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Talking Freight

Operations as a Solution to Freight Congestion

June 21, 2006 Talking Freight Transcript

Operator:
My name is Audrey and I will be your audio coordinator. At this time all participants are in a listen only mode. We will be conducting an audio question and answer session toward the end of the presentation. You may submit questions by using the chat tab in the lower right-hand corner of your WebEX window. If at anytime of the call you require assistance press star followed by zero. Should you experience any difficulty with today's presentation, please contact technical support at (866) 779-3239. I would now like to turn the call over to Ms. Jennifer Seplow.

Jennifer Seplow:
Good afternoon or good morning, depending on where you are. Welcome to the Talking Freight Seminar Series. My name is Jennifer Seplow and I will moderate today's seminar. Today's topic is Operations as a Solution to Freight Congestion. Please be advised that today's seminar is being recorded.

Today we'll have two speakers, Randy Butler of the Federal Highway Administration Office of Freight Management and Operations and Bruce Wargo of PierPASS, Inc.

Randy Butler is a Transportation Specialist in the Federal Highway Administration
Office of Freight Management Operation and Technology Team. Randy joined the FHWA in November of 2003. Randy's transportation experience includes thirty years experience at a class one railroad holding many positions including Superintendent of Transportation Operations and General Director of Intermodal Planning. As the Technology Team Program Manager, Randy's responsibilities in the FHWA's Office of Freight Management include the ITS major initiative Electronic Freight Management, Cost Benefit Methodology for freight technologies, Intermodal Freight Technology Working Group, Freight Information Highway, and the proposed Cross Town Improvement Project that Randy will be speaking about this afternoon.

Randy has a Bachelor of Science in Engineering Technology, a Masters of Business Administration with a concentration in information systems and he is currently completing a Masters of Transportation Policy, Operations, and Logistics at George Mason University.

Bruce Wargo is the President and CEO of PierPASS Inc. which has introduced the Off Peak Hours Program for the ports of Los Angeles and Long Beach. With PierPASS, Mr. Wargo now heads up an effort that includes computer systems development, commercial internet payment processes, accounting and financial systems and a customer service center supporting PierPASS operations.

Mr. Wargo has been working on the waterfront since 1970 and has managed several marine container and general cargo terminals in Northern and Southern California. He has been directly involved with the design and construction of new cargo facilities including the introduction of new technologies for gate and yard operations. In addition to Contracts and Marketing, he has overseen the implementation of joint ventures, construction of near dock facilities and on-site assessments of foreign and domestic business opportunities. Mr. Wargo has also served on several employer labor relations committees in addition to local port and community working groups.

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 smaller text box underneath the chat area on the lower right side of your screen. Please make sure you are typing in the thin text box and not the large white area. 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. The LISTSERV is an email list and is a great forum for the distribution of information and a place where you can post questions to find out what other subscribers have learned in the area of Freight Planning. 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. Due to the size of the file, recorded files are available for viewing/listening purposes only and cannot be saved to your own computer. 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 will also be available within the next week. I will notify all attendees of the availability of the PowerPoints, the recording, and a transcript of this seminar.

Today's topic, for those of you who just joined us, is Operations as a Solution to Freight Congestion. Our first presenter will be Mr. Randy Butler of the Federal Highway Administration Office of Freight Management and Operations.

Randy Butler:
Thank you, Jennifer. The project that I'm going to be speaking about is referred to as the Kansas City Cross Town Improvement Project and I refer to it throughout the presentation as C-TIP. This is a working group that is in place between government and industry that looks at new ideas and innovations that can improve productivity through technology in the intermodal workplace. The presentation today will cover a little bit of the background, we will discuss the problem statements, some of the community and business impacts, and what do we see as solutions and key issues. We will talk about why we chose Kansas City and I will emphasize this is a potential pilot. Some of the pieces have already been funded for this project, but the major piece is still in process of funding. We will talk about the partners and their significance as stakeholders and finally our next step in summary.

The movement of intermodal freight within the U.S. often requires the use of multiple truck moves in addition to the primary movement by rail, ship or air. There are numerous reasons for this. Sometimes it is to take advantage of favorable cartage rates, other times it is necessitated by the limitations of infrastructure. Often it is dictated by delivery and scheduling requirements. This characteristic of intermodal transportation requires the interchange of intermodal traffic between modes, often in or near metropolitan areas where freight terminals or warehousing and distribution facilities are located. During these interchanges, freight traffic is often loaded on trucks for short movements through or around metropolitan areas.

Railroads provide critical freight links throughout the United States, especially on long-haul trips where they offer a very competitive alternative to long-haul trucking. Unfortunately, there is a break in rail infrastructure that prevents uninterrupted coast-to-coast service. Hence, moving freight by rail from one side of the Mississippi River basin to the other, such as from the Port of Long Beach to Central Ohio, typically requires an interchange via truck at one of a handful of Midwestern cities.

There are five major east-west intermodal exchange points for rail-to-rail traffic: Chicago, Kansas City, Memphis, New Orleans, and St. Louis, shown in the graphic. Chicago is the largest by far, with 1,200 trains moving through the region daily. All six of the Class I railroads interchange in Chicago and there are more than 20 rail yards throughout the city.

