Southern California Regional Freight Study
As part of a process to enrich the national dialogue about freight transportation issues, needs, and potential program options, the Federal Highway Administration’s (FHWA) Office of Freight Management and Operations has undertaken a series of case studies. This report presents the results of a case study undertaken in Southern California (the Los Angeles metropolitan area). Southern California is home to the nation’s largest container port complex, a major air cargo center, a West Coast rail hub, and numerous regional distribution centers. As the second largest metropolitan area in the U.S., Southern California also represents one of the largest local markets for freight services in the country. The volume and complexity of freight movements in the region are enormous. The institutional environment for freight planning in Southern California is also extremely complex. Within this complex region much is being done to address freight issues. Yet many of the participants in this case study agree that the challenges the region faces in the future will require substantial resources and innovative approaches that are still being developed.
Freight movement in Southern California consists of three major markets: 1) regional and local distribution, 2) domestic trade and national distribution, and 3) international trade. Southern California provides a huge internal market for goods and services. Based on the Freight Analysis Framework, FHWA estimated that over 223 million tons of freight were shipped internally within the Southern California region – approximately 30 percent of the total freight shipped in the region. Southern California is also one of the leading manufacturing centers in the nation, generating shipments for domestic trade with the rest of the U.S. The six-county region ranks fourth in the nation, behind only California, Ohio, and Texas, in total manufacturing jobs. Shipments between Southern California and the rest of the country account for 447 million tons, or over 60 percent of freight shipped in the region. Southern California is also a large gateway for international trade. Over 11 percent of the nation’s trade (by value) passes through the region and it collects over 37 percent of the nation’s import duties.
In order to meet its freight transportation needs, the Southern California transportation network has developed and invested in international gateway facilities (such as the Ports of Los Angeles and Long Beach and the international airports of Los Angeles and Ontario), interstate multi-modal corridors (including several major interstate highways and the transcontinental rail lines operated by the Union Pacific and Burlington Northern Santa Fe railroads), and a vast metropolitan roadway system.
As Southern California grapples with its freight transportation needs, it plans within the context of a number of major regional issues. These include:
Despite these challenges, the region has enjoyed numerous successes in addressing freight transportation needs. Successes have included both major capital projects as well as planning process/institutional relationships. Perhaps the best known of these successes is the Alameda Corridor, which brought together cities, ports, and railroads in a unique public-private partnership of epic proportions. Lesser known, but equally important, successes are present throughout the region.
The experiences of Southern California illustrate a number of themes that should be the focus of freight policy discussions throughout the nation. These fall into two broad categories: funding/financing and institutional/planning process.
1. Case Study Introduction
The Federal Highway Administration’s (FHWA) Office of Freight Management and Operations invited stakeholders from five areas across the country to examine how different regions are addressing freight transportation needs. These case studies were selected to illustrate different types of freight activity, institutional complexity, and approaches to problem solving. Together, these case studies help tell the national “freight story.”
Southern California (the Greater Los Angeles Metropolitan region) presents a particularly informative example. The region is home to the nation’s largest container port complex, a major air cargo center, a West Coast rail hub, and numerous regional distribution centers. As the second largest metropolitan area in the U.S., Southern California also represents one of the largest local markets for freight services in the country. The volume and complexity of freight movements in the region are enormous. The institutional environment for freight planning in Southern California is also extremely complex. Within the region much is being done to address freight issues. Yet most agree that the challenges the region faces in the future will require substantial resources and innovative approaches that are still being developed.
This report summarizes the results of a case study conducted by major freight transportation stakeholders in Southern California. The report begins with a brief description of the characteristics of freight movement and the freight transportation network in Southern California. Freight transportation in the region serves three distinct markets: international trade, domestic trade, and regional/local distribution. To serve these markets, the regional freight transportation network consists of three types of facilities playing the roles of international gateways, elements of a statewide/multi-state transport network, and a system of local roads and connector facilities that aid in local and regional distribution systems.
After describing Southern California freight transportation, the report describes some of the critical factors and issues that influence freight transportation planning and management in the region. These issues include regional economic/population growth, congestion on transportation facilities, air quality concerns, land use issues/conflicts, and regional governance and institutional complexity.
Southern California has often succeeded in addressing freight transportation needs within this context of regional issues and concerns. The report provides some examples of how the region has dealt with its diverse freight transportation needs. Examples of capital project successes, institutional/planning successes, and funding/resource successes are also examined.
The remainder of the report describes lessons learned from the region’s experience and describes challenges for the future. These can be broadly categorized as institutional/planning process-related or funding/resource-related. The analysis suggests areas where various freight transportation partners in private sector, regional and local government agencies, state government agencies, and the federal government will need to work together to shape the region’s future freight transportation system. An analysis of the challenges related to many topics, including funding/financing, regional coordination and decision-making, institutional partnerships, public awareness of freight issues, development of data and analytical tools, and implementation and coordination of information technology and intelligent transportation systems (ITS), is also discussed.
While the region has undertaken a number of freight movement studies (including an interregional goods movement study, a number of subregional goods movement reports, and numerous analyses of corridors and specific freight-related projects), this case study provided a unique opportunity to take a big picture look at regional freight issues. By examining not only how regional freight issues manifest themselves within the broader regional transportation picture, but also where past efforts have resulted in successful programs and projects, and finally where challenges remain, local stakeholders have been able to discuss the region’s freight future from a new perspective.
2. An Overview of Existing Freight Movement Patterns in Southern California
Southern California – the counties of Los Angeles, Orange, Riverside, San Bernardino, Imperial, and Ventura that comprise the metropolitan planning organization (MPO) region of the Southern California Association of Governments (SCAG) – is the second largest metropolitan region in the United States. The population in the region is over 16.5 million people, up two million from 1990, according to census reports. In addition, the Southern California economy generates over seven million jobs, mostly in the trade and transportation, manufacturing, and tourism industries.
