provides loans, loan guarantees, and lines of  credit.  The proposal expands the eligibility of the program to include  private freight rail facilities, access to intermodal freight transfer facilities,  and allows for the grouping of projects.  In addition, the loan threshold  would be lowered from $100 million to $50 million.  In addition, the  administration’s proposal would amend the Internal Revenue Code by  expanding the eligibility of private activities that can be financed with tax- exempt private activity bonds to include freight-related projects.   Eligibility would be expanded to include all federal-aid eligible surface  transportation projects and surface freight transfer facilities, such as  intermodal rail yards.
Alternative financing mechanisms involve a careful evaluation of trade-offs  involving their use.  On one hand, expanding eligibility could encourage  development of new funding sources for transportation projects by  attracting private-sector participation in projects that serve both public and  private ends.  Also, they may be necessary tools for freight infrastructure;  many freight operators are private entities, which currently makes it  impossible or inappropriate to provide funding for them through direct  federal grants.  On the other hand, despite potential benefits, these  mechanisms could result in higher costs to the U.S. taxpayer.  For example,  when we compared direct appropriations for transportation infrastructure  projects with methods such as TIFIA loans or state and local tax-exempt or  tax credit bonds, we concluded that a direct appropriation had the lowest  combined cost to state, local, and federal governments for a given amount  of transportation investment.  The U.S. Treasury has drawn similar  conclusions.  Further, because these approaches would allow public  support for private infrastructure, it will  be important that evaluations are  conducted to prospectively test the economic rationale for government  involvement in such projects and retrospectively evaluate whether  intended benefits have been achieved.
A related feature of alternative financing approaches is the strategy for  generating revenue from various tolling approaches, which can provide  new sources of funding to address the increasing freight-related and other  infrastructure needs.  Tolling is often associated with alternative financing  tools since nearly all require a dedicated revenue stream to repay borrowed  funds.   According to TRB, a greater reliance on tolls allows capacity to be  more self-adjusting by rationing use, providing funds for expansion, and  providing an indication of where expansion should occur in the long run.   In concept, tolling on highways and major access roads is consistent with  the premise that the users of the transportation facilities should pay the  cost of those facilities.  Also, to the extent that the private sector  participates in building and maintaining toll roads or intermodal facilities,  tolling can bring new funding sources into the financing mix, thus  potentially reducing funding contributions of the public sector.
Tolling can take many forms, but two approaches are particularly  relevant—tolling mainly to raise revenues and tolling instituted at peak  driving times to reduce congestion.
Tolling as a revenue-generating source.  Tolling on some roads is done  as a way of generating new revenues to pay for needed infrastructure  rather than to reduce congestion.  The Reason Foundation has  suggested freight-specific tolling through self-financing toll truckways.   Toll truckways, solely for use by large trucks, could be custom-built and  designed for use by longer and heavier trucks.  Separating large trucks  from other vehicles would improve safety along with transportation  efficiency.  In its study, the Reason Foundation concludes that trucking  firms would be willing to pay a toll up to one-half of the cost saving that  would be generated from the use of the truckways.
Tolling for congestion pricing. Not only can pricing strategies generate  revenue to help fund transportation investment, our past work has  shown that this approach can potentially reduce congestion by  providing incentives for drivers to shift trips to off-peak periods, use less  congested routes, or use alternative modes, thereby spreading out  demand for available transportation infrastructure.  A number of  congestion pricing projects are in place in surface transportation, both  here and abroad.  For the most part, they demonstrate that congestion  pricing can be successful.  Congestion pricing also has the potential to  generate sufficient revenue to help fund operations—and sometimes  fund other transportation investment as well.  For example, in San  Diego, where users pay a toll to use a less crowded freeway lane, some  of the revenues are used to operate a new express bus service, providing  commuters with more travel options.
In one possible form of congestion pricing for public roads, tolls would be  set on an entire roadway or road segment during periods of peak use.  In  another form, sometimes known as value pricing, peak-period tolls would  be set on only some lanes of a roadway, allowing drivers to choose between  faster tolled lanes and slower nontolled lanes.  High-occupancy toll (HOT)  lanes, under which drivers of single-occupancy vehicles are given the  option of paying a toll to use lanes that are otherwise restricted to high- occupancy vehicles, are an example of value pricing.  A more freight  specific alternative, such as truck toll lanes, may also be a way to reduce  congestion, expand capacity, and generate revenues.