Ports provide critical freight links for goods imported to the United States. Once intermodal freight reaches ports in the U.S. it must be transported to another mode before reaching its final destination. Because the majority of ports do not have expansive on-dock rail facilities, the first leg of that journey is often a cross-town movement in the arrival city.

Airports provide critical freight links for high-value, time sensitive goods. In many cities these goods must be transported from the airport to nearby distribution centers before they can be shipped to a final destination. This interchange is nearly always by truck, creating a third source of cross-town movements. This figure offers an overview of major U.S. cargo handling airports.

Why did we choose Kansas City for this potential pilot? Although Chicago is the largest example of the cross-town problem, there are a large number of risks associated with trying to pilot a study in such a large, complex environment. The scope of the project would be too large and the pilot would be highly visible in a city such as Chicago. Any difficulties encountered during development and deployment would surely be magnified under such circumstances. In addition, a pilot study in Chicago would be significantly more expensive than in a smaller city.

Kansas City is the second largest rail hub in the US, and has been determined to be a more reasonable place to attempt the pilot study. Smaller rail hubs are also affected by cross-town truck moves and thus the project is applicable in Kansas City. While the problem may not be as significant, benefits will be seen and the results will be directly transferable to other cities.

Because of the number of truck moves they represent, cross-town rubber tire interchanges create conditions that adversely impact the efficiency of the transportation network, the safety of the motoring public, and the security and quality of life of citizens in the communities through which they take place. They add to overall traffic congestion, increase the volume of pollutants, and in the case of empty moves, represent inefficiencies and safety risks. As freight trade continues to grow, these conditions will also.

Without significant changes in business practices, interchange volumes are expected to increase proportionally to overall freight volumes. The volume of freight moved in the United States has been steadily increasing and is predicted to continue doing so. The volume of goods moved as intermodal traffic has been steadily increasing since the early 1980s. Between 1990 and 2000 U.S. international trade nearly doubled from $900 billion to $2.2 trillion.

Inefficiencies in cross-town interchanges lead to added congestion in an already strained roadway infrastructure network. The FHWA Freight Analysis Framework (FAF) predicts significantly worsening congestion by 2020. These images graphically depicts the predicted growth in daily truck volumes between 1998 and 2020. Note that it is along the Mississippi River basin and the coastal areas where many of the cross-town interchanges occur, that the most serious problems appear. In addition to an increase in overall daily truck volumes, FHWA data also points to increases in truck traffic within urban areas.

The same problems exist in air quality. Of the roughly 35 cities we've identified as locations of major rail, port or airport hubs, 25 are classified as non-attainment for one or more air quality standard by the Environmental Protection Agency (EPA). Due to the frequency of trips, the amount of time spent idling inside and at the gates of terminal facilities, and the proportion of trips generated in large urban areas, air quality degradation is compounded by cross-town and bobtail moves. Further, the low profitability of drayage operations contributes to an aging fleet of vehicles, which are less environmentally friendly. In addition, general roadway congestion increases due to large truck volumes lead to the release of even more pollutants.

Empty and bobtail moves between facilities, either to reposition equipment or pick up loads, represent a significant portion of overall truck traffic. Inefficiencies in the cross-town interchange model result in additional, and potentially unnecessary, truck trips which create no revenue for trucking companies. Ultimately, the cost of these moves must be regained somewhere in the supply chain, and are generally built into the carrier's rate schedule, resulting in higher overall transportation costs.

One of the largest contributing factors to inefficient interchange operations is the lack of integration and communication between modes, which results in fragmented carrier operations. Because operations are not integrated across modes, backhaul opportunities are lost, and empty repositioning moves are increased. The result is that asset and shipment visibility information is not accurate and is rarely shared, and separate, isolated databases promote inconsistencies in data quality and quantity. Lastly, communications between modes is sub optimal, with heavy reliance on human intervention. Phone, fax and email are the main forms of communication in many of these companies.

In addition to being a pure cost to the system, bobtail truck moves are inherently unsafe. Studies have shown that the bobtail configuration results in the highest crash rate of any truck configuration. A study done by the University of Michigan in 1990 found that bobtail crashes occurred six times as often as crashes involving the single or double configuration. This table shows the number and rate of crashes for each configuration. The study concluded that "the bobtail configuration clearly has the most serious problem safely negotiating the highway system."

Finally, bobtail and other empty truck moves into freight terminals represent a potentially serious security risk. Among other concerns, because these conveyances are not linked to individual shipments, they are often not subjected to comprehensive security reviews. The issues shown in this list were identified in stakeholder interviews held in Kansas City.

The reliance on cross-town rubber-tire interchanges to move intermodal freight in many cities reduces the quality of life for citizens of those communities. Bobtail moves and the large number of trucks on city streets present a safety issue, increase congestion, and contribute to degradation in roadway levels of service and air quality. Further, the erosion of carrier profitability continues to play a major role in the disappearance of owner-operators and a shortage in truck drivers across the freight community, causing increases in the cost of goods. These conditions, in addition to the costs associated with building new infrastructure and a general public resistance to the acquisition of new roadway right-of-way, means that building new roads to solve such problems is not a viable option.

