oversight

Freight Transportation: Strategies Needed to Address Planning and Financing Limitations

Published by the Government Accountability Office on 2003-12-19.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                United States General Accounting Office

GAO             Report to the Committee on Environment
                and Public Works, U.S. Senate



December 2003
                FREIGHT
                TRANSPORTATION
                Strategies Needed to
                Address Planning and
                Financing Limitations




GAO-04-165
                a
                                                December 2003


                                                FREIGHT TRANSPORTATION

                                                Strategies Needed to Address Planning
Highlights of GAO-04-165, a report to the       and Financing Limitations
Committee on Environment and Public
Works, U.S. Senate




The strong productivity gains in the            The major challenges to freight mobility share a common theme—
U.S. economy have hinged in part                congestion. National studies point to such problems as overcrowded
on transportation networks                      highways and freight-specific “chokepoints” that stifle effective intermodal
working more efficiently. The                   transfer of cargoes. All 10 ports GAO studied faced similar congestion-
nation’s ports, which handle 95                 related problems. For example, many of the ports are in dense urban areas,
percent of overseas freight
tonnage, are a key link in this
                                                limiting the ability to expand rail yards, roadways, and other infrastructure.
network, and efficient intermodal               Increased port security measures may exacerbate congestion if new controls
links between ship, rail, and                   drastically slow the movement of goods.
highways are vital to continued                 Stakeholders encounter two main limitations in addressing freight mobility
productivity gains. GAO was asked               challenges. The first relates to the limited visibility that freight projects
to address (1) the challenges to
freight mobility, (2) the limitations
                                                receive in the process for planning and prioritizing how transportation
key stakeholders have encountered               dollars should be spent. The planning process often lacks a comprehensive
in addressing these challenges, and             evaluation approach, such as a cost-benefit framework that might result in
(3) strategies that may aid decision            the implementation of freight improvements to better ensure that system-
makers in enhancing freight                     wide, multimodal solutions are considered and adopted where appropriate.
mobility. GAO’s work was based                  The second relates to limitations of federal funding programs, which tend to
on a synthesis of previous studies              dedicate funds to a single mode of transportation or a nonfreight purpose.
and a review of conditions at 10
ports and surrounding areas that                Two strategies may help address these limitations. One is to ensure that
handle almost two-thirds of all                 transportation planning cuts across modes and individual jurisdictions,
containers moving in and out of the             includes coordination with freight stakeholders representing an intermodal
country.                                        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
GAO recommends that the
Secretary of Transportation take                for programs that emphasize better use of existing infrastructure. If
steps to facilitate state and local             integrated in these strategies, three principles could better assure that the
planners’ use of better methods                 freight infrastructure system provides the level of capacity and performance
and tools to make freight                       that makes the greatest contribution to the nation’s economic well-being.
transportation investment                       These principles include promoting efficiency by embracing a “user pay”
decisions. These methods and                    approach, establishing performance measures, and aligning incentives for
tools include better freight-related            planning agencies to adopt best practices.
data, consistent and sound
evaluation approaches, and greater              Truck Congestion near the Port of New York/New Jersey
consideration of alternatives to
capital construction. The
Department of Transportation
reviewed the draft of this report
and generally agreed with the facts
presented, but did not take a
formal position on the
recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-04-165.

To view the full product, including the scope
and methodology, click on the link above.
For more information, contact JayEtta Hecker
at (202) 512-2834 or heckerj@gao.gov.
Contents



Letter                                                                                                          1
                             Results in Brief                                                                   2
                             Background                                                                         6
                             Challenges to Freight Mobility Center on Congestion                                8
                             Planning and Financing Limitations Pose Difficulties in Addressing
                               Freight Mobility Challenges                                                     19
                             Two Key Strategies Could Help Address Freight Planning and
                               Financing Limitations                                                           34
                             Conclusions                                                                       54
                             Recommendations for Executive Action                                              55
                             Agency Comments and Our Evaluation                                                56


Appendixes
              Appendix I:    Objectives, Scope, and Methodology                                                58
             Appendix II:    Summary of the Administration’s 2003 Surface
                             Transportation Reauthorization Proposal Freight-related
                             Provisions and Observations                                                       60
             Appendix III:   Summary of Freight-related Recommendations Developed by
                             the Transportation Research Board                                                 65
             Appendix IV:    Summary of the Freight-related Reauthorization Proposals
                             Developed by Stakeholders                                                         67
              Appendix V:    Assessment of Stakeholder Proposals                                               72
             Appendix VI:    GAO Contacts and Staff Acknowledgments                                            73
                             GAO Contacts                                                                      73
                             Staff Acknowledgments                                                             73


Tables                       Table 1: Key Elements of Evaluations Used in a Public
                                      Decision-making Process                                                  25
                             Table 2: Types of Data Collected and the Additional Data Needs for
                                      Freight Mobility Planning                                                28
                             Table 3: Federal Funding and Financing Sources Providing
                                      Eligibility for Some Freight Projects                                    33
                             Table 4: Examples of Stakeholder Proposals to Expand Eligibility
                                      Criteria to Include Freight Projects                                     44
                             Table 5: Description of Nonbuild Alternatives and Relevant
                                      Stakeholder Proposals                                                    50
                             Table 6: Coverage of Strategy Elements in the Most Extensive
                                      Reauthorization Proposals                                                72



                             Page i     GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
          Contents




Figures   Figure 1: Congestion-related Challenges Are the Dominant
                    Constraint to Freight Mobility                                           9
          Figure 2: Trucks and Cars on Congested I-710 near the Ports of Los
                    Angeles and Long Beach                                                  10
          Figure 3: Examples of Freight-related Congestion at Six Large
                    Gateway Ports and the Surrounding Areas                                 12
          Figure 4: Connector to the Elizabeth New Jersey Port Authority
                    Marine Terminal: Intersection of North Fleet Street and
                    Corbin Street                                                           15
          Figure 5: At-Grade Rail Crossing Near Ports of Seattle/Tacoma—
                    before and after Construction of Overpass                               16
          Figure 6: Examples of Infrastructure with Limited Expansion
                    Potential                                                               17
          Figure 7: Focus of Planning and Funding Processes Limit
                    Consideration of Freight Improvements                                   20
          Figure 8: Reasons for Limited Private-Sector Participation in the
                    Planning Process                                                        24
          Figure 9: Key Strategies and Principles to Address Planning and
                    Financing Limitations                                                   35