Possible challenges to implementing congestion pricing include current  statutory restrictions limiting the use of congestion pricing and concerns  about equity and fairness across income groups.  For example, tolls are  prohibited on the Interstate Highway System, except for roads that already  had tolls in place when they became part of the system or where  exceptions have been made for pilot programs.  Also, equity and fairness  issues for low income and other groups have been raised, but there is  evidence that these issues can be mitigated.  Some projects have shown  substantial usage by low-income groups, and other projects have used  revenues generated to subsidize a low-income transportation option.  In  addition, some recent proposals for refining congestion pricing techniques  have incorporated further strategies for overcoming equity concerns.  For  example, the Fast and Intertwined Regular (FAIR) lanes proposal in New  York suggests crediting users of the nontolled lanes to partially pay for  them to use public transportation, or to use the express lanes on other  days.
The administration’s proposal allows for the use of such alternatives in the  form of variable toll pricing.  The administration’s proposal encourages the  use of a variable toll pricing provision that would permit a state or public  authority to toll any highway, bridge, or tunnel to manage existing high  levels of congestion or reduce emissions.  The administration’s proposal  would also allow low-occupancy vehicles or solo drivers to pay a fee to use  high-occupancy vehicle (HOV) lanes during peak travel periods.
section_title: Using Nonbuild Alternatives
paragraphs: Finally, a number of low cost alternatives can be used to expand the  capacity and efficient use of existing infrastructure.  These alternatives are  a diverse mix, including corrective and preventative maintenance and  rehabilitation, operations and system management, and new technology.   Keeping up with growth within the constraints that will be imposed on the  transportation system in the future will not be possible through capital  improvements alone; operators must also extract more service and  capacity from existing facilities.  Although many of these techniques are  currently in use, public planners can more consistently consider a full  range of techniques.  Table 5 briefly describes the types of alternatives  available with examples of stakeholder proposals that apply to each.  While  the administration’s proposal allows for the use of all of the nonbuild  alternatives, many of the provisions do not require the consideration and  analysis of these noncapital alternatives in evaluating capital projects.
section_title: Building in Basic Economic and Management Principles into Reauthorization Strategies and Provisions Could Enhance Capacity and Performance of Freight Mobility
paragraphs: Congress will formulate a new national transportation policy when it  reauthorizes TEA-21.  Our past work and our review of numerous studies  by a diverse group of transportation experts show that the planning and  financing processes established by core transportation legislation make it  difficult for freight mobility projects to compete with nonfreight projects.   Our work has also led us to identify sound principles that, if integrated into  the transportation planning and financing strategies and provisions of the  new legislation, would better assure that the freight infrastructure system  provides the level of capacity and performance that makes the greatest  contribution to the nation’s economic well-being.
While not an all-inclusive list, we have synthesized three main guiding  principles, often mentioned by transportation experts, for use in  structuring federal support.
Promote efficiency by embracing “user pay” principle.  Public financial  support to individual private entities or transportation modes is best  structured so as to minimize distortion of any competition.  Competition  will be enhanced and efficiency will be promoted when capital and  operating costs for infrastructure are paid from the revenues or fees  charged to the direct users or beneficiaries of the facilities.  Reliance on  revenue from users will increase the likelihood that the most  worthwhile improvements will be implemented and that facilities will be  operated and maintained efficiently, according to transportation  experts.  Fees assessed on each mode (user) need to be accurately  aligned with the costs each mode or vehicle imposes on the  transportation system.  Where user fees and costs are not aligned, a  mode may enjoy an advantage over another in competing to transport  goods.  For example, according to TRB, the heaviest combination trucks  pay a smaller share of the expenditures highway agencies incur to serve  them.  From an economic standpoint, this level of taxation distorts the  competitive environment with railroads and other modes that could also  move the goods by making it appear that these heavier trucks are a less  expensive means for shippers to transport their goods than they really  are.  Better matching of fees to costs could provide incentives for  shippers to make modal choices and transportation options based on  true costs.  Transportation experts recommend that, to ensure market  outcomes of competition between trucking and other modes are in the  public interest, adjusting user fees is preferable to providing off-setting  subsidies to competing modes, such as railroads.
