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

Part 1. Background

1.1 Study Overview

Background.It has been long recognized that highways can enable economic development by providing access between regions and within regions - thus making it possible for new kinds of economic activities to occur which would not otherwise be occurring. In the last two decades, a economic research studies have also shown that access to broader labor markets, supply markets and customer markets can lead to business productivity advantages associated with economies of scale, just-in-time production, logistical efficiencies and product or service specialization.

FHWA Perspective. Recognizing the role of local and regional access in economic development, a growing number of states have initiated what are most commonly known as "economic development highway programs" - programs that provide funding to improve local or regional access as deemed necessary to attract and grow businesses. However, the scope and scale of these state-initiated activities had not been well documented. Accordingly, the Federal Highway Administration (FHWA) funded a research study of the national scope and potential for improvement of state economic development highway programs.

Series Structure. This report is the second of a two-part series.

1.2 Definition and Classification of Programs

This section is drawn from the first report to provide summary definitions and classifications of state initiatives and programs that justify road investments on the basis of economic development.

General State Support for Economic Development.The consultant team completed interviews with representatives of state transportation agencies in all 50 States, and found that 39 states had some form of formal administrative recognition or support for investing in roads to further economic development goals. Based on these findings, we identified four categories of state involvement in highways and economic development. (Note that some states fall into more than one of these categories.)

  1. Funding Programs for Local Access Roads - These are formal programs with dedicated state funding for investment in local connector routes that provide access from intercity highways to local business districts or industrial parks. These programs generally involve formal application processes with eligibility requirements covering: (a) private sector investment, (b) local government co-funding, and (c) cooperation with state economic development departments. At the time of the study, 19 states had formal state programs of this type. The Appalachian Regional Commission's Local Roads program also provided a mechanism for 13 states to co-fund local road access projects. In addition, three states had set-aside funding sources for local road or highway projects that were intended to support economic development goals, though without formal programs in place.

  2. Funding Programs for Inter-City Connector Routes - These are formal programs with dedicated state funding for investment in highway routes that improve access from isolated rural and economically depressed parts of the state to the major highway routes and larger economic market centers. This can include (a) single state highway system enhancements and (b) multi-state highway systems. At the time of the study, four states had single state programs. In addition, 13 states effectively offer this type of program through the multi-state Appalachian Development Highway Program, of which five were not counted in previous categories.

  3. Policies Recognizing Economic Development as a Factor in Funding Decisions - Some states lack dedicated funding of roads for economic development purposes, but do formally recognize economic development as a criteria in highway decision-making. This can include the statewide TIP selection process and benefit-cost assessment criteria. At the time of the study, 13 states had formal policies of this type, including 11 states that were not counted in previous categories. Another three states were in the process of setting up such policies.

  4. No Formal Economic Development Highway Policies or Programs - At the time of the study, 11 states had no formal programs or policies for funding road investment for economic development. Among them, three were in the process of setting up formal economic development highway investment policies, and another three had set-aside funding for economic development road or highway projects although without formal programs in place.

Formal Highway Economic Development Programs. This part of the study focuses on formal Economic Development Highway programs, i.e., state programs that provide direct funding for road and/or highway investments based on economic development considerations through operation of formal application and disbursement processes. This corresponds to categories #1 and #2 of the four categories previously presented. All of these state-funded economic development highway programs also meet three fundamental criteria:

Further classifications and details on the different types of formal programs are provided in Part 6 of this report.

1.3 Report Overview

The core of this report (Parts 2-5) is a series of four in-depth case studies of economic development road programs in four states, which were conducted by members of consultant team together with a representative of Federal Highway Administration. The primary objective of the interviews was to discuss perceptions of program evolution and expected future changes in program design and priority.

Members of the research team consulted with FHWA's Technical Representative to select case studies and schedule interviews. The four case studies - Massachusetts, Oklahoma, Tennessee and Wisconsin -- were selected to represent a wide range of geographic, economic and political settings. The interviews with program staff covered the following questions:

Program Design Process

Eligibility and Application Review


Results Measurement


The remainder of this report (Parts 6-7) covers two additional issues.

Part 7 discusses the extent of need and potential for benefit if FHWA was to develop guidelines on highway economic development as seen by those interviewed.

Updated: 5/10/2012
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