          Page ii    GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Contents




Abbreviations

CMAQ                  Congestion Mitigation and Air Quality
CMS                   Congestion Management System
DOT                   Department of Transportation
FAF                   Freight Analysis Framework
FAIR                  Fast and Intertwined Regular Lanes
FAST                  Freight Action Strategy
FHWA                  Federal Highway Administration
FMSIB                 Freight Mobility Strategic Investment Board
HOT                   high-occupancy toll
HOV                   high-occupancy vehicle
ISTEA                 Intermodal Surface Transportation Equity Act
ITS                   Intelligent Transportation System
MPO                   metropolitan planning organization
NHS                   National Highway System
RRIF                  Rail Revitalization and Improvement Funding
STP                   Surface Transportation Program
TEA-21                Transportation Equity Act for the 21st Century
TIFIA                 Transportation Infrastructure Finance and Innovation Act
TRB                   Transportation Research Board



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Page iii     GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
A
United States General Accounting Office
Washington, D.C. 20548



                                    December 19, 2003                                                                    Leter




                                    The Honorable James M. Inhofe
                                    Chairman
                                    The Honorable James M. Jeffords
                                    Ranking Minority Member
                                    Committee on Environment and Public Works
                                    United States Senate

                                    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



                                    Page 1      GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                   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.1 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. 2 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.



Results in Brief   Freight mobility is most affected by congestion-related challenges. Freight
                   traffic on roadways has increased fourfold over the last two decades, and
                   both rail and highway congestion are particularly severe in urban areas


                   1
                    The six metropolitan areas are Charleston, SC; Seattle/Tacoma, WA; Los Angeles/Long
                   Beach, CA; San Francisco/Oakland, CA; Houston, TX; and New Jersey/New York. Except for
                   Charleston and Houston, each of the areas has two ports. The percentage is based on the
                   number of 20-foot equivalent container units (TEUs), a standard measurement of container
                   volume.
                   2
                    U.S. General Accounting Office, Surface and Maritime Transportation: Developing
                   Strategies for Enhancing Mobility: A National Challenge, GAO-02-775 (Washington, D.C.:
                   Aug. 30, 2002); U.S. General Accounting Office, Marine Transportation: Federal Financing
                   and a Framework for Infrastructure Investments, GAO-02-1033 (Washington, D.C.: Sept. 9,
                   2002); and U.S. General Accounting Office, U.S. Infrastructure: Agencies’ Approaches to
                   Developing Investment Estimates Vary, GAO-01-835 (Washington, D.C.: July 20, 2001).




                   Page 2       GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
where container ports for international trade are located. Such congestion
was evident at all six locations we visited. In Oakland, for example, truck
traffic on key access highways to the port increased by 50 to 100 percent
from 1996 to 2000. Congestion on rail lines is also an issue. In the Los
Angeles area, two mainline freight railroads are already experiencing 30-
minute delays per train; freight traffic is projected to more than double
along these rail lines by 2025. Severe congestion also regularly occurs at
freight-specific “chokepoints” or bottlenecks, which exist at entrances to
port facilities, at-grade rail crossings where highways and rail lines
intersect, and roads connecting interstate highways and rail lines to ports
and intermodal facilities.3 The area around the Port of Seattle located in
the heart of the downtown area, for example, has considerable congestion
due to at-grade rail crossings, which slow freight trains and trucks moving
in and out of the port. Old and inadequate infrastructure in and around
gateway seaports—such as underpasses, tunnels, and bridges with
insufficient clearance—is another source of congestion. The ability to
expand or improve this infrastructure is often limited by geography or by
surrounding development. For example, about 90 percent of the freight
moved through the Port of New York/New Jersey is carried by truck.
Dense commercial and residential development adjacent to key routes in
the area limits highway expansion in most areas and makes upgrades to
tunnels and overpasses very expensive. Moreover, existing rail lines in the
area have high-density usage due to heavy use by freight, commuter, and
intercity passenger trains. Another potential source of congestion—which
has not yet materialized—centers on tighter security measures being
adopted in and around gateway seaports. The impact of future security
measures, such as stricter container inspections and port access controls,
could have a major impact on the efficient flow of goods at seaports and
surrounding metropolitan areas, depending how such measures are applied
and implemented.

The fundamental limitation to overcoming freight mobility challenges is
that the public-sector process at the state and local levels for planning and
financing transportation improvements is not well suited to address freight
projects. On the planning side, 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


3
 For the purposes of this report, intermodal freight transportation refers to the transport of
goods in containers that can be moved on land by rail or truck and on water by ship or
barge.




Page 3        GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
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, a factor which deters valuable private sector
participation in the process. These limitations were evident at the
locations we visited. For example, planning officials in Southern California
indicated that improvements to a key freight interstate route from the ports
of Los Angeles and Long Beach clearly would have benefits that extend
beyond the jurisdiction of the planning body. Instead of funding this type
of freight improvement, however, planning bodies tend to allocate funding
to nonfreight projects, which clearly benefit the local constituents. In New
York, state officials said that the long planning horizons associated with the
public planning process and the perception by the freight industry that it
was not benefiting from the process have limited participation by the
freight sector. In addition, freight projects are disadvantaged in the
planning process because many local planning bodies have not applied
rigorous evaluation approaches, such as a cost-benefit framework, or do
not have good data to evaluate freight projects relative to other projects
and to better ensure that multimodal solutions to enhance freight mobility
are considered. Financing limitations pose another difficulty in advancing
freight improvements. Freight projects can often have difficulty securing
public funding because they may generate substantial private-sector
benefits and are intermodal in nature, while funding sources often restrict
access to private firms and focus on a single mode. For example, gaining
access to funding sources—even those federal programs specifically
targeted for freight projects, such as the National Corridor Planning and
Development Program and the Coordinated Border Infrastructure
Program—has been limited because, according to the Federal Highway
Administration (FHWA), these programs are oversubscribed and much of
the funding for these programs has been allocated to congressionally
designated projects. Also, because of private ownership and other issues,
certain freight projects, most notably rail projects, are especially difficult to
fund through federal programs because of restrictions in using public funds
for infrastructure that is privately owned.

