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Delaware Valley Regional Planning Commission
SJ-PIDN: Good Public Policy
Congestion Mitigation Economic Development Efficiency/Flexibility
Delaware Valley Regional Planning Commission Project No. 4-43-400: Port Inland Distribution
Network, Phase II Action / Business Plan
The Delaware Valley Regional Planning Commission (DVRPC) entered into an agreement with the
New Jersey Department of Transportation (NJDOT) for the performance of the above project. The
DVRPC subsequently entered into an agreement with DMJM Harris to perform the identified scope
of services. DMJM Harris is technically responsible to the NJDOT Office of Maritime Resources
and administratively responsible to the DVRPC.
Southern NJ PIDN Feasibility Study 1
Delaware Valley Regional Planning Commission
SJ-PIDN: Good Public Policy
Cost Effective Alternative?
Southern NJ PIDN Feasibility Study 2
Delaware Valley Regional Planning Commission
SJ-PIDN Objective
• Enhance southern New Jersey’s economic
redevelopment initiatives and promote job growth while
providing a cost effective alternative to intermodal
trucking between northern and southern New Jersey
The primary objective of the SJ-PIDN initiative is to enhance southern New Jersey’s economic
redevelopment initiatives, while providing a cost-effective alternative to intermodal trucking between
southern and northern New Jersey. It is anticipated that achieving this objective will entail reducing
impacts of trucking and congestion in northern NJ, as well as along the I-95 corridor that connects
northern and southern NJ. As a result, benefits expected to be generated in southern NJ include
economic developments that will foster job creation, leading to an improved quality of life and
increases in taxes that accrue to the State. The objective is not to “transplant” congestion problems
from northern NJ to southern NJ, rather, it is to create a complimentary system that provides
benefits in both regions.
Southern NJ PIDN Feasibility Study 3
Delaware Valley Regional Planning Commission
PIDN – Motivating Factors
• Significant Increases in
Container Volumes
Imports:
15% Growth
Exports:
8% Growth
Source: PANYNJ – CPIP Forecast
Several motivating factors are understood to provide the rationale for implementing a PIDN system.
Regardless, these factors alone do not necessarily suggest that the implementation of a PIDN
system will be successful. The goal of this exercise is to ascertain the key elements that need to be
incorporated into a business plan for the implementation of a PIDN system, provided that such a
system can be proven to be operationally, economically and financially viable.
One of the predominant factors is the ever-increasing volume of container traffic handled at marine
terminals in the United States and the relatively underdeveloped state, when compared to over-the-
road transportation by truck, of alternative modes of onward transport of containers from these
terminals. The resultant increase in truck traffic has given rise to (severe) congestion, not only at
the marine terminals, but on roadways that connect to these terminals as well.
Additionally, increased commercial focus on reducing operating costs and increasing margins, as a
result of improved technology, inventory control and supply-chain management, are exerting more
downward pressure on an already downward trend in logistics costs. The costs associated with
congestion run counter to these objectives, thus rendering the need for transportation alternatives,
such as a PIDN system, potentially attractive.
Southern NJ PIDN Feasibility Study 4
Delaware Valley Regional Planning Commission
PIDN – Motivating Factors
• Current over-the-road
price to shippers
– Phase 1 = $380.00 RT or
$2.00 per mile
excludes hidden costs
– Real Cost is 1.8 to 2.5
times higher
• Actual price for shippers
ranges from $685.00 to
$3.00+ (2006)
$950.00
Price of Crude Oil +/- $70/Barrel (2006)
As described in greater detail later in this study, an additional motivating factor that is driving pursuit
of alternative transport modes is the real cost of our region’s overwhelming reliance on trucking to
transport goods. The National Geographic article (2004) portrays an assortment of hidden costs
that substantially increase the true cost associated with transporting goods via over the road
transport. The resulting impact is that from a public policy perspective, cost comparisons should
include all cost elements – both direct and indirect – to accurately assess the merits of one
transport alternative vs. another.
Southern NJ PIDN Feasibility Study 5
Delaware Valley Regional Planning Commission
Business Plan – Key Elements
• Executive Summary
• Public / Private Stakeholders
• Potential Market
• Operational Plan
– Service Parameters
– Capital Investment
– Cost & Revenue Comparison
• Public Benefits
• Synergy
• Recommendation
• Next Steps
Three key elements in defining a Business Plan are:
1. The potential market that a PIDN service could serve
2. The operational plan to make a PIDN service work
3. The commercial strategy to ascertain the financial parameters under which a PIDN
service would operate
The market that a PIDN service could serve is initially defined by the hinterland around an identified
geographic node.
The operational plan requires identifying and planning the service parameters, form the market’s
perspective, that would be required, including the capital investments plus the pricing
characteristics from a competitive standpoint vis-à-vis alternative transportation modes.
Since previous experience has demonstrated that similar schemes are not necessarily immediately
“viable”, it is necessary to determine the nature and quantum of public benefits that could be
derived, as well as synergies that could be leveraged, in order to elicit public agency participation
and commitment.
Southern NJ PIDN Feasibility Study 6
Delaware Valley Regional Planning Commission
Business Plan – Executive Summary
• Public stakeholder sponsorship is essential from the
market’s perspective
• Key issue: (Continuous) subsidy will most likely be
necessary, to the tune of millions of $’s
• Model to be used should replicate elements utilized
today for public projects:
– Cross-harbor Barge Service (Red Hook)
– Ferry Services
– Subsidized Transit Bus Services
• Financial viability needs to be offset against public
benefits that will be generated
The participation of public stakeholders is considered essential since the program is unable to
compete head-to-head with trucking, i.e., subsidies are necessary to get the program up and
running from a financial standpoint. Although barge transportation is more competitive on a mile-
for-mile basis with trucking, the longer waterborne route between northern NJ and southern NJ, as
well as the charges associated with the handling (e.g. loading/unloading) or transshipment of cargo,
render barging uncompetitive.
The concept of subsidizing such a service at startup is not uncommon and is regularly utilized to
promote public transit systems, such as buses, passenger rail and commuter ferries. The
fundamentals are principally the same, i.e., instead of removing passenger vehicles off roads, this
scheme is designed to remove trucks off roads. From a global perspective, programs that have
worked elsewhere have been initiated on a similar platform, with additional elements, such as
discouraging truck traffic, being incorporated into them.
Since public agencies will need to provide monies for a program that is essentially not viable from a
financial standpoint, the shortfall in cash-flow that these agencies will need to cover has to be offset
by a set of socio-economic benefits, both tangible and intangible, that will likely result from
implementation of the program.
Southern NJ PIDN Feasibility Study 7
Delaware Valley Regional Planning Commission
Business Plan – Executive Summary
• Existing services, and associated financial models,
indicate that costs exceed current trucking rates,
rendering service uncompetitive
• Revenue enhancement opportunities, such as value-
added logistics or oversize loads, are not readily
available at startup
• Congestion, both on roadways and at terminals, will
continue to increase in the foreseeable future, with the
inherent associated inefficiency giving rise to
opportunities for alternatives – PIDN
The primary outcome of the cost comparison exercises, conducted as part of this study, is that
barge transportation associated with a SJ-PIDN initiative is uncompetitive with trucking, from a
pricing standpoint.
In order to render barge transportation more competitive, an integrated development strategy,
which encompasses additional economic developments, such as value-added logistics (VAL),
warehousing and other post-processing activities, needs to be developed. Experience indicates
that such opportunities are not necessarily readily available at startup, i.e., the industry tends to
adopt a “wait-and-watch” stance. If the service commences and proves to be successful, the
aforementioned ancillary developments tend to follow.
A proactive approach to planning is what is driving PIDN at the moment. From a summary level
perspective, marine terminals in northern NJ have “spare” capacity available, when measured
against comparable operations on the US West Coast. Productivity, as measured in terms of lifts
per net acre of terminal area, is (much) lower in the Northeast than in the Ports of Los Angeles and
Long Beach. As a result, marine terminals in the Northeast do not face the same pressures of
congestion that are being experienced at West Coast Ports. Once these pressures become
significant enough to start affecting productivity and efficiency, they will give rise to opportunities
and the timing will be appropriate for a PIDN program.