Establish performance measures and expectations and build in  accountability.  Leading organizations have stressed the importance of  developing performance measures and linking investment decisions and  their expected outcomes to overall strategic goals and objectives.  Doing  so is valuable in evaluating the effectiveness of investment decisions,  and it provides decision makers with valuable information for  determining whether intended benefits were achieved and whether  goals, responsibilities, and approaches should be modified.  Establishing  a framework for performance and accountability involves three key  components—setting expectations for performance outcome,  developing and maintaining an information system to capture critical  performance-related data, and establishing a mechanism for evaluating  and reporting results.  Transportation experts have suggested that such  a framework be built into legislation as a means of better ensuring  effective use of transportation dollars.  The Brookings Institution, for  example, recently recommended that Congress should subject MPOs to  enhanced accountability measures and require states and MPOs to  maintain information systems on indicators of national significance,  such as daily vehicle miles traveled, improving air quality, lowering  transportation costs, and expanding transportation options.  Brookings  also recommended establishing annual performance objectives and  holding decision makers accountable by establishing consequences for  excellent and poor performance.  TRB has suggested similar measures  including the need for systematic and uniform retrospective evaluations  after projects are completed to assess the financial and economic  performance of completed projects and facilities in operation.  As  discussed above, none of the states or MPOs in the locations we visited  currently perform retrospective evaluations.  TRB also recommended  developing benchmarks to evaluate existing or proposed transportation  facilities.  The benchmarks would be a systematic comparison of  performance measures, such as physical efficiency, cost, and rate of  return; such benchmarks would be used to evaluate a specific facility  under construction with other similar facilities, including state-of-the-art  facilities abroad.
Align incentives for planning agencies to adopt best practices and to  achieve expectations.  Aligning incentives for existing and new  programs or approaches to facilitate the use of better freight  transportation project planning and financing options could improve the  efficiency of federal transportation programs in enhancing freight  mobility.  Better aligning both intended and de facto incentives of  federal programs could elevate freight consideration in transportation  planning and investment decisions more effectively than rigid direction  or mandatory programs and is consistent with the ISTEA and TEA-21  premise of providing state and local planners with broad flexibility to  address the nation’s transportation needs.  To be effective, incentives  should be tangible and significant enough to address the need and spur  action.  Incentive approaches can take many different forms, as  evidenced by varied suggestions from transportation experts and  stakeholders.  FHWA has suggested, for example, that to promote a  more system-wide approach to planning freight improvement projects,  incentives could be offered to multistate or regional coalitions or  organizations.  One such incentive would provide funding to support  freight planning or financing for projects that meet certain criteria, such  as involving multiple states or modes.  TRB has noted, for example, that  as an incentive for states to experiment with alternative financing and  management methods, Congress could set aside a fund dedicated to  projects on roads where the highway agency has implemented efficient  maintenance, traffic control, and other management measures,  according to specified definitions.  TRB has also suggested that as part  of the highway program reauthorization, Congress should consider  measures to reduce obstacles and provide incentives to private  participation in highway development.  Others have suggested that to  promote the use of low cost, noncapital alternatives to more efficiently  use existing infrastructure, a system could be established in which  federal support would reward those states and localities that apply  federal money to gain efficiencies in their existing transportation  system.  Different matching criteria would be one way to provide these  rewards.  For example, to spur consideration of preservation of existing  infrastructure, matching requirements could be changed to a 50 percent  federal share for building new capacity and an 80 percent share for  preservation.  The Brookings Institution, for example, has  recommended consideration of other types of incentives—for example,  that Congress should allow DOT to maintain a small incentive pool to  reward states and MPOs that consistently perform at the exceptional  level.  Ideally, an intentional alignment of the full range of existing  programs and policies would emerge from a rigorous retrospective  evaluation of both intended and de facto incentives provided by current  programs and policies.
section_title: Conclusions
paragraphs: The current system for planning and financing transportation  infrastructure projects is not well suited to advancing freight  transportation improvement  projects, and fundamental changes are  needed that take a broader, systemwide approach to planning and  financing freight projects and that foster active participation by the private  sector in this process.  Without such changes, growing congestion, coupled  with a doubling of freight volume in the next two decades, could  overwhelm the capacity of our nation’s transportation infrastructure and  thereby severely impede goods movement.  This, in turn, would likely  negatively impact the nation’s economic well-being and productivity.
Reauthorization of TEA-21 represents an opportunity to examine current  federal policies and programs and determine how best to address freight  mobility issues.  The range of freight-related options proposed by various  freight stakeholders is broad and sometimes controversial, and selecting  among these options and splicing them together into a cohesive package  represents a significant challenge.  A blend of measures offers promise in  two broad strategies: first, to promote a systemwide approach to planning  and transportation investment decision making, and, second, to provide an  array of flexible financing approaches and funding sources for freight- related infrastructure improvements.  Taken together, these strategies offer  a balanced approach to enhancing freight mobility.  Optimum results could  be furthered if three overarching economic and management principles are  applied in the development and refinement of reauthorization provisions.   These include (1) promoting efficiency by enhancing “user pay” principle,  (2) maximizing a performance-based program, and (3) aligning the  incentives for planning agencies and investment decision makers to focus  on efficiency and results.
