Chandler Duncan. Economic Development Research Group, Inc.

Transcription

1 Chandler Duncan Economic Development Research Group, Inc. 1

2 Allowing an infrastructure asset to fall below previously accepted standards of condition or performance by either investing resources elsewhere, or simply investing less in the asset. 2

3 Aging infrastructure Changing demand Fiscal constraints Now and at risk funding in the future Global Warming Resilience planning putting a strain on limited resources E.g. Age of CT Highway Network: 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 Based on current spending and revenue trends, the U.S. Department of Transportation estimates that the Highway Account of the Highway Trust Fund will encounter a shortfall before the end of fiscal year (FY) VMT Trends - FHWA VMT - Moving 12-Month Affecting asset condition (increased incidence of severe weather, more advanced deterioration)

4 4 What are the economic costs of disinvestment? Can we benchmark economic performance of a transportation system? Lee, D B. Monitoring and Evaluation of State Highway Systems. Transportation Research Record, Issue 891, 1982, p What are key system interdependencies? Defining performance can be easier or harder depending on the level of complexity & openness of the transportation & economic system. For example: A state with a primarily export-based economy may be able to define economic performance vis-à-vis transportation more clearly than a state with many sectors and conflicting demands. Image: Mitch Wahlsten, S.D.

5 5 Tradeoff: User costs v. Maintenance costs World Bank graph of relationship between road agency expenditures (horizontal axis) and corresponding value of maintenance to system users (vertical axis) World Bank. Road Deterioration in Developing Countries: Causes and Remedies Life cycle costs Replacement decisions Changing understanding of performance needs (and/or changing demand) Increased travel time/cost from removing a system linkage (or severely constraining capacity) Deferred maintenance = higher future rehabilitation costs Redundancy and potential for route or mode switch

6 6 DISINVESTMENT IS NOT Simply giving up on a place, a population or an aspect of system performance. Temporarily neglecting needs for lack of funds. A necessary evil. DISINVESTMENT IS Changing how assets are used and where revenues are invested to achieve realistic performance outcomes. Permanently making changes in how assets are used to reflect new transportation markets. A pro-active and meaningful choice.

7 7 Expansion Paradigm Emphasis on building new facilities for expanding population and expanding auto dependency. Preservation/Asset Management Pardigm (Fix it First) Emphasis on maintaining existing facilities and limiting costs imposed by new or expanded systems. Strategic Investment Paradigm Emphasis on efficiently adapting existing or new assets to changing needs over time.

8 8 Minimum Tolerable Conditions Investment Gap Underinvestment Unintentional Disinvestment Programmatic Investment Strategy Intentional Disinvestment Adaptive Re-use Jurisdictional Turnbacks

9 9 USDOT tracks and forecasts Conditions and Performance Does not include national economic impact of different scenarios Each state has its own statewide plans, defining long-term needs Some include Economic Impact, others don t Often state and federal pavement, bridge, transit and traffic models differ in data and methods

10 10 Cost of Operating on Deficient Pavement Cost of Operating in Congested Conditions Cost of time lost due to delay VMT and VHT of re-assigning due to congestion Cost of Bridge Detours Cost of Transit Interruptions

11 11 Compare user costs of deficiencies with funding gap by program & performance area Highway Preservation Bridge Preservation Transit Preservation Highway and Transit Expansion Provide a basis for economic impact analysis

12 12 Michigan considered alternative programmatic allocations for responding to their investment gap. Some options had more revenue than others. Each one allocated revenue differently.

13 13 Michigan considered alternative programmatic allocations for responding to their investment gap. Each strategy accepted some unmet needs.

14 14 Economic Analysis demonstrates the comparative benefits and impacts of different investment strategies. Economic Impacts and Benefits

15 15 Familiar Questions Where will investment pay off? Which projects to do? New Questions Which projects not to do? Where will dis-investment allow better use of funds? Where does dis-investment enable better use of assets?

16 16 Effects of Disinvestment Reduced Use Increased Risk Reduced Market Size Change in Amenities Economic Drivers Level of affected demand Relative user cost of alternate facilities Likelihood and cost of catastrophic failure Effects on size of available workforce, inputs or markets; Elasticity of affected markets Footlose nature of dependent industries Comparative infrastructure in competing trade centers.

17 17 Band Five assets are identified as excess, policy dictates a disinvestment strategy Asset Priority Index: scoring based on importance of infrastructure to NPS mission Facility Condition Index: ratio of asset s projected cost of repairs to its current replacement value Identified Issues Unaccounted for costs associated with abandoning or decommissioning an asset Prioritizing funding for Band 1 and 2 transportation assets means that visitor demand is funneled onto a small subset of routes Unaccounted for Economic Implications: (1) Impacts ability to attract and handle increased visitor traffic; (2) affects patterns of visitor spending within adjacent communities

18 18 Viaduct near the end of its useful life more intense and more frequent maintenance & rehabilitation work; operational deficiencies Replacement decision: still needed? change functionality? Options: tunnel, at-grade, as-is, modernized design with smaller footprint (e.g. consolidate/rebuild access ramps) Historic context: the planning paradigm for urban interstates has evolved in the last 50 years changing understanding of performance (transportation + economic development + urban design) Economic considerations: freed up land for development, local urban quality, impact on freight flows

19 19 1. Compare costs and user benefits of both the disinvested and invested program or facility 2. Make reasonable assumptions about the uses (and user costs or benefits) of the asset after disinvestment. 3. Make reasonable assumptions about the uses (and user costs or benefits) of the new way the need will be met after disinvestment. 4. Consider multiple investment scenarios with different investment levels (and recipies).

20 20 1. Models of demand that better assess shifts in demographics, lifestyles and travel behavior 2. Research for quantifying qualitative and livability factors associated with different uses of infrastructure. 3. Case-based research for how property markets and business cost structures change after disinvestment. 4. Overcoming barriers for states and MPO s who still lack data or resources to implement investment management paradigm in planning and programming 5. Methods for determining optimal investment levels

21 21 E.g. Age of CT Highway Network: Back

22 VMT Trends - FHWA 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 VMT - Moving 12-Month 500,000 0

23 23 Back Based on current spending and revenue trends, the U.S. Department of Transportation estimates that the Highway Account of the Highway Trust Fund will encounter a shortfall before the end of fiscal year (FY) 2014.

24 24 Back Tradeoff: User costs v. Maintenance costs World Bank graph of relationship between road agency expenditures (horizontal axis) and corresponding value of maintenance to system users (vertical axis)