Southern NJ PIDN Feasibility Study 8
Delaware Valley Regional Planning Commission
Business Plan – Executive Summary
• Terminal operators are unwilling to offer discounts, as a
“PIDN Rate” may dilute their standard terminal charges
• Terminal operators are not operating as efficiently as the
balance of the industry; hence, they are unwilling to
consider alternatives to current operations
• PONY&NJ ILA is willing to “arrange gang sizes to make
it work”
• Southern NJ ILA is willing to “modify gang sizes and
responsibilities as necessary”
Since terminal operators are not truly experiencing the crippling effects of on-terminal congestion,
they are unwilling to deviate from their “bread-and-butter” business, which entails handling boxes
through the terminal for onward transportation by trucks. As a result, these operators are less
willing to consider alternative modes of onward transport, as these are likely viewed as “diluting” the
revenue-base of their core business. As noted earlier, once congestion at terminals and the
surrounding roadways lead to increases in the required levels of efficiency and productivity,
alternative means of reducing congestion and enhancing productivity/efficiency will inevitably need
to be considered. PIDN offers the opportunity to reduce the number of containers that impact both
the container yard and the gate.
The International Longshoremen’s Association (ILA) at the Port of New York and New Jersey
(PONY&NJ) have indicated that they are supportive of a PIDN program and, in principle, they are
consequently willing to make the necessary amendments to their gang sizes and work rules in
order to make such a program work. The ILA in southern NJ has agreed, in principle, to make
similar amendments to facilitate the implementation of a PIDN program.
Southern NJ PIDN Feasibility Study 9
Delaware Valley Regional Planning Commission
Business Plan – Executive Summary
• Ocean carriers are unwilling to share a portion of NYSA
assessment savings
• Tug operators are willing to participate; however, the
price differential on offer is minimal, when compared to
standard rates charged
• Some truckers are willing to participate, based on the
ability to achieve better equipment utilization; however,
they feel that the burden should not solely be placed on
them and that it should be shared amongst all parties
that are beneficiaries
Importers are primarily concerned with the “landed cost” of a box at their inland facility, which often
entails contracting with an ocean carrier for transportation of a container from a foreign country to
the inland facility on an “all-in” basis. A portion of these costs includes an assessment that is levied
by the New York Shipping Association (NYSA), which amounts to approximately $110 if a container
is handled through the terminal for onward transport by truck. In the event that a container is
handled through the terminal for onward transport by a waterborne mode of transportation, the
assessment is reduced to $25, generating a landed cost savings of $85. The current practice
involves ocean carriers collecting the assessment from the importer as part of the ‘all-in’ transport
cost and as a result the ocean carriers are unwilling to relinquish control of these monies. Being
able to capture the savings of $85 would significantly improve the competitiveness of a waterborne
PIDN program.
Tug-and-barge operators are willing to provide some concessions to facilitate the implementation of
a PIDN program; however, the discounts offered are not significant enough to improve the
competitive position of a waterborne PIDN program.
Trucking companies are also willing to make certain concessions, based on the fact that the shorter
runs afforded by a PIDN program will allow them to achieve better fleet and manpower utilization.
Southern NJ PIDN Feasibility Study 10
Delaware Valley Regional Planning Commission
Business Plan – Stakeholders
• Private entities • Public Entities
– Shipping Line – Port Authority of NY&NJ
– Port of NY&NJ Terminal – New Jersey DOT
Operator – South Jersey Port Corp.
– Trucking Company – Delaware Valley Regional
– Warehouse & Distribution Planning Commission
Center – Delaware River Port
– Shipper / Consignee Authority
– Consortium Manager – New Jersey EDA
– Container-on-Barge – Municipalities / Counties
Service Provider
The implementation of a PIDN program will require the involvement of both private, as well as
public, entities. While participation of all of the entities listed above might not be necessary from
the outset, their eventual participation is considered vital in order to develop an integrated approach
to establishing an effective PIDN program. This is particularly significant in order to foster ancillary
developments that would facilitate the generation of the socio-economic benefits that are
considered to be of critical importance in demonstrating the overall economic viability of a PIDN
program. Given the large number of public and private entities, often with conflicting and, in
extreme cases, perhaps diametrically opposing objectives, that need to be involved, it is evident
that establishing (contractual) relationships between such entities is likely to be a very time-
consuming, complex, challenging, and in some cases cumbersome, process.
Southern NJ PIDN Feasibility Study 11
Delaware Valley Regional Planning Commission
Business Plan – Stakeholders
PUBLIC SECTOR PRIVATE SECTOR
Willing Willing Semi-willing $$
DVRPC / Not willing $$
NJDOT ILA Local
SJTPO
Terminal
Willing
Operator
DRPA Willing $
Container-on-Barge Tug
Feeder Service Operator
NJEDA
NYSA /
Willing
Carrier(s)
Local
SJPC PANY&NJ Not willing $$$$
Drayage
Willing Willing Semi-willing $
As noted earlier, involvement from a broad spectrum of private and public stakeholders, with
varying levels of interest/commitment, is required if a successful PIDN program is to be established
and maintained.
The graphic in this slide aims to depict the relationships that are likely to exist between such
entities, as well as the level of interest/commitment that we understand each of these entities to
have. It is interesting to note that, in principle, all the public entities are willing to participate in a
PIDN program. Conversely, although some private entities are willing to participate, to varying
extents, it should be noted that their level of interest/commitment indicates a broad spectrum of
variance. The key issue, in this regard, is the adopted stance of private entities that “control” the
largest monetary streams within the logistics chain, i.e., terminal operators and ocean carriers. In
order for a PIDN program to be cost-effective, it is essential that the monetary benefits associated
with over-the-water onward transport of containers, which accrue to them, can (partially) be
captured. For example, the ocean carriers are responsible for payment of the NYSA fees on behalf
of consignees/shippers. In the event that boxes are re-handled over the water, a saving is incurred
in the NYSA assessments, which the ocean carrier is unwilling to relinquish (all or a portion
thereof), which in turn erodes the cost-competitiveness of the PIDN program, when compared to
over-the-road transportation.
Another example is the lift rate available from terminal operators. While a reduced lift rate has been
quoted by NY/NJ terminal operators based on straight time operations, typical barge
loading/unloading operations have been required to occur during overtime periods. Since deep sea
vessels often require lifts that measure in the thousands per port of call (compared to barge
volumes that are in the double or triple digits), the deep sea vessels receive container handling
priority. The surge in containers volumes for the past several years that have been moving through
the port has placed barge handling in a lower priority position, thereby often requiring the handling
of the barge during overtime hours, which ultimately results in higher per box handling costs.
Southern NJ PIDN Feasibility Study 12
Delaware Valley Regional Planning Commission
Business Plan – Model
• Public-Private Partnership Arrangement
• Much like transit projects are designed to take cars off
the road, this is designed to take trucks off the road
• Public agencies fund construction of transit facilities and
provide operating subsidies to bus and ferry operators
• Similar considerations would be applicable to the
development of infrastructure at the PIDN Node and
container-on-barge service provider
Since the establishment of a PIDN program requires the involvement of both public and private
entities, the obvious choice is (some form of) a public-private partnership (PPP) arrangement. The
PPP framework should ideally be structured in an “equitable” manner, i.e., one where each
particular element of the PIDN program is allocated to those entities that are best suited to manage
them. The basic PPP model framework for the PIDN program should replicate “best practices” and
“lessons learned” from established transit programs. The primary objectives of transit programs are
to provide the public with a transportation alternative and in so doing reduce congestion on
roadways. The objectives are achieved by making the use of public transportation sufficiently
attractive to the general public so that they are encouraged to use the same instead of their
vehicles. The PPP model framework for the PIDN program aims to replicate the same logic and
principles, except that it would be geared to stimulate the use of an alternative mode of
transportation besides truck transport.
It is our understanding that New Jersey Department of Transportation (NJDOT) provides buses to
private charter operators for a flat fee of $1 with these operators subsequently being responsible for
all the associated operating and maintenance costs. Recovery of these costs are achieved by
charging passengers fares that are approved by NJDOT. Similarly, the PPP model framework for a
PIDN program envisages that a public agency could provide a barge for a nominal fee of $1 with
the container-on-barge service provider (COBSP) being responsible for recovery of all operating
and maintenance costs at a tariff that is competitive with truck transport.
