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Federal freight user fee could provide much-needed dedicated funding for goods movement infrastructure

Metropolitan Chicago is North America’s premier freight hub, with large concentrations of truck, rail, air, and water shipments providing connections to all parts of the country. This robust freight network ensures that residents and businesses in the region and across the nation get the goods they need in a timely manner. Yet this network is expensive to operate and maintain, and it faces congestion and operational challenges that require significant investment. New federal freight programs established in the Fixing America’s Surface Transportation (FAST) Act have begun to address this need for investment, but this funding is insufficient to tackle the magnitude of needs and is not derived from a revenue source dedicated to freight improvement.

Acknowledging that this revenue gap is only projected to increase over the coming decades, ON TO 2050 recommends implementing a federal cost of freight service (COFS) fee. A COFS fee would assess a small percentage on the cost of shipping freight — essentially a sales tax on the price shippers pay to carriers for transporting goods — with revenues dedicated to a multimodal freight improvement program. This approach has a user fee nexus to the freight system, and could be mode-neutral (that is, collected proportionately from shippers using truck, rail, or water to move goods). A similar approach is currently used for air freight shipments. A COFS fee has been considered by a number of commissions, is supported by national freight interest groups, and was endorsed by the Eno Center for Transportation’s 2016 Delivering the Goods report. Given northeastern Illinois’ importance to national freight movement, a COFS fee could provide substantial revenue to improve the region’s goods movement infrastructure. This analysis discusses the need for the federal government to implement such a fee and how it might function.

This analysis is one of a series examining transportation funding in northeastern Illinois and explaining the revenue recommendations included in ON TO 2050. This analysis explores a federal cost of freight service fee. Other parts of the series examine existing revenue sources for the regional transportation system, and explain recommendations including increasing the state motor fuel tax and eventually replacing it with a road usage charge, expanding the sales tax base, expanding parking pricing, and using tolling and value capture to fund transportation improvements.