Planning Freight-Efficient Land Uses: Methodology, Strategies, and Tools (2022)

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9   To foster FELUs, it is important that an unambiguous definition of “efficiency” guides the overall process. As such, it should be stressed that this definition is aspirational in nature, rep- resenting the goal to be strived for through the application of the principles and tools outlined and developed in this project, over a reasonable period. Recognizing the need to consider the broad range of impacts that freight and supply chain activities have, the following definition is adopted: “Freight-Efficient Land Uses (FELUs) are the land-use patterns that minimize the social costs (private plus external costs) associated with both the supply chains and the economic activi- ties that consume and produce goods, at all stages of production and consumption, including reverse and waste logistics.” The private costs involve all of the production, logistics, and facility costs incurred by the busi- ness and infrastructure operators. The external costs, referred as externalities, are the impacts that affect those who are not directly involved in the economic activity performed. In some cases, the externalities—either positive or negative—are translated into monetary values, though this is not always necessary. Considering all externalities, even qualitatively, is what really matters. An example of a negative externality is the negative health effects for nearby communities from a polluting factory. There are important reasons to consider social costs, because not doing so can lead to land-use patterns that generate significant externalities that negatively impact local communities, or that excessively penalize private-sector activity, to the detriment of the local economy. Exhibit 1 shows examples of the kind of private and external impacts that ought to be considered when making land-use planning decisions. The term freight vehicles in Exhibit 1 refers to all the technologies that could be used to trans- port supplies. The term truck is not used because the majority of freight traffic used in urban areas consists of pickup trucks, delivery vans, small trucks, and even passenger vehicles. Medium and large trucks typically represent less than 20% of total freight traffic. The fact that the bulk of the freight activity is done using vehicles that are indistinguishable from passenger vehicles creates a situation where most individuals underestimate the amount of freight activity in their jurisdic- tions, and fail to appreciate the importance of freight activity in their lives. Considering the impacts on “all stages of supply chains” is important because of the inter- connected nature of supply chain stages. A land-use planning decision that affects the location of a single facility in a supply chain could have major repercussions on both the upstream and down- stream stages as well as on the surrounding communities. The importance of a broader consid- eration of the impacts is illustrated in Figure 1. The figure shows the case of a city with a major retail district in its urban core. The supplies needed by the retail district come from a regional distribution center outside the city, which delivers the supplies to an urban distribution center using large trucks. From there, the supplies are delivered to the retail locations using 10 delivery C H A P T E R 2 FELUs: Definition, Principles, and Strategy

10 Planning Freight-Efcient Land Uses: Methodology, Strategies, and Tools Exhibit 1. Components of social costs. Regional DC Urban DC Location A Urban DC Location B Regional DCRegional DC Urban DC Location C Figure 1. Effects of the location of an urban distribution center (DC). vans. Assume that the locations A, B, and C correspond to the locations where warehouses and distribution centers are allowed to be situated. To denote the degree of road congestion, a color gradient pattern from bright red in the areas close to the center (indicating high congestion) to light yellow in the outskirts of the city (minimal congestion) is used. From the private-sector perspective, the only consideration that matters are the private costs; the externalities produced may not even be considered. e analysis assumes that the private-sector decision of the location of the distribution center is only based on operational and facility costs. us, a distribution center will be located where it maximizes its net revenue, which is the dierence between its gross revenues and total logistics and facility costs. Since the cost of using the large truck is lower than the total costs of operating the delivery vans, it is benecial for the company to maxi- mize the use of the large truck as much as possible. At the same time, the company must consider the land costs, which generally increase with proximity to the urban core. Getting closer to the urban core makes sense if the savings in transportation costs are larger than the increase in land costs. e optimal location is the point where no further improvements are possible, and the marginal savings in transportation costs are equal to the marginal increase in land cost. Among the three alternative Private Impacts External Impacts (Externalities) Producer or supplier: • Cost of labor, land, buildings, equipment to operate the dis- tribution center Carriers: • Cost of labor, acquisition, and operation of freight vehicles Communities near the distribution center: • Congestion, pollution, noise, security, accidents, aesthetic degradation, etc., produced by the distribution center Communities along the corridor producer-distribution center: • Congestion, pollution, noise, security, accidents, aesthetic degradation, etc., produced by the traffic of freight vehicles Traffic along the corridor producer-distribution center: • Congestion, pollution, noise, accidents, aesthetic degradation, etc., produced by the traffic of freight vehicles Traffic in local streets distribution center-consumers: • Congestion, pollution, noise, accidents, aesthetic degradation, etc., produced by the traffic of freight vehicles between distribution center- consumers Communities along the corridor distribution center-consumers: • Congestion, pollution, noise, security, accidents, aesthetic degradation, etc., associated with the traffic of freight vehicles