Southern NJ PIDN Feasibility Study 13
Delaware Valley Regional Planning Commission
Business Plan – Arrangement
Public Private
Agency Entity*
Manage Service Contracts Minimum Vol. Guarantee
Profit / Loss Responsibility Container On NJ Lift Rate & Conditions
Berth & Upland Facilities Barge Feeder SJ Lift Rate & Conditions
Profit Sharing with Carrier Service Profit Sharing with SJPC
(COBFS)
Est Rate Est Rate Est Rate Est Rate Est Rate
Stevedores Chassis Local South
PONY&NJ Tug & Barge
on Delaware Pool NJ Trucking
Terminals Provider
River
Service Other
Contracts Trucking
* - or other combination of deep sea vessel operator & PONYNJ terminal operator
This one example or ‘Arrangement’ of service agreements includes two key elements.
The top portion of the graphic pertains to items that should be included with a potential
shipping line or terminal operator as indicated in the ‘Private Entity’ box. The principal
requirement is to guarantee a minimum volume from the shipper line or terminal operator
thereby ensuring the barge system generates the type of cost efficiencies necessary.
The bottom portion of the graphic highlights the type and number of operational or service
agreements that will be required to implement a container on barge feeder service
(COBFS).
Southern NJ PIDN Feasibility Study 14
Delaware Valley Regional Planning Commission
Business Plan – Market
• Success of system will depend on several factors;
however, experience from PANY&NJ’s Albany
ExpressBarge program indicates that volumes are the
primary determinant of viability, followed by VAL services
• The market’s there, in order to serve it, you need the
involvement of, and tangible commitment by, key private
and public stakeholders
• Barge load factor (80%+) and yield management (net
revenue per unit) are critical to financial viability
The initial step in developing a business plan is to assess the viability of any potential market(s) for
a PIDN program. Experience from the Port Authority of New York & New Jersey’s (PANY&NJ)
Albany ExpressBarge initiative has demonstrated that non-conservatively estimating the potential
market has serious negative implications on the overall viability of the program. In addition,
measures to stimulate market demand, such as the establishment of warehousing/distribution parks
and value-added logistics (VAL) services have demonstrably proven to increase market
attractiveness.
By all accounts, the magnitude of the overall container market for a PIDN program is not
necessarily in question – the large population base in the Northeast generates commensurate
demand for goods that are predominantly shipped in containers. However, in order to be cost-
competitive with truck transportation, serving this market by alternative means of transportation
through a PIDN program requires a committed involvement by several public and private entities as
noted earlier.
As with any fixed-capacity transportation system, e.g., airlines, the viability is dependent upon
achieving threshold load factors to ensure the coverage of fixed costs that are necessary to capture
cost advantages implied by economies of scale that can be realized once such threshold load
factors are exceeded. A direct derivative of the foregoing is the management of costs and yield,
i.e., net revenues per unit transported.
Southern NJ PIDN Feasibility Study 15
Delaware Valley Regional Planning Commission
Business Plan – Market
• Market demand determined under three (3) scenarios:
– Probable
– Achievable
– Opportunistic
• Program requirements formulated on the basis of the
“Probable” approach
The potential market demand for the Southern NJ PIDN node has been determined based on
variations in the following 2 (two) key market-determinant variables:
1. Market Growth
2. Market Capture
For each of these variables, 3 (three) different scenarios were developed, which yields a total of 9
(nine) possible market growth scenarios. These scenarios were whittled down to the following 3
(three) overall scenarios, which are depicted on the ensuing slides:
1. Probable – Medium Market Growth and Low Market Capture
2. Achievable – Medium Market Growth and Medium Market Capture
3. Opportunistic – High Market Growth and Medium Market Capture
For the purposes of defining the operational requirements of the PIDN program, the volumes
derived from the “Probable” approach have been utilized.
Southern NJ PIDN Feasibility Study 16
Delaware Valley Regional Planning Commission
Business Plan – Regional Market
LEGEND
Pennsylvania
TEUs by Zipcode
Hazelton 0-2,000
2,000-7,000
7,000-16,000
Port of NY&NJ 16,000-594,000
l Centroid of Dense
Allentown ai
/R Trade Cluster
k
uc
Reading, PA Tr Total TEUs
Export 137,387
Import 358,170
TOTAL 495,557
Pennsauken
%Share by Port
Wilmington Philadelphia/ 4%
9%
Hanover, PA Camden
18% 45%
Maryland
Millville
Hanover, MD 24%
PONYNJ
Atlantic
Delaware Ocean
Other North Atlantic
Delaware
Bay West Coast (Direct)
e
rg West Coast (Warehouse)
Ba Canadian Ports
Source: PANY&NJ / M&N – PIDN Philadelphia/Camden 1998/1999 Case Study
. Based on PIDN analyses of origin and destination data for Southern NJ and Pennsylvania,
the geographical distribution of the 1998/1999 dense trade cluster market information for
Reading and Camden/Philadelphia is depicted above.
As noted in the graphic, this market demand is served by several port facilities, on both the
Atlantic and Pacific coasts. Currently, the PONY&NJ handles approximately 45% of the
total throughput followed by other North Atlantic ports, which have a market share of 24%.
The remaining market share is held by West Coast and Canadian ports.
In 1998/1999, the top 5 import countries and their respective market shares were: China
(12.6%), Central America / Caribbean (6.0%), UK / Ireland (5.9%), Hong Kong (5.5%) and
Germany (4.9%).
In 1998/1999 the top 5 shipping lines and their respective market shares were: Maersk
Sealand (10.9%), Evergreen (8.2%), Yang Ming (5.4%), China Shipping (4.4%) and P&O
Nedlloyd (4.1%).
A variety of significant importers included Ames Department Stores, Owens Corning
Fiberglass, Ikea, Panalpina and Atlantic Cocoa while significant exporters included EI
Dupont, Becton Dickenson and several 3rd party forwarders or logistics providers.
Southern NJ PIDN Feasibility Study 17
Delaware Valley Regional Planning Commission
Business Plan – Target Market
LEGEND
TEUs by Zipcode
0-2,400
Pennsylvania
2,400-8,800
8,800-19,400
19,400-37,800
Total TEUs
Export 56,968
Import 251,564
Broadway
Terminal TOTAL 308,532
%Share by Port
2%
7%
22% 49%
20%
New Jersey
State Export Import Total %Share
PONYNJ
Other North Atlantic
Target Market New Jersey 42,574
Pennsylvania 14,394
239,859
11,705
282,433
26,099
91.5
8.5 West Coast (Direct)
≈140,000 TEU 20 Miles Total 56,968 251,564 308,532 100.0 West Coast (Whse)
Canadian Ports
Source: PANY&NJ / M&N – PIDN Philadelphia/Camden 1998/1999 Case Study
Based on the origin / destination data derived from the PANY&NJ’s PIDN analyses, it was
determined that in 1998/99, the overall market for the South-eastern PA and Southern NJ region
represented nearly half a million TEUs (358,200 TEU – Imports and 137,400 TEU Exports). For the
purposes of this analysis, the potential market that could be served by a PIDN node is considered
to be located within a 20-mile radius of such a node.
As depicted in the attached figure, the overall 20-mile market for a Southern NJ-based PIDN node
location at South Jersey Port Corporation’s (SJPC) Broadway Terminal, constitutes nearly 308,500
TEUs. A 20-mile roundtrip distance is assumed in order to minimize final over-the-road drayage
operations, thereby maximizing trucker turn times and minimizing per TEU drayage costs. In
addition, due to the aforementioned location of the PIDN node on the NJ banks of the Delaware
River, it is considered unlikely that significant cargo volumes destined to PA could be captured by a
barge service since the incremental cost of tolls for using Delaware River bridge crossings,
combined with time impacts associated with possible congestion, could render service
uncompetitive from a total cost standpoint, as compared to over-the-road haulage from alternative
places. This reduces the overall market to that of Southern NJ, which is approximately 282,400
TEUs. Since the identified PIDN hub is the PONY&NJ, which has a market share of 49%, the
overall market that could theoretically be served by a COBSP between the PONY&NJ and a PIDN
node located @ SJPC’s Broadway Terminal is estimated to be approximately 140,000 TEUs
(≈282,433 X 49%).
Southern NJ PIDN Feasibility Study 18
Delaware Valley Regional Planning Commission
Business Plan – Market Capture Forecast
Projected Annual Volumes for South Jersey PIDN
Dense Trade Cluster via the PONYNJ
180,000
Low Medium High
- - -
High
160,000 High High High
LH MH HH
Cargo Growth
Low Medium High
- - -
140,000 Average Average Average
LA MA HA
Low Medium High
120,000 - - -
Volume (TEUs)
Low
Low Low Low
LL ML HL
Market Capture
100,000 Low High
80,000
60,000
40,000
20,000
0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Year
LL LA LH ML MA MH HL HA HH
Due to the geographical distribution of the SJ-PIDN data previously presented, a market capture
rate that ranges from a low of 15% to a high of 25% was analyzed over a period from initial start-up
through a 20-year feeder service development program. Based on the range of market capture
rates, the projected annual volumes for a Broadway based PIDN facility are presented above,
These projections are based on a start-up or year 1 throughput volume of 28,000 TEU and include
corresponding “LOW”, “AVERAGE” and “HIGH” forecasts for subsequent years.
