Good afternoon or good morning to those of you to the West. Welcome to the Talking Freight Seminar Series. My name is Jennifer Symoun and I will moderate today's seminar. Today's topic is Freight Fee Structures. Please be advised that today's seminar is being recorded.
Today we'll have three presentations, given by Michael Fischer of Cambridge Systematics, Tim Adams of the International Registration Plan, and Greg Owen of Ability Tri-modal.
Michael Fischer is a Principal of Cambridge Systematics with more than 30 years of experience in transportation planning, with emphases in freight transportation planning and modeling. He is the Strategic Business Development Director of the Cambridge Systematics freight transportation planning practice. Mr. Fischer is currently managing the Southern California Association of Governments (SCAG) Regional Goods Movement Study, which includes a major update of the region's heavy duty truck model; task leader for data collection for the HGAC Cube Cargo Phase I project; and manager of the Oregon DOT Statewide Freight Plan. He co-authored the Port Peak Pricing Program Evaluation report, on which today's presentation is based.
Tim Adams is the Director for Motor Carrier Services with the International Registration Plan, Inc. (IRP, Inc.). Prior to joining IRP, Inc., Tim was employed with AAMVA for 4 years and the Kentucky Transportation Cabinet, Department of Vehicle Regulation for 24 ½ years overseeing various functions in the Motor Carrier Services area. Tim served six years on the IRP Board of Directors including 4 years on the IRP executive committee, serving as Chair of the Board in 2003. Tim also served on many IRP and AAMVA committees including chairing several committees over the years.
Gregory L. Owen is the Head Coach Ability Tri-Modal Transportation Services, Inc. Ability Tri-Modal prides itself in being a third-generation owned company focused on third party logistic solutions, innovative operations and above all superior service. Mr. Owen started Tri-modal Distribution Services, Inc. in 1982, which then became Ability Tri-modal around 2000. Prior to starting the company, he was President of City Freight Lines in Santa Fe Springs from 1974-1982 He is also past President/Chairman of the Board California Trucking Association and is currently a Board member/Executive Board member of the American Trucking Association and a Board member of the American Transportation Research Institute,
I'd now like to go over a few logistical details prior to starting the seminar. Today's seminar will last 90 minutes, with 60 minutes allocated for the speakers, and the final 30 minutes for audience Question and Answer. If during the presentations you think of a question, you can type it into the chat area. Please make sure you send your question to "Everyone" and indicate which presenter your question is for. Presenters will be unable to answer your questions during their presentations, but I will start off the question and answer session with the questions typed into the chat box. Once we get through all of the questions that have been typed in, the Operator will give you instructions on how to ask a question over the phone. If you think of a question after the seminar, you can send it to the presenters directly, or I encourage you to use the Freight Planning LISTSERV. If you have not already joined the LISTSERV, the web address at which you can register is provided on the slide on your screen.
Finally, I would like to remind you that this session is being recorded. A file containing the audio and the visual portion of this seminar will be posted to the Talking Freight Web site within the next week. We encourage you to direct others in your office that may have not been able to attend this seminar to access the recorded seminar.
The PowerPoint presentations used during the seminar are available for download from the file download box in the lower right corner of your screen. The presentations will also be available online within the next week. I will notify all attendees of the availability of the PowerPoints, the recording, and a transcript of this seminar.
One final note: Talking Freight seminars are now eligible for 1.5 certification maintenance credits for AICP members. In order to obtain credit for today's seminar, you must have logged in with your first and last name or if you are attending with a group of people you must type your first and last name into the chat box. To obtain your credits, visit the AICP Certification Maintenance web site after the seminar, login using your ID# and password, select My CM log, and select add credits. I have included more detailed instructions in the file share box on how to obtain your credits after the seminar. Please also download the evaluation form from the file share box and submit this form to me after you have filled it out.
We're now going to go ahead and get started. Today's topic, for those of you who just joined us, is Freight Fee Structures Our first presentation will be given by Michael Fischer of Cambridge Systematics. As a reminder, if you have questions during the presentation please type them into the chat box and they will be answered in the last 30 minutes of the seminar.
Thanks, Jennifer. I am going to be talking today about peak pricing programs based on some work we did for Federal Highway. I would like to acknowledge my colleague who did much of the research that I am going to be discussing today. I am going to start off by just giving you a little flavor for the objectives of the study that we did from the perspective of what motivates folks to be interested in peak pricing programs. I am going to focus in the PierPass OffPeak Program in Long Beach, which was kind of a model for the types of programs that others might be considering. I will shift into talking more about the applicability of these types of programs, starting with some discussion of market and institutional considerations, then I will talk about government structures and State DOTs might be at all to maximize these programs.
So, to get started, what are the kind of issues that are motivating DOTs to look at these types of pricing programs and ports? Over the past 20 years, the container traffic was the fastest driver. They are not withstanding the current downturn. That is creating not terminal options and access route congestion and the need to address that congestion in transportation programs. The types of things that people try to achieve with peak pricing programs include reducing congestion on access routes and around the terminal areas, improve terminal operating efficiencies and increase throughput without unnecessarily expanding physical facilities, reduce truck weight and idle times, and then a consequential impact on communities and particularly in the Long Beach situation improvements in air quality. So, let me start off about talking about the PierPass OffPeak Program. Just to get the terminology straight, PierPass is actually not the name of the program. It is a not-for-profit entity created by the marine terminal operators (MTOs) to manage OffPeak program. At the OffPeak program, one of the major things it did was create extended eight hours at the two ports. Basically, that means there were four new night shifts per week that were added. Most of the port activity prior to the OffPeak occurred during the day shifts between 8:00 a.m. and 5:00 p.m., so there were these new night shifts and weekend shifts. In order to do that, a mitigation fee was adopted as of April 2006. That was at $50. The fee is paid by the beneficial cargo owner. It is paid for pickup and delivery during the day shift. If you pick your box of between 8:00 a.m. and 5:00 p.m., you were subject to the fee.
