Thursday, June 30, 2022
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Round table: Transportation and logistics, paving new paths

••• SPONSORED SECTION •••

Guilford Technical Community College and Piedmont Triad International Airport Authority sponsored the discussion, which was moderated by Business North Carolina Publisher Ben Kinney. It was edited for brevity and clarity. 

North Carolina’s nicknames include The Good Roads State. That moniker was bestowed in the early 1900s when major efforts were made to improve the state’s mostly dirt roads. It’s still earning that title today, wherever one is driving from Murphy to Manteo. The transportation industry, including air, water and rail, plays an essential role in economic development, helping determine the state’s future. Business North Carolina recently gathered a group of industry experts to discuss the state of transportation and what needs to be addressed for continued vitality.

RT logistics and transportation panelists

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How has the pandemic changed the transportation industry? 

FOX: It’s an exciting but dramatically different time. We’ve survived two years of pandemic, which kept everyone at home for about three months. That took a big bite — about $350 million — out of the state Department of Transportation’s vehicle-fuel tax revenue. It created cash-flow issues for DOT. But the good news is society has adapted to living with COVID. Vehicle traffic has returned to about 95% of its pre-pandemic level, though it doesn’t move in the same way. People gained flexibility to work from home, for example, so rush hours are no longer only in the morning and evening. 

While DOT’s overall financial health is strong, it would like to spend more money on projects than it is right now. But capacity, workforce and raw material issues in the market mean fewer projects can be undertaken. DOT is working with its partners and contractors, avoiding those projects that can’t be completed because of a lack of workforce or raw materials, at least for the time being. It’s a balancing act. Project costs are at a level that hasn’t been seen in a long time.

I remember 2009 and 2010, the height of the Great Recession. Every project would attract six or eight bids, and the low bid was at least 25%below the engineers’ cost estimate. That was a great environment for DOT. Money went further. Projects cost 10% to 15% more today than they did two or three years ago. 

SAIDI: Most transportation funding comes from vehicle-fuel taxes. With driving changes spurred by COVID and more electric vehicles, it’s easy to connect the dots and see that source will become less and less reliable. And the state’s population is growing, so it needs more revenue. Transportation is vital to residents’ livelihood. You want your child to get on a safe bus and arrive at school. We need secure bridges, roads and infrastructure. My engineering firm is affected by transportation funding. We’re excited to see DOT’s revenue return. That helps my company and others in the industry plan for hiring and project delivery. We want more projects and have capacity for preconstruction design and project administration. The construction supply chain is under stress and will continue to be impacted down the road.

MILAZZO: The pandemic has had many effects on transportation, such as increases in work from home or work from anywhere. I was recently asked if those will continue. I sure hope so. They have brought many benefits — better quality of life, more flexibility, less environmental impact. They relieve the burden on the state’s highway system, too. Traffic is spread over the course of the day, for example, which makes better use of it. The pandemic was horrible, but it offers lessons.

What is the future of N.C. transportation funding?

FOX: Defining DOT’s future funding is a long-term challenge. It needs to be addressed soon — sooner than some people predicted. There is a group of North Carolinians, representing many viewpoints, working on it. DOT’s NC First Commission, a group of industry leaders, educators, state representatives and local elected officials that assembled in 2019, was tasked with discovering how other states and countries are handling transportation funding. Those ideas help set the table. 

The most recent effort is Gov. Cooper’s executive order that directs DOT to have a process and engagement on future funding, transportation and technology. There are many important stakeholders who realize we have to start a conversation or we won’t find the answer. Legislative leaders and the state treasurer had a candid discussion at DOT’s transportation summit in January. They agreed that while we may not share one idea, we know that we have to cooperate to assemble a group of ideas to steer funding to the next sustainable source and away from vehicle-fuel taxes.

SAIDI: Transportation funding is an important focus of the N.C. Chamber, which created Destination 2030, a coalition exploring the modernization of transportation funding. Many industry folks serve in the coalition. They’re looking at other states, hunting for creative and innovative ways to fund transportation.

MILAZZO: RTA supports a user fee approach, similar to the model used for cellphones. With most service providers, your cost is the same, even if you use 200 minutes one month and 1,000 the next. That’s because the value isn’t in the minutes. It’s in the access to a reliable network; that’s what you’re purchasing. 