FELUs: Denition, Principles, and Strategy 11   locations, the best candidate is likely to be location B if the land costs are comparable with those of location A. However, in both A and B, the 10 delivery vans are bound to produce signicant exter- nalities as they travel to deliver supplies to their customers in the urban core. In terms of the transportation-related externalities—emissions, accidents, road noise, and the like—and ignoring other externalities for the moment, location A is clearly the worst option because it leads to long travel journeys for both the inbound supplies (regional distribution center to urban distribution center) and the delivery tours (urban distribution center to retail locations). Location A dramatically increases externalities, because of the increased VMT. Loca- tion B is better because it leads to a minimal inbound journey, although this is at the expense of creating relatively long trips by the small trucks used to make deliveries to retail locations, thus increasing VMT. Location C is likely the best among the three alternatives because it reduces the VMT of the outbound delivery vans making the deliveries, by increasing the journey of the large trucks that supply the urban distribution center. From the perspective of the communities near the urban distribution center, what matters are the externalities produced by the operation of the urban distribution center, such as conicts with bicyclists, aesthetic degradation, emissions, and others. From this perspective, Locations A and B are better alternatives because they would be located in areas with the lowest population density and trac congestion. In contrast, Location C is the most problematic because it would be located closer to the urban core, where congestion and population density are the highest. In the absence of remedial measures, the freight trac at location C is bound to create externalities that provoke community opposition. However, this is not necessarily the only outcome. e use of appropriate mitigating initiatives could help reduce, or eliminate altogether, the negative eects, as demonstrated by the City of Paris (discussed in Chapter 10). With the implementa- tion of initiatives such as context-sensitive design, trac management, buer areas, and the use of environmentally friendly vehicles—location C could become the best solution overall. e reason is that, in terms of the total social costs, location C would minimize the externalities associated with traveling from the regional distribution center to the urban distribution center, the associated private costs, and the externalities at the urban distribution center (thanks to the use of complementary initiatives). Recently, a prominent Internet vendor decided to build an urban distribution center near Amsterdam, New York, with the explicit purpose of conducting last-mile Internet deliveries in the Albany metro area (about 37 miles from the center of the metro area). Originally, the vendor considered a smaller facility in Colonie, New York, (about 8 miles away from the center) but rejected the idea. Although it is likely that the retailer made this decision on the basis of sound business considerations, the reality is that the decision adopted will lead to the creation of about 29 miles of travel for each one-way trip from the urban distribution center to the Albany metro area. This translates into a minimum of 800,000 freight VMT per year (assuming 100 freight trips a day, 275 days per year). Inducing the vendor to adopt the socially better location would have eliminated these externalities. Pane A: Location Selected (Amsterdam, New York) Pane B: Location Rejected (Colonie, New York) Source: Google Maps

