Transportation leadership you can trust.

presented to

Canada/U.S. Transportation Border Working Group

presented by

Stephen Fitzroy, Economic Development Research Group

Andreas Aeppli, Cambridge Systematics, Inc.

April 13, 2010

Economic Impacts of the Border on Transportation

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Presentation Overview

Project Summary

Case studies

Application of model on a real situation

Some thoughts for further action

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Economic Impacts on Transportation of the United States/Canada Border

Main objective was to determine the economic consequences of delay at the US/Canada border, including:

• impacts at specific border facilities or regions

• macroeconomic effects for entire border

• impacts of policy alternatives

Some key questions:

• What are the impacts of freight versus passenger delay?

• What commodities/industries are affected most?

• How does the transport sector respond?

• What role does reliability play?

Study ElementsOverview of Transborder Trade Data

• Collect data and identify trends

Literature Review• Summarize relevant work

• Identify advantages and limitations of applied methodologies

Develop Analytic Methodology• Logical approach

• Compare to methods from literature review

• Data requirements

• Define three sample scenarios that reflect range of potential model application

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Literature ReviewMost relevant studies:• HDR|HLB (2006) – San Diego/Baja Border

• Taylor et al. (2003) – US/Canada Border

• DAMF (2005) – US/Canada Border (impacts to trucking firms)

Two broad approaches:• macroeconomic – measure supply and demand elasticities of response to time

delay

• microeconomic – measure costs at vehicle-level, determine how costs “flow” through economy

Room for improvement:• “delay” is not the only cost of crossing border

• address travel time variability

• add commodity dimension

• recognize multiple freight carrier types

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Key Considerations for Methodology

Many types of costs

• travel time and variability

• operating costs (fuel, capital, maintenance, labor, etc.)

• administrative costs

Costs affect many economic players

• passenger (commute, leisure, on-the-clock)

• freight carriers (own-account, for-hire, common carriers)

• freight shippers (bulk, mixed freight, small package, JIT firms)

Many possible responses to costs

• Vehicle: mode/ route/ time-of-day

• Firm: inventory management/ production technology/ site location

• Household: tourism, employment, residential location

Data

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Overview of analytic approachScenarios:• Changes in fees or charges• Change in processing time• Change in inspection policy• Change in hrs of operation• Change in security procedures

Facility Capacity Response:• Change in processing time• Change in idle time• Change in reliability• Change in tolls

Demand Response:• Change in crossing demandby trip purpose• Change in vehicle/freight mix• Change in crossing location• Change in crossing time of day

Change in user costs by vehicle

Analyzing Border Delays

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Methodology blends micro- and macro- approaches

Veh. Costs:• Trucks• Cars Vehicle Users:

• Households• Industry (pass.)• Freight shippers• Freight carriers Users’ Responses:

• Travel demand• Traveler spending• Carrier response• Shipper response Regional Impacts:

• Employment• Output• Value Added• Wages

microeconomic elements

macroeconomic elements

Overview of Methodology

Flow of Model Interactions

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Figure 1. Overview of Model for Estimating Delay Impacts at U.S./Canada Border Crossings

Time Cost Factors Passenger Time Crew Time Freight Time Buffer Time

Vehicle Cost Factors VOC/mi-Congested VOC/mi-Free Flow VOC/hr-Idle

Travel Demand Factors Vehicle-Trips VMT (VKT) VHT Congestion Level Buffer Time Average Crew per Vehicle Average Pass per Vehicle Average Freight per Vehicle Freight Commodity Mix Average Toll/Fare per Trip Average Passenger Spending Local Portion of Trip Ends

Input Variables

1 – Travel Savingsby Cost Type

Passenger Time Cost Crew Time Cost Freight Time Cost Reliability Time Cost Toll/Fare Cost Vehicle Operations Cost

2 – Travel Savingsby “User” Type

Households-Time Households-Out-of-Pocket Vehicle Operator (carrier) Industry-Freight (shipper) Industry-Nonfreight

3 – Travel Savingsby NAICS Industry

4 – Direct Industry Impacts (output)

