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Report to the Senate Committee on Commerce, Science, and Transportation 
and the House Committee on Transportation and Infrastructure: 

July 2005: 

Freight Transportation: 

Short Sea Shipping Option Shows Importance of Systematic Approach to 
Public Investment Decisions: 

GAO-05-768: 

GAO Highlights: 

Highlights of GAO-05-768, a report to the Senate Committee on Commerce, 
Science, and Transportation and the House Committee on Transportation 
and Infrastructure: 

Why GAO Did This Study: 

A dramatic increase in freight moving on the nation’s highways and rail 
lines, coupled with growing congestion and infrastructure limitations, 
has prompted DOT to explore new mobility-enhancing options like short 
sea shipping (SSS)—transporting freight by water between domestic 
ports, either along the coast or on inland waterways. This report 
describes (1) why SSS is being considered and factors affecting its 
viability, (2) the department’s role in the development of this option, 
and (3) issues that should be considered by public transportation 
decision makers when making investment decisions about this option or 
other types of projects for addressing freight mobility challenges. 
This report is based on a review of pertinent studies, federal 
activities, and an examination of two new SSS operations. 

What GAO Found: 

Transportation experts have cited numerous benefits, such as congestion 
mitigation, for developing short sea shipping, but they have also noted 
numerous obstacles, such as shippers’ reluctance to try a different 
mode for transporting their cargo, that impede its development. Absent 
in-depth information on the benefits and obstacles, opinions vary on 
how to proceed. Some stakeholders favor extensive public involvement, 
including federal funding for projects while others see a more limited 
public role, such as addressing regulatory provisions that may 
interfere with its development. The two new services GAO examined 
provide insights—but no clear answers—about the viability of this 
approach.

The Department of Transportation (DOT) has made short sea shipping a 
high-priority option to enhance freight mobility and has drafted a 
policy proposal to provide potential federal funding. So far, the 
department’s efforts have been too narrowly focused. Before determining 
that federal funding should be applied to its development, a thorough 
understanding of key issues is required, such as the potential effect 
of federal involvement on the competitive balance among all 
transportation modes, lessons to be learned from recent start-up 
services, and actions that could mitigate identified obstacles, 
particularly with respect to reluctance to use this option. 

Public transportation decision makers are also actively considering 
short sea shipping in the context of a range of other options to 
address freight mobility challenges in their jurisdictions. Improving 
freight mobility, however, is a particularly complex challenge because 
the freight transportation system encompasses many modes on systems 
owned, funded, and operated by both the public and private sectors. In 
light of growing budget deficits, public decision makers must guard 
against waste of limited public resources when making investment 
decisions. This report contains a four-step approach for helping public 
decision makers define the rationale for public involvement, assess the 
merits of projects, determine the appropriate level and type of public 
support, and evaluate project results. 

Self-propelled Short Sea Shipping Vessel: 

[See PDF for image]

[End of figure] 

What GAO Recommends: 

GAO recommends that the Secretary of DOT and the Administrator of the 
Maritime Administration: (1) develop a more thorough understanding of 
SSS issues before defining a federal role involving substantial federal 
investment and (2) use current mechanisms to encourage other public 
decision makers to use a systematic approach for making investment 
decisions on freight mobility projects. 

DOT officials generally agreed with the contents and agreed with the 
recommendations in this report.

www.gao.gov/cgi-bin/getrpt?GAO-05-768.

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact JayEtta Z. Hecker at 
(202) 512-2834 or heckerj@gao.gov.

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Transportation Stakeholders See Short Sea Shipping As Having Multiple 
Benefits, but Also Cite Obstacles That May Impede Development: 

The Department of Transportation's Role in the Development of SSS and 
Freight Transportation Improvements Needs More Careful Study: 

A Sound Investment Approach Is Needed to Guide Current and Future State 
and Local Public Investments in Freight Improvements: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendixes: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Characteristics of Traditional and Newer Waterborne Services: 

Table 2: Benefits of Short Sea Shipping Cited by Stakeholders: 

Table 3: Summary of Operating Characteristics of SSS Services GAO 
Studied: 

Figures: 

Figure 1: The Sea Trader: 

Figure 2: Map of the Gulf Coast Service: 

Figure 3: Map of the Northeast Service: 

Figure 4: Investment Approach to Guide Public Investment Decisions: 

Abbreviations: 

CMAQ: Congestion Mitigation and Air Quality: 

DOT: Department of Transportation: 

FAST: Freight Action Strategy: 

FHWA: Federal Highway Administration: 

FTA: Federal Transit Administration: 

ISTEA: Intermodal Surface Transportation Equity Act: 

MARAD: Maritime Administration: 

MPO: metropolitan planning organization: 

NYMTC: New York Metropolitan Transportation Council: 

PIDN: Port Inland Distribution Network: 

SEA-21: Sea Transportation Efficiency Act of the 21st Century: 

SSS: short sea shipping: 

TEA-21: Transportation Equity Act for the 21st Century: 

TIFIA: Transportation Infrastructure Finance and Innovation Act: 

Letter July 29, 2005: 

The Honorable Ted Stevens: 
Chairman: 
The Honorable Daniel K. Inouye: 
Co-Chairman: 
Committee on Commerce, Science, and Transportation: 
United States Senate: 

The Honorable Don Young: 
Chairman: 
The Honorable James Oberstar: 
Ranking Democratic Member: 
Committee on Transportation and Infrastructure: 
House of Representatives: 

A robust U.S. economy depends on the efficient movement of freight to 
fuel domestic production and satisfy consumer demand. In 2002, 16 
billion tons of freight, valued at about $11 trillion in year 2000 
dollars, moved through the U.S. transportation system. The efficient 
movement of these goods across roadways, rail lines, and inland 
waterways, helps ensure that factories remain efficient, packages are 
delivered on time, and retail and grocery store shelves are stocked. 
Efficient freight movement also tends to lower total shipping costs, 
helping keep production costs and consumer prices lower, and these 
savings to households and businesses help ensure that American products 
remain competitive in global markets. 

Increases in freight volume coupled with current rail, roadway, and 
port capacity problems, however, are stressing the capacity of the U.S. 
transportation system and interfering with the efficient movement of 
these goods. Estimates made in 2003 suggest that growing international 
trade and domestic production will increase overall freight traffic by 
70 percent by 2020. Adding this much freight to the transportation 
system is particularly worrisome since the system is currently showing 
signs of strain. For example, roadway congestion, which affects 60 
percent of the freeway mileage in urban areas, is causing significant 
delays for truck traffic in certain cities. Driver shortages further 
impact the efficient movement of goods and make it difficult for 
trucking companies to expand capacity--a factor that is particularly 
relevant since trucks carry 78 percent of the nation's goods (measured 
in terms of freight tonnage). Freight movement by rail is also 
encountering serious capacity problems in many areas. In July 2004, for 
example, Union Pacific took measures to limit service because 
increasing freight volumes were affecting service levels.[Footnote 1] 
The 2002 Mid-Atlantic Rail Operations Study,[Footnote 2] which analyzed 
rail traffic in five states in the Northeast, noted that there was a 
lack of capacity on critical rail lines in at least 25 different 
locations. Congestion at freight gateways--container ports and land 
border crossings--is also expected to worsen as containerized imports 
from our international trading partners are estimated to double in the 
next 15 years. 

There are no quick and easy remedies for these capacity problems. 
Addressing these problems is a particularly complex challenge because 
the surface transportation system encompasses many modes--water, 
highway, transit, and rail--on systems owned, funded, and operated by 
the public and private sectors, or both. State and local governments, 
for example, have primary responsibility for selecting projects within 
their jurisdictions, while private sector companies conduct most of the 
actual transportation of cargo. Public transportation decision makers 
who attempt to expand infrastructure capacity face a myriad of funding, 
planning, and regulatory constraints. Highway projects costing from 
$100 million to several billion dollars, for example, are becoming 
commonplace and can take as much as two decades to complete. In the New 
York City area, transportation officials estimate that transportation 
projects will cost an estimated $147.1 billion (in 2005 dollars) by 
2030, and most of this money is needed just to maintain the current 
infrastructure.[Footnote 3] Freight railroad expansion efforts, which 
are largely a private-sector endeavor, are also costly. The Mid- 
Atlantic Rail study estimated that it would cost $6.2 billion to 
address freight rail capacity needs in that region.[Footnote 4] These 
problems are only exacerbated by difficulties in accessing federal, 
state, and local funding sources for freight projects. Public officials 
have noted that inadequate funds for freight projects also hinder 
expansion efforts. Finally, in many larger urban areas, a lack of 
available land to build new roads or rail lines adds to the constraints 
imposed by the costs to expand capacity. 

The continued growth in freight volume has led the U.S. Department of 
Transportation to explore alternatives to improve freight mobility. One 
of the options the agency is exploring involves the use of waterborne 
freight, known as short sea shipping. Broadly defined, short sea 
shipping encompasses waterborne transportation of commercial freight 
between domestic ports through the use of inland and coastal 
waterways.[Footnote 5] The department is exploring whether moving more 
freight in this manner could provide an economically viable option to 
relieve some highway and rail congestion while increasing freight 
mobility. We conducted this study to provide information to the 
Congress about this effort as it considers various ways to enhance 
freight mobility. Our report addresses (1) why short sea shipping is 
being considered as an option for addressing freight mobility concerns 
and the factors that affect its viability as an approach, (2) the 
Department of Transportation's role in the development of short sea 
shipping, and (3) issues that should be considered by public 
transportation decision makers when making public investment decisions 
about short sea shipping or other types of projects for addressing 
freight mobility challenges. 

To determine why short sea shipping is being considered as an option 
for addressing freight mobility concerns and the factors that affect 
its viability as an approach in the United States, we conducted a 
literature review of public-and private-sector reports and studies 
related to freight mobility issues and the waterborne transport of 
goods, and interviewed known short sea shipping experts in the public 
and private sectors. To determine whether the issues identified through 
the literature review and interviews were evident in practice, we 
visited two short sea shipping operations and interviewed a wide range 
of public and private transportation officials involved with or 
knowledgeable about the services. In identifying existing services, we 
relied on information gleaned from the literature review and 
interviews, and selected a private-sector operation that ships cargo 
along the Gulf of Mexico and a publicly funded operation that ships 
cargo between the Port Authority of New York and New Jersey and the 
Port of Albany. We also interviewed officials at the federal level, 
including at the Department of Transportation and the Department of 
Homeland Security's Customs and Border Protection agency, to supplement 
information obtained through the literature review and interviews. To 
determine the Department of Transportation's role in the development of 
short sea shipping, we interviewed officials at the department and its 
agencies, including the Maritime Administration and the Federal Highway 
Administration. We also collected and analyzed documents supplied by 
the department and its agencies. To determine issues that should be 
considered when making public investment decisions, we analyzed the 
results of this review of short sea shipping and built on the 
perspectives gained from our past work in transportation systems and 
federal investment strategies.[Footnote 6] We performed our work from 
July 2004 through June 2005 in accordance with generally accepted 
government auditing standards. 

Results in Brief: 

Transportation stakeholders representing both the public and private 
sectors believe that incorporating short sea shipping into the surface 
transportation system can produce numerous public benefits, but 
stakeholders also note that numerous factors may limit the development 
of short sea shipping services in the United States. Potential benefits 
of new applications of short sea shipping, according to these 
transportation stakeholders, include improved freight mobility, 
improved air quality, and reduced public expenditures on large 
infrastructure projects. For example, some transportation officials in 
the Northeast believe that a short sea shipping service operating out 
of the Port Authority of New York and New Jersey could relieve 
congestion in and around New York City because cargo could move by ship 
rather than by truck. Transportation officials note, however, that 
numerous legal, operational, and acceptance-related factors, such as 
laws that increase start-up costs, necessary modifications to port 
facilities, and a general reluctance among shippers to try new modes, 
may present obstacles to a wider development of short sea shipping 
services. For example, ports may be mainly set up to lift containers 
from large cargo ships using cranes, but short sea shipping operations 
may instead use trucks to roll containers on and off barges or small 
ships--an approach requiring new truck ramps and holding areas. The 
effect of such factors, however, remains somewhat unclear, given that 
few new applications of short sea shipping have been developed. For the 
two operations we examined, many of these factors were apparently not 
insurmountable, although there were indications that some factors may 
interfere with further development. For example, operators of a service 
between several ports in the Gulf of Mexico said the federal 
requirement to use a U.S.-built ship for domestic shipping was limiting 
their ability to expand capacity, because there are a limited number of 
U.S.-built ships available on the market. Sponsors of a service between 
the Port Authority of New York and New Jersey and the Port of Albany 
said that shipper reluctance to use the service was limiting their 
ability to attract more business, even though the subsidized service is 
being offered at a lower cost than trucking. 