Applying the increased capture rates, it is anticipated that this volume could increase to nearly
40,000 TEUs, or approximately 25,000 boxes, by the end of the fifth year and that it could further
increase to nearly 60,000 TEUs, or approximately 35,000 boxes, by the end of the tenth year.
The “Low” growth forecast is based on annual throughput increases of 3.6% annually, whereas the
“High” growth forecast is based on annual increases of 4.2%. The “Low” market capture forecast
commences at a 15% capture rate for the 1st year of service and increases at a 1% capture rate
per annum (i.e. 16% in year 0+1, 17% in year 0+2 etc.) for the first 10 years and reduces down to a
0.5% increase per year for years 10 through 20. The “High” market growth forecast commences at
a 25% capture rate for the 1st year of service and increases at a 1.5% capture rate per annum for
the first 10 years and reduces down to a 1.0% increase per year for years 10 through 20.
The projected growth rates are comparable to the Port Authority of New York and New Jersey’s
long term forecast for the overall PIDN program.
Southern NJ PIDN Feasibility Study 19
Delaware Valley Regional Planning Commission
Business Plan – Market
• Volume figures are from 1998/99; current figures will
likely be higher, since volume at PONY&NJ has roughly
doubled between 1998 and 2005
• Trade-lane switch from West Coast to East Coast may
have driven up volumes further
• Hence PONY&NJ share could be >49%
• All-else being equal, the target market could therefore be
in excess of 280,000 TEUs
It is noted that the volume figures used in arriving at the projected market for a Southern NJ PIDN
are based on data that was assembled in 1998/99. Since volume figures through the PONY&NJ
have virtually doubled between 1998 and 2005, one can conclude that these figures can be
considered as conservative.
Additionally, the recent labor unrest at West Coast ports has led to a reorganization of supply
chains, with many big-box importers broadening the number of trade lanes that they utilize,
between Asia and the West Coast, by including Suez routes or relay services between Asia/Europe
and the East Coast. The foregoing phenomenon is likely to have led to an increase in the market
share of East Coast ports and, as a result, it is more than likely that the portion of the Southern NJ
PIDN market that is handled through the PONY&NJ has increased beyond 49%, as estimated in
1998/99.
Based on the foregoing assumptions, and all other market determinant variables being equal, the
projected baseline market for a Southern NJ PIDN would likely be 280,000 TEUs at present, i.e.,
twice the magnitude of the earlier estimate of 140,000 TEUs.
Southern NJ PIDN Feasibility Study 20
Delaware Valley Regional Planning Commission
Business Plan – Institutional Issues
• Combination of institutional factors need to come
together to make this work
– Jones Act, Harbor Maintenance Tax, NYSA Assessment
Collection, Tug/Barge Manning, Terminal Gang Sizes,
Chassis Pool
• In models that have worked elsewhere, strong public
commitment has been imperative, including
implementing policy to impose penalties or disincentives
to truck traffic – cargo needs to be “forced” to alternative
modes
Although market volumes are key to determining the potential market and commercial viability of a
Southern NJ PIDN service, various external factors also have an impact. When comparing a
potential PIDN service with benchmark examples elsewhere in the world, it should be noted that
several institutional, policy, environmental and commercial differences currently exist between the
U.S. and such places. In order to effectively replicate “success stories” that have materialized
elsewhere, at a minimum, the institutional factors, as currently prevalent in the U.S., need to be
addressed.
The Jones Act is considered a primary source of competitive cost disadvantage, by virtue of the
incremental cost associated with constructing vessels in the U.S., as well as the additional cost
implications associated with the implied crewing requirements of the act.
Since a container that is transported via a PIDN barge service will be handled four (4) times more -
(lift on barge to PIDN node, lift off barge at PIDN node, lift on barge at PIDN node, lift off barge at
PONYNJ node) - than a ‘non-PIDN’ container, which is transported via truck, the labor gangs that
facilitate a barge based load and unload process must utilize various means and methods to obtain
cost efficiencies. Alternative handling processes could include the ability to perform multiple tasks,
removing the minimum hour allocations, ‘piggy-backing’ with deep sea ship operations and
providing for flexible gang sizes that correlate with the number of containers to be trans-shipped via
the PIDN service.
Southern NJ PIDN Feasibility Study 21
Delaware Valley Regional Planning Commission
Business Plan – Institutional Issues
• NYSA Assessments are paid by ocean carriers on behalf
of shipper/consignee, hence the fee differential for using
the barge is usurped by ocean carriers
• NYSA needs to reexamine how its assessments are
collected – ocean carriers should be made to relinquish
control over these monies
• Shipper/consignee willing to use barge routing as long
as delivery is managed at comparable costs to trucking
In addition to these cost disadvantages, the current methodology for collection of the New York
Shipping Association’s (NYSA) assessments on container cargo further exacerbates the
competitive cost disadvantages of barge transportation. In the event that an import container is
handled through the gate facility of a marine terminal, it incurs an assessment by the NYSA of
$110, whereas handling the same container over water only incurs an assessment of $25.
Finally, the practice in the U.S. of carrier-owned chassis pools, as opposed to trucker-owned
chassis, as prevalent elsewhere in the world, adds additional cost to maintaining, managing and
repositioning chassis inventories. The latter is more easily managed when the container and
chassis are “married”. In the case of barge transportation, this implies the need to manage a
chassis pool at two locations – the PIDN hub terminal and the PIDN node.
Southern NJ PIDN Feasibility Study 22
Delaware Valley Regional Planning Commission
Business Plan – Institutional Issues
The quote highlighted in the Journal of Commerce article above states: “So the main proponents of
short-sea and short-rail transport have been public-sector organizations such as port authorities
and state and local governments, which can contemplate subsidizing the startup costs.” The key
words to take note of are “public-sector organizations” and “startup”. Fundamentally, models that
have been successful elsewhere have necessarily required the involvement of public-sector
organizations at the outset, in order to facilitate the transition from over-the-road transportation to
alternative modes such as barge and rail. The foregoing is predicated on the fact that previous
policy, which was geared to promoting road transportation, requires changing to induce private
sector entities, who are the carriers and owners of freight, to utilize alternative transportation
modes. The risks associated with the costs incurred at the outset, which predominantly comprise
subsidies, are best borne by public-sector organizations. Generally, the expectation is that,
following a number of (successful) years of operation, volumes will have increased to the point
where sufficient economies of scale will have been generated to render alternative modes of
transportation competitive with over-the-road transportation, thus making it viable for private sector
entities to step in. Ideally, developing a public-private partnership from the outset, with a clear
definition of roles, responsibilities and transfer conditions, is an institutional model worth pursuing.
Southern NJ PIDN Feasibility Study 23
Delaware Valley Regional Planning Commission
Business Plan – Institutional Issues
1. Yes
2. Yes
3. Yes
4. Yes
5. Yes
6. Possibly
7. Yes
The National Freight Transportation Policy (NFTP) has a “Vision Statement” that stipulates the
following: “The U.S. freight transportation system will ensure the efficient, reliable, safe and secure
movement of goods and support the nation’s economic growth while improving environmental
quality.” The NFTP outlines 7 (seven) objectives that need to be achieved in order to transform the
NFTP “Vision Statement” into reality. As noted in the slide, a Southern NJ PIDN system achieves
the seven (7) stated objectives of the NFTP. So, as public policy initiatives go, the Southern NJ
PIDN system is in alignment with the NFTP and can therefore be considered “good” public policy.
The important thing to note is that such a confluence with national-level policy should be leveraged
as an opportunity to promote a Southern NJ PIDN system at the federal government level when it
comes to attracting funding from public sources.