Transportation Sectors (481-485) Other Industry Sectors

Expanded Industry Production Changes in Final Demand

5 – Total Industry Impacts

All Industry Sectors Direct + Indirect + Induced Employment Output Value Added Wage Income

Industry Factors Modal Utilization Production Elasticities Output Multipliers Passenger Spending Patterns

Detailed Border Crossing Methodology (BCM)

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Implications

Addresses limitations of surveyed approaches

• Vehicle based

• Incorporates industry and macroeconomic responses

• Includes travel time variability

• Recognizes different truck carrier types

• Impacts revealed at industry level

Additional features

• Benefit/Cost analysis

Challenges

• Appropriate data

• Demand responses to cost changes

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Three Sample Scenarios to Test BCM

Niagara Falls Peace Bridge improvements: • Analyze options for operational improvements to more

efficiently handle traffic

Detroit – Windsor tunnel: • Assess the impact of the Western Hemisphere Travel

Initiative (WHTI) on cross-border travel

Pacific Highway border crossing:• Examine the impact on travel times from expanded FAST

implementation

Niagara Falls Peace Bridge Improvements

Problem: Assess proposed post-9/11 physical and operational improvements to approaches and processing plazas

Criteria/Needs to be addressed:

• Inspection/Security

• Safety

• Structural Improvements/Renovations

• Capacity/Reliability (during and after structural improvements)

• Environmental/Externality Issues

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Modeled Economy-Freight Relationship

Economic Change

Freight Flows

• Taxes, Fees

• Regulations• Facilities Investment

• Services Affected Speed, CostProductivityMarket Access

• Industry Output• Profit • Value Added• Jobs & Wages

Freight-Focused Project or Policy

• Commodity Value• Import/Export• Tonnage• Containers/

Vehicles

ConnectivityThroughput

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Niagara Falls Peace Bridge Solutions

Multi-criteria investment evaluation

• More than one “solution” must be implemented and tested in combination with others

• Extended construction and interaction effects must be addressed

• Costs and responses vary over time and differentially affect user segments and markets served

• Timing, regional scale and industry impacts vary by policy/investment configurations and duration of activity

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Detroit – Windsor Tunnel

Problem: Assess impact of WHTI on cross-border travel and the corresponding impacts on business sales, employment, tax revenue, wages, and output.

Criteria/Needs to be addressed:

• Effect of current border crossing policies and restrictions on economy of Detroit and Windsor− Local spending (especially tourism)

• Effects of labor markets and market access− Labor productivity impacts

• Impacts on both US and Canadian economies

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Modeled Economy - Passenger Relationship

Economic Impacts

Travel Decisions

• Regulations• Facilities Investment

• Security ProceduresSpeed, CostProductivityMarket Access

• Industry Output• Profit • Value Added• Jobs & Wages

Alternative Border Policies

• Value of Time• VHT/VMT Savings• Household

Spending

ConnectivityThroughput

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Modeled Passenger-Economy Relationship

Key issues to be addressed:

• Benefits and costs of tunnel approach improvements

• Procedural innovations to respond to alternative security levels

• Robustness of procedures to respond to security alerts *and costs associated with implementing these procedures

• Overall economic impacts of Detroit/Windsor region

• Key employment and retail sectors believed to be affected

• Effects of tunnel connectivity (and options – both capital and operational)

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Detroit-Windsor Tunnel Solutions

Assessment must address:

• Full range of regional economic impact measures− Ability to assess local, metro (two cities) and regional scales

• Assessment of benefits and costs for multiple scenarios

• Scenarios that include both policy and capital investment solutions− Include parking and traffic management at bridge approaches

• Assess differential impacts by trip purpose

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Pacific Highway Border Crossing

Problem: Assess proposed post-9/11 physical and operational improvements to approaches and processing plazas and evaluate effects of options to take advantage of current FAST “excess” capacity

Policy responses to be addressed:• Increase FAST enrollment• Mutual recognition of FAST enrolments for empty vehicles

(73% of southbound moves are empty)• Use of pricing to allow non-FAST users to “purchase”

unused FAST lane capacity when GP lane is congested• Convert FAST lane to: a) Priced lane; or b) GP lane• Retain FAST lane and convert one of two GP lanes to priced

lane

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Modeled Economy-Freight Relationship

