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Publication Number:      Date:  May/June 2002
Issue No: Vol. 65 No. 6
Date: May/June 2002


Do Better Roads Mean More Jobs?

by Ellen Schweppe

If you build a highway, jobs will come.

Well, maybe—so how do transportation planners predict whether a highway project will boost an area's economy? Some studies show links between better roads and more jobs. But most often planners lack the data they need to determine whether proposed projects will actually produce desired economic benefits, according to Martin Weiss, who has studied the issue for the Federal Highway Administration (FHWA) for nearly a decade.

Planners are turning to FHWA for the answers they need.

The economic benefits of highway improvements have long been a subject of debate. Proponents of highway investment point to such expected paybacks as job creation, income growth, and business expansion. Opponents argue that new roads merely increase traffic to the detriment of the environment and redistribute jobs without creating net economic benefit. In fact, Weiss maintains, too little research has been done to develop a base of information that can be used to project the economic effects of individual highway proposals. In addition, too little research has been done to assess the quality of life and other environmental issues related to the economic development impacts.

FHWA is working on several fronts to develop information that the transportation community can use to make better decisions on highway projects aimed at economic expansion. The efforts include before-and-after-studies of projects to determine the effect of highway improvements on local economies, as well as prospective studies to find out what motivates sponsors of highway projects.

"Completing these studies will help us understand the mechanisms by which different types of highway improvements actually result in growth," says Weiss, principal program official for FHWA's National Corridor Planning and Development and Coordinated Border Infrastructures (NCPD/CBI) programs and the Economic Development Highways Initiative. "Once we know the mechanisms, we think we can better sort economic development proposals into those that are `very promising,' `promising,' and `other.' " And planners can use the results to make investment decisions.

What about statewide planning? Factors such as traffic commute patterns? If we can sort the proposals, planners can make better investment decisions, and statewide plans and programs can be better supported. Eventually, traffic projections, particularly those related to commuting and tourism, can be more accurate.

Highway projects that fall into the economic development category are those that are expected to result in a sustained increase in employment or an increase in wages, profits, sales, and similar indicators—but are not justifiable by traffic.

"Funds that go into such projects may not be a large percentage, but it's not an amount to be sneezed at, particularly if State planners can improve on how it gets spent," says Weiss.

Many local, State, and regional transportation officials agree. Elected officials are turning to FHWA for advice and funding on highway economic development with increasing frequency. Sometimes four or more high-level delegations visit FHWA headquarters in a single week.

"People are struggling to put together impact studies," says Weiss. "They don't really know what to say about whether a project will or won't accomplish economic development. There's a potential to develop valuable information for transportation planning."

The Better Roads-More Jobs Connection

Studies starting back in the era of interstate construction demonstrated a connection between highway improvement and economic growth. A 1970 study that looked at employment trends between 1958 and 1963 found dramatically higher job growth in urban areas with interstate access. A 1980 report on the impact of the interstate system on rural areas found similar results.

By the 1990s, new interstate construction had slowed, making the continued usefulness of the earlier research questionable. Four regional studies, however, shed light on the relationship between transportation improvement and economic development. Two of the studies focused on the 13-state Appalachian region.

The first Appalachian study looked at counties with per capita incomes of less than two-thirds of the national average to see which of them succeeded in climbing out of the low-income category between 1969 and 1993. West Virginia and Kentucky exhibited relative lack of success compared to other states. The study identified several reasons, two of which relate to highways: The low-income counties in those two states were more distant from metropolitan areas than low-income counties in other states, and scheduled highway improvement projects in the two states had not yet been completed.

The other Appalachian study compared income growth in 391 counties with demographically similar counties outside the region. The study showed that per capita income increased 17 percent more in the Appalachian counties than in their counterparts. But the increase was 32 percent greater in counties with at least 3 miles (4.8 kilometers) of new highways constructed under the Appalachian Development Highway Program.

The other two studies concentrated on the seven-state lower Mississippi Delta region.

The first of these studies, coordinated by Weiss, was a follow-up to a 1988 report by the congressionally appointed Lower Mississippi Delta Development Commission. The report included 55 recommendations on transportation improvement, most of which were highway-related. Between 1990 and 1995, nearly all of the highway recommendations were at least partially implemented. During the same period, counties and parishes in the region outperformed the rest of the nation in relative job growth.