Freight Movement in Southern California
Freight movement in Southern California consists of three major and distinct freight markets:
Figure 2.1 provides some perspective on the magnitude of each of these components of the regional freight movement picture and how this is projected to change in the future. This figure shows the amount of tonnage carried by each freight mode in each of the three market segments in 1998 and forecasted for 2020. The data for international trade shows the mode used to move these cargoes to/from their domestic markets through Southern California gateways, not necessarily the mode used to carry the product into or out of the United States. In 1998, over 735 million tons of freight moved into, out of, and within Southern California (FHWA Freight Analysis Framework Database, 2002). Key features of Southern California freight markets are summarized below.
Regional and Local Distribution
Figure 2.1 Freight in the SCAG Region (Millions of Tons)
Source: Federal Highway Administration, Office of Freight Management and Operations, Freight Analysis Framework.
Domestic Trade and National Distribution
Figure 2.2 Los Angeles Total Truck Flows (1998)
The Freight Transportation Network in Southern California
In order to support its freight transportation markets, Southern California has developed an extensive infrastructure of international gateway facilities, interstate multimodal corridors, and a metropolitan roadway and distribution network.
Southern California has made substantial investments in infrastructure to service international trade through its airports and maritime ports. The region is a major air cargo center, home to two international and six commercial airports. Most of the region’s air cargo moves through Los Angeles International Airport (LAX), making it the third busiest air cargo facility in the world. Air cargo is critical for many manufacturing operations both in the U.S. and abroad, and the high-value cargo typically shipped by air explains why LAX handles more exports by dollar value ($36.5 billion in 1997) than the nearby Ports of Long Beach and Los Angeles ($35.2 billion).
Southern California is home to three international deepwater port facilities that comprise the Los Angeles Customs Region. The Ports of Los Angeles and Long Beach, respectively the first and second largest container port facilities in the United States, together form the third largest container port complex in the world. Their share of West Coast container cargo is an astounding 50 percent and growing, and they handle 35 percent of all waterborne cargo in the U.S. The Port of Hueneme, the only deepwater harbor between Los Angeles and the San Francisco Bay Area, has developed to serve a core niche. It is the top seaport in the United States for citrus exports and ranks among the top 10 ports in the country for imports of automobiles and bananas.
Interstate Multimodal Corridors
An extensive network of multimodal facilities has developed in order to link the large cargo volumes of both domestic and international trade moving between Southern California and the rest of the country. The regional air cargo system also serves the domestic trade system. Southern California is a major rail hub with both Western Class I railroads operating on mainlines that connect the region to the national rail network. The region includes six rail-truck intermodal facilities, including Burlington Northern Santa Fe’s (BNSF) Hobart Intermodal Facility, the busiest in the U.S. (handling over 90,000 lifts per month). There are three major interstate highway corridors in the region: I-5 (providing linkages to the rest of the West Coast of the U.S., Canada, and Mexico); I-15/I-40 (providing links to the interior U.S.); and I-10 (the “Southwest Passage” to the rest of the Sun Belt). Each of these interstates ranks among the highest truck volume corridors in the Western U.S.
Metropolitan Roadway System
Southern California is famous for its freeway system, which functions as the backbone for the extensive local distribution network that serves the regional economy. As of 1997, Southern California was home to 8,906 miles of freeways; 14,998 miles of principal arterials; 17,605 miles of minor arterials; and 8,262 miles of major collectors. This system includes critical access routes to the ports, airports, and rail intermodal facilities.
3. Regional Concerns that Influence Freight Planning and Management in Southern California
Freight transportation has helped facilitate the enormous economic success Southern California has enjoyed throughout its history. Looking to the future, this metropolitan area must determine how it will balance the needs of a growing economy and population with an increasingly constrained transportation system. Decision-makers at the state and local level are beginning to craft innovative strategies for addressing freight transportation needs, with an initial focus on trade gateways and corridors of statewide and regional significance. An example of these innovative approaches is the Global Gateways Development Program (SCR 96, Karnette), a state program that calls on the state’s Department of Transportation (Caltrans) to develop strategies and funding programs to improve those key transportation facilities that provide access to trade gateways. In its report to the legislature as mandated by SCR 96, Caltrans identified a number of issues that will influence freight transportation priorities in California in the future. Most of these issues will also drive freight transportation planning in Southern California.
Growth heads the list of regional issues that will face freight transportation planners in the future. The question for Southern California is how to accommodate economic and transportation growth in the context of heavily congested transportation facilities, regulatory constraints posed by the region’s air quality non-attainment status, increasing concerns about transportation safety and security, growing land use conflicts and constraints, and the complexity of regional governance and institutional relationships.
Fueled by the continuing economic growth of the region and the increasing importance of international trade in the national economy, goods movement traffic in Southern California by all modes is projected to increase by over 80 percent between 1995 and 2020, according to studies conducted for SCAG. More recent freight forecasts by the FHWA project that domestic freight flows in Southern California will grow at a higher rate than the national growth rate (83 percent growth in Southern California between 1998 and 2020 as compared to 71 percent growth nationally). International freight traffic in Southern California is projected to grow at a substantially higher rate than international freight will grow for the nation as a whole (170 percent growth in Southern California between 1998 and 2020 as compared to 98.7 percent growth in the rest of the nation).