The Department of Transportation has established short sea shipping as 
a high priority component of the federal freight transportation 
strategy and has drafted a policy proposal to provide targeted 
incentives for short sea shipping projects. The department has been 
exploring the potential of the option to reduce congestion and expand 
capacity of the freight transportation system, but its efforts to date 
have been narrowly focused--that is, they have been focused on the 
option itself and not on the impact of this option on other 
transportation modes or of federal involvement in its development. 
Nonetheless, the Department of Transportation is already contemplating 
a potential role for the federal government; it has developed policy 
proposals that would include short sea shipping as a central component 
of increased federal investment in the maritime sector. Before 
determining that federal involvement is appropriate, a more 
comprehensive understanding of key issues should be explored. If a 
federal role does exist, key issues that are pertinent to this role are 
(1) how to go about providing federal support to privately owned and 
operated infrastructure and (2) whether and how to increase funding 
levels for freight improvement projects. Considering the implications 
of these broader issues can help guide the agency in defining the 
federal role and ensure that the federal approach for short sea 
shipping development is part of an integrated federal approach to 
addressing the nation's congestion and capacity problems. 

As the federal role is being defined and clarified, public 
transportation decision makers at the state and local levels are also 
actively considering short sea shipping and other options to address 
the freight mobility challenges affecting their jurisdictions. 
Increased funding constraints and compartmentalized funding programs, 
however, create challenges for public decision makers in setting 
transportation priorities and linking resources to results to ensure 
that limited public dollars are wisely and effectively spent. A 
systematic investment approach to guide public investment decisions at 
all levels--federal, state, and local--could help public decision 
makers in making those difficult choices. Building on the perspectives 
gained from our past work in federal investment strategies and the work 
of transportation experts, we developed a four-step approach that may 
be helpful. The first step of the approach involves determining whether 
public support for a proposed project is warranted by considering 
whether it is expected to produce public benefits, such as reduced 
congestion, improved air quality, and economic development 
opportunities. If a rationale for public involvement can be 
established, the second step involves a closer scrutiny of the proposed 
project through an analysis of the costs and expected benefits of the 
proposed project to determine if the project is the most cost-effective 
option among alternatives. The third step of the approach involves 
determining the level and type of public support to be provided. This 
step involves recognizing that public support does not necessarily mean 
financial support, but when financial support is provided, it should be 
structured in such a way to minimize distortion of any competition. The 
final step involves the evaluation of ongoing and completed projects to 
determine if intended benefits have been achieved and to hold decision 
makers accountable for their public investment decisions. 

We recommend that the Secretary of Transportation and the 
Administrator, Maritime Administration, (1) ensure that a comprehensive 
understanding of key issues is developed before defining a federal role 
that would involve any substantial federal investment in short sea 
shipping projects and (2) use current mechanisms to encourage decision 
makers at all levels to take a more systematic approach to making 
decisions about freight mobility projects. In commenting on a draft of 
this report, the Department of Transportation generally agreed with its 
contents and agreed with the recommendations. The department also 
provided technical comments that we incorporated, as appropriate. 

Background: 

Transporting freight by water has been part of the freight network for 
many years in the United States, but most operations have traditionally 
been used for the movement of bulk commodities, such as coal, 
petroleum, grain, and lumber. Waterborne modes, sometimes referred to 
as short sea shipping (SSS) operations, currently operate along the 
Mississippi River system, across the Great Lakes, through the St. 
Lawrence Seaway, and along some coastal routes. Together, these 
operations moved about 6 percent of the nation's freight tonnage in 
2000. SSS is one of the most cost-effective ways to move heavy, lower- 
value, and non-time-sensitive goods, but since it is slower and less 
reliable than trucking or air, shippers tend to move higher-value and 
time-sensitive freight by faster and more reliable modes, such as 
trucking or air. 

Recent years have brought an increasing focus on developing new SSS 
options that are better suited for moving cargo that normally travels 
by truck and tends to include higher-value and time-sensitive goods. 
(See table 1 for examples of traditional and newer waterborne 
services.) Some of these proposals rely on traditional waterborne 
methods, such as tug-and-barges, that are adapted to move containerized 
cargo instead of the traditional bulk commodities. For example, one 
operation we examined uses a tug-and-barge to move containers between 
two cities in the Northeast. Other proposals, however, look much 
different from the traditional waterborne modes. For example, one 
operation has proposed using two self-propelled ships to move 
containerized cargo along coastal waterways at faster speeds than tug- 
and-barges. Another proposal calls for building a dozen "next- 
generation" vessels that could move trucks and passenger cars along an 
extensive waterway network at more than four times the speed of tug- 
and-barges. 

Table 1: Characteristics of Traditional and Newer Waterborne Services: 

Characteristics: Cargo; 
Traditional services: Mostly lower-value non-time-sensitive cargoes, 
including bulk commodities, such as grain, coal, and lumber; 
Newer services: Many different types, but many are targeted at the 
higher-value time-sensitive containerized freight that normally moves 
by truck. 

Characteristics: Vessel speed/type; 
Traditional services: Mostly slower-moving tug-and-barge operations; 
Newer services: Higher-speed self-propelled vessels; many propose using 
ships that can allow trucks to roll on and roll off, instead of the 
traditional methods in which cargo is lifted on and off by large 
cranes. 

Characteristics: Areas served; 
Traditional services: Along inland waterways and the Great Lakes; 
Newer services: Proposals include the Great Lakes and inland waterways, 
but many are focused on coastal routes that parallel high-traffic 
interstates. 

Characteristics: Purpose; 
Traditional services: To provide the most economical way to move low-
value and non-time-sensitive freight; 
Newer services: To remove cargo from busy truck cargo routes and port 
areas. 

Source: GAO analysis of information from studies, interviews, and other 
sources. 

[End of table]

To develop these newer types of SSS operations, some transportation 
stakeholders have called for extensive public-sector involvement, while 
others have advocated for a more limited government role. For example, 
some transportation stakeholders believe that the federal government 
should provide money for SSS demonstration projects or heavily 
subsidize start-up operations to prove to shippers that this is a 
viable mode of transportation. Others, however, see a more limited 
government role and argue that government officials should focus their 
efforts on addressing regulatory provisions that may interfere with the 
development of SSS operations. 

The waterborne transportation of freight has a strong presence in 
Europe, where European Union policies have encouraged its use. In 
Europe, SSS grew steadily between 1970 and 1998.[Footnote 7] Shipping 
in Europe, however, is not directly analogous to shipping higher-value 
freight in the United States. For example, Europe's rail system is less 
efficient for moving freight than the U.S. rail system, and because of 
Europe's geography, many of Europe's main industrial centers are close 
to waterways. Thus, in many cases, SSS routes in Europe may provide the 
fastest and most reliable service between destinations. In addition, 
legal provisions--such as road taxation and driving restrictions-- 
increase the cost of road transport in Europe and play a role in the 
greater use of SSS. 

Federal funding that could potentially be used to assist with the 
development of SSS in the United States is currently limited. Under 
certain circumstances, however, current federal laws could provide some 
financing for waterborne options because these laws allow states more 
flexibility to expend federal aid on certain nonhighway freight 
projects. The Intermodal Surface Transportation Efficiency Act of 1991 
(ISTEA) and its successor, the Transportation Equity Act for the 21st 
Century (TEA-21), broadened the reach of programs established under 
title 23 of the United States Code[Footnote 8] to fund and finance 
surface transportation projects with user tax receipts[Footnote 9] 
credited to the Highway Trust Fund and distributed to states through 
annual apportionments according to statutory formula.[Footnote 10] 
While funds apportioned to the states are most often used to build and 
maintain roads, innovations in ISTEA and TEA-21 allow transportation 
decision makers some flexibility in using funds for freight improvement 
projects. For example, funds can be used to make improvements to rail 
lines and port facilities. The current federal framework also allows 
for greater use of public-private partnerships through programs such as 
the Transportation Infrastructure Finance and Innovation Act of 
1998,[Footnote 11] a program that provides federal loans or loan 
guarantees to be used in concert with funding from other sources, 
including the private sector. 

Transportation planning occurs at the federal, state, and local levels. 
Although the last two surface transportation reauthorizations provided 
enhanced project-specific decision authority for the use of formula 
funds to the state level, the U.S. Department of Transportation (DOT) 
has responsibility for nationwide transportation planning, as well as 
program-level oversight. DOT has recently become involved in exploring 
the potential of SSS to expand the capacity of the freight 
transportation system to improve freight mobility and reduce 
congestion. In its strategic plan, DOT states that the U.S. coastal and 
inland waterway system is underutilized and could provide a practical, 
safe, and efficient means of transporting freight.[Footnote 12] Through 
its National Freight Action Agenda, DOT has specifically identified SSS 
for accelerated development.[Footnote 13] As the primary operating 
agency within DOT responsible for promoting SSS, the Maritime 
Administration (MARAD) has also made SSS a high-visibility component of 
its strategic plan.[Footnote 14] MARAD's Strategic Plan proposes that 
greater use of the maritime transportation system, through elements 
like SSS, offers the potential to reduce passenger and freight 
congestion, as well as facilitate increased U.S. military reliance on 
commercial marine transportation systems.[Footnote 15]

Transportation Stakeholders See Short Sea Shipping As Having Multiple 
Benefits, but Also Cite Obstacles That May Impede Development: 

Stakeholders, including transportation officials and maritime 
stakeholders representing both the public and private sectors, see SSS 
as a potential option for improving freight mobility and creating other 
benefits, especially in high-demand transportation corridors, but they 
also note that certain obstacles may limit its development. Benefits 
cited include improved freight mobility, reduced infrastructure 
spending, and improved air quality. Potential obstacles to being an 
effective competitor include laws that increase start-up and operating 
costs, port facilities that are not readily adaptable to SSS 
operations, and a general reluctance among shippers to try new modes. 
For the two operations we examined, the effect of these potential 
obstacles varied. Some affected the viability of the operations, but 
others appeared to have little effect or were overcome by the 
operators. 

Benefits Cited Include Improved Freight Mobility, Improved Air Quality, 
and Reduced Infrastructure Spending: 

According to stakeholders, the development of SSS operations may 
produce a number of public benefits.[Footnote 16] (See table 2.) By 
providing an additional option for transporting freight, stakeholders 
contend that such services would increase the capacity of certain 
freight routes, thus alleviating many of the capacity stresses that 
currently affect the surface transportation system. For example, an SSS 
service that moved cargo from New York to Miami might reduce the number 
of trucks on Interstate 95, the major highway between the two cities, 
thereby reducing overall roadway congestion. Similarly, SSS services 
that move containerized cargo out of busy ports to less congested ports 
could help alleviate dock congestion and reduce the number of trucks 
and trains traveling on crowded port access routes, thus alleviating 
capacity constraints affecting many ports. Stakeholders also contend 
that since SSS services are more fuel efficient than trucks, SSS 
operations can help improve air quality in certain locations by 
reducing pollution. Finally, stakeholders contend that SSS services 
could provide a more cost-effective alternative to building new 
roadways and rail lines, thus reducing the amount of money spent on 
infrastructure projects. 

Table 2: Benefits of Short Sea Shipping Cited by Stakeholders: 

Benefit: Improved freight mobility (increased freight capacity); 
Explanation: At a basic level, incorporating SSS into the surface 
transportation system may add capacity to certain cargo routes because 
it increases modal alternatives. SSS operations may also help increase 
capacity in other ways, such as helping remove containers from busy 
ports, thus freeing up needed dock space for incoming cargo. 

Benefit: Improved freight mobility (less congestion); 
Explanation: By taking trucks off the road, SSS may help alleviate 
congestion along key corridors. 

Benefit: Improved air quality; 
Explanation: Barging services may be more fuel efficient than trucking, 
and one barge may be able to carry as much freight as 58 trucks. 
Removing these trucks from the road and using a more fuel-efficient 
option may reduce emissions and improve air quality. 

Benefit: Reduced need to build roadways and rail lines; 
Explanation: By reducing the pressure on existing transportation 
infrastructure, SSS can reduce the need to build new infrastructure. 
Large infrastructure projects, such as new roadways and rail lines, are 
expensive, time consuming, and in some cases may be limited because of 
population density or land costs. 

Source: GAO analysis of studies, reports, interviews, and position 
papers. 

[End of table]

Potential Obstacles Cited Include Legal, Operational, and Acceptance 
Issues: 

While stakeholders contend that such SSS operations can produce a 
number of public benefits, they also note that various obstacles could 
make it difficult for operators to start and sustain an SSS service 
that competes effectively with other modes. Since few SSS services have 
actually been created, there is no consensus about the effect, if any, 
these obstacles would present to SSS development. The potential 
obstacles cited involve legal, operational, and acceptance-related 
challenges. Legal requirements could present a barrier to SSS 
development by increasing the start-up or operating costs of 
operations. Operational challenges involve incompatible infrastructure 
and potential strains on port capacity. Finally, a general 
unwillingness among the shipping community to switch from well- 
established modes, such as trucking and rail--even if SSS can be shown 
to be a competitive option--can present a barrier to SSS development. 

