This monograph describes a federal freight policy designed to address growing challenges faced by the U.S. freight network in an environment dominated by declining revenues and public resistance to increasing taxes. The strategy emphasizes disaggregating project costs and benefits by location, stakeholder, and level of government and requiring identifiable beneficiaries to pay a share of project costs proportionate to the benefits they receive.

A Federal Role in Freight Planning and Finance

Sandra Rosenbloom, Martin Wachs

ResearchPublished Mar 21, 2012

This monograph describes a federal freight policy designed to address growing challenges faced by the U.S. freight network in an environment dominated by declining revenues and public resistance to increasing taxes. The strategy is based on the use of benefit-cost analysis to not only calculate the overall benefits of a project but also disaggregate project costs and benefits by location, stakeholder, and level of government. The approach rejects the notion that the federal government should automatically pay the major cost of a freight project; instead, it advocates requiring identifiable beneficiaries to pay a share of project costs proportionate to the benefits they receive, while identifying important spillover costs and benefits. The approach also rejects the view that the federal commitment should always be limited to costs that local and state participants cannot or will not cover; instead, the authors describe steps to determine when federal assistance may be warranted, and how much, based on a project's scope and the benefit it provides to the nation. The authors discuss ways in which the strategy could be efficiently and sustainably funded by increasing and encouraging the use of user-based pricing.

Key Takeaways

The U.S. Supply Chain Network Faces Significant Challenges

  • Congestion within the U.S. freight system has increased dramatically in the past few decades and continues to do so, costing travelers, consumers, and businesses billions of dollars each year.
  • While the U.S. freight network needs billions of dollars to maintain (let alone expand) current infrastructure, traditional funding sources are woefully inadequate to meet these needs.
  • Infrastructure needs are exacerbated by regulatory barriers, inefficient pricing policies, and the inability of planners and policymakers to adequately respond to growing problems in the freight network.
  • There is substantial consensus that the federal government should play a greater role in addressing these problems, but far less agreement on exactly what the federal role should be or the kind of projects that deserve or require federal assistance.

The Federal Role in Freight Planning and Finance Should Have Six Major Objectives

  • Improve freight planning at every level of government by improving freight data, disseminating best practices and promising approaches, and increasing institutional capacity.
  • Provide federal financial assistance to appropriate freight projects based on justifiable and sustainable revenue sources.
  • Condition federal assistance to freight projects on specific and measurable performance criteria.
  • Require any federally supported freight projects to have a substantial user-pay component.
  • Reform regulations that inhibit the competitiveness of various freight modes or inhibit the active involvement of the private sector in freight projects.
  • Respond to market failures, such as the lack of cooperative efforts, and positive and negative externalities from freight projects.

Recommendations

  • Develop a federal capital freight assistance program using sustainable revenue sources that bases funding decisions explicitly on specific performance measures. Individual projects should be assessed using a four-step process: (1) Conduct a traditional benefit-cost analysis (BCA); (2) disaggregate the BCA to identify the distribution of costs and benefits among major stakeholders; (3) determine what portion of costs and benefits should be eligible for federal financial support; (4) match the federal response to the problem proportionately to the degree of federal or national benefit.
  • Reform regulations that directly or indirectly inhibit or distort competition among freight modes or place financial restrictions on the participation of private stakeholders.
  • Encourage and increase user-based pricing to improve the economic efficiency of the freight network and create a sustainable revenue source for federal freight programs, recognizing that these two goals are not always compatible.
  • Enhance the ability of state, regional, and local planners to address pressing freight issues by improving the quality of freight data, knowledge of best practices, and the capacity of local institutions to effectively plan complicated and complex freight projects.

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Rosenbloom, Sandra and Martin Wachs, A Federal Role in Freight Planning and Finance. Santa Monica, CA: RAND Corporation, 2012. https://www.rand.org/pubs/monographs/MG1137.html.
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This research was conducted under the auspices of the Supply Chain Policy Center of the Transportation, Space, and Technology Program within RAND Infrastructure, Safety, and Environment, a division of the RAND Corporation.

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