Based on our past work and the work of transportation experts, we have
identified two key strategies that we believe are needed to effectively
address the freight planning and financing limitations. The first strategy
involves promoting a more systemwide perspective in planning
transportation projects. Such a perspective involves several facets in



Page 4      GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
planning projects. For one, our case studies have demonstrated that
successful intermodal projects—such as the Freight Action Strategy (FAST
Corridor) project in Washington state4—are those that are coordinated
across various transportation modes and planning jurisdictions and include
close coordination among multiple sets of stakeholders. Also, active
participation by the private sector in partnership with the public sector
often helps to ensure a successful outcome. The private sector often can
bring a more global view of freight needs to the planning process, can help
identify and implement projects, and can provide new data for making
more informed decisions. An integral part of this strategy is also ensuring
that sound analytical approaches are being applied locally and meaningful
data are available, not only to evaluate and prioritize infrastructure
investments but also to determine whether public support is justified by
considering a wider array of social and economic costs and benefits. The
second strategy involves determining the appropriate federal role and
providing a wider range of financing and related options to enhance freight
mobility. Expanding the eligibility criteria for existing programs to cover a
broader range of freight projects is one way to accomplish this. For
example, one of the administration’s current proposals is to expand the
eligibility of one relevant program to include public or private freight rail
facilities and intermodal freight transfer facilities. Another way could
involve expanded support for alternative financing mechanisms, such as
federal loan programs, and new sources of revenue, such as truck toll
lanes, to appropriately blend public and private funds to match public and
private costs and benefits. Finally, promoting low cost alternatives to
expand capacity through the more efficient use of existing transportation
infrastructure may be a way to address congestion with limited funds.
These alternatives include a diverse mix of measures, including corrective
and preventive maintenance, operations and systems management, and
new technology. The administration and freight stakeholders have
developed a variety of reauthorization proposals to broaden eligibility
criteria, expand alternative funding, and promote low cost alternatives
that, taken together, could represent key components of the two strategies
we identified. While one aspect of the administration’s reauthorization
proposal encourages coordination and cooperation of planning agencies
across jurisdictional boundaries and various transportation modes, more
fundamental, bolder steps to change the way projects are planned and


4
 Through various partnerships, the FAST Corridor is a project that has identified solutions
to problems where transportation systems meet along the freight corridor between Everett
and Tacoma.




Page 5        GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
             financed may be necessary to overcome widely recognized limitations with
             the process. Some transportation experts contend that more far-reaching
             solutions, such as establishing a federally administered program to identify
             and fund freight projects having national significance, are needed to
             overcome local disincentives currently impeding such cooperation.

             We are making specific recommendations to the Secretary of
             Transportation to facilitate the use by state and local planners of better
             methods to make freight-related and other transportation investment
             decisions. These methods include increasing efforts to collect and
             maintain more complete and useful freight-related data and using
             consistent and sound analytical methods and evaluation approaches. The
             Department of Transportation reviewed a draft of this report, provided
             technical comments, and generally agreed with the facts presented in this
             report. We made changes, as appropriate, to ensure the accuracy of our
             report. The department did not take a formal position on GAO’s
             recommendations.



Background   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.



             Page 6      GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
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



Page 7      GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                        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. 5



Challenges to Freight   Congestion-related challenges are among the dominant constraints for
                        freight mobility. Congestion on our nation’s highways and at intermodal
Mobility Center on      connectors to rail lines, terminals, and port facilities threaten the efficiency
Congestion              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.6

                        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


                        5
                        A portion of highway user revenues is dedicated to mass transit.
                        6
                         According to information provided by the Port of Los Angeles, slowdown of this cargo in
                        the Los Angeles area can have an economic ripple effect for the nation as a whole. For
                        example, the Los Angeles Economic Development Corporation released estimates as part of
                        a study, placing the total trade disruption cost at $6.28 billion. However, the Bureau of
                        Transportation Statistics notes that costs of the shutdown have ranged from $1.67 billion to
                        $19.4 billion, depending on the provider of the estimate.




                        Page 8        GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
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.



Figure 1: Congestion-related Challenges Are the Dominant Constraint to Freight
Mobility




Page 9      GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Current Levels of             One major challenge to freight mobility is the existing high demand on the
Congestion Are Already        transportation infrastructure, which is increasing in large urban areas near
                              international gateway ports. Overall, highway congestion for passenger
Significant and Will Likely   and commercial vehicles traveling during peak driving periods doubled
Grow with Increasing          from 1982 through 2000. Freight traffic is adding to this congestion at a
Traffic Volumes               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.7 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.)



                              Figure 2: Trucks and Cars on Congested I-710 near the Ports of Los Angeles and
                              Long Beach




                              7
                               Trucks include both single unit trucks (six tires or more) and combination trucks (trailers
                              and semitrailers).




                              Page 10       GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
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 times8 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.9 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.)




8
 Delay times for passenger and freight are measured in average annual peak-person hours of
delay. Annual person-hours of delay is equal to daily vehicle hours of incident plus recurring
delay times 250 working days per year times 1.25 persons per vehicle.
9
 Texas Transportation Institute, The 2002 Urban Mobility Study, http://mobility.tamu.edu,
Texas A&M University (June 2003).




Page 11       GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Figure 3: Examples of Freight-related Congestion at Six Large Gateway Ports and
the Surrounding Areas




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.




Page 12     GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Specific Intermodal      While the freight industry shares many congestion problems with other
Chokepoints Exacerbate   users of the transportation system, some sources of congestion have a
                         more severe impact on freight mobility. In large urban gateway areas,
Congestion as Traffic    severe freight congestion regularly occurs at roads connecting main
Volumes Increase         highway and port landside facilities10 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 System11 (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.12 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




                         10
                           These are port facilities located on land, such as terminals including warehouses, storage
                         facilities, and intermodal connectors.
                         11
                          The NHS is approximately 160,000 miles of roadway including the Interstate Highway
                         System, as well as other roads important to the nation’s economy, defense, and mobility.
                         The Department of Transportation (DOT), in cooperation with the states, local officials, and
                         metropolitan planning organizations developed the NHS.
                         12
                          U.S. Department of Transportation, Federal Highway Administration, The Role of the
                         National Highway System Connectors: Industry Context and Issues (Washington, D.C.:
                         February 1999).




                         Page 13       GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
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.13

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.




