Jennifer Symoun
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 Institutional Arrangements. Please be advised that today's seminar is being recorded.
Today we'll have three presentations, given by Michael Williamson of Cambridge Systematics, Bruce McDowell of the National Academy of Public Administration, and David Seltzer of Mercator Advisors. Ed Strocko of the FHWA Office of Freight Management and Operations will be giving a brief introduction to Bruce's presentation.
Michael Williamson is a Principal of Cambridge Systematics with over 16 years of experience in the areas of freight and intermodal planning, commercial vehicle operations (CVO), intelligent transportation systems (ITS), and transportation planning. Mr. Williamson has worked extensively with metropolitan planning organizations (MPO), state departments of transportation (DOT), and federal agencies to assist them in the development of freight programs. He recently served as the Principal Investigator for the National Cooperative Freight Research Program (NCFRP) Project 9 - Institutional Arrangements in the Freight Transportation System. This project resulted in a set of guidelines designed to facilitate the development successful freight institutional arrangements. He also serves as Cambridge Systematics' Regional Planning Manager for Florida.
Dr. Bruce D. McDowell has over 50 years of professional experience as a local and regional planner, a federal executive, and a planning and management consultant. He retired from the U.S. Advisory Commission on Intergovernmental Relations in 1996 when Congress abolished it, and has been a leading project director at the National Academy of Public Administration (NAPA) ever since. He also has his own active private consulting practice, Intergovernmental Management Associates. Dr. McDowell has extensive experience with transportation studies as a public official, a non-profit researcher, a private consultant, and a long-time member of several Transportation Research Board committees. He is an emeritus member and former chair of the TRB committee on Metropolitan Planning, Policy and Processes, and a Fellow of both NAPA and the American Institute of Certified Planners.
David Seltzer is a Principal and co-founder of Mercator Advisors, a Philadelphia-based financial advisory firm consulting to governmental, corporate and non-profit organizations sponsors of major infrastructure projects and programs. Mr. Seltzer has over 30 years of experience in the field of public and project finance, working in both the governmental and private sectors. Mr. Seltzer previously served as Senior Advisor to the Federal Highway Administrator from 1996-1999, and was actively involved in designing and executing new financial assistance programs such as TIFIA (a federal loan and guarantee program) under the TEA-21 authorizing legislation. Before joining USDOT, Mr. Seltzer spent 20 years in investment banking, and assembled public and project financings for transportation and other infrastructure programs at Lazard Frères and Lehman Brothers.
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. Please also 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. 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. 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.
We're now going to go ahead and get started. Today's topic, for those of you who just joined us, is Institutional Arrangements. Our first presentation will be given by Michael Williamson 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.
Michael Williamson
Thanks Jennifer. I'll give you a high level overview of the projects that were recently completed for the national cooperative freight program. I believe it is the first project out of that program since it was created to be completed It's currently being edited for distribution today. I'd like to acknowledge the panel that we had for this project including Dave who is formally with the MDOT. He's on the line here to assist with any of the questions that folks might have at the end. To kind of acknowledge, if you look down through this list, you'll see we had quite a mix of state, federal, academic association lobbyists, and local governments. We had a lot of folks providing some very good input as we moved forward with this project. I know several of them are on the phone today, as well.
The purpose for the project as defined by the statement of work really was to describe successful and promising institutional arraignments that help improve freight movement; both what works well today and what we believe we're going to need in the future based on the ships and global transportation. Our work plan was designed to describe what works well today, convert that input in to a resource guide. This partners both transportation agencies as well as industry representatives to put together new institutional arraignments or modify the arrangements that they already have in place. Ultimately to define an implementation plan to get this information out to folks. The participation in today's Talking Freight seminar is one of the steps in making it towards meeting that last objective.
Before we got started we felt it was important to define what a freight institutional arrangement is. It was defined as a structured foundation that enables relevant parties to advance the general interests of freight mobility, infrastructure, operations, services and regulations. Also in particular, focus on programs or projects that specifically increase freight mobility whether it is at a local or national level. This includes a literature review of some of the best examples of institutional arrangements that are out there today. We held a stakeholder workshop where we got about 65 folks out there to spend two days with us helping define what the key needs were and how to develop a resource document that would be useful. Then we conducted a series of follow up intensive interviews to develop 16 detailed case studies which ultimately were used to define guidelines or guideline recommendations. We grouped the institutional arrangements in three different types. We developed guidelines to address each of those arrangements. We also used TRB's annual meeting earlier this year to test what we had and get some fine inputs before finalizing our document for the final output.
We did a quick assessment on what works and what doesn't. We found among the strengths that exist today, certainly there's been a lot of success in integrating freight in the policy and programming activities that the transportation agencies are undertaking. That's being done through a variety of committees and task forces. Groups of private stakeholders that are getting together and in many cases these gatherings are annually or more frequently. Put together their long range plan and updates. Also, the ability to facilitate project prioritization and completion and there's several examples out there. I know that I have a few acronyms that will be defined forward like the Florida Seaport Management and Council that allocate state funds across a variety of seaport projects on an annual basis. We have the Freight Mobility Strategic Investment Board where private partners specifically to select fund and monitor transportation improvements to benefit freight transportation. There are examples of that out there. We have some examples such as the Peer Pass Program in southern California. That's one of the things MPOs, states, conferences in the federal government have done a fairly good job at doing. Again, this is a perfect example of that. A few other strengths include multijurisdictional programs like the I-95 Corridor Coalition identifying what the needs are. Coming up with ways to program and invest the funds the ends to be more of a challenge. Certainly that is probably the largest example of that in the United States. Not done too often, but there are examples of it being done successfully. Leveraging public and private funding opportunities, and bringing public and private partners together to invest in infrastructure to leverage each others capabilities. We also found at the highest level there are three basic weaknesses: lack of a mandate to do so within, freight transportation really covers multijurisdictional areas whether it's multiple urban areas, multiple countries and being able to bring the right group of people together is often a challenge. Of course, it is sometimes due to insufficient funding.