Legal Requirements: 

Paying the Harbor Maintenance Tax. Some proponents contend that the 
Harbor Maintenance Tax, a general levy on the value of cargo moved 
through a port,[Footnote 17] would make SSS less competitive with other 
modes, such as truck or rail, because it places an additional tax 
burden on shipping by water. The fee, which pays for such activities as 
harbor dredging, is levied on the value of cargo (0.125 percent) as it 
is loaded or unloaded from a commercial vessel in a U.S. port.[Footnote 
18] Stakeholders argue that since shippers may avoid the tax by 
utilizing other modes, such as trucking or railroads, few would choose 
to use SSS services. For example, a shipper moving cargo from New York 
to Miami using SSS would be subject to the tax, but the same shipper 
can avoid the tax if the shipment travels by rail or truck. Trucking 
associations note, however, that they, too, are subject to user taxes, 
such as tolls and federal taxes. 

Potentially higher vessel costs because of Jones Act requirements. Some 
SSS stakeholders contend that certain provisions in the Jones 
Act,[Footnote 19] which requires that any vessel (including barges) 
operating between two U.S. ports be U.S.-built, owned, and operated, 
may increase the start-up costs of SSS operations because ships built 
in U.S. shipyards tend to be more expensive than vessels that can be 
acquired from the global market.[Footnote 20] These higher costs, in 
their view, could increase start-up costs and make it difficult for 
operators to create SSS services or sustain profitability. Another 
stakeholder argued that SSS operators are overstating the cost 
differences between U.S. and foreign-built ships and note that even if 
U.S.-built ships are more expensive, these additional capital 
expenditures, given the long operating life of a ship, would add little 
to the cost of each trip. 

Operational Issues: 

Potential need to alter port facilities. Current port infrastructure is 
often designed to accommodate large and deep-draft oceangoing vessels 
and may not be compatible with ships designed for SSS operations. For 
many oceangoing ships, large cranes are generally used to load and 
unload containers. This approach, referred to as "lift-on/lift-off," 
may be compatible with some SSS operations, but others may use 
different loading and unloading techniques. For example, some SSS 
operations may use a different approach, such as "roll-on/roll-off," in 
which trucks drive off and on the ship. Therefore, starting an SSS 
service might require ports to build ramps that allow trucks to move on 
or off the ship or additional dock-side space where truck trailers wait 
to be loaded and unloaded from the ramp. SSS vessels are also smaller 
than oceangoing ships, and this size difference has raised concerns 
that SSS ships will not be compatible with docks designed for larger 
oceangoing vessels. 

Added handling costs. Shipping operators must pay dockworkers to lift 
cargo on or off ships, and some stakeholders have argued that the cost 
of these "lifts" will make SSS services less cost competitive with 
other modes. A shipper moving a container by SSS from New Orleans to 
Houston, for example, would need to pay for at least two "lifts"--one 
at the port of departure and one at the port of arrival. This could add 
hundreds of dollars to the total shipping costs, according to some 
proponents. A shipper choosing to move the goods by truck avoids the 
costs of the "lifts." An SSS service using a roll-on/roll-off approach 
rather than cranes to load its vessels, however, might encounter cost 
savings. 

Potential strains on port capacity. While some SSS services may improve 
port efficiency, thus reducing strains on port capacity, other types of 
SSS services might have the opposite effect, according to some 
stakeholders. For example, a service that attracted additional 
containers to a port for shipment by SSS rather than by truck would add 
to the number of containers entering and leaving the port. Because of 
these concerns, some proponents have advocated basing SSS services at 
ports that handle less cargo than the nation's major freight gateways, 
but these are often further away from the major market areas that 
demand the cargo. 

Acceptance-Related Challenges: 

A viable economic advantage. Some stakeholders note that short sea 
shipping must offer economic advantages before shippers would be 
willing to use such services. Stakeholders note that for shippers to be 
willing to try this new approach, SSS operations would need to provide 
service that is cost-competitive with other modes and is as consistent 
and reliable. In addition, shippers would need to identify some 
advantages to shifting to SSS services, such as faster, more reliable, 
or cheaper service than other transportation modes. 

General reluctance to try new modes. A general reluctance among 
shippers, freight forwarders, and others involved in moving freight to 
try new shipping modes, regardless of the potential benefits, poses an 
additional challenge, according to many stakeholders. One 
transportation stakeholder told us that since shippers have operated 
under negotiated contracts with trucking companies for many years, they 
may be unwilling to shift business to SSS operations regardless of 
perceived benefits. 

SSS Services Examined Were Operationally Different, but Both Attempted 
to Address Similar Freight Capacity Concerns: 

While the two SSS services we examined--one in the Gulf Coast and one 
in the Northeast--differed in many ways,[Footnote 21] both of the 
services were designed to address capacity concerns. The two operations 
differed in such ways as the types of vessels used, operating 
schedules, types of cargo moved, and structure of funding (public or 
private). (See table 3.) Both services, however, were designed to 
provide a modal alternative that could help improve freight mobility 
around ports and along congested cargo routes. 

Table 3: Summary of Operating Characteristics of SSS Services GAO 
Studied: 

Characteristic: Operator/sponsor; 
Gulf Coast service: Osprey Line, LLC (private operator); 
Northeast service: Port of Albany, Port Authority of New York and New 
Jersey (primary project sponsors), and private barge operator (vessel 
operator). 

Characteristic: Funding source; 
Gulf Coast service: Private funding only: Operator charges shippers for 
the service; Northeast service: Private funding: Operator charges 
shippers for the service; 
Public funding: Shipping rates are subsidized with money from a federal 
grant (Congestion Mitigation and Air Quality program) and funds from 
the Port of Albany and the Port Authority of New York and New Jersey. 

Characteristic: Type of cargo; 
Gulf Coast service: International and domestic containerized cargo, 
mostly bulk commodities but also finished manufactured goods; 
Northeast service: International containers (no domestic) carrying 
mostly bulk commodities. 

Characteristic: Vessel type; 
Gulf Coast service: Self-propelled ship (lift-on/lift-off); 
Northeast service: Tug-and-barge operation (lift- on/lift-off). 

Characteristic: Service frequency; 
Gulf Coast service: Once every 7 days; 
Northeast service: Once every 7 days. 

Source: GAO analysis of information provided by SSS operators. 

[End of table]

Gulf Coast Service: 

The Gulf Coast service, which began in 2000, is a private-sector 
initiative designed to attract shippers concerned about several freight 
capacity issues at ports and along key transportation routes. Operating 
on a 7-day cycle[Footnote 22] around the Gulf of Mexico, the Gulf Coast 
service uses a self-propelled U.S. flagship vessel (named Sea Trader) 
to move international and domestic containerized cargo, such as 
building supplies, finished manufactured goods, and chemicals, to and 
from ports in Houston, New Orleans, Tampa, and other cities as needed. 
(See fig. 1 for picture of the Sea Trader.) For example, the service 
moves finished manufactured products from Houston to Tampa and empty 
containers from Florida to Gulf Coast ports. The self-propelled vessel 
completes these types of trips in about half the time of a tug-and- 
barge service, according to the operators of the service. Speed is 
important, they said, because it allows them to compete with trucking 
along these cargo routes. 

Figure 1: The Sea Trader: 

[See PDF for image] 

[End of figure] 

The service has provided a successful solution to several of the 
freight mobility concerns in the area, according to operators. (See 
fig. 2 for a map of the Gulf Coast service.) Two concerns, in 
particular, attracted customers to the service, according to officials 
we spoke with. One was the difficulty of finding truck drivers for 
several routes covered by the service. These routes, such as Houston to 
Tampa, are reportedly undesirable to many truck drivers because they 
involve a long-distance trip that may take multiple days, and the 
drivers often receive compensation for only one leg of the trip. One 
logistics provider[Footnote 23] told us that a company in the region 
began using the SSS service because it was unable to find drivers 
willing to move cargo from Houston to destinations in Florida. 
Operators of the service maintain that the service provides shippers 
with an alternative means of moving cargo along these routes. The 
second concern was declining rail service, which has become 
increasingly unreliable, according to the operators and the logistics 
provider we spoke with. 

According to the operators, the service has also been able to help 
relieve port congestion and provide other public benefits, including 
the following: 

* Because containers can be transferred directly from other ships to 
the SSS vessel at the Port of Houston, fewer trucks will need to travel 
along port access routes, thus reducing congestion on roadways leading 
to and from the port. 

* This ability to pick up cargo from the port also increases the amount 
of cargo that can be removed from the docks during a 24-hour period, 
increasing overall port capacity and reducing the amount of time that 
cargo normally sits on the docks[Footnote 24] before it is loaded onto 
another mode for delivery to its final destination. 

* Finally, to the degree that containers are transported to their 
destination on the SSS vessel instead of on the highway, the service 
reduces the number of trucks traveling along congested roadways. 

Figure 2: Map of the Gulf Coast Service: 

[See PDF for image] 

[End of figure] 

The Gulf Coast service has been able to attract enough business that 
the service is currently covering most of its operating expenses. The 
logistics provider we spoke with said the cost of the service was 
competitive with trucking rates. Although the service has been able to 
move enough cargo to sustain operations, the operators said that they 
are still operating below full capacity and have had a difficult time 
attracting more business from shippers in the area. Nonetheless, the 
operators said they plan to add an additional self-propelled vessel to 
the Gulf Coast route within the next 12 months. They expect future 
customers to be attracted because of (1) problems that trucking 
companies are having with finding drivers for certain long-distance 
routes and (2) continued concerns on the part of shippers about rail 
service in the region. 

Northeast Service: 

The Northeast service, which began in April 2003, is a public-sector 
initiative designed to help alleviate many of the port capacity 
problems at the Port Authority of New York and New Jersey as well as 
relieve congestion on crowded roadways in the New York City area. The 
Port Authority of New York and New Jersey, the Port of Albany, and 
regional and state planners spearheaded an SSS service for moving 
containerized cargo up and down the Hudson River between the Port 
Authority of New York and New Jersey in the south and the Port of 
Albany in the north. This service is part of a proposed inland 
distribution network that planners hope will include multiple rail and 
SSS services. 

This service, called the Albany Express Barge, uses a privately owned 
and operated tug-and-barge to transport the containers, which are 
primarily loaded with bulk commodities, such as logs and silicon. (See 
fig. 3 for a map of the Northeast service.) Shipping containers between 
these ports by barge is slower than shipping them by truck, so the two 
ports decided to use a public subsidy to make the shipping rate more 
attractive to potential shippers. With the help of the public subsidy, 
the ports were able to set a shipping rate 10 percent below the rate 
for shipping by truck. Officials at the Port Authority of New York and 
New Jersey, faced with space limitations and expecting a dramatic 
influx of international cargo in future years, believed that within 15 
years, such operations would be able to transfer more than 18 percent 
of all containerized cargo moving into and out of the Port Authority of 
New York and New Jersey. 

Figure 3: Map of the Northeast Service: 

[See PDF for image] 

[End of figure] 

To set a shipping price that was lower than trucking rates, the ports 
have used public funding from several sources as a way to supplement 
the amount the operator is receiving. The main sources for this subsidy 
are two federal grants secured by the Port of Albany through the 
Congestion Mitigation and Air Quality Improvement (CMAQ) 
program.[Footnote 25] The first grant was for $3.3 million for 2003 to 
2004; the second, an extension of the first grant, was for $2 million 
for 2005. Under the rules of the CMAQ grant, Port of Albany officials 
are required to provide a 20 percent match to receive the funds. The 
Port of Albany has been providing much of this amount from its budget, 
although Port Authority of New York and New Jersey officials have 
recently provided $500,000 to help meet the requirement.[Footnote 26] 
Operators of the service also collect a fee from users of the service 
for each container shipped, which, according to port officials is about 
10 percent less than what it costs to move the same goods by truck. 

This service is not meeting officials' expectations.[Footnote 27] Port 
officials said that during the first 2 years, it has moved 
significantly less cargo than originally projected and will likely 
remain dependent on public subsidies for the next 10 years. The 
operation initially began as a twice-weekly service, but shortly after 
its launch, officials cut service to once a week because the volume of 
freight was not sufficient to sustain two trips a week. During the 
first 12 months of service, the operation moved an average of 105 
containers per month. Usage rose to an average of 383 containers per 
month in the next 11 months (April 2004 through February 2005), but 
this higher level is still far less than originally projected. In 
addition, port officials said that about half of the containers that 
travel on the service are empty and, thus, do not generate revenue for 
the service.[Footnote 28] Because usage is lower than expected, the 
ports have had to use more grant moneys than expected to meet the 
operator's costs. According to port officials, without the 1-year $2 
million extension of the CMAQ grant, the operation would likely have 
been discontinued. Plans for the service after grant moneys are 
exhausted are uncertain. 