The fee was not set unnecessarily and not set at a level that would drive traffic in a particular direction but set to offset the costs of administering the system. A least this was the way that it was presented by PierPass. The sort of factors that led to the creation of these programs and these are kind of similar things others may be experiencing. First, the ports sustained rapid growth international. There has been huge growth in the late 1990s and early 2000. With that can increase community awareness and concerns of port-related impacts. There is significant roadway congestion on roads leading to the ports, and some major investments being considered. Community and local planners want to consider always of addressing congestion, not just expanding the physical capacity. Along with that congestion came some major concerns about air pollution and health risks in the immediate area. There were also some known capacity constraints at the port. Some of you may recall in 2004 for the peak shifting season, the kind of meltdown that occurred. We observed that in general U.S. ports operate at relatively lower throughput then say Asian counterparts, so there is this interest in expanding both physical throughputs without expanding the physical footprint of the port. In the first year, 30 to 35% of truck trips were shifted during the day peak periods to the night shift. This was really achieved well ahead of schedule in terms of the types of ships they were trying to achieve. Now, there are some peculiarities with how the program operates. It is probably important to understand these and how they might affect you if you are interested in looking at this type of program.
There is a one hour break between end of the day shift at 5:00 p.m. and the beginning of the night shift at 6:00 p.m.. According to the current labor rules, there is a lunch break occurs in the night shift at about 10:00 p.m., so a lot of trucks are trying to get down into and processed through the gates in the first part of the night shift between 6:00 and 10:00 p.m.. That tends to create queuing on outside of the gates in the 5:00 to 6:00 p.m. periods, and it does have some impact in terms of freeway congestion. Overall, there have been reductions in terminal and gate area congestions reported. There is some congestion in the early part of the periods, and then also some concerns on the part of marine terminal operators about labor utilization in this part of the night. And there has been a general reduction of freeway truck traffic in the midday, the morning, commuter peaks, and some degree in the evenings. As I said, a slight increase actually at the end of the p.m. peak periods, because this program was not optimized to reduce congestion. There was a pretty extensive study of the program done shortly before our study was done by the University Transportation Center of the University of Southern California. That study did look at some of the stakeholders and their reactions. Again, these are important things to consider in looking at programs in the future. First of all, the marine terminal operators to admit that political pressure was a key driver to getting the program off the ground, but I think they generally agreed that the program has had operational benefits for them and has allowed them to improve their operations, at least this was certainly observed in periods of time when there were higher volumes of traffic moving through the ports than there are today. Again, there is expected growth in the future.
The beneficial cargo owners had little more mixed reaction to the program. It has been popular with low-margin exporters and high-volume importers, particularly those who own their own distribution centers and already had night operations. So, for them there are barley any additional costs to operate in the nighttime. They were able to take advantage of the full program fairly easily and take advantage of the reduced congestion in the evenings. They believe, generally, that those benefits are for the greatest for the marine terminal operators and some beneficial cargo owners did have to add extra shifts. This created additional costs beyond just the cost of the traffic mitigation fees. In general, truckers reported they were able to do an increased number of trips or turns to the port. Although, there are some specific issues that they have raised as well. Now I want to shift to talking a little bit more about the applicability of this type of program to other ports. In our report, we broke that down into two sets of factors that we thought were important to consider. The first really determines whether the types of conditions at a port would warrant looking at this type of program to address specific types of problems. The factors that we thought were most relevant are they have to be terminal and highway congestion that someone is trying to address. Certainly, in the case of many ports that are located in more urbanized areas where there are nonattainment issues to be addressed, air quality, and local environmental issues, that would also tend to suggest this might be a good type of program to approach those types of problems. Also, if there are issues in the community, as in some cases there are concerned about the impacts that ports have on local communities, relativity the benefits that are derived directly around the port. Again, this might be a good type of program to address some of those concerns. Even if a program is relevant, there are a set of factors that we call success factors that need to be in place in order to make this a successful type of program.
First of all, there are regulatory issues. These generally focus on land use and local ordinances that may restrict night operations. This could make it difficult for the beneficial cargo owners to operate and receive cargo in the night periods. Also, it is important to consider the market characteristics of the port. As I mentioned in an and discussing the PierPass OffPeak example, the existence of a large number of high-volume importers and low-margin exporters that use the port facility made the market particularly attractive for this type of program. It is also important to consider interest for competitiveness. Of course, this was an issue in Los Angeles and Long Beach where they compete against each other. If these programs have been adopted one port and not the other, that could have created some competitive imbalances. You want to look at who your competition is and how they are addressing these kinds of issues and how your overall cost structure compares. Lastly, there is just a set of institutional issues. This diagram is kind of simplification of some of the key institutional relationships that exist around a port that need to be considered. In this case, we are looking at a situation in which of the port is a public port, but it is being operated by private marine terminal operators. In this case, the landlord part is setting the lease terms. They may have some influence over the marine terminal operations through those terms, but it is the marine terminal operators who are assumed to be the ones who are implementing the fee program and collecting the fee. That fee is being paid by the beneficial cargo owners who are among those who may be ordering trucking services. Marine carriers may also order directly from the trucking industry. The drayage industry is the ones we are going to dispatch the trucks and determine when those trucks arrive at the port and what the impact is on roadway congestion.
All those relationships need to be considered. The State DOTs and MPOs, in this case, are sort of off to the side here. They do not have a direct role in the program but may play an important indirect role in states where there are public port authorities that operate the marine terminals and they have a different kind of situation in which they can participate in the programs. As I said, State DOT may have a role in away where they are owner operator and actually administer the programs. There are a number of states in which that is the case. Certainly, State DOT and MPO can bring stakeholders to the table to organize and design these programs and to work to optimize public/private benefits. If you recall, I did say earlier that in the case of the PierPass OffPeak Program, there was not a lot of thought given to what the impacts were going to be on high with the congestion at any particular point in the day. There was just sort of a general belief that shifting traffic out of the daytime to the night time would create positive impacts. And the PierPass example, again, the threat of regulatory action may have been a key factor. There clearly is a role that State DOTs and MPOs template. Other institutional issues also need to be considered. In the case where we are talking about private marine terminal operators who are collecting fees, shippers have a lot of concerns and interests in how those revenues are used. Again, in the case of the PierPass OffPeak program, the objective was to collect sufficient revenues to cover costs.
