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|Federal Highway Administration > Publications > Public Roads > Vol. 75 · No. 6 > Moving the Nation's Goods|
Publication Number: FHWA-HRT-12-004
Moving the Nation's Goods
by Ed Strocko and George Schoener
FHWA and the I-95 Corridor Coalition examine institutional arrangements to improve the performance of multistate freight corridors. Check out these organizational options.
The mobility challenges facing the Nation are clear: aging infrastructure, congestion, and improving safety, to name a few. The challenges increase as trips lengthen and traverse more of the transportation network, which is a problem particularly for freight transportation. Half the tonnage shipped in the United States moves more than 100 miles (161 kilometers), and 18 percent or 3.4 billion tons per year move more than 500 miles (805 kilometers). Movements at these distances can cross several State lines and pass through several congested metropolitan areas. Disruptions to long-distance movement add costs to the Nation's economy and affect consumers across the country.
Given the nature of today's travel, one single entity simply cannot solve the issues by itself. Solutions for improved mobility must, of necessity, span jurisdictional, modal, and institutional boundaries, because travel choke points know no borders.
At the same time, the stakeholder organizations that can solve these problems are diverse, from railroads to trucking and delivery companies. Other stakeholders include the agencies that manage the highway infrastructure, airports, water ports, inland and intercoastal waterways, and transfer terminals for intermodal transportation. An initial step toward implementing effective improvements for the movement of freight is to persuade these stakeholders to mutually identify and pursue solutions.
Recognizing this need, the Federal Highway Administration's (FHWA) Office of Freight Management and Operations, in partnership with the I-95 Corridor Coalition, convened a roundtable of 23 national experts in 2009 to discuss institutional changes that could improve freight movement. The discussion centered on a white paper, "Multi-State Institutions for Implementing Improved Freight Movement in the U.S.," authored by Dr. Bruce D. McDowell. The paper explores overarching multistate institutional frameworks that could identify and implement ways to improve the efficiency and reliability of the U.S. freight network and determine the impacts of those improvements.
"The paper is intended to serve as a foundation for practitioners and policymakers to draw upon as they think through solution sets to evolve freight corridor coalitions into effective organizations for planning, financing, and implementing projects across State lines," says FHWA Associate Administrator of Operations Jeffrey Lindley. "There is no silver bullet or one-size-fits-all answer; different solutions will be applicable for different projects. Our intent is to present a series of options to agencies that are faced with decisions on which path they may want to pursue. Looking forward, FHWA will continue to work with freight corridor coalitions to identify options to administer and fund the implementation of multistate/multijurisdictional transportation projects."
Institutional Options to Strengthen Performance
Assessing the pros and cons of prospective institutional options for improving multistate freight corridors requires examination of four fundamental structures to determine which could best accomplish the activities needed to strengthen the performance of the freight system. The structures are as follows: (1) formation of the organization, such as by Congressional mandate or voluntary charter; (2) governance of the organization -- who controls it, how inclusive is its membership, and how flexible is its mission; (3) financing -- how stable is its stream of funds and how large a pool of funds are available to operate and undertake tasks; and (4) capacity to perform the essential functions of an organization overseeing a multistate corridor. Those functions include goal setting, system management, and public accountability to achieve outcome-oriented performance.
The paper was the starting point for the roundtable discussion, which explored eight types of institutional options and the ability of each to achieve the functions needed to strengthen the performance of multistate freight corridors. The eight options were interstate compacts, Federal agencies, Federal corporations, voluntary coalitions, commercial companies, joint services agreements and interlocal cooperation agreements, special districts or authorities, and nonprofit corporations or foundations. The white paper presented at the roundtable discussed these options and their ability to strengthen the performance of freight movement.
According to the white paper, interstate compacts have by far the greatest potential for providing all of the capabilities needed to improve multistate freight corridors. The U.S. Constitution, with the consent of Congress, allows the establishment of compacts among States, most of which already have experience with interstate compact authorities or commissions. The States negotiate the compacts, and then each party enacts legislation establishing the compact in identical form. Congress must approve the compact, unless it has no impact on Federal responsibilities.
The difficulty lies in the fact that each State's legislature and governor -- and sometimes the U.S. Congress and the President -- must agree to exactly the same language. Completing this process usually takes many years and may not include all the capabilities originally proposed.
Because most of the specifics of a compact are subject to the negotiated agreement, the functions and powers vary widely from one instance to another. Some compacts create an organization and a full range of operational functions, while others simply provide agreements about how the pertinent States will work together.