So we took that information. We took the literature that we did and kind of a national canvas of what's out there and what works. We developed a classification scheme that looked across to what we have an issue scale, a function scale and a legal structure. We were trying to determine whether or not commonly grouped arrangements behaved the same. When you look at the issue, you could be a gateway, metro area, corridor, multistate. It could cover anywhere from advocacy to research to operations to capital improvements. A legal structure, you have averted there as well. The example you see here is for CVISN. CVISN which is the Commercial Vehicle Information Systems and Networks Program is a multistate program. It's really national for all the states that choose to compete. It deals with regulations and operations. It partners with other public sector agencies as well as industry. For those of you who are not familiar can CVISN that provided a framework and technology to automate both regulatory and desk side commercial vehicle operations as well as safety enforcement at the roadside. It brings together state, federal and private sector partners and really has provided an opportunity to create a national architecture for commercial vehicle operations. We looked across the types of arrangements out there and we grouped them as I mentioned. The first type focuses on increases the visibility and importance of freight issues and policies. The second type takes and builds upon that to develop consensus on project priorities. Different types of improvements may get involved in ranking projects and allocating funds. Type three, which is a little less frequent in the United States is designing, mitigating, constructing and operating some type of new system.
When you look at the types of activities that fall within each of these types, it helps you understand where a particular arrangement would fit. Under type one, we are focused on information sharing, consensus building, setting your policies increasing your visibility of freight. Type three gets into developing consensus on specific project priorities; may score and rank projects competing for funds. When you get to type three you get very specific for all the steps you have go through to make a project happen. In order to illustrate those types to actually develop specific guidelines, we did created guidelines, and we did a 16 case study. The majority of them fall in type one. That's the most common type of arraignment in the United States today. They range from regional task forces to multistate coalitions, economic initiatives like the Kansas City Smartport. If you look at type two, you can see program funding like the Maine DOT has an Industrial Rail Access Program that provides state funding in the rail transportation system. When you get down to type three, that's when you start focusing on projects that are going through detailed policies and procedures like the CREATE program. Based on those case studies, we developed a series of guide leans and we grouped these guidelines.
Prioritizing your projects and then funding them. Type three again is more focused on the implementation, whether it is design construction or operations. I want to point out that each of these builds on each other. You may have a type one that was created to be a type one and will forever be a type one or you may have a type one that in its early stages was type one. As it evolved over multiple years, based on what its mission was, the project can change to a type two or three.
So type one guidelines, I'm not going to go through all of these in general or in detail but the type one guidelines they focus on identifying the need and purpose of your arrangement. Some of these guidelines are: performing your strategies, figuring out who's your champion identifying partnerships with your fellow stakeholders, use a consensus-based process, ensure short and long term process, having performance measures, and encouraging some cost sharing.
An example of a type one project would be the I-95 Corridor Coalition. Their intermodal track which looks specifically at freight transportation needs across many different states.
When you look at the type two guidelines, again, they're focused on defining program elements and implementation processes. What's the appropriate set of protocols? Voting structures, approval processes, evaluation criteria for ranking your projects are some of these protocols. It could include project audit, site visits and ensuring that you are making progress over time to achieving your mission. In an example here would be the Florida Seaport Transportation and Economic Development Program. It was created by the Florida legislature back in 1991. Creating a public benefit and were being invested in projects that made sense for the states and the seaports. So it is a 50/50 match through grants and bonds. It's provided the state with an opportunity to look for at a system level as opposed to port by port.
Our type three guidelines, you'll see a few more here. We're talking about champions. We're talking about mitigation strategies whether it is environmental or traffic. Establishing clear decision makes authority. Developing a product orientation you are not just developing policies and plans anyone. You are implementing projects. You have to establish funding firewalls and look at bond rating agencies. It gets very specific in what you are trying to accomplish in type three. An example we have here today is the CREATE program in Chicago which is bringing together private and public in the rail system in the greater Chicago area which we all know serves as a rail freight hub for the United States.
So there's a lot more detail. It's hard to go over in a PowerPoint presentation that describes exactly how you would implement those guidelines. We want to provide some on what the first steps are in getting started. They mimic the first type one guidelines. In order to get started with an institutional arrangement, you need to have a leader or champion that's going to step forward. I know many of you represent very successful institutional freight institutions today. If you don't have that commitment of an agency or an individual it's hard to keep a program together over time. It's important to bring together the right group stakeholders. You need to set that before you set all your objectives and goals. You might have a problem statement that you're trying to address but you need to get the right stakeholders together so they help you define your missions and objectives and the goals you are going to take. That could be through an open forum where you identify the specific needs. You get folks to talk about the opportunities and challenges that are facing the group. Again, draft a purpose of what the institutional arrangement is going to accomplish. Once you have that accomplished, you can develop your action plan, which really would be looking at the project from the perspective of this resource, you look at the type of guidelines that exist, the things you are trying to accomplish. You can look through detailed case studies that illustrate the use of those guidelines and put together an action plan that addresses your needs in the short term with the understanding that you are probably going to be evolving over time.