Effect of Potential Obstacles Varied for the Two Services: 

Some of the factors that stakeholders identified as potential obstacles 
appeared to affect the development and continued operations of the Gulf 
Coast and Northeast services, but others had little effect or were 
overcome by the operators.[Footnote 29] For example, neither the 
Northeast nor the Gulf Coast operators cited inadequate port 
infrastructure as a major obstacle to development, but both said that 
shipper reluctance was affecting the viability of their services. Some 
factors, such as handling costs, affected the two services in different 
ways. Below, we describe how each identified obstacle affected the two 
SSS operations we examined. 

Harbor Maintenance Tax. The Harbor Maintenance Tax did not appear to be 
a significant obstacle to the development or operation of either SSS 
service, but in both cases, the operators of the services still 
expressed concern about its potential effect. While users of the 
Northeast or Gulf Coast service are required to pay the Harbor 
Maintenance Tax, the operators said they were not sure whether the 
shippers using these services were submitting their payments. Operators 
of both services nonetheless said they were concerned that if the tax 
is ever explicitly levied on these domestic movements, shippers may be 
unwilling to use the services because they can avoid the cost by using 
land-based options. 

Jones Act requirements. The Gulf Coast operators said that, in general, 
the high capital costs of U.S.-flag vessels are affecting their ability 
to expand operations and keep shipping prices competitive with 
trucking, while the Northeast operators said that this requirement was 
not affecting them. The difference, however, may lie primarily with the 
type of vessel each service uses. According to the Gulf Coast 
operators, this obstacle did not prevent them from starting their 
service because they were able to buy a used U.S.-flag ship--a cheaper 
alternative than buying a new U.S.-flag vessel. For expansion, however, 
the Gulf Coast operators said the limited number of used U.S.-flag 
ships available on the market poses a greater difficulty. Operators of 
the Northeast service, by contrast, said the requirement was not a 
significant concern because they use a tug-and-barge option in which 
the U.S. and foreign-built versions, compared with self-propelled 
vessels, are more similarly priced.[Footnote 30]

Handling costs. The Gulf Coast operators said that handling costs were 
not a significant concern because they were able to negotiate special 
rates with dockworkers. In contrast, the Northeast operators said that 
handling costs are affecting the sustainability of their service. In 
both instances, the operators were able to negotiate special contracts 
with dockworkers that reduced the cost of each "lift," thus helping 
decrease overall shipping costs. The Northeast operators, however, said 
even their negotiated rates are still high enough to affect viability. 

Port infrastructure. Neither service cited port infrastructure as a 
problem. Gulf Coast operators said they worked with transportation 
officials in various locations to provide needed infrastructure 
additions or upgrades at ports, such as roadway access routes. However, 
both operators used lift-on/lift-off equipment (such as cranes), and it 
is unclear whether SSS operators who attempted to use roll-on/roll-off 
technology would encounter port infrastructure problems. 

Adverse impact on port capacity. According to port officials in the 
Northeast and the Gulf Coast, the SSS operations have not had a 
significant impact on port capacity. For the Gulf Coast operation, 
officials at the Port of Houston said that the SSS service was moving a 
small amount of freight; thus, it did not add to capacity problems at 
the port. In the Northeast, officials from the Port of Albany and the 
Port Authority of New York and New Jersey said that the operation was 
also not adding to capacity concerns. 

Shipper acceptance. The Gulf Coast and Northeast operators both said 
that a general unwillingness among the shipping community to try new 
and untested modes, such as SSS, was affecting the viability of their 
SSS services. The Northeast operators said that even though they are 
offering a service that is cheaper than trucking, they have been unable 
to convince shippers to switch. The Gulf Coast operators also said that 
they have had a difficult time convincing many shippers to switch from 
trucking to SSS, even though they believe they offer a service that is 
comparable in price and speed to trucking. Our discussions with 
logistics providers produced two main explanations for this lack of 
acceptance. One concerns speed. For example, one logistics official in 
the Northeast told us that SSS services in general are too slow for 
shippers' needs, and thus many shippers are unwilling to use them. The 
other concerns frequency of service. Logistics providers in the 
Northeast and the operators of the Gulf Coast service said that the SSS 
services are at a disadvantage to trucking because they cannot 
currently offer more-frequent service, while trucking companies can 
move goods daily. This frequency of service, according to logistics 
providers, is an important factor for many shippers. 

Operators of the Gulf Coast service echoed these concerns in their own 
comments about potential obstacles to keeping or expanding a viable SSS 
service. They said the ability to provide service that is comparable 
with trucking is critical, especially if the goal is to remove trucks 
from major roadways and port access routes. In this regard, they said, 
tug-and-barge operations are too slow to compete with trucking along 
certain cargo routes, and even self-propelled vessels are still slower 
than trucks along many cargo routes. Likewise, frequency of service was 
a concern because more-frequent service allows shippers to integrate 
SSS services into their supply chains. The Gulf Coast operators also 
said that Coast Guard crewing requirements were an impediment to SSS 
operations that use self-propelled vessels because the Coast Guard 
requires a larger crew for self-propelled vessels that carry 
containers. Because the operators of the service must pay for a larger 
crew, these requirements decrease the cost competitiveness of the SSS 
operation, according to the operators of the Gulf Coast service. 
Finally, the most important factor, according to the Gulf Coast 
operators, is that SSS services must be cost-competitive with trucking 
if such operations are going to attract business from shippers. 

Stakeholders involved with the Northeast service said that a lack of 
commitments from ocean carriers--those responsible for exporting and 
importing international shipments--is also affecting the viability of 
their SSS service. According to officials at the Port Authority of New 
York and New Jersey, ocean carriers often decide how international 
cargo entering the United States will reach its final destination, and, 
therefore, having their commitment to move goods on the Northeast 
service might make it more successful. This is a factor that could 
affect other SSS operations in other regions of the country. 

The Department of Transportation's Role in the Development of SSS and 
Freight Transportation Improvements Needs More Careful Study: 

While SSS appears to have merits worth considering, it is unclear why 
DOT has already identified SSS as a high-priority component of the 
national freight transportation strategy and chosen to promote and 
accelerate its development. Such an endorsement appears premature given 
the limited experience in the United States in using this approach, the 
preliminary nature of the information generated so far through the 
agency's exploratory efforts, and the absence of a comprehensive 
understanding of key issues necessary to define the appropriate federal 
role needed, if any. Before moving ahead, more work is necessary to 
establish whether federal intervention in the development of SSS in 
this country is appropriate. Then, if an appropriate federal role 
exists, a necessary next step is to consider what changes, if any, 
might be needed to carry out that role. Two questions appear central to 
such a discussion: (1) Should federal support be provided for privately 
owned and operated infrastructure? (2) Should funding levels be 
increased and existing funding sources expanded?

DOT Has Identified SSS Development as a National Freight Priority 
before Determining Why the Federal Government Should Be Involved: 

DOT has identified the acceleration of SSS development in the United 
States as one of six high-priority freight initiatives through its 
National Freight Action Agenda and has taken steps to explore the 
viability of the approach.[Footnote 31] According to agency officials, 
SSS is an important concept for the agency to explore because of the 
potential of the approach to produce public benefits, such as reducing 
traffic congestion in areas experiencing heavy freight movement and 
expanding the capacity of the freight transportation system to support 
continued economic growth. At this stage, however, agency officials 
acknowledge that all of the public benefits of SSS and factors that may 
affect its development in this country have not been fully considered. 
DOT has undertaken a number of exploratory activities, most of which 
were undertaken to promote and accelerate the approach in the United 
States. For example, MARAD--the primary agency within DOT responsible 
for the SSS initiative--has funded studies of the concept, created a 
public/private partnership of stakeholders to share resources and in- 
kind services for accelerating SSS development in the United States, 
and sponsored conferences to exchange industry knowledge of SSS and its 
potential contribution to the nation's transportation system. Agency 
officials emphasize that MARAD's exploration of these issues spans only 
a few years and results to date can be characterized as preliminary. 

DOT does not yet appear to have a sound basis for identifying SSS as a 
high-priority component of the national freight transportation 
strategy. Thus far, federal efforts have focused on studying and 
exchanging industry knowledge on the concept, and not on whether 
federal involvement in its development is necessary. This information 
may be useful in understanding the potential of the approach to reduce 
congestion and expand system capacity, but it will not help 
policymakers determine whether federal involvement in its development 
is warranted, and it does not begin to broach issues involving the 
effects of federal involvement on the freight transportation system as 
a whole. For example, DOT has not thoroughly assessed key issues, such 
as: 

* the potential impact of federal involvement in developing SSS on the 
competitive balance among all transportation modes;

* lessons learned from new SSS services, such as the Gulf Coast and 
Northeast services that we examined; and: 

* obstacles and mitigating actions necessary to developing SSS, 
particularly with respect to the reluctance by shippers and logistics 
providers to using this option. 

In-depth insight into these and other issues is an important 
prerequisite in order to establish the extent of federal involvement 
needed, if any, in the development of SSS in this country. However, it 
is unclear at this time whether DOT and, in particular, MARAD are 
planning to address these issues. DOT's Office of Freight and Logistics 
and MARAD's Directorate of Port, Intermodal, and Environmental 
Activities, which together account for the bulk of federal SSS 
activities undertaken to date, have recently reorganized and are 
rethinking where next to focus their SSS efforts. Both are developing 
plans for future SSS activities in which they plan to engage, and these 
plans were not yet finalized and were not available for our review 
during the course of our work. 

Before asserting a federal role in the development of a domestic SSS 
system, DOT should consider whether federal involvement is even 
appropriate. As part of the agency's information-gathering efforts, it 
would be important for DOT to consider the potential of the private 
sector to develop SSS without any involvement from the federal 
government. Many transportation experts maintain that government 
involvement in freight projects should be limited to circumstances in 
which market-based solutions would produce less than efficient 
results.[Footnote 32] Government-imposed solutions to freight problems 
have the potential of superseding solutions that the private market 
would reach on its own. Determining whether SSS development could occur 
solely in response to market forces is an important issue to explore, 
in part, because the federal involvement may be spurred by 
considerations other than freight efficiency. For example, the federal 
government is interested in maintaining the safety and condition of the 
transportation system in addition to improving the efficiency of the 
system. Therefore, without fully exploring the implications of federal 
involvement, policymakers may adopt an approach that unintentionally 
causes market distortions and reduces efficiency. In the extreme, 
providing federal support for a project has the potential of producing 
overcapacity and distorting shippers' choices about which 
transportation mode to use. 

Part of determining the advisability of a federal role involves 
assessing the risks associated with providing federal support for SSS 
projects. While lessons learned from the two SSS operations we reviewed 
are not necessarily transferable to other operations, they serve as 
examples of how government intervention might produce the risk of 
resources being used inefficiently. One of these services (the Gulf 
Coast service) had little or no federal involvement and demonstrates 
the willingness of users to pay for a project; the second (the 
Northeast service) involved a federal subsidy and demonstrates the risk 
associated with providing a subsidy when demand is not completely 
understood. The unsubsidized Gulf Coast service depends on private- 
sector demand and has been able to attract enough business that the 
service has been able to cover most of its operating expenses. In 
contrast, the subsidized Northeast service is not meeting the 
expectations established for it, even though the ports were able to set 
a shipping rate 10 percent below the rate for shipping by truck with 
the help of the federal subsidy. Additionally, an extension of federal 
funds had to be secured, without which the operation would have been 
discontinued, according to project sponsors. 

At the very least, the lessons learned from the two operations we 
reviewed suggest that more information should be developed to help 
policymakers weigh the risks associated with federal involvement in 
SSS. However, the available evidence indicates that DOT is already 
proposing a role for the federal government in SSS and is considering 
federal financing mechanisms that will, in part, provide support for 
SSS projects. DOT has recently developed federal policies intended to 
benefit the maritime sector and packaged these policies within a 
proposal referred to as the SEA-21 initiative. According to DOT 
officials, the purpose of the SEA-21 initiative would be to create a 
federal maritime program similar to the surface transportation program 
governed by ISTEA and TEA-21. This proposal has not been formally 
introduced, but, according to the prepared remarks of the Under 
Secretary of Transportation for Policy, DOT has endorsed SEA-21 and 
appears to be committed to its eventual enactment.[Footnote 33] DOT 
officials have stated that the proposal includes SSS as a central 
component and involves increased investment in the maritime system by 
leveraging federal, local, and private sector funds. It would thus 
appear that DOT has determined that the federal role would involve the 
provision of targeted incentives for SSS projects. These decisions seem 
premature by establishing that federal involvement is warranted before 
determining how SEA-21 will impact the competitive balance among all 
transportation modes, such as rail and trucking. 

