regional economic development impacts of transportation ...srg/book/files/pdf/9. economic... ·...

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Regional Economic Development Impacts

of Transportation Investments

Transportation Decision-making – Principles of Project Evaluation and Programming

Kumares C. Sinha and Samuel Labi

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Contents of this PresentationContents of this Presentation

BackgroundBackground

ED Impacts ED Impacts –– What units are used to measure them?What units are used to measure them?

ED Impacts ED Impacts –– How does it happen (Impact How does it happen (Impact Mechanisms)Mechanisms)

ED Impact Assessment ED Impact Assessment –– The StepsThe Steps

A Review of Some Past StudiesA Review of Some Past Studies

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BackgroundBackground

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Role of Transportation InfrastructureRole of Transportation Infrastructure

Transportation systems: backbone of an Transportation systems: backbone of an economyeconomy

Transportation closely related to economic Transportation closely related to economic outputoutput

Good transportation system essential for Good transportation system essential for getting goods to market (customers) getting goods to market (customers)

workers to/from businesses, etc.workers to/from businesses, etc.

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Passenger and Freight Transport in U.S. (1960Passenger and Freight Transport in U.S. (1960--1998)1998)

GDPGross Domestic Product

Transportation of Humans

Transportation of Freight

Source: US Department of Transportation, Bureau of Transportation Statistics, 1999 National Transportation Statistics

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National VMT/GDP Trends (1960National VMT/GDP Trends (1960--1998)1998)

Source: US Department of Transportation, Bureau of Transportation Statistics, 1999 National Transportation Statistics

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ED Impact Assessment – Why the Emphasis on Highways?

Freight transportation increasingly dominated by the highway mode

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10

20

30

40

50

60

70

1980 1990 1998

Modal share of highways

in freight trsp. (%)

YearYear

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Transportation/Economy: A Symbiotic RelationshipTransportation/Economy: A Symbiotic Relationship

Transportation

The Economy

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Transportation

The Economy

Every $1 billion invested in transportation infrastructure Every $1 billion invested in transportation infrastructure -- generates > $2 billion in economic activity and generates > $2 billion in economic activity and -- creates up to 42,000 American jobs.creates up to 42,000 American jobs.

The transportation The transportation constructionconstruction industry:industry:-- generates $200 billion in annual economic activity generates $200 billion in annual economic activity -- sustains > 2.2 million American jobs.sustains > 2.2 million American jobs.

11.3 million Americans (approx. 10% of working 11.3 million Americans (approx. 10% of working population) have population) have transportationtransportation--related related jobs.jobs.

Source: ARTBA, An Economic Analysis of the U.S. Transportation Construction Industry , 1999.

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Transportation

The Economy

Highway constructionHighway construction alone directly generates 8 jobs per alone directly generates 8 jobs per $1 million spent (1996$) on construction $1 million spent (1996$) on construction

(Source: “FHWA Jobs Generation,” 1996).(Source: “FHWA Jobs Generation,” 1996).

Public TransportationPublic Transportation directly supports an average of directly supports an average of 24.5 jobs per million passenger24.5 jobs per million passenger--miles miles

(Source: “APTA Report,).(Source: “APTA Report,).

AirportsAirports support an average of 75 to 1,000 onsupport an average of 75 to 1,000 on--site jobs site jobs per 100,000 annual passengers per 100,000 annual passengers

(Source: studies at selected airports).(Source: studies at selected airports).

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Transportation

The Economy

Increased number or size of: Factories, Schools, Service CompaniIncreased number or size of: Factories, Schools, Service Companies, es, etc.. etc..

-- Increased need for movement of people, goods, servicesIncreased need for movement of people, goods, services-- Increased travelIncreased travel-- Higher need for physical transportation facilitiesHigher need for physical transportation facilities

This need is This need is felt felt by private sectorby private sector

Statement of Need is Statement of Need is formalizedformalized by transportation planner, city by transportation planner, city planners, legislators, general public, etc.planners, legislators, general public, etc.

Decision to fulfillDecision to fulfill the need is legislated by the need is legislated by -- public sector public sector (federal/state/local government)(federal/state/local government)

FundingFunding for the transportation facility provided by public sector, for the transportation facility provided by public sector, private sector, or both. private sector, or both.

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So, Why Assess ED Impacts of our So, Why Assess ED Impacts of our TranspoTranspo Projects?Projects?