Introduction to the solution. The proponents of the C-TIP solution recognize that for it to be sustainable, a strong business case must exist. Namely, the various stakeholders in the interchange environment must perceive sufficient value in the solution in order to participate in its use. A number of factors were considered in formulating the operating model through which C-TIP might be delivered.

The C-TIP project seeks to leverage technology advancements in a way that will maximize benefits to the public while minimizing the cost to both the public sector and private industry. Fundamentally, the project consists of an integrated set of solutions that is aimed at removing inefficiencies by more closely linking operations among stakeholders, and enabling transportation providers with support tools that enable more informed operational decisions. The next slide offers additional detail on each of the components shown here.

C-TIP will be delivered through a public private partnership (PPP) that includes the participation of city governments, metropolitan planning organizations, State Departments of Transportation and the US Department of Transportation, in addition to railroad and trucking companies, steamship lines and third party logistics providers.

The intermodal exchange database, the wireless updating, the chassis utilization tracking, these portions of the solution are intended to be revenue producing enterprises. Although they will be run by a not for profit organization, each component should produce enough revenue to pay for operations and maintenance costs associated with implementing the solution. In addition, third parties will be able to generate business by offering add-on applications and additional information and analysis.

There is one additional piece that is not represented here, because its integration with the overall project has not yet been worked through. It is called Interchange Capacity Management , or ICM, and involves implementing improvements in terminal operations based on modeling and simulation of different load handling practices. We will make more information available on this as it is developed

The C-TIP project is expected to improve the efficiency and safety of the transportation network, as well as reduce negative environmental factors that are brought on by cross-town interchanges. Eliminating unnecessary cross-town moves will reduce the overall number of trucks on the roadway, which is expected to reduce congestion, pollution and increase safety. Reducing bobtail moves will lower the overall volume of the inherently unsafe truck configuration from the roadway. Industry estimates that as many as 50 percent of the bobtail moves can be eliminated.

The C-TIP project will also provide benefits for private industry. Elimination of unnecessary empty (bobtail) moves will improve carrier efficiency. The implementation of the C-TIP solution will provide increased reliability and availability of key data to carriers and facility operators. This data can be used to facilitate the improvement of overall operation deficiency.

This next table contains the results of preliminary analysis regarding the business case issues identified earlier in the presentation. As you can see, we've attempted to address the key considerations associated with providing a sustainable solution by identifying opportunities for the various partners to identify returns on investment. In addition, we've made initial conclusions regarding the expandability of the solution, and the role of State and Local governments. Each of these answers is subject to modification and negotiation among the partners.

The pilot study must bring together city and state government as well as private industry if the project is to be successful. This table shows the anticipated partners and their contributions to the project. Each of the members of this project team, which may well expand to encompass more regional and national stakeholders, represents a critically important contribution to the project.

This slide reflects the primary objectives of the major partner groups for the C-TIP project. As you can see, the TSA has already committed nearly $700K for security related work, which has already begun. Additional funding, though not guaranteed, is being sought from the USDOT, through the Joint Program Office, and from an existing earmark in the Kansas City area. My office has requested a modest budget for FY07 for the project, and expects to make a presentation to the DOT Management Council sometime in the next several months to gain commitment to fund the overall project.

As discussed earlier, a successful business case can only be defined when the affected stakeholders are committed to the project's success. The C-TIP project constitutes a true public-private partnership. The stakeholders listed here have already committed to supporting C-TIP. They will be critically important not only to the development of the C-TIP concept, but also to its pilot deployment and evaluation.

The institutional and business framework is currently underway and the next steps for the C-TIP project involve developing a Concept of Operations and performing a User Needs Assessment. My office has issued a task order RFP for this support through the FHWA Operations Contract, and has received proposals from the contractors. We should have a decision in the next few weeks, and expect to get started immediately after the award is made.

The figure here also shows what we consider to be the major tasks that lie ahead for C-TIP, including the development of the overall institutional and business framework, the underlying technical connectivity architecture, the user applications by solutions developers, and the operations and evaluation by the project partners. This obviously reflects that C-TIP sill be a major, multi-year undertaking.

In summary, we've discussed that cross-town interchanges occur frequently and are expected to grow in number as freight volumes increase. We've also shown how these Interchanges are currently deficient and present negative efficiency, and create safety and environmental issues for the communities where they occur. A coordinated intermodal solution that leverages technology is necessary to solve the problem. A public private partnership has been developed to support a multi-component deployment of a Cross-Town Improvement Project. Initially deployed in the Kansas City area, the solution will be repeatable, scaleable and expandable such that it can be implemented in other locations with minimal alteration.

Our next steps are to secure the funding necessary to move the project forward, and to begin the work involved with defining user requirements and developing a concept of operations.

Thank you.

