Economic Impacts of the Border on Transportation

Transportation leadership you can trust.

presented to

Canada/U.S. Transportation Border Working Group

presented byStephen Fitzroy, Economic Development Research Group

Andreas Aeppli, Cambridge Systematics, Inc.April 13, 2010

Economic Impacts of the Border on Transportation

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Presentation Overview

Project Summary

Case studies

Application of model on a real situation

Some thoughts for further action

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Economic Impacts on Transportation of the United States/Canada Border

Main objective was to determine the economic consequences of delay at the US/Canada border, including:• impacts at specific border facilities or regions• macroeconomic effects for entire border• impacts of policy alternatives

Some key questions:• What are the impacts of freight versus passenger delay?• What commodities/industries are affected most?• How does the transport sector respond?• What role does reliability play?

Study ElementsOverview of Transborder Trade Data• Collect data and identify trends

Literature Review• Summarize relevant work• Identify advantages and limitations of applied methodologies

Develop Analytic Methodology• Logical approach• Compare to methods from literature review• Data requirements• Define three sample scenarios that reflect range of potential

model application

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Literature ReviewMost relevant studies:• HDR|HLB (2006) – San Diego/Baja Border• Taylor et al. (2003) – US/Canada Border• DAMF (2005) – US/Canada Border (impacts to trucking firms)

Two broad approaches:• macroeconomic – measure supply and demand elasticities of response to time

delay• microeconomic – measure costs at vehicle-level, determine how costs “flow”

through economy

Room for improvement:• “delay” is not the only cost of crossing border• address travel time variability• add commodity dimension• recognize multiple freight carrier types

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Key Considerations for MethodologyMany types of costs

• travel time and variability• operating costs (fuel, capital, maintenance, labor, etc.)• administrative costs

Costs affect many economic players• passenger (commute, leisure, on-the-clock)• freight carriers (own-account, for-hire, common carriers)• freight shippers (bulk, mixed freight, small package, JIT firms)

Many possible responses to costs• Vehicle: mode/ route/ time-of-day• Firm: inventory management/ production technology/ site location• Household: tourism, employment, residential location

Data

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Overview of analytic approachScenarios:• Changes in fees or charges• Change in processing time• Change in inspection policy• Change in hrs of operation• Change in security procedures

Facility Capacity Response:• Change in processing time• Change in idle time• Change in reliability• Change in tolls

Demand Response:• Change in crossing demandby trip purpose• Change in vehicle/freight mix• Change in crossing location• Change in crossing time of day

Change in user costs by vehicle

Analyzing Border Delays

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Methodology blends micro- and macro- approaches

Veh. Costs:• Trucks• Cars Vehicle Users:

• Households• Industry (pass.)• Freight shippers• Freight carriers Users’ Responses:

• Travel demand• Traveler spending• Carrier response• Shipper response Regional Impacts:

• Employment• Output• Value Added• Wages

microeconomic elements

macroeconomic elements

Overview of Methodology

Flow of Model Interactions

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Figure 1. Overview of Model for Estimating Delay Impacts at U.S./Canada Border Crossings

Time Cost Factors Passenger Time Crew Time Freight Time Buffer Time

Vehicle Cost Factors VOC/mi-Congested VOC/mi-Free Flow VOC/hr-Idle

Travel Demand Factors Vehicle-Trips VMT (VKT) VHT Congestion Level Buffer Time Average Crew per Vehicle Average Pass per Vehicle Average Freight per Vehicle Freight Commodity Mix Average Toll/Fare per Trip Average Passenger Spending Local Portion of Trip Ends

Input Variables

1 – Travel Savingsby Cost Type

Passenger Time Cost Crew Time Cost Freight Time Cost Reliability Time Cost Toll/Fare Cost Vehicle Operations Cost

2 – Travel Savingsby “User” Type

Households-Time Households-Out-of-Pocket Vehicle Operator (carrier) Industry-Freight (shipper) Industry-Nonfreight