Once established, interstate compacts are difficult to change. Some, however, include broadly stated purposes that might be interpreted to allow the undertaking of new functions. For example, a water-related compact might be able to address the needs of a marine highway program.
In one such case, the States of New York and New Jersey established a water-related compact, the Port Authority of New York and New Jersey, in 1921. The two States are the only parties to the compact, and the authority's revenues are limited to the proceeds and repayment of revenue bonds sold by the authority. To increase the port's competitive position along the East Coast, the authority's initial task was to overcome the high costs of moving goods from the port's docking facilities in New York to the rail terminals, which are located in New Jersey. To meet that challenge, the port authority eventually expanded its scope of activities to include oversight of highway bridges and tunnels, a consolidated bus terminal in Manhattan, a containerized marine terminal, arterial highways, rail transit, the region's airports, and the World Trade Center. The success of the Port Authority of New York and New Jersey in turn inspired other multistate organizations.
Another example of an interstate compact is the Midwest Interstate Passenger Rail Commission, formed in 2000 by States extending from Ohio to Nebraska. The commission's activities include advocating for improved passenger rail service within the region, linking the region to other regions by rail, planning for high-speed passenger rail service, bringing together State leaders, and support the participating States' departments of transportation (DOTs). Members of the commission include State legislators, governors, and their designees. The commission became one of the earliest applicants for the high-speed rail funding made available by the American Recovery and Reinvestment Act of 2009.
Federal Agencies and Corporations
Federal agencies and corporations also have the potential to provide most of the institutional capabilities needed to enhance freight movement, including prospective regulatory authority to assess overall improvements in performance. The U.S. Congress establishes Federal Government agencies, commissions, and project offices, and legislation defines their purposes, responsibilities, powers, high-level organizational structures, and means of financing.
Such structures vary widely according to the particular legislation. The President can use executive action, under the authority of earlier broader legislation, to create project offices whose officials are Federal employees or appointees. For example, the Interstate Commerce Act of 1887 established the Interstate Commerce Commission. Its original purpose was to regulate railroads (and, later, trucking) to ensure fair rates, eliminate rate discrimination, and regulate other aspects of common carriers. It operated independently as a five-member commission. As a result of deregulation in the 1980s and 1990s, however, it lost many of its functions, and Congress abolished it in 1995.
Institutional Options for Strengthening Multistate Freight Movement
This table is color-coded to assist the reader in interpreting eight institutional models: Green indicates the model's probable capability to meet transportation corridor needs. Yellow indicates uncertainty about the ability of the model to meet those needs. Red indicates the likelihood that the model would not meet transportation corridor needs in some significant way. Source: Multi-State Institutions for Implementing Improved Freight Movement in the U.S.
Congress turned over the commission's remaining powers to the multimember Surface Transportation Board (STB), which is an agency administratively lodged within the U.S. Department of Transportation (USDOT). However, the board makes its adjudicatory and regulatory decisions independent of the department. It has jurisdiction over such economic matters as railroad rates and services, restructuring of rail companies, some trucking and ocean shipping matters, intercity passenger bus companies, and rates and services of pipeline companies not under the jurisdiction of the Federal Energy Regulatory Commission.
Another example of a Federal agency with the potential to provide institutional capabilities that could benefit freight movement is the U.S. Army Corps of Engineers' (USACE) Directorate of Civil Works, a major water management and transportation agency. USACE manages many of the rivers that are not under the jurisdiction of the Bureau of Reclamation, has flood control responsibilities nationwide, and provides inland and intercoastal waterway services in many parts of the country. Its waterways program is funded largely by a user-based waterways trust fund similar to the highway trust fund.
Congress occasionally charters Federal corporations, such as the U.S. Postal Service, to execute government functions. These Federal corporations, while always remaining accountable to Congress, typically fall under the auspices of a separate federally structured board of directors.
In 1933, for example, Congress enacted the Tennessee Valley Authority (TVA) as a federally owned corporation to develop the resources of the 652-mile (1,049-kilometer) Tennessee Valley, which extends from the Great Smoky Mountains in North Carolina to the Mississippi River in Tennessee. TVA operates as a comprehensive regional development organization under an independent board of directors reporting to Congress and funded as a single unit to make regional decisions for the betterment of the area as a whole.