Economic Change

Freight Flows

• Taxes, Fees• Regulations• Facilities Investment• Services Offered

Speed, CostProductivityMarket Access

• Industry Output• Profit • Value Added• Jobs & Wages

Freight-Focused Project or Policy

• Commodity Value• Import/Export• Tonnage• Containers/

Vehicles

ConnectivityThroughput

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Pacific Highway Border Crossing Solutions

Assess differential effects of user segments:• Relationships between delay reduction on commercial and

passenger crossings

Evaluation of industry-specific market effects • Does commercial traffic increase, and if so, for which

industry groups/commodity shippers

How do benefits move through economy:• How are operator cost savings passed through to shippers• How do shipper savings affect operations and markets

served• What are the effects of non-commercial relay reductions on

household expenditures

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Application of BCM in Actual Situation

Analysis of fiber optic network installation at Vermont’s Derby Line/Highgate Springs Border Crossing

Problem: Assess impacts of pre-processing fully-laden trucks to reduce queuing times for all border traffic.

Criteria/Needs to be assessed:

• Introduction of ITS to speed pre-approval and processing of laden trucks

• Affect of delay and reliability at crossing and on I-89 and I-91

• Impacts on passenger cars, buses and empty trucks

Derby Line/Highgate Springs Border Crossing

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Canadian Customs

Canadian Queue

US-Canadian Border

US Queue

US Customs

Derby Line/Highgate Springs Profile

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I-91/ Derby

I-89/ Highgate Totals

Total Exports $0.50 $2.86 $3.36Exports Originating in Vermont $0.04 $0.67 $0.72% Originating in Vermont 8.80% 23.50% 21.30%Total Imports $2.12 $4.53 $6.66Source: WiserTrade, 2009; (in $ billion)

Derby Line/Highgate Springs Border Crossing

Data Available:

• Available vehicle entry data (USDOT, Customs and Border Protection, OMR database, December 2008)

• DHS Survey of vehicle border crossing times (2008)

Analysis Approach:

• Synthesize queuing distributions using current data

• Estimate new queuing distribution(s) assuming: − 5-minute reduction in laden-vehicle median crossing time− average queue mix of passenger cars, laden trucks, empty

trucks, and passenger buses− Minimum, average and standard deviation of processing time

for each vehicle type

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Modeled Economy-Freight Relationship

Economic Change

Freight Flows

• Taxes, Fees• Regulations• Facilities Investment• Services Offered

Speed, CostProductivityMarket Access

• Industry Output• Profit • Value Added• Jobs & Wages

Freight Project or Policy

• Commodity Value• Import/Export• Tonnage• Containers/

Vehicles

ConnectivityThroughput

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Derby Line/Highgate Springs Queuing

Average delays of 15 minutes propagate through peak queues and result in more than 5% of trucks experiencing 30-minute delays

Reductions of 5 minutes in median crossing produces 3-minute reduction in minimum times; reduction in standard deviation of 4 minutes; and results in less that 5% of trucks experiencing 20-minute delays

Inputs to model developed using queuing simulations of the build and no-build scenarios and comparing the differences

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Derby Line/Highgate Springs Economic Impacts

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Economic Development Benefit DirectIndirect & Induced Total

Jobs 2,700 2,400 5,100 Output ($ Millions) 276$ 229$ 505$ Value Added ($ Millions) 138$ 125$ 263$ Wages ($ Millions) 97$ 85$ 182$

Sources: Calculated by EDR Group from EDR-LEAP and IMPLAN modeling packages. Indirect and induced benefits are Vermont-wide; (in $ million)

Derby Line/Highgate Springs BCA

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FactorsPresent Value

Border Queuing 265.0$ Safety 0.3$ Congestion Reduction 1.5$ Fuel and Emissions Reduction 0.1$ Benefits 267.0$ Costs 77.5$ NPV 189.4$

BCR 3.44Source: EDRG, 2009; (in $ million)