Southern NJ PIDN Feasibility Study 24
Delaware Valley Regional Planning Commission
Business Plan – SJ PIDN
Service Parameters
• Barge (234 nautical miles – 29 hours / direction)
– 180 containers / movement
• Truck (85 miles – 3 hours / direction)
• Barge offers comparatively lower unit costs on a mile-
per-mile basis
– Rehandling boxes adds costs
– Longer route erodes competitiveness
The Southern NJ PIDN system is based on a routing between the PONY&NJ and SJPC’s exiting
facilities at the Broadway Terminal in Camden, NJ, and the one-way distance between these two
nodes is 234 nautical miles. Based on an average sailing speed, for a tug-barge combination of 8
knots, it is estimated that the one-way trip could be completed in 29 hours. The barge is assumed
to be able to carry 180 containers in each direction.
In comparison, over-the-road transportation by truck is estimated to equate to a distance of 80 to 85
miles and the one-way trip between the PONY&NJ and Camden, NJ can be completed in 3 hours,
based on an average speed of 30 miles per hour.
Although transportation by barge offers comparatively lower unit costs per container on a mile-per-
mile basis, its competitiveness is eroded by the fact that the waterborne route is three times longer
than over-the-road transportation.
Additionally, since every container that is earmarked for waterborne transportation incurs a
minimum of two additional moves by a quay or other heavy lift crane, when compared to over-the-
road transportation, the additional costs associated with these moves further serve to erode the
competitiveness of transportation by barge.
Southern NJ PIDN Feasibility Study 25
Delaware Valley Regional Planning Commission
Business Plan – Service Parameters
• PONYNJ Marine Terminal(s)
– Modify gang size; Lock-in “Lifts/Hour” Handling Criteria
• Tug & Barges – maximize efficiency
• SJ PIDN Terminal Operator (SJPC)
– Stevedoring (Delaware River Stevedores)
– Wharfage & Dockage
– Storage / Demurrage
– Direct to In-Terminal Yard or Stack
• Terminal Drayage (Champion Trucking)
• Local Drayage (Various Trucking Companies)
• Value Added Activity / Acreage Available
– SJPC, NJEDA, City of Camden
– VAL services may consist of: stripping / stuffing, repackaging, parts
assembly, US Customs clearance, quality assurance inspections,
product upgrades, installation of accessories, preparation for retail
sale, commodity processing and inventory management
In order to render a PIDN service effective, a number of service parameters need to be
appropriately addressed and defined. First, at the marine terminals in the PONY&NJ, the minimum
gang size that needs to be employed, as per the International Longshoremen’s Association (ILA)
requirements, is larger than necessary for a barge operation. Second, the terminal handling
charges (THC) that terminal operators are quoting generally do not incorporate discounts, which in
turn is not conducive to improving the cost-competitiveness of a PIDN service. Finally, the
configuration of tugs and barges needs to be such that their efficiency, in terms of fleet
configuration and capacity utilization, is maximized.
At the Southern NJ PIDN node, the parameters, under which the existing terminal operator (SJPC)
is to provide services, such as stevedoring, wharfage, dockage and storage, need to be defined
and agreed to. While published tariff rates exist, both the SJPC and the ILA have expressed a
desire to work with other project stakeholders to achieve a cost structure that is appropriate to
facilitate a feeder service start-up.
Since the model for a Southern NJ PIDN system is reliant upon a short haulage between the
Southern NJ PIDN node and the ultimate inland destination of the cargo, it is necessary to secure
the services of a local drayage company at defined rates to established destinations or zones..
The viability of a PIDN system is often inexorably linked to the ability to post-process cargo in some
manner. The economies of scale that can be achieved by a tug-barge combo should give rise to
value-added logistics (VAL) activities and the involvement of state and local authorities should be
considered and actively pursued as a viable economic development strategy.
Southern NJ PIDN Feasibility Study 26
Delaware Valley Regional Planning Commission
Business Plan – Capital Investment
• Program envisages no initial capital investments in
infrastructure (berths, wharves, upland terminals,
warehousing & distribution facilities, etc.) and minimal for
equipment (barges, cranes, top-picks, reach-stackers,
trailers, etc.)
• SJPC’s existing facilities will be used to minimize risk
and defray initial capital outlay
• Could be structured as a “no-interest” loan or a deferred
repayment scheme with a specified “grace period” of a
certain number of years, once proven viable
The Southern NJ PIDN system has been structured in such a manner as to defray the initial capital
outlay thereby minimizing the associated risks. Consequently, the program does not involve any
up-front capital-intensive investments in infrastructure; rather, the startup operation will utilize
SJPC’s existing facilities in Camden. In order to be effective, some (minimal) investment, in
container-handling equipment, will be necessary, primarily to undertake yard operations. It is
envisioned that the waterside operations could be handled with SJPC’s existing ship-to-shore
cranes. The required capital investment, as presented on the following page, could be structured
as an SJPC bond initiative, coupled with or independent of a “no interest” economic development
loan, grant, or other deferred payment scheme, which would serve to alleviate the lack of cost
competitiveness vis-à-vis road transportation at the outset.
Southern NJ PIDN Feasibility Study 27
Delaware Valley Regional Planning Commission
Business Plan – Capital Requirements
(minimal public $ at outset)
• Marine terminals and associated infrastructure:
– Preliminary estimate*: $0.0 million
• Equipment
– Barges $0.0 million
– Cranes $0.0 million
– Yard Equipment $1.0 million
– Other Equipment $0.5 million
– Total ± $1.5 million*
* – Assumes startup operations via SJPC’s existing facilities and lease of
major equipment, i.e., barges and cranes if necessary at a later date
As previously noted, no investment in landside infrastructure is envisaged; rather, use will be made
of SJPC’s existing facilities at Camden. It is anticipated that the barges will be leased, thus
rendering the associated costs as a direct operating expense, rather than placing the burden of
asset ownership, which will need to be liquidated in the event that the Southern NJ PIDN system is
unsuccessful, on a public-sector entity such as the NJDOT. The only investment envisaged is for
top-picks/side-picks and on-terminal tractor-trailer combos, to the tune of a total of $1.5 million.
Southern NJ PIDN Feasibility Study 28
Delaware Valley Regional Planning Commission
Cost Structure
Probable
1 COB Service Equipment
1.1a Tug Hire (Equipment Costs) $6,500 per day
1.1b Tug Hire (Fuels Costs) $6,250 per day
Business Plan – Operating
1.1c Barge Lease $2,500 daily/barge
2 Port of NY & NJ Terminal
2.1 Shore to barge loading at PONY&NJ Terminal $185 per box
2.2a Multi-Terminal Repositioning $1,000 per move
2.2b Multi-Terminal Repositioning 2 hrs./move
2.3 No. of Terminal Calls 4
2.4 NYSA Assessments $25 per box
3 Voyage to SJ PIDN Node
3.1a Journey Time @ average speed of 8 kts. 29 hrs. O/W
3.1b Barge Docking and Line-Handling (In & Out) 4 hrs. total
4 SJ PIDN Node (Inbound)
4.1 Barge to shore unloading at SJ PIDN Node $100 per box
Costs
4.2a Multi-Terminal Repositioning (Packer Ave. Terminal in Philadelphia) $250 per move
4.2b Multi-Terminal Repositioning (Packer Ave. Terminal in Philadelphia) 2 hrs./move
4.3 No. of Terminal Calls 2
4.4a Yard, Gate & Local Delivery Fees (Loaded) $100 per box
4.4b Yard & Gate Fees (Outbound Loaded or Empty) $25 per box
4.5 SJPC Wharfage and Dockage $25 per box
5 SJ PIDN Node (Outbound)
5.1 Shore to barge loading at SJ PIDN Node $100 per box
5.2a Multi-Terminal Repositioning (Packer Ave. Terminal in Philadelphia) $250 per move
5.2b Multi-Terminal Repositioning (Packer Ave. Terminal in Philadelphia) 2 hrs./move
5.3 No. of Terminal Calls 2
5.4 Yard & Gate Fees (Inbound Return) $25 per box
5.5 SJPC Wharfage and Dockage $25 per box
6 Voyage to PONY&NJ Terminals
6.1 Journey Time @ average speed of 8 kts. 29 hrs. O/W
7 Port of NY & NJ Terminal
7.1 Pre-Berthing Time 4 hrs.
7.2 Shore to barge loading at PONY&NJ Terminal $185 per box
7.3a Multi-Terminal Repositioning $1,000 per move
7.3b Multi-Terminal Repositioning 2 hrs./move
7.4 NYSA Assessments $25 per box
8 Management
8.1 Management Fees $25 per box
A roundtrip voyage between the PONY&NJ terminal(s) and a Southern NJ PIDN node at Camden,
NJ, has been broken down into the following 8 (eight) components for operational modeling and
costing purposes:
1. Container-on-Barge Service Equipment (fixed cost per roundtrip voyage)
2. PONY&NJ terminal costs (based on throughput and number of terminals called), including
stevedoring, multi-terminal calls and NYSA assessments, per outbound or ”export” move.