TVA works with the region's State and local governments, businesses, and all other Federal agencies that have roles in the area. As an independent agency, TVA is able to plan and invest Federal funds on a coordinated basis. It can integrate the activities of the other development partners without being limited by the independent and disparate planning, funding, and decisionmaking processes of each partner acting separately. Many of TVA's operations generate revenues to help offset Federal investments and operating expenses. Today, TVA continues to operate as a unique resource for the region.
Also chartered by Congress are Government sponsored enterprises (GSEs), which provide financial services to the public. Independent private sector boards of directors guide and control these entities, which have implied support from the Government but lack an explicit Government guarantee.
In 1916, for example, Congress established the Farm Credit System, the first GSE in the United States. In 1932, Congress founded another GSE, the Federal Home Loan Bank System, to make loans to private financial institutions that fund mortgages. Congress established this system as a privately owned entity that is sponsored (but not guaranteed) by the Government. More recently, Congress established several other GSEs as public interests in the lending markets, such as Freddie Mac (originally the Federal Home Loan Mortgage Corporation) and Sallie Mae (originally the Student Loan Marketing Association).
"Despite the institutional capabilities described above, the current political and economic climate makes it difficult to create new Federal roles, programs, and agencies," says FHWA's Lindley.
Voluntary coalitions typically offer the next best-suited capabilities for a multistate region or corridor. One advantage of these organizations is that they are relatively easy to establish. Common interests tend to pull organizations together into coalitions designed to secure benefits for all stakeholders even when a formal governmental organization does not cover the entire area. The parties have agreed to be "at the table" to cooperate and seek productive solutions.
These coalitions, usually State-led, bring together DOTs, businesses, and other interests to facilitate improvements in multistate transportation corridors on a systemwide basis. The Federal Government often provides incentives to form such coalitions through grant programs or other Federal funding, and these incentives typically include impact assessments to validate that taxpayer dollars are well-spent.
Currently, the United States has about 20 voluntary multistate transportation coalitions, some of which were established decades ago to foster interstate commerce and trade. The I-95 Corridor Coalition is among the largest, with stakeholders from 17 eastern States along the coast from Maine to Florida. The coalition encompasses State and local transportation agencies; marine, rail, and freight operators; transit and toll operators; port authorities; public safety agencies; and law enforcement.
As with the I-95 Corridor Coalition, voluntary coalitions often evolve from an initial entity focusing on specific transportation activities such as highway improvements. Later, they expand to encompass all modes of surface transportation for both people and goods.
Voluntary coalitions usually possess no governmental powers of their own. For example, the E-ZPass Group is an association of 24 toll agencies in 14 States that operate the E-ZPass electronic toll collection system. This voluntary coalition formed to implement a regionally compatible system that would not only satisfy the various needs in toll collection and traffic management of the participating agencies, but also would provide regional mobility and convenience to customers.
Such coalitions are, by their very structure, nonthreatening. Instead, they advise and assist organizations that seek to act in concert with each other. They operate by consensus and rely on their members to implement the solutions. As such, voluntary coalitions are well-positioned to identify, implement, and assess results to achieve all members' goals, the white paper concluded.
A 2001 National Forum on Challenges with Multistate/Jurisdictional Transportation Issues, sponsored by FHWA, the Transportation Research Board, and the American Association of State Highway and Transportation Officials, found that multistate coalitions have demonstrated successes that might not have been achievable by other types of organizations. Without these entities, for example, electronic toll devices compatible across multiple States might not have been put in place as quickly and seamlessly; potential multistate route locations might not have been identified and justified for funding; international border transportation studies might not have been prepared; and the benefits of high-speed rail as an alternative to congested airports and roads might not have been studied.
The biggest disadvantage to voluntary coalitions, however, is that it is difficult for them to implement their recommendations. They generally do not have the governmental authority to raise money or build and operate facilities. Thus, their implementation records depend on their power to persuade coalition members to implement the coalition's recommendations. Nevertheless, these institutions regularly perform an essential areawide strategic development and coordination role not performed by other organizations, and voluntary coalitions often encourage other organizations to focus on the roles for which they are best suited.
Commercial firms are essential institutions in freight corridors because they provide the primary services of operating railroads, trucks, barges, ships, and air cargo services. The main exception to private companies in the freight business is the short-line railroad sector, which now is supported by State and local governments in order to preserve freight and passenger rail services deemed essential in areas where they are no longer commercially viable.