One issue requires immediate attention because of its importance in the  process for both planning and financing transportation infrastructure.   State and local planners, in particular, need—but lack—sound,  economically based methods and approaches and sufficient freight-related  data to perform a variety of critical planning and financing functions.  The  absence of these analytical methods and data undermines local planners’  abilities to develop evaluations essential to support public transportation  decisions; to assess viable alternative solutions, including multimodal  solutions; to justify government involvement in and subsidy levels for  projects; and to retrospectively assess projects and hold planners  accountable for their decisions.  Because this issue is so critical to the  entire process, it is important that state and local planners adopt sound,  consistently applied methods and develop and enhance data collection  efforts.
section_title: Recommendations for Executive Action
paragraphs: To encourage the use of sound evaluation and data collection efforts  among state and local transportation planners, we recommend that the  Secretary of Transportation:  Develop evaluation approaches for state and local planners to use in  making freight-related and other transportation investment decisions  and actively work with transportation planners to achieve  implementation of these approaches.  In developing these approaches,  DOT should promote the incorporation of key elements of effective  planning, including systematic cost-benefit analyses, evaluation of  noncapital alternatives, inclusion of external benefits (e.g., congestion  and pollution costs), and routine performance of retrospective  evaluations.
Facilitate the collection of freight-relevant data that would allow state  and local planners to develop and use a broad range of evaluation  methods and techniques, such as demand forecasts, modal diversion  forecasts, estimates of effects of proposed investments on congestion  and pollution, and other factors, as they make transportation investment  choices.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the Department of Transportation for  its review and comment.  Generally, the department agreed with the facts  presented in the report.  Department officials provided a number of  comments and clarifications, which we incorporated to ensure the  accuracy of our report.  The department did not take a formal position on  GAO’s recommendations.  Department officials raised two points that were  either outside the scope of our work or were not addressed by freight  stakeholders at locations we visited or discussed in various reports  included in our evaluation synthesis.  First, department officials noted that  expanding port business hours should be considered as a nonbuild option  to relieve congestion.  Although we do not disagree with the expansion of  hours as a potential nonbuild option, it was not raised in either our  evaluation synthesis or expressed as a major congestion issue during our  case study work.  Second, department officials indicated that intermodal  freight movement is larger than depicted in the report and involves many  transportation communities essential to productive freight movement.   These include shippers, receivers, warehouses, and trucking companies.   We recognize this point as well, but we were asked to focus on  international gateways around major containerized ports, since this is  where transportation congestion is often most acute and where intermodal  solutions are critically needed.  In addition, while we do not explicitly  identify all of the various communities involved in freight movement, our  discussion of the private and public sectors is intended to encompass all of  the communities involved in freight movement.  To this end, we have  described the key entities involved in freight movement in the background  section.
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 the report to the Secretary  of Transportation.  We also will make copies available to others upon  request.  In addition, the report will be available at no charge on the GAO  Web site at http://www.gao.gov.
If you have any questions about this report, please contact me at  heckerj@gao.gov or (202)512-2834 or Randall Williamson at  williamsonr@gao.gov or (206)287-4860.  GAO contacts and  acknowledgments are listed in appendix VI.
section_title: Objectives, Scope, and Methodology
paragraphs: The objectives of this report were to identify (1) the national challenges to  freight mobility and how these challenges were evident at selected  container ports and surrounding areas, (2) the existing limitations to  effectively addressing these challenges, and (3) strategies that may help  public decision makers improve freight mobility, including a discussion of  relevant provisions of selected proposals related to reauthorization of  federal surface transportation programs.  To address these objectives, we  conducted an evaluation synthesis of national reports and studies, an  analysis of proposals issued by numerous stakeholders addressing  reauthorization of TEA-21, and case studies at six international gateway  container ports.
We conducted an evaluation synthesis of research reports, analytical  studies, and proposals issued by numerous stakeholders to gain a national  perspective of freight mobility issues.  This was done through an extensive  literature review and analysis of key categorical findings.  Findings were  supplemented with interviews of key officials in federal agencies and  national association representatives to include, at the Department of  Transportation:  the Office of Intermodalism, Office of Freight Operations,  the Federal Highway Administration, Federal Railroad Administration,  Maritime Administration, and stakeholders including the American  Trucking Association, Association of Metropolitan Planning Organizations,  American Association of Port Authorities, Association of American  Railroads, and the American Association of State Highway and  Transportation Officials.