J. Seplow:
Thank you, Randy. I see we have a few questions. But will get to those after the next presentation during the question and answer session. I'm now going to bring up our next presentation and the next presenter is Bruce Wargo of PierPASS, Inc.. If you have questions for Bruce or Randy, please type them in. Please send your questions to all participants so that way we can make sure everybody sees them. Also indicate which presenter your question is directed towards. So with that, Bruce, you can get started.

Bruce Wargo:
Thank you. Good morning everybody. I'm with PierPASS as you pointed out. PierPASS is really only operating here in Southern California in the Ports of Los Angeles and Long Beach. I'm here today to talk a little bit about how PierPASS as an operational process has benefited the community and improved on the congestion issues here.

As you are all aware of we have some fairly significant growth curves ahead of us in the next few years. These growth curves seem to be panning out. Last year we had around 7.2% growth and this year were projected to exceed 10% growth in California. What that translates as pretty significant, a 10% growth is approximately 1.5 TEUs. It's a fairly daunting task to provide for capacity in southern California as I mentioned we do have growth that is fairly well known to be coming. We do not have additional space that is being developed in time for this growth so the challenge in the future is going to be how to operate more efficiently getting more volume through the same amount of acres in the same amount of infrastructure, bridges, highways and railroads. As an example, by 2010 we should only be adding about nine or 10% more capacity on the terminal side, but there should be probably three times that in terms of TEUs.

Previously there was little attention paid by the community, but in the last five years there's been quite a bit of interest due to the fact that there's been a general complying in the body of life issues here. Air quality being number one. It's really a state issue, but it's significantly a regional issue here. A lot of the air quality issues are attributed to the port activity. So there's a nexus between the growth and the perception by the community on air quality. Additionally, traffic has been incredibly difficult, approximately 50 percent of the cargo that comes and goes out of the harbor is by trucks. So we're talking about a significant number of trucks. Along with the trucks comes the noise. Port neighborhood groups have been fairly active in addressing not only city commissions, but also port commissions on these issues. This has kind of lead to a general question about growth in general. Is it something that is desirous of the community? Do they want to see the ports grow? Or do they want to somehow restrict the growth? It's actually a question they talk about.

Truckers, not only is a national problem but is a significant issue in Southern California. The port turned times and the rate structure has led to quite a turnover in the trucking community. We see a significant amount of turnover with regard to harbor to harbor haulers and that's going to be a challenge in the future not only for the port, but for the industry in general. We do have limited land resources as I pointed out. Historically the ports would feel pretty free to develop properties in traditional ways. Those ways have been challenged in court and there's a significant amount of challenge to the EI hour process these days so future land is going to be at best.

The freeways have been around a long time. There are some plans to improve the freeways, but again, those plans could be 15 to 20 years away. The Ports of Los Angeles and Long Beach are serviced by three major bridges. Those bridges are in need of replacement, and again, will be costing a lot of money and will take a considerable amount of time to replace. We have some real challenges with the infrastructure in terms of servicing the ports. Again, a lot of this led to some negative legislative action from the community legislators. There were a lot of problems not only with the community but in terms of training and longshore issues back in 2002 and 2004. This all led to assembly bill 2041 which was to mandate the use of night gates as a solution to congestion and problems in the community in favor of a business solution by the terminal operators which essentially is PierPASS and I will get to that in a minute. By providing a business solution to the policy makers of the benefits, they voluntarily withdrew their bill. The terminal operators on this issue took the lead here in Southern California and formed a group to deal with this problem and required approval by the Federal Maritime Commission in order to regain their antitrust community but essentially formed a group to deal specifically with congestion and security. This group consulted with a lot of the stakeholders in the transportation chain here, not only warehouses and trucking communities, but also cargo owners.

There was a major cost study done by a consultant, and the basis of the study was not only the cost of the program as proposed, but also the anticipation of the benefits in terms of traffic mitigation. That group crated a company called PierPASS in order to effect actual operation. The group of terminal operators sits on a large board and PierPASS essentially works for the board of terminal operators. PierPASS's off-peak hours program that we're engaged in here does provide a way for cargo owners and truckers to work during these off peak hours, thus avoiding a lot of the daytime congestion. It does have some benefits I will get into it in a minute. The program also provides a funding mechanism, this program is completely funded by the cargo owners. They pay a fee for the use of the daytime gates which essentially subsidizes the nighttime operations. The goal was to shift a significant amount of cargo from days to nights, that was essentially our objective. We were very surprised at the success of our first year. We had originally estimated approximately 20% of the traffic would be moved to nights, but within the first five months, number was 33%. So it has been a very successful program. People want to avoid the fee, but enough people were coming days to continue the funding of the program.

This program this is a feat against all the international cargo that import and export cargo moving through the ports of Los Angeles and Long Beach. The peak hours are currently defined as 3:00 a.m. to 6:00 p.m. Monday through Friday. So if your import containers or export containers move in or out of the terminals that are subject to the fee. The current fee is $50 for a 20-foot container and $100 for a 40-foot container. The collection of those fees goes to PierPASS, and then PierPASS distributes all of those collections to the marine terminal operators to offset their cost for the night time gates. Those annual costs are approximately 160 to $180 million. This is a significant amount of cost and expense, but line that expense across all the cargo that's coming to Long Beach and Los Angeles during the daytime hours, it does seem to be a bearable cost.