Figure 3.1 illustrates the growth in freight tonnage by mode projected by SCAG. The Regional Transportation Plan (RTP) forecasts over 65 percent increase in regional heavy-duty truck traffic by 2020. SCAG studies project rail tonnage in Southern California to increase by more than 240 percent between 1995 and 2020, due in large part to international trade growth and connections to the Ports of Los Angeles and Long Beach. Air cargo is expected to be the fastest growing component of the regional goods movement picture, with growth of over 300 percent in tonnage projected by SCAG between 1995 and 2020. Other studies forecast the strong growth in marine cargoes will continue into the future. Port projections show increases to between 25 million and 36.1 million 20-foot equivalent units (TEUs) by 2025 from current levels of 9.5 million TEUs.
Figure 3.1 Freight Forecasts by Mode: 1995-2020
Population growth will exacerbate trends in congestion and land use competition, while creating an even larger internal market. The six-county Southern California region will add more than five million people – twice the population of Chicago – over the next 20 years. Ultimately, additional freight growth will also be driven by demand from this growing population.
Congestion - Highway and Facility Based
Congestion is a critical problem in Southern California. According to the American Society of Civil Engineers’ 2001 Report Card for America’s Infrastructure, Los Angeles highways create 82 person-hours of delay per capita annually, the highest in the country. This report also shows that Los Angeles has four of the 10 most congested highway locations in the U.S. The I-405 at the I-10 interchange, U.S. 101 at the I-405 interchange, State Route 55 at the State Route 22 Interchange, and the I-10 at the I-5 interchange each average 10 minutes of delay per vehicle per trip during peak hours. The contribution of trucks to regional congestion is forecast to increase as truck vehicle miles of travel (VMT) increase from 38 million miles in 2000 to 50 million miles in 2010, according to estimates by the California Air Resources Board (ARB), a higher rate of growth than is being experienced by automobile traffic.
There remains a perception that trucks are significant contributors to congestion due to their disproportionate use of roadway capacity, but trucks are also influenced by congestion, and the resultant costs eventually affect all consumers. Congestion leads to longer travel times per trip, which in turn means that truck drivers will make fewer pickups and deliveries during a day. Therefore, either the cost of goods will increase or drivers’ income will decrease. Spreading of the peak period exacerbates the congestion problem by making it more difficult for truckers to squeeze their activities into narrowing windows of low traffic volumes during off-peak hours.
Incident-based congestion creates unreliability in the transportation system. Unreliable transportation systems cause travel times to become unstable, preventing shippers, carriers, and logistics providers from being able to precisely schedule shipments. This can cause a ripple effect throughout the supply chain as inefficient inventory levels and labor utilization increase the cost to deliver goods to the final customer.
Highway congestion also affects the operations of other transportation facilities. Air cargo facilities rely on trucks to feed shipments to the airport and to deliver goods to their final destination. Intermodal rail facilities primarily utilize trucks to connect the rail system to its customers and with other modes such as the ports. The largest intermodal facility, the BNSF Hobart Yard in downtown Los Angeles, is within 20 miles of four of the worst interchanges in the country (I-405 at I-10 interchange, U.S. 101 at I-405 interchange, State Route 55 at State Route 22 interchange, and I-10 at I-5 interchange) . I-710, the major access route to the Ports of Los Angeles/Long Beach, experiences an average of five accidents, and the resultant delays, everyday.
In addition to congestion on the highways, air, rail, and port facilities in Southern California also face significant internal capacity constraints. For example, airport and air traffic congestion is influencing the reliability of airfreight operations. In 1999, the Federal Aviation Administration reported that about 28 percent of departures (including freight and passenger flights) at LAX were delayed because of air traffic volumes. To accommodate future demand, the region must balance between expanding the 6.1 million square feet of dedicated cargo space in the LAX local area (over two million of which are on LAX property) and expanding air cargo facilities at other local airports. The traffic volumes at intermodal facilities serving both the ports and railyards in Southern California are also projected to exceed capacity over the next 20 years. Increased delays at terminals gates and within the terminals themselves, coupled with increased passenger traffic demands to move freight into and from these facilities, has led to additional concerns over the region's ability to handle future freight movements.
Air quality management is another significant issue facing transportation planners in Southern California. The region includes all or part of seven different air quality non-attainment or maintenance areas in five air basins. The South Coast Air Basin is a severe non-attainment area and the need to demonstrate transportation plan conformity can constrain capacity expansion.
Marine, rail, and truck modes predominantly use diesel fuels, which are major sources of oxides of nitrogen (NOx – an ozone precursor) and the primary mobile source of particulate matter. With the successes of the past 30 years in the control of emissions from light-duty on-road vehicles, emissions from freight modes are coming under increasing scrutiny. However, the share of total mobile source NOx emissions in the South Coast Air Basin attributable to trucks is expected to increase from 44 percent to 53 percent between 2000 and 2010, even with the adoption of new truck emission standards.
In California, trucks will face increasingly stringent emission standards and requirements for cleaner burning diesel fuels. These requirements will add costs to freight transportation. Historically, California established its own emission and fuel standards, a difficult posture given that many trucks operate in interstate commerce. Competitive effects on the California trucking industry have long been an issue of contention between the California Trucking Association and the California Air Resources Board, which, with the U.S. Environmental Protection Agency (EPA), regulates truck emissions and diesel fuel specifications. Regulation of off-road mobile sources of pollution, including locomotive and steamship emissions, have also periodically involved contentious relationships among the carrier community, the California Air Resources Board, and regional air quality management agencies.
In the aftermath of the terrorist attacks on September 11, 2001, transportation security has become a priority. The Coast Guard has dramatically stepped up its harbor patrols and monitoring efforts. The California Highway Patrol completed a re-certification of the 1,000 companies licensed to carry hazardous materials in the Southern California region, although current inspection processes are costly and time consuming. Containers must be selected (often at random), stopped, opened, sifted, and approved to continue moving towards their final destination. Increasing the amount of inspection introduces significant additional costs to goods movement.