If a Federal Role Exists, Key Policy Issues Merit Close Consideration: 

If DOT determines that federal involvement in the development of SSS is 
appropriate, changes may be needed at the federal level to realize the 
concept's potential. These changes potentially affect the federal 
surface transportation program established under Title 23 of the United 
States Code because the vast majority of freight moves across the 
nation's roadways, and this program provides most of the federal 
support forroadways.[Footnote 34] This program is also important in any 
discussion of providing federal support to advance freight improvements 
in that freight transportation is typically intermodal and through 
these acts the Congress established intermodalism in federal policy. 

If a federal role exists for SSS, the potential change involved appears 
to center on two broad policy questions: (1) Should federal support be 
provided for privately owned and operated infrastructure? (2) Should 
funding levels be increased and existing funding sources expanded? 
Understanding the implications of these broader policy issues can help 
guide DOT as it wrestles with defining the federal role for SSS 
development and ensuring that the approach adopted will be part of an 
integrated approach to addressing the nation's congestion and capacity 
problems. 

Determining How Federal Aid Could Be Applied to Projects That Provide 
Benefits to the Private Sector: 

Accommodating freight projects under federal aid programs involves 
considering the implications of providing public support to projects 
both that provide substantial private benefits and that individuals and 
firms would be willing to pay for on their own. The high level of 
private sector involvement in freight transportation is a major factor 
distinguishing freight improvements from other transportation projects. 
For example, most freight carriers are private companies, and they own 
and operate significant components of the nation's freight 
transportation infrastructure, such as port terminals, trucking 
companies, and rail lines. Therefore, any freight improvement, 
including SSS projects, would likely involve privately owned or 
operated infrastructure. Funding such types of projects might thus 
provide a significant benefit to the SSS operator that owns and 
operates the service. 

The rationale for considering whether federal aid programs should be 
broadened to include freight improvements is that these types of 
projects also have the potential of producing a public benefit. Broadly 
stated, a freight improvement project may produce benefits that are not 
captured in market transactions. For example, an SSS project might 
alleviate congestion over a wide area by removing some freight from 
highway and rail, thereby increasing the capacity of the surface 
transportation system. These types of benefits provide benefits to 
society but do not in themselves generate incentives to the private 
sector to invest because the benefits do not accrue to the projects' 
users and, therefore, would not be reflected in the prices they would 
be willing to pay. 

Although freight improvement projects may have potential to produce 
public benefits, current decision-making processes and federal funding 
requirements can limit the consideration they receive. Transportation 
decision making has been established primarily as the responsibility of 
state departments of transportation and local metropolitan planning 
organizations,[Footnote 35] based on the premise that these levels of 
government would know best how to identify transportation priorities 
and dedicate funding to them. As we have reported in the past, however, 
consideration of freight improvement projects within this state and 
local process is limited because the process is oriented to projects 
that clearly produce public benefits, such as passenger-oriented 
projects.[Footnote 36] Because of eligibility requirements, many 
federal-aid programs also limit the use of federal support for 
privately owned or operated projects. The exceptions to such 
restrictions include the Congestion Mitigation and Air Quality (CMAQ) 
program, which requires a correlation between the use of funds and 
improved air quality, and loan or loan guarantee programs, such as the 
Transportation Infrastructure Finance and Innovation Act (TIFIA) 
program, that require that the projects being supported have the 
ability to take on debt. 

When public subsidization is being considered for freight 
infrastructure projects--which to a large degree would likely benefit 
the private sector--the appropriate scope of government involvement 
must be considered carefully. Apportioning the cost burden of freight 
projects among participants equitably[Footnote 37] is important not 
only to guard against the waste of limited public resources but also to 
enhance the efficiency of the transportation system by supporting only 
the most worthy projects. Federal subsidies should not be assumed for 
all projects, since this increases the risk of resources being used 
inefficiently. Encouraging or requiring state and local decision makers 
to establish cost-sharing frameworks between the public and private 
sectors would better ensure that federal funds or support are being 
applied in the most effective way.[Footnote 38] Cost-sharing involves 
two important factors: 

* First, the degree of public involvement, whether local, state, or 
federal, should be limited to the public benefits the project is 
expected to produce--for example, those related to congestion 
reduction, pollution reduction, accident avoidance, and other public 
benefits. In other words, the cost-sharing framework should ensure that 
the private sector is assessed the costs of projects commensurate with 
the benefits it receives from them. 

* Second, care should be taken to adequately consider the capabilities 
and resources of the private, state, and local entities to fund freight 
improvement projects. These stakeholders may seek to use federal funds 
to reduce the levels of commitment they would have provided otherwise. 
Federal assistance, when deemed appropriate, should promote or 
supplement expenditures that would not otherwise occur and should not 
supplant private or other public investors. 

Encouraging or requiring the quantification of project costs and 
identifying all parties who will bear the costs can help ensure that 
costs are apportioned among all stakeholders equitably. When federal 
support through a loan or loan guarantee is used to advance a project, 
rather than using federal funds, DOT could consider encouraging or 
requiring that project sponsors plan the project to be self-supporting 
by targeting user fees to retire debts. Relying on revenue from users 
and encouraging public/private partnerships to provide efficient 
solutions to freight transportation needs should increase the 
likelihood that the most worthwhile improvements will be implemented 
and that projects will be operated and maintained efficiently. 

There are precedents in which cost-sharing frameworks have been devised 
for freight improvement projects that stress reliance on federal, 
state, local, and private partnerships to share in the costs of freight 
projects. One such example involves a rail project in the Los Angeles 
area--the Alameda Corridor Project--which created a 20-mile railroad 
express line connecting the ports of Los Angeles and Long Beach to the 
transcontinental rail network east of downtown Los Angeles. Project 
sponsors secured a federal loan to cover a relatively small portion of 
the project cost and planned the project in such a way that revenues 
from fees assessed on the users of this service were targeted to retire 
debts. Also, the Freight Action Strategy (FAST) project in Washington 
state, involving a series of freight improvement projects in the 
Everett-Seattle-Tacoma region, received funding from a variety of 
public sources and private railroads. These projects illustrate how a 
cost-sharing framework--not largely dependent on federal funding--can 
be devised in such a way that all stakeholders share in the cost of 
freight projects. 

By requiring or encouraging state and local decision makers to develop 
equitable cost-sharing frameworks as a condition for public support, 
the federal government would help ensure that costs are borne by all 
relevant stakeholders and that public resources are used as effectively 
and efficiently as possible. This approach would likely involve the 
least intrusive change at the federal level because it would retain the 
basic structure of transportation decision making by leaving the 
identification of transportation objectives and solutions to address 
those objectives in the hands of state and local decision makers. This 
change, however, might not change the perspectives of state and local 
transportation decision makers, who tend to give freight improvements 
limited consideration in the transportation-planning process. Left in 
the hands of state and local decision makers, freight improvement 
projects may continue to receive secondary consideration even if the 
eligibility requirements of existing federal-aid programs have been 
broadened to include freight improvements. 

Determining Whether Funding Levels Should Be Increased and Sources of 
Funding Expanded: 

After deciding if federal financial support should be provided for SSS 
development, a follow-on consideration is whether additional resources 
beyond what is currently available should be provided. The primary 
source of federal support for freight improvements is the federal 
surface transportation program. The revenues collected and disbursed 
through this program involve excise taxes on highway users, which are 
credited to the Highway Trust Fund and apportioned to states by 
formula. States are given some flexibility in selecting projects on 
which federal-aid funds are expended, making possible the expenditure 
of federal aid on nonhighway freight projects in certain limited 
circumstances. Limited availability of federal funds, coupled with the 
hesitancy of state and local decision makers to devote public resources 
to projects that produce direct benefits in readily identifiable forms 
to the private sector, has resulted in freight improvement projects 
typically not receiving the level of federal support that perhaps some 
in the freight industry believe is necessary. 

Considering whether Highway Trust Fund revenues should be expanded to 
nonhighway freight projects is a controversial issue. The argument 
against increasing flexibility in the use of federal-aid funds is 
related to the way revenues are collected. However imperfectly it may 
be implemented, the method by which revenues are collected and credited 
to the Highway Trust Fund is based on the user-pays principle, which 
contributes to efficiency.[Footnote 39] In this instance, the user-pays 
principle ensures that users value the facility at least as much as the 
cost of providing it. However, the opposing view holds that highway 
users do not pay for the effects of air pollution and the congestion 
delays they cause for others, and user-fee payments are not well 
matched to highway agency costs attributable to individual highway 
users. For example, the Transportation Research Board has reported that 
the heaviest combination trucks pay a smaller share of the expenditures 
highway agencies incur to serve them. Therefore, an argument in favor 
of increased flexibility in the use of these funds is that nonhighway 
uses of trust fund revenues may be defended as offsetting the effects 
of imperfect pricing of highways.[Footnote 40] Another argument for 
increased flexibility is that states should manage their transportation 
infrastructure programs by defining their transportation objectives and 
then identifying the optimal means to obtain those objectives. Limiting 
consideration of nonhighway solutions is an arbitrary constraint that 
will lead to suboptimal investment solutions. 

In the face of controversy over use of the Highway Trust Fund for 
nonhighway projects, DOT has proposed a separate funding source to 
address improvements involving the maritime system. According to DOT 
officials, the SEA-21 proposal--a maritime version of the federal 
surface transportation program--is intended to benefit the maritime 
sector. Creating a new system of providing federal funds for freight 
projects based on one mode, however, addresses neither the problems of 
the overall system nor the source of the federal aid that will be 
necessary to implement the SEA-21 initiative. An integrated approach to 
addressing the impediments to freight mobility involves evaluating 
investment decisions across modes and making modal trade-offs. For 
example, a nonhighway project, such as SSS, may have the potential to 
relieve highway congestion and is, therefore, not a project that should 
be viewed in isolation of other modes. 

Adopting an approach that involves new funding sources and federal-aid 
programs would require substantial changes at the federal level. 
Therefore, careful consideration should be given to the implications of 
implementing such changes. More work needs to be done to determine 
whether new sources of funding are actually required for SSS 
development or whether existing funding levels and sources could 
accommodate these types of projects. While the freight transportation 
industry and transportation agencies might agree that improving freight 
mobility is an essential factor for maintaining the nation's economic 
health and competitiveness and that adequate funding must be made 
available for freight projects, reaching agreement on where the money 
should come from or how federal aid should be administered will be much 
more difficult. 

While we have enumerated various factors that federal policymakers 
should consider in determining an appropriate role in the development 
and implementation of SSS in the United States, state and local 
transportation decision makers will also be faced with making difficult 
choices regarding SSS and other freight-related projects. In the next 
section, we describe an approach that state and local planners could 
use to guide investment decisions. 

A Sound Investment Approach Is Needed to Guide Current and Future State 
and Local Public Investments in Freight Improvements: 

While DOT considers the federal role in the development of SSS 
activities, transportation decision makers at the state and local 
levels also face the need to consider alternatives for improving 
freight mobility. This is a challenge that goes far beyond SSS, because 
the transportation system involves many different modes and is funded 
by both the public and private sectors. Successfully addressing the 
needs of the system in the face of these complex, crosscutting 
challenges will require state and local decision makers to make tough 
choices in setting priorities and linking resources to results to 
ensure that public dollars are wisely and effectively spent. The public 
investment approach that we have developed, which grows out of our past 
work and our interaction with transportation experts, may be helpful in 
guiding public investment decisions. 

The Complexities of the Transportation System and Growing Fiscal 
Constraints Present Challenges for State and Local Decision Makers: 

Improving the efficiency of the nation's surface transportation system 
is a particularly complex challenge because it encompasses many modes-
-water, highway, transit, and rail--on systems owned, funded, and 
operated by both the public and private sectors. As primary decision 
makers, state and local governments have significant and broad 
responsibilities. On the front lines of transportation decision making, 
state and local governments must address multiple and sometimes 
competing priorities, such as maintaining the safety and condition of 
the transportation system while, at the same time, improving the 
efficiency of the system. 