3 – Travel Savingsby NAICS Industry

4 – Direct Industry Impacts (output)

Transportation Sectors (481-485) Other Industry Sectors

Expanded Industry Production Changes in Final Demand

5 – Total Industry Impacts

All Industry Sectors Direct + Indirect + Induced Employment Output Value Added Wage Income

Industry Factors Modal Utilization Production Elasticities Output Multipliers Passenger Spending Patterns

Detailed Border Crossing Methodology (BCM)

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ImplicationsAddresses limitations of surveyed approaches• Vehicle based• Incorporates industry and macroeconomic responses• Includes travel time variability• Recognizes different truck carrier types• Impacts revealed at industry level

Additional features• Benefit/Cost analysis

Challenges• Appropriate data• Demand responses to cost changes

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Three Sample Scenarios to Test BCM

Niagara Falls Peace Bridge improvements: • Analyze options for operational improvements to more

efficiently handle traffic

Detroit – Windsor tunnel: • Assess the impact of the Western Hemisphere Travel

Initiative (WHTI) on cross-border travel

Pacific Highway border crossing:• Examine the impact on travel times from expanded FAST

implementation

Niagara Falls Peace Bridge Improvements

Problem: Assess proposed post-9/11 physical and operational improvements to approaches and processing plazas

Criteria/Needs to be addressed:• Inspection/Security• Safety• Structural Improvements/Renovations• Capacity/Reliability (during and after structural

improvements)• Environmental/Externality Issues

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Modeled Economy-Freight Relationship

Economic Change

Freight Flows

• Taxes, Fees• Regulations• Facilities Investment• Services Affected Speed, Cost

ProductivityMarket Access

• Industry Output• Profit • Value Added• Jobs & Wages

Freight-Focused Project or Policy

• Commodity Value• Import/Export• Tonnage• Containers/

Vehicles

ConnectivityThroughput

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Niagara Falls Peace Bridge Solutions

Multi-criteria investment evaluation• More than one “solution” must be implemented and tested

in combination with others• Extended construction and interaction effects must be

addressed• Costs and responses vary over time and differentially affect

user segments and markets served• Timing, regional scale and industry impacts vary by

policy/investment configurations and duration of activity

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Detroit – Windsor Tunnel

Problem: Assess impact of WHTI on cross-border travel and the corresponding impacts on business sales, employment, tax revenue, wages, and output.

Criteria/Needs to be addressed:• Effect of current border crossing policies and restrictions on

economy of Detroit and Windsor− Local spending (especially tourism)

• Effects of labor markets and market access− Labor productivity impacts

• Impacts on both US and Canadian economies

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Modeled Economy - Passenger Relationship

Economic Impacts

Travel Decisions

• Regulations• Facilities Investment• Security Procedures

Speed, CostProductivityMarket Access


Alternative Border Policies

• Value of Time• VHT/VMT Savings• Household

Spending


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Modeled Passenger-Economy Relationship

Key issues to be addressed:• Benefits and costs of tunnel approach improvements• Procedural innovations to respond to alternative security

levels• Robustness of procedures to respond to security alerts *and

costs associated with implementing these procedures• Overall economic impacts of Detroit/Windsor region• Key employment and retail sectors believed to be affected• Effects of tunnel connectivity (and options – both capital

and operational)

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Detroit-Windsor Tunnel Solutions

Assessment must address:• Full range of regional economic impact measures

− Ability to assess local, metro (two cities) and regional scales

• Assessment of benefits and costs for multiple scenarios• Scenarios that include both policy and capital investment

solutions− Include parking and traffic management at bridge approaches

• Assess differential impacts by trip purpose

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Pacific Highway Border Crossing

Problem: Assess proposed post-9/11 physical and operational improvements to approaches and processing plazas and evaluate effects of options to take advantage of current FAST “excess” capacity

Policy responses to be addressed:• Increase FAST enrollment• Mutual recognition of FAST enrolments for empty vehicles