Project planning/program development:Project planning/program development:Forecasting future impacts of proposed projectsForecasting future impacts of proposed projects

-- Identify costIdentify cost--effective projects.effective projects.-- Efficient allocation of fundsEfficient allocation of funds-- DecisionDecision--making to select the best projectmaking to select the best project-- Justify the value of transportation investment. Justify the value of transportation investment.

Investigate if a completed project has achieved it goalsInvestigate if a completed project has achieved it goalsPublic information.Public information.

Fulfilling federal requirements (NEPA, TEAFulfilling federal requirements (NEPA, TEA--21).21).

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ED Impacts ED Impacts –– What Units are Used to Measure?What Units are Used to Measure?

JobsJobs

IncomeIncome

Business SalesBusiness Sales

ProductivityProductivity

Property valuesProperty values

Quality of lifeQuality of life

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ED Impact MechanismsED Impact Mechanisms

TranspTransp. Impacts on Impacts ED : How does it happen?. Impacts on Impacts ED : How does it happen?Link key centers in region to national marketsLink key centers in region to national markets

Provide for more efficient flows of commerceProvide for more efficient flows of commerce

Provide access to new services and employment opportunitiesProvide access to new services and employment opportunities

Provide local access roads to stimulate retail developmentProvide local access roads to stimulate retail development

Open up new sites for commercial/industrial developmentOpen up new sites for commercial/industrial development

Support new business initiativesSupport new business initiatives

Promote tourism/recreational developmentPromote tourism/recreational development

Provide quality of life benefitsProvide quality of life benefits

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ED Impact MechanismsED Impact Mechanisms

Economic Development Impacts: How do they happen?Economic Development Impacts: How do they happen?Link key centers in region to national marketsLink key centers in region to national markets

Provide for more efficient flows of commerceProvide for more efficient flows of commerce

Provide access to new services and employment opportunitiesProvide access to new services and employment opportunities

Provide local access roads to stimulate retail developmentProvide local access roads to stimulate retail development

Open up new sites for commercial/industrial developmentOpen up new sites for commercial/industrial development

Support new business initiativesSupport new business initiatives

Promote tourism/recreational developmentPromote tourism/recreational development

Provide quality of life benefitsProvide quality of life benefits

Can we categorize these mechanisms?

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Categories of ED Impact MechanismsCategories of ED Impact Mechanisms

Direct mechanismsDirect mechanisms

Indirect mechanismsIndirect mechanisms

Induced mechanismsInduced mechanisms

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Transportation System Improvement

Change in Business Costs and Markets

Change in Average and Total Worker

Wages

Change in Supply Purchases (Capital

Investments)

Change in Earnings Retention (Profit, Reinvestment)

Direct Impacts Indirect Impacts Induced Impacts

Change in Business

Activity (Output) of Directly Affected

Businesses

Change in Business Activity of

Suppliers


Consumers

Total Direct, Indirect and Induced Impacts

Regional Output (Business Sales), Gross Regional Product (Value Added) Wages (Personal Income), Jobs (Employment)

Dynamic Impacts Related to Economic Development

Property Values Land Use/Development Environment Government Revenue and Costs

Change in Transportation System Parameters (Travel Time, etc.)

Change in User Costs

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Wages


Investments)



Change in Business


Businesses


Suppliers


Consumers







↓ Crashes, ↓Safety Cost, ↓Workers lost to crashes

↑Travel Speed, ↓ Travel Time, ↓Time spent in production

↓Decreased VOC, ↓Cost of fleet maintenance

For a Business organization:

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Wages


Investments)



Change in Business


Businesses


Suppliers


Consumers







Savings from reduced costs of travel time, safety and VOC

Thus, increased funding available for:- purchasing new equipment, etc- pay workers more- declare higher profits


↓ Business Travel CostsBusiness Travel Costs↑ Business Market ReachBusiness Market Reach

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Wages


Investments)



Change in Business


Businesses


Suppliers


Consumers







Savings from reduced costs of travel time, safety and VOC

Thus, increased funding available for:- purchasing new equipment, etc- pay workers more- declare higher profits

Overall, improved environment for increased investment


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Wages


Investments)



Change in Business


Businesses


Suppliers


Consumers







Increased incomes

Increased purchasing power

Increased patronage of services, retail, schooling, etc.