Derby Line/Highgate Springs Benefits

Border Queuing

• Time savings for all vehicles (commercial and passenger) attributable to queue reduction at border

Safety

• Crash reduction - injuries, property damage

Congestion Reduction

• Value of congestion reduction on I-89 and I-91 throughout Vermont

Fuel Used and Emissions Reduction

• Savings in fuel costs and reduced emissions costs

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Border Crossing Model Advances and Limitations

Sensitivity of BCM to Transportation Factors Affecting Cross Border Trade

Spatial Coverage/Geographic Range of Impacts

System Output and Results

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Sensitivity of BCM to Transportation Factors Affecting Cross Border Trade

Advantages and Modeling Innovations

• Network operations (delay/Reliability)

• Pricing and cost pass-through structures

• Vehicle/load characteristics

Limitations

• Differing detail on commodity flow information (O/D and routings) on US versus Canadian networks

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BCM Spatial Coverage/Geographic Range of Impacts

Advantages and Model Innovations

• Details on sub-state and sub-provincial economic data

Limitations

• Interactive effects of macro-economic shifts/responses must be exogenously or iteratively addressed

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BCM System Output and Results

Advantages and Model Innovations

• Flexible reporting structure and consistent outputs

• Addresses concerns of US DOT on methods and practices

Limitations

• Sensitivity analysis (risk and uncertainty) associated with inputs and responses

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Some Further Thoughts

Develop Comparable Cross-Border Economic Interaction Models

Integrate Cross-Border Commodity and Freight Routing Algorithms

Develop Financial Modeling and Accounting for Revenue and Innovative Financing Evaluation

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Development of Provincial & Sub-Provincial I/O

Enhanced Social Accounting Structure

• Stats Canada I/O

• IMPLAN− Commodity flows and wage

structure

Industry and commodity interactions for detailed industry impacts

• Industry spending on labor and materials

Wage payments to employees for induced economic impacts

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User Responses

Provincial Impacts

Statistics Canada

I/O Multipliers

IMPLANCommodity

& Wage Structure

Tax Impact Analysis

Tax impacts for federal and state/local govt.

Contribution from households & businesses

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TAX IMPACT REPORT ($mil)

Tax/FeeCollector

Tax/Fee DescriptionTaxes/Fees Paid by:

TotalsHouseholds Businesses

Service Operator Tolls & Fees 97.09 446.49 543.59

Federal Government

Motor Fuel Tax 0.45 9.49 9.94

Income/Profits 526.97 494.33 1,021.31

Social Insurance Tax (FICA) 420.76 398.62 819.38

Miscellaneous Fees & Taxes - 139.88 139.88

Total Federal Government 948.18 1,023.34 1,971.52

State and Local Government

Motor Fuel Tax 0.33 12.66 12.99

Motor Vehicle License Fees 8.36 6.77 15.12

Income/Profits 155.30 106.57 261.87

Sales tax not available not available 370.67

Property Tax 3.34 294.09 297.43

Social Insurance Tax 1.29 5.15 6.43

Miscellaneous Fees & Taxes 60.30 70.26 130.56

Total State & Local Government 228.92 470.18 1,069.76

Grand Total 1,177.09 1,493.52 3,041.28

Revenue & Cost Sharing Analysis

Input public & private sector responsibilities for construction, operation, maintenance, revenue collection

Internal rate of return (ROI), payback period, revenue/cost ratio

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REVENUE & COST SHARING REPORT

Cost or Revenue Description Government Private Totals

Project Costs ($m)

Capital Costs 1,450.00 250.00 1,700.00

Operations - 55.30 55.30

Maintenance - 75.20 75.20

Lease/Contract Costs - 750.00 750.00

Project Cost Totals 1,450.00 1,130.50 2,580.50

Project Revenues ($m)

Tolls 918.25 1,836.50 2,754.75

Lease/Contract Revenues 750.00 - 750.00

Project Revenue Totals 1,668.25 1,836.50 3,504.75

Revenue to Cost Metrics

Payback Period 12 years 7 years 7 years

Internal Rate of Return 11.5% 26.3% 19.9%

Revenue/Cost Ratio 1.15 1.62 1.36

Questions?