A follow-up to the Delta study looked at how much of the increase in employment in seven rural counties and parishes with rapid job growth could be attributed to transportation improvements. Through a series of focused interviews, researchers concluded that as much as 40 to 65 percent of job growth was attributable to transportation improvements.

More recently, Weiss looked at job growth in Laredo, Texas, after the new World Trade Bridge linking the city with Nuevo Laredo, Mexico, was opened to traffic in 2000. The bridge project, partially funded under FHWA's NCPD/CBI programs, was designed to alleviate congestion and eliminate a major bottleneck to commercial traffic between Mexico and the United States.

From 1999 to 2001, Laredo gained about 4,400 jobs, and its unemployment rate dropped 1.4 percent. During the same period, both the Texas and U.S. economies lost momentum, with the State's unemployment rising 0.4 percent and the national rate increasing 0.7 percent.

World Trade Bridge
The World Trade Bridge in Laredo, Texas, was opened April 15, 2000. Traffic backups disappeared, and jobs were created.

"This is a particularly good example that shows the benefits of highway improvement to job growth in an urban area," Weiss says. "Not only were a lot of real jobs added during a time when the economy was going downhill, a lot of them were transportation-oriented, and the jobs went to an urban area with historically high unemployment." In May 2002, Miguel A. Conchas, the CEO of the Laredo Chamber of Commerce, said the reason was that "...the opening of the bridge breathed new life into Laredo's tourism and retail industries as it returned Laredo's downtown bridges to regular traffic use. Shoppers, school children, visitors, and commuters, all are able to make use of these bridges without the worry [about] the congestion that was brought about by intermixing with commercial traffic, i.e., tractor trailers."

FHWA's Three-Pronged Plan

Despite the contribution of past studies to understanding of the link between better roads and more jobs, planners need more and better information to determine whether future projects will yield the same benefits, Weiss says.

"At this point, we don't know enough to make confident judgments regarding economic development outcomes for use in developing transportation improvement programs, transportation plans, or environmental documents," he wrote in a 1999 report on economic growth from transportation improvements.

He went on to note that completing the plans will require "decision-brokering tradeoffs" between improvements in different jurisdictions. Different kinds of transportation improvements, maintenance projects, and increased capacity projects also require tradeoffs, as do "projects that support different, sometimes contradictory, regional goals."

A significant problem for planners is that they often must rely on computer economic models or assumptions that lack a basis in empirical analysis. The models may not produce accurate predictions of whether a particular project will produce expected economic results.

"Computer models can be useful, but they also can be manipulated, and it's difficult to figure out what has been done," says Weiss. "The most difficult assumption to deal with is the tooth fairy assumption that money drops out of the sky to be used on highway improvements. But it comes from taxpayers. We need to work on building realistic predictive methodology instead of digital fiction."

Photo of hunting club
Local residents refer to much of the area near U.S. Route 80 in Alabama as the "Blackbelt," as shown on the sign of this hunting club. FHWA's study in this corridor is looking at improvements that could foster industrial parks and tourist attractions.

First Prong: Economic Development Highways Initiative

The first of FHWA's three-pronged effort to create better data is the Economic Development Highways Initiative. Congress directed FHWA to launch the initiative in the House/Senate conference report on the U.S. Department of Transportation's (DOT) 2000 Appropriations Act.

The report cited the Mississippi Delta Region study, saying that Congress was interested in "recent studies that demonstrate the degree of new and sustainable economic development generated by new or substantially improved highway facilities through economically disadvantaged regions."

Under the initiative, researchers are studying potential economic development around highway corridors in 12 areas—two each in Alabama, California, and Louisiana, as well as one each in Montana, North Carolina, Pennsylvania, South Dakota, Texas, and West Virginia. The studies, scheduled for completion in spring 2003, are being carried out in consultation with advisory committees in each state that include local and state officials and representatives from FHWA division offices.

The studies are designed to refine FHWA's understanding of the economic potential of specific highway corridors. In a study of U.S. 80 in Alabama, for example, major issues for stakeholders include improvement to the corridor to help generate local industrial parks and tourist attractions near major urban areas. In a similar study of U.S. 43 in Alabama, Mayor Austin Caldwell of Demopolis, Alabama, said at a January 2001 stakeholder meeting, "If we do not improve this highway, the future will be like the past, ... and a lot of people will be driving around looking and wondering where their next job will be. If we improve the highway, we can save our employers and have more of them." In Texas, stakeholders want to identify how planned improvements to U.S. 83 in Dimmit, Webb, and Zavala counties may set the stage for economic development in those areas.

