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Evaluating Transportation Economic Development Impacts
Understanding How Transport Policy and Planning Decisions Affect Employment, Incomes, Productivity, Competitiveness, Property Values and Tax Revenues
18 August 2010

Todd Litman Victoria Transport Policy Institute

Transportation planning decision affect economic development in many ways: by influencing the connections between resources, workers, businesses and customers; by influencing consumer expenditures; and by affecting land use development location and intensity.

Abstract
Economic development refers to progress toward a community’s economic goals such as increased employment, income, productivity, property values, and tax revenues. This report examines how transportation policy and planning decisions affect economic development, methods for evaluating these impacts, and ways to maximize economic development benefits in transport decisions. Some of these impacts are often overlooked in conventional analysis.

Todd Litman © 2010

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Evaluating Transportation Economic Development Impacts
Victoria Transport Policy Institute

Executive Summary
Transport policy and planning decisions often have significant economic development (also called macroeconomics) impacts by affecting government and consumer expenditures, employment opportunities, resource consumption, productivity, local environmental quality, property values, affordability and wealth accumulation. Some of these impacts are widely recognized and considered in conventional policy and planning analysis, but others are often overlooked or undervalued. This report identifies practical ways to incorporate comprehensive economic analysis into transport planning. It describes specific economic impacts, methods for evaluating these impacts, and transport strategies for achieving economic development objectives.
Table ES-1
Factor Project expenditures Consumer expenditures Transport project cost efficiency Transport system efficiency Basic access

Economic Development Impacts
Description Jobs and business activity caused by project expenditures. Impacts of future consumer transport expenditures. Whether transport facility investments repay costs and optimize value. Ratio of benefits to costs. Whether transport policies support economic objectives Effects on basic mobility for non-drivers (access to shops, schooling and jobs) Impacts on local retail and tourism industries Impacts on specific industries and businesses (e.g., vehicle and fuel producers, taxis, etc.) Whether policies and projects increase real estate values and development. Support for more accessible, efficient land use development. Impacts on transportation and housing affordability. Household wealth created by housing investments. Improved health, education, environmental quality, etc. Evaluation Methods Regional economic models, input-output tables Consumer expenditure surveys and regional economic models Comprehensive benefit/cost models that account for all impacts. Whether transport policies reflect efficient market principles. Analysis of travel options between affordable housing, services and jobs Surveys, input-output tables. Development Strategies Favor policies and projects with greater job creation. Favor policies and projects that reduce future fuel and vehicle expenditures. Choose projects with high return on investment or benefit/cost ratios. Use efficient pricing and policies that favor higher value trips (such as freight) and efficient modes. Support projects that improve commute options for disadvantaged workers. Improve access and travel conditions, reduce negative impacts. Identify potential negative impacts and arrange transition and compensation if needed Support projects that increase property values. Capture value for transport project funding. Favor projects that support strategic land use objectives Favor affordable modes and affordable-accessible housing Support location-efficient development. Favor projects that help achieve desired outcomes.

Retail and Tourism Impacts on specific industries Property values and development Land use objectives Affordability Wealth accumulation Outcomes

Analysis of employment and productivity of specific industries and businesses Property valuation studies. Surveys of real estate professionals. Land use development impact analysis. Transportation and housing affordability analysis. Expenditures on housing versus transportation. Sustainable development indicators.

This table categorizes transportation economic development impacts, evaluation methods, and strategies to achieve related economic development objectives.

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Evaluating Transportation Economic Development Impacts
Victoria Transport Policy Institute

Conventional transport economic evaluation tends to focus on certain impacts (travel time, congestion delay, vehicle operation costs, and some accident costs), but overlooks and undervalue others that are often significant (parking costs, vehicle ownership costs, and incremental costs of induced travel). As a result of these omissions, what analysts report as the economic impacts (or net present value, or benefit/cost ratio) of a transport project are often a subset of total economic effects. More comprehensive analysis considers a wider set of economic impacts. Transportation policy and planning decisions tend to support economic development to the degree they increase efficiency by reducing unit costs (cents per tonne-mile or dollars per passenger-trip) and favoring higher value travel (emergency, freight, service, business travel and high occupancy vehicles) over lower value travel. Policies that reflect efficient market principles (suitable consumer options, cost-based pricing, efficient prioritization, and neutral public policies) tend to support economic development. Market distortions that underprice transport activity or unnecessarily reduce accessibility options can result in economically inefficient travel, in which marginal costs exceed marginal benefits. Some experts claim there is a direct relationship between mobility and economic productivity so policies that reduce vehicle travel are economically harmful. Research in this report suggests otherwise. It indicates that beyond an optimal level (about 4,000 annual vehicle-miles per capita) marginal economic costs exceed marginal benefits. In industrialized countries, economic productivity tends to increase with less motor vehicle travel and higher fuel prices, as indicated in Figures ES-1 and ES-2.
Figure ES-1 Per Capita GDP and VMT For U.S. States
$60,000

Per Capita Annual GDP (2004)

$50,000 $40,000 $30,000 $20,000 $10,000 $0 0 5,000 10,000 15,000 20,000

Per capita economic productivity increases as vehicle travel declines. (Each dot is a U.S. state.)