Commercial companies operate on a competitive basis. Often, they depend on public infrastructure, policies, and financing to support some of their operations. In addition, they are constrained by market forces and industry competition. Therefore, their ability to help serve public needs is limited unless they have constructive partnerships with governmental institutions. Given the private sector's primary role in freight movement, the planning, funding, and implementation of public policies addressing improvements to freight services need to be developed in cooperation with private companies.
Other Institutional Structures
The study also examined other institutional structures such as joint services agreements, interlocal cooperation agreements, and special authorities. The study determined that these approaches provide valuable, but limited, capabilities.
Joint services agreements. Approximately 30 States implement joint services agreements requiring contracts, and some include State agencies as well as local government units. Because they are rarely interstate in composition, joint services agreements might not be the most viable institutional structure for achieving improvements in freight movement in multistate corridors.
One of the best known transportation improvements using a joint services agreement is the Alameda Corridor freight rail expressway in southern California. The Southern California Association of Governments, the cities of Los Angeles and Long Beach, the ports of each city, and the Los Angeles County Metropolitan Transportation Authority established the Alameda Corridor Transportation Authority (ACTA) by a joint powers agreement. Breaking a serious freight bottleneck that had threatened the viability of the two ports took about 20 years for studies, engineering, and construction.
ACTA purchased the most direct rail right-of-way serving the ports and redeveloped it below grade to provide a 20-mile (32-kilometer) grade-separated, high-speed urban rail link that consolidates all rail traffic between the ports and the mainline railways that connect Los Angeles to the rest of the Nation. ACTA's operating committee includes personnel from the two railroads serving the ports. To meet 96 percent of its needs, the authority employs revenue bonds and dedicated revenue streams that rely on usage fees and container charges.
Interlocal cooperation agreements. Communities and counties across the Nation have developed thousands of interlocal cooperation agreements for a variety of public activities, including transportation, public works and utilities, police and fire communications, and emergency services. Many of these agreements provide for joint services to be delivered -- sometimes by one existing unit of government that agrees to provide the service for all, and sometimes by establishing a separate joint services organization that serves all of the members.
Special districts or authorities. The most numerous form of government in the United States is the special district or authority, which is used for a large number of services. This institutional option may not be the best situated to affect corridorwide freight mobility, because it is dependent on political will, is seldom interstate in nature, and typically has narrow functions. A special district can be State or local in nature, and it provides the flexibility to conform the boundaries of tax areas to service provisions.
Special districts provided for by State laws have not yet been used to establish local units that cross State lines. They have potential for future local-interstate activities, however, because they appear to be eligible to participate in interlocal or joint-powers agreements and compacts that encompass cross-border geographic units.
The California High-Speed Rail Author--ity is an example of a State-legislated, statewide authority. California established the authority in 1996 to plan, construct, and operate high-speed passenger rail service connecting the State's major metropolitan areas. The authority has a nine-member policy board, with five appointed by the governor, two by California's Senate Rules Committee, and two by the speaker of the Assembly.
The State's voters approved a proposal for $9 billion in bond funding to get the system started, and the authority's financial plan calls for approximately 80 percent public funding for construction and 20 percent from the private sector. The authority's planning and environmental approvals for the 800-mile (1,287-kilometer) system are complete.
Nonprofit corporations or foundations. The American Red Cross is an example of a nonprofit established by Congress to carry out public functions. Some of these nonprofit entities provide supplemental operational functions that support the activities of Federal agencies or other governmental units.
The Transportation Research Board (TRB), for example, is the transportation-specific arm of the National Academy of Sciences, which was chartered by Congress in 1863 to advise the Federal Government on scientific and technical matters. TRB provides extensive research, publications, committee meetings, conferences, and other opportunities to strengthen and support the professional and policy disciplines of all modes of transportation. Most of its activities are supported by Federal and State transportation agencies that benefit from TRB's capacity-building services.
Other nonprofit corporations that are carrying out national purposes, such as the Intelligent Transportation Society of America, were established under ordinary State corporation laws. ITS America is a public-private partnership created in 1991 as a not-for-profit membership organization to foster the use of advanced technologies in surface transportation. The partnership accomplishes this goal by funding research, development, and deployment of emerging technologies.
Because nonprofit corporations such as these are dependent on market fluctuations, as well as contributions or membership dues, not all stakeholders have the ability to participate or elect to do so. This is a critical limitation when it comes to improving the freight network.