For Workers and their Families in a Region:

↓ Personal Travel CostsPersonal Travel Costs↑ Job AccessJob Access

↑ Quality of LifeQuality of Life

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Wages


Investments)



Change in Business


Businesses


Suppliers


Consumers







User Benefit Corresponding Cost Savings to Business

Time Savings—business travel (“on-the-clock” worker time)

Value of additional productive labor hours (for non-salaried portion of workers)

Time Savings—other trips (includes commuting)

(May lead to additional spending or affects wages for recruiting workers.)

Operating Cost Savings—business travel (pickups and deliveries)

Direct cost savings

Operating Cost Savings—other travel (includes commuting)

Increase in disposable personal income. (May also affect wage rates.)

Safety Improvements—business travel (“on-the-clock” worker time)

Reduction in insurance costs and worker absenteeism

Safety Improvements—other travel Reduction in insurance cost, raising disposable income

A Summary …

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Economic Impact Analysis FrameworkEconomic Impact Analysis Framework1. Identify the Type of Transportation Project

2. Identify the Purpose of the Analysis

3. Select the Base Case and the Transportation

Alternatives4. Select the Appropriate

Geographical Study Area

5. Select the Appropriate Time

Period for the Study

6. Select the Appropriate Impact Measure

7. Select the Appropriate Analysis Methods

8. Apply Data to Calculate the Economic Impacts

9. Present Results

[Sources: [Sources: WeisbrodWeisbrod, 1997; , 1997; WeisbrodWeisbrod and and ForkenbrockForkenbrock, 2001], 2001]

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Step 1: Identify Characteristics of the Transportation ProjectStep 1: Identify Characteristics of the Transportation Project

What is the What is the modemode of the transportation improvement: of the transportation improvement: highway, railway, waterway, air transportation?highway, railway, waterway, air transportation?

What is the What is the network featurenetwork feature of the system under of the system under investigation:investigation:

-- line feature (highway or railway linkline feature (highway or railway link-- node feature (intersection, interchange, rest stops, node feature (intersection, interchange, rest stops, terminals, etc.)?terminals, etc.)?

What is the What is the entityentity to be transported: freight or passengers or to be transported: freight or passengers or both?both?

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Step 1 (continued)Step 1 (continued)

ScopeScope of the project: Does new (or improved) of the project: Does new (or improved) system cover a specific site, strip or corridor, or entire system cover a specific site, strip or corridor, or entire systemsystem--wide area such as city or county? wide area such as city or county?

Intended Intended efficacyefficacy: Will the project …: Will the project …(i) maintain(i) maintain(ii) expand (ii) expand (iii) upgrade (iii) upgrade

service for an existing service for an existing transportation systemtransportation system

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Step 2: Establish the Purpose of the AnalysisStep 2: Establish the Purpose of the Analysis

Evaluation to Support (or Oppose) Proposed Investments Evaluation to Support (or Oppose) Proposed Investments

Part of a Special Economic Development ProgramPart of a Special Economic Development Program

Responding to Stated Local ConcernsResponding to Stated Local Concerns

Planning Purposes and Fulfillment of Regulatory MandatePlanning Purposes and Fulfillment of Regulatory Mandate

PostPost--Implementation EvaluationImplementation Evaluation

Public EducationPublic Education

Concern about Possible Adverse ImpactsConcern about Possible Adverse Impacts

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Step 3: Define the Base Case and Other AlternativesStep 3: Define the Base Case and Other Alternatives

Base case typically is the “DoBase case typically is the “Do--Nothing” AlternativeNothing” Alternative

Base case should provide a realistic representation Base case should provide a realistic representation of conditions (past, current, or possible future) of conditions (past, current, or possible future) associated with the base case.associated with the base case.

Base case scenario and other scenarios may differ Base case scenario and other scenarios may differ on the basis of mode, facility size, type and location, on the basis of mode, facility size, type and location, area served, or other attributes etc.area served, or other attributes etc.

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Step 4: Define the Spatial (Geographic) ScopeStep 4: Define the Spatial (Geographic) Scope

The area of jurisdiction for the agency or The area of jurisdiction for the agency or government that is sponsoring the study government that is sponsoring the study (neighborhood, city, county, state or province, nation, or an (neighborhood, city, county, state or province, nation, or an economic community of nations). economic community of nations).

The area of direct project influence The area of direct project influence (area within which (area within which users and nonusers and non--users are affected by the transportation users are affected by the transportation stimulus). stimulus).