3. Voyage to Southern NJ PIDN node.
4. Southern NJ PIDN costs per inbound or ”import” move, including stevedoring, multi-terminal
calls, wharfage and dockage.
5. Southern NJ PIDN costs per outbound or ”export” move, including stevedoring, multi-
terminal calls, wharfage and dockage.
6. Voyage to PONY&NJ terminal(s).
7. PONY&NJ terminal costs (based on throughput and number of terminals called), including
stevedoring, multi-terminal calls and NYSA assessments, per inbound or ”import” move.
8. Southern NJ PIDN System service management fee.
Southern NJ PIDN Feasibility Study 29
Delaware Valley Regional Planning Commission
Business Plan – Revenue / Cost Comparison
$1,400
$1,200
$1,000
$800
Unit Cost
$600
$400
$200
$0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Year
Probable
Cost } Achievable
Opportunistic
OTR = $330
OTR + 25% Fuel Surcharge = $413
Revenue } OTR + 25% Fuel Surcharge + MT Return @ $50 = $463
OTR + 25% Fuel Surcharge + MT Return @ $50 + NYSA Assessment @ $110 = $573
OTR + 25% Fuel Surcharge + MT Return @ $50 + NYSA Assessment @ $110 + VAL Revenue @ $100 = $673
As the volume of cargo handled increases in time, the fixed cost components are spread over this
larger volume, leading to economies of scale and an overall reduction in the unit cost per box
handled by the Southern NJ PIDN system. The above graph is designed to depict the comparison
between the costs for a tug-and-barge PIDN service and over-the-road (OTR) truck transportation
under the following alternatives:
• OTR (baseline)
• OTR plus a fuel surcharge of 25%
• OTR plus a fuel surcharge of 25% plus an empty return @ $50
• OTR plus a fuel surcharge of 25%, plus an empty return @ $50, plus NYSA assessments of
$110
• OTR plus a fuel surcharge of 25%, plus an empty return @ $50, plus NYSA assessments of
$110, plus value-added logistics (VAL) activities of $100
Under the three market volume scenarios developed and presented previously, it is evident that a
tug-and-barge PIDN service, running between the PONY&NJ terminals and the Southern NJ PIDN
node, can only be cost-effective when compared to an OTR truck transportation alternative that
includes a number of additional surcharges, assessments and costs. The idea is that a tug-and-
barge PIDN service would be able to more readily generate the additional business and revenue
opportunities associated with value-added activity. Under the “Opportunistic” scenario and
including all the alternatives presented above, a tug-and-barge PIDN service could achieve cost
equality with OTR transportation by the 7th year. Conversely, under the same scenario, but
excluding the additional revenue attributable to VAL activities renders the service cost-equivalent in
the 15th year. The “Achievable” scenario only reaches cost-equivalency with the costliest OTR
option in the 24th year, whereas the “Probable” scenario never quite obtains cost-equivalency.
Southern NJ PIDN Feasibility Study 30
Delaware Valley Regional Planning Commission
Business Plan – Subsidy Costs
Cumulative Subsidy
$160.00
$140.00
$120.00
$100.00
$ (million)
$80.00
$60.00
$40.00
$20.00
$0.00
1 2 3 4 5 6 7 8 9 10
Probable $11.68 $24.19 $37.01 $50.16 $63.67 $77.55 $91.84 $106.55 $121.88 $137.63
Achievable $9.68 $19.91 $30.39 $41.14 $52.19 $63.53 $75.20 $87.24 $99.79 $112.68
Opportunistic $7.76 $15.82 $24.04 $32.43 $41.00 $49.76 $58.73 $68.03 $77.72 $87.65
Year
Probable Achievable Opportunistic
The graph above depicts the cumulative subsidy costs that would have to be borne by the public
sector, during the first 10 (ten) years of operation, in order for a Southern NJ PIDN system to
achieve cost-equivalency with OTR truck transportation. Based on the 3 (three) market-growth
scenarios presented herein, the cumulative subsidies, for the 10-year period, would range from
approximately $88 million under the “Opportunistic” scenario, to $113 million under the “Achievable”
scenario and finally to $138 million under the “Probable” scenario. In essence, these equate to
annual subsidies that could range between approximately $8 million and $14 million. Clearly these
costs are significant, and they need to be weighed against the economic benefits that could arise
out of the implementation of a Southern NJ PIDN system.
Southern NJ PIDN Feasibility Study 31
Delaware Valley Regional Planning Commission
Benefits – Locale-Specific
Southern NJ PIDN Node
•Job Generation
•Marine Terminal
•VAL
•Warehousing
•Taxes
Delaware River
•DRPA Waterfront Master Plan
•Potential New Terminals
•Paulsboro Northern NJ PIDN Hub
•Greenwich •Job Generation
•Carney’s Point •Marine Terminal
•Southport •Tug & Barge
•Others (PA / DE) •Reduced Congestion
•On-Terminal
•Roadway
•Air Quality Improvement
NJTP – I95
•Reduced VMTs
•Reduced Congestion
•Reduced Wear-and-Tear
•Reduced Accidents
•Air Quality Improvement
It is anticipated that the implementation of a Southern NJ PIDN system would give rise to a
multitude of benefits, which are not solely tied to the location of the Southern NJ PIDN node. As
depicted in the slide above, it is envisaged that such benefits would arise at the following 4 (four)
locales:
1. Southern NJ PIDN (South Jersey Port Corporation / Camden County)
2. Along the Delaware River
3. Along the New Jersey Turnpike (NJTP) / I-95 Corridor
4. Northern NJ PIDN Hub (Port of New York & New Jersey)
Broadly speaking, the benefits that would be generated include:
• Economic growth and associated developments, such as job generation, value-added
logistics, warehousing and marine terminals
• Congestion mitigation on roadways
• Air quality improvement
• Reductions in VMT’s and the associated benefits, such as reduced wear-and-tear to
roadways and the reduced incidence of accidents
Southern NJ PIDN Feasibility Study 32
Delaware Valley Regional Planning Commission
South NJ PIDN Node – Jobs Generation
• Employment Type
– Transport (Water + Inland)
• 5 man tug crew
• 1 man local drayage….same as
truck transport
– Marine Terminal
• 8 – 11 man gang size
– Plus checkers & truckers
– Warehouse (250,000 sf)
• 100 jobs pending size of facility
– Value Added possibility
• +100 additional jobs, pending size
and type of facilities
Perhaps the most significant benefit likely to arise from the implementation of a Southern
NJ PIDN system is the generation of employment. As outlined earlier, in order for a
Southern NJ PIDN system to be successful, it is deemed necessary that, besides the
obvious marine industry jobs that would either be enhanced or created, such as
stevedoring jobs at the PIDN hub and node, plus crewing jobs on the tug-and-barge
combos, it generates new jobs in warehousing and value-added logistics (VAL) as well.
The foregoing is predicated on the fact that lower establishment costs, coupled with the
availability of adequately sized tracts of land to accommodate warehousing, storage,
processing and/or distribution, will likely give rise to a reduction in the overall logistics
costs incurred by end-users of cargoes, when compared to the cost of routing and
processing the cargo through the PONY&NJ.
Based on the amount of volume that is actually handled by the Southern NJ PIDN system,
through such warehousing and VAL facilities, it is estimated that the number of jobs
created could be in excess of 200 in the medium to long-term. It is estimated that, on
average, stripping or stuffing a 20’-box can be completed in 3 hours by a 4-man gang,
whereas the same gang would require 5 hours for a 40’-box. Assuming 2,080 hours could
be worked per employee on an annual basis, based on a 40-hour workweek, and
assuming a loss of 15% of this time for vacations, holidays, illness, etc., yields a figure of
approximately 1,800 net annual hours worked per employee. Based on a box-ratio of 1.7,
the weighted average time to handle a box is 4 hours and 24 minutes, which in turn
translates to an annual productivity of just over 400 boxes per 4-man gang. Assuming that
50% of the Year-5 volume of 20,000 boxes, i.e., 10,000 boxes, are handled through the
facility would mean that twenty-five (25) 4-man gangs, or 100 employees would be
required.