If you look at our calendar, it looks something like this. You come in Monday through Friday, 3:00 a.m. to 6:00 p.m., the green box are the PierPASS gates and those gates essentially are free. The green blocks we call them wild cards but terminal operators are free to buy gates on those days or nights at their own discretion but they are not part of the program. It had a significant change in the traffic patterns here in Southern California. The picture on the lower left was a routine event, both directions. You can imagine the difficulties that would pose on a major freeway. This picture is probably about 5 miles from the port, so on a given day those trucks would be essentially closing down the 710 freeway from Los Angeles into Long Beach in to the port of Los Angeles. Now that PierPASS is in effect, that traffic has significantly changed. You see a lot more activity at night. That's changed the traffic patterns on days significantly, it seems to have garnered a lot of success from the community. A key factor at PierPASS in the off-peak hours program is the fact that it applies to all the container cargo terminals. So we really don't have anybody that operating outside of the program. That's an important item because if we didn't it would essentially create a competitive environment and essentially and eventually we wrote the program. So all terminals big and small are part of PierPASS.

There's been a significant amount of time and money. I spent a lot of time not only in industry meetings but community meetings getting people to understand the concept, the reasons that we need to charge these fees, the benefits of the program. We spent a lot of money and time on meeting with policy makers and quite frankly, although expensive, it had a tremendous payoff. We were pleasantly surprised that the amount of support received from not only the community but policy-makers in general, locally and throughout the state. We don't operate necessarily in a vacuum. We get a lot of input from other stakeholders on an ongoing basis. We meet approximately three times a year not only with shippers but other interested parties, truckers, legislators and brokers. As you may or may not know the Alameda Corridor Transportation Authority plays a significant role in moving goods here in Southern California so they are a part of our advisory committee. We essentially give them a lot of opportunity for feedback, we bounce ideas off of them, process changes. They find that a very valuable access to PierPASS.

As you can imagine, the Internet plays a very large part in our program. Essentially it's the only way he can pay the fees. We have a pretty robust system not only for the process behind PierPASS, but also the Internet. Again, all the activity that the brokers and cargo owners are using is through the Internet. We don't take phone calls, faxes, blank checks, we don't do any of that. That's been very cost effective for our program. We did have a very short timeline on developing this program. There was a lot of pressure from policy makers in the community to make it happen before the peak season in 2005. We did ramp up very quickly and today we have over 12,000 companies nationwide that are registered with PierPASS and the majority of them play an active role. A lot of them are in just to get the information, but essentially, the shippers, freight forwarders brokers are playing a large role. We do have about 1,000 accounts that are billable accounts. We do turn out a lot of invoices to those shippers and consignees and brokers.

I wasn't the only one that had a lot of concern about this thing working in the beginning. Back in July of 2005 we did start, aside from all of the concerns, the waterfront labor did support the program. In spite of a lot of negative concerns from the trucking community about the wages and their own set of problems, truckers did show up and have continued to show up. Policymakers have been very supportive of our program. They view this as an effective example of how private industry can come up with a solution to a community problem. Again, the traffic on the freeway system is visibly improved. I get calls routinely from people I don't know telling me how much it has changed. It's been a very visible, positive impact in the community. Additionally, the congestion at the terminal gates have been reduced. It hasn't completely gone away because we are a busy port, but we've taken a very large chunk of the daytime traffic and moved it to nights and it has been proved the key to reducing congestion. In the five months of August through December, we moved 1.1 million trucks to the off-peak program. That's a lot of trucks in such a short amount of time. We routinely last year saw 10,000 trucks a night. I would like to always point out is the line 10,000 trucks up bumper to bumper, that would stretch from Long Beach to San Diego. That's every night. It's been a significant change in the traffic patterns and the way trucks operate. 33% of all the cargo is moving to the off-peak hours and on the import side, about 40%. That was a little bit more than we had actually anticipated in terms of the import cargo and the export cargo obviously has enjoyed a lot of the nighttime activity. But you still get a lot of empty activity, chassis activity intermodal activity on both shifts.

We had a peak season last year without a major terminal disruption. The two years prior to 2005 we had significant problems with our peak season our terminal operations. I'm sure you all read about not only the congestion but the railroad and labor issues we had. Last year was a very good year for the ports of Long Beach and Los Angeles. Very little congestion. Hopefully, in 2006 we are going to continue this trend. We're going to do close to 3 million trucks on these off peak gates. I have seen the nighttime traffic pick up a bit. It's pretty much consistent with the general increase in traffic, so that shouldn't be surprising, but it is nice to see that. The turn time within the terminals has been fairly consistent, about 25 to 35 minutes within the terminal. There is time outside, but the time inside the gates is 25 to 35 minutes on average. We did create an awful lot of new jobs at night. The ongoing terminal operations because they are full-service at night, we have a lot of city jobs at night for these gates and of course that's a lot of the reason there's a longshoreman that do like the program. We have had a positive effect on the velocity of cargo through the terminals, by doing this, the terminals have actually created some capacity going forward, they will be able to use as volumes increase. All good news and hopefully 2006 will be another year where we have no issues.