Air cargo facilities have a unique security issue, because passengers and freight are often mixed aboard the same aircraft with cargo being carried in the belly of commercial airlines. Screening of cargo is likely to undergo increased scrutiny in line with the procedures that have been enacted for air passengers and their baggage. Potential future actions range from increasing the percentage of cargo security checks, to improving the cargo screening equipment, to mandating that cargo use dedicated air freighters only. The latter solution would dramatically increase the cost for both air cargo and air passengers. In Southern California, implementation of increased inspection processes will be particularly difficult due to the high percentage of international freight moving through airport facilities.
Provision of a safe transportation system is one of the key goals of regional transportation planning in Southern California. However, the interaction of passenger transportation and freight transportation on the regional roadway system and at road-railroad crossings creates significant safety concerns. Many accidents result from outdated highway designs that do not reflect current vehicle size, vehicle performance, or driving habits. The lack of proper median or narrow shoulders of highways has also increased accident risk. Overloading or improper loading of vehicles also creates safety concerns. Truck-involved accidents have a higher incidence of fatality, property damage, and economic loss compared to other types of accidents. Truck-involved accidents also generate traffic congestion, because truck related incidents generally involve a larger number of lanes blocked or closed. Records show that, in Southern California during the five-year period from 1992 to 1997, there were over 27,000 truck-related accidents with 10,200 accidents involving injuries, 232 accidents involving fatalities, and over 20,000 accidents involving property damage. Safety issues are more critical on the corridors with heavy volumes of truck traffic. For example, in 2000, on a 27-mile stretch of the I-710 Freeway, trucks were involved in over 31 percent of its 2,250 reported accidents. The trucks were found to be at fault in roughly half of the accidents.
Rail accidents are also a major concern in the region, especially at rail-roadway crossings. Fatalities related to railroad traffic have declined by two-thirds since 1960 as the result of improvements in rail crossing technology, better education, and improvements to rail infrastructure. Nevertheless, between 1997 and 2000, the California Highway Patrol counted over 40 deaths and 345 injuries due to rail crossing accidents. Hundreds of millions of dollars are spent in the region to separate the rail and road infrastructure in an effort to reduce the safety risk of accidents at highway-rail crossings.
While the older metropolitan areas of the East and industrial Midwest are grappling with freight access problems in mature, built-out, high-density urban cores, Southern California faces its own unique land use-related problems. The metropolitan area is famous for its sprawling development and high-priced real estate. This development pattern has had significant consequences for freight facilities in the region. Ports, airports, intermodal terminals, and truck terminals frequently abut built-out industrial, residential, and commercial areas, creating land-use conflicts and limiting the ability to expand existing facilities. Attempts to expand the LAX airport are fiercely opposed by residents in neighboring communities, while residents of communities along the I-710 access routes to the San Pedro Bay ports complain of environmental justice violations associated with heavy truck traffic. Truck operators face increasing parking and traffic route restrictions in cities throughout Southern California.
Distribution centers utilize cheap suburban land to relocate and expand their facilities. Housing developers are building in the same areas to provide homes to the region’s growing population. Over time, the pattern experienced in today’s developed sections of the metropolitan area will be repeated. Community pressure will mount for the distribution centers to relocate and expand further out of the region. One long-term outcome may be more dispersed distribution centers and longer truck trips, leading to an increase in local and regional congestion and emissions.
Regional Governance and Institutional Complexity
Transportation planning and programming in Southern California are conducted in one of the most institutionally complex settings of any region in the country. Figure 3.2 lists some of the many organizations that are involved in regional transportation planning. Four different district offices of the California Department of Transportation (Caltrans) are responsible for planning, design, construction, maintenance, and operation of the region’s state highways. SCAG, the regional MPO, develops the Regional Transportation Plan (RTP) and provides funding for numerous regional transportation studies. There are six county transportation commissions/authorities (CTCs) that are responsible for programming and funding the transportation projects in Southern California. There are 14 subregions, represented by councils of government and subregional planning agencies that work with SCAG and the CTCs to conduct transportation planning throughout the region. At the base of this pyramid of regional transportation agencies are 184 cities that have critical roles in permitting roadway construction projects and operating and maintaining much of the regional roadway network.
Figure 3.2 Organizations Involved in the Regional Transportation Planning
There are a host of other governmental agencies involved in regional transportation issues. These include the seaport and airport operators (city agencies or joint powers authorities), the California ARB, and the regional air quality management and water quality agencies. The competing priorities, fragmented funding resources and authority, and overlapping geographic jurisdiction of these different agencies make cooperative planning a necessity and a frequent challenge. In general, the various transportation agencies in Southern California have developed processes for planning and implementing transportation programs and projects that provide clear authority and jurisdiction to each participating agency. However, most of these planning and implementation models encounter problems when applied to freight projects. The reach of freight markets and freight projects extends across traditional jurisdictional boundaries and the cooperative relationships that are needed to deal with freight projects (often involving both public and private agencies) have often not been developed.
In an attempt to coordinate freight activities at the regional level, SCAG has established a Goods Movement Advisory Committee (GMAC). While the GMAC provides a useful forum for discussing freight issues that have regional implications, it has yet to tackle some of the thornier problems associated with institutional relationships. Some stakeholders feel new institutional structures/models are needed to bring together various agencies that have responsibilities for planning freight projects that overlap existing jurisdictional boundaries. In the most widely heralded freight success story in the region, the Alameda Corridor, a new joint powers agency was created to handle implementation of the project. Creating new joint powers agencies for every multi-jurisdictional freight project in the region may prove cumbersome in the future. Which agencies will be included in these agreements and which will not, could be a source of much controversy. Clearly, Southern California is still searching for the appropriate institutional mechanisms with which to plan and coordinate major freight projects of regional significance.
