Follow that Freight: Americas Freight is Americas Future

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Follow that FreightAmericas Freight is
Americas Future

• Presented by
• George Billows
• Executive Director IL Trucking Association
• November 13, 2007

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The Critical Nature of the Trucking Industry

• Trucking does the heavy lifting to move, at some
  point in the supply chain, nearly everything
  consumed in our modern society.
• Few Americans realize that trucks deliver nearly
  70 percent of all freight tonnage or that 80
  percent of U.S. communities receive their goods
  exclusively by truck.
• Even fewer are aware of the significant
  employment, personal income, and tax revenue
  generated by the motor carrier industry.
• With as many as three-quarters of a million
  interstate motor carriers in the U.S. the
  trucking industry is the driving force behind the
  nations economy.

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• It takes nearly nine million people to move
  approximately 11 billion tons of freight
• annually.
• Trucking generates approximately 625 billion in
  revenue and represents roughly five percent of
  U.S. Gross Domestic Product.

• One out of every 13 people working in the private
  sector in the U.S. is employed in a
  trucking-related job, with these jobs ranging
  across the manufacturing, retail, public utility,
  construction, service, transportation, mining and
  agricultural sectors.
• Of those employed in private-sector
  trucking-related jobs, 3.4 million are commercial
  drivers.

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• The trucking industry is composed of both large
  national enterprises as well as a host of
• small businesses, all of whom operate in
  extremely competitive business environments with
• narrow profit margins.
• According to the U.S. Department of
  Transportation, 91 percent of motor carriers have
  20 or fewer trucks and are classified as small
  businesses.

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A vision for a changing America

• Imagine a transportation system with the capacity
  to serve Sunbelt growth metropolitan expansion,
  connect all regions to the global economy, and do
  so reliably every day.

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How things have changed

• That was then
• In the late 1950s, there were 65 million
  vehicles, creating 600 billion annual vehicle
  miles of travel.

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This is now

• 50 years later, there are over 230 million
  vehicles, creating 3 trillion vehicle miles of
  travel.
• In the same period, the highway system grew only
  15

• Forecasts indicate that the US population will
  grow from 300 million today to 435 million by
  2055
• VMTs will increase from todays 3 trillion to as
  much as 7 trillion by 2055
• Truck-borne freight is expected to double by 2035
  rail freight to increase by over 60

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• The health of the trucking industry in the United
  States is not only dependent upon the laws
  enacted across the nation
• But it is also dependent upon the global economy
  and the financial commitments of nations around
  the world.

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Future Federal Surface Transportation Program

• CHINA
• National Transportation Highway System 150B
  investment
• 1989 168 miles of expressway
• 2001 10,000 miles of expressway
• 2005 25,480 miles of expressway
• - Goal 52,000 expressway miles by 2020,
  connect all cities with population over 200,000
• China highway investment in 2001 2.5 of GDP
  (0.3 average through 1980s)
• US highway investment 0.65 of GDP

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Future Federal Surface Transportation Program

• INDIA
• National Highway Development Project 50B
  investment
• Improve 40,000 miles of expressway
• 1999 Enacted national gas diesel tax created
  Central Road Fund trust fund
• EUROPEAN UNION
• 30 Priority Axes 2005 European Commission
  identified 30 critical transnational multi-modal
  transportation improvement projects
• 300B investment from EU and member states
• More than 1/3 of projects ALREADY UNDERWAY
• By 2020 expanding existing road network by
  2,976 miles, rail by 7,750 miles substantial
  additional highway, rail and inland waterway
  improvements

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Freight Future by 2020

• Imports and exports are doubling every 10 years
• The volume of freight will increase to 25 billion
  tons, worth about 30 trillion
• Freight traffic within the U.S. borders will
  increase 100
• Foreign trade moving through American ports is
  expected to increase by 187
• Containerized cargo will experience an explosive
  350 increase
• Trucks are expected to move more than 75 more
  tons of freight
• Rail is anticipated to carry 888 million tons of
  goods, a 44 increase

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Projected Growth in Freight Transportation
Tonnage 2005 to 2017
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Rail Investment Impacts on Highways

• 2.6 Billion - Annual Public Investment Needed
  for Rail
• If not met, 31 billion truck VMTs (vehicle miles
  traveled) shift to highways