(73% of southbound moves are empty)• Use of pricing to allow non-FAST users to “purchase”

unused FAST lane capacity when GP lane is congested• Convert FAST lane to: a) Priced lane; or b) GP lane• Retain FAST lane and convert one of two GP lanes to priced

lane

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Economic Change

Freight Flows

• Taxes, Fees• Regulations• Facilities Investment• Services Offered



Freight-Focused Project or Policy


Vehicles


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Pacific Highway Border Crossing Solutions

Assess differential effects of user segments:• Relationships between delay reduction on commercial and

passenger crossings

Evaluation of industry-specific market effects • Does commercial traffic increase, and if so, for which

industry groups/commodity shippers

How do benefits move through economy:• How are operator cost savings passed through to shippers• How do shipper savings affect operations and markets

served• What are the effects of non-commercial relay reductions on

household expenditures

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Application of BCM in Actual Situation

Analysis of fiber optic network installation at Vermont’s Derby Line/Highgate Springs Border Crossing

Problem: Assess impacts of pre-processing fully-laden trucks to reduce queuing times for all border traffic.

Criteria/Needs to be assessed:• Introduction of ITS to speed pre-approval and processing of

laden trucks• Affect of delay and reliability at crossing and on I-89 and I-91• Impacts on passenger cars, buses and empty trucks

Derby Line/Highgate Springs Border Crossing

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Canadian Customs

Canadian Queue

US-Canadian Border

US Queue

US Customs

Derby Line/Highgate Springs Profile

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I-91/ Derby

I-89/ Highgate Totals

Total Exports $0.50 $2.86 $3.36Exports Originating in Vermont $0.04 $0.67 $0.72% Originating in Vermont 8.80% 23.50% 21.30%Total Imports $2.12 $4.53 $6.66Source: WiserTrade, 2009; (in $ billion)

Derby Line/Highgate Springs Border Crossing

Data Available:• Available vehicle entry data (USDOT, Customs and Border

Protection, OMR database, December 2008)• DHS Survey of vehicle border crossing times (2008)

Analysis Approach:• Synthesize queuing distributions using current data• Estimate new queuing distribution(s) assuming:

− 5-minute reduction in laden-vehicle median crossing time− average queue mix of passenger cars, laden trucks, empty

trucks, and passenger buses− Minimum, average and standard deviation of processing time for

each vehicle type

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Economic Change

Freight Flows

• Taxes, Fees• Regulations• Facilities Investment• Services Offered



Freight Project or Policy


Vehicles


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Derby Line/Highgate Springs Queuing

Average delays of 15 minutes propagate through peak queues and result in more than 5% of trucks experiencing 30-minute delays

Reductions of 5 minutes in median crossing produces 3-minute reduction in minimum times; reduction in standard deviation of 4 minutes; and results in less that 5% of trucks experiencing 20-minute delays

Inputs to model developed using queuing simulations of the build and no-build scenarios and comparing the differences

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Derby Line/Highgate Springs Economic Impacts

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Economic Development Benefit DirectIndirect & Induced Total

Jobs 2,700 2,400 5,100 Output ($ Millions) 276$ 229$ 505$ Value Added ($ Millions) 138$ 125$ 263$ Wages ($ Millions) 97$ 85$ 182$

Sources: Calculated by EDR Group from EDR-LEAP and IMPLAN modeling packages. Indirect and induced benefits are Vermont-wide; (in $ million)

Derby Line/Highgate Springs BCA

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FactorsPresent Value

Border Queuing 265.0$ Safety 0.3$ Congestion Reduction 1.5$ Fuel and Emissions Reduction 0.1$ Benefits 267.0$ Costs 77.5$ NPV 189.4$

BCR 3.44Source: EDRG, 2009; (in $ million)

Derby Line/Highgate Springs Benefits

Border Queuing• Time savings for all vehicles (commercial and passenger)

attributable to queue reduction at border

Safety• Crash reduction - injuries, property damage

Congestion Reduction• Value of congestion reduction on I-89 and I-91 throughout

Vermont

Fuel Used and Emissions Reduction• Savings in fuel costs and reduced emissions costs