12 Planning Freight-Efcient Land Uses: Methodology, Strategies, and Tools ese examples show the eects of considering, or not, the externalities produced by supply chains when selecting the location of a facility. By considering externalities, the eects on all stakeholders are taken into account, resulting in the maximization of the collective net benets to the city. However, in real life, things are not always so straightforward. To start, the costs and benets are not always obvious and easy to quantify. Second, there is a great deal of uncertainty about future conditions. ird, land use tends to change slowly in mature metropolitan areas as the pace of development is constrained by the existing land-use patterns. On account of these factors, there is a major need for conceptually solid and actionable guidance that land-use plan- ners could use to take steps toward increasing the freight eciency of the prevailing land uses. Chapter 3 discusses this topic. 2.1 The Case of the Port of New York The case of the Port of New York provides a compelling lesson about the importance of considering the effects of land-use decisions on the entire supply chain. In the early 20th century, the New York City (NYC) harbor was the biggest and most important port in the United States (Lueck 1986). NYC’s industrial sector grew due to its proximity to the port, and manufacturers crowded near the waterfront so that they could be near shippers (Boyd 2014). By 1950, after the Port Authority took over the Port of Newark, maritime ac- tivities started to shift to the Port of Newark, which became the first port that could handle containerized cargo (Port Authority of New York and New Jersey 2019). Over time, for reasons unrelated to the relocation of the port, the economic nature of NYC dramatically changed as its economic base evolved from manu- facturing to a service orientation. This major economic shift did not mean that freight activity diminished. In fact, the opposite is true. At the height of its manufacturing heyday in the early 1960s, the 18.5 million residents and 8 million em- ployees in the NYC metropolitan area generated about 2.8 million freight trips per day (about 90% by delivery vans and six-tire trucks) (Wood 1970). As of 2016, the area’s 20.2 million residents and 8 million employees generate about 5 million deliveries per day (Holguín-Veras et al. 2019). This includes about 2 million deliveries to commercial establishments and about 3 million internet deliveries to households. As the bulk of the freight being transported to NYC arrives at locations in Pennsylvania and New Jersey, the supplies must be transported across the Hudson River, causing congestion on the bridges and tunnels, and costing NYC billions of dollars in congestion—over the past 60 years since the gradual relocation of mar- itime activity—to transport the cargo across the Hudson River. Source: (Port Authority of New York and New Jersey 2019b) is case provides crucial lessons. e rst is about the importance of considering the eects that a land-use decision concerning a specic freight node could have on the entire supply chains. Although policymakers and communities in NYC most likely welcomed the move of the port because of the removal of the associated freight trac and the potential use of the vacated land for condominiums and residential buildings, very few could have foreseen the impacts that would be produced by the subsequent transport of the cargo across the river crossings. Undoing this decision has proven dicult and extremely expensive. e proposed Hudson River Freight Tunnel, intended to bring rail freight directly to NYC, is expected to cost between $7 and $11 billion (U.S. Department of Transportation and New York City Economic Development Corporation 2004; U.S. Department of Transportation and Port Authority of New York and New Jersey 2014). Another important lesson is that the relocation of LTGs must be carefully thought out. e local benets produced by such a move could be dwarfed by the externalities accrued over time in other parts of the urban area, reinforcing the need to use the holistic concept of eciency developed in this Guide. In retrospect, retaining a meaningful portion of the port activity on the

FELUs: Denition, Principles, and Strategy 13   NYC side—though not necessarily in Manhattan—could have avoided the externalities brought about by the relocation of the port. 2.2 FELU Principles As stated, the goal of FELU is to foster land uses that minimize the social costs associated with supply chain activity. is, in turn, requires an integration of supply chain and freight activity into the fabric of communities, land use, and local economies. It is important to embed FELU practices and concepts into current land-use concepts and practices. e discussion in this section is based on the urban-to-rural transect, a widely accepted model of urban planning, which provides a coherent perspective of the transitions between rural and urban areas, and a basic representation of the ideal features of the built environment, such as road widths and building heights (Center for Applied Transect Studies 2019). e transect provides an appealing and somewhat intuitive view of an idyllic transition from rural areas in the outside, to urban cores in downtown areas. As shown in Figure 2, the only land-use needs that are recognized are those of LTGs, which are supposed to be located in special districts. e rest of the metro- politan area is designated human habitation and supporting activities, such as recreational and commercial areas. e implication is that the needs for supplies at retail stores, hotels, and restaurants can be served from the handful of warehouses and distribution centers located in a few special districts. Unfortunately, this assumption is not sound for multiple reasons. e rst is that these special districts are typically too small to accommodate all the warehouses and dis- tribution centers needed, and if they are large enough, they tend to be located on the outskirts of the metropolitan area. In the latter case, their use will articially increase freight VMT and the associated externalities. Second, the large concentration of freight trac serving the special districts would produce large amounts of externalities in the areas surrounding the special dis- tricts that will be extremely dicult to mitigate. Instead of segregating urban life and freight activity—only possible for LTGs—the position taken in this Guide is that a seamless integration of small logistics facilities in the metropolitan fabric is the best option. e principles outlined in this section to foster such integration. e fundamental pitfall of transect, and similar urban planning concepts, is their simplistic view of the supply chains and freight activity. is view fails to take into account that, notwithstanding the importance and visibility of freight LTGs such as distribution centers, these only represent a small portion of the freight activity that actually takes place in urban areas. Such a view overlooks the fact that the bulk of urban freight activity is generated by the more numerous small establish- ments in the Retail Trade and Accommodation and Food Service sectors. Neglecting the land-use Source: (Adapted from Center for Applied Transect Studies 2019). Figure 2. Urban-to-rural transect.