Addressing these transportation challenges in light of federal and 
state budget constraints will require an understanding of existing 
transportation program constructs and financing mechanisms to ensure 
that limited public dollars are wisely and effectively spent.[Footnote 
41] For example, the current method of dispersing federal 
transportation funds to the states does not necessarily encourage 
transportation decision makers to address the needs of the system in a 
systematic or rational manner. Much of the public funding for system 
maintenance and improvement for surface transportation projects comes 
from federal programs established under Title 23 of the United States 
Code, with funds from the Highway Trust Fund apportioned to the states 
by formula without regard to the needs or capacity of the 
recipients.[Footnote 42] Because decisions are primarily made by state 
and local governments, there is little assurance that the projects 
selected and funded best meet the nation's mobility needs. Improving 
freight mobility in particular is hampered by the highly 
compartmentalized structure and funding of federal transportation 
programs. The structure and funding of these programs give state and 
local transportation agencies little incentive to systematically 
compare the trade-offs between investing in different transportation 
alternatives to meet mobility needs because funding can be tied to 
certain programs or types of projects. For example, while passenger and 
freight travel occurs on all modes, federal funding and planning 
requirements focus largely on highway and transit. This framework makes 
it difficult for freight projects to be integrated into the 
transportation system. 

A Public Investment Approach Can Help Public Decision Makers Guard 
against an Inefficient Use of Public Resources: 

As calls for increased transportation investments come amid growing 
concerns about the size of federal and state budget deficits, state and 
local decision makers must guard against any waste of limited public 
resources when making transportation investment decisions. At the same 
time, intermodal approaches and coordinated solutions involving the 
public and private sectors should be considered. Using the work of 
transportation experts and our own experience in evaluating freight 
mobility projects, we have developed a public investment approach to 
guide public decisions about freight improvement projects.[Footnote 43] 
This approach incorporates but also expands upon the points discussed 
earlier in describing the actions we think DOT needs to take in 
assessing potential federal involvement. As can be seen in figure 4, 
this approach encourages public decision makers to consider four steps: 
(1) establish a rationale for public involvement in a project, (2) 
develop a systematic framework to evaluate the merits of projects, (3) 
determine the level and type of public support to be provided, and (4) 
evaluate projects to ensure that intended benefits have been achieved. 

Figure 4: Investment Approach to Guide Public Investment Decisions: 

[See PDF for image] 

[End of figure] 

Step One: Determining Whether Public Support in a Freight Project Is 
Warranted by Establishing a Rationale for Involvement: 

Public transportation decision makers attempting to advance freight 
improvement projects must work within a system that is often designed 
to favor projects that appear to clearly produce public benefits, such 
as passenger-oriented projects. Public transportation-planning decision 
makers are hesitant to give consideration to freight improvements 
because many freight improvements are undertaken by and directly 
benefit the private sector. Generally, freight improvements undertaken 
by the private sector usually arise in response to market forces (e.g., 
profit) and, as a result, are most likely to produce efficient results. 
Care should be taken not to artificially stimulate the market by 
publicly subsidizing an operation inappropriately, especially if the 
private sector is unwilling to undertake the project in the first 
place. Otherwise, this would likely be a waste of public resources. 
Although freight improvement projects may also produce public benefits, 
public planners are wary of providing public support for projects that 
would also yield direct private benefits. Within this focus, public-
sector attention tends to be directed to freight projects only when 
there is considerable public benefit as well. 

There are, however, freight improvement projects that are unattractive 
to the private sector but have the potential of producing benefits to 
the public; one such benefit is reducing the external costs of 
transportation, such as reducing fuel emissions and roadway congestion. 
Considering whether the project has the potential to reduce the 
external costs of transportation provides an indication of a project's 
potential for yielding a good return. For example, improving freight 
mobility through the implementation of an SSS service may have the 
effect of shifting some freight from truck to water and, as a result, 
reduce external costs such as pollution and congestion. These benefits 
can, in turn, produce indirect benefits, such as economic development 
and employment, that affect the regional or local economy. Lowering 
transportation costs for users and improving access to goods and 
services enable new and increased economic and social activity. Over 
time, indirect impacts, such as changes in land use and development, 
changes in decisions to locate homes and businesses in areas where 
housing and land are more desirable, and changes in warehousing and 
delivery procedures for businesses in order to take advantage of 
improved speed and reliability in the transportation system may occur. 
These impacts can lead to increased property values, increased 
productivity, employment, and economic growth. These indirect impacts, 
however, may constitute transfers of economic activity from one area to 
another or are a result of the direct benefits filtering through the 
economy. Although these indirect benefits represent real benefits for 
the jurisdiction making the transportation improvement, they represent 
transfers and not real economic benefits, from a national perspective. 

The SSS service sponsored by the Port Authority of New York and New 
Jersey serves as an example of how public involvement in a proposed 
project appears to be justified. SSS was being explored by the port 
authority as a way to transport a portion of the international 
containers entering the congested and capacity-constrained Port 
Authority of New York and New Jersey to the less congested and capacity 
constrained Port of Albany. Public officials believe that an SSS 
service between these two ports has the potential of diverting 
international containers from trucks to barge and by doing so, truck 
emissions, fuel consumption, roadway wear and tear, and roadway 
congestion (i.e., external costs) would be reduced. Public officials 
also believe that the service will create new economic development 
opportunities at public facilities, if successfully implemented. 
Potential private benefits identified include increased efficiency for 
terminal operators, reduced highway congestion for truck drivers, and 
stable and reliable scheduling and defacto free warehousing of 
inventory for shippers.[Footnote 44] Project sponsors also believe that 
both sectors would gain service insurance and security benefits due to 
the redundancy aspect of the new service and its safety advantages in 
transporting hazardous materials outside of populous urban highway and 
rail corridors.[Footnote 45] However, establishing a rationale for 
public involvement is not enough to justify financial support for a 
project. Rather, it merely supports closer public scrutiny of a 
proposed project through benefit-cost and other analyses to determine 
if the project is worthwhile. 

Step Two: Developing a Framework to Evaluate the Merits of the Proposed 
Project: 

Once public interest in a project appears to be justified, investment 
decisions based on a systematic benefit-cost analysis could provide a 
structure for rational analysis and a factual basis for public 
discussion of public decisions. Benefit-cost analysis enables decision 
makers to more closely scrutinize the justification for a project by 
quantitatively considering whether the proposed project is a low-cost 
alternative to constructing new highway capacity and whether it is the 
most cost-effective option among other modal improvements. By including 
a comparison of other modal improvements, the public planner gains an 
understanding of the trade-offs and relationships among alternative 
solutions involving different transportation modes. 

A carefully considered list of public and private benefits and costs 
should be developed and the costs and expected payoffs should be 
quantified. For freight improvement projects, the costs and expected 
benefits largely mirror those of highway and transit projects. In 
recently published work on highway and transit investments, we provided 
information on the types of costs and benefits decision makers 
typically consider when evaluating highway and transit 
projects.[Footnote 46] We reported that these types of projects have 
the potential of producing direct benefits, such as travel-time 
savings, and collateral benefits, such as a reduction in the adverse 
environmental impacts of transportation. These direct benefits can 
produce indirect benefits, such as economic development opportunities 
that affect the region or local economy. Freight improvement projects 
seek to produce the same benefits. Highway and transit projects also 
produce costs, including the direct costs to construct, operate, and 
maintain the project as well as other potential social costs resulting 
from the construction and use of the facility, such as unmitigated 
environmental effects. Any freight improvement project under 
consideration would include similar categories of costs. 

Although public decision makers may view freight projects as being 
somewhat different from highway and transit projects, state and local 
decision makers can use similar categories of costs and benefits. The 
SSS service operating in the Northeast illustrates this point. Project 
sponsors considered the proposed SSS project as an option that had the 
potential to reduce congestion in and around the Port Authority of New 
York and New Jersey. The project was considered to be an 
environmentally sound method for moving international containers from 
the congested port, via a biweekly barge service, to a less-congested 
port area. In this example, project sponsors quantified potential 
project benefits such as congestion reduction, improved air quality, 
and economic development opportunities for the feeder port. Costs 
considered included the capital and operating costs of the barge 
service. 

In conducting benefit-cost analyses, accurate and relevant data are 
essential to the evaluation of freight improvement proposals because 
such data are needed to evaluate forecasts of transportation demand and 
the effect a project would have on diverting traffic to and from other 
transportation modes. However, in past reports, we have found that 
state and local decision makers do not have data to sufficiently 
evaluate freight projects.[Footnote 47] Without such forecasting, the 
analyses will not expose the true costs and expected payoffs of a 
project. The SSS service operating in the Northeast provides insights 
into what might occur if sufficient data are not available to forecast 
demand. While this service appeared to be a project in which public 
involvement was justified, acceptance-related issues with the potential 
users of the service were apparently not adequately considered to 
accurately predict outcomes. For example, project sponsors did analyze 
data indicating that there were sufficient cargo flows to support the 
new service, but they had difficulty estimating the level of acceptance 
of the new service by stakeholders within those markets. They 
acknowledged, however, that shipper acceptance is perhaps the most 
critical factor that has held back the project so far. After starting 
the service, they realized that factors beyond market size, level of 
service, and service cost must be taken into account. Consequently, 
once the service began operating, service had to be cut back from twice 
a week to once a week, and the federal grant being used to subsidize 
the operation was expended more quickly than anticipated. Juxtaposing 
this example with another illustrates the significance of this point. 
The SSS service operating in the Gulf of Mexico performed a market 
survey before implementation to determine that a market existed for the 
service. In this case, the service was advanced by the private-sector 
and not surprisingly, depends on private-sector demand. 

While benefit-cost analysis ensures that decision makers closely 
scrutinize proposed projects objectively, we recognize that other 
factors work against using this kind of analysis. These factors may 
involve the way federal programs are structured and funded, federal 
requirements that place demands on analytical resources to other areas, 
and the high cost of such analyses. In addition, factors other than 
those considered in analyses of projects' benefits and costs can play a 
greater role in shaping state and local public investment choices. Some 
of the factors considered reflect local or regional priorities and 
needs; others are required to be considered in the decision-making 
process by federal legislation. These factors may not be easily 
considered in traditional benefit-cost analysis.[Footnote 48] 
Nevertheless, as we have recommended in an earlier report, the 
increased use of benefit-cost analysis can provide important 
information that can be used to inform discussions on transportation 
investments.[Footnote 49]

Step Three: Determining the Level and Type of Public Support to Be 
Provided: 

If evaluation supports the merits of public involvement in a freight 
project, the public decision maker must determine the level of public 
support to be provided. While in most cases, public involvement is 
often assumed to mean subsidization of a project, such involvement need 
not necessarily imply the need for or appropriateness of subsidization. 
A subsidy is any cost imposed on taxpayers as a whole to pay for 
benefits that are received by users of the service. Therefore, if a 
public decision maker plans a project to be entirely self-supporting 
from user fees and private-sector contributions, no public subsidy is 
involved. Relying on revenue from users increases the likelihood that 
the most worthwhile improvements will be implemented, operated, and 
maintained efficiently. Fees assessed on the mode in question should be 
accurately aligned with the costs other modes or vehicles impose on the 
transportation system. Otherwise, one mode may enjoy an advantage over 
another in competing to transport goods. For example, according to the 
Transportation Research Board, the heaviest trucks pay a smaller share 
of the expenditures that highway agencies incur to serve them.[Footnote 
50] From an economic standpoint, this level of taxation distorts the 
competitive environment with other modes by making it appear that the 
heavier trucks are a less-expensive means for shippers to transport 
goods. Ultimately, an accurate alignment of fees to costs could provide 
incentives for shippers to make modal choices and transportation 
options based on true costs. 

A rail project designed to improve freight mobility illustrates how a 
project can be planned with relatively little federal subsidy. The 
Alameda Corridor Project in the Los Angeles area created a 20-mile, 
$2.4 billion railroad express line connecting the ports of Los Angeles 
and Long Beach to the transcontinental rail network east of downtown 
LA. The express line eliminated approximately 200 street-level railroad 
crossings, relieving congestion and improving freight mobility for 
cargo. The project was funded through a blend of public and private 
sources. While the federal government contributed to the funding, its 
share was about 20 percent of the total, of which 80 percent was in the 
form of a loan. Revenues from user fees paid by the railroads have been 
targeted to retire debts. Decision makers have planned the project so 
that fees would be charged to the direct users of the system, which, in 
this case, are the railroads. The railroads are paying $15 for each 
loaded container, $4 for each empty container, and $8 for other types 
of loaded railcars, such as tankers and coal carriers. Over a 30-year 
period, fees will be increased between 1.5 percent and 3 percent per 
year, depending on inflation. 

The planning of this rail project contrasts with the manner in which 
the SSS operation in the Northeast was planned. Project sponsors 
involved with the Northeast service planned to subsidize the capital 
and operating costs of the service from the outset rather than through 
fees charged to the direct users of the service. Project sponsors 
acknowledged that they knew the service would experience an operating 
deficit during the first several years of the operation due to the need 
to achieve a sufficient level of demand to be economically viable. 