As I mentioned, this project is currently has been submitted to the Transportation Research Board. It is being edited by their editing department. It releases anticipated late this year or certainly early 2010 based on how that process takes. Bill Rogers, who is our contact with the NCFRP within TRB, certainly can be contacted with additional questions as can I. Thank you.
Jennifer Symoun
Thank you Mike. Again, I want to encourage you if you have any questions for Mike, place them in the chat area. You can also indicate that your question is for Mike so when we get to the end, we can keep track of which presenter they are for. We'll now move on to Ed Strocko of the FHWA Office of Freight Management and Operations, who will give a brief introduction before we move onto Bruce McDowell of the National Academy of Public Administration
Ed Strocko
Bruce will be discussing the results of the work he completed for the Highway Administration. His work was focused on analyzing multistate institutions that states and MPOs can employ when implementing freight movement projects. Some of the recent discussions of freight transportation show there is going to be high growth rates of freight volume and that's going to continue. Whether the high growth rates return with the economic recovery or whether they're replaced by modest growth, there are a number of issues that are going to be the same. Freight transportation is significant and should be accommodated more effectively. Second, as the economy evolves freight transportation will need to keep pace with the changes in distribution of goods used by businesses and households. As you can see on the slide unless capacity is increased, we will be subjected to increased delay and decrease reliability which will disrupt the logistical systems and increase the cost for American businesses.
On this slide I want you to note the areas in red. The freight transportation system that supports the economy stays within political boundaries. This system moves a large percentage of the value and tonnage of freight across state and national boundaries. For those that really like empirical data, the data in this program comes from 500,000 trucks with GPS. This data captured 3,000 trucks originating to Dallas on a single day. The map you see shows you where those trucks went over the next ten days. Just a bit beyond the Texas border.
The next slide shows the freight corridors. We know that federal legislation established MPOs years ago to coordinate transportation planning, however the freight corridors usually extend well beyond the metropolitan areas and often involve several states. MPOs simply lack the geographic reach that is needed for freight movement to distant locations. We've seen several multistate coalitions form. But we've also seen that implementation has been a struggle to find mechanisms to administer, fund, manage the multistate large capital projects that are needed. We think to evolve in to an effective organization to implement and finance projects across state lines, we need to build on the expertise gained from others out there, and gain from others out there beyond the transportation sector. So with that said, FHWA wants to better understand what the arrangements and structures that can be employed to administer and fund these multistate projects. We see this work as a background piece and thinking through solutions we really don't see this as a decision document or one recommendation for specific institutional mechanisms. We don't see there's a silver bullet. There's going to be different solutions that are applicable for different projects. Our intent was to provide a series of options for folks like you on which path they want to pursue. With that I want to turn it over to Bruce to talk about the results of what he's done.
Bruce McDowell
Thank you Ed. I think Ed has really pretty much explained this page that's on the screen right now. The purpose is to take a broad scan at interstate institutions, multistate institutions. There are many multistate operations in other fields of activity and transportation might benefit by taking a broader look. You'll notice some overlap between my presentation and Mr. Williamson's presentation. These were two projects going on at the same time but independently. We came up with a lot of the same ideas and so that verifies that we're on the right track, I think.
My white paper has been developed starting around February and should be available within a month or less, I hope. We're just making some final revisions and just about to get it out. It doesn't have to go through the long process that TRB uses and so we will send it to each of you and also distribute it more broadly.
As a part of putting this paper together, we held a national round table with about 20 experts around the country on June 18, in Washington, D.C. We got a lot of additional ideas and some refinement of what was in the paper. We are trying to include that before we wrap up the final version of the paper.
As Ed explained, there's no magic here. I think the thing that is felt to be most lacking by the 20 or so corridor coalitions is that they sponsor studies and make recommendations, but then where do they go? Where do we go with implementing the multistate portions of their recommendations? I think they feel inadequate in doing that. There's nobody in charge of a corridor basically. Should there be someone in charge? Can we do a better job working with what we have at the moment institutionally?
The paper offers three key things. First, it identifies seven key capabilities that are needed to improve performance in multistate transportation corridors. I'll outline those in a minute. Essentially this is the question of what needs to be done.
Second, the slide says a survey but I want to change that to a scan of cross-boundary institutions, and we came up with eight types. You'll notice when I get to explaining those, there's some similarity with those that Mr. Williamson just went through. I looked at about 80 illustrative examples. I did not do case studies. This was not an evaluation but simply an identification of many of the organizations I have known for years and have followed over my career. I've pulled together out of my experience and out of current resources, to take a look at those and put them in piles of similarity, and see what we can learn from them.
Third, some considerations or criteria or deciding which of these institutional options might be the most helpful in any given multistate transportation corridor. I will go into each of these topics now. I wanted to reemphasize as Ed did. We made no recommendations. We wanted to have a presentation available to the whole community so you're not going to overlook some possibilities when you are dealing with these tough institutional questions. The institutional questions usually are the toughest ones you find.
We outlined seven key capabilities that are necessary to improve the operations and performance of a multistate freight corridor.