14 Planning Freight-Efficient Land Uses: Methodology, Strategies, and Tools needs of the logistics facilities that supply these small consumer-oriented establishments will trans- late into longer trips from these facilities to individual establishments, and larger private costs and externalities. The principles mentioned in Chapter 1 are outlined in this section. They provide guidance for the formulation of FELU programs. Far from being prescriptive, the FELU principles should be interpreted as guidance for action, to be adapted to the local conditions. 2.2.1 Principle 1: Minimize the Private and External Costs of Supply Chains and Their Stages Principle 1 states the need to minimize the private and external effects produced by entire supply chains. This stands in contrast with the traditional focus of land-use policy, which centers on the impacts produced at a given site. In the case of land uses deemed incompatible with the rest of urban activities, the practice has been either to locate them in special districts, as sug- gested by the transect concept, or to confine them to the outskirts of the urban area. The chief limitation of these approaches is that they do not consider the subsequent impacts on the supply chains and the associated private and external costs. The quest to achieve FELUs entails fostering compact supply chains, and reducing the private and external costs produced at the receiving locations at the end of each supply chain stage. 2.2.2 Principle 2: Reduce the Distance Traveled at Supply Chain Stages, Upstream and Downstream Some of the most significant supply chain private and external effects are associated with the travel of freight vehicles at each stage of the supply chains. The longer the travel, the higher the amounts of private and external effects. This principle highlights the need to consider the impacts of land-use decisions on both upstream and downstream supply chains. Considering the impacts of land-use decisions and the private and external costs associated with the travel (a) between manufacturing locations to warehouses and distribution centers, (b) from ware- houses and distribution centers to retail locations and households, and (c) in reverse and for waste logistics, is bound to lead to more compact supply chains, which could go a long way to fostering FELUs. 2.2.3 Principle 3: Mitigate, or Eliminate, the Externalities at Supply Chain Nodes and LTGs The freight traffic generated at supply chain nodes—retail locations, restaurants, warehouses and distribution centers, manufacturing sites, and LTGs in general—could produce major externalities that impact nearby communities and generate community opposition. If these externalities are effectively mitigated, it becomes easier to advance a FELU agenda. Principle 3 stresses the need to mitigate these externalities using the land-use and transportation initiatives in Chapters 7 and 9. 2.2.4 Principle 4: Recognize and Account for Local Conditions This principle recognizes the heterogeneity in land-use patterns and economic conditions in metropolitan areas and cities. This heterogeneity extends to their institutional and decision- making environments; each with its own land-use controls, comprehensive plans, and political environments. To complicate things further, each state has its own unique land-use enabling legislation and case law. Governance structures within a metropolitan area can be very diverse as well. Land-use control may be the responsibility of a city, county, village, or township. Considering these factors is key for the successful implementation of FELU programs.

FELUs: Definition, Principles, and Strategy 15   2.2.5 Principle 5: Engage All Stakeholders Land-use planning decisions could impact a range of stakeholders in different ways. As a result, it is likely that these stakeholders will have different views on how land-use planning should advance community goals and objectives. It is critical to engage all stakeholders in consensus building aimed at charting the path forward. This is particularly important when discussing deci- sions concerning the location of facilities that could negatively impact the surrounding commu- nities. In these cases, it is imperative to involve all stakeholders in the location decision, and the identification of remedial measures to mitigate or eliminate potential externalities.