1. Transportation leadership you can trust. presented to Talking Freight presented by Michael Fischer Cambridge Systematics, Inc. December 16, 2009 Port Peak Pricing Programs

2. 1 Overview Objectives of the Study Overview of PierPass OffPeak Program Market and Institutional Considerations Governance and maximizing benefits

3. 2 Background Issues for DOTs/MPOs Over past twenty years waterborne container traffic growth was the fastest driver of U.S. freight demand Terminal and access route congestion Peak period pricing programs Reduce congestion Improve terminal operating efficiencies Reduce truck wait and idle times Improve air quality Reduce community impacts

4. 3 PierPass OffPeak – Ports of LA/LB PierPass Not-for-profit entity created by marine terminal operators (MTOs) to manage OffPeak Program OffPeak Program Extended gate hours −4 new night shifts per week −1 new weekend shift Traffic Mitigation Fee ($50/TEU, Apr. 2006) −Paid by Beneficial Cargo Owner (BCO) −Paid for pickup/delivery in day shift (8am – 5pm) −Offset cost of night operations −Cover costs of administering the system

5. 4 Factors Leading to PierPass OffPeak Sustained and rapid growth in international trade Increased community awareness of port-related impacts Roadway congestion and investment needs Air pollution and health risks Capacity constraints 2004 peak shipping season – serious operating problems US ports operating at 5000 TEU/acre throughput vs. Asian ports at 16,000 TEU/acre Legislative pressures – AB2041 (Lowenthal)

6. 5 Results of PierPass OffPeak 30-35% of truck trips shifted to off peak periods by end of first year Queuing begins in one-hour lag between day and night shift (5pm – 6pm) Most gate activity occurs prior to evening “lunch” break (prior to 10pm) Overall reductions in terminal and gate area congestion reported Some terminal congestion created in period from 6pm – 10pm Labor utilization issues from 11pm – 3am

7. 6 Results of PierPass OffPeak (cont.) General reduction of freeway truck traffic in mid-day, morning and evening peak periods Slight increase at end of pm peak period – not optimized to reduce freeway congestion

8. 7 Stakeholder Perceptions (METRANS Study) Marine Terminal Operators (MTO) Political pressure was a key driver but program has operational benefits Beneficial Cargo Owners (BCO) Popular with low-margin exporters and high volume importers who own their own DCs and already operate night shifts Believe benefits are greatest for MTOs – required some BCOs to add extra shifts and/or create space for off-peak storage

9. 8 Stakeholder Perceptions (cont.) Truckers Increased number of daily turns Reduced congestion

10. 9 Applicability to Other Ports Relevance and Success Factors Relevance Factors Terminal and highway congestion Air quality/environmental issues Community attitudes towards trade and ports Success Factors Regulatory issues (land use and night operations) Market characteristics Interport competitiveness Institutional issues

11. 10 Institutional Environment Marine Terminal Operators Beneficial Cargo Owners Drayage Trucking Marine Carriers Pay Fees Order Trucking Dispatch Landlord Port Set Lease Terms State DOT MPO Community

12. 11 Insitutional Roles – State DOTs and MPOs State DOTs may have a role in states with state port authorities Owner/Operator port authorities can administer programs State DOTs and MPOs can bring key stakeholders to the table to optimize public/private benefits In PierPass example, threat of regulatory action may have been a key driver of private sector action

13. 12 Institutional Issues – Shipper Acceptance Shipper concerns Use of revenues by MTOs Efficiency of gate operations in peak night hours Exporter concerns about fee impacts on product competitiveness Impacts of night operations - program equity Larger importers/exporters more likely to already have night operations Larger imports/exporters more likely to be able to accommodate changes to operating hours

14. 13 Institutional Issues – Independent Drayage Truckers Need to be actively engaged in setting up programs Operational features must be aligned with external traffic patterns in order to realize benefits for truckers Exemptions from certain port-related fees/costs if willing to operate off-peak All terminals in a port should offer same operating hours Federal policy should “guide” but not set fees

15. 14 Institutional Issues – Labor ILWU and ILA work rules are significant determinants of shift timing and drive structure of pricing programs Shift wage differentials are the cost driver for fees Labor contracts and pricing programs need a high level of coordination

16. 15 Governance Structures Management of the program Landlord port – favors a private non-profit corporation Owner Operator port – favors operation by public port authority Setting fees Cost-based user fee vs. fee set to optimize diversion Administration Ensure transparency of revenues and uses of fees

17. 16 Maximizing the Benefits of the Port Peak Pricing Programs Appointment systems Balance congestion reduction benefits inside terminals, at gates, on access routes Reduce gate queues Improve labor utilization Variable pricing – optimize system for multiple time periods Coordination with design of longshore labor shifts