4. Regional Successes in Freight
Despite the many challenges facing freight planners and managers in Southern California, the region has achieved some notable successes. Several projects have addressed freight transportation for both international and domestic shipping needs through improvements at the international gateways, the statewide and multi-state corridors, and within the metropolitan roadway network and by dealing with many of the freight planning and management issues mentioned in the previous section. Successes have included capital projects, several of which are under construction and many of which have been programmed. In addition, the region has developed successful planning processes and institutional strategies, along with innovative funding/resource management strategies. The lessons learned from these successes and the remaining planning process, institutional, and funding challenges should help inform discussion about future regional, statewide, and national freight policy.
Successes at the International Gateways
Capital Project Successes
Organizational and Planning Successes
Successes on State and Multi-State corridors
Capital Project Successes
Organizational and Planning Successes
Successes on the Metropolitan Transportation Network
Capital Project Successes
Organizational and Planning Successes
5. Lessons Learned and Continuing Challenges
Much can be learned from the Southern California experience that is relevant to the national freight policy discussion. The region’s project successes provide examples of the full range of types of freight projects that states and MPOs may need to undertake at international gateways, state and multi-state corridors, and in the metropolitan road network. There are many more project ideas that have been identified and will be pursued in the future.
What is most relevant to national freight policy are the lessons learned and challenges in the areas of funding/financing and planning processes/institutional relations. Within each of these broad areas, there are a number of specific issues that have emerged in Southern California that are discussed in the remainder of this section
Adequacy of Funding Resources
With the enormous growth in goods movement traffic predicted for Southern California across all modes, it is not difficult to see why there is a need for substantial investment in infrastructure and operational improvements. However, the cost of maintaining and improving the existing transportation network within the region for all users exceeds the available resources. The 2001 SCAG RTP estimates costs of all regional transportation projects over the next 20 years at $44 billion, compared with available resources estimated at only $24 billion. In addition to the enormous construction costs associated with these projects, transportation projects in Southern California, as elsewhere in the country, face growing costs of right-of-way acquisition, environmental compliance, complex public involvement processes, and other planning costs that will strain local transportation budgets. Competition for transportation funds will continue to be hard fought and will challenge the political ability of the region’s decision-makers.
Several freight projects have been identified that have the potential to improve the flow of goods in the metropolitan area. However, freight projects tend to be expensive, due to their scale and institutional complexity, and funding of the projects remains a challenge in a fiscally constrained environment.
A major program that may suffer from funding limitations is the development of dedicated truck lanes.  The SCAG RTP has identified five freeway segments that would benefit from the use of truck lanes. However, a recent feasibility study of truck lanes on the SR-60 freeway indicated that, even if tolls were optimally applied to the truck lanes, less than 30 percent of the project costs could be recovered from project revenues. Therefore, billions of dollars of the truck lane projects would have to be funded from other (likely public) sources.
Other projects, such as the Orangethorpe Corridor project and the San Bernardino and Riverside County portions of the ACE project, have substantial funding needs that have not been fully met.
As long as freight projects must compete in such a highly constrained fiscal environment, they will advance slowly. This may be especially true for projects at international gateways and on multi-state networks. These freight projects tend to be especially costly and are often perceived locally as having state or national benefits that should be paid for by the state and federal governments. In addition, lack of flexibility in many of the available funding sources that are targeted for highway and transit improvements further limits the funding available for these types of projects.
Burden Sharing and Fairness: The Distribution of Costs and Benefits of Freight Projects
Projects conveying national benefits but having local repercussions create unique challenges for local funding. For example, over $3 billion worth of road improvements have been proposed for I-710, the major access route to the San Pedro Bay ports. These improvements would have national transportation implications, since a great deal of the truck traffic is to support international trade that does not directly benefit Southern California. Generating local sources of funding for these projects is often difficult due to the perception that the projects benefit national interests and have a mixed effect on local traffic. Other projects, such as the Alameda Corridor, are completed only at substantial additional cost in terms of the mitigation needed to overcome local opposition.
The issue of equitable distribution of costs and benefits for goods movement projects is a question that is hotly debated in Southern California. Many of the most expensive freight projects in the region involve access improvements to international trade hubs and dealing with increasing volumes of through traffic on facilities that serve these hubs. Projects such as ACE, the Orangethorpe Corridor, and the San Bernardino and Riverside County grade separation projects are all dealing with increased delay and safety problems at railroad grade crossings due in part to increased international trade traffic. The amount of local funding that has been obtained for these projects to-date falls far short of need and many local decision-makers contend that with national benefits should come national funding.
In the past, there has been limited political support at the federal level for separate categories of funds for nationally significant freight projects, so funding from Washington has often come through earmarking (as it did in the case of the Alameda Corridor). This often pits the freight interests of this region against each other across jurisdictional lines. At the state level, the source of funding for improvements suggested for the Global Gateways Development Program has yet to be identified and could involve contentious debate over user fees and state/local allocation of transportation discretionary funds.
The Importance of Local Benefits in Justifying Local Funding
The evidence in Southern California suggests that, while economic development benefits are often associated with successful freight projects, this seems to be more important to attract federal funding than local funding. Former Alameda Corridor Transportation Authority (ACTA) staff indicate that it was the congestion relief and air quality benefits of the Corridor that attracted local funding. This local funding, even in the case of a nationally significant project like the Alameda Corridor, was extremely important. The LACMTA provided $347 million in direct grants, or 14 percent of the total project funding, based on the local congestion and air quality benefits that could be demonstrated. In Los Angeles City, while economic development benefits were an initial rationale for the Goods Movement Improvement Program (when the project was started, California was at the height of the recession of the early 1990s), ultimately the project was sold on the merits of its safety benefits.
