Boston Economic Club February 22, 2017

Transcription

1 Boston Economic Club February 22, 2017 Steven Landau Economic Development Research Group, Inc Economic Development Research Group

2 What is the Failure to Act series? Why was it commissioned? What did we hope to accomplish? 2

3 3

4 The Failure To Act series addresses one key question: How will the nation s failure to act to improve the condition of U.S. infrastructure affect the nation s economic performance? 4

5 Economic Development Importance of Infrastructure Access to Markets: Creating Jobs & Income Ancient Sea-Land Trade Routes; risk analysis, freight hub at Timbuktu Romans: 50,000 mile interstate & national defense highway system; Intermodal transfer via in Caesaria Water supply piping, Greece, circa B.C.E Journal of Water Resources Planning, ASCE, January/February Freight Vehicles

6 Evaluation Criteria Capacity Condition Operations & Maintenance Funding Future Need Public Safety Resilience Innovation

7 Why do these Report Card grades matter? What does a C or D+ mean?. 7

8 Surface Transportation Roadways, Bridges, Transit, Rail Water Delivery of Potable Water, Wastewater Treatment Electricity Generation, Transmission, Distribution Ports Airports, Marine Ports, Inland Waterways All of the Above What happens under conditions of general disinvestment? 8

9

10 10

11 GAP How is investment keeping up with needs? Trends through 2040 called out for 2025 and 2040 Cost What is the presumed cost to businesses and households if infrastructure services deteriorate? Economic Impacts How do these costs affect national impacts in terms of jobs, income, GDP and output, and what are the key industries affected? 11

12 Trends extended for needs and investments to 2040 Did not assume major interruptions infrastructure failure such as bridge collapse or weather catastrophe Did not consider construction impacts for building/modernizing needed infrastructure Assumed infrastructure performance is not perfect B Level, Not A-Level Minimum Tolerable Conditions/State of Good Repair All dollars presented in constant 2010/2015 values 12

13

14 Savings and/or Costs Direct to Business Direct to Households Surface Transportation Water Wastewater Electricity Airports Costs for services; costs of inputs Costs for Services Marine Ports Inland Waterways Indirect to Business Labor access Specialized Labor Profitability Indirect to Households Cost of purchases: disposable income 14

15 Inputs to Cost of Production Increase Transportation Water/Wastewater Electricity Prices Change Sales Fall ($s) International Competition Profits Slide Business and Household Purchases Decline Business Decisions Sell Less Make Cheaper Products Labor Affected Household Income Falls Decline in Household Disposable Income 15

16 U.S. Infrastructure Needs From the Update 16

17 Estimated Changes in Investment Gaps Infrastructure Sector Gap Estimates in 2016 Failure to Act (Billions 2015$) Gap Estimates Calculated for Failure to Act (Adjusted from Billions 2010$ to 2015$) Surface Transportation $1,101 $4,334 $ 908 $3,931 Water & Wastewater $ 105 $ 152 $ 113 $ 163 Electricity $ 177 $ 565 $ 212 $ 743 Aviation $ 42 $ 88 $ 46 $ 82 Ports & Inland Waterways $ 15 $ 43 $ 18 $ 42 Totals $1,440 $5,182 $1,297 $4,961 17

18 The Bottom Line 2016 Update Lost Business Sales $7 Trillion over 10 Years Reduced Productivity/ Decline in GDP $3.9 Trillion over 10 Years Fewer Jobs 2.5 Million in 10 Years Less Disposable Income per Household $3,400 Annually Over 10Years 18

19 Depreciated asset (need to replace) Obsolete location (Need to rebuild elsewhere) Obsolete design (Need to enhance/fix to avoid functionality loss;..incl. congestion effects) 19

20 Infrastructure Sector 10 years 25 Years Surface Transportation $1.00 $1.00 Water & Wastewater $0.10 $0.04 Electricity $0.16 $0.13 Air Transportation $0.04 $0.02 Water Transportation $0.01 $0.01 Water & Wastewater 7% Air Transportation 3% Electricity 12% Water Transportation 1% Water & Wastewater Air Transportation 2% 3% Electricity 11% Water Transportation 1% Surface Transportation 77% Surface Transportation 83% Projected 10 Year Gap Projected 25 Year Gap 20

21 21

22 22 Assessing Productivity Impacts of Transportation Investments NCHRP Report 786 (Project 02-24) Productivity = fn (cost, reliability, agglomeration effects on factors of production )

23 Technology Industries Decline Auto Repair Jobs Increase 23

24 24

25 Density as people experience it (ignoring areas where nobody lives) Miami Metro: higher pop per square mile density Boston Metro: higher pop-weighted density Metro Pop per Sq. Mile Pop-Weighted Density Boston Miami-Ft. Lauderdale 1,230 7,237 Boston Worcester 1,034 7,980 Miami 25

26 Highway Trust Fund/state roads through VMT tax instead of gasoline tax View transportation as a service Growth of shared ride/vehicle services (Lyft, Zip Car, etc..) Transportation as a single service available on demand and incorporating all transport services from cars to buses to rail rather than as a physical asset to purchase. Technology, providing both frontend and back-end services. 26

27 Effective Supply (Capital Stock) Effective Goal Achievement (Performance) Outcomes (Cost, Access, Reliability) Economy & Other Benefits Int. Air Gateway Markets Intermodal Rail Markets Intl. Port Markets Same Day Delivery Mkts Labor Markets Source: ARC, Economic Impact of Completing the Appalachian Development Highway System 27

28 Extend the Satellite Accounts concept to cover supply chain elements: trace facilities serving wholesale, warehouses & distribution to final demand Source: TREDIS Freight 28

29 Supply Chains (reliability for JIT processes) Global Trade (gateway connections) Business Markets (same day travel) Labor Markets (specialized skills) (Agglomeration effects) 29

30 OECD/ITF: International Workshop, 2014 UK: National Audit Office, Value for Money Assessment France: LOTI Audit: Transportation Planning Law requires ex post analysis US: 1996: GAO Critique of ARC, EDA & TVA 2005: FHWA Case Studies Transportation Project Impact Case Studies (TRB / SHRP2 FHWA & AASHTO)

31 It should be possible to break out historic data on infrastructure investment by type and location context. That will enable distinctions among programs for mobility expansion, mobility replacement, loss avoidance, and reliability of water, wastewater and energy investments. It will also enable classifying public and private costs by program and infrastructure sector This will allow for identifying trends in out of pocket costs to businesses and households, affordability to businesses and households It should be possible to match changes in cost with demand and willingness to pay by sector and household. This can provide a basis for presenting benefits in terms of net GDP and non-gdp impacts. Moving forward, more systematic tracking of supply chains, industry needs and household needs may also enable better economic evaluation for strategic national investment. 31

32 32

33 33

34 34

35 Steven Landau Economic Development Research Group, Inc. 35

36 36

37 37