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June 4, 2015

Leveraging the Region’s Freight Assets and Addressing its Challenges

CMAP's regional economic indicators microsite features key measures of metropolitan Chicago's economy and, where applicable, compares these measures to peer metropolitan areas.  The microsite and accompanying Policy Updates are a resource for economic development professionals, planners, and others who seek to understand the complex factors that shape our region's competitiveness in the global economy.  This Policy Update examines challenges facing the regional freight system, continuing our review of freight-related topics that includes previous posts analyzing freight flows into and out of the Chicago region and broader intermodal trends.

One of the key factors in Metropolitan Chicago's economic success is its unparalleled freight assets -- seven interstate highways, six of North America's seven Class I railroads, the nation's fourth busiest cargo airport, and access to the St. Lawrence Waterway.  Each year, between one-quarter and one-third of the nation's freight worth over $3 trillion moves into, out of, or through metropolitan Chicago.

The region specializes not only in industries directly involved in the movement of freight -- for example, logistics, warehousing and distribution, railroads, and trucking -- but also in industries that rely heavily on the freight system, chief among them manufacturing.  Home to the nation's second largest manufacturing cluster, the region has developed nearly 1.1 billion square feet of industrial space.  The three freight-dependent industries of manufacturing, construction, and retail trade represent nearly one-quarter of all jobs in the region and added over $127 billion to the regional economy in 2013, according to Bureau of Economic Analysis data on employment and economic activity.

This Policy Update analyzes core challenges to maintaining the region's status as a freight hub.  Insufficient local, state, and federal revenues have limited the region's ability to invest in maintenance, modernization, and expansion projects to improve freight and passenger transportation.  Congestion slows the movement of goods and reduces the reliability of highways and railroads, and a lack of coordination among the jurisdictions responsible for investing in and regulating the freight system has led to inefficient freight movements and disruptions to communities.  

While the health of the region's freight cluster and infrastructure is key to economic prosperity, it is also important to recognize that freight operations can have negative impacts on communities and residents.  Freight activity can impose delays on passenger cars and trains, raise safety concerns, generate nuisances like noise and pollution, and conflict with neighboring land uses.  Further, some of these impacts can be difficult to address because of limited funding and fractured governance.  The region's freight cluster also faces workforce challenges, with growing shortages of qualified and skilled workers in some key occupations.  Addressing the challenges of the region's freight system presents significant opportunities to improve metropolitan Chicago's long-term economic vitality and ensure high quality of life for its residents.

Lack of Adequate, Dedicated, and Sustainable Funding

Despite its economic importance locally and nationally, the metropolitan Chicago freight system does not have a robust and dedicated source of funding.  Moreover, due to its unique and central role nationally in the movement of goods, the lack of investment in our region's overall transportation infrastructure has broad impact on freight that reaches far beyond the borders of Illinois.

In recent years, insufficient revenue for transportation infrastructure has limited the region's ability to make needed investments in its freight system.  Federal, state, and local transportation revenues, including those that provide public funding for freight improvements, are predicated on traditional user fees, which tie the amount of the fee or tax to utilization of the transportation system.  These fees include the motor fuel tax (MFT), vehicle fees, tire taxes, passenger fares, and tolls.  While the user fee model successfully financed the extensive federal and state highway networks in the postwar decades, changing fuel efficiency standards and failure to raise or index flat, per-gallon taxes have diminished the purchasing power of traditional user-fee revenues. 

Flat-rate per-gallon MFTs levied at federal and state levels tend not to keep pace with infrastructure costs because they are set in statute and must be altered through the legislative process.  As discussed in a recent CMAP policy brief, the flat-rate, per-gallon design of the MFT makes its revenues vulnerable to improvements in vehicle fuel economy and inflation.  If the Illinois MFT rate of 19 cents per gallon had been indexed to the Consumer Price Index in 1990, for example, the rate would have been 34.4 cents per gallon in 2014 -- 82 percent higher than the current rate.  Similar political hurdles to keeping pace with inflation have arisen for other flat transportation user fees like tolls, vehicle registration fees, and transit fares.