They are going to be concerned about gate operations in the night hours to make sure that they are achieving benefits. Exporters in particular would be concerned about the impact on their product competitiveness, particularly given which ports they choose to operate through. In terms of net operations, there are some program equity issues to consider. Large importers and exporters are more likely to have night operations or be able to accommodate changes to their operating hours, so there may be smaller shippers who either are stuck paying the fee because they cannot open at night or have to encourage significant cost to change their operations. And terms of the drayage industry, and we think we heard often the need for the drayage industry to be actively engaged in setting up the programs. Sometimes they are more given an afterthought. At the operational features of the program really need to be aligned with external traffic patterns in order for the truckers to actually benefit. If these create different types of congestion patterns and truckers cannot realize increased benefits, this just becomes an added cost at the port. Some traders have suggested that other related fees might be an additional incentive to get them to operate in the off peak periods. They want to make sure that all terminals offer the same operating hours so they're not dealing with all the friends of ours. They generally felt that the federal policy should guide, but not set the fees and let those be determined locally. In terms of labor issues, the two major long shore unions on the West Coast and on East Coast will tend to drive the structure of the program. Shift wage differentials are the cost drivers for fees. Therefore, labor contracts and pricing programs really need a high level of coordination. Our contacts with both unions and state officials were generally supportive of these types of programs but wanted to be involved in the planning.
In terms of looking at governance structures, looking towards the future, in terms of management of the program, really, there are two types of situations. One is a landlord port in which the Port Authority does not actually operate the terminal. This might favor a more private non-profit type approach. In a case where the public Port Authority is the owner and operator of the facility, they may be the ones who would operate and implement the program. In terms of setting fees again, consideration of cost-based user fee, which is the model used in the of OffPeak program obverses a fee set to optimize the version at particular times during the day. They are two sorts of factors to consider in how fees are set for this type of program. Administration needs to ensure transparency of what the revenues are and how the fees are used. That is, clearly, important to the shippers. Again, looking toward the future, there may be some other options for maximizing the benefits of Port Peak Pricing Programs. That is a mouthful. First of all, one thing to consider is an appointment system. Some of the kinds of local congesting issues we experience in the OffPeak program might have been alleviated, and there might be better labor utilization if the marine terminal operators adopted more of an appointment system to spread that the OffPeak traffic over the night shifts. Obviously, there are some issues related to that and getting the trucking industry involved in establishing those types of programs would be important. The idea of variable pricing is part of the system for optimizing traffic flow, or multiple times is something that really has not been considered up to this point in the OffPeak program, but might be something worthwhile depending on local traffic conditions. And then coordination of the design of the long shore labor shipped as part of those kinds of contract discussions with the design of these types of programs realizing potentially greater benefits. So, that wraps up my presentation. I will be, I guess, happy to take questions later after the other presentations.
Thank you Mike and thank you to those of you who posted questions. Just to note the report that his presentation is based on is available for download in the file share box. It is the Peak Pricing Report. We'll address your questions at the end of the seminar. We'll now move on to Tim Adams of the International Registration Plan.
Thank you, Jennifer. On behalf of International Registration Plan, I want to thank this group for allowing us to participate and to explain what IRP is, how it began, how IRP works, a little bit about who must register under IRP, the motor carriers required. And I am going to touch a little bit on why IRP is important and some of the partnerships and relationships that IRP has and explain a little bit about the role of IRP in helping make IRP work like it does today. With that, I will just go ahead and walk you through the process of how IRP came to be. Basically, IRP is an agreement for registration amounts the states of the U.S., the District of Columbia, and Canada. We provide for payment and license fees on the basis of fleet distance. One unique feature we like to point out about the two is that even though they're paid to multiple jurisdictions through the base jurisdiction, only one license plate and registration is identified. Prior to IRP, there were multiple agreements that existed to cover jurisdictional movement of vehicles. Across the U.S. and Canada, there were several regional compacts that it was in place years ago. Some of those are still in place today to cover things that are not covered or operations that are not covered by IRP. A good example of that in the southeast where Kentucky is located was an agreement with the multistate reciprocity agreement. In 1968 the American Association of Motor Vehicle and Administrators formed a subcommittee to develop a plan to incorporate all the theories of reciprocity and attract all jurisdictions of U.S. and Canada into one uniform agreement. The subcommittee was made up of jurisdiction and administrators and industry representatives set out to draft what has become known as the IRP plan today. I like to emphasize there the important partnership relationship between the jurisdiction, CMV administrators and the industry. This contract was drafted with industry as a partner at the table. That is an important point that I always like to make, because it is a partnership that we have with the administrators and the industry. The major objective of the subcommittee was to come up with an agreement that would be prepared for the motor transportation industry and provide a fair share of the revenue to the jurisdiction. When I say a fair share of the revenue, basically, the idea there is to ensure that the jurisdictions were getting a share of the revenue paid through the registration fees for the operations on their highways and their individual jurisdictions.
The idea was to ensure that each jurisdiction was getting their fair share based upon the operations of the motor carriers. September 1972, AAMVA on record as endorsing the concept of proportional distribution of registration fee for inter-jurisdictional vehicles. An ad hoc committee was developing the proposed plan which has become the agreement or the IRP agreement as we call in today. The final draft of the plan, the name was changed form the National Registration Plan to the International Registration Plan indicating the international flavor. In 1973 there are nine signatory jurisdictions which made IRP a reality. You notice the jurisdictions there are red. Those nine jurisdictions signed on in 1973 and actually some of them began issuing the IRP credentials in 1974. In July of 1974, Alberta became the first Canadian province to join of the IRP. Since the original jurisdictions joined in 1973, 50 additional jurisdictions have joined. In 1991, the Intermodal Surface Transportation Efficiency Act of 1991 required all states become members of IRP. I always like to add to that, that states are required, but there is really no financial penalty other than the fact that the state if they are not a member of IRP, the jurisdiction would not be allowed to impose any other requirements. They would have to allow vehicles to operate interstate commerce whether they are part of IRP are not. That was really the only penalty included in that legislation. The intent of the legislation was to get all jurisdictions in IRP, and it worked as we now have all jurisdictions in. All the continental U.S., a guess I should say. And in 1994 IRP, Inc was created as the official repository. The last U.S. jurisdiction not to join was the District of Columbia in November 1996. They actually began to issue an IRP registration April 1st 1997. Given the 59 numbers that we have today, the last member to join was the province of Nova Scotia from Canada. They joined in December 2000 and were effective and issuing registrations April 1st 2001. This map illustrates all the jurisdictions that are now members. It pretty much covers the continental United States, most of the larger provinces of Canada and even the smaller ones for that matter.