13
 U.S. Department of Transportation, NHS Intermodal Freight Connectors: A Report to
Congress (Washington, D.C.: July 2000).




Page 14      GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Figure 4: Connector to the Elizabeth New Jersey Port Authority Marine Terminal:
Intersection of North Fleet Street and Corbin Street




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.




Page 15     GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                             Figure 5: At-Grade Rail Crossing Near Ports of Seattle/Tacoma—before and after
                             Construction of Overpass




                             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.



Much Inadequate              Infrastructure that is old and inadequate—such as underpasses or tunnels
Infrastructure Has Limited   with insufficient clearance—often carries limited expansion potential;
                             thus, mitigating this source of congestion and enhancing the efficiency of
Expansion Potential
                             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


                             Page 16     GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                        storage, railroad tracks, and truck roads is being pursued and developed,
                        but slowly and at a high cost.



                        Figure 6: Examples of Infrastructure with Limited Expansion Potential




Heightened Security     Security concerns are one additional matter that needs to be considered in
Concerns Also Must Be   addressing congestion challenges. Many of the studies included in our
                        evaluation synthesis were conducted in 2001 or earlier and did not raise
Taken into Account      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.14

                        Security and freight mobility are not mutually exclusive goals, but they can
                        potentially conflict, adding to congestion. Access in and out of ports


                        14
                         Michael E. O’Hanlon et al., Protecting the American Homeland: A Preliminary Analysis
                        (Washington, D.C.: Brookings Institution Press, 2002).




                        Page 17      GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
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. 15 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


15
 Transportation Research Board, Special Report 270: Deterrence, Protection, and
Preparation: The New Transportation Security Imperative (Washington, D.C.: 2002).




Page 18      GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                         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.16 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.



Planning and Financing   Studies examining freight mobility point primarily to planning and funding
                         issues as the main limitations in efforts to help address challenges to the
Limitations Pose         system, and our work has confirmed their relevance at the ports and
Difficulties in          surrounding areas we visited. (See fig. 7.) On the planning side, the
                         limitations center on two areas. First, consideration of freight
Addressing Freight       improvement projects as part of the local planning process is limited
Mobility Challenges      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

                         16
                          Previous GAO studies on this issue include U.S. General Accounting Office,
                         Transportation Security: Federal Action Needed to Enhance Security Efforts, GAO-03-
                         1154T (Washington, D.C.: Sept. 9, 2003); U.S. General Accounting Office, Aviation Security:
                         Progress Since September 11, 2001, and the Challenges Ahead, GAO-03-1150T
                         (Washington, D.C.: Sept. 9, 2003); and U.S. General Accounting Office, Maritime Security:
                         Progress Made in Implementing Maritime Security Act, but Concerns Remain, GAO-03-
                         1155T (Washington, D.C.: Sept. 9, 2003).




                         Page 19       GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
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.



Figure 7: Focus of Planning and Funding Processes Limit Consideration of Freight
Improvements




Page 20     GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Freight Priorities Have       According to several studies examining freight mobility, the transportation
Difficulty Competing in the   decision-making process does not lend itself well to regional freight
                              mobility planning.17 Under ISTEA and TEA-21, much of this planning
Transportation Planning       process takes place at the local level through metropolitan planning
Process                       organizations (MPOs) and at the state level through state departments of
                              transportation.18 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


                              17
                               Federal Highway Administration, Office of Freight Management and Operations, Freight
                              Financing Options for National Freight Productivity (Washington, D.C.: April 2001) and
                              Federal Highway Administration, Addressing Freight in the Transportation Planning
                              Process (Washington, D.C.: October 2001).
                              18
                                Federal law requires the creation of MPOs for any urbanized area with a population greater
                              than 50,000. Composed of representatives from local government and transportation
                              authorities, MPOs are charged with developing a comprehensive metropolitan long-range
                              transportation plan and transportation improvement program that consider other interests
                              in the planning process through cooperative partnerships with stakeholders. MPOs receive
                              federal funding in addition to other sources to conduct their operations.




                              Page 21       GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
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.19 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


19
 Federal Highway Administration, Addressing Freight in the Transportation Planning
Process (Washington, D.C.: October 2001) and Federal Highway Administration, Office of
Freight Management and Operations, Freight Financing Options for National Freight
Productivity (Washington, D.C.: April 2001).




Page 22      GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
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.20 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.)




20
 Federal Highway Administration, Office of Freight Management and Operations, Freight
Financing Options for National Freight Productivity (Washington, D.C.: April 2001) and
Federal Highway Administration, Addressing Freight in the Transportation Planning
Process (Washington, D.C.: October 2001).




Page 23      GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                              Figure 8: Reasons for Limited Private-Sector Participation in the Planning Process




Better Analytical Methods     Transportation research recognizes the importance of using a sound
and Sufficient Data Needed    evaluation approach, such as a cost-benefit framework, to take a more
                              systemwide, multimodal approach to transportation planning. 21 However,
for Transportation Planning
                              our review at the locations we visited showed that many state and local
at the Local Level            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


                              21
                               Transportation Research Board, Special Report 271: Freight Capacity for the 21st
                              Century (Washington, D.C.: 2002); Transportation Research Board, Special Report 252:
                              Policy Options for Intermodal Freight Transportation (Washington, D.C.: 1998); and
                              GAO-02-775.




                              Page 24      GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                                   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.

State and Local Planners Are Not   Our past work on best practices for capital decision-making22 found that
Consistently Applying Sound        establishing a decision-making framework that is supported by proper
Analytical Methods and             financial, technical, and risk analysis is a critical factor in making sound
Evaluation Approaches              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. 23


                                   Table 1: Key Elements of Evaluations Used in a Public Decision-making Process

                                   Type of
                                   evaluation           Key elements
                                   Prospective          • Cost-benefit analyses should be used, especially for projects involving
                                   evaluation             trade-offs among freight mobility benefits, passenger benefits, and
                                                          environmental protection. Transportation benefits should be evaluated in
                                                          terms of users’ willingness to pay for the change. Estimating the
                                                          demand response to changes in transportation cost is necessary.
                                                        • Cross-modal and low cost noncapital alternatives, including traffic
                                                          control improvements and congestion pricing, should be actively
                                                          considered and analyzed in lieu of capital improvements.
                                                        • External benefits and the value of avoiding external costs (like air
                                                          pollution and congestion) should be quantified to the extent possible in
                                                          the cost-benefit analysis.
                                                        • An analysis of risks and sources of uncertainty, including uncertainty
                                                          in traffic projections and strategies for reducing risk should be included.
                                   Retrospective • A retrospective evaluation of completed projects should be
                                   evaluation      performed according to established guidelines. These evaluations allow
                                                   public planners to learn from experience, provide incentives to achieve
                                                   results, and hold planners accountable for their decisions.
                                   Source: GAO summary of elements presented in TRB’s Policy Options for Intermodal Freight Transportation and Freight Capacity for
                                   the 21st Century.