First is strategic planning and goal setting - that is the public policy part of this. Therefore, this capability needs to center primarily in public institutions of one sort or another. Not necessarily a single agency, but something that is recognized and legitimized as a public policy-making organization.
What I mean by an outcome is something that actually makes a difference to people, not simply something that you are accountable for doing and did it. So this is the to make a difference part. I'll illustrate that very quickly. All of you, I'm sure are quite familiar with the just-in-time nature of our current transportation system. Where something may be on the shelf of a retail organization on a day that is advertised in the newspapers ahead of time and it's not actually on the shelf when it's advertised. Or when you sign the contract for the advertising to be done. This product comes from many countries away as raw materials that are manufactured into something in a far off country and then follows a long train of logistics to get on that store self early in the morning before the doors open for the advertised sale. This is an intricate kind of system and that's what makes a difference. The difference is whether this stuff is on the shelf. That's the performance of the freight corridor. If the freight corridor is not really performing and some of these things are not going to be on the shelf, you are going to have to get a rain check. That may be an awfully simple example but that's what we're talking about in terms of outcomes.
The next one in light green, number three, ‘implementation of projects and operational improvements' is hard to do if it's a multistate project because there are not that many multistate institutions. One that comes to mind is the Port Authority of New York and New Jersey, which really does have some pretty strong powers to operate across state boundaries. More than likely, what you would really like to do is under the jurisdiction of individual state DOT's or other individual agencies that do not cross state boundaries.
Next, strong and reliable financing is where more project battles are lost than anywhere else. No financing, no implementation, no performance improvement, and the public policy does not get implemented. So it's a chain. I don't have to tell you now that we're in a recession, that times are tough and money is hard to get. I did a lot of work in the Chesapeake Bay where they recognized in the early 1970sit was way over polluted. In 1983 they finally put together a multistate coordinating group to do something about it. It's been working hard and diligently, and the Bay continues to get worse. So somebody says, what's going on here? Well, I think you have the same situation with freight, and if the growth in freight is going to be as strong as the projections are, we need to do better institutionally. One of the reasons the Bay is not getting better is they're getting about 10% of what they figure they need in terms of financing.
This bottom one may seem a little strange to you but the ease of establishment of the institution is really important to be able to get the institution. Otherwise, you can sort of have nowhere to go. But if you have an institution, you can build upon it and you can gradually strengthen it. I would say out of all of these, getting the institution established is probably your number one priority.
So let's take a look then at what the institutional options are, these eight options that I mentioned earlier. Under each of these I give a few illustrations; primarily transportation ones that you will recognize and resonate with. You'll know immediately what I'm talking about. There are a few in here that are not transportation. But let me just read across the eight. Interstate compact, the joint services agreement like they have in the Alameda Corridor, California high speed rail is an example of a special district. Voluntary coalitions consist of the 20 or so transportation corridor coalitions and the MPOs 384 of those with 22 being interstate. There's the new concept of these things coming along that's been getting started in recent years. Regional rural transportation planning organizations (RPOs) are forming in more and more states. Several states have gone to this as the general practice, but it's not national yet. Putting together an MPO-type of organization, even if the population is smaller than metro. A lot of the freight problems come up in rural areas like the farm to market. The reason the Feds got into highways to start with was that rural roads were so bad they couldn't get food to market, believe it or not. That's where the highway program began. So I think we cannot ignore the regional aspect at the rural or less than metro levels. Non-profit corporations - take a minute just to highlight a couple of these that you are not familiar with. It's the sort of thing that TRB is and you are very familiar with that. I happen to be sitting in the offices right now of the Intelligent Transportation Society of America where I'm working on a very interesting project. But these other two that I put in here have, I think, something to teach us in transportation. The National Fish and Wildlife Foundation was established by Congress a couple of decades ago because so much of our fish and wildlife work at the federal level and when you get into states, it's mirrored by the same kind of set of stovepipes. It's split between the Fish and Wildlife Service, EPA and NOAA. This organization was set up to pool funds from those three. It's also authorized to accept and use congressional appropriations and leverage these public funds with non-profit or foundation funds to tackle the problems that are larger than any individual funding source has. So that's kind of an interesting approach. I don't know of any others that are quite like it, but that's a possibility for transportation funds, which come from many, many different programs.
I was very surprised to run across this next example. You will recall a number of years ago that the northeast part of the nation, most notably New York City and extending into Canada, had a real serious black out. Then more recently about a decade ago or so there were huge problems on the West Coast when the whole area, but most notably California, found its electrical power was not adequate; the grid could not supply the needs of those areas all along the coast. So we had major problems. There was the national study as a result of those incidents, the Federal Energy Regulatory Commission established reliability standards for the network and interestingly enough, they gave compliance authority with those regulations to the North American Electrical Reliability Corporation, which is a non-profit incorporated in the state of New Jersey. It is also developing relationships with, I think, two of the Canadian provinces to bring all those together so it can be not just multistate, but international. What that illustrates, I think, is the value of a non-profit being able to be borderless if it gets agreement from various parties to act on their behalf.