Regarding the payment flow, PierPASS is essentially a program all about collecting money. We do spend a lot of time counting in and making distributions to our members. Again, the payment is all done online. We receive those payments, and when we do, we send those notices to the terminals and the terminal is free to receive or to deliver cargo. We do make that weekly remittance to the terminal operators. The cash flow is essentially important to them because they do have the labor and they do need to make those payrolls every week. In a very untraditional way in our business, the cash flow is important and our terms are net ten credit accounts and of course credit card payments are -- that's been a very important aspect at PierPASS, cash flow. I've represented that kind of cash flow here. Graphically it's very simple. Using the Internet so many people are used to using the Internet for merchandise, purchases and for payment of bills that just seemed the obvious way to go and has really proved to be essentially the cornerstone of our process and the success our cash flow to the terminal operators, but we're very happy about that.

As I pointed out to the operational benefits we have had a positive affect on congestion. We have improved the freeway congestion that is the genesis of the complaints from the community. The port operators are actually getting better use of their assets not only their cranes and trucks, but their computer systems and the facilities in general. Additionally, the truckers have had a better experience. They're making more trips per shift, essentially making more money. That's been a benefit for them that we had hoped for, not necessarily to be part of the program, but we realized a trucker makes better turns they make more money. That has had a positive effect. Environmentally speaking, we have made the comments that reducing gridlock on the freeways and highways does reduce air pollution. As you can imagine the truck queues at the ports in the mornings it was incredibly long those trucks were idle for hours and hours. That's changed and we've obviously had a positive impact on the air pollution from a truck idling perspective. All good news. Again adding to some of the benefits of the program that was really an operational program intended to reduce congestion getting the side benefit of reducing environmental pollution. We're making changes to the program. We are going to be changing the export cargo payment process in August. Exporters will be required to claim their booking numbers prior to delivery of containers during peak hours. Off-peak hours are free. Keeping the concept of the program to move up more cargo at nights.

We are going to be launching shortly a RFID program that tags the trucks. We distributed over 10,000 tags to the trucking community to attach to their trucks. We will be using those tags to monitor the access and exit the trucks from the marine terminal. There will be some additional benefits to tracking trucks to the new terminal. Again, we are changing those hours for export process. During the peak hours, export containers, are being received and exporters are going back in after the fact in making payments. We are going to change that in August and get them to step up and make their bookings prior to delivery during peak hours and that will have a positive impact on our billing process and reduce our costs. The truck tag program is really going to be an interesting program. It has the full support of the Coast Guard and the Department of Homeland Security. We will be tracking trucks that come and go and it will be interesting first step toward the clip process that seems to be coming down the road for all the ports in America. We will integrate the requirements into our Truck Tech program. It should not be as disruptive. We're pretty excited about that. That's my presentation. Thank you very much.
J. Seplow:
Thank you, Bruce. Before we get into the question and answer session, I'm about to bring up a slide on the Freight Peer to Peer Program. This side will provide a little more information on that. It will also have the web address at which you can go to, to obtain more information. It's a great new program. A way for State DOTs and MPOs to learn from each other and share information so I encourage you to go to the website and learn more about that program.

I'm going to start with questions for Bruce Wargo, since, Bruce just finished up his presentation. I do encourage everybody to continue typing in questions for both Bruce and Randy and I will try to get through all of them. If we have time we will open up the phone for questions. Bruce, the first question for you is has the traffic mitigation fee caused shippers to move to another port?

B. Wargo:
The answer to that is yes, but a very small number. We had a growth last year of over 7 percent. There was a general concern by the cargo owners of were we going to have another meltdown in Long Beach in 2005. I think a lot of that migration had to do with that more than PierPASS. There are people who indicated that they have left because of the fee, but not many. In fact, we've actually had a pretty good growth this year today, and I expect -- I would expect that the consistency in the port being able to provide services and transportation is more important than the fee.

J. Seplow:
Thank you. The next question we have for you is, do you know if the California DOT or anybody else has measured the level of service on affected highways before and after implementation of PierPASS?

B. Wargo:
The Alameda corridor Transportation Authority measured that and they indicated on the roadways that they monitored, which were not all the roadways, but the majority of them, they sought a reduction of 25 percent of the traffic on those roadways. It was important for somebody else to come in and accurately measure the difference, that's what they did.

J. Seplow:
The next question we have is do you expect the PierPASS mitigation fee to reduce current growth projections? Have the marine shippers threatened to shift discretionary cargo to other ports (Oakland, San Diego, Pac.NW,etc.)?

B. Wargo:
Again, I don't believe it will convince people to go to other ports. It's probably a good idea for the big shippers like Wal-Mart and Target, those large companies should have a strategic plan because things do happen of course. I would say generally, no, we have not seen a large migration or movement of cargo to other ports. Other ports have had an increase. I think Seattle had a pretty good increase last year and Oakland and Houston saw an increase. But I like to point out to those people they are going to have their own congestion problems shortly. We need to be thinking long term. I've seen some articles for the East Coast is indicating they're having some congestion problems. I would just point out to those other port authorities they need to sit back and take a look and see where they are in terms of providing for the future because L.A. and Long Beach continue to grow in spite of cargo that is actually moving to other ports.