There have been some talks about Mexico's participation in IRP. Those have been ongoing for a long time. They go back to when it was initially brought into play. While there have been a lot of discussions that have happened at various levels of the two governments over the years in between, representatives from Mexico and IRP, Mexico at this time they are not a member, but this is a chance that in the future there will be. IRP has made arrangements within the plan itself, made the necessary changes to the agreement that would allow them to participate if they make application and are approved by the membership to join. So, I just wanted to make that know about our southern border partners as well. Getting into now a little bit about the fundamentals of IRP and why it is important, what some of the responsibilities of the jurisdictions are? Basically, this statement is a statement out of the actual IRP agreement. The fundamental principle of the plan is to promote and encourage the fullest possible use of the highway systems by authorizing abortion and registration of fleets of a portion of both vehicles and the recognition by each member jurisdiction of the registration of vehicles apportioned by other member jurisdictions. Or, it is simply freedom of vehicle movement. This slide represents the administrative responsibilities and the basic concepts. They provide the license plates and credentials displaying apportioned registration. They are required to issue a single registration cab card and each member jurisdiction is required to allow inter- and intra-state jurisdictional operations. Basically, allowing vehicles to not only bring a load in, drop it, or pass through a state, but also conduct intra-state operation. In addition to those basic concepts, jurisdiction responsibilities maintain uniformity and calculate and collect all IRP fees, disperse fees on a regular basis within 30 days of the transmittal periods, which would be the end of the month that they were collected in. There are to notify the IRP repository of any changes regarding their process of IRP a portion registration. And they are required to assist member jurisdictions in connection with any applications or fees, any disagreements or whatever that might arise over an application.
How does IRP work? The registration fees are calculated for each jurisdiction based upon the distance operation as reported by the registrant annually. They report the actual distance that they operated and the fees that they pay are based upon as actual operations. It is based on a percentage that each carrier would pay a minimum of 100%. In some cases, they could pay in excess depending upon where they have actual operations and want to maintain certain jurisdictions that they may not have operated in. They could pay possibly a little over 100%. The registration fees are distributed on a monthly basis between jurisdictions and I will talk a little bit later about a product that the IRP, Inc has that helps facilitate that process. Each commercial vehicle was issued one license plate, one cab card indicating the jurisdictions the registrant is registered for and the weight for which registration fees have been paid. These sample calculations are just a little bit of a breakdown, a very simple breakdown of how the calculations would look. This calculation is done on an 80,000-pound vehicle operating in five jurisdictions. You see there that based upon their mileage breakdown that they operate, the amount of fee each jurisdiction could expect to obtain out of those fees. When we talk about vehicles that are required to be apportioned under the IRP agreement, they are called apportionable vehicles. Basically, I put the definition on this slide. Basically these are defined as a power unit having two axles and a gross weight or registered weight of over 26,000 pounds or 11,793.401 kilograms. Or is a power unit of three more axles regardless of the weight or a combination of vehicles that exceed the weight requirements as well. Truck tractors or any combination of vehicles that may not otherwise meet the weight requirements or as used in the transportation of charter parties may be IRP registered at the option of the registrant. Basically, the point like to make is that while some vehicles may not be required to be IRP registered, the option to registers them under the IRP. If they operate in interstate commerce and want IRP register the vehicle, most jurisdictions can and will allow that to happen. In some cases where you have small service vehicles that sort of thing operating on the borders between two states, it is beneficial to them to IRP plate the vehicle, that way it takes care of any problems that they may have been operating in other jurisdictions. In a lot of cases, those are covered by the old existing agreements, but in some cases it is better to put the IRP on them and eliminate any issues or problems they might have.
This is just an example of what and an apportioned plate looks like. I chose Texas because it is 1 I had easy access to. And basically, you can see where it says apportioned on it. Most states are something similar to that where they will indicate the jurisdiction and identifying number and the word 'apportioned'. At the next slide, at just a cab card. There is a little bit about the vehicle, the year, the make, that sort of thing. It shows the jurisdictions that the vehicle is IRP registered in and the weight in which they are allowed to operate that vehicle. In some cases, the tab cards are issued in paper format and in some cases they are a state form or jurisdiction form. A lot of states have moved toward electronic credentials and processes getting away from using these forms due to cost and also, to provide better customer service. Some states allow motor carriers to actually issue their own credentials. They can be printed at their location and on plain paper in a lot of cases which helps make it a more customer friendly operation. Oh, why is IRP important? Prior to IRP, there were multiple registration agreements that existed. Most of them covered strictly interstate, but few if any of them provided reciprocity for intra-jurisdictional operations in other jurisdictions. This meant if a motor carrier had intra-jurisdictional operations in other jurisdictions, they were forced to dual plate per purchase temporary trip permits for their vehicles in order to be properly registered to operate. This benefit had jurisdiction operations. Prior to IRP, only the base jurisdiction received the revenue. Basically, if you had an agreement to the base jurisdiction collecting and maintaining all the fees and that vehicle may be operating 90 percent of their time and other jurisdictions permit those other jurisdictions were not getting any share of the revenue. Under IRP jurisdictions, they share the revenue based upon the operations. Therefore, they are getting closer to getting that fair share of their revenue based upon what is being operated on their highways.