Innovative Financing and User Fees
Many goods movement planners in the region acknowledge that it will be necessary in the future to come up with alternative revenue sources. Thus, there is increasing interest in user fees. One of the successful features of the Alameda Corridor was the provision for a $30 container fee on all cargo moving in the Corridor. This provided a revenue stream, which when combined with attractive loan terms from the federal government, allowed for almost two-thirds of the financing of the project to come from debt instruments. But not all freight projects can be structured with user fees. Projects on Southern California’s freeways will clearly address congestion, air quality, and safety issues that affect all motorists and many non-motoring residents. Again, the issue of equitable distribution of costs and benefits and linking revenue sources with use of the facility is important in evaluating user fee alternatives.
There is also local concern about the negative effects that user fees could have on the competitive position of the region in both international and domestic trade. Local state legislators have recently proposed to collect some form of fees on all cargoes moving through the ports and to use this to finance landside access improvements. There are strong and mixed feelings about this proposal among the private and public sector freight interests.
Some local decision-makers think that the answer to the funding problem may lie, at least in part, with an alternative mechanism for distributing revenues from fees already collected by the federal government in connection with trade activities. These officials argue that more funds ought to be available locally from customs fees and the Harbor Maintenance Tax to pay for improvements necessary to support efficient trade transportation.
Public Investment in the Private Freight System
A particular funding issue for freight projects in Southern California is the need for funding to assist the private sector for projects with broad public sector benefits. The private sector often perceives these projects as having an insufficient return on capital due to long payback times, lack of equity, and high risk. This is becoming an increasingly important issue in the region as public agencies become more interested in rail capacity problems. Improvements to the regional rail system could create opportunities to divert more truck traffic off of congested freeways, as well as reducing delay at grade crossings. Making these investments with public funds is difficult. In Southern California, successful financial participation by public agencies in railroad projects has generally come in connection with commuter rail projects (such as the Metrolink project in Riverside County), safety upgrades, or land swaps.
Regional Coordination and Decision-Making
A major problem faced by freight projects in Southern California is the large number of agencies with overlapping geographic jurisdiction that become involved in significant goods movement projects. Freight markets do not respect political boundaries, and this requires agencies to cooperate not only in the implementation of projects, but also in the identification of needs and solutions.
The Problem of Coordinating Freight Projects that Cross Political Boundaries
An example of how this problem has been played out in Southern California comes from the history of the Alameda Corridor. The ACTA was formed as a joint powers agreement between the cities of Los Angeles and Long Beach (both San Pedro Bay ports are managed by the departments of their respective cities). Since the Alameda Corridor runs through a number of smaller cities on its way from the ports to downtown Los Angeles, these smaller cities were originally invited to participate as members of the board of the ACTA. Distrust between the cities and the ports concerning how project funds would be spent and the ports’ concern about their fiduciary responsibility for the bonds that were to be issued eventually led to a reconstitution of the ACTA board that eliminated the smaller cities.
After lawsuits between the cities and the ports were resolved, the ACTA and the cities ultimately came to agreements codified in two separate memoranda of understanding that provided $12 million in mitigation funds to the cities and a guarantee of expedited permitting for construction to the ACTA. The road to this collaboration was expensive and time consuming.
Boundaries Don't Match Freight Movement Patterns
Many other freight projects in the region involve the movement of goods over transportation networks that cross jurisdictional lines and similar issues of collaborative planning are faced consistently. Defining the appropriate boundaries of goods movement projects can create problems from the outset. While it may be convenient to define a goods movement project consistent with the boundaries of existing subregional or political boundaries, this may run counter to the need to produce the most cost-effective system-level solutions to problems. For example, the definition of the ACE project now carries a particular political significance, because it is a designated corridor eligible for funding under the National Corridor Development Program. But the definition of the corridor in the Transportation Equity Act for the 21st Century (TEA-21) legislation does not include certain portions in San Bernardino, Riverside, and Orange Counties. Some planners in the region believe that this broader definition is more reflective of how railroad operations associated with international trade affect the regional railroad network. Today, the projects in each of the segments of this rail corridor that are not part of the ACE are being planned as separate projects, sometimes competing against each other for regional funding priority.
Achieving Group Consensus
Regional consensus on freight project priorities is also difficult to achieve in such an institutionally complex environment. While SCAG is responsible for establishing the RTP and as part of this responsibility undertakes to reflect regional goods movement priorities in that plan, each county has its own transportation programming authority. Many decisions about funding priorities are, thus, made at the county level rather than at the regional level. In this type of decision-making environment, it is especially difficult to tradeoff projects that address national and state needs with those that have primarily local benefits.
The Financial Risk Implications of Multi-Jurisdictional/Public-Private Projects
Projects that involve a single jurisdiction are clearly easier to implement than are those that involve multiple jurisdictions. The size and scope of the Los Angeles Goods Movement Improvement program and the fact that it was proposed and implemented by a single city were keys to its success. The Alameda Corridor, on the other hand, was one of the more institutionally complex projects ever undertaken in the region. Dealing with three Class I railroads (before the UP-SP merger) and numerous smaller cities along the corridor created many complications and presented risk that might have been unacceptable to private financiers of the project. In order to negotiate out of this risk, the ports ultimately purchased the rail right-of-way from the Southern Pacific Railroad (in order to assure all three railroads equal access) and memoranda of understanding were signed with all of the cities, as described previously. While these agreements were costly to the project, they reduced the financial risk and allowed funding to proceed.
The financial community indicates that port ownership of the rail right-of-way was a critical element of the financial arrangements in another way. Because the bonds were backed by the revenues from the container fees, the financial risk was that of achieving trade volumes rather than the financial and management health of the railroad companies. While long-term trade projections do carry uncertainty, the risk is associated more with when the trade volumes will be achieved rather than if they will be achieved. With conservative revenue projections, the cost of financing could be held to a more reasonable level with the revenue bond options that the ports were able to pursue. In addition, tax exempt public sector bonding authority is a benefit rail projects rarely use.