To identify challenges to freight mobility and the efforts to address them,  we also conducted case studies of international gateway ports and their  surrounding areas. We adopted a case study methodology because, while  the results cannot be projected to the universe of ports, case studies are  useful in illustrating the range and complexity of challenges and projects  implemented to address those challenges.  Our efforts included in-person  interviews along with follow-up questions via telephone and e-mail, visual  observations of ports and their surrounding areas, and collection of  pertinent documents for analysis. The ports selected were geographically  representative and comprised more than 65 percent of U.S. container  traffic by volume.  We conducted case studies of six regions containing 10  container ports including Charleston, SC; Seattle/Tacoma, WA; Los  Angeles/Long Beach, CA; San Francisco/Oakland, CA; New York/New  Jersey; and Houston, TX.   The information collected and analyzed may not  be representative of other types of ports, such as smaller container ports  and noncontainer ports.  The information collected included information  regarding the planning process, both at the state and local level; the  metropolitan organization’s role, funding, and financing; private-sector  participation; data and use of nonbuild tools; and security.  In the area of  security, we reviewed previous GAO studies on this issue, but because of  ongoing studies and the enormity and complexity of evaluating the security  issues involved in protecting the transportation system, we did not address,  in this report, barriers that agencies and others face to implement sound  security measures or evaluate options offered by others or efforts under  way to strengthen transportation security.  These issues will be more fully  addressed as part of other ongoing and future studies.
To identify strategies that may aid decision makers in enhancing freight  mobility, we relied extensively on perspectives gained from our past work  in transportation and infrastructure systems and federal investment  strategies and other perspectives gained through our evaluation synthesis.   We assessed the reauthorization proposals developed by key stakeholders  within the context of these strategies.
section_title: Summary of the Administration’s 2003 Surface Transportation Reauthorization Proposal Freight-related Provisions and Observations
paragraphs: 1. State planning and research (Title I, Section 1503(i)(1)(B)).
Two and one-half percent of the sums apportioned to a state for  state planning and research to be made available for a number of  activities, including freight planning. 2. Transportation planning (Title VI, Section 6001, subsection  5203(e)(4)).  Metropolitan planning organizations (MPOs) are  encouraged to coordinate their planning processes with officials  responsible for other types of planning activities that are affected  by transportation, including freight. 3. Multistate corridor planning program (Title I, Section  1806(f)(1)).  States and other jurisdictions are encouraged to  work together to develop plans for multimodal and  multijurisdictional transportation decisionmaking and to prioritize  multimodal planning studies.
Observation: Although these provisions are consistent with  Intermodal Surface Transportation Efficiency Act (ISTEA) and  Transportation Equity Act of the 21st Century (TEA-21) in that  they emphasize the importance of freight transportation and  continue the decentralized planning approach, states and MPOs  are best positioned to make decisions on transportation  planning and project selection; encouragement alone may not  be enough to overcome planning challenges. 4. State planning and research (Title I, Section 1503(i)(3)(A)).
Not less than 20 percent of the dedicated state planning and  research funds (2 ½ percent of the sums apportioned to a state for  state planning and research) to improve the collection and  reporting of strategic surface transportation data to provide critical  information about the extent, condition, use, performance, and  financing of the nation’s highways (including intermodal  connectors) for passenger and freight movement.
Observation: Requiring a set-aside may increase freight data  collection efforts, which may lead to an elevation of freight  issues in the planning process.  Requiring a set-aside, however,  may be viewed as an unwelcome mandate that negatively  affects the ability of states and MPOs to address their unique  transportation needs. 1. Freight transportation gateways; freight intermodal  connections (Title I, Section 1205, subsection 325).  Creates a  new program that adds state responsibilities and allows the use of  Surface Transportation Program (STP) and National Highway  System (NHS) funds for freight-related projects.  (1) State  responsibilities include ensuring that intermodal freight  transportation, trade facilitation, and economic development needs  are adequately addressed and fully integrated into the project  development process; designating a freight transportation  coordinator responsible for fostering public- and private-sector  collaboration needed to implement complex solutions to freight  transportation and freight transportation gateway problems; and  encouraging the adoption of innovative financing strategies for  freight transportation gateway improvements.  (2) Allows states to  obligate STP funds for publicly owned intermodal freight transfer  facilities, access to such facilities, and operational improvements  for such facilities.  (3) Requires a set-aside of NHS funds for NHS  routes connecting to intermodal freight terminals.
Observation: Since the STP funds are part of the state  apportionment and the provision is not requiring the use of the  funds for freight-related projects, freight transportation projects  would still have to compete with other projects in the planning  process.  While the mandatory set-aside of NHS funds for  intermodal connectors would directly address the problems  associated with NHS intermodal connectors, it runs counter to  the funding flexibility established in ISTEA and TEA-21. 2. Transportation Infrastructure Finance and Innovation Act  (TIFIA) amendments (Title I, Section 1304). Modifies the  TIFIA program by (1) expanding the eligibility to include a public or  private freight rail facility, an intermodal freight transfer facility,  access to such facilities, and service improvements for such  facilities; or grouping of such projects with the common objective  of improving the flow of goods; (2) reducing the threshold from  $100 million to $50 million; and (3) revising the lines of credit clause  by removing the requirement that TIFIA lines of credit be drawn  upon as a last resort.