                                   22
                                    U.S. General Accounting Office, Executive Guide: Leading Practices in Capital Decision-
                                   Making, GAO/AIMD-99-32 (Washington, D.C.: December 1998).
                                   23
                                      Transportation Research Board, Policy Options for Intermodal Freight Transportation
                                   (Washington, D.C.: 1998) and Transportation Research Board, Freight Capacity for the 21st
                                   Century (Washington D.C.: 2002).




                                   Page 25             GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
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, FHWA24 said that planners lack
the tools to evaluate freight projects with nonfreight projects. TRB
studies25 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. 26


24
 Federal Highway Administration, Addressing Freight in the Transportation Planning
Process (Washington, D.C.: October 2001).
25
 Transportation Research Board, Special Report 252: Policy Options for Intermodal
Freight Transportation (Washington, D.C.: 1998) and Transportation Research Board,
Special Report 271: Freight Capacity for the 21st Century (Washington, D.C.: 2002).
26
  This process involves solicitation of freight projects from potential public agency sponsors
that are then screened, ranked, and then jointly advanced for state and federal funding
partnerships (together with local, port, and railroad funds). Within this process, a project-
level, weighted point system is used, in combination with a documented team review of all
applications, that includes potential funding sources and a project narrative that includes
looking at reduced delays, cost effectiveness, and cost alternatives. Once advanced to the
state, the Freight Mobility Strategic Investment Board (FMSIB) reviews projects to be put
forward as part of a statewide list to the legislature for project selection and funding.




Page 26       GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                               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.

Transportation Planners Lack   Transportation studies by us and by others have found that sufficient data
Sufficient Data to Evaluate    and information systems are essential to make sound investment decisions.
Freight 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



                               Page 27    GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
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.



Table 2: Types of Data Collected and the Additional Data Needs for Freight Mobility
Planning

                  Examples of types of
Location          data used                      Key limitations cited by planners
Charleston        Freight Analysis           • Accessible data are generalized to
                  Framework (FAF)a, census     state and national level; specific
                  data, commodity flow data,   localized data is not available.
                  travel demand model        • Some of the data from private
                                               companies are confidential and
                                               proprietary and, therefore, lack
                                               sufficient detail for accurate freight
                                               planning purposes.
Houston           A variety of national, state, • The validity of some of the national,
                  and local data that             state, and local data are questionable,
                  includes freight flows,         and it is difficult to get the data in detail
                  emissions, vehicle miles        at the local level.
                  traveled, truck counts,       • Data purchased from consultants are
                  purchased data from             expensive.
                  consultants
Los Angeles/Long A variety of national and       • Useful freight data are generally
Beach            state data including              unavailable.
                 commodity flow data;            • Available commodity flow data are not
                 demand model that                 detailed enough (i.e., county or by zip
                 incorporates heavy trucks         code) for accurate freight planning.
                 included in regional
                 transportation plan




Page 28      GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
(Continued From Previous Page)
                             Examples of types of
Location                     data used                                  Key limitations cited by planners
New Jersey                   National data such as the                  • Modeling data are available, but results
                             FAF, some state data, in-                    are often unreliable because of
                             house modeling,                              questionable assumptions on routes for
                             purchased data from a                        trucks.
                             consultant                                 • Reconciling similar data from different
                                                                          sources is also a problem; combining
                                                                          data and developing new data sets is
                                                                          time consuming and resource
                                                                          intensive.
New York                     Commodity flows and                        • Proprietary issues make it difficult to
                             volumes, origin and                          obtain detailed data that are useful.
                             destination data, truck                    • Often there is a time lag in the data
                             counts                                       received, and the data may not
                                                                          necessarily reflect the current
                                                                          environment.
Oakland                      State and local data, travel • There is a need for more interstate
                             demand models, roadway         import and export data and more
                             monitoring including car       freight-specific data.
                             and truck counts
Seattle/Tacoma               FAF and Bureau of           • There is a need for better information
                             Transportation Statistics     on trip reliability or predictability.
                             data, marine cargo            Metropolitan traffic models do a poor
                             forecasting, modeling data,   job of reflecting “real world” traffic
                             state-level data, trucking    delays.
                             data
Sources: Highlights of information collected by GAO from the metropolitan planning organizations for these locations.
a
 FHWA has created the FAF. This framework was developed from various government and private-
sector databases including the commodity flow database and the highway capacity dataset.


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.27 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


27
 Freight Planning Support System, Final Summary Report (New Jersey Institute of
Technology, July 2003).




Page 29              GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                               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.

Federal Efforts to Encourage   The variation in local planning evaluation approaches and data gathering
Sound Evaluation Procedures    among MPOs is not surprising given the wide latitude that planning
Have Been Limited              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.28 Almost all of
                               the officials said they wanted more help in obtaining sufficient data for


                               28
                                For example, ISTEA and TEA-21 require the Department of Transportation, through the
                               FHWA and FTA, to review and certify that all metropolitan areas with a population of
                               200,000 or more meet certain transportation planning requirements, including developing a
                               Congestion Management System (CMS). Some transportation officials said more detailed
                               guidance was needed on how to implement a CMS that meets specific requirements.




                               Page 30       GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                              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.



Intermodal Nature of          A variety of factors in the way federal transportation programs are
Freight Projects and Access   structured and used as funding sources for infrastructure projects hamper
                              MPOs and states in advancing freight improvement projects. For one,
Limitations to Federal
                              freight improvement projects are more complicated to fund than
Programs Can Hamper           traditional, modally oriented projects, both because of the intermodal
Planners in Funding Freight   nature of most freight projects and the challenge in balancing public and
Improvements                  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



                              Page 31     GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
funds on a modal basis, MPOs may make decisions based on the mode
eligible for federal funding, which puts freight projects at a disadvantage.29

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.30 Table 3 shows the federal programs
established in ISTEA and TEA-21 that are available as funding sources for
freight projects.