Southern NJ PIDN Feasibility Study 33
Delaware Valley Regional Planning Commission
Environmental Analysis – Roadway
• VMT Comparison
– NJ Turnpike (Exit 14 to Exit 3)
• Year 1 Volume = 28,000 TEU
– VMT Reduction > 7.4 million
• Year 5 Volume = 40,000 TEU
– VMT Reduction > 10.6 million
• Year 15 Volume = 80,000 TEU
– VMT Reduction > 21.0 million
Based on the feeder barge operating forecast, reductions in annual vehicle miles traveled
(VMT) could range from approximately 7 million in year 1, increasing to some 20 million in
year 15.
The VMT calculations are based on the following:
• 1 TEU = 0.588 containers or 1.0 container = 1.7 TEU
• 85 miles from Port of New York and New Jersey to Broadway Terminal less an
average of 10 miles for local delivery or a total of 150 miles per container.
• Tractor trailer equivalent to standard vehicle is 3:1
The VMT reduction values are exclusive of additional VMT reduction benefits that could
accrue from transportation of overweight containers via the feeder barge service.
One additional initiative, which the PANYNJ has expressed an interest in developing along
with potential feeder port sponsors, is the potential to generate air quality credits from VMT
reduction associated with container transport via barge or rail in lieu of via over-the-road
transport. If air quality credits could be developed for PIDN, an additional form of cost
incentive could possibly be available to entice shippers to utilize the feeder barge or rail
service.
Southern NJ PIDN Feasibility Study 34
Delaware Valley Regional Planning Commission
Full Marginal Cost
• FMC
– Costs from additional
traffic movements
– Direct Operating Cost
– Direct Travel Time Cost
– Congestion Cost
– Accident Cost
– Infrastructure Cost
– Air Pollution Cost
– Noise Cost
In addition to the generation of jobs and reductions in the amount of vehicle miles traveled,
other benefits are possible from the commencement of a transport alternative (e.g. barging)
to intermodal trucking between southern and northern NJ. If one takes into account the
direct and indirect social costs associated with truck traffic, it is possible that from a society
viewpoint, the transport alternative is more economical. Typically, when shippers are faced
with the direct costs of using two alternative modes undoubtedly the shippers select the
lower truck costs since they do not bear the quite substantial social costs of truck
movements. This rational provides the justification for the public subsidization of waterways
transportation, thereby promoting social welfare and economic growth.
Given this situation, the objective is to compute the direct and indirect social costs and
benefits from the development of barge transportation while concurrently reducing highway
truck use. This approach requires the computation of the various indirect costs associated
with highway truck traffic, which are born by society at large and not by the users
themselves. The total costs from additional traffic movement are termed “Full Marginal
Costs” or FMC. FMC is utilized to indicate the impact of additional traffic on the total costs
that society must bear in providing highway travel services.
Reducing these costs, via the reduction in vehicle miles traveled, amounts to social cost
savings or social benefits. The social cost savings include: (1) cost savings from reduced
congestion, (2) highway maintenance savings due to reduced wear and tear, (3) reductions
in traffic accidents involving trucks, (4) enhanced air quality and reduced noise, (5) increased
state domestic product and employment and (6) service and logistic chain efficiency gains.
The combination
To quantify these items, a concept titled “Value of Time” or VOT is utilized and is a function
of time spent in traffic. A common way of estimating VOT is to regard it as a percentage of
the hourly wage rate. For purposes of this study, a lower and upper bound or range of VOT is
defined. The lower bound is based on 50% of the median hourly wage rate for all
occupations in NJ and the upper bound is based on 75% of the median wage rate for
management occupations.
Southern NJ PIDN Feasibility Study 35
Delaware Valley Regional Planning Commission
Social Benefits Quantified
Total Social Cost-Savings: 1 Container = 3 Cars
Container Number of Cars Total Social Cost
Total FMC (RT) Throughput Removed From Savings
Per Year Traffic Due to (million)/Year
Barge Operation
$246.0 (VOT=$7.6) 18,720 56,160 $13.81
$492.0 (VOT=$32.3) 18,720 56,160 $27.63
Total Social Cost-Savings: 1 Container = 4 Cars
Container Number of Cars Total Social Cost
Total FMC (RT) Throughput Removed From Savings
Per Year Traffic Due to (million)/Year
Barge Operation
$246.0 (VOT=$7.6) 18,720 74,880 $18.42
$492.0 (VOT=$32.3) 18,720 74,880 $36.84
Minimum = $13.8 million per year
Average = $20.7 million per year
Since a specific trip length value for NJ is not available, this analysis utilized calculations
from a previous congestion pricing paper written by Ozbay, Bartin and Berechman in 2001,
that was based on a National Personal Travel Survey Summary (1995). This analysis
determined Full Marginal Costs by specific cost categories for a defined trip length. A
graphic that presents the distribution of trip costs with respect to trip distance for peak and
off-peak hours is shown on the previous page. The bottom of the table correlates the data
from the above mentioned study into the Southern NJ-PIDN travel length (i.e. 82 miles one
way or 164 miles round trip) and identifies the Full Marginal Cost per trip segment or round
trip.
Based on the FMC associated with each truck trip, the number of truck trips associated
with each barge movement were calculated. The table above presents two alternatives for
the potential derivation of Total Social Cost Saving based on car – truck equivalency.
The top alternative indicates a car – truck equivalency ratio of 3:1 (i.e. 3 cars = 1 truck)
whereas the bottom alternative indicates a car – truck equivalency ratio of 4:1. The net
result of the car-truck equivalency comparison is that a Southern NJ-PIDN barge based
container transport system that handles 18,720 containers per year can generate a
minimum of $18 million annually in social cost savings and could generate upwards of $36
million annually.
For additional details, calculations, reference materials and data sources, refer to Appendix
A – South Jersey PIDN: Analysis of Social Benefits and Economic Development by Dr.
Joseph (Yossi) Berechman
Southern NJ PIDN Feasibility Study 36
Delaware Valley Regional Planning Commission
Business Plan – Synergies
• VAL
• Integration with PA &
DE maritime nodes
(“8”-loop)
• Backhaul
• These are medium to
long-term
opportunities;
however, they will
have a catalyst effect
in the short-term
PIDN, or distributed-logistics, systems are already operational in the Northeast to some degree. As
depicted in the slide, services exist between the PONY&NJ and Massachusetts, as well as between
Norfolk and terminals on the Delaware River. The implementation of a Southern NJ PIDN system
will give rise to synergies between all three systems, by effectively creating a waterborne
transportation corridor that links these systems together.
The single-greatest benefit of leveraging these synergies will be that the waterborne corridor could
serve to reduce truck trips and VMT’s, thereby alleviating congestion on the heavily-traveled I-95
corridor between Boston and Washington, DC. However, as noted elsewhere in this document, the
existence of such synergistic benefits in themselves are not necessarily guarantors of success.
Consequently, the creation of a waterborne transportation corridor, as a credible and viable
alternative to road transportation, should be viewed as a medium to long-term opportunity, pending
the resolution of various institutional issues, as well as the adoption of policies to effect the same.
Nevertheless, it is considered likely that the implementation of a Southern NJ PIDN system will
serve to act as a catalyst for such developments in the short-term, and as such, the “intangible”
benefits of doing so need to be duly considered in any decision-making process.
Southern NJ PIDN Feasibility Study 37
Delaware Valley Regional Planning Commission
Business Plan – Wrap Up
• Market
– At a minimum, 140,000 TEUs – 82,500 boxes
– 20% capture is 315 boxes/week
• Once-weekly service - $10 MM subsidy
– $ 4 MM operating revenue vs. $14 MM operating costs
• Twice-weekly service - $13.5 MM subsidy
– $ 4 MM operating revenue vs. $17.5 MM operating costs
• If 2-year service, then $21.5 - $28.5 MM investment
• Benefits are $27.5 – $41.5 MM
• Go / No-Go “fork in the road/river”
In summary, based on information from 1998/1999, the overall (road, rail and water) market size of
the area that could be considered the effective hinterland of a Southern NJ PIDN node has been
estimated to be 140,000 TEUs or 82,500 boxes at a minimum; however, considering the
subsequent growth in container volume handled at ports along the Northeastern Seaboard, it is
considered quite likely that the overall market could conceivably be double these figures, i.e.,
280,000 TEUs or 165,000 boxes.