IRP allows the motor carrier industry the freedom of movement and operations, both inter & intra jurisdictional, with only their base registration plate and cab card. Taxpayers only have to deal with their base jurisdiction to obtain a registration and pay their fees and not worry about dealing with 50 jurisdictions if they operate in 50 jurisdictions. The financial impact of IRP, it is what I feel like is very substantial numbers when it comes to the registration fees. We cannot think of them being that high, but they provide quite a bit of revenue to the highway funds. Registration fees from IRP represents over $2 billion dollars annually to jurisdictional highway funds contributing to funding for highway infrastructure projects and highway safety initiatives. I would like to point out the highway safety initiatives, because a lot of the revenue is derived from IRP and other motor carrier credential functions that help support improving highway safety on our highways. I think that is one of the things that we are all striving to do. These fees are generated from the registration of over 2 million of vehicles registered. Basically, I want to talk about some of the benefits. I have talked about all of these, but for the jurisdictions, the fair share of the revenue, increased use of high weight basically, IRP supersedes other agreements. For the registrants, it provides them a one-stop shop process. Also, it provides the inter- and intra-jurisdictional travel and the one plate, one registration concept. IRP brought uniformity and showed that multiple jurisdictions working together could come up with a contact that would work and be consistent. IRP has action provided the model for many other commercial motor vehicle programs that has been followed over the past several years. The uniformity, consistency of process, overall efficiency seen in the IRP process has proven very beneficial.
A good example, the International Fuel Tax Agreement (IFTA) is similar to IRP in that it took the cumbersome process of quarterly fuel tax filing with each jurisdiction that a motor carrier operated into and adopted a process for filing quarterly fuel taxes for all jurisdictions through the motor carriers' base jurisdiction. As I said, it also dashed the program also change the fuel tax licensing process. It showed their authority to operate in different states. Basically, IRP really improved process to make it with the motor carrier could deal with one agency and get them qualified to operate anywhere in the U.S. and Canada pretty much. They are issued a decal that is displayed on the side of the vehicle that indicates that the vehicle has proper fuel tax license and authority to operate. There have been several other programs that have similar processes to IRP that came along after IRP. One of those is the most recent Unified Carrier Registration Program (UCR). The UCR is a similar process in that the base jurisdiction registers motor carriers and issues an electronic credential. There is not an actual paper credential. It is just another example of how the concept of what IRP started years ago has been adopted by other programs. It shows the big cooperation and agreement that things like this can work.
I am going to talk a little bit about IRP, Inc. As I said earlier, IRP, Inc. serves as the repository for IRP supporting the many functions of the Agreement including various committees and services. The governance of IRP, Inc. is provided by a Board of Directors which is made up of IRP Administrators from the 4 IRP regions across the U.S. and Canada. I left something off here. We also have industry representation both from the motor carrier industry and the motor coach and bus industry. That is nonvoting members but advisers. They are a great benefit to the IRP community. Our mission statement, as I put it there, is to serve as the repository of the International Registration Plan, improve Plan compliance, and serve as a catalyst for positive, effective change with respect to commercial motor vehicles issues. This is just an overview of our committees. I did not go into detail. A lot of them are pretty self-explanatory by their name. The Audit Committee oversees the audit process of the IRP jurisdictions. The Dispute Resolution Center is for any disputes that might arise. Peer Reviews the, basically, our compliance process for the jurisdictions to ensure that the jurisdictions are complying with these requirements. Plan, Procedures, and Education Committee is responsible for developing educational and outreach opportunities for IRP to keep our members any industry educated and aware of what is the went on with IRP and new changes and things like that. I would mention real quickly, it is not something on here, but one of our educational efforts is to put together a video recently that helps to introduce IRP to the motor carriers and educate them on the record keeping requirements of IRP. They do have to keep records. Their fees are based upon their mileage operations. So, that is something we have that is available on the IRP website if anyone is interested to look at that. We are very proud of that product. We think it will be something very good for the industry. We also have the international community, which we deal with issues across border natures between Canada and the U.S. and U.S. and Mexico.
We have an Industry Advisory Committee made up of about 30 industry representatives. They meet at each of our annual meetings. They provide input and recommendations to the board and to the membership. And then we have several specific task force working groups working on specific issues like the Compliance Audit Work Group is looking at rewriting of the manual for IRP. We have a group looking at reciprocity plan, which is basically dealing with estimated mileage handled in the plan. We have a task force working on the heavy vehicle usage tax. We have another task force looking at credentials and how to get that data to law enforcement in the best way possible. A talk a little bit earlier about a major product that IRP has. While I say it is a major product, this is developed to provide an electronic means of sharing and exchanging required data and fees between the jurisdictions. Basically, it allows states or jurisdictions not to have to send loads of paperwork and write and send checks to jurisdictions each month. This allows them to upload the data electronically to exchange their data and fees. It has a netting process. We don't just have money flying back and forth. It is all done electronically. It has been a really good benefit to the membership. All but about five participate in the clearing house. The IRP does work with a lot of other organizations. We talked about the fuel tax agreement earlier. A good example is we host a joint workshop held each year in January or February. That has been a long going effort. We work with FHWA and FMCA and some projects are listed there. We have in the past worked with Commercial Vehicle Safety Alliance on a highway safety award program that recognizes people that have made significant contributions to improve safety on the highway. Of course, the American Trucking Association, Commercial Vehicle Safety Alliance, and we work very closely with American Association of Motor Vehicle Administrators.
With that, that is my contact information made that available to you. Also, our website, which I would encourage if you have any questions or world like to learn a little more about IRP or anything I haven't touched on, feel free to contact me. But go up to our website. We have quite a bit of information out there. Just feel free to search around. If you have questions, let me know. With that, I thank you.
Thank you Tim. We'll now move onto the final presentation, given by Greg Owen of Ability Tri-modal.
