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

Part 3. Case Study - Tennessee Industrial Access Roads Program

3.1 Program Overview

The Industrial Access Roads Program provides grants to local governments (cities and counties) to pay for design, engineering and construction of access roads to industrial areas that help facilitate the development and expansion of industry in the State of Tennessee. Only industrial areas are eligible, so commercial retail and office projects are not allowed. Funding is restricted to access roads on public land, and the local community must bear costs of right of way, utility adjustment and railroad crossing protection. The Tennessee Dept. of Transportation (TDOT) administers the program. The Commissioner of Transportation makes grant awards.

The program process starts with a local government filling out an application for funding an access road project, with information about the proposed new industry (or industrial expansion) and the local participation role. A TDOT field engineer reviews design and permitting needs. Upon approval, TDOT builds the road or lets a contract for construction of the access road (industrial highway project.) Once the industrial highway construction is completed, it is the responsibility of the local government to maintain the industrial highway.

The State Legislature appropriates funding each year when it approves the Department of Transportation budget. For recent years, the Legislature has funded the program at $10 million annually. In FY 2003 actual spending was reduced as much as half due to revenue shortfalls, but increased in FY 2004 to $11 million for 14 projects.

3.2 History and Evolution of the Program.

The Industrial Access Roads Program was enabled by the Tennessee legislature through the Industrial Highway Act of 1959. However, funding started in 1966 with $600,000. That annual funding allocation has grown over time. In 1986 funding was increased contemporaneously with a gas tax increase. As noted above, in recent years it has generally been in the range of $10 million/year.

Starting in the mid 1990's, benefit cost information was required. As of the time of this study, TDOT staff conducted a benefit/cost type analysis on applications, by considering the local property tax revenues and payrolls to be generated (as reported on applications) relative to the expected costs.

Another evolutionary change has been program staffing. Originally, the program was centralized with all staff at the TDOT headquarters, but now the program has regional project managers, located at TDOT's four regional offices. This has helped with local liaison and engineering review. However, the four regions of the TDOT do not exactly match the seven regions of the Tennessee Dept of Economic and Community Development (TECD.)

In 2000, there were several rules changes to give more flexible options to local communities:

• The first rule change affected road design. Previously, TDOT engineers designed industrial access roads to a basic state standard of two 12-foot wide lanes with 4-foot shoulders, although a higher standard was possible if the local community wanted to pay the additional construction cost. Since 2000, local governments have been given the option of either doing the road design by themselves or letting the state do it.

• The second rule change affected right of way (ROW) acquisition. Previously, the state acquired the ROW, but the new option allows local government to do this with 50% funding from the state. It is usually faster to let local government acquire row and the cost is sometimes modest, so sometimes this option is selected.

• The revised rules also made it clear that industrial access roads do not become part of the state highway system, and that local government must maintain them

In 2003, there were additional rules changes with the addition of environmental guidelines to avoid historically or environmentally sensitive areas. Also in 2003, the Governor (Phil Bredesen) signed an Executive Order creating the "Fast Track" service to cut government red tape for existing or prospective Tennessee businesses seeking to expand or invest in Tennessee jobs. With this system, there were protocols for coordination among state agencies in responding to inquiries from prospective or existing businesses interested in locating or growing in the state, and the state government commits to provide a response within three days. Under this system, each agency including TDOT assigns a representative to work closely with the TECD, the latter being the lead agency. Part of the new system was a "pre-application process" for the Industrial Access Roads Program. TDOT assigned its Chief Engineer as its Fast Track representative.

3.3 Program Funding Decisions and Follow-Up.

Program eligibility for Tennessee's Industrial Access Roads Program is set by law, and is restricted to applications for funding the construction of a public road or street (on public land), designated and located to provide access to an industrial site or industrial park.

Program funding decisions considerations include:

• A formal resolution of the local government confirming that construction of the proposed industrial access road is necessary to serve said a proposed new or expanded industrial plant, and is vital to the successful completion of this project and the future economic well-being of this area;

• A project cost estimate, made by a TDOT engineer from information on the application form, including engineering, right of way, utilities and construction;

• Required permits, as identified by state DOT staff, to be obtained by local government;

• Measurement of project benefits, in terms of local jobs, local payroll, and local property tax to be added as a result of the business location or expansion being supported by the project;

• A benefit/cost ratio exceeding 1.0, which is calculated as (anticipated annual payroll + annual property tax) / (amortized annual cost of the highway improvement);

• Available funding;

• Local government willingness and ability to assume responsibility for maintenance of the road.

There is no formal follow-up to confirm the number of jobs and payroll actually added to the community. TDOT reviews road maintenance. If the road is not being effectively maintained, then TDOT may take over maintenance and withhold all funds otherwise allocable to the city and/or county until the project is restored to its proper condition.

3.4 Supplementary Program Information.

Procedures

The Industrial Highway Act of 1959 (T.C.A. 54-5-403) authorized the Tennessee Department of Transportation to contract with cities and counties for the development of "Industrial Highways" in order to provide access to industrial areas, and to facilitate the development and expansion of industry within the State of Tennessee. The following is a list of steps for making application and developing projects under the State Industrial Access (SIA) Program.

1. Project Eligibility. The proposed project must be eligible as an industrial highway. An "Industrial Highway" means any road or street designated and located to provide access to an industrial site or industrial park. These proposed roadways may be eligible for the funding under the TDOT SIA Program. An Industrial Highway cannot be constructed on private property.
2. Field Review. Local representatives and TDOT representatives review the proposed project in the field. The purpose of this review is to confirm the eligibility of the project, discuss the parameters of the project, and gather information to develop a cost estimate for the project.
3. Project Design. The typical section for Industrial Highway projects is 2-12' lanes with 4' shoulders. The Applicant may request additional design features. Such features are to be the cost responsibility of the Applicant. The TDOT prepares cost estimates. Traffic analysis is required only if the request is for wider road or traffic signals. Since 2000, give locals options - either they can do road design or let state do it. Either they can do right of way or lets state pay for 50%l it is usually faster to let the community do it
4. Permits. TDOT will conduct technical studies and obtain all permits for the construction of the proposed highway. The local government is responsible for obtaining all Federal, State, and local Permits for development of the plant site.
5. Applications. The application consists of 1) a form detailing information about the proposed industry (or industrial expansion) and the local participation, 2) a certified Resolution indicating that the application is an official action by the government making application, and 3) maps showing the location of the proposed roadway, plant site, and entrances.
6. Consideration. The TDOT is to consider and approve Industrial Highways based on the project eligibility and available funding.
7. Approval. Upon approval of the Application, the TDOT and local government is to execute a contract defining the responsibilities of each party. Appropriate monetary deposits are to be submitted by the Applicant.
8. Project Activities. Design, right-of-way acquisition, and utility relocation activities will proceed in accordance with the responsibilities defined in the contract.
9. Construction. The project may be let to contract or constructed by TDOT, depending on the complexity of the work and the availability of TDOT maintenance forces.
10. After Construction. The local government assumes full responsibility for the maintenance of the Industrial Highway.

Application for Industrial Highway Projects

The following text was taken verbatim from Tennessee DOT documents:

3.5 Examples of Funded Projects.

The Industrial Access Roads program was used in the 1980's as one element of a package of incentives used to attract a Nissan auto plant and later a Saturn auto plant. More recent projects are listed on the table that follows:

Tennessee Industrial Access Roads Program Projects FY 2002

¹ Projects approved in calendar year 2002