Public-Private Collaboration and Challenges
As noted throughout this case study, the involvement of the private sector in freight transportation planning and management is crucial. A major obstacle to this collaboration – cited by public and private sector officials alike – is the divergent planning timeframes of the public and the private sectors. The public sector plans for 20- to 25-year implementation, whereas the private sector needs quick turnaround and rapid response in order to maintain competitiveness. Private businesses do not see results in the public sector policy process. Some in the region believe that shifting the focus of the GMAC, primarily an advisory group on policy issues, towards project orientation will improve the results of the GMAC. An alternative or parallel forum that is focused on solving problems in the short term or tackling major long-term projects might prove more engaging to the private sector.
A related issue is the complexity of the planning process from the perspective of the private sector. There are an enormous number of public agencies that are involved in identifying freight transportation needs, funding projects, and implementing projects. Private businesses, particularly the numerous small trucking and warehousing operations, do not have the staff time to stay involved on a regular basis with all of these agencies. Many of the issues of concern to shippers and carriers in Southern California have to do with local regulations (parking and route restrictions), design of loading areas and on-street parking, and geometric configuration of local streets. These issues are generally not effectively addressed within the many public-private forums on goods movement that currently exist within the region. The subregional planning studies that have been conducted have often been successful in identifying these issues and bringing together local shippers, carriers, city public works directors, and law enforcement officials. But the extent to which any of these groups have continued to meet once the studies were completed is difficult to determine.
Another problem that has been a significant factor in public-private collaboration in the region is the distrust that has developed between the parties as a result of contentious regulatory relationships. A central issue has been air quality regulation and its influence on the freight industry. At various times, state and regional air quality regulations have had the potential to affect all goods movement modes. But the trucking industry has clearly had the most frequent disagreements with the California ARB and the regional air quality management agencies over emissions and fuels regulations. In cooperation with the ARB, the South Coast Air Quality Management District has pursued numerous programs to provide incentives for truck owners to switch to cleaner burning fuels or to adopt various emission control devices. But these programs have not been widely subscribed.
Some of the most successful public-private collaborations involve facility improvements that benefit both freight and passenger vehicle movement. This is even true for non-highway modes, as was the case of the Metrolink improvements in Riverside County that created justification for investment in the Class I railroad system.
Many of the solutions to freight and goods movement problems in Southern California could be addressed through changes in operating practices within the industry. But these types of changes would require a degree of cooperation among private businesses that is difficult to achieve given the competitive nature of the freight industry. For example, many studies have concluded that if freight activity could be spread over a longer period throughout the day to avoid truck operation during peak traffic hours, increased efficiency could be wrung from the existing system. This would require major changes in the operating practices of shippers and consignees. Arranging these types of changes across industries has been difficult.
Port Operating Hours - One Example of Private-Private Collaboration Challenges
For example, in order to stretch existing capacity and accommodate growth at space-constrained facilities, the option of lengthening the hours of operations at terminal gates at the San Pedro Bay ports has been explored. Terminal operators avoid this option, because longer hours mean paying overtime wages or changing labor rules. Overtime wages increase the cost of doing business at the port, and changing work rules involves difficult labor-management negotiations. Some terminal operators report that when they have experimented with longer operating hours, there is little demand from consignees to have their cargoes picked up in off-peak hours. Most of the shippers/consignees continue to run their pickup and delivery operations during normal business hours and are unwilling to experiment with extended operations. These shippers/consignees cite the increased costs of overtime wages to warehouse employees under current contracts (or unwillingness of non-unionized workers to work at regular wages in off-peak hours) and local ordinances that limit night loading/unloading operations. Drayage firms, who would like to take advantage of off-peak traffic conditions, are unable to store cargoes overnight due to lack of space and increased liability/security costs.
In the above example, the circular logic of "port terminal hours will change if truckers change their hours if warehouses change their hours if the port terminals change, etc.," presents a problem regarding who will make the first step at identifying problems and implementing solutions in a manner that generates economic benefits for the private sector partners. Thus far, there has not been sufficient economic incentive for significant private-private collaboration in the area of expanded operating hours. Private companies are accustomed to allocating resources to activities that create an advantage over their competitors but to also maintain profits and control costs. There are costs associated with change, since new services require a level of commitment and usage to cover fixed costs (hiring workers in anticipation of projected activities) and generate additional profits. Many firms may feel that they are providing adequate service for their customers, and the additional costs associated with expanding their hours may not be economically feasible, nor will their clients find any additional benefit. The costs associated with inefficiency are simply spread amongst the various users. Most private-private collaborative initiatives would reduce costs evenly for all companies in the industry, and, therefore, innovations may be eventually transformed into lower prices for all end customers rather than increased profits for the firms initially engaged in the freight partnership.
Yet some terminal operators and shippers/consignees are moving in the direction of longer operating hours. For the terminal operators, it is simply an issue of how to increase throughput for a given acreage of terminal space. Longer operating hours can mean more throughput per acre. These operators work hard to identify shippers most able to adapt to these changes and offer service incentives. The terminal operators also need to be willing to wait for logistics systems to adjust, something that can be costly without an aggressive marketing campaign. While improved reliability of delivery schedules is an advantage to shippers/consignees, it is often an insufficient incentive, particularly if drayage operators bear most of the risk of missed delivery windows.