Thank you, Jennifer. It is a pleasure to represent the trucking industry and give our perspective on transportation funding. Good morning to everybody. My name is Greg Owen. I am the Head Coach of Ability Tri-Modal. A little bit about Ability Tri-Modal. We are located here in Carson, California. We operate Class eight trucks using company-owned and independent contractors covering half the state of California, southern Nevada, and western Arizona. Our operations are 24/7. Our operations consist of 27 acres of property and 600,000 square feet of facilities. Our warehouse and distribution include major automated distribution systems to provide transloading, distributions, and other related services for the retail industry in North America. Each one of our facilities receives and dispatches an average of 200 to 300 gate transactions per facility on a daily basis. The top five trucking industry issues listed here and, these were provided by the American Transportation Research Institute in 2009. They are the economy, of course, government regulations, fuel issues, congestion and highway infrastructure, and more importantly, all hours of service. The economy is the greatest concern. Trucking does not have room to increase the number and amount of fees and taxes without feeling the pain personally.
Congestion is the number four spot, which is surprising realizing the current state of our economy. Even today congestion remains to be a major issue. As Mike pointed out in his presentation, a lot of container traffic has been the major driver of the U.S. freight demand. However, the last two years have seen drops of 23% 2008 and 24% in 2009 of container volume. Pricing programs for the containers have produced mixed results. Mike and I talked a little bit earlier one of those congestion relief programs, PierPass. PierPass remains to be a little bit of an issue for how much money is being raised by the program and the accountability on where and how it is spent. One of the negative issues is the fact that PierPass was intended to have a lifespan of three years and is now into its fifth year with no end in sight. PierPass has also re-described the term peak period. Prior to PierPass peak period were understood to be a couple of hours of commute time in the morning and a couple of hours in the evening. PierPass has pushed all import loaded containers to night time operations. While PierPass does produce some negatives, it also creates many positives. The real answers will be when all stakeholders are allowed at the table to iron out the wrinkles.
In the meantime, our infrastructure continues to be ignored. However, one thing is for certain, it seems as if every agency and representative, state and federal, is looking to import containers as a method of raising revenues to build and improve our infrastructure.
Regardless, congestion issues can and need to be addressed through the investment in infrastructure through the Highway Trust Fund.
One important trucking reality to remember is, trucking is technically deregulated. However, states and agencies continue to regulate trucking, hours of service, equipment, routing, and insurance. New regulations are added almost daily. As an example, 2007 diesel engine technology added an additional $15,000 per class 8 truck. The 2010 Technology, which is now coming on board, is set to add an additional $15,000 per class 8 truck as well. Trucking is highly competitive with low margins of profit. Average margins of profit in trucking nationally is approximately 3%. It is difficult to find room to add taxes and/or additional fees.
Currently, there are over 640,000 carriers registered with the U.S. Department of Transportation. One hundred thousand of these are new carriers in the last five years. This last figure probably needs to be modified due to the loss of carriers during the current economic and financial crisis. We all have been aware that trucking is critical to the U.S. economy. How critical is trucking is to the United States' economy? More than 68% of the transportation and 86% of transportation revenue moves by truck. At some point, trucking moves the majority of all goods that are consumed in this country.
Although, trucking amounts to just 7% of all vehicles on our highways, they amount to 15% of total highway use. Transportation funding issues such as congestion is expected to increase, and vehicle miles traveled will increase. And the structure needs to be increased three or 4% in the same time. Transportation assistance and investment is needed. Researchers suggest the need for over 100 billion annually to simply maintain the present infrastructure and up to 200 billion annually by 2015. Congestion causes reduction in travel speed and time. Failure to reach certain required speeds and maintain those speeds for proper lengths of time, restricts the costly investments in environmental technologies to properly function. Worse, this requires additional investment for technologies to take care of what the technology in the normal operations will not do. Due to congestion, productivity in local and short-haul operations has been reduced an average of 20 to 40% in the last 20-30 years. Funding for infrastructure is an obvious solution.
There are four proposed and existing funding options, the are: motor fuels tax, tolling, highway privatization with tolling, and mileage based tax. Each and every one of these forms of taxation will draw revenue from trucking. All four concepts relied upon trucking as a revenues source. Trucking perspective and how each will affect the mode in terms of internal costs and costs that may or may not allow trucking to pass additional costs onto their shippers. Make no mistake about it, each and every one of these options will significantly impact trucking and will draw revenue away from trucking. Trucking perspectives on the motor fuel portion is the next topic of this debate. The motor fuel tax is an efficient way to collect taxes. The infrastructure to collect additional tax is currently in place. However, the motor fuels tax does have difficulties supporting the transportation systems, because the per gallon rate has not been changed since 1993. Inflation has decreased motor fuel tax purchasing power by as much as 28%. It has eaten away at the in effectiveness of this rate. Additionally, there are some users who do not contribute to the Highway Trust Fund for the motor fuels tax, such as government fleets. Tax exemptions reduce user based revenues. Subsidies on alternate fuels are a perfect example. They reduce motor fuel tax and taxpayers pay for the subsidy. Highway user fees are typically diverted to non-highway uses. Here in California we have built more town malls, sound walls and bike paths, all the while we continue to neglect our existing highway infrastructure. Finally, the earmarking diverts money to test projects instead of projects of national importance. That is the effectiveness of the motor fuels tax that has been damaged even more. In California since 1993, we have typically paid $0.25 to $0.85 per gallon more our fuel than any other state in the union. We have paid more than our fair share. That said, the money did not go to the pavement where we urgently need it. It went to the items mentioned above. All the while, state representatives continue to add new highway projects and infrastructures that they have neglected over the last 30 years.
This is our perspective on tolling.
This slide points out toll revenues for the years 2004 and 2005. It is extremely deceiving as although the costs of the system looks to be profitable and experienced quoting 21 to 30% profit margins. This only relates to the collection process. When adding all the other related costs, the results are enormous losses. This is the very reason that tolls have increased 83% by their submission. The cost to collect tolls is also less efficient than other collection methods. As shown in the slide to be typically very expensive to run toll collection operations. Therefore, as a trucking company that pays money to toll facilities, I am receiving less investment of the transportation system for each dollar spent compared with each dollar spent toward the motor fuels tax.
There are safety impacts of toll diversion. Here is the point that I made in the last slide. Between 1995 and 1999, the Ohio Turnpike Authority increased tolls on the turnpike by 82%. As a result, commercial traffic was diverted to non-toll roads. This diversion resulted in high profile crashes resulting in fatalities on alternate routes and led to the rollback in tolls. Toll-diversion is also a very difficult issue that needs to be part of the overall toll discussion. In the example on this slide, the Ohio Turnpike increased tolls significantly. Vehicles converted to alternate routes.