J. Seplow:
Good point. The next question is, have the truck trips been spread over the non-peak times or are they generally in the first few hours of the evening?

B. Wargo:
They didn't go from days to night, they went from afternoons and evenings and essentially what happens is we see slower mornings and busy afternoons and we see busy early evenings and slow late night that's been a problem in a sense that we don't see a lot of use in the facilities after 11:00 at night and hopefully we're going to see some changes in that. In talking to some of the truck companies that had night time shipments, their drivers made a lot of trips every night, a lot more than they would have made the other way. I think over time the trucking community will start to see the benefit of both the day and night shift.

J. Seplow:
What impact if any has the shift of truck traffic to off-peak hours had on highway related accidents?

B. Wargo:
I've been on a few calls to the California Highway Patrol, they were not aware any significant change in the accident patterns regarding trucks. Having said that, I have heard about some accidents at night, but generally nothing more than we normally get. A lot of times you see trucks overturning on off ramps or on ramps which ultimately leads to a freeway problem, but I'm not aware of any significant increase in those accidents.

J. Seplow:
The next question is directed to you, Bruce, but Randy feel free to jump in. The question is what is a cross town interchange?

B. Wargo:
I will let Randy answer that.

R. Butler:
The cross town interchange basically exists when one carrier has to move a container or trailer to another rail carrier and there is no means of what we refer to as a steel and wheel interchange available for them to do that. Also, it can happen when there's a time sensitivity of shipments where steel to wheel interchanges take an excessive amount of time and doing it by cross town with a truck saves the shipper and the carrier time in moving the box from one terminal to another.

J. Seplow:
Thank you. We have a few more questions for Bruce and then we will jump over to questions for Randy. The next question is do you have any insight on what the economies of scale need to be to make a program like PierPASS work?

B. Wargo:
One of the concerns that was routinely voiced before we started the program -- and I've heard this voiced in York, New Jersey, was it won't work because nobody is open at night. An essential part of the program is to change that institutional thinking. We need to be open at night in many places in order to have the ports continue to grow. If we don't, then the ports won't grow. Prior to the program, we had a lot of buy in from many of the large importers like Target and Home Depot and those sized companies who had agreed to support the program because they were already open at night, it took a minor change for them to get involved. The program, if you look at it is a carrot and stick approach. And because the costs are so high, it's important that the funding mechanism is effective. So if nobody showed up at night, everybody would pay for the daytime activity in the terminal operators would collect their money and not have any business to conduct. But that didn't happen. As I pointed out about 33 percent of the traffic moved to a night, There is actually a higher percent of importers and exporters moving cargo at night than the overall number. The important thing is there is enough to activity on daytime to continue to fund the program. We recently increased the fee by $10, but that in itself did not have much of an impact. I didn't see any migration from the harbor here to other ports because of that. I think the important thing to understand in this approach, there was no economy of scale that needed to be achieved, it basically was going to cost you to come on days, it will not cost to come on nights.

J. Seplow:
Okay. We have two more questions for you. The next one is, is the benefit cost document produced available on the Web?

B. Wargo:
I believe it is. It would be on www.PierPASS.org. I believe it's there. We've actually just updated it and we will be posting that shortly if it's not there now.

J. Seplow:
The final question is has there been an air quality analysis completed that estimates the reduction in emissions due to PierPASS?

B. Wargo:
That's a great question. I believe the answer is that you come down to Southern California there's about 15 different organizations constantly measuring the air quality so it's an industry down here. Other people are measuring that. I believe air quality is being measured at all the ports of California and Long Beach, but I will let them quantify it.

J. Seplow:
We will now move onto questions for Randy Butler. If you do think of additional questions please feel free to type them in and as I mentioned we will open up the phone lines. Randy, the first question we have is if you could please define bobtail?

J. Seplow:
The term bobtail is a trucking industry term, it refers to a truck moving without a trailer or a chassis, or pulling a chassis or container. It's normally seen again, in the metropolitan areas moving containers between one location to another and sometimes there's not a return route so they have to return back to the next location without a container or without a trailer.

J. Seplow:
The next question is, is the communication protocol for acquiring and provisioning information is cellular telephony? Paul Belella has typed in a response saying cellular has not been specifically identified as the communications protocol, however, it does represent an attractive potential solution due to its low cost and ubiquitous presence. This issue will be addressed during the development of user requirements and concept of operations.

R. Butler:
Couldn't have said it better myself. Thank you Paul. Right now we are in the process of developing user requirements and concept of operations and this certainly will be considered.

J. Seplow:
The next question is please expand on planned C TIP measures outlined on slide 21. I will bring up that slide.