I won't comment on the commercial companies. You are familiar with the railroads and the truckers. You are probably also familiar with the federal corporations. My paper gives some little descriptions of how Conrail was established to take over from the failing freight operations of the private railroads in the northeast. Pulled them together, rationalized them, and sold them off in about 20 years as profitable corporations. Amtrak took over from the exit by all of the railroads in the nation from the passenger rail service. So we've made some rather major institutional decisions in this country in times of crisis. And the message I get from that is, don't think it's impossible. If the crisis is there and it can be articulated, you probably can get the institutions you need, but it may have to wait for the right moment.
We've had a variety of federal agencies over time: the office of high speed ground transportation in the 1960's which began to lay the groundwork for the Metro Lines on the East Coast. The U.S. Army Corps of Engineers does all the port stuff which has a strong relationship to the supply chain. The Appalachian Regional Commission has its primary program, a whole new highway system for that underserved part of the nation to tie it in to the whole system. It's 90% or more complete over a period of 30 to 40 years. So we've got some real success stories out there. Some are huge and some are smaller, but these are the kinds of things that are illustrated briefly in my paper.
A couple of conclusions. No single institution might be what you are looking for. Each may have an important contribution to make. I'm kind of a visual person, not everybody is. But on this next slide are the same eight institutional forms. Each one is pictured as a drinking glass, which sometimes is fairly empty. But here are the typical combinations of the capabilities you can put into these institutional glasses. You remember those seven capabilities from a couple of slides ago. These are some of the capabilities you might expect to find more or less typically in each of these institutional organizations. The interstate compact, if done right, can have everything in it. It can also have almost nothing in it. For example, one of the things we ran into was the Mid-west Interstate Passenger Rail Commission I think it has 14 states. It's quite a few, but it essentially is a promotional organization for the idea of passenger rail tying Chicago, Detroit and some of the other major Midwestern hubs together in a passenger rail set up. It's only got one of these layers in it, the strategic public policy capabilities. It's really not even quite that in a robust way, but it does do the studies, promotes the ideas and it does get the ideas on the table. You can go all the way from there to something that can finance, implement and do the whole works, if you have the right kind of legislation. The big problem with an interstate compact is that it's very hard to establish as an institution. You'll notice that there are very few of these.
Joint services agreements, nothing special there. You have to have everybody lined up ahead of time and these guys do it on special order. Special districts and authorities are somewhat the same way.
I think it's interesting to look at these voluntary coalitions. They have the policymaking, they have a range geographically, and they have the range modally. They are pretty easy to establish. But they don't have some of the other layers of getting it done.
If you look right below the voluntary coalition, at the federal agency, or next to it, the federal corporations, they have a good deal of implementation authority if they are established with it. But sometimes that's a big "if," because sometimes there's a major governance issue. People are afraid of big government and so they don't give a lot of discretion to a federal organization. They want to make sure that it doesn't take over. Of course, the states are very concerned about that also because a lot of what's in the transportation portfolio is traditionally in the state.
The commercial and the non-profit institutions are relatively limited in what they can do, but they can do it very well.
So that's kind a quick run-down where we combine the capabilities analysis with the institutional analysis. It gives you sort of a reality check on what you might be able to expect. Don't take any of these glasses as a given. You have to go and fill up each glass with the capabilities with legislation and hard work institutionally.
The task ahead is to select the most appropriate glasses for meeting your specific corridor's needs. And hat means you have to be really sure about what your needs are. I think that was a major conclusion that the Williamson study came to as well.
Here are some key considerations for selecting the appropriate institutional options. You might call these institutional design principles.
First, form follows purpose. Be very clear about the purposes for which you are trying to set up an institution and get people to buy into that and agree to it. Otherwise you are not likely to get it.
Number two, I've already mentioned. No single institution necessarily is what you are looking for, but a combination that can work together.
The third conclusion here, look to existing organizations first to find and utilize the capabilities that they have and satisfy the needs for institutional capabilities. The reason I emphasize this one as much as I do, is you ignore the existing institutions at your own peril. If you don't take them in, they're somehow going to become opponents. And the last thing you need in multistate work is opponents. You have enough natural opposition to the idea of doing things multistate as you need without creating any more.
Then, finally, make sure you tailor this institution specifically to the time and place within your region or whatever the multistate grouping is. What's going to work in one part of the country may not work in another. You have to be very sensitive to the time and place in which you're trying to put these organizations together.
Remember, the most important capability sought is boundary crossing. If you can't get across the boundary, you're not doing what my study is about.
This final slide is a table that summarizes this all on one page. I won't go in to this in detail. It's stuff I've already talked about. But here is how it's organized. Down the left hand side, you have the eight types of institutions, in other words the glasses. You go across and get examples of each. Then, when is it appropriate? We put two things in there. One is who takes the lead? State people? Local people? Innovators of variation types? Special interests? Private people? Federal? And so on. Next, the table indicates specifically, what kind of a situation the institution would most be useful in. You can see the red, yellow, green. A lot of this is how hard it's going be to do and what you can naturally expect from that type of organization for this type of function you want to fill across the four types. Those are roughly combinations of the seven capabilities.
So that's what we have in my paper, a matrix of choices. A little bit of thinking about how you would make those choices. I hope it will be helpful to the transportation community as you try to deal with the institutional challenges that you come across in each part of the country. Thank you very much.
Jennifer Symoun
Thank you Ed and Bruce. We'll now move onto the final presentation, given by David Seltzer of Mercator Advisors.
David Seltzer
Thanks Jennifer. The institutional arrangements that I'll be briskly walking through unlike Bruce and Mike's presentation which centered around the institutional designs and project sponsors, we're going to be surveying the financing end of freight projects and specifically looking from the federal perspective.
