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  - January 29, 2008 -  

Logistics News: National Surface Transportation and Revenue Study Commission Report Recommendations Can Have Big Impact for Shippers

 
 

Headlines of 40 Cent Increase in Consumer Gas Tax Only Part of the Story; When Does the Cure Become Worse than the Disease?

 
 

 

SCDigest Editorial Staff

SCDigest Says:
While most everyone agrees additional infrastructure investment is needed, different options have different costs for shippers and their carriers. At some point, the new costs will exceed the benefits of an improved logistics system. .

What do you say? Send us your comments here

Two weeks ago, the National Surface Transportation and Revenue Study Commission, formed by an act of Congress in 2005, and which received increased public and Congessional attention in 2007 after the April bridge collapse in Minneapolis-St. Paul, issued a report containing both analysis and recommendations regarding transportation and logistics infrastructure.

Last week, we looked at many of the findings regarding the state of US logistics infrastructure, and the report’s analysis of the funding shortfalls that would occur over the next decades under the status quo (see Understanding the National Surface Transportation and Revenue Study Commission Report).

This week, we look in more detail at the Commission’s recommendations. (The full report is available here: The National Surface Transportation and Revenue Study Commission report.)

National Surface Transportation and Revenue Study Commission Report Recommendations

Given the near crisis in logistics infrastructure perceived by the commission, the report uses some dramatic language in attempt to spur action.

The Commission believes that to meet 21st Century transportation needs, it is necessary for Congress to establish a new Federal Compact with the American people,” the report states.

The “compact” involves significant new investment by both governments and private enterprise to make up for past shortfalls, better use of government funds, funding that is performance-based and focused on cost-benefit analysis, and far-reaching program reform to eliminate waste and delays in Federally funded program delivery.

Interestingly, the Commission concludes that the current Federal surface transportation programs should not be “re-authorized” in their current form. “We must begin anew,” the report says. A key element of that change – looking more broadly at all modes, and not just on highways, as the Federal Government has tended to do in its funding.

 
 
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Improving Program Effectiveness

The Commission believes significant leverage could be achieved simply by making existing highway and other infrastructure projects and program management more efficient.

It takes too long and costs too much to deliver transportation projects, and that waste due to delay in the form of administrative and planning costs, inflation, and lost opportunities for alternative use of the capital hinder us from achieving the very goals our communities set,” the report concludes. It says that for some major projects, the time needed to complete planning, environmental, and construction activities can exceed 14 years, inflating costs above estimates and undermining finance plans and construction schedules.

The Commission suggests a key element in reducing project timelines is streamlining the environmental review process and reducing overlapping authorities.

To help drive these programs, the Commission recommends formation of a new independent National Surface Transportation Commission (or NASTRAC) to oversee development of a national strategic plan for transportation investment and to recommend appropriate revenue adjustments to the Congress to implement that plan. It compares this idea with the generally successful Base Closure and Realignment Commission (BRAC) that looks at military matters. (Note: Many readers will observe similarity that the acronym of the report’s recommended is nearly identical to the transportation industry association abbreviated as NASSTRAC.)

10 Logistics Infrastructure Programs

The Commission recommends revamping the current patchwork of Federal transportation programs into 10 focused areas. The list of those 10 programs is provided in the graphic nearby.

The second of those 10 programs, titled “Freight Transportation: A Program to Enhance U.S. Global Competitiveness,” recognizes the importance of efficient freight movement to US economic competitiveness. The “chokepoints at major gateways and trade corridors are a potential trade barrier as threatening as tariffs,” the Commission observes.

The Commission recommends creation of a national freight transportation program that would, in conjunction with States and local governments, implement highway, rail, and other improvements to eliminate chokepoints and increase throughput.

The program would provide public investment in crucial, high-cost transportation infrastructure, including highways, areas of public-private partnerships, such “as “intermodal connectors” - roads that link intermodal facilities with an interstate highways - and key sections of interstate highways, such as those near port facilities, where congestion increases air pollution from mobile sources and adds time and costs to the supply chain.”

Where Does the Money Come from?

The report says that additional funding for logistics infrastructure over current investment projections to the tune of almost $200 billion dollars will be needed through 2020.

The headline news of the report was a recommendation to increase gasoline taxes at the pump for consumers by as much as 40 cents per gallon – a potential increase of more than 200% from today’s 18-cent Federal tax.

Less publicized was a call for more taxes from truckers to pay a more proportional amount to their use/benefit of the highway system. While specific proposals are not made, the call appears to be for sharp increases in diesel fuel taxes and other taxes on trucks.

“Increasing the fuel tax without commensurate changes in truck taxes could exacerbate the current situation where heavy trucks pay less than their share of highway costs. When adjusting Federal fuel tax rates, the Commission recommends that tax rates on existing Federal truck taxes be adjusted proportionately to maintain the current allocation of highway cost responsibility,”  the report notes.

That’s not all for shippers and truckers. The Commission notes the role of new container fees levied on goods coming through the Port of Long Beach/LA in funding the Alameda Corridor improvements for moving containers to import warehouses, and says the concept should be used more broadly.

“A freight fee such as a container charge, freight waybill surcharge, or other equitable fee could be used to fund projects that remediate chokepoints and increase throughput,” it writes.

More attractive to shippers is likely the idea to siphon off some of the money from duties and tariffs and into a transportation fund. Currently, all these revenues go to the General Fund. The Commission recommends taking 5% of those collections for infrastructure programs.

Other revenue recommendations include new or higher tolls, and implementation of congestion fees for certain areas and times.

The key questions for shippers will be:

  • What are going to be the real details of potential programs and legislation?
  • What is the cost-benefit analysis?

While most everyone agrees additional infrastructure investment is needed, different options have different costs for shippers and their carriers. At some point, the new costs will exceed the benefits of an improved logistics system.

What’s your take on the Commission’s recommendations? Should shippers be wary of new taxes and fees that, in the end, exceed the benefits? How would you fund what’s needed? Let us know your thoughts at the Feedback button below.

 
     
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