Spatial scope definition reflects an interest in Spatial scope definition reflects an interest in distributional ED impacts in an area. distributional ED impacts in an area.

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Step 5. Establish a Time Period of AnalysisStep 5. Establish a Time Period of Analysis

From Step 2, if the Purpose of the Analysis is … Then the time period should be …

Impact assessment of proposed new services A future year or period of time after new service opens

Benefit Cost analysis for proposed new services A period of time from start of financing through life span of project

Public education on existing services

The current year

Public education on proposed new services A future year or period of time after new service opens

Research study of existing services Period of time including pre- and post- project time periods

Then the Time Period for the ED Evaluation should be …

From Step, If the Purpose of the Analysis is to carry out …

[Source: [Source: WeisbrodWeisbrod and and WeisbrodWeisbrod, 1997], 1997]

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Step 6. Select Your ED Impact MeasuresStep 6. Select Your ED Impact Measures

Regional outputRegional outputGross regional product (GRP)Gross regional product (GRP)Jobs (Nr. and Quality)Jobs (Nr. and Quality)Wages and other incomeWages and other incomeNumber of businessesNumber of businessesBusiness volume and sales;Business volume and sales;Private investment in buildings, plant, and Private investment in buildings, plant, and equipmentequipmentReal estate valuesReal estate valuesPopulationPopulation

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Step 7: Select the Step 7: Select the Tool(sTool(s) for Your Analysis) for Your Analysis

Surveys and InterviewsSurveys and Interviews

Case StudiesCase Studies

Econometric ModelsEconometric Models-- Multiple Regression ModelsMultiple Regression Models-- Cluster AnalysisCluster Analysis

Economic ModelsEconomic Models-- I/O Accounting Models (IMPLAN, RIMS II)I/O Accounting Models (IMPLAN, RIMS II)-- Simulation Models (REMI)Simulation Models (REMI)

Hybrid ModelsHybrid Models-- Traffic and Economic Models (MCIBAS)Traffic and Economic Models (MCIBAS)-- LandLand--Use and Economic Models (TELUS, MEPLAN)Use and Economic Models (TELUS, MEPLAN)

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Step 7. Analysis Tools (contStep 7. Analysis Tools (cont’’d)d)

[Source: [Source: CalspanCalspan--UB Research Center, Inc. et al., 2001UB Research Center, Inc. et al., 2001 ]]

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STEP 7 STEP 7 --continued continued ((What is IWhat is I--O Analysis?)O Analysis?)

II--O models, capture O models, capture interinter--industry linkagesindustry linkages of a of a regional economy and estimate output, income and regional economy and estimate output, income and employment economic multipliers.employment economic multipliers.

With some expectations on the direct effects, IWith some expectations on the direct effects, I--O O models estimate associated indirect and induced models estimate associated indirect and induced effects.effects.

Applicable for estimating the effects of construction Applicable for estimating the effects of construction spending. spending.

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STEP 7 STEP 7 --continued continued (Existing Models for I(Existing Models for I--O Analysis)O Analysis)

RIMS II (BEA): RIMS II (BEA): Spreadsheet Analysis based on Spreadsheet Analysis based on BEA’sBEA’s National INational I--O Table and O Table and BEA’sBEA’s Regional Economic Accounts.Regional Economic Accounts.

Low cost; user friendly; readyLow cost; user friendly; ready--toto--use tables of multipliers.use tables of multipliers.Multipliers can be compared across areas.Multipliers can be compared across areas.No need to inflate or deflate the data.No need to inflate or deflate the data.Approximate orderApproximate order--ofof--magnitude estimates of impacts; best suited for magnitude estimates of impacts; best suited for estimating the impacts of small changes on a regional economy.estimating the impacts of small changes on a regional economy.

IMPLAN (Minnesota IMPLAN Group, Inc.):IMPLAN (Minnesota IMPLAN Group, Inc.):Flexibility in model construction.Flexibility in model construction.Individual estimates of direct, indirect and induced effects.Individual estimates of direct, indirect and induced effects.More costly and more complex than RIMS II.More costly and more complex than RIMS II.Need to inflate or deflate the dataNeed to inflate or deflate the data

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STEP 7 STEP 7 --continued continued

The Regional Economic Simulation Model (REMI)The Regional Economic Simulation Model (REMI)

Dynamic/longDynamic/long--term effects.term effects.Suitable for estimating impacts resulting from Suitable for estimating impacts resulting from transportation investments.transportation investments.Provide wide range of outputs.Provide wide range of outputs.Consider population migration changes.Consider population migration changes.

