Transportation and the Economy Ron Hagquist Research Office Government and Public Affairs Division Transportation Forum July 20, 2007
Hamburger. $5.95 Chef Surprise #1.....$15.95 Chef Surprise #2...$25.95
What is a cynic? A man who knows the price of everything, and the value of nothing. - Oscar Wilde
THE VALUE OF REDUCING CONGESTION IS LITTLE APPRECIATED because just as most of an iceberg is below the surface, most of the economic damage done by congestion is not visible.
UNDER-APPRECIATED FACTS: The current and especially the FUTURE extent of congestion if nothing is done. The economic cost of congestion and the value of reducing it given the evolution of supply chains. The impact of congestion on small business.
Some estimates of annual traffic delay cost (in 2003 dollars) by the Texas Transportation Institute are: Austin: $391,000,000 Houston: $2,300,000,000 Dallas-Ft Worth: $2,500,000,000 San Antonio: $401,000,000
EVOLUTION OF THE ECONOMY More Service Oriented U.S. ECONOMY Just-In-Time Production
Result: Inventories have Shrunk 26% Inventory as % of GDP 24% 22% 20% 18% Business Inventory Ratio to GDP 16% 14% 12% 10% 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003
MISCONCEPTIONS: Economic development is about mega-stores and corporations. Economic development is about the new businesses that line new highways. Economic development is just about the employment from road construction.
Pollution Impact Passenger Time, Cost, & Safety Trucking Efficiency & Safety Construction Industry TIME
In reality, essentially ALL of the consequences of transportation investment impact the overall economy. The competitive situation of transportation in the state also affects the migration of business into or out of the state.
Pollution Impact Local Economic Multiplier Effects Passenger Time, Cost, & Safety Trucking Efficiency & Safety Industry Cost Reduction, Product Demand Increase Business Migration Long-term Productivity Impact Initial Construction Stimulus Benefit Streamlined Industry Structure & Management
Long vs. Short Term Employment Increases From Highway Capacity Addition
Long vs. Short Term Employment Increases From Highway Capacity Addition Project-Related Employment Initial Construction Stimulus Benefit Long-Term Productivity Impacts 2000 2020
Is this voodoo???
Long-Term Impacts From Highway Capacity Addition Delivered prices fall, so Business and consumer access to commodities rise, and Industries have access to a larger and more diverse workforce, and so Gross Regional Product rises.
Pollution Impact Passenger Time, Cost, & Safety Trucking Efficiency & Safety Business Migration Local Economic Multiplier Effects Industry Cost Reduction, Product Demand Increase Streamlined Industry Structure & Management
2006 Governor s Business Council report (GBC-2): Capacity investment = 25.4% annual rate of return. Economic benefits for the metro areas of about $18.4 billion per year over the 25-years Business productivity improvement would generate about 9000 more permanent jobs, not including the 113,000 constructionrelated jobs.
2006 Governor s Business Council Report Summary METRO AREA BENEFITS OVER 25 YEARS: Billions of $ Cumulative Rate of Return Increased Economic Efficiencies to Business 61.2 Economic Impact of Business Savings 16.7 77.9 9.1% Fuel Savings 37.4 115.3 13.4% Time Savings (Business and Personal) 103.6 218.9* 25.4% * Investing $2.65 billion/year for 25 years.
TWO FUNDAMENTAL QUESTIONS: 1. What is the size of the future financing gap to meet mobility standards? 2. What would be the value of making this investment?
Unfinanced 25-year statewide capacity needs: Present value = $86 billion Lost economic opportunity = $284 billion (present value) Lost jobs = 12,000 permanent + 147,000 construction
So the value of meeting the capacity gap is increased economic activity of $284 billion, or an average of about $11 billion per year for 25 years. This amounts to over $400 for every Texan each year for 25 years.
GBC-2 Study: Shaping the Competitive Advantage Of Texas Metropolitan Regions TTI 5437: The Impact of Toll Roads On the Regional Economy CTR/TTI 4871: Transportation and the Texas Economy CTR/TTI 5025: Promoting Local Participation In Transportation Projects Wilbur Smith/TTA: TTC-35 Perryman: TTC-35 & TTC-69 TTI/DAL: "LBJ/IH635 Project, Dallas CTR 5538: Value of Texas Ports To the Texas Economy
Metastudy white paper summarizing Texas economic research findings. Improved project-specific economic opportunity index. Development of a set of economic impact case studies for use at the district level for making the case for local participation.