This chapter describes the second step in the analysis framework, which is the identification of evaluation issues. This step starts with the transportation benefits identified in the prior task, and moves on to identify the fundamental economic effects and broader (social, environmental, and public policy) objectives motivating the project. These broader issues are critical because they represent the most fundamental criteria upon which projects must be evaluated.
It is important to note that there is no direct or automatic connection between the type of project identified in Step 1 and the relevant evaluation issues considered here in Step 2. Both are important for different reasons. It is important to classify the project type in Step 1 so that direct transportation benefits can be appropriately measured.
Response to a Problem. While the transportation benefits listed in Step 1 focused on efficiency, that is too narrow. Rather, we recognize that most large-scale freight projects are usually proposed as a response to a significant problem that is either at hand or imminently expected for the future. The problem is typically that an existing facility or set of facilities is seen as:
Therefore some combination of capacity or performance enhancement is seen as necessary to eliminate, reduce, or offset the problem.
Underlying Motivation (Concerns). The motivation for project proponents (who see a problem requiring action) is usually centered on concerns about the financial viability and competitiveness of the freight transportation facilities in the face of changing demand, or else the environmental consequences of those changes. The metrics for underlying motivation may thus be classified into the following four categories of concerns:
Ultimate Stakes. The ultimate stakes for proponents include both the economic and non-economic qualities of their lives, their companies, or their communities/regions. The appropriate benefit metrics depend on the stakeholders. Some audiences would be satisfied with knowing the improvements to the usual transportation metrics (e.g., travel time and reliability, accidents, operating costs) and logistics effects. Not all analyses need to estimate changes in GDP, income or jobs. Ultimately, many stakeholders will want to have estimates of the following elements of economic and environmental impact:
When considering these “bottom line” metrics, it becomes important to also evaluate various factors affecting their spatial pattern of impact and distribution of benefits, including the following:
Thus, the framework is intended to capture all transportation effects, national scale of goods movement, and impacts to industries. The final steps also analyze ultimate effects on income generation (value added) in the economy viewed from both national level and local level perspectives, as well as for subsets of the economy (such as shippers, carriers and related industries) if needed.
It is necessary to examine economic effects from both national and more local (community, region, or state) levels for several reasons. One is that the Federal government has an interest in national-level economic growth but also in regional development that supports efficient national growth. There are many Federal programs that support the economic development of regions and local areas that are in economic distress. Such programs support the creation of jobs in areas of high unemployment and under-employment. In addition, there is a Federal role in providing technical assistance to local areas.
Since national and state/local interests are often intertwined, it becomes important to estimate economic benefits at national and state/local levels. Such analysis can also serve as a basis for identifying the distribution of benefits from large-scale projects and hence issues to consider in cost and benefit sharing among jurisdictions.
Each of the various combinations of project actions and modal facilities directly translates into a different set of public and private stakeholders. This includes both stakeholders incurring project costs and stakeholders reaping project benefits.
Incidence of Costs. To assess the incidence of project costs (i.e., who ultimately funds the improvements), it is useful to distinguish the parties responsible for both capital and operating costs, which may be borne by Federal, state, and local governments, as well as the private sector. Furthermore, many freight projects directly transfer some of these costs (especially operating costs) to other parties via tolls or fees. In determining the incidence of costs, ownership of the facility(ies) in question can be confusing and may be ultimately provide a poor indicator of who is paying for the capital investment and its operation.
Incidence of Benefits. While ownership of freight transportation facilities tends to vary systematically by mode and facility type, the beneficiaries are generally shippers regardless of the modes being used. In general, freight carriers (or more correctly, those who own and operate freight vehicles) experience the travel time and operating cost savings from transportation improvements, but the shippers who pay for and rely on the freight transportation system end up ultimately realizing most benefits. This is true for several reasons.
For trucking, studies by the Bureau of Transportation Statistics show that nearly half of all freight spending is for in-house truck fleets that are owned and operated by the shippers themselves – manufacturers, wholesalers, retailers, agricultural producers, and service companies. Second, even when for-hire motor carriers are used, transportation cost and time savings tend to be passed on to the shippers in the long run, and it is also the shippers who typically realize the additional benefits of schedule reliability improvements. Third, the distinction between carriers and shippers is becoming further clouded as more firms adopt integrated supply chain logistics, and as freight carriers take on growing roles in providing inventory management and other logistics services for their customers.
For other (nontruck) modes of freight transport, a variant of the same story applies. Some shippers own their own containers for rail or sea shipping. Others own their own railcars. Most other shippers are reliant on for-hire carriers or freight forwarders for moving their air freight, marine freight or rail freight, though reliance on integrated logistics is also rising for these other modes of freight movement.
The bottom line, then, is that the distinction between carriers and shippers is becoming increasingly elusive. That distinction is also not particularly relevant for this guidebook. Rather, it is more useful to recognize that the real beneficiary of freight transportation improvements are manufacturers, services and trade firms that generate the freight demand and rely on freight movement to provide their products and services. And the ultimate beneficiaries of improved productivity for these shippers are the workers who gain additional jobs and income as well as the customers who gain from lower cost and higher quality products and services. Other ultimate beneficiaries are passenger vehicle drivers and passengers who can gain when roadway congestion is reduced and there is less truck-car interaction or competition for road space.
Implications for Evaluation. The incidence of ownership and cost responsibility differs systematically by type of facility and mode, while incidence of benefit tends to be distributed among sectors of the economy that are either directly or indirectly benefiting from those facilities or the worker income that they generate.
The appropriate measurements of benefits from freight transportation projects start with estimation of initial direct benefits in terms changes in efficiency of transportation (e.g., travel time, reliability). This proceeds to intermediate measures of business activity, such as productivity, average wages, or capital investment. Ultimately, most direct and intermediate benefits show up as changes in regional or national economic activity and thus are usually expressed as economic metrics such as changes in gross regional or national product (which reflects the sum of worker income and net corporate earnings that may be paid out to owners or reinvested in further business expansion), jobs and personal income to workers. Depending on the purpose of the project and the preferences of decision-makers, the analytic framework can produce some or all of these metrics as a final product for decision-support. However, the goal of this framework is to proceed all the way to calculation of aggregate measures of regional and economic impact along with the sectoral/firm economic benefits and the transportation impacts from which they derive.
These measures should reflect three different dimensions:
Whatever metrics are used, however, the ultimate set of benefits may not provide a clear cut up or down measure of success. Significant improvements to the infrastructure supporting international trade, for example, have helped to move a great deal of U.S.-based manufacturing off-shore. This has led to lower prices for consumer goods (a benefit that appears as a net increase in personal income), but it has also led to significant job loss and lower wages. This contradiction across metrics may also be important when it exists for the same metric: a freight improvement may increase one region’s gross regional product at the expense of its neighboring regions.