29
 When MPOs make infrastructure decisions based on the mode eligible for federal funding,
this can potentially result in greater funding for one mode over another.
30
 U.S. Department of Transportation, Federal Highway Administration, Office of Freight
Management and Operations, Transportation Policy: Evolution of Federal Freight
Transportation Policy (Washington, D.C.: 2001).




Page 32      GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Table 3: Federal Funding and Financing Sources Providing Eligibility for Some
Freight Projects

Funding source                        Applicability
Congestion Mitigation and Air        • Can be used to fund a wide range of freight
Quality Program (CMAQ)                 improvement projects, including rail and other
                                       nonhighway transportation projects.
                                     • Project must reduce carbon monoxide or other
                                       specified air pollutants in a nonattainment or
                                       maintenance area as specified in the Clean Air Act.
                                     • Freight projects are required to show reduced air
                                       emissions.
Surface Transportation Program       • Can be used for highway-related freight projects,
(STP)                                  such as roadway improvements to facilitate truck-
                                       freight movement or accommodate other modes,
                                       raising bridges, at-grade rail separations, and
                                       improvements to intermodal connectors.
                                     • Project must be related to federal-aid highway
                                       system.
National Highway System (NHS)        • Can be used to improve intermodal connectors.
                                     • Project must be identified as a NHS priority
                                       highway or a connector linking the NHS to key
                                       intermodal facilities.
National Corridor Planning and       • Can be used to fund projects related to planning
Development Program and                and construction on major corridors that have been
Coordinated Border Infrastructure      identified.
Program (Corridors and Borders)      • These programs are oversubscribed, and much of
                                       the funding is allocated to congressionally
                                       designated projects.
Transportation Infrastructure      • Can be used for publicly owned, intermodal,
Finance and Innovation Act (TIFIA) surface freight transportation facilities (other than
                                     seaports and airports) located adjacent to the NHS.
                                   • To qualify for assistance, projects must be valued at
                                     over $100 million.
Rail Revitalization and              • Targeted specifically at providing credit for rail
Improvement Funding Program            infrastructure and equipment.
(RRIF)                               • Applicants must pay an up-front fee in order to
                                       receive the loan, are subject to the lengthy
                                       application process, and must first be turned down
                                       by a bank or credit institution.
Source: FHWA.


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



Page 33         GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                        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.31 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 nonattainment32 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.



Two Key Strategies      The upcoming reauthorization of TEA-21 provides an opportunity to
                        consider ways in which federal policies and programs might be adjusted to
Could Help Address      help address the planning and funding limitations described above. Using
Freight Planning and    the work of transportation experts and our own experience in evaluating
                        transportation mobility projects,33 we identified two key strategies that
Financing Limitations   hold promise for addressing the planning and financing limitations that
                        surfaced from our work. The first strategy addresses planning limitations,

                        31
                         U.S. Department of Transportation, Federal Highway Administration, Freight Financing
                        Options for National Freight Productivity (Washington, D.C.: April 2001).
                        32
                         EPA uses six criteria pollutants as indicators of air quality. When an area does not meet
                        the air quality standard for one of the criteria pollutants, it may be designated as a
                        nonattainment area.
                        33
                           GAO-02-775, GAO-02-1033, Transportation Research Board, Special Report 252: Policy
                        Options for Intermodal Freight Transportation (Washington, D.C.: 1998) and
                        Transportation Research Board, Special Report 271: Freight Capacity for the 21st Century
                        (Washington, D.C.: 2002).




                        Page 34       GAO-04-165 Strategies Needed to Address Planning and Financing 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.)



Figure 9: Key Strategies and Principles to Address Planning and Financing
Limitations




Page 35     GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                              The administration and system stakeholders have developed a variety of
                              reauthorization proposals to address the planning and financing
                              limitations. 34 (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.



First Strategy: Emphasizing   Our past work has shown that planning should be viewed from a
a Systemwide Approach to      systemwide perspective.35 Such a perspective includes taking multiple
                              transportation modes and jurisdictions into account—rather than
Transportation Planning
                              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.

Coordination Across           As one means to ensure that freight perspectives are included in public
Transportation Modes and      planning and programming decisions, coordination across the various
Jurisdictions                 transportation modes and planning jurisdictions is important. Intermodal

                              34
                               National stakeholders include the Freight Stakeholders Coalition, the American
                              Association of State Highway and Transportation Officials, Local Officials for
                              Transportation, Association of American Railroads, American Trucking Associations,
                              Association of Metropolitan Planning Organizations, American Road and Transportation
                              Builders Association, and U.S. Conference of Mayors.
                              35
                                   GAO-02-775.




                              Page 36            GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
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



Page 37     GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                               types of planning activities that are affected by transportation.36 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.37
                               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.

Ensuring That Private-sector   Since a systemwide approach to transportation planning will require more
Stakeholders Are Effectively   focus on issues that cross jurisdictions, securing the participation of the
Involved                       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.


                               36
                                    Title VI, Section 6001, subsection 5203(e)(4).
                               37
                                    Title I, Section 1806(f)(1).




                               Page 38            GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
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.38 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.39 This program would require states
to designate a freight transportation coordinator responsible for fostering


38
 The Freight Stakeholders Coalition is composed of the American Association of Port
Authorities, the American Trucking Associations, the Association of American Railroads,
the Coalition for America’s Gateways and Trade Corridors, the Intermodal Association of
North America, the National Association of Manufacturers, the National Industrial
Transportation League, the U.S. Chamber of Commerce, and the World Shipping Council.
39
     Title I, section 1205.




Page 39            GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                            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.

Applying Sound Analytical   As part of a systemwide approach to planning, standard evaluation
Approaches and Collecting   methods and sufficient data will also be needed to support public
Sufficient Data             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.40 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

                            40
                                 Title I, Section 1503(i)(3)(A).




                            Page 40           GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                                economic rationale for both existing projects and proposed projects
                                requiring new government involvement in transportation investments.