Private-Private Collaborations Do Exist But Difficult To Engage With Public Sector
Many private-private examples exist where firms engage in one-to-one relationships, where freight operations can be tailored to meet the needs of individual clients. Anecdotal evidence suggests improvements can be made, but private-private partnerships are further complicated by the inability to define the issues with specificity to others outside the private sector. Public efforts may be needed to provide the incentive necessary for private-private collaboration, but it is difficult for a public sector participant to support improving private sector operations unless the weak links in system operations can be clearly identified by the private sector firms involved.
There is often the perception in the local communities that the effects of freight activities on the surrounding neighborhoods are limited to increases in congestion, pollution, and traffic accidents. The positive effects of freight activities, such as employment and efficient goods movement, are not recognized. Expansion of freight facilities has the potential to be viewed by some in Southern California as an exclusively harmful event. This was evident during United Airlines’ expansion of its air cargo facilities at LAX. United’s air cargo operation had expanded beyond the capacity of its 20-year old facility to the extent that freight was often stored outdoors. According to United, millions of dollars of cargo was at risk of being lost to spoilage annually due to the improper handling of freight from its old facility. New facilities were also needed for the airline to handle the increase in demand that has been predicted for the region. However, concerns by the local community about the effect of the new facilities on truck traffic in the surrounding neighborhoods delayed construction of the new facility and ended up costing United Airlines a significant amount of time and money. The city of Los Angeles, on behalf of LAX, assisted in local mitigation and public awareness of the full effects of the facility expansion that ultimately allowed for completion of the project. Clearly, a campaign to educate affected communities about the role that goods movement plays in their economy could be effective. Thus far, the region has not developed an effective way of conducting this campaign.
Data and Modeling Tools
The evaluation of alternative proposals for freight improvements, particularly when this evaluation must be made in comparison with other non-freight alternatives, requires effective freight demand forecasting tools and performance measures. While the Southern California region has made major steps towards the development and application of such tools, much work remains to be done. To a large extent, this work will be focused on data deficiencies that will be expensive to address and will face practical limitations with regard to the data collection techniques.
For example, the development of the regional truck model for SCAG faced numerous data collection problems, and much of the data the model uses are based upon limited samples or data borrowed from other communities. Carriers in the region have historically been unwilling to participate in major origin-destination studies. Reasons cited include lack of time to participate in the program, the frustration over lack of coordination among the various agencies in the region all trying to collect the same data, and the concern over the proprietary nature of origin-destination information. Surveys to collect statistically valid origin-destination data for a region this large will be very expensive.
The SCAG truck model also utilizes aggregate commodity flow information. These data could be very valuable for other types of freight analyses in the region. But the data were purchased a number of years ago and there is no process in place for updating the data. In addition, there are needs for more disaggregate transactional data that are not available from any published source.
Decisions Made Based Upon Inadequate Freight Data Sources
Despite these problems with data, regional and subregional planners continue to try to make use of the data and tools they have as best as they can to make major investment decisions. For example, the SCAG truck model and limited additional count data have been used to develop critical information for the SR-60 truck lane feasibility assessment and the I-710 Major Corridor Study and will be used again to study truck issues in the I-15 corridor. Data on national and global commodity movements are being used to justify federal participation in regionally significant projects. That these decisions are being made with data and tools that suffer from the types of deficiencies described previously is clearly a concern to regional and national decision-makers. Regional, county, and subregional agencies are all working together with FHWA to try to build better databases and tools, but the available resources and techniques do not appear adequate to the task.
Coordination of ITS
The full integration of Intelligent Transportation Systems (ITS) into transportation operations has the potential to improve both the availability of goods movement data and the implementation of public policy initiatives. While information systems technologies have been widely used in the freight industry for a number of years, the application of public ITS technology to freight transportation is relatively new. There are a growing number of ITS deployments throughout Southern California, and these clearly benefit freight movements to the extent that they improve overall traffic flows and operational capacity on major freeways and arterials. However, little has been done to target ITS squarely at significant freight corridors and facilities.
Application in Southern California
The Port of Long Beach recently received a demonstration grant from the U.S. DOT to assist with the application of ITS to improve access and security at the ports and to mitigate congestion on the area roadways. The ports’ ITS project will provide truck drivers, truck dispatchers, terminal operators, traffic engineers, system operators, and all motorists with real-time traffic conditions information to better assist travel and manage incidents. The Port’s Automatic Traffic Management and Information System will include terminal-gate queue-detection cameras at all container terminals; closed circuit television surveillance at container terminal gates and key roadway locations; and changeable message signs at gate exits. The system will also provide links to other ITS, including the Caltrans Traveler Information System; eModal (a private Internet-based shipment information management system); and the Long Beach, Los Angeles, and Caltrans Traffic Management Centers. This type of interactive ITS, coordinated across multiple government agencies and with links to private systems, could be a critical element of future freight transportation operational strategies.
Some Challenges Identified
However, much of the ITS information is owned by separate private entities rather than transportation-related public agencies. Therefore, proprietary issues impede the availability of ITS freight data, and the data that are available are often contained in inconsistent and incompatible formats. In addition, private systems operators have not effectively linked to public data sources, nor do they share data among each other for operational improvements. The security of data from private systems is a critical concern as efforts to share these data are pursued.
Safe, efficient, and reliable freight transportation is critical to the continued growth of the economy of Southern California. The region has taken major steps to identify freight transportation needs and potential solutions to goods movement problems. Many strategies for addressing freight transportation needs can be developed and implemented locally, but the region will continue to look to the state of California, the federal government, and private industry for partnership in ensuring efficient goods movement continues.
While the region has benefited from some major successes in building freight planning processes and analysis tools, considerable work remains to be done.
 In a companion document, these stakeholders have provided a more thorough presentation of the freight story for their region. This document is available from the Los Angeles County Metropolitan Transportation Authority.
United States Department of Transportation - Federal Highway Administration