When public involvement does mean direct financial support for a 
project, benefit-cost analysis allows a public decision maker to 
determine the level of public support to be provided on the basis of 
the public benefit the project is expected to accrue. Therefore, there 
should not be an expectation that public dollars should automatically 
fund the entire or even majority of the project. Rather, costs should 
be apportioned among all relevant stakeholders. This apportionment 
involves identifying the relevant stakeholders, determining the level 
of benefits they are likely to derive from the project, and 
apportioning costs on that basis. Beneficiaries should pay the costs of 
projects commensurate with the cost of providing the service to the 
users. For example, when users are the direct beneficiaries of a 
project, user fees are the preferred method that should be considered 
for projects that directly benefit the users. When external benefits, 
such as the reduction of pollution or congestion, result from a 
project, the direct users should pay the net cost of the use of the 
service after deducting the public benefit. In the case of the SSS 
service operating in the Northeast, the true costs of the service were 
not apportioned among all of the relevant stakeholders because the 
service was being completely subsidized with public funds--that is, 80 
percent with CMAQ funds and 20 percent with port funds. However, 
project sponsors believe that as demand for the service increases, the 
service will eventually meet expectations and rise to the level 
necessary for self-sustainability, which means that operating costs 
will eventually be paid from the fees charged to the direct users of 
the service. 

Step Four: Evaluating the Performance of Ongoing and Completed 
Projects: 

The final component of our public investment approach involves 
evaluating results and incorporating lessons learned into the decision- 
making process. Evaluating the effectiveness of ongoing and completed 
projects could provide public planners with valuable information for 
determining whether intended benefits have been achieved and whether 
the service should be modified. With thorough evaluation of projects, 
the public sector can learn from experience, improve the performance of 
its infrastructure investments, and hold planners accountable for their 
decisions. 

Comparing the actual results of a project with the project's 
projections tests the economic rationale for a project, provides a self-
correcting mechanism, and holds public decision makers accountable for 
decisions made. A federal transit program provides an apt example of 
how a federal program can be designed to require such evaluations. The 
New Starts program provides funds to transit providers for constructing 
or extending certain types of transit systems and is the primary source 
of funds for new transit capacity. The Federal Transit Administration 
(FTA) has recently adopted a requirement for project sponsors to 
complete before and after studies of New Starts projects. Project 
sponsors seeking federal funding for their New Starts project must 
submit to FTA a plan for the collection and analysis of information 
that addresses how the project's estimated costs, scope, ridership, and 
operating plans proposed during planning and project development 
compared with what actually occurred. This requirement is intended to 
hold transit agencies accountable for results and identify lessons 
learned for future projects. In another example, federal program 
requirements led to both a prospective evaluation of a proposed project 
and an evaluation of the ongoing project to secure federal funds. 
Project sponsors of the Northeast SSS service evaluated the ongoing 
performance of the service to update estimates of future performance in 
their bid for an extension of CMAQ funds. By monitoring the performance 
of the service, project sponsors have been able to identify problems 
and devise strategies to address those problems. For example, project 
sponsors are developing strategies to reduce some of the operational 
costs of the service and increase demand. Ongoing evaluations of the 
service also revealed that within the first few years of operation, the 
feeder port was providing a disproportionate amount of funding for the 
service through the local CMAQ match, and as a result, the primary port 
agreed to provide the local match for the third year of service 
operation. Monitoring the performance of the service allowed project 
sponsors to seek ways to improve the service, thereby guarding against 
a waste of public resources. 

Opportunities Exist for Encouraging the Use of a More Systematic Public 
Investment Approach: 

The application of a decision tool such as the one we developed could 
be useful in making more fully informed decisions about transportation 
projects. However, there is no federal or other mechanism that would 
require its use or even ensure that it is considered in evaluating 
transportation investment decisions. This is the case even for projects 
that receive a substantial amount of funding from the federal 
government. For example, for federally assisted highway projects, 
federal requirements specify a wide range of factors (such as safety or 
environmental impacts) that must be considered when selecting a project 
from alternatives, but they generally do not specify what analytical 
tools should be used to evaluate these factors. Federal requirements 
also do not mandate that in making these decisions, cost-benefit 
analysis be performed and the results of such analysis considered. 
Instead, officials have the flexibility to select projects based on 
their own determination of the community's priorities and needs. In 
general, decisions about what transportation projects to adopt are 
generally made at the local, regional, or state level. In examining how 
various locations made decisions for highway projects, for example, we 
found that officials used a variety of approaches and often based their 
decisions on different criteria.[Footnote 51] For example, decisions 
were often based on whether to proceed primarily on the project's 
perceived indirect benefits, such as desirable changes in land use or 
economic development, which are difficult to forecast and were 
generally not quantified or systematically analyzed. 

While federal policy gives transportation planning authorities 
considerable latitude in deciding how to make decisions about which 
projects to fund, there are mechanisms available at the federal level 
for disseminating information about decision-making approaches and 
encouraging the use of approaches that can make the best use of limited 
public funds. DOT, for example, issues guidance and information on a 
variety of matters for which it has responsibility. One such mechanism 
for doing so is DOT's Transportation Planning Capacity Building 
Program, which is designed to equip decision makers, transportation 
officials, and staff with tools for resolving the issues they face when 
addressing transportation needs in their communities. This program is a 
collaborative effort of DOT agencies as well as various public and 
private organizations. Among other things, it provides communities with 
background information, examples of effective transportation-planning 
practices from across the nation, and technical assistance. Our 
approach, which represents a set of "best practices" stemming from our 
previous work and our discussions with transportation officials, might 
be useful as part of DOT's guidance and information. 

DOT has a variety of ways to disseminate such information. One way is 
through its Web site, which incorporates a variety of program 
resources, including detailed information related to the Transportation 
Planning Capacity Building Program. Another way is though its network 
of seminars, training opportunities, and technical assistance. The 
scope of training and assistance includes conferences held over the 
Internet, classroom training, and Internet-based short courses. For 
example, the Federal Highway Administration developed and implemented a 
Web-based "Talking Freight" seminar series on many diverse topics, such 
as freight data and modeling, SSS, and linking freight to economic 
development. 

Conclusions: 

Expanding the SSS option may be a way to enhance freight mobility by 
supplementing roadways and rail lines, alleviating congestion in 
metropolitan areas and freight corridors, and mitigating the need for 
more highways or rail corridors. However, despite the potential 
importance of SSS to enhance the nation's freight mobility, its 
viability as a cost-effective approach is uncertain, given the legal 
and operational issues cited by proponents of this option. Also, there 
is reluctance among shippers to use this option, a factor that affects 
its acceptance and further development. 

DOT deserves credit for thinking "outside the box" in looking for ways 
to alleviate congestion in the nation's growing transportation 
bottlenecks, but the direction it is taking--increasing federal 
involvement in SSS--needs to be more carefully examined. DOT has made 
the development and implementation of SSS a national priority for 
enhancing freight mobility and has undertaken numerous activities but 
has not articulated a clear rationale for what the federal role, if 
any, should be. Also, the department's draft proposal for greater 
involvement in maritime transportation (SEA-21) calls for financial 
assistance to further the SSS option. Actions such as those in the 
draft proposal are premature, in our opinion, until a broader 
understanding of the federal role with respect to SSS is defined and 
the potential applications and impacts of such an option on other modes 
are better understood. Otherwise, DOT runs the risk of "putting the 
cart before the horse" and is at greater risk for creating 
inefficiencies within the transportation system and missing 
opportunities to best apply and leverage federal resources. 

State and local public transportation officials are the primary 
decision makers for planning and financing projects, such as SSS, to 
enhance freight mobility, and they will largely determine the extent of 
public involvement in SSS projects and the amounts and types of public 
subsidies for that purpose. Ideally, a sound investment approach--one 
based on recognized economic and management principles--is needed to 
make this determination. But many public transportation entities lack a 
consistent and comprehensive investment approach to identify, evaluate, 
and implement competing projects, including potential SSS projects. 
Having a sound investment approach is critical to better ensure that 
available resources are used cost effectively to address the most 
pressing freight mobility needs. The approach we developed based on our 
past work and extensive literature research will be helpful, we 
believe, in guiding public investment decisions. DOT can play a role in 
promoting this approach by interacting with public entities using 
established communication channels and other mechanisms. 

Recommendations for Executive Action: 

We recommend that the Secretary of Transportation and the Administrator 
of the Maritime Administration undertake the following two actions with 
regard to further federal involvement with SSS and greater use of 
systematic approaches to making public investment decisions: 

1. Before expending substantial federal resources on SSS activities or 
developing a formal program for federal involvement in helping to fund 
this approach, establish a comprehensive understanding of key issues to 
determine whether there is a genuine need for federal involvement and 
what the role of the federal government should be, if any. Such a 
determination could, for example, involve consideration of the 
following issues. 

* To determine whether the private sector would likely undertake SSS 
projects on its own, policymakers could explore several areas in depth. 
For example, gaining a better understanding of the conditions and 
circumstances under which existing SSS started and are being sustained 
and the potential impact of the regulatory, administrative, and 
operational barriers to the development and implementation of SSS are 
both important in determining whether federal involvement is necessary. 

* To better define an appropriate federal role, if deemed necessary, a 
number of areas could be explored, including (1) an assessment of the 
state, local, and private resources that may be likely available for 
SSS projects; (2) quantitative and qualitative analyses of nonmarket or 
external factors with respect to SSS, such as reduction in the costs of 
congestion, pollution, and accidents, that the private sector will 
likely not be willing to fund; and (3) an evaluation of potential 
financing mechanisms and incentives to best leverage federal resources, 
develop an equitable cost-sharing framework among public and private 
entities, and ensure that users and beneficiaries of SSS services pay 
for these services commensurate with the costs of providing them. 

2. To foster greater use of systematic approaches, use existing 
mechanisms and communications channels to encourage public 
transportation decision makers to evaluate SSS and other freight 
projects using an investment decision tool--such as the one we 
developed--that incorporates recognized economic and management 
principles. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to DOT and MARAD for review and 
comment and met with a number of officials, including the Assistant 
Secretary for Transportation Policy, the Deputy Assistant Secretary for 
Transportation Policy, and MARAD's Associate Administrator for Ports, 
Intermodal, and Environmental Activities. DOT and MARAD agreed with our 
recommendations and assured us that efforts within the department to 
gain a more detailed understanding of key issues surrounding the SSS 
approach will be undertaken before requesting federals funds for it. 
The department also provided clarifying comments and technical 
corrections, which we incorporated, as appropriate. These officials 
reiterated that while the freight demands placed on the nation's 
highways and rail systems continue to grow, the marine transportation 
system remains underutilized. They said there is a need to explore 
innovative, potentially viable options to increase the capacity of the 
nation's transportation system in order to expedite the flow of goods 
and support economic growth. These officials stressed that the maritime 
freight capacity option has received scant attention (with the 
exception of two small demonstration projects using CMAQ funds to 
support barge moves of cargo), because ISTEA, TEA-21, and the proposed 
TEA-3 are essentially surface transportation bills. According to these 
officials, the department is using a range of actions and discussions, 
including a thorough vetting of maritime capacity options, to "press 
the envelope" on freight capacity deliberations as the country 
continues to experience serious and growing freight congestion issues 
on key highway and rail corridors. 

The DOT officials told us the department has begun to explore SSS as 
one means to accommodate growth in freight shipments, given the 
capacity constraints of the national transportation system and the high 
cost of increasing surface transportation capacity. DOT has also been 
working to raise awareness of this option among potential industry 
participants and throughout the government. Further, these officials 
explained that DOT is now conducting detailed and rigorous studies of 
the potential for SSS and has been drafting possible policy options as 
a means to stimulate discourse on the topic within the administration. 
They maintain it is not premature to conduct these activities since it 
is necessary to act with an understanding of the considerable lead 
times involved. They assured us that any request to the Congress for 
funding related to the SSS initiative will be made only after the 
option and its implications are fully and rigorously explored and well 
understood. 

The efforts taken to date by DOT and MARAD to begin exploring the SSS 
option provide a good first step to gain a better understanding of key 
issues with respect to developing this approach. As DOT and MARAD 
proceed, we think it is critical that they do so thoughtfully, taking 
the time to thoroughly consider the implications on other modes and on 
current SSS operations. Until a thorough assessment is completed in 
this regard, proceeding with federal intervention such as providing 
regulatory relief or financial assistance to SSS projects is premature. 

We are sending copies of this report to congressional committees with 
responsibilities for transportation issues; the Secretary of 
Transportation; and the Administrator, Maritime Administration. We will 
also make copies available to others upon request. In addition, this 
report will be available at no charge on the GAO Web site at 
[Hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at [Hyperlink, heckerj@gao.gov] or (202) 512-2834. Contact 
points for our Offices of Congressional Relations and Public Affairs 
may be found on the last page of this report. GAO staff who made key 
contributions to this report are listed in appendix II. 