Trucking perspective on privatization issues: This is not a funding solution either. These systems typically have non-compete clauses that hurt adjoining systems. Prices on private toll facilities are perceived to be uncertain and unpredictable. He must realize the users of a private toll facility must cover the profit, required or anticipated by private companies. Therefore, less revenue is going toward the system improvement. We need to realize that privatization essentially disconnects the transportation system resulting in a pieced together, dysfunctional system. The interstate system is critical for the U.S. economy. We cannot allow privatization to destroy what the world has perceived to be the best Highway Interstate System in the world, that has been the major contributor to our nations growth and success since World War 2.
Finally, mileage-based taxation appears more and more to be less of a viable option. The implementation of a mileage-based type of tax will be costly to install and collect data from every vehicle on the road. Enforcement seems difficult. If not, totally impossible. Current technology is not sophisticated enough to allow for such a national system especially one that would allow for lane or facility differentiation. While such a tax may be possible far in the future, it is not a viable option in the short term. Overall feasibility is questionable.
In summary, the Highway Trust Fund is not currently meeting the needs of trucking or the transportation system. More revenue is required. The fuel tax is the most efficient method of collecting such revenue. Additional, the system for collecting this fuel tax is already in place. The tolls and privatization of roadways on the other hand collect revenues less affectively and disconnect the system. The mileage tax at this juncture seems impossible in the short term. The bottom line is that a motor fuel tax that is currently in place is an effective tool. The cost of collecting these funds at the federal level is about two tenths of the on percent of revenue. At the state level, it could go as high as 2%. It is nowhere near the 20 or 40% that is found in toll authorities. This means that the money my company is paying into motor fuel taxes is being put to better use than money that goes to the toll authorities.
Finally, since the motor fuels tax has not been increased since 1993, and revenues are badly needed, an increase in the motor fuel tax is required. Raising the motor fuel tax would be nearly cost free. Quickly implemented, it will create an immediate solution to closing the gap in the Highway Trust Fund.
Thank you for the opportunity to present the trucking industry's perspective. Thank you.
Thank you. I am now going to go ahead and start the question and answer session with the questions posted online. If time allows, I will open up the phone lines for questions. I will start with questions from Greg and work from the bottom up. Greg, you mentioned of fuel subsidies, maybe for bio-fuel. Can you explain?
To encourage the use of alternate fuels, the government has put in as much as one dollar per gallon. Basically, the taxpayers are paying for the debt subsidy to have users use alternate fuels.
On the tolling revenue numbers, where did you obtain the numbers?
Those were collected from the American Transportation Research Institute. There was another slide that we took out because it kind of confused the matter. If you did look at it, it showed a ridiculous overall cost and extreme loses, which was pretty deplorable. We showed this one because it directly related to the cost, the revenue versus the cost of collecting it. I would have to get that, the information is available. I know that is not a good answer, but the answer to your question, I would talk to Jeff Short at the American Transportation Research Institute in Atlanta.
Jeff, you are on the line. Is there anything you wanted to add to that?
Those numbers were taken from publicly available financial statements from toll authorities. Basically, what the researchers from ATRI did was have a look at the operating costs of the toll roads, and not taking into account maintenance, but what it actually costs to collect the toll. That is what those numbers represent. They are all detailed in a report that was released in 2007. But I can send you a copy of that report if you would like.
Okay, thanks. Next question is, typically toll road operators include planning, designing, engineering, etc. in their operation administration expenses. Do your amounts and percentages for motor fuel tax collections include those expenses at State and Local DOTs as well?
The figures deal specifically to the amount of fuel taxes raised and the cost to administratively collect those taxes. Simply put, fuel taxation is the most cost effective and easiest way to create additional fees for infrastructure investment and put the most revenue to improvements for our infrastructure.
If the person that typed that question in would want to be clarified exactly what you mean by your question, we can come back to it. We will move on. With respect to toll charges, can you discuss the threshold at which the industry will begin diverting to non-toll highways?
I know in some of the original discussions which the American Trucking Association had with some Chicago portion of toll road and Indiana and I believe Ohio. It was rather interesting because the people in attendance could for see it is a profit situation. These groups of people are buying highways and getting in some cases 99 year leases. And it is a profit situation. We could perceive one to 300 percent increases over ten years or more. The Ohio Turnpike is a very good example as 82% increase between 1999 and 2005; I think that is pretty much an eye opener.
Thank you. Let's see. We do not have a clarification on the question yet, so I think we will move on to some other questions we have here. Actually, I'm sorry. Something just came in. The 2% costs for administering border state fuel costs, does that include similar costs which toll road operators include in their administration costs? In other words, are you comparing apples to apples?
Well, if you looked at the two side-by-side, the difference is absolutely and totally significant. There is no comparison whatsoever. I know that as an example in 1980 the state of California had a deficit crisis in their transportation funds. They proposed to go to a mile tax. We did the actuary on that. At that time, the amount of revenue that would be collected by such a tax, very similar to mileage based tax, but the revenue would be eaten up by 50 or 60% between what it costs industry to adhere to that tax and what it would cost the government to adhere to that tax. Sixty or 70% of the revenue would be eaten up. If you look at the toll situation, you can see that, and those costs are astronomical. If you raise fuel tax $0.10 more per gallon, it wouldn't cost you any more to administer the tax. The people and everybody are still in place. It is just a matter of pushing numbers.
Okay. Thank you. We will move on to some questions for Tim. What is the difference between a Unified Carrier Registration Plan and Agreement and the IRP?
Well, basically the Unified Carrier Registration, or the UCR as it is called, was a compromise program that was put into the law to replace what was called the old single state registration system (SSRS). Basically, that process deals with the authority of the carrier to operate and providing a uniform way to ensure the carrier has proper insurance. Basically, there was a compromise between industry and the jurisdictions that were participating to come up with a better program that didn't require paper credentials and that got away from requiring redundant supporting of insurance and that sort of thing. That was the UCR. Basically, it doesn't have the insurance requirements in it. The carriers, in order to operate, just have to register with their jurisdiction and pay the applicable feet. That is based upon the number of vehicles in the fleet.
