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

1 Presentation Overview Project Summary Case studies Application of model on a real situation Some thoughts for further action

2 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 Elements Overview 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 3

4 Literature Review Most 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

5 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

6 Overview of analytic approach Scenarios: 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 demand by 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

7 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 8

9 Detailed Border Crossing Methodology (BCM)

10 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

11 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 12

Modeled Economy-Freight Relationship Economic Change Freight Flows Taxes, Fees Regulations Facilities Investment Services Affected  Speed, Cost  Productivity  Market Access Industry Output Profit Value Added Jobs & Wages Freight-Focused Project or Policy Commodity Value Import/Export Tonnage Containers/Vehicles  Connectivity  Throughput 13

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 14

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 15

Modeled Economy - Passenger Relationship Economic Impacts Travel Decisions Regulations Facilities Investment Security Procedures  Speed, Cost  Productivity  Market Access Industry Output Profit Value Added Jobs & Wages Alternative Border Policies Value of Time VHT/VMT Savings Household Spending  Connectivity  Throughput 16

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) 17

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 18

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 19

Modeled Economy-Freight Relationship Economic Change Freight Flows Taxes, Fees Regulations Facilities Investment Services Offered  Speed, Cost  Productivity  Market Access Industry Output Profit Value Added Jobs & Wages Freight-Focused Project or Policy Commodity Value Import/Export Tonnage Containers/Vehicles  Connectivity  Throughput 20

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 21

22 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 23 Canadian Customs Canadian Queue US-Canadian Border US Queue US Customs

Derby Line/Highgate Springs Profile 24

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 25

Modeled Economy-Freight Relationship Economic Change Freight Flows Taxes, Fees Regulations Facilities Investment Services Offered  Speed, Cost  Productivity  Market Access Industry Output Profit Value Added Jobs & Wages Freight Project or Policy Commodity Value Import/Export Tonnage Containers/Vehicles  Connectivity  Throughput 26

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 27

Derby Line/Highgate Springs Economic Impacts 28

Derby Line/Highgate Springs BCA 29

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 30

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 31

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 32

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 33

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 34

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 35

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 36 User Responses Provincial Impacts Statistics Canada I/O Multipliers IMPLAN Commodity & Wage Structure

Tax Impact Analysis Tax impacts for federal and state/local govt. Contribution from households & businesses 37

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 38

Questions?