Observation: (1) Adding “private freight rail facilities” would  suggest that rail lines would be eligible for TIFIA assistance.  In  such a case, public funds could potentially be used for privately  owned infrastructure.  The expanded definition would also  allow for the grouping of projects, which may enable smaller  projects to be packaged together to meet the eligibility project  cost threshold requirement.  (2) Lowering the loan threshold  would make many more projects eligible.  (3) Expanded use of  TIFIA loans as a result of these changes could heighten federal  risks. 3. Private activity bonds (Title IX, Section 9004). Expands the  eligibility of private activities that can be financed with tax-exempt  private activity bonds to include surface freight transfer facilities,  defined as facilities for the transfer of freight from truck to rail or  rail to truck (including any temporary storage facilities directly  related to such transfers).  The total amount of the bonds issued for  highway facilities and surface freight transfer facilities cannot  exceed $15 billion.
Observations: Expanding eligibility could encourage  development of new funding sources for freight projects by  attracting private-sector participation in such projects.   However, expanded eligibility could potentially result in higher  costs to the taxpayers.  Bonds can be more expensive than  grants because the governments have to compensate private  investors for the risks that they assume. 1. Infrastructure Performance and Maintenance Program (Title  I, Section 1201). Creates a new program intended for projects  that would preserve, maintain, or extend the life of existing  highway infrastructure elements or provide operational  improvements, including traffic management and intelligent  transportation system (ITS) strategies and limited capacity  enhancements, at points of recurring highway congestion. 2. Transportation planning (Title VI, Section 6001, Subsection  5203(g)(2)(C)). A transportation plan will be required to contain,  among other things, operational and management strategies to  improve the performance of existing transportation facilities to  relieve vehicular congestion and maximize the safety and mobility  of people and goods. 3. Transportation systems management and operations (Title I,  Section 1701, subsection 165(b)(3)).  Allows the Secretary of  Transportation to assist and cooperate with other departments and  agencies to improve regional collaboration and real-time  information sharing; issue, if necessary, new guidance or  regulations for the procurement of transportation system  management and operations facilities equipment, and services; and  approve for federal financial assistance support for regional  operations collaboration and coordination activities that are  associated with regional improvements.
Observation: While these provisions allow for the use of these  tools, there is no explicit requirement to evaluate the  effectiveness of the tools to discern whether intended benefits  have been achieved. 4. Intelligent Transportation Systems Performance Incentive  Program (Title I, Section 1703). In the area of ITS, the provision  would allow funds to be used for projects involving planning,  deployment, integration, and operation of ITS.  The funding formula  would be based on the following criteria that reflect each state’s (1)  reductions in delay due to incidents, (2) improvements in the  operation and safety of signalized intersections, (3) reductions in  delay and improvements in safety of work zones on the NHS, (4)  improvements in the efficiency and reliability of transit services, (5)  overall improvement in integrated regional transportation  operations, (6) improvements in the quality and availability of  traveler information, (7) improved crash notification, and (8)  improvements in the safety and productivity of commercial vehicle  operations in the NHS.
Observation: Tying funding to performance outcomes  increases the likelihood that agencies will endeavor to improve  performance. 5. Toll programs (Title I, Section 1615). The provision would  allow a state or public authority to toll any highway, bridge, or  tunnel, including facilities on the Interstate Highway System, to  manage existing high levels of congestion or reduce emissions in a  nonattainment area or maintenance area.  The tolls must vary in  price according to time of day to manage congestion or improve air  quality.  A state may also permit vehicles with fewer than two  occupants to operate in high-occupancy vehicle (HOV) lanes as part  of a variable toll pricing program. 6. Use of HOV lanes (Title I, Section 1610). Responsible agencies  may permit vehicles that do not satisfy the established occupancy  requirements to use an HOV facility only if they charge such  vehicles a toll.  Any agency electing to toll such vehicles shall also  (1) establish a program that addresses how motorists can enroll and  participate; (2) develop, manage, and maintain a system that will  automatically collect the tolls that vehicles must pay; (3)  continuously monitor, evaluate, and report on performance; (4)  establish the policies and procedures for varying the toll that is  charged to manage the demand to use the subject facilities and  enforce violations; and (5) establish procedures that will limit or  restrict the use of such vehicles, as necessary, to ensure that the  performance of individual facilities or the entire system does not  become seriously degraded.