Signed by: 

JayEtta Z. Hecker: 
Director, Physical Infrastructure Issues: 

[End of section]

Appendixes: 

Appendix I: Objectives, Scope, and Methodology: 

To determine why short sea shipping (SSS) is being considered as an 
alternative method for transporting freight and factors that may affect 
its viability as an approach, we conducted a literature review of 
reports and studies related to freight transportation issues; 
interviewed freight transportation stakeholders representing all levels 
of government; interviewed private-sector stakeholders involved in 
various aspects of the freight transportation system; and examined two 
existing SSS operations. Our literature review included reports and 
studies issued by public-and private-sector organizations, nonprofit 
organizations, and academia; articles from relevant trade journals; and 
position papers reflecting the views of freight stakeholders. To 
supplement the information obtained through the literature review, we 
interviewed transportation officials representing ports on the East and 
West Coasts and the Gulf of Mexico; officials involved in 
transportation planning at the local and state levels; and federal 
officials from the Department of Homeland Security's Customs and Border 
Protection agency. We also interviewed private-sector officials from 
the trucking and rail industries and other private officials involved 
with the movement of freight, such as third-party logistics providers. 
To supplement the information obtained through our literature review 
and interviews, we examined two existing operations. We selected one 
publicly subsidized operation in the Northeast and one private 
operation in the gulf region from information we received from our 
interviews as well as information we obtained through our literature 
review. The services were also selected because they were operating in 
regions of the country that handle a significant portion of the 
nation's freight. Because we evaluated only two existing operations, 
however, lessons learned from the operations may not be transferable to 
other operations. It is also important to note that because our review 
focused on existing services, it provides no indication of whether 
other operators may have considered a service but not followed through 
because of perceived obstacles to SSS implementation. 

To determine the federal role in the development of SSS, we conducted 
in-person interviews with U.S. Department of Transportation (DOT) 
officials, as well as officials at its operating agencies; analyzed 
documents supplied by DOT and its operating agencies; reviewed GAO 
reports on transportation systems and infrastructure projects; and 
reviewed studies and reports issued by transportation experts. At the 
department level, we interviewed officials from the Office of Freight 
and Logistics, Office of Environmental Activities, and Office of the 
Secretary. At the agency level, we interviewed officials from the 
Maritime Administration and the Federal Highway Administration. Our 
work also included an analysis of documents supplied by DOT and its 
agencies, including strategic plans, budget documents, and studies and 
reports on freight transportation issues. 

To identify issues that should be considered when making public 
investment decisions, we analyzed the results of our review of SSS and 
built on the perspectives gained from our past work in transportation 
systems and federal investment strategies. We also analyzed reports and 
studies completed by various federal agencies and other independent 
experts on public investment strategies. 

We conducted our work from July 2004 through June 2005 in accordance 
with generally accepted government auditing standards. 

[End of section]

Appendix II: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

JayEtta Z. Hecker, (202) 512-2834: 

Staff Acknowledgments: 

In addition to the individual named above, Jason Berman, Jay Cherlow, 
David Hooper, Elizabeth McNally, Sara Ann Moessbauer, Alex Sarapu, Stan 
Stenersen, Seyda Wentworth, Randall Williamson, and Susan Zimmerman 
made key contributions to this report. 

(544095): 

FOOTNOTES

[1] Union Pacific Railroad Press Release (July 8, 2004). 

[2] The Mid-Atlantic Rail Operations Study was a joint product of five 
states (Delaware, Maryland, New Jersey, Pennsylvania, and Virginia); 
the I-95 Corridor Coalition, which represents 13 states in the 
Northeast; and three railroads (Amtrak, CSX, and Norfolk Southern). 

[3] Estimates are from the New York Metropolitan Transportation Council 
(NYMTC). NYMTC is an association of governments and transportation 
providers that serves as the metropolitan planning organization for New 
York City, Long Island, and the lower Hudson Valley. 

[4] This estimate is not expressed in dollars of one particular year 
because components of the cost were estimated in different years, but 
it roughly represents the estimated cost in 2000 or 2001 dollars. 

[5] The U.S. waterway system consists of approximately 25,000 miles of 
inland, intracoastal, and coastal waterways and channels, of which 
about 12,000 miles are capable of handling commercial traffic. 

[6] Transportation Research Board, Special Report 252: Policy Options 
for Intermodal Freight Transportation (Washington, D.C., 1998); 
Transportation Research Board, Special Report 271: Freight Capacity for 
the 21st Century (Washington, D.C., 2002); GAO, Highway and Transit 
Investments: Options for Improving Information on Projects' Benefits 
and Costs and Increasing Accountability for Result, GAO-05-172 
(Washington, D.C.: Jan. 24, 2005); and GAO, Freight Transportation: 
Strategies Needed to Address Planning and Financing Limitations, GAO- 
04-165 (Washington, D.C.: Dec. 19, 2003). 

[7] Data on the percentage of freight moved by short sea shipping in 
Europe is only available through 1998. 

[8] Several programs were expanded under title 23 of the United States 
Code to allow funds to be used for nonhighway projects, including the 
Surface Transportation Program (23 U.S.C. § 133) and the Congestion 
Mitigation and Air Quality Improvement Program (23 U.S.C. § 149). 

[9] The user taxes include excise taxes on motor fuels and truck- 
related taxes on truck tires and sales of trucks and trailers. Formulas 
consider a variety of factors, including vehicle miles traveled on the 
interstate system and motor fuel usage by each state's highway users. 

[10] Other programs have been established at the federal level to 
build, maintain, and operate inland waterways and enhance and maintain 
harbors. 

[11] P.L. 105-178, 112 Stat. 241 (1998). Seaport projects are 
ineligible for funding under the Transportation Infrastructure Finance 
and Innovation Act (TIFIA). 

[12] DOT, Department of Transportation Strategic Plan, 2003-2008: 
Safer, Simpler, Smarter Transportation Solutions (Washington, D.C., 
September 2003). 

[13] DOT has also recently developed the National Freight Action 
Agenda, in conjunction with its operating agencies, in an effort to 
guide DOT and its partners in making the nation's transportation system 
better serve its citizens. The Action Agenda identifies six high- 
priority freight initiatives, one of which is to accelerate the 
development of short sea shipping. 

[14] Maritime Administration, Strategic Plan for Fiscal Years 2003-2008 
(Washington, D.C., September 2003). 

[15] MARAD's Strategic Objective Commercial Mobility aims to address 
congestion reduction by promoting the exploration of technology 
development and infrastructure that will improve the use of the 
maritime system. 

[16] We did not determine, through our own independent analysis, 
whether SSS can produce these public benefits, and we were unable to 
locate studies that determined, through rigorous analysis, the 
potential public benefits of SSS. 

[17] 26 U.S.C. § 4461 and 19 C.F.R. § 24.24. In the case of imports, 
the importer pays the tax. In all other cases, the shipper pays the 
tax. 

[18] Cargo entering some ports is exempt, such as those in Alaska, 
Hawaii, Puerto Rico, and possessions of the United States. For domestic 
shipments, the fee is levied at one port--either the port of departure 
or the port of entry, but not both--and it does not normally apply to 
movements along inland waterways as long as the ship moving the goods 
is subject to the Inland Waterways Fuel Tax (19 C.F.R. § 24.24 (C) (5) 
and 26 U.S.C. § 4042). 

[19] Section 27 of the Merchant Marine Act of 1920 (46 U.S.C. App. § 
883). 

[20] We asked one SSS operator about whether the Jones Act requirement 
to use U.S. crews was a potential obstacle to expanding SSS services 
since U.S. crews may be more expensive than foreign labor. The operator 
said the requirement was not a particularly important issue, but that 
Coast Guard crewing requirements, which he believes mandate 
unnecessarily large crews for his SSS operations, increase the costs of 
SSS operations. 

[21] Some of the transportation stakeholders we spoke with noted that 
SSS operations may be less successful on the West Coast because of 
labor issues, port density along the West Coast, and a lack of freight 
movement along the north-south cargo routes (most freight in the 
western United States tends to move west to east). 

[22] This means that the vessel returns to its port of origin every 7 
days. A shipper moving goods from Houston to Tampa, for example, could 
make one shipment every 7 days on this SSS service. 

[23] Logistics providers, such as third-and fourth-party logistics 
providers, work with clients to arrange for the transportation of 
products. One task of a logistics provider is to help clients determine 
which mode of transportation to use, such as truck, rail, or SSS. 

[24] According to officials at the Port of Houston, cargo normally sits 
on the dock for an average of 7 days before a truck removes it. 

[25] The CMAQ program was designed to assist nonattainment and 
maintenance areas under the Clean Air Act in attaining the national 
ambient air quality standards by funding transportation projects and 
programs that will improve air quality. 

[26] This is an advance on a $25 per container payment that the Port 
Authority of New York and New Jersey makes to the Port of Albany to 
help keep shipping rates on the Northeast service lower than trucking 
rates. 

[27] Officials from the Port Inland Distribution Network generated 
expectations based on the volume of containers actually shipped. 

[28] Empty containers must be repositioned for use when there is a lack 
of two-way trade; that is, the containers must be returned to the 
steamship companies after the freight has been transported to its final 
destination. 

[29] While these findings suggest that many of these obstacles may be 
surmountable, it is important to note that because we evaluated only 
two existing operations, these lessons may not be transferable to other 
operations. It is also important to note that because our case-study 
approach focused on existing services, it provides no indication of 
whether other operators may have considered a service but not followed 
through out of concern for any of these obstacles. 

[30] While some stakeholders have cited potentially higher costs 
associated with the Jones Act provision that requires the use of U.S. 
crews, which can add to the cost of each trip, neither of the SSS 
operations we visited had such concerns. 

[31] The National Freight Action Agenda was developed to guide the 
agency and its partners in agency efforts to make the transportation 
system better serve its citizens. Within this plan, DOT has identified 
the following six high-priority freight initiatives: (1) facilitate the 
development and planning of major freight projects, (2) promote 
intelligent transportation technologies to improve freight 
transportation, (3) improve intermodal connectivity by improving 
coordination of planning and financing across DOT programs, (4) enhance 
DOT's Freight Capacity Building Program, (5) improve the timeliness and 
quality of freight data, and (6) accelerate development of SSS. 

[32] For example, less than efficient results would include solutions 
driven by the private sector that may not recognize certain costs 
imposed on others by users of the transportation system, such as 
congestion, environmental costs, and accident costs. 

[33] Remarks of Jeffrey N. Shane, Under Secretary of Transportation for 
Policy, at the September 25, 2003, annual National Waterways Conference 
and the May 20, 2004, National Maritime Day Luncheon held in 
Washington, D.C. 

[34] Other programs build, maintain, and operate the inland waterways; 
provide aid to airports; maintain the air traffic control system; and 
maintain harbors. The federal surface transportation program, however, 
is the largest of those programs and the most important for freight. 

[35] Federal law requires the creation of metropolitan planning 
organizations (MPO) for any urbanized area with a population greater 
than 50,000. Composed of representatives from local governments and 
transportation authorities, MPOs are regional policy boards charged 
with developing a comprehensive metropolitan long-range transportation 
plan and transportation improvement program that considers a wide array 
of interests and factors through cooperative partnerships with 
stakeholders. 

[36] GAO-04-165. 

[37] The use of the term "equitable" in this regard refers to the 
principle that beneficiaries should pay for project costs commensurate 
with the benefits they receive from projects. 

[38] We discuss the value of conducting benefit-cost analyses in GAO- 
04-165, GAO-05-172, and GAO, Surface Transportation: Many Factors 
Affect Investment Decisions, GAO-04-744 (Washington, D.C.: June 30, 
2004). 

[39] Transportation Research Board, Special Report 252: Policy Options 
for Intermodal Freight Transportation (Washington, D.C., 1998). 

[40] Transportation Research Board, Special Report 252. 

[41] GAO, 21st Century Challenges: Reexamining the Base of the Federal 
Government, GAO-05-325SP (Washington, D.C.: February 2005). 

[42] Other programs have been established at the federal level to 
build, maintain, and operate inland waterways and enhance and maintain 
harbors. 

[43] Transportation Research Board, Special Report 252 and Special 
Report 271; GAO-05-172; and GAO-04-165. 

[44] According to project sponsors, the warehousing benefit is becoming 
more important to shippers and ocean carriers as terminal operators, in 
an effort to handle more cargo within their facilities, continue to put 
pressure on the shippers and carriers to move containers off their 
piers as quickly as possible. 

[45] According to project sponsors, the lack of freight system 
redundancy is particularly troublesome in corridors such as Interstate 
95 where the loss of any individual segment could have an impact. 

[46] GAO-05-172. 

[47] GAO-04-165 and GAO-05-172. 

[48] GAO-05-172. 

[49] GAO-05-172. 

[50] Transportation Research Board, Special Report 252 and Special 
Report 271. 

[51] GAO-05-172. 

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