• 21 Billion
• Increased cost to
• Highways

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Freight-Truck Highway Flows in 2005 and 2035
Source Cambridge Systematics based on Global
Insight, Inc TRANSEARCH 2004 data and economic
forecasts
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Infrastructure Growth OptionsPerception Meets
Reality
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Infrastructure Growth OptionsPerception Meets
Reality
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Future Federal Surface Transportation Program

• Challenges
• Current federal highway transit (airport, rail,
  port and waterway) capital investment programs
  are woefully under funded to meet current OR
  future mobility, security and environmental needs
  
• Failure to act dramatically for the future now
  also puts Americas competitiveness at serious
  risk

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How much money is raised by an increase in fuel
taxes?
Gasoline Annual Yield 1.6 bil per penny 8 bil.
per nickel
Diesel Annual Yield 400 mil. per penny 2 bil.
per nickel 10 bil per quarter
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Merely a Down Payment on Needs

• From 2005 to 2015, total national needs will be
  3.4 trillion to improve the system, but total
  revenue will be only 2.4 trillion, leaving a
  cumulative gap of approximately
• 1 trillion

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What Does the Future Hold?

• Congestion worsening
• Vehicle miles traveled expected to increase over
  72 by 2025
• Research suggests need for over 222B annually to
  maintain infrastructure up to 295B annually by
  2015

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Freight Corridors Top 200 Bottlenecks Time
Money Lost Can Never Be Found

• 243 Million Hours Lost Annually
• Cost 7.8 Billion/year
• Physical bottlenecks account for 40 of
  congestion

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The Cost of Congestion

• In 2005 industry spent 87.7B on diesel fuel
• 2nd highest operating expense
• As much as 25 of total operating costs
• No congestion credit in HOS

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Highway Funding Analysis

• Addressing the issue of how to fund our
  nations transportation infrastructure from the
  transportation system user perspective

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Whats Wrong?

• No increase in federal motor fuel tax since 1993
• Inflation has decreased motor fuel tax purchasing
  power
• Tax exemptions reduce user-based revenues
• Highway user fees diverted to non-highway uses
• Project earmarking diverts from critical
  projects

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Who Pays and Who Doesnt?

• Trucking industry contributes nearly 40 of
  federal HTF
• IRS exempts from federal motor fuel tax
• State, local and municipal government vehicles
• School buses
• Qualified intercity and local buses
• Vehicles used exclusively by nonprofit
  educational organizations

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Exemptions Cost

• 363M annually from state, local and municipal
  government fleets
• IL 15.9M annually (gasoline only)
• School buses - 146M annually
• Transit buses - 61M annually
• 570M total annually in lost HTF
• Factor in state exemptions total exceeds 907M
  annually

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Exemptions Cost
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Diversions Cost

• Congress split federal HTF into two accounts in
  1983
• Highway Account
• Mass Transit Account (originally 11.1)
• MTA received nearly 50B from HTF (1994-2005)
• LUST Fund receives 70M annually from HTF (0.1
  per gallon tax) to EPA for clean-up

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Motor Fuel Tax is an Efficient Way to Collect
Revenue

• Cost to collect federal motor fuel tax
  approximately 0.2 percent of revenue collected
• At the state level, cost of collecting motor fuel
  tax 1-2

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Tolls are Not
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Diversion Kills

• Between 1995 and 1999, Ohio Turnpike Authority
  increased tolls on Ohio Turnpike by 82
• As a result, commercial traffic diverted to
  alternate, non-tolled roads
• High profile crashes (fatalities) on alternate
  routes led to rollback in tolls

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Privatization Harms Rural America

• Rural corridors lack VMTs to attract private
  investment
• Move toward privatization threatens rural
  corridors which serve as critical links in supply
  chain
• Outside of federal-aid program, limited local
  funds available to maintain roads and bridges
  (some of the most deficient in the country)

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Key Findings

• HTF not meeting needs
• Fuel tax most efficient
• Tolls not only inefficient but create safety
  impacts
• Privatization negatively impacts seamless
  transportation network
• US DOTs PPP model legislation abdicates
  responsibility for access and mobility
• Balkanization of system harms global
  competitiveness

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Questions?

• Thanks!

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Thanks to

• AASHTO
• ATRI
• ATA
• TranSystems
• Whose presentations were used in this one!