At the same time revenues have been declining, the capital needs of the system continue to grow.  While estimates vary across different transportation providers, it is clear that these needs far outstrip the available capital revenues.  The recent update to GO TO 2040 estimates that the core transportation revenues (those currently utilized in the state and region) will be just barely sufficient to maintain and operate the existing transportation system to a safe and adequate level.  This means that nearly $40 billion in funding from new sources will be needed through 2040 to support system enhancements, bring the system toward a state of good repair, and construct a limited number of new major capital projects. 

Congestion Affects Mobility

Today's fast moving economy with its complex supply chains requires speed and reliability, both of which are hindered by congestion.  The most recent Texas Transportation Institute Urban Mobility Report estimates that metropolitan Chicago has the nation's third-worst truck congestion as measured by hours of delay, with 22.8 million trucking hours lost in 2011 at an estimated economic cost of $1.7 billion.

In 2014, the American Transportation Research Institute (ATRI) released its annual list of the worst trucking bottlenecks in the country; three of those locations are in the Chicago region.  The report identifies the Jane Byrne (Circle) Interchange as the nation's second-worst bottleneck and the north and south junctions of I-90 and I-94 as the 11th and 30th, respectively.

Rail terminal operations in Chicago are also beset by congestion because of heavy demand from both freight and passengers.  Nearly half the nation's intermodal rail traffic passes through the region, and over 750 commuter and intercity passenger trains use the rail system each weekday.  Passenger trains tend to move from the edge of the region toward the center, while freight trains tend to move from the southeast to the west or northwest, across passenger flows.  Passenger rail is typically provided operational priority, but this reduces freight speeds at locations where passenger and freight lines cross or share tracks.  Compounding the challenge of high demand, numerous heavily-used freight lines cross each other or major roadways at-grade.  Much of the rail infrastructure in the Chicago region was built over 100 years ago and was not designed to accommodate modern train traffic volumes or freight car counts.  Today, the Chicago region is the nation's largest rail chokepoint, with average freight train speeds ranging from 5 to 12 miles per hour.

Rail infrastructure and freight and passenger rail congestion can cause delays to Metra and Amtrak passenger rail service, as well as to motorists, bicyclists, and pedestrians at highway-rail grade crossings.  The Illinois Commerce Commission estimates that such grade crossings affect over 380,000 motorists each weekday in northeastern Illinois, who are delayed a collective 7,817 hours at the region's 1,500 highway-rail grade crossings.  A select few of these crossings are particularly severe, with the top 100 locations accounting for over 60 percent of total delay.  In some cases, particularly near train yards and near rail-rail crossings, delays can be excessive, at times exceeding an hour in length.  At-grade crossings are also a safety concern for the region's communities.  Between 2009-14 there were 283 collisions at public highway-rail grade crossings that resulted in 65 fatalities and 146 injuries.

Local Freight Network Governance

While the freight system generates regional economic benefits, freight activities can impose costs on local communities.  Some of these points of conflict are readily apparent: Many freight activities create noise and vibrations, contribute to air and water pollution, and generate truck traffic.  This traffic, in turn, increases congestion, imposes significant damage on road pavement, and can affect public safety.  In some areas, trucks choose to drive through neighborhoods rather than along designated truck routes. 

In part, some trucks may choose neighborhood roads because the regional truck network is so complex.  Northeastern Illinois contains seven counties, 284 municipalities, and 123 townships that, along with the state, have jurisdiction over the highway network.  These agencies can designate truck routes, determine size and weight limits for trucks on various roads, and impose fees for vehicles that exceed those standards.  This system can lead to instances where local truck routes do not meet at jurisdictional boundaries.  Further, local governments have authority to regulate truck parking and impose restrictions on delivery times.  On a regional level, these piecemeal regulations can create a disjointed patchwork that presents challenges for truck drivers and businesses.  