Second Strategy: Providing      The second strategy addresses the other main limitation identified by our
a Wider Range of Funding        own reviews and other researchers as a common obstacle to progress in
                                resolving freight and overall congestion issues—financing and funding. In
and Related Options             the current budgetary environment, along with long-range fiscal challenges
                                confronting the country,41 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.

Determining the Appropriate     Transportation experts generally agree that determining the appropriate
Federal Role and Apportioning   scope of government involvement and level of subsidization in freight-
the Cost Burden among           related and other projects is an important step in making transportation
Beneficiaries                   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.

                                41
                                 Speech made by the Comptroller General of the United States on September 17, 2003
                                entitled “Truth and Transparency: The Federal Government’s Financial Condition and Fiscal
                                Outlook.”




                                Page 41       GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
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.42 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.43 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-

42
 Transportation Research Board, Special Report 252: Policy Options for Intermodal
Freight Transportation (Washington, D.C.: 1998) and Transportation Research Board,
Special Report 271: Freight Capacity for the 21st Century (Washington, D.C.: 2002).
43
  According to TRB, public support for freight infrastructure projects is appropriate if a
project possesses certain characteristics, such as (1) reducing external costs of
transportation, (2) producing external economic development benefits, (3) providing
offsetting subsidies, (4) meeting a national defense need, and/or (5) is an established
government responsibility.




Page 42       GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                                   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).”44 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.

Expanding Eligibility Guidelines   A concern voiced by national stakeholder groups and raised through our
for Existing Federal Programs      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


                                   44
                                    Transportation Research Board, Special Report 252: Policy Options for Intermodal
                                   Freight Transportation (Washington, D.C.: 1998).




                                   Page 43      GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
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.)



Table 4: Examples of Stakeholder Proposals to Expand Eligibility Criteria to Include
Freight Projects

Stakeholder                 Proposal
Administration              • Allows the use of Surface Transportation Program funds for
                              publicly owned intermodal freight transfer facilities and National
                              Highway System funds for routes connecting to intermodal freight
                              terminals.
                            • Expands the types of private activities that can be financed with tax-
                              exempt private activity bonds to include surface freight transfer
                              facilities.
                            • Expands the eligibility of the Transportation Infrastructure Finance
                              and Innovation Act to include public or private freight rail facilities
                              and intermodal freight transfer facilities.
Freight                     • Expands eligibility guidelines by dedicating funds for National
Stakeholders                  Highway System connectors and expanding the Corridors and
Coalition                     Borders Program to include gateways.
Sources: The administration’s surface transportation reauthorization proposal and the Freight Stakeholders Coalition proposal.


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



Page 44              GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
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



Page 45    GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                                  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.

Using Financing Mechanisms or     Many stakeholders have argued that the level of transportation funding is
Developing New Revenue            insufficient to adequately address the challenges to freight mobility
Sources to Ensure a Blending of   described earlier in this report. While more funding might appear to be an
Public and Private Funds to       obvious solution, in the current budgetary environment, many stakeholders
Match Public and Private Costs    believe that other methods must be explored. One alternative would be to
and Benefits                      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




                                  Page 46     GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
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.45
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.46 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.




45
     Title IX, Section 9004.
46
     GAO-02-1126T.




Page 47           GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
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.47
  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. 48 A number of


47
 Reason Foundation, Toll Truckways: A New Path Toward Safer and More Efficient
Freight Transportation (Washington, D.C.: June 2002).
48
     GAO-03-735T.




Page 48         GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
   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



Page 49    GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                              would also allow low-occupancy vehicles or solo drivers to pay a fee to use
                              high-occupancy vehicle (HOV) lanes during peak travel periods.

Using Nonbuild Alternatives   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.49
                              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.



                              Table 5: Description of Nonbuild Alternatives and Relevant Stakeholder Proposals

                              Type of alternative     Description                          Examples of proposals
                              Increased               This entails having a regular        In the administration’s proposal,
                              maintenance and         and a systematic corrective and      maintenance and rehabilitation
                              rehabilitation          preventive maintenance               is addressed through the
                                                      program at the state and local       establishment of a new
                                                      level to maintain the integrity of   program—the Infrastructure
                                                      existing infrastructure and          Performance and Maintenance
                                                      prevent or forestall major           Program—which focuses on
                                                      rehabilitation or replacement.       projects that preserve existing
                                                      Such a program can improve           highway facilities or alleviate
                                                      the speed and reliability of         traffic chokepoints.
                                                      freight travel.




                              49
                                Tolling for congestion pricing, discussed earlier as an alternative financing approach, is
                              another nonbuild alternative. Congestion pricing can spread out demand on existing
                              infrastructure, thereby reducing congestion and expanding system capacity.




                              Page 50       GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                             (Continued From Previous Page)
                             Type of alternative               Description                        Examples of proposals
                             Improving                         This involves using existing       The administration’s proposal
                             management and                    infrastructure more efficiently,   requires transportation plans to
                             operations                        which adds capacity.               contain operational and
                                                               Examples include installing        management strategies. It also
                                                               modern traffic control systems     encourages transportation
                                                               and developing strategies to       agencies to collaborate and
                                                               handle traffic accidents and       coordinate on a regional level for
                                                               breakdowns.                        improved systems management
                                                                                                  and operations.
                             Developing and using This includes Intelligent                       The administration’s proposal
                             new technology       Transportation Systems (ITS)                    addresses ITS through an
                                                  that are designed to enhance                    Intelligent Transportation
                                                  the safety, efficiency, and                     Systems Performance Incentive
                                                  effectiveness of the                            Program. The goal of the
                                                  transportation network. ITS                     incentive program is to
                                                  can serve as a way of                           accelerate the integration and
                                                  increasing capacity and                         interoperability of ITS to improve
                                                  mobility without making major                   the performance of the surface
                                                  capital investments.                            transportation system in
                                                                                                  metropolitan and rural areas.
                                                                                                  Funding would be directly tied to
                                                                                                  criteria that reflect each state’s
                                                                                                  performance outcomes with
                                                                                                  respect to established criteria for
                                                                                                  enhanced safety, operations,
                                                                                                  and mobility.
                             Source: GAO and the administration’s reauthorization proposal.