High level of complexity. High level of complexity. Extensive amount of data required.Extensive amount of data required.Special staff training.Special staff training.High cost.High cost.

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Models that link an econometric model to an IModels that link an econometric model to an I--O Model.O Model.

Dynamic/longDynamic/long--term effects.term effects.Suitable for estimating impacts resulting from Suitable for estimating impacts resulting from transportation investments.transportation investments.Provide wide range of outputs.Provide wide range of outputs.

High level of complexity. High level of complexity. Extensive amount of data required.Extensive amount of data required.Special staff training.Special staff training.High cost. High cost.

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Step 8. Apply Data to Estimate ED ImpactsStep 8. Apply Data to Estimate ED Impacts

Business Cost SavingsBusiness Cost Savings

Economic Benefits Economic Benefits -- Direct effects of construction spendingDirect effects of construction spending-- Indirect and induced effectsIndirect and induced effects-- LongLong--term benefitsterm benefits

Increased JOBSIncreased JOBSIncreased OUTPUT and PRODUCTIVITYIncreased OUTPUT and PRODUCTIVITYIncreased INCOMEIncreased INCOME

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Step 9. Present Your ResultsStep 9. Present Your Results

Description of benefits resulting in a given yearDescription of benefits resulting in a given year-- applicable for impact assessments, public relations applicable for impact assessments, public relations evaluations, and research studies in which there is a evaluations, and research studies in which there is a stable poststable post--project impact.project impact.

Description of benefits as a stream over time Description of benefits as a stream over time -- aapplicable for impact assessments, public relations pplicable for impact assessments, public relations evaluations, and research studies in which the postevaluations, and research studies in which the post--project impact varies over time.project impact varies over time.

ED Impacts could be used for ED Impacts could be used for -- MultiMulti--objective Analysis objective Analysis -- Economic Efficiency (if all benefits can be monetized)Economic Efficiency (if all benefits can be monetized)

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A Review of Past EDI StudiesA Review of Past EDI Studies

Early 1960sEarly 1960s--focus on econ. dev. impacts of Interstate constructionfocus on econ. dev. impacts of Interstate constructionSince 1980sSince 1980s--focus on the link between transportation & econ. dev. focus on the link between transportation & econ. dev. 1990s1990s-- studies claimed substantial econ. growth impactsstudies claimed substantial econ. growth impacts2000s2000s-- studies claim declining returns on transportation investmentstudies claim declining returns on transportation investment

AASHTO, 1990AASHTO, 1990--role of transportation in the economyrole of transportation in the economyNCHRP Reports 389 (1997), 418 (1998), 456 (2001)NCHRP Reports 389 (1997), 418 (1998), 456 (2001)NCHRP Synthesis 290 (2000)NCHRP Synthesis 290 (2000)-- current practicescurrent practicesFHWAFHWA--national productivity impacts of hwy spending (1990s)national productivity impacts of hwy spending (1990s)FHWA, 2001FHWA, 2001--empirical info to measure econ impacts of empirical info to measure econ impacts of hwyshwysEDR Group EDR Group ––review of state econ dev programsreview of state econ dev programs

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A Review of Past EDI StudiesA Review of Past EDI Studies

Early 1960sEarly 1960s--focus on econ. dev. impacts of Interstate constructionfocus on econ. dev. impacts of Interstate constructionSince 1980sSince 1980s--focus on the link between focus on the link between hwyshwys & econ. dev. & econ. dev. 1990s1990s--studies claimed substantial econ. growth impactsstudies claimed substantial econ. growth impacts

AASHTO, 1990AASHTO, 1990--role of transportation in the economyrole of transportation in the economyNCHRP Reports 389 (1997), 418 (1998), 456 (2001)NCHRP Reports 389 (1997), 418 (1998), 456 (2001)NCHRP Synthesis 290 (2000)NCHRP Synthesis 290 (2000)-- current practicescurrent practicesTCHRP 35 (1998)TCHRP 35 (1998)-- econ. impact analysis of transit investmentsecon. impact analysis of transit investmentsFHWAFHWA--national productivity impacts of hwy spending (1990s)national productivity impacts of hwy spending (1990s)FHWA, 2001FHWA, 2001--empirical info to measure econ impacts of empirical info to measure econ impacts of hwyshwys

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Thank youThank you

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