Planning for Freight-Supportive Land Uses

A combination of local regulations and market factors has changed the geography of freight land uses in the region.  While the region still has a strong core of industrial development, particularly around transportation assets, new facilities are increasingly built on the outskirts of the region where larger parcels of land are more readily available, land prices are lower, and fewer conflicting land uses are located.  At the same time, some freight facilities in the core of the region have faced pressures to convert to other uses such as residential or retail. 

While freight-related land uses often provide a high economic benefit for the region, many local communities choose not to encourage freight-related development.  Further, municipalities in the region have a fiscal incentive to emphasize land uses that maximize municipal revenue streams.  Despite producing higher economic output, freight and industrial land uses often generate less revenue for municipalities, making them potentially less attractive than other land uses.

There are potential regional costs to this trend.  Development at the edge of the region often requires the construction of new infrastructure, whereas redevelopment of existing industrial and freight-related land in the core of the region could use existing infrastructure.  The decentralization of freight land usage may also create incongruity between where jobs are located and where workers live, resulting in more congestion as employees travel farther to get to work and have fewer public transportation options.  Additionally, the placement of freight facilities far from the region's traditional freight and manufacturing core may require longer truck trips, also contributing to congestion.

Workforce

One of the region's strengths is its large and diverse workforce.  However, CMAP analysis of EMSI and Bureau of Labor Statistics data found that more than half of the region's truck and rail transportation workers are over the age of 45 and could retire within the next 20 years.  Finding enough skilled workers to fill jobs left open by these likely retirements will be a critical challenge for the region's freight cluster. 

Compounding the challenge of an aging workforce, some freight cluster employers are hard pressed to recruit and retain workers.  For example, truck drivers are listed as one of the top ten most difficult to fill occupations according to the American Staffing Association, and recent EMSI analysis shows a significant nationwide increase in the number of job postings for truck drivers since 2013.  Retaining truck drivers can be difficult because of the long hours and low compensation associated with entry-level driver jobs.  The American Trucking Association recently reported that truck driver turnover was 96 percent nationally in the fourth quarter of 2014. 

Looking Forward

GO TO 2040 recognizes the many challenges facing the freight system and the regional economic importance of efficient freight movement.  CMAP continues this effort by working to inform local, state, and federal policymakers about the health of the region's economy and its infrastructure assets.  In addition to CMAP's Regional Economic Indicators website, the recently published data visualization website depicts data on GO TO 2040's performance measures, goals, and progress tracking for the regional transportation system.  Two recent Policy Updates highlight this data by investigating rail crossing delays and the status of the CREATE rail program to closely analyze the region's efforts to improve reliability and reduce congestion.

In addition to research and analysis of the freight system, CMAP has two efforts underway to address regulatory issues related to truck permitting and truck routing within the region.  Working through CMAP's Local Technical Assistance program, these planning efforts will help to promote efficient freight movement, economic development, and quality of life.

CMAP has also focused on federal policy, including an effort to coordinate with other major metropolitan regions across the country to identify and advocate for common interests.  More specifically, this group calls for the next federal transportation authorization to take a multimodal perspective on freight policy, provide at least $2 billion in annual funding for freight improvements, and incorporate regions into the investment decision-making process.  These policy positions build on the current federal transportation authorization, which for the first time establishes national freight policy, albeit with limitations.  The keen federal interest in freight topics presents a unique opportunity for the nation's metropolitan regions, and Chicago in particular, as increased investment in the nation and region's freight system would support a vital part of our economy.  

To help address freight challenges, CMAP is currently working to develop a regional freight plan as part of the next comprehensive plan.  This effort will build upon the policies of GO TO 2040, recent and ongoing CMAP research, and the growing awareness at all scales of the importance of freight.