R. Butler:
The intermodal exchange database will be an open architecture basically were pulling the information together from many different sources and bringing in the movement informational associated with the Union Pacific the and as the KC S and A Burlington Northern and putting it into a database that can be used with applications. When a truck delivers a blow in across town interchange to a rail terminal and at that time they will be able to look into the database either their dispatcher or that are a small company on an operator type environment and see if there is another potential move them back to another location, they may be moving to another rail terminal, his maybe he delivery of a load to a customer. Those applications will be a role based and only information that is correctly associated with participant will be able to be viewed date wireless, updating, again, it will be his application that will run with the intermodal. For looking to provide hot spots within terminals in their 802.11 p or cell phone information, some type of application that the driver would be able to receive information readily about availability of Lotus. And the chassis utilization system will be focused on repositioning its assets. Sometime chess is, especially in an environment where chassis are not in an open pool, that is required for the container. The real-time traffic monitoring -- The State of Missouri this currently have an earmarked referred to as KC Scout which they are monitoring metropolitan traffic. We would like to be able to give that information to the community to be in this EIR -- C TIP Project any type of rerouting that would be required and also an application to support improved travel time.

J. Seplow:
The next question is who was the Missouri DOT point of contact for the the Kansas City C-TIP Project?

R. Butler:
I was trying to find that as we were going through that. I will have to get back to this participant. It's a local person in Kansas City that has been focused on KC Scout. We've also been dealing with the Mid-American Planning Commission and also KC Smart Point. Those two organizations are focused on improving the Kansas City movement of freight to the entire metropolitan area.

J. Seplow:
The next question is what is the technical basis for C-TIP? Has any body considered building rail to rail transfer points?

R. Butler:
Those points exist today. It's not a matter of having that capability, steel wheel interchange, sometimes it's a point of the congestion. It is a time factor of moving containers from one railroad to another through the mass -- sometimes it takes two days to get a train across Chicago and as much easier to take a box off of one terminal and make an outbound train and another rail terminal in the same day versus try to take 2 to 3 days to get across Chicago. The congestion factor has a lot to do with the overall movement of the containers.

J. Seplow:
Has RFID tracking of equipment (containers specifically) been considered?

R. Butler:
It is in place today. The Union Pacific facility is using it to track train containers in and out. All the facilities in Kansas City and most in Chicago have some means of identifying the containers. Not all the containers have these attacks. We are considering this in the security portion of the project looking at what benefits may lie in other tracking devices if necessary.

J. Seplow:
Could C-TIP be applied to drayage to transloading facilities?

R. Butler:
It possibly could be. We haven't considered that. We focused on the rail terminals, air cargo, the port facilities and certainly there's other applications in C-TIP as we start to grow and understand what the true benefits are.

J. Seplow:
In response to the Missouri DOT contact, Paul wrote in asking would that be Mark Winter?

R. Butler:
I believe it is, yes. By the way, Paul Belella of Delcan is supporting us on this project.

J. Seplow:
We've gotten through all the questions that have been typed in. Audrey, if you could give instructions to enable attendees to ask questions over the phone.

Operator:
Ladies and gentlemen, if you wish to ask a question, press star one on a touch-tone telephone. As a reminder, it is star one on your touch-tone telephone. We do have a question from the line of Abbey Swain.

Abbey Swain:
This is Abbey Swain. I was wondering if you could give me a sense of what sort of push back you've gotten from neighborhoods that have experienced increased night time or evening traffic during the off-peak hours that terminals are now operating?

B. Wargo:
Good question. They usually voice their complaints through their elected officials. And those officials usually bring it to my attention. Usually an assembly person or city council person, but I don't know what I can do about people who choose to live near the freeway, but again, the larger benefit is to reduce the overall congestion not only for those living near the harbor but for those trying to get on the freeways. I usually leave it up to the officials to go back to their constituents on the benefits of the program. I do talk quite a bit in public. I hear those kind of comments. I tried to give them as much positive news as I can. The reality is, is that PierPASS does not control the growth of the trade. It's just a reality that is current here in Southern California and our challenge is to deal with that growth and trade in the most efficient and positive way we can. So PierPASS does do that in changing the dynamic of the traffic patterns for all the citizens in Southern California.

Abbey Swain:
Okay. I was asking that because I was trying to figure out the dynamics of promoting such a system here.

B. Wargo:
I think it's one of those greater good concepts, you know, essentially there are a lot of people that are affected by the ports of Los Angeles and Long Beach so there needs to be a larger plan. PierPASS also is just a band aid. It's only a temporary fix. It gives the stakeholders' about five, six years to plan a larger, strategic initiative that will deal with long-term growth, not just seek short-term congestion issues.

Operator:
As a reminder, star one to register your question. And at this time I show there are no questions inside the queue.

J. Seplow:
Thank you. Since we don't have anymore questions typed it in, we will end a little early today. I want to thank both presenters for two great presentations and thank everybody for attending today's seminar. The PowerPoints, as well as a recorded version of this event and the transcript will be available within the next week on the Talking Freight website.

The next seminar will be held on July 19, and is titled "Truck Parking Issues and Programs." If you haven't done so already, I encourage you to visit the Talking Freight Web Site and sign up for this seminar. I also encourage you to join the Freight Planning LISTSERV if you have not already done so.

Enjoy the rest of your day!

Updated: 03/29/2011
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