Observation: Pricing incentives such as these can enhance  economic efficiency by making users take into account the  external costs they impose on others.
section_title: Summary of Freight-related Recommendations Developed by the Transportation Research Board
paragraphs: 1. Department of Transportation (DOT) data and analysis  programs. Continued support should be given to the development  of DOT capabilities for economic analysis of the federal aid  highway program and federal highway user fees and to the  application of this analysis in support of decisions. 2. Evaluation methods. As one means of promoting more useful  evaluation at the federal and state levels, a clearinghouse devoted  to evaluation methods within DOT should be created where DOT  program agencies and local and state governments could share and  compare methods and examples of evaluations. 1. Maintain and reinforce the principle of user financing by  reforming the structure of fees so that they more closely  relate to costs each highway user imposes. 2. Provide funding adequate to ensure that the states have  resources to maintain the overall performance of the  highway system. 3. Programs in successor legislation should meet certain  criteria.  These programs should  (1) sustain the “user pays”  principle, which involves paying capital and operating costs from  the revenues of fees charged to the direct users of the facilities; (2)  sustain the support of the affected parties that the federal user fee  financing system enjoys by funding projects that fee payers  recognize as having value to them; (3) ensure that the market  outcomes of competition between trucking and other modes are in  the public interest, primary reliance should be placed on adjusting  user fees rather than supply offsetting subsidies to the competing  modes; and (4) establish requirements for ongoing and  retrospective evaluation of the performance of the programs for  federal multimodal credit assistance programs. 4. DOT should study the costs and market potential of  exclusive truck facilities. 5. State and local governments should routinely conduct  evaluations to quantitatively test the economic rationale for  government involvement in their freight transportation  infrastructure projects.  Federal programs should require  such evaluations of projects receiving federal assistance.
section_title: Summary of the Freight-related Reauthorization Proposals Developed by Stakeholders
paragraphs: I. Proposals to Address Planning Barriers: American Association of State Highway and Transportation  Officials proposed (1) the development of a freight planning capacity  building process jointly sponsored by Department of Transportation (DOT)  and American Association of State Highway and Transportation Officials  (AASHTO) wherein up to $10 million annually would be provided to  support an initiative through which DOT and the state DOTs would jointly  develop and implement a training and capacity-building program to  strengthen the ability of state and local transportation agencies to  effectively address freight transportation issues, (2) enacting an increase in  the Federal Highway Administration’s (FHWA) research and technology  program allowing a greater emphasis on freight transportation research  and creating a Freight Transportation Cooperative Research Program, and  (3) creating a Freight Advisory Group to communicate with one voice to  DOT on freight transportation issues.
Local Officials for Transportation proposed (1) encouraging the  development of a seamless transportation system by connecting all modal  elements to ensure the efficient movement of people and goods and (2)  developing new approaches to help localities combat increasing urban  congestion.
Association of American Railroads proposed encouraging that freight  issues be given additional consideration in state and local transportation  planning.
American Trucking Associations proposed (1) producing a national  Freight Transportation Improvement Program (FTIP) that focuses on  transportation corridors with heavy freight usage relative to the national  economy and relative to regional populations and economic activity; (2)  establishing a Freight Advisory Board to review and comment on the FTIP;  (3) requiring that MPO governing boards include representatives from the  freight community; (4) setting aside a portion of the MPO funds for the  salaries and training of freight planning specialists; (5) establishing a  Freight Cooperative Research Program; (6) establishing a discretionary  program that provides research grants to states, MPOs, multijurisdictional  transportation planning groups, and private-sector groups; and (7) funding  and supporting multimodal research programs that benefit and improve the  safety and productivity of the trucking industry, as well as fostering  innovative partnerships with the private sector.
Association of Metropolitan Planning Organizations proposed  continuing efforts in the area of goods movement data and setting regional  priorities.
American Public Transportation Association proposed a pilot  program that will identify the benefits of shared use of freight rail corridors  by freight and light rail.  Although shared use is common in Europe, Federal  Railroad Association (FRA) has a number of regulatory requirements that  restrict this practice.  The proposals called for amending federal transit law  to provide for this pilot program to be carried out jointly by Federal Transit  Administration (FTA) and FRA.  It would draw on European experience  with shared use of freight rail corridors to demonstrate that operations can  be safe, effective, and smooth.  Separate funding would not be available for  the program.  Instead, applicants would use existing resources to support  it.  Conclusions drawn from the pilot program would be the basis for FRA  to revise its current regulatory framework.
