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Study of the National Scope and Potential for Improvement of State Economic Development Highway Programs

Contents

Executive Summary

Acknowledgements

Part 1. Background
1.1 Study Overview
1.2 Definition and Classification of Programs
1.3 Report Overview

Part 2. Case Study - Massachusetts Public Works Economic Development Program
2.1 Program Overview
2.2 History and Evolution of the Program
2.3 Program Funding Decisions and Follow-Up
2.4 Supplementary Program Information
2.5 Examples of Funded Projects

Part 3. Case Study - Tennessee Industrial Access Roads Program
3.1 Program Overview
3.2 History and Evolution of the Program
3.3 Program Funding Decisions and Follow-Up
3.4 Supplementary Program Information
3.5 Examples of Funded Projects

Part 4. Case Study - Oklahoma Industrial Access Program
4.1 Program Overview
4.2 History and Evolution of the Program
4.3 Program Funding Decisions and Follow-Up
4.4 Supplementary Program Information
4.5 Examples of Funded Projects

Part 5. Case Study - Wisconsin Transportation Economic Assistance Program
5.1 Program Overview
5.2 History and Evolution of the Program
5.3 Program Funding Decisions and Follow-Up
5.4 Supplementary Program Information
5.5 Examples of Funded Projects

Part 6. National Summary of State Funding
6.1 States With Economic Development Highway Programs
6.2 State Funding Levels for Economic Development Highways

Part 7. Analysis Findings
7.1 Program Design
7.2 Eligibility and Application Review
7.3 Program Operation
7.4 Recommendations by State Officials Regarding Federal Role


Executive Summary

Study Overview. A growing number of states have initiated "economic development highway programs" - programs that provide funding to improve local or regional access as deemed necessary to attract and grow businesses. This report is the second of a two-part series. The first report, Overview of State Economic Development Highway Programs, Task A-B Report, provided a definition and classification of the different types of state-funded economic development highway programs and a profile description of each state's highway-related economic development program. This, the second report, follows up with in-depth case studies of four state programs to show how they have evolved over time in response to both external factors (shifting public policy needs) and internal factors (efforts to reorganize or optimize operation of the program). It also discusses the appropriateness of a potential federal role to help support or improve these types of transportation investment programs as seen by State officials in four States.

The four case studies - Massachusetts, Oklahoma, Tennessee and Wisconsin -- were selected to represent a wide range of geographic, economic and political settings. The findings are notable for both the similarities and differences in programs among the states:

Program Design.All four state programs were initiated by the state legislature, which provides special set-aside funding for the program. In all cases, the economic development road program was set-up with the explicit objective of facilitating economic growth in areas that have deficient connectivity or access to the broader network of local and state highways. These are most often rural and small town areas, though occasionally they are depressed parts of urban areas. By investing in road (and sometimes rail) infrastructure that provides such access, these programs are designed to enable businesses to locate new or expanded industrial plants in areas where they would otherwise be unlikely to occur. To ensure a focus on these objectives, all of the case study programs require: (1) a local government resolution confirming need for the transportation access improvement to facilitate desired economic development, and (2) a confirmation of the anticipated additional growth of jobs, wages, and private investment (or local tax base).

Project Selection. While all of the state programs expect a commitment to expand jobs, wages and private investment, there are variations among the states in terms of the basis for judging project benefits. They include: wages, jobs, property taxes, private investment, financial stability of the new or expanding business and reduction in local economic distress. Some of the programs also have some form of benefit/cost standard, which may include the ratio of wages and property tax revenues generated per dollar of public investment, or the ratio of jobs created per dollar of public investment. However, all of the states allow some discretion in judging project eligibility and priority, which is important because they need to be responsive to time-sensitive business growth and investment opportunities.

Program Operation. All of the programs involve a process of coordination between the state transportation department and the state economic development department to develop package offers of investment assistance to firms considering locations in their state. However, the programs differ widely in whether projects are constructed by the state or by local grantees, and whether or not there is a local match required for the state grant.

Evolution of Project Operation. All of the states have seen some evolution over time in the nature of the applications and projects, and the way in which coordination occurs to support state economic objectives. Some of the changes that have been occurring in various states include: (a) more formal coordination arrangements with state economic development agencies, (b) decentralized operations, adding representatives at regional offices, (c) local co-funding options added for expediting projects, (d) addition of more formal eligibility standards, and (e) updating the process for monitoring results of funded projects.

National Perspective. A wide range of economic development objectives are embodied in the goals, eligibility criteria and selection processes of the various state economic development highway programs. They include direct objectives of job growth, wage growth, and local tax base growth. However, they often also include state priorities for assisting economically depressed areas, promoting environmentally or economically sustainable development, supporting community revitalization, and enhancement of the industrial technology base. Given this range of objectives and differing state priorities, it is not realistic to promote any universal set of project eligibility or selection criteria.

Most of the above-referenced objectives are desirable from a national viewpoint in that they promote greater efficiency in transportation movement (improving connectivity and accessibility) and/or greater efficiency in use of existing resources (under-utilized worker skills, community infrastructure and industrial land). To the extent that these projects tend to benefit rural areas, small town areas and depressed urban areas, they arguably contribute to greater equity in income levels and economic well-being. Of course, an infrastructure improvement project can also shift the competitive balance between prospective business location sites in different states, so not all of the new job and income creation is necessarily a full benefit from a national viewpoint. Nevertheless, the above-cited efficiency and equity benefits of these programs indicate that they do address goals of national value.

Interviews with state staff of these programs yielded a consistent message, confirming that they generally see federal-level recognition of the concept of these programs as helpful for supporting continued state funding, and that raising awareness of best practices is generally welcomed as a way for continuing improvement to these types of programs.


Acknowledgements

This report was prepared by staff of Economic Development Research Group (Glen Weisbrod and Manisha Gupta) under the supervision of Martin Weiss of the Federal Highway Administration, US Dept. of Transportation. The authors are grateful to staff of state agencies that gave time to be interviewed and who provided information for the four case studies in this report:

All observations and interpretations coming from those interviews were generated by the consultant team and do not necessarily represent positions of the state agencies or US Dept. of Transportation.

Updated: 04/18/2012
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