DOT needs a consistent and predictable revenue source so it can plan. That’s attainable if each registered vehicle owner paid a consistent amount instead of an amount based on fuel usage, which varies. That fee could be the average price that all of us pay for vehicle-fuel tax over the course of the year, divided by 12 or 52, depending on whether they pay weekly or monthly. And if an owner switches to an electric vehicle, or God forbid we have another pandemic, which ends up cutting vehicle use 50% for a time, funding would continue at the same rate. It’s not a new idea. It’s essentially what’s done for electric vehicles right now. 

BAKER: People want to live in North Carolina. It has a nice environment and is governed well. The legislature is forward looking, especially when it comes to airports. A decade ago, airports would receive a small amount of state money annually. Today that amount has probably increased 20-fold. That enables airports to invest in their future. We have a competitive edge over other states because we’re further ahead with projects. Companies need to be able to start up quickly. That’s easy to do with sites that are further ahead. In addition to a growing population, lower cost of living, quality roads and relatively inexpensive utilities, North Carolina has a strong workforce and long traditions of manufacturing, banking and technology. Its assets can’t be matched anywhere in the country. We see companies vote with their feet and move here.

What does the federal infrastructure law mean to North Carolina?

FOX: It’s a great thing, from DOT’s perspective. More federal investment has been needed. North Carolina is different than many states. It uses a data-driven process for selecting projects. Some states rely on lobbying — this congressman wants a bridge and this one wants a train station. It eliminates that. New money goes into one pie so to speak, that feeds all projects. Their priorities are set by DOT partners, communities, metropolitan planning organizations, rural planning organizations and local elected officials. New money makes the pie bigger, so more projects can be considered. Grant money rarely funds an entire project, but it provides a good start. If we have a project on the books that fits the grant program, it moves up in priority and is built sooner. It will influence projects for a decade. It’s not a situation where you get an extra billion dollars and spin it out over a couple months.

I recall the stimulus during the Obama administration. North Carolina Railroad and DOT had done a lot of great work to prepare projects that would improve the rail line between Charlotte and Raleigh. So, they were awarded more than $500 million for different projects. That work wrapped up over the last year or so. It’s the gift that keeps on giving.

SAIDI: Costs are rising. Salaries are rising higher and faster than ever before. So, it will be positive, helping cover some of those additional costs. In many areas, this money will go into public transit, so there are many aspects that could see a big impact. Transportation investment creates jobs, and that helps the economy. The impact will be significant over time. But we still need to focus on modernizing transportation funding sources. While wonderful, these federal funds won’t be sufficient for the long term.

Workforce is always a concern. How is it being addressed?

PENTZ: Education and training are the keys to success. Guilford Tech offers the GAP apprenticeship program. Students in the supply-chain program, where I teach, are in GAP, apprenticing with local companies. They go to school part time, work part time and are paid. That’s a big help to many students, who know the program covers certain costs, ensuring they can continue their education. They receive invaluable on-the-job training. Students are interested in what’s happening in different industries. So, it’s important to incorporate those issues in their studies, within the local and broader picture. GTCC offers a variety of transportation programs, including warehouse and engineering. We recently added a transportation management services program, offering students real-world experience in how companies manage their needs such as loading trailers front to back to create efficient deliveries. We focus on technology such as enterprise resource planning systems. 

Many GTCC supply chain classes discuss SAP’s enterprise-resource planning system, giving students hands-on experience with it. If you learn SAP, then you can use whichever ERP system, including J.D. Edwards or Oracle, that a company uses. You understand how they all work. We’re offering and expanding what the students need to know, so they’re prepared when they leave. We’re in discussions about adding drone technology, including last-mile delivery, to our transportation classes. Students are very interested in technology and see it in their personal and work lives. That makes it real to them, so they’re more aware of the issues connected to the pandemic and return to work over the past two years. The students are motivated to learn from GTCC’s industry partners, who sit on its panels and attend its career fairs. Students are interested in what’s available and how they need to prepare to be successful.

What are the industry’s challenges? How is North Carolina addressing them?

MILAZZO: How and where we travel have changed. Work from home or anywhere is a part of that. North Carolina’s rapid economic and population growth has fueled changes, too. Growth is especially challenging for transportation planning. It can take 10 or 15 years between when an airport runway, for example, is conceived and planes are landing on it. Interstate and commuter-rail projects have similar timelines. Those long lead times simply don’t work in booming metro areas, where there isn’t time to wait for more infrastructure. Of course, growth is still the problem you want. The alternative is life in a declining market, where you are paying for legacy infrastructure that’s being used less and less. 