Building in Basic Economic   Congress will formulate a new national transportation policy when it
and Management Principles    reauthorizes TEA-21. Our past work and our review of numerous studies
                             by a diverse group of transportation experts show that the planning and
into Reauthorization
                             financing processes established by core transportation legislation make it
Strategies and Provisions    difficult for freight mobility projects to compete with nonfreight projects.
Could Enhance Capacity       Our work has also led us to identify sound principles that, if integrated into
and Performance of Freight   the transportation planning and financing strategies and provisions of the
Mobility                     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.




                             Page 51             GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
• 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.50 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


50
   Transportation Research Board, Special Report 271: Freight Capacity for the 21st Century
(Washington, D.C.: 2002); Transportation Research Board, Special Report 252: Policy
Options for Intermodal Freight Transportation (Washington, D.C.: 1998); and GAO-02-775.




Page 52       GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
   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



Page 53     GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                   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. 51 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.



Conclusions   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



              51
               The Brookings Institution, Improving Metropolitan Decision Making in Transportation:
              Greater Funding and Devolution for Greater Accountability (Washington, D.C.: October
              2003).




              Page 54       GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                      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.



Recommendations for   To encourage the use of sound evaluation and data collection efforts
                      among state and local transportation planners, we recommend that the
Executive Action      Secretary of Transportation:




                      Page 55    GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
                      • 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.



Agency Comments and   We provided a draft of this report to the Department of Transportation for
                      its review and comment. Generally, the department agreed with the facts
Our Evaluation        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



                      Page 56     GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
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.




JayEtta Z. Hecker
Director, Physical Infrastructure




Page 57     GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Appendix I

Objectives, Scope, and Methodology                                                                 AA
                                                                                                    ppp
                                                                                                      ep
                                                                                                       ned
                                                                                                         n
                                                                                                         x
                                                                                                         id
                                                                                                          e
                                                                                                          x
                                                                                                          Iis




              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



              Page 58     GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Appendix I
Objectives, Scope, and Methodology




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.

We conducted our work from October 2002 to November 2003 in
accordance with generally accepted government auditing standards




Page 59      GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Appendix II

Summary of the Administration’s 2003 Surface
Transportation Reauthorization Proposal
Freight-related Provisions and Observations                                                         Appendx
                                                                                                          Ii




               I. Planning

                   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




               Page 60     GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Appendix II
Summary of the Administration’s 2003
Surface Transportation Reauthorization
Proposal Freight-related Provisions and
Observations




             affects the ability of states and MPOs to address their unique
             transportation needs.

II. Financing

    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




Page 61       GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Appendix II
Summary of the Administration’s 2003
Surface Transportation Reauthorization
Proposal Freight-related Provisions and
Observations




          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.

III.Nonbuild Tools

    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.




Page 62       GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Appendix II
Summary of the Administration’s 2003
Surface Transportation Reauthorization
Proposal Freight-related Provisions and
Observations




    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.




Page 63       GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Appendix II
Summary of the Administration’s 2003
Surface Transportation Reauthorization
Proposal Freight-related Provisions and
Observations




    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.




Page 64       GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Appendix III

Summary of Freight-related
Recommendations Developed by the
Transportation Research Board                                                                       Appendx
                                                                                                          iI




               I. Planning

                   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.

               II. Financing

                   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.




               Page 65     GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Appendix III
Summary of Freight-related
Recommendations Developed by the
Transportation Research Board




    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.




Page 66     GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Appendix IV

Summary of the Freight-related
Reauthorization Proposals Developed by
Stakeholders                                                                                              Appendx
                                                                                                                iIV




              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;1 (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


              1
               The American Trucking Associations proposed that the purpose of the FTIP is to identify
              corridors that are currently deficient or are likely to become deficient given projected
              freight transportation demands and specific local system bottlenecks, including deficient
              intermodal connectors.




              Page 67       GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Appendix IV
Summary of the Freight-related
Reauthorization Proposals Developed by
Stakeholders




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



Page 68      GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Appendix IV
Summary of the Freight-related
Reauthorization Proposals Developed by
Stakeholders




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) 2 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.




2
 Section 130 is a program to enhance safety at highway-rail grade crossings on public
highways.




Page 69       GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Appendix IV
Summary of the Freight-related
Reauthorization Proposals Developed by
Stakeholders




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;3 (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

3
 The Association of Metropolitan Planning Organizations provides the following specific
changes that should be considered: increasing direct federal capitalization of infrastructure
banks, making changes to tax-exempt bond finance restrictions, removing barriers to
public-private joint development, and broadening eligibility rules and relaxing thresholds on
innovative financing tools already available.




Page 70       GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Appendix IV
Summary of the Freight-related
Reauthorization Proposals Developed by
Stakeholders




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.




Page 71      GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Appendix V

Assessment of Stakeholder Proposals                                                                                                                           Append
                                                                                                                                                                   x
                                                                                                                                                                   i
                                                                                                                                                                   V




                                                                   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.



Table 6: Coverage of Strategy Elements in the Most Extensive Reauthorization Proposals

                                                          Elements of planning strategy                               Elements of financing strategy
                                                                           Private          Data and             Expand         Alternative      Nonbuild
Reauthorization proposal                       Coordination             involvement          tools              eligibility      finance          tools
Administration’s 2003 surface                           X                        X              X                   X                X               X
transportation reauthorization
proposal
Freight Stakeholders Coalition                          X                        X                                  X                X
American Association of State                                                    X                                  X                X
Highway and Transportation
Officials
Association of American                                                                                             X                X
Railroads
American Trucking                                       X                        X                                                                   X
Associations
Association of Metropolitan                                                                     X                   X                X               X
Planning Organizations
American Road and                                                                                                                    X               X
Transportation Builders
Association
Source: GAO analysis of selected system stakeholder reauthorization proposals.




                                                                   Page 72           GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
Appendix VI

GAO Contacts and Staff Acknowledgments                                                                Appendx
                                                                                                            iVI




GAO Contacts      JayEtta Z. Hecker (202) 512-2834
                  Randall B. Williamson (206) 287-4860



Staff             In addition to those individuals named above, Jack Burriesci, Jay Cherlow,
                  Tom Collis, Sarah Eckenrod, David Hudson, Elizabeth McNally, Albert
Acknowledgments   Schmidt, Sharon Silas, Stan Stenerson, and Stacey Thompson made key
                  contributions to this report.




(544058)          Page 73    GAO-04-165 Strategies Needed to Address Planning and Financing Limitations
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