Financing transport capacity in the United States Is experience elsewhere useful? Presentation to Minnesota Agri-growth Council Minneapolis, MN March 21, 22 Louis S. Thompson Railways Adviser The World Bank http://www.worldbank.org/transport/rl_over.htm
Freight demand growth in the U.S. Demand has grown steadily for truck and rail The relationship of transportation demand to GDP is strong, but a chicken and egg issue Limited potential for modal shifts Limited effect of electronic data versus freight movement
Ton-Km in the U.S. by mode (, Ton-Km) 25,, 2,, Rail Lakes Truck Canals 15,, Pipelines Air 1,, 5,, 29 34 39 44 49 54 59 64 69 74 79 84 89 94 99
Freight modal shares in the U.S. (% T-Km) Rail Truck Lakes Rivers Pipelines Air 6 5 Deregulation 4 3 2 1 5 55 6 65 7 75 8 85 9 95
U.S. transportation capacity history -- railroads Rail (responding to market incentives) Early growth, then decline Post Staggers deregulation, reducing capacity, increasing demand and density. Dramatic productivity growth, decline in tariffs Capacity is becoming stretched
Km of Rail Line in the US 4 Class I Railroads 35 3 25 2 15 Local Railroads 1 5 Regional Railroads 182 184 186 188 19 192 194 196 198 2
Employees of US railroads 25 2 Class I Railroads 15 1 5 1915 192 1925 193 1935 194 1945 195 1955 196 1965 197 1975 198 1985 199 1995 2 In 1998 Regional Railroads had 1,995 employees and Local Railroads had 11,741 employees
Productivity in U.S. railroads: Index: 1982=1 45 4 35 3 25 2 15 Wagons (Ton-km/ton of wagon capacity) Labor (Ton-km/employee) 1 5 Locomotives: (Ton-km/horsepower) 195 1955 196 1965 197 1975 198 1985 199 1995 2
US rail freight revenue (US cents/ton-km) 3.5 3 Constant 1988 dollars 2.5 2 1.5 1 Current dollars.5 197 1975 198 1985 199 1995 2 Source: AAR Handbooks of Railroad facts, various years
1997 U.S. rail traffic 4.5 4 3.5 3 2.5 2 1.5 1.5 Revenue/Ton-Mile Revenue/Variable Cost Average Average 1. Coal Farm Products Food Metallic Ores Lumber/ Wood Nonmetallic Minerals Top 12 commodities, 86 % of ton-miles Primary Metals Clay, Concrete Petroleum/Coal Prod Pulp, Paper Chemicals Transportation Eqpt
Ton-Mi/Mi on U.S. Class I Railroads 12, 11, 1, 9, 8, 7, 6, 5, 4, 3, 2, Amtrak Established Deregulation 195 196 197 198 199 2
Average U.S. freight train speed (mph) 15 16 17 18 19 2 21 22 23 24 25 1945 195 1955 196 1965 197 1975 198 1985 199 1995 2
U.S. rail freight line traffic density -- 1995
Rail traffic density comparison traffic units per kilometer passenger and freight 3, 25, 2, Freight only 15, 1, 5, Hungary Turkey UK Sweden France Poland Romania Italy Germany CN Austria CP Netherlands India China Russia Korea Japan US:Class I Note: traffic units is the sum of ton-km plus passenger-km
Labor productivity 1999 and compared with 1988 Output ( TU)/Employee 14 12 1 8 6 4 2 Poland Slovenia Turkey Romania Cz+Slvk Hungary Bulgaria Croatia Macedonia TU/Emp Ratio 99/88 % Ukraine Lithuania Armenia Latvia Belarus Estonia Russia Kazakhstan US:Amtrak France Italy Austria Ratio of: 99 output/employee to 88 output/employee % 25 2 15 1 5 US: Cl I Frt Canada:CN Finland Germany* CEE CIS EUR/NA Source: World Bank Railway Database
U.S. transport capacity: roads and highways Roads: (the U.S. built them and the traffic came even faster) Lane-mile capacity growth More rapid traffic increases (auto and bus vs. truck) The urban/rural balance Result: increasing congestion
Lane-miles of major highways in the U.S. 1,3, 1,2, 1,1, 1,, 9, 8, 7, 6, 5, 4, 3, 2, 1, Interstates Other Arterials Total 198 1985 199 1995 2 Source: National Transportation Statistics 2
Interstate Highways mileage 45 4 35 3 25 2 15 1 5 1955 196 1965 197 1975 198 1985 199 1995 2