North Carolina’s strong and wellthought-out approach, including using data to setting project priority, is an advantage. Other things can help address the challenges of growth. I believe our community college system is the nation’s best. It quickly pivots to retrain people, getting them up to speed on the skills that are in demand. North Carolina’s university system continues to be a point of pride. We can be proactive, figuring out how to make the best North Carolina. Or we can be reactive, letting it happen to us. We’re ready to embrace the challenges and are ready for what’s next. Finally, the electrification and decarbonization of transportation are right in front of us. It’s coming faster and faster.

PENTZ: A recent study detailed the differences between urban and rural North
Carolina. Certain communities want economic development and infrastructure, but they lack both. Technology is a big reason. It can be something as simple as access to high-speed internet, which many of us take for granted. The pandemic highlighted that. Some students struggled with remote learning because high-speed internet was unavailable or unreliable at their home. That situation occurs across large swathes of the state and country. It needs to be addressed. It’s extremely difficult for businesses, including those in the transportation industry, to operate without high-speed internet. That is an example of a real-life challenge that’s presented in my classroom. They become part of the discussion. 

BAKER: North Carolina uses an innovative approach. Early in our pursuit of Boom Supersonic, which announced it’s building a $500 million aircraft factory on PTI’s campus earlier this year, a transportation challenge emerged. We needed a solution. I called Mike Fox, because it could have involved the ports, rail and roadways. He helped bring in Kevin Lacy, state traffic engineer, and Brian Clark, N.C. Ports Authority executive director. They didn’t say the ask was too much. They said we’ll figure it out; we’ll get it done. That type of help is amazing and refreshing. It solves problems, creating wins for the state.

SAIDI: The challenges are real, but the opportunities are greater. We have responsibilities as leaders to push this in the right direction and take advantage of this great time in the state’s history.

What is transportation’s role in economic development?

MILAZZO: We need mobility to work statewide. The Triangle, Charlotte and other large metros cannot and will not be the state’s single source of economic development, income and tax revenue. Those need to happen within all of the state’s 100 counties.

SAIDI: Transportation is vital to economic development. There is no growth without a solid transportation system. We need to ensure a robust statewide system — highways, ports, airports and more.

FOX: The past few months have been filled with big economic development news, much of it associated with the transportation industry. Toyota, for example, is building a lithium battery plant at the Greensboro-Randolph Megasite. It’s happening elsewhere, too. Volvo Trucks North America in Greensboro is developing autonomous vehicle technology and AeroX in Winston-Salem is developing drone technology. It seems North Carolina breaks investment and job-creation records every year. 

That type of success doesn’t happen overnight. It took decades of planning, hard work and people. A senior person at Toyota listed the reasons why the automaker chose North Carolina for its factory, which will support growing demand for electric vehicles. First was its extensive system of well-maintained highways. Second was the international airports and two ports. Third was on-site rail. The balance included availability of workforce and renewable energy, world-renowned education system and strong partnerships between state and local government.

BAKER: It’s an interesting time in North Carolina, which is getting some well-deserved long-term economic wins. I played a lot of ice hockey as a kid., and every coach tells players the same thing: Skate to where the puck will be, not where it is. It’s a popular business euphemism, and it rings true in many ways for North Carolina. Without the investments and participation of GTCC, which has classrooms and labs on PTI’s campus, Forsyth Technical Community College in nearby Winston-Salem and other community colleges in the region, PTI probably wouldn’t have landed Boom Supersonic. They were crucial to convincing the company that the skilled employees it needs will be available. 

The road system is driving other big economic development wins. In my opinion, North Carolina’s roads are second-to-none in the nation. And there’s capacity for growth, especially in the Triad. We’re standing on the shoulders of our predecessors, who planned and gambled 30, 40, 50 years ago. They envisioned where the puck would go and headed in that direction, sometimes at the risk of being challenged or criticized for their decisions. Now they’re being proven right. I wish they could be here to take a bow. They made the state very competitive. PTI has been home to HondaJet, FedEx and Cessna for decades. Boom Supersonic is not the end. It’s the beginning or middle of the game. There’s a lot of economic development activity. There’s still a long way to go —  at PTI and across the state.

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