This PowerPoint is really a condensation of some work that we had done for the I-95 Corridor Coalition which is designed to enhance both passenger and freight movement throughout the corridor. The other factors that are in the background are some recent legislative initiatives in Washington that have been introduced dealing with one form or another financial institution infrastructure development including in the President's 2010 budget where there's a 2 billion-dollar FY2010 request for capitalizing the first year of a Federal Infrastructure Bank.
I'm not going to dwell on the freight project categorization other than to say if a project is a hub, intermodal or intramodal or a long distance corridor or that last mile connector. The fact is there's a wide array of different goods movement projects and they have different mixes of public benefits as private benefits and those in turn, lead to different funding strategies, financing techniques and as Bruce and Mike pointed out, institutional arrangements. That underscores the need for various forms of federal assistance. We're talking about a federal discretionary program for large freight projects not just one form of federal assistance. Many of us are aware of why public funding for freight at all levels federal, state and local, is limited, the fact that much of it, particularly rail is privately owned. Current federal programs, projects, particularly corridor projects spanning those jurisdictions that Bruce was alluding to especially where public support is required. The spill over benefits is hard to measure and harder to monetize or to transfer in to cash. I think in SAFETEA-LU, 2 percent of the grants are designated for freight programs. We need to ask ourselves what's the problem that we're trying to solve with these large freight projects? Is it that financing is either too expensive or as we've seen in the last year perhaps unavailable at any price for these projects? That would suggest that the objective of this new federal institution should be to overcome the capital market's failure through either some credit assistance loans or perhaps the financing subsidies in the form of tax code. Lack of underlying revenue streams, particularly where the public benefits, that doesn't result in necessarily extracting a revenue stream from users. In addition, we have the question of whether our focus should be near term stimulus measures. I heard someone say that the recovery bill as we now have a national sidewalk policy. The project seems to be most ready implemented or is it a longer term perspective? Ones that are more complicated may have getter benefits but much more difficult to kick start.
The literature focuses on the I-95 Corridor Coalition complexity often; there are the four noted gaps in Federal Aid Eligibility. The benefit of providing a bundle of different programs in one office so that the project sponsors have one-stop shopping for the various needs of the major goods movement investments. Also targeting those projects that have the largest economic benefit regionally and nationwide. Then another factor, this is pointed out by the recent study to enhance the project selection at the federal level with the focus on the outcomes, not the modes.
Acknowledge that there's a need for a federal program, why create a new program? Why not do it through existing DOT organizational structures? Many observers felt there would be a benefit in terms of an independent board that could help lead to that improved project selection. If there's going to be a new revenue stream, there would be value to aligning a specific organization with a dedicated revenue stream to accelerate investment, offer the one-stop shopping, and then lastly, perhaps the new program for large freight projects could take pressure off of or remove competition from the existing and continuing formula funded programs by really targeting the larger projects.
Here, the question is really, looking at the financing end. Why not authorize states to create their own regional or financing entities? Not project sponsors, which should be done at the state or regional or local level, but at the financial assistance level. There are several arguments for that, starting with the fact that projects have national benefits. There should be some sort of organization that has responsibility for advancing them. The very scope of the project suggests that a single nation-wide entity could bring scale economies and avoid duplicate efforts that have to be done at the regional level. We've seen the fact that there's varying degrees of success with the state infrastructure banks. Then significantly allowing access to lower-cost source of financing and greater budgetary efficiency through fractional "scoring", and finally the tax code can be a federal tool for simulating investment.
I'm going briefly just note that our own thinking was informed by AASHTO's preauthorization policy. You'll see in bold font there in addition to $21 billion in formula funds. That might be funded from any one of sources. It's that $21 billion of discretionary funding that we really looked at how it might be utilized. We also looked at how the organizational form that the SPE should take. This is something I believe that CBO initially identified this diagram of different organizational templates for a federally initiated special purpose entity, arranging from the most federal starting on the left with the existing modal agencies at DOT all the way to a purely privatized approach on the right. We centered on the second column on the left. Some federally chartered government corporations that would have features of a commercial enterprise but also would be an on budget entity. These have important budgetary implications with what the fiscal architecture of the entity is. The structure of the U.S. Treasury Department is always concerned about cost effectiveness of other organizations, borrowing in the capital markets, in the wake of Fannie May and Freddy Mac. This diagram here this is what I'll call the money shot. In the light font on the left are existing programs to the state that would still play a mayor role in the goods movement projects. The shaded boxes on the right are for this new discretionary program, the National Freight Infrastructure Bank. Essentially, offering three different product lines. Indeed, we call this a bank, but it's not your typical financial lending institution, but it's a granting program. The second box in yellow is a lending program, credit program to the TIFIA and RRIF programs that you are familiar with tax incentives in the form of tax advantage debt. But tax credit bonds that were 30 billion bonds that were in recovery bill. This entity would not be an issuer of the bonds, the public and private that would have responsibility.