Comparing Institutional Capabilities
As noted earlier, FHWA's Office of Freight Management and Operations convened a roundtable of national experts to consider which type of institutional structure is best positioned to bring about widespread performance improvements in freight movement. The roundtable achieved consensus on a key point: It is urgent for the Nation to place greater emphasis on improving multistate corridor performance for freight movement in order to keep the United States competitive in the global marketplace.
After comparing the capabilities of the respective institutional structures, the roundtable reached the following conclusions as to which structure might best serve the goal of improving freight mobility.
Interstate compact organizations usually are difficult and time-consuming to establish. In addition, some do not have any more authority to build and operate facilities, or to deliver services to the public, than a well-structured -- and much easier to establish and modify -- voluntary coalition or a multistate organization funded and empowered largely by Federal grants. However, some interstate compacts have effective operating and revenue-raising powers not otherwise available to an interstate region. Furthermore, once in place, these organizations tend to be permanent. They seem to be most appropriate when their function is essential, there is a strong and broadly held consensus to establish them, and they have strong and reliable powers to exercise over a long period of time.
Federal agencies and commissions perform public services needed on a national or multistate scale. New Federal entities have been difficult to establish in recent years because of the perception that they would inappropriately expand the size of government and increase the possibility of public waste and inefficiency. However, they seem most appropriate for performing essential Federal functions that no other organization is capable of or willing to perform.
Federal corporations generally are subsidized and place performance of public service ahead of profit. They often have significant revenue-raising sources such as fares and fees for their services, and they are managed by boards of directors charged with using good business practices. Federal corporations seem most appropriate for use in running businesslike enterprises that lack sufficient short-term profit potential to support a private company.
Voluntary coalitions are easy to establish and modify across both geographic and functional governmental boundaries, and they can easily be empowered to conduct studies, build consensus, and facilitate joint or coordinated action on behalf of their members. However, they depend heavily on external sources of funding and the extent of the consensus they are able to develop and maintain among their members. Although they have no governmental authority of their own, they often derive significant "powers" from Federal grant requirements. In some cases, these responsibilities include delegated goal-setting and regulatory functions. These voluntary organizations seem most appropriate for innovative and evolving programs that need to involve multiple parties and that have dependable sources of outside funding to support their consensus-building and flexible functions. However, they are seldom given major roles in operating programs or in allocating big-ticket project funds. Their effectiveness is limited by their need to remain subordinate to their members and to avoid threatening the powers of their members.
The roundtable also concluded that USDOT could provide intermodal coordination and the needed leadership to define and designate multistate transportation corridors. Of key importance is that this stepped-up Federal leadership be exercised collaboratively, not unilaterally. The collaborative processes used in designating the Interstate Highway System (in the 1950s) and the National Highway System (in the 1990s) might be instructive.
Although not tied directly to a specific type of institution, this involvement is consistent with Federal funding of existing voluntary corridor coalitions. The roundtable rendered no formal recommendations, but the members believed that the other institutional models, such as interlocal cooperative agreements, special districts, and nonprofits, were too situational to produce a consensus, took too long from inception to implementation, or could be too contentious from a regulatory or competitive perspective to be effective models for a multistate institution to oversee the improvement of freight movement. The roundtable suggested that a better approach in many cases might be to focus on providing the specific capabilities needed -- potentially added to an existing organization -- rather than creating a new institution.
Ed Strocko is the manager of the Freight Performance Measures program in FHWA's Office of Freight Management and Operations. He has served as FHWA's program coordinator for the Transportation Investment Generating Economy Recovery (TIGER Discretionary Grants) and manages several large infrastructure programs, including Projects of National and Regional Significance. Strocko focuses on urban freight issues and freight policy, economics, and finance. He has a B.A. from Loyola College in Maryland and a master's in planning from the University of Maryland.
George Schoener is executive director of the I-95 Corridor Coalition, an alliance with the goal of enhancing the mobility, safety, and efficiency of passenger travel and freight traffic operating within the I-95 corridor. Before joining the coalition in 2006, Schoener served 33 years with FHWA and USDOT, holding various policy, planning, and operations positions, including deputy assistant secretary for transportation policy. Schoener holds a master's degree in engineering from The Pennsylvania State University and a bachelor's degree in civil engineering from the University of Minnesota.
For additional information, please contact Ed Strocko at 202-366-2997 or email@example.com.
The full white paper and roundtable findings can be found at these links. Study white paper: www.ops.fhwa.dot.gov/freight/documents/msiwp/index.htm. Roundtable: www.ops.fhwa.dot.gov/freight/documents/mscrt/index.htm.
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