From your perspective, to what degree does the IRP control or influence inter-jurisdictional regulations on trailer weight and/or length?
Basically, IRP would not have any input on that. That, in most cases, would need to be federal specific regulations or state specific laws and regulations that deal with it. IRP really wouldn't have any regulatory authority unless our members ask us to deal with it.
Is there any way a small percentage of IRP funds could be diverted to public transportation?
Of course, that would be based upon state and federal allocations. I worked in Kentucky for 24 years. We collected the money from all the motor carriers. Those fees went directly into the state highway fund.
And what sort of admin or processing overhead is involved in processing that?
That is a good question. I think in most cases it is probably minimal. I don't know the exact operating budgets of every jurisdiction that we have an even the operation of the clearing house would be minimal and exchanging those fees compared to the actual $2 billion. I think in most cases you have small offices and operations within the jurisdiction to handle the registration of those vehicles, small budgets to handle it.
The IRP expanded in scope to handle the national permit system?
I am not sure I understand what that is referring to.
If the person who wrote that wants to write in and clarify, or if we have a second on the phone line, maybe just to provide some clarification there. We will move on to the next question. Why is Alaska's not part of IRP?
Each state does a study to evaluate whether it is worth their while to be in number of IRP. Alaska did that study on actually two or three different occasions as over the years that things changed. Basically, it was not lucrative for them to be a member. There was not enough interstate operations between Alaska and the U.S. jurisdictions and even the Canadian provinces that the border to make it worthwhile to be a member.
What role does or will technology such as GPS play in determining percentages to members?
They definitely will play a role in helping members keep the records. Technology is playing a key role with the electronic on-board recorders. It makes it easier for carriers to maintain the records, maintain their operations, and know the actual mileage figures and those sorts of things. Many things they already use today, but the new technologies will definitely be a benefit to not only the jurisdictions to ensure that they get good records but to the administrator that provides those records.
We have a question that actually is for all the presenters. Do any of the presenters have comments about the German toll collect system that ties tolls to truck emissions? I will open this up to everyone to see if anyone has any thoughts on this.
Okay. If we do not have any comments on that and Jeff, if you are on the line, if you want to comment, feel free.
I have no comment on that.
Okay. We will move on. Let's see here. This one is for Tim. You've discussed the potential inclusion of Mexico into the IRP. There have been ongoing concerns about safety and emission issues from trucks coming from there. Would the IRP require that certain standards are met before IRP registration?
That is a good question. Actually, in most cases in most states those things that are required to make sure the vehicle meets certain vehicle standards to be on the highways, they're handled at a different level than the registration process. While IRP would be very supportive of it, I don't know that he would ever see anything in the IRP agreement requiring those sorts of things. We surely don't want to ensure that any vehicles coming in the U.S. our jurisdictions are alert to the need to ensure that those vehicles meet the minimum safety requirements at a minimum, hopefully above that before they allow those vehicles to be titled and registered in the U.S. I don't know that IRP itself would ever adopt to have any language specifics put in the plan. I think the individual states will have plans and be increased as we see the border and finally opened. I think you'll see a really big push to increase to make sure that those trucks are U.S. standard and that they meet not only safety but the emissions standards.
Thank you. Above the any other questions kept in. Do any presenters have questions sent directly to you that I didn't see?
None for me Jennifer.
None for me.
Okay. Before I open up the phone lines, there is one question sent to me that I didn't address about whether past seminars, which are posted online in the Talking Freight archives, if they are eligible for AICP credits. I think the answer is no, but I will check into that. When I send out the follow up information or I will send something and clarify that to let everyone know for sure. I believe the answer is you do have to attend the live seminar. If the operator could give instructions on how to ask questions over the phone, we will see if anyone has questions there, or feel free to type them and as well.
If you like to ask a question, please press star one of your phone. Please make sure your phone is unmuted. In order to withdraw your request, you can press star two. Again, that is star one to ask a question. One moment was the first couple questions come through.
I have a question from Dan Smith. Your line is open.
This is Dan Smith. The question is for Mike Fisher. I wonder if you picked up any recognition of benefits from shippers and receivers who are at some distance from the port. Even if they don't operate night or early morning distribution centers, it gives them the opportunity to use the port, because they can now ship up to normal working hours.
I know we have looked at this for other applications. We did not hear that from anybody in particular. I don't know if anybody has looked at it as potentially increasing size of the hinterland. We did not take that up from any of the people that we talked to.
Thank you. Once again, to ask a question, please press star one. And I have no questions on the phone line.
Thank you. Actually, during that question I did get clarification from Carol Keenan is the Federal Highway Administration contact for Talking Freight. What I said was correct. You do have to attend a live seminar to receive the AICP credits. You're certainly welcome to view archived seminars, but they are not eligible for credit. I want to clarify that you do have to be a member to get the credit. I have instructions on the screen, or you can download them on how to obtain credits. You basically have to go yourself to the AICP website and log in to get your credit. I don't think we have any other questions at this point. I don't see any others typed in. It didn't seem like we had any over the phone. We will go ahead and close out for today. I want to thank all three presenters for three great presentations. We really appreciate it. I think everyone on the line for attending today's' seminar. The recorded version of this event will be available within the next few weeks on the Talking Freight website.
As a reminder, if you are an AICP member and would like to receive 1.5 Certification Maintenance credits for attending this seminar, please make sure you were signed in today with your first and last name or type your first and last name into the chat box if you are attending with a group of people. Please download the evaluation form and email it to me after you have completed it. Please also download the CM Credit instructions if you are unsure of how to obtain your credits for today's seminar. The next seminar will be held on January 20 and will be about Best Practices for Moving Freight through Urban Areas.
If you haven't done so already, I encourage you to visit the Talking Freight Web Site and sign up for this seminar. The address is up on the slide on your screen. I also encourage you to join the Freight Planning LISTSERV if you have not already done so.
Enjoy the rest of your day!