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Border Crossing Model Advances and Limitations

Sensitivity of BCM to Transportation Factors Affecting Cross Border Trade

Spatial Coverage/Geographic Range of Impacts

System Output and Results

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Sensitivity of BCM to Transportation Factors Affecting Cross Border Trade

Advantages and Modeling Innovations• Network operations (delay/Reliability)• Pricing and cost pass-through structures• Vehicle/load characteristics

Limitations• Differing detail on commodity flow information (O/D and

routings) on US versus Canadian networks

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BCM Spatial Coverage/Geographic Range of Impacts

Advantages and Model Innovations• Details on sub-state and sub-provincial economic data

Limitations• Interactive effects of macro-economic shifts/responses must

be exogenously or iteratively addressed

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BCM System Output and Results

Advantages and Model Innovations• Flexible reporting structure and consistent outputs• Addresses concerns of US DOT on methods and practices

Limitations• Sensitivity analysis (risk and uncertainty) associated with

inputs and responses

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Some Further Thoughts

Develop Comparable Cross-Border Economic Interaction Models

Integrate Cross-Border Commodity and Freight Routing Algorithms

Develop Financial Modeling and Accounting for Revenue and Innovative Financing Evaluation

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Development of Provincial & Sub-Provincial I/O

Enhanced Social Accounting Structure• Stats Canada I/O• IMPLAN

− Commodity flows and wage structure

Industry and commodity interactions for detailed industry impacts• Industry spending on labor

and materials

Wage payments to employees for induced economic impacts

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User Responses

Provincial Impacts

Statistics Canada

I/O Multipliers

IMPLANCommodity

& Wage Structure

Tax Impact Analysis

Tax impacts for federal and state/local govt.

Contribution from households & businesses

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TAX IMPACT REPORT ($mil)Tax/FeeCollector Tax/Fee Description

Taxes/Fees Paid by:Totals

Households Businesses

Service Operator Tolls & Fees 97.09 446.49 543.59

Federal Government

Motor Fuel Tax 0.45 9.49 9.94

Income/Profits 526.97 494.33 1,021.31

Social Insurance Tax (FICA) 420.76 398.62 819.38 Miscellaneous Fees & Taxes - 139.88 139.88

Total Federal Government 948.18 1,023.34 1,971.52

State and Local Government

Motor Fuel Tax 0.33 12.66 12.99

Motor Vehicle License Fees 8.36 6.77 15.12 Income/Profits 155.30 106.57 261.87

Sales tax not available not available 370.67 Property Tax 3.34 294.09 297.43

Social Insurance Tax 1.29 5.15 6.43 Miscellaneous Fees & Taxes 60.30 70.26 130.56

Total State & Local Government 228.92 470.18 1,069.76 Grand Total 1,177.09 1,493.52 3,041.28

Revenue & Cost Sharing Analysis

Input public & private sector responsibilities for construction, operation, maintenance, revenue collection

Internal rate of return (ROI), payback period, revenue/cost ratio

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REVENUE & COST SHARING REPORT

Cost or Revenue Description Government Private Totals

Project Costs ($m)

Capital Costs 1,450.00 250.00 1,700.00

Operations - 55.30 55.30

Maintenance - 75.20 75.20

Lease/Contract Costs - 750.00 750.00

Project Cost Totals 1,450.00 1,130.50 2,580.50

Project Revenues ($m)

Tolls 918.25 1,836.50 2,754.75

Lease/Contract Revenues 750.00 - 750.00

Project Revenue Totals 1,668.25 1,836.50 3,504.75

Revenue to Cost Metrics

Payback Period 12 years 7 years 7 years

Internal Rate of Return 11.5% 26.3% 19.9%

Revenue/Cost Ratio 1.15 1.62 1.36

Questions?

Economic Impacts of the Border on Transportation

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