Based on a 20% capture of this market, gradually ramping up to 30% during the first 10 years, the
overall market that could be captured and effectively served could range from just over 300 boxes
per week to nearly 500 boxes per week. These volumes could be accommodated with a once-
weekly service at the outset, which would need to increase to a twice-weekly service when round
trip volumes increase beyond 350 boxes per week. In order for the service to be competitive with
over-the-road (OTR) transportation, the required subsidies for a once-weekly and twice-weekly
service would respectively be $10 million and $14 million per annum. Assuming that a startup
service would be contemplated for a 2-year period, this would entail a total investment, including
the equipment costs outlined earlier of $1.5 million, of between $21.5 and $28.5 million. The
associated benefits, assuming that the projected market capture is actually realized, range between
$27.5 and $41.5 million, which translates to minimum and maximum benefit-cost ratios of 1.28 and
1.93 respectively.
In essence, since the implementation of a Southern NJ PIDN system is likely to generate benefit-
cost ratios in excess of 1, it can be viewed as a viable public policy initiative. However, given the
broad range of risks and uncertainties implied as a result of (unresolved) institutional issues, a fork
in the road/river has been reached, where the public sector (e.g. NJDOT) needs to carefully
consider all aspects before reaching a “Go” or “No-Go” decision in this matter.
Southern NJ PIDN Feasibility Study 38
Delaware Valley Regional Planning Commission
Considerations for No-Go
• Principal users are “non-committal” – seemingly have
other priorities
• Environmental transport policy is not yet ready
• Requires combined alignment of high-productivity, low
costs and VAL services
• Key question:
– Stakeholders need to determine by means of a comparative
analysis whether available public funds could generate a higher
level of incremental public benefits from other initiatives.
The main considerations in support of a “No-Go” decision are the following:
• The cost-competitiveness, and consequently the financial viability, of a Southern NJ PIDN
system versus over-the-road (OTR) transportation is simply not there. The longer haulage
by barge combined with the charges associated with the handling or trans-shipment of
cargo render the barge movement more costly.
• In most discussions with the primary users and most-likely beneficiaries of a Southern NJ
PIDN system, it has emerged that these entities’ willingness to switch from their existing
(OTR) logistics to a waterborne alternative is relatively limited.
• Several (significant) institutional “hurdles” remain and environmental policy (i.e. promoting
alternative transport modes inclusive of significant financial incentives) has not sufficiently
evolved in the past 5 years to adequately and effectively address these issues.
• In order for a Southern NJ PIDN system to be effective, the synergistic benefits of ancillary
activities need to be exploited, if the implementation is to be promoted from a public
standpoint. The foregoing requires a high-productivity and low-cost operation, combined
with VAL services to generate additional income and benefits. While it is conceivable that
this can be realized in the medium to long-term, it does give rise to a “mismatch” with the
objectives of a short-term “pilot” program as envisaged herein.
The key question that needs to be considered is whether the (public) stakeholder agencies have
alternative uses for public funds that are likely to generate even more incremental public benefits,
i.e., “more bang for the buck”, than a Southern NJ PIDN system.
Southern NJ PIDN Feasibility Study 39
Delaware Valley Regional Planning Commission
Considerations for Go
• B/C Ratio > 1 = Good Public Policy
• Removes truck-related VMT’s
• Creates multi-modal competition
• Enhances economic development and job generation
initiated by other programs
– Southern NJ Waterfront Master Plan (DRPA)
– EDA Revenue Allocation District
– South Jersey Port Corporation
• Enables multi-agency buy-in in NJ / PA / DE
• Enhances regional redundancy
Conversely, it may be concluded, from the results of the study, that several considerations exist that
would render the implementation of a Southern NJ PIDN system feasible. These considerations,
which can predominantly be classified as benefits, are:
• A benefit-cost ratio greater than 1, which is a threshold requirement for public agencies to
consider a project as feasible and defensible from a public policy standpoint.
• The removal of truck-related VMT’s from a heavily traveled and congested roadway, namely
the I-95 corridor.
• The creation of multi-modal competition, providing users with transportation alternatives
• An enhancement of economic development and job generation opportunities that dovetail
with the activities and objectives of other (public) entities and their initiatives or programs,
such as the DRPA’s Southern NJ Waterfront Master Plan; the NJ Economic Development
Authority’s (EDA) Revenue Allocation Districts; and SJPC’s operations at Camden and
Paulsboro (proposed).
• The opportunity of multi-agency cooperation and integration between NJ, PA and DE, thus
allowing for the development of a regional strategy for multi-modal transportation
alternatives along the Delaware River including branches to the north and south, as
appropriate.
• An increase in the redundancy of regional freight movement capacity, by alternative means
of transportation besides over-the-road (OTR) transportation.
Southern NJ PIDN Feasibility Study 40
Delaware Valley Regional Planning Commission
If Go – Next Steps Moving Forward
• At a minimum, establish a short-term program (18 to 24
months) to demonstrate public commitment
• Without concurrent efforts towards the resolution of several
institutional issues, a program for the longer-term (beyond
10 years) is not cost-effective
• Need critical mass in terms of volume
• Execute business arrangements and lock-in rates
• Institutional issues need to be effectively addressed
In the event that a decision to move forward with a Southern NJ PIDN system is
considered as desirable and necessary, the following conditions should be met in order to
ensure that the initiative has maximum chance of success.
• Demonstration of public commitment to the process will require establishment of a
short-term program with a minimum duration of 18 to 24 months.
• The commercial viability of the program is heavily dependent upon the volume that
it could attract and the subsequent economies of scale and scope that can be
generated as a result. Achieving an adequate critical mass of volume governs not
only the cost-effectiveness, but the competitiveness and viability of follow-on
economic development opportunities (e.g. value-added services) as well.
• The issue of rates is critical to the commercial viability of the program and
agreement on realistic and cost-effective rates is imperative in order for the
program to be successful. Given the more advantageous and cost-competitive
nature of over-the-road (OTR) transportation, executing the business arrangements
in such a manner as to ensure the cost-competitiveness of a Southern NJ PIDN
system is considered a critical success factor.
• The key issue remains the resolution of a multitude of institutional issues that were
outlined earlier in this document. In addition to the three conditions listed above,
the concurrent resolution of the institutional issues, in the medium to long-term, is
fundamental to the overall longer-term commercial viability of the program as well
as its eventual success as a credible transportation alternative.
Southern NJ PIDN Feasibility Study 41
Delaware Valley Regional Planning Commission
If Go – Target Issues
• Institutional issues to be integrated are:
– NYSA’s collection of assessments
– Necessity of VAL to cover shortfalls
– Disincentives to reduce truck traffic
– Pursue short-haul rail opportunity as more North NJ facilities
come online
– Plan terminal operations and lease agreements with flexibility to
assure negotiated lift rates and tariffs are achievable
The development of an integrated strategy to resolve (all) the following institutional issues needs to
be developed if a Southern NJ PIDN system is to become a cost-effective, environmentally friendly
and ultimately successful competitor to OTR transportation.
• The New York Shipping Association (NYSA) levies assessments on inbound cargoes
handled at PONY&NJ facilities. The current practice involves assessments that are higher
for OTR transportation than for waterborne transportation; however, since the shipping lines
collect these assessments from their customers and subsequently pay NYSA, any savings
in assessments, realized for using waterborne transportation for local delivery, are
“pocketed” by the shipping lines.
• VAL activities are considered a critical incremental element that is necessary to cost-
effectively cover the shortfall in tariffs/revenues when compared to OTR transportation.
• Models that have worked elsewhere, and Europe in particular, have been formulated on the
premise that inducing cargo to switch modes can only be achieved by “forcing” the use of
alternative modes by applying disincentives (“penalties”) to the predominant transportation
mode, i.e., OTR transportation.
• As the PONY&NJ terminals continue to develop solutions to facilitate the ever-growing
cargo volumes, more intermodal rail terminals are being developed as alternative means to
evacuate cargo from marine terminals. As these intermodal terminals come online and
regional rail improvements are completed, these assets are likely to give rise to short-haul
rail opportunities in lieu of waterborne transportation, that may merit consideration.
• Terminal operations and lease terms, both at PONY&NJ terminals as well as at the
Southern NJ PIDN node, need to planned, organized and structured in such a manner as to
be able to incorporate sufficient flexibility from an operational standpoint, i.e., primarily labor
and stevedoring, so that lift rates and tariffs can be maintained at cost-competitive levels.
Southern NJ PIDN Feasibility Study 42
Delaware Valley Regional Planning Commission
Business Plan – Next Steps
• Public Sector to Decide on No-Go vs. Go TBD
Southern NJ PIDN Feasibility Study 43