II. Proposals to Address the Limitations with Existing  Funding/Financing Programs American Association of State Highway and Transportation  Officials proposed (1) the use of existing innovative finance tools and  new financing mechanisms for investments in freight transportation  infrastructure such as lowering the Transportation Infrastructure  Financing and Innovation Act (TIFIA) project dollar threshold, expanding  the eligibility of freight projects and relaxing repayment requirements,  allowing pooling of modal funds, expanding the state infrastructure bank  (SIB) program to all states, creating tax incentives for freight rail and  intermodal infrastructure investment, and exploring the utility of a  Transportation Finance Corporation as a financing mechanism for freight  projects; (2) tailoring existing and proposed innovative financing  techniques to make increased investment in intermodal connectors  possible in combination with increases in core Transportation Equity Act  for the 21st Century (TEA-21) programs; (3) focusing the National Corridor  Planning and Development Program and the Coordinated Border  Infrastructure Program more tightly on freight corridors and augmenting  funding from the Highway Trust Fund with innovative financing; (4)  clarifying the eligibility of freight projects for Congestion Mitigation and Air  Quality (CMAQ) funding; (5) increasing the funding for the highway rail  grade crossing program (section 130) proportionate to the increase in the  overall highway program; and (6) expanding and reforming the Rail  Revitalization and Improvement Funding Program (RRIF).
Association of American Railroads proposed (1) providing tax  incentives and tax-exempt financing to companies making investments in  intermodal freight infrastructure; (2) allowing funding of rail infrastructure  through the issuance of tax-exempt indebtedness, increasing the amount of  low-interest loans and loan guarantees available through the RRIF  program, and removing overly restrictive regulatory requirements that have  hindered program implementation; (3) increasing funding for the section  130 grade crossing program and allowing funds to be spent on maintenance  activities; (4) increasing funding and clarifying freight project eligibility for  the CMAQ program; and (5) increasing funding for the Corridors and  Borders program and liberalizing project eligibility criteria.
American Road and Transportation Builders Association proposed  increasing the amount of funding available nationally under TIFIA and  reducing the overly restrictive qualifications and criteria that discourage  expanded use of the tool.
American Trucking Associations proposed (1) ensuring that revenues  are dedicated to projects and programs that serve national economic,  safety, and research interests; (2) preventing further diversion of highway  user revenues to nonhighway projects; (3) creating new innovative  financing programs that allow states to fund extremely high-cost highway  projects designed to expedite the movement of freight; (4) opposing the  adoption of any new highway user fees on the trucking industry or  increases in existing user fees; (5) preventing further diversion of highway  user revenues to nonhighway freight projects; and (6) dedicating adequate  resources to the development of infrastructure and human resources along  the U.S. borders with Canada and Mexico in order to meet the challenges  associated with rapidly increasing trade growth.
Association of Metropolitan Planning Organizations proposed (1)  promoting the use of innovative financing arrangements, through providing  more incentives, greater flexibility in regulations, and removal of barriers  to public-private joint development; (2) giving additional assistance to  metropolitan areas at major entry ports and intermodal hubs; (3) using  Highway Trust Fund or other federal funding sources in excess of current  authorizations to increase program capacity to support the safe and  efficient movement of goods in corridors that are crucial to national  economic security and vitality; and (4) broadening the eligibility of freight  project funding, providing incentives to attract private investment, and  allowing port access and gateways to be eligible for the Corridors and  Borders programs.
III.Proposals That Would Allow for the Use of Nonbuild Tools American Road and Transportation Builders Association proposed  exploring new technologies to help meet system and mobility needs.
American Trucking Associations proposed elevating highway  operations to a level comparable to highway construction and maintenance  with comparable increases in funding for operations.  As part of this  increased focus on operations, the DOT should continue to support and  fund research into improved highway operations.
Association of Metropolitan Planning Organizations proposed (1)  managing existing capacity better through traditional congestion  management techniques and ITS and (2) giving MPOs the responsibility for  determining which institution in their region should lead the development  of metropolitan-level management and operations plans.
Local Officials for Transportation proposed increasing funding for all  existing research and technology programs that directly benefit local  government.
U.S. Conference of Mayors proposed (1) suballocating surface  transportation funds to metropolitan areas for repair and maintenance of  existing urban highways while giving equal weight to other transportation  needs and (2) dedicating resources to combat increasing metropolitan  congestion through the expanded use of ITS technology.
section_title: Assessment of Stakeholder Proposals
paragraphs: Stakeholder proposals vary considerably in the degree to which they  address the various elements of the strategies to address planning and  financing limitations.  Table 6 shows the most extensive proposals that  have been made, together with our assessment of which elements of the  two strategies are present in the proposal.  (In the table, an “X” indicates  whether the proposal addressed this element in some manner; it does not  indicate the nature or extent of the action.) As the table shows, the  broadest representation of these elements is contained in the  administration’s surface transportation reauthorization proposal.   Collectively, the proposals touch on all of the elements of these strategies,  although no single proposal currently contains the breadth of elements that  will be needed to address the multidimensional limitations inherent in the  public planning process and in federal funding/financing programs.
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