Researchers also hope to generate data that FHWA can use in analysis of future legislative proposals relating to economic development highways and the impact of highway improvements on economic growth, interstate commerce, and the regional availability of well-paying jobs.

Second Prong: Guidelines for Before-and-After Studies

A second FHWA effort is aimed at improving the methodology used to gather information about the economic impacts of local highway improvements. To accomplish that goal, FHWA sponsored a 2001 study to develop detailed guidelines for States and localities to use in conducting before-and-after studies of highway improvements.

"Local studies are valuable because most projects these days are built at that level," says Weiss. "We're building small sections of highways, not the multimile interstates of yesterday."

The principal researcher for the 2001 study was Glen Weisbrod of Economic Development Research Group (EDRG). He and others from EDRG, Cambridge Systematics, Inc., the Appalachian Regional Commission, and the Virginia and Wisconsin departments of transportation consider the study a starting point in equipping FHWA and transportation planners with consistent, believable data on how and under what circumstances highway improvements can provide desired economic development.

Photo of historic marker on the Pine Ridge Reservation
The Ogalla Sioux Indian Nation constructed this historic marker on the Pine Ridge Reservation in South Dakota, subsequently substituting the word "massacre" (which by consensus of historians is a more accurate description) for "battle." FHWA's Economic Development Highways Initiative is studying the impact of highway improvements in the Pine Ridge area on access for visitors.

The resulting "Guidelines for Data Collection and Analysis" outline best practices for conducting before-and-after analyses of three types of highway projects: multi-county corridor, multi-town corridor, and one-town corridor. FHWA plans to provide funding for two local studies based on the guidelines. The agency also is encouraging other localities to use the guidelines when planning before-and-after studies on highway projects.

"Dozens of before-and-after studies have been done, but they didn't use this methodology and are therefore not as helpful," says Weiss.

Once a sound information base is built, planners will be able to use it in several ways. The results will help planners better understand how various factors, including highway investment, interact to stimulate economic development. The findings also can be used to develop and improve economic forecasting models. Planners can apply results from a specific project to determine the potential benefits of a planned project with similar characteristics.

Third Prong: Systemic Observation

In addition to prospective and before-and-after studies, the third prong is FHWA's systemic observation of transportation improvement projects that have had an effect on economic growth. FHWA's look at the impact of Laredo's World Trade Bridge was the first in the series, which will include observations of projects funded by the NCPD/CBI programs, as well as projects on congressionally designated High Priority Corridors.

Photo of Pine Ridge Indian Reserve
Improving tourist access to the natural beauty and cultural attractions of Pine Ridge Indian Reservation, South Dakota, could help generate much-needed income and jobs.

The information gained is expected to advance FHWA's knowledge of which projects can contribute the most to economic development. That, in turn, could lessen some of the controversy about the issue of economic development highways.

"Some past economic development projects were generally considered to have been pork barrel, but there was no way to prove it or even test it," says Weiss. "If we can separate the snake oil from the worthwhile projects, it can help a lot."

Better information about prospective economic development highways also may help planners address the concerns of groups opposed to building new roads.

Generating a database of information on economic development highways is an ongoing process for FHWA. Agency experts plan to develop reports and position papers on the topic for use as a resource during DOT's 2003 reauthorization process.

"We think we can provide information that could be extremely useful in decision-making on funding future highways," says Weiss. "We can make this a more scientific, more efficient, less random process."

Photo of stakeholder group
A stakeholder group comprised of State and local officials and representatives of Tuskegee University will advise FHWA as the corridor study for Economic Development Highways Initiative progresses.

Ellen Schweppe is a contract writer for FHWA.

Martin Weiss has been with FHWA since 1974 in a variety of field and headquarters assignments. Since 1993, he has been involved with multistate and multijurisdictional studies and economic development aspects of planning. He wrote the NHS report to Congress in 1993. His work on a lower Mississippi Delta highway and economic development study became nationally regarded. Since 1997 he has been the liaison for FHWA in the Latin America Trade and Transportation study, a multistate and multimillion dollar effort. Since 1998 he has been the principal program official for the National Corridor Planning and Development and the Coordinated Border Infrastructure discretionary programs, the highest annual dollar value discretionary program in FHWA. Since 2000 he has been the principal program official for the economic development highway initiative.




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