This freight infrastructure bank, if it had 3 and a half billion a year, it might go for grants. Half a billion could be used for credit because of the budgetary charge for loans. Then a third component would be allocating the tax advantaged bonds or tax exempt private bonds. So finally, there are some other open issues. Starting with whether this multipurpose entity or mode that hasn't had access to dedicated funding until the recovery bill. Indeed, other major surface transportation projects that assist freight. Should the existing TIFIA and RRIF programs be consolidated in to these new banks? Should it be part of SAFETEA-LU reauthorization or a new stimulus bill? And should it like the President's infrastructure proposal be general fund funded? The broader reach in the more externalities public benefits of this, the stronger the argument for general fund funding. So with that, I'll turn it over to Jennifer.
Jennifer Symoun
Thank you David. Thank you to all presenters for some great presentations. We will get started with the question and answer session. While we're going through the question and answer session I'm going bring up a slide on the Freight Peer to Peer program. I encourage you to take a look at the slide and visit the website for more information.
Jennifer Symoun
We'll start with a question for you David. First question is that I had heard a couple of years ago that the Class I railroads weren't so enamored of TIFIA/PABs, but preferred direct tax credits. To your knowledge, is this still the case?
David Seltzer
Historically that's absolutely correct the railroads have been wary of accepting federal assistance with the implication that it might lead to some federal assessment on their services. From what I've seen has evolved, there's now greater receptivity to having the rail carriers take advantage of some of these new initiatives. They have been promoting investment tax credits as the tax code incentive and we think that this alternative form attaching the tax credits to debt rather than equity is more cost effective from a federal viewpoint and would lead to greater investment over all.
J. Symoun
To what extent do railroads, for example, take advantage of existing federal financial programs such as the railroad revitalization program? Aren't there existing finance programs?
D. Seltzer
This is another good question. There is the Railroad Rehabilitation and Improvement Financing authorized at 35 billion under SAFETEA-LU. I don't think a billion has been used yet. I think again, that's part of the evolving picture, maybe other people have views on this. I think the railroads are now seeing the important projects like CREATE can't necessarily have it on their own.
J. Symoun
For the infrastructure banks, what countries have these already been successful?
D. Seltzer
I feel that it is always good to answer that I do not know to one question in a presentation, and I am not sure about this question. We did not look internationally. I'm not aware of any freight specific infrastructure bank. It could have been in Western Europe as they have greater government involvement than in the United States.
J. Symoun
We'll move onto some questions now for Bruce and Ed. Please feel free to continue typing in questions for any of the presenters. We'll also if we have time open the phone lines at the end. Let's see I'm going to start at the top Bruce and Ed for a question for you. Why haven't more multistate collations formed?
Ed Strocko
I think one of the reasons is the dedicated funding. There's a desire to get together and receive them over time. Some of these groups come together ad hoc for a project, but the ability to maintain that momentum has been somewhat of a struggle.
Bruce McDowell
If you think of these as the historical development of the MPOs, and the first decade of those, there were some special federal urban studies in the larger urban areas because it was begun to be realized that we needed something that took a look at the metropolitan areas as a whole. Those gradually grew into self-organized groups that took on transportation roles and gradually developed. But it wasn't until in the 1960s and more in the 1970s when there was consistent funding for those organizations. Now there's been consistent funding for quite a few years and a requirement that you don't get your federal grant money unless you have an MPO. I think it's more a question of institutional development over a period of time. It is a natural evolution. We have 20 of these things and they're all pretty big. So it's not an insignificant movement already, but it's self-initiated. There's not much support, so they have to want it strongly enough to support it themselves by-and-large. That could be changed by a federal program that would sponsor those kinds of organizations routinely.
Michael Williamson
When you think about the I-95 corridor, it was created around the same time as the GCM corridor. The two corridors had different evolutions and I-95 is still there going strong and the GCM corridor is not going strong because of a strong desire by those folks to keep it going but primarily funding. There's also the West Coast Corridor Coalition that was started a year or two ago that is struggling to get up and running. I don't know if anyone is on the line who's involved in that, but to some degree, that has struggled as well to get up and going. I think the I-95 has been successful because it's gotten dedicated funding and it's been successful in showing strong commitments from the states and progress over time.
B. McDowell
It may also go back to the need for a champion. Who champions multistate things? It is usually not governors and usually not legislators. Who? Well you need your champions coming from the national level, probably. Or just rely on a natural leader coming up in an individual case. I think that's a little more of where we are now at this stage of evolution.
J. Symoun
Do you ever envision the I-95 Coalition signing a concession agreement with each state to operate and maintain I-95 from Florida to Maine?
Mary Grace Parker
My short answer would be no. When I step back and answer the question before this, I think that will tell you why. The evolution of the coalition started out with one of the things you need to form a coalition, and that's strong leadership and champions and strong will. Then a strong purpose for people to come around and organize and clearly it was strong leadership. We saw clarity and a need for agencies to come together for coordination. That time in an operational role it was the early deployment of ITS and system operations. There were a lot of issues regarding systems operation with respect to impact on highway systems whether it was planned or unplanned events. So the purpose is really what started it along with the leadership and initial funding. I think what allowed it to grow and continue has been the issues have evolved whether it's policy, planning, looking at freight, looking at just highways and just transportation of the system. The key is that the state agencies realize that their boundaries are not the boundaries for things like freight and for events such as the major accidents and congestion impacts that relate to them. Freight doesn't have one particular home. It moves between locations. So the ability to have the organization where they can come and look at these issues, work on policy, start to talk about how you finance mega-projects, where do those benefits accrue, make that a healthy environment to have those dialogues. At the same time it continues because frankly it's not a threatening environment.
J. Symoun
On the institution slide, how come there are so few examples for interstate highway?