Highway traffic density in the U.S. Index: 198=1 (Vehicle Miles Traveled/Lane-Mile) index 19 18 17 16 15 14 13 12 11 1 9 Urban Interstate Urban Arterials Rural Interstate Rural Arterials 198 1985 199 1995 Source: National Transportation Statistics 2
Urban highway congestion Congestion Index: >1. = undesirable 1.2 1.1 1.9.8.7.6 Minneapolis/St Paul Average for all 68 cities 1982 1984 1986 1988 199 1992 1994 1996 68 cities total. 5 largest plus 18 selected by States. 5 congested in 1982, 4 congested in 1997 Source: National Transportation Statistics 2
Financing issues: past and future How the U.S. financed transport capacity in the past Transport financing in U.S. compared with elsewhere The various degrees of cross subsidy
Balance of U.S. transportation spending in 1998 8, 6, 4, State Federal 2, Air Water -2, -4, Charges Spending Net Charges Spending Net Charges Spending Net Charges Spending Net Charges Spending Net -6, Transit Rail -8, -1, -12, Highways
Average highway user charge revenue: U.K. compared to U.S. (US cents per vehicle mile) 5 45 4 35 3 25 2 15 1 5 UK US Auto Light trucks Heavy trucks Source: Sansom, Nash, Mackie, et al, Surface Transport Costs and Charges, Great Britain, 1998 And, Addendum to the 1997 Federal Highway Cost Allocation Study, May, 2
Ratio of highway user charge revenue to fully allocated infrastructure costs 45 4 35 3 25 2 15 1 5 Auto Light trucks Heavy trucks UK US Source: Sansom, Nash, Mackie, et al, Surface Transport Costs and Charges, Great Britain, 1998 And, Addendum to the 1997 Federal Highway Cost Allocation Study, May, 2
Financing capacity in the future:barriers What can the U.S. afford? Railroads Highways Getting prices right, for capacity and for environmental effects Funding and administrative barriers (FAA and air traffic control, Corps of Engineers, funding fences) A better public/private balance Public investment in private rail infrastructure? Private investment in highway infrastructure? New technology (road pricing, intelligent vehicles, rail signaling and electrification): does or can it promote efficiency and increase capacity?
GDP/Capita 1999 (US$ at PPP) 35 3 25 2 15 1 5 Italy Ireland Spain Poland Mexico Russia Brazil Romania China India Sweden UK US Norway Denmark Belgium Japan Canada Netherlands Germany France Finland Source: WDR 2/21, pg 274/275
Class I railroad investment in track as % of total investment 8 75 7 65 6 55 5 Accounting Change 45 4 35 3 1978 198 1982 1984 1986 1988 199 1992 1994 1996 1998
Rate of Return in U.S. Railroads () 14 12 1 Net income as % of shareholder equity 8 6 Net Railway Operating Income as % of Asset Value 4 2-2 1935 194 1945 195 1955 196 1965 197 1975 198 1985 199 1995 2
One approach to relieving urban congestion
Average U.S. freight tariffs Index: 199 = 1 14 12 1 8 6 Rail LTL truck TL truck Barge Prod.Price 4 2 Deregulation 195 196 197 198 199 2
Gasoline and diesel fuel prices (US $/gallon) 1998 5 4.5 4 3.5 3 2.5 2 1.5 1.5 Saudi Arabia Gasoline (super) Diesel Untaxed Russia India China US Average Mexico Brazil Canada Romania Poland Germany Japan Spain France Finland Netherlands Sweden Belgium Denmark Italy Ireland Norway UK Source: Fuel Prices and Taxation, GTZ, May 1999
Ratio of highway user charge revenue to marginal transport costs in the U.K. and U.S. 9 8 7 6 5 4 3 2 1 UK US Auto Light trucks Heavy trucks Source: Sansom, Nash, Mackie, et al, Surface Transport Costs and Charges, Great Britain, 1998 And, Addendum to the 1997 Federal Highway Cost Allocation Study, May, 2
Percent of marginal costs attributable to congestion 9 8 7 6 5 4 3 2 1 Auto Light trucks Heavy trucks UK US Source: Sansom, Nash, Mackie, et al, Surface Transport Costs and Charges, Great Britain, 1998 And, Addendum to the 1997 Federal Highway Cost Allocation Study, May, 2