E. Strocko
I'll let Bruce give a more thorough answer. I think where you just see the interstate highways, the nature of how the interstate system is funded and was built with the formula funds from federal aid really to the state's didn't require some of these other mechanisms that other modes of transportation have needed to develop.
B. McDowell
I could just add that the federal government from time to time has exercised fairly major amounts of leadership. For the interstate highway systems, the President called for that, the Eisenhower Initiative. Once your President is behind an idea, the federal agency gets behind it. It wasn't a federal thing only, but the Feds had a real incentive to pull the states together and work on the design of a system. So it was a collaborative design as I understand it, but it came from federal initiatives. A little bit like Amtrak and Conrail; somewhat different origins but nevertheless federal leadership. In the Roundtable we called to go over my paper, one of the surprising conclusions, I thought, was almost unanimous agreement that it is time now for more federal leadership. Not only multistate, but more leadership in intermodal. I think one of the questions a little farther down the list is why not more about federal intermodal? It's been tried several times, but very tentatively, and then has fallen into disuse. I think our Roundtable group was pretty strong in believing that it's time for the Feds to do more on intermodal coordination than they have been doing recently. So the federal leadership waxes and wanes, depending on times and conditions and the political scene, but there are plenty of precedents for bringing federal leadership back into a stronger position.
J. Symoun
I think we'll do one more question for Bruce and Ed. Does your research give any lessons from the long running federal arrangements? Do they get better over time, stay the same or deteriorate?
B. McDowell
There was one study that had been done, a brief study that took a look at it and concluded that there is an evolution, those three stages that Williamson talked about, noting that very few ever make the jump into type three. When you start off as a coalition, you tend to sort of stay as a coalition. There's a self-perpetuation about that type of organization. You have a Board of Directors and the Board of Directors stay on the same theme: we're here to help, not to take over. You can start having problems when you start stepping in to making hard choices and taking votes and making enemies, if the coalition does not have the kind of strength to withstand that. If you expect the I-95 corridor coalition to take on a more active decision and funding and implementation role, that's the kind of dynamics you will have in that type of organization.
M. Williamson
This is Mike. I'd like to add a few things. When you look at the purpose behind an institutional arrangement, and its ability to evolve over time, I think really dictates the longevity of the arraignment and whether or not the need for it continues. Certainly, the I-95 example has been shown to be one that works and has continued to serve a purpose. You look at some others just to throw out an example, in Washington State, was created and funded by the legislature prior to their being an Office of Freight within the DOT because the legislature recognized that there needed to be investments in the freight transportation system. So they set aside some funding and created this strategic investment to allocate that funding. Over the next several years, the DOT reorganized and created their office of freight which has then stepped up and provided the state-wide planning and programming element. Has had to refocus kind of what its doing and compliment so that they're complimenting each other. They both remained intact. When you look at some others, when a lot of MPOs started getting in to freight transportation planning, they would set up freight advisory committees as part of their freight plan to advise the study and to help set the basic platform for the region's freight program. In some cases those advisory committees were transitioned in to official advisory committees for the board providing monthly reports to them on what they're doing. In other cases they kind of fell away based on lack of motivation to keep the folks attending the meetings. So it really does, I think, impact the longevity of whether they get better or stay the same is really based on the leadership, the need for the arraignment and whether it can evolve over time.
J. Symoun
Mike, there's one question for you so I think we'll go ahead and address that now. Then we'll be out of time. The question is that it looks like a natural evolution is to go from Tier 1 to 2 to 3. How much time transpires typically? At the end of the day are we all interested in developing a funded project?
M. Williamson
As I pointed out in my presentation, there's a natural progression from type one to two to three, particularly for those arrangements that need to be a type three. They need to go through the type one and two to get to the type three because without that foundation, the type three is going to struggle. But there are plenty of type ones that only evolve as far as type twos and there are plenty of type twos that stay at type one. It's based on the objective. I don't think everyone is looking for every arrangement for funded projects. But there are different roles. If your role is to provide education and outreach and build an understanding and promote the importance of freight, that's going to lead to other folks championing whether it be elected officials or directors of MPOs or secretaries of transportation to prioritize, but the sole purpose of an advisory group is to build that. In cases of how long it takes, I don't have the numbers in front of me but the Alameda Corridor went through the evolution process very quickly from the perspective of what they accomplished. Once they got the mechanisms in place they moved fairly quickly. It was all within the idea of getting to type three.
J. Symoun
Thank you. We're about out of time. I think there are one or two questions that we didn't get a chance to address. I'll send that out to the presenters. When I send the follow up information to everybody online, I'll include the written response to the questions. I want to thank all presenters for a very interesting seminar today and thank you for everybody in attendance. Again, the recording, transcript and presentation will be available online. If you didn't register in advance and you want to receive the follow-up information send me your information. If you logged in today than you used to register, let me know what you registered under so I can follow up. The next seminar will be October 21st, it will be about the Panama Canal. The link to register is right on your screen right now. We're also starting to collect topics for the 2010 seminar series. If you have any ideas for topics or presenters email them to me, and I'll forward them onto Federal Highway Administration. You can type them in the chat box here and the screen will remain up after the seminar is over. I also encourage you to join the freight planning LISTSERV and all future seminars are through the LISTSERV. We'll close out for today. Thank you Mary Grace for joining in today and have a great day.