R2 = 0.2923

Per Capita Annual Mileage (2005)

This has important policy implications. It indicates that excessive automobile dependence can reduce economic productivity, and policy reforms that reduce per capita vehicle travel and increase transport system efficiency (called mobility management or transportation demand management) often support economic development.

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2004 $1.50 $0. particularly in oil consuming countries. They reduce transportation costs and increase transport system efficiency.75 $0. More efficient management is generally more cost effective and beneficial overall.0338 2 R2 = 0.3157 Oil Consumers Oil Producers Linear (Oil Producers) Linear (Oil Consumers) Average Annual GDP Economic productivity tends to increase with fuel prices.25 $1. which tends to increase costs and reduce efficiency.000 $60.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Figure ES-3 GDP Versus Fuel Prices $1.000 R = 0. expanding its capacity to reduce congestion has negative as well as positive impacts because it stimulates automobile dependency (fewer travel options) and sprawl. High quality interregional highways support economic development. • • 3 . such as: • • • • Are transportation improvements really the best way economic development strategy? Is the proposal really the best way to improve transportation and access? Could better management of existing facilities satisfy demands at lower costs? Does the proposal really increase overall productivity? Are some perceived benefits are really economic transfers? Are benefits partly offset by indirect costs? Are subsidies justified? Could costs be borne directly by users? Applying this analysis framework to typical transport planning issues indicates that: • • Parking subsidies are an inefficient way to support downtown economic development.50 $1.00 $0 $20.75 Gasoline Prices Per Liter .000 $40. but once a basic highway system exists.25 $0.00 $0. which increases economic productivity and development. When evaluating the economic impacts of specific transportation policies and projects it is important to ask critical questions. High quality public transit provides many economic benefits and so can be cost effective provided there is sufficient consumer demand and supportive land use policies. Many mobility management strategies reflect basic market and planning principles.

................. 52  Property Values and Development ................................................... 79  Best Practices .................................................................................................................. 56  Land Use Economic Productivity Impacts ............................................................................................................................................... 58  Desirable Outcomes ............... 33  Mobility Management Economic Impacts............................................. 62  Employment and Income Growth ........................... 48  Basic Mobility ................................................... 21  How Vehicle Travel Affects Economic Productivity............. 5  How Transportation Affects Economic Development ............................... 9  Goals............................................................................................................................................................................................................................................................................................................................... 51  Retail and Tourism Industries ................................... 16  Freight Transport ........................................................... 66  Examples and Case Studies ................................................. 64  Evaluation Methods..................................................................................................... 58  Economic Development Impact Analysis Summary ..................................................... 80  Conclusions.................................................................................................................................................. 76  Multi-Modal Transportation Economic Development Benefits ...... 54  Affordability......................................................................... 60  Improve Transport System Efficiency ................. 7  Economic Efficiency Principles ............................................................................................ 46  Roadway Improvements ....................... Vehicle Travel and Economic Development ........................................................................ 78  Automobile Industry Subsidies ................................................................ 51  Impacts on Specific Industries and Businesses ........................................... 56  Household Wealth Accumulation ................................................................................................................... Objectives and Performance Indicators ........... 35  Evaluating Specific Economic Development Impacts ................................................................................................................................................................................... 13  Transportation Productivity Trends ......................... 17  Mobility.......... 63  Affordability and Basic Accessibility ................................................................................................................................. 59  Transportation Economic Development Strategies .............................................................................................. 83  References and Resources........................................................................................................................................................................................... 69  Roadway Expansion......................................................................................................................................................................................................................................................................................................................................... 16  Personal Transport .....................................................................................Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Contents Introduction ........................................................................................................................................Employment Access ................................................................................................................................................................................. 60  Transportation Planning Reforms For Efficiency ......................................................................... 71  Public Transportation Investments ... 42  Transportation Project Cost Efficiency ............................................................................ 72  Transportation Pricing Reforms ............................ 45  Transport System Efficiency .................................................... 39  Consumer Expenditures ........................................... 69  Downtown Parking Subsidies.................................................... 85  4 ................................................................................................................................................ 7  Economic Efficiency and Productivity ....................................................................... 63  Property Values ............... 39  Transportation Program Expenditures ......................... 13  Equity Analysis ................................... 74  Automobile-Oriented Versus Transit Oriented Development Expenses ........................................................................................................................................................................... 9  Production Versus Consumption Travel Impacts ......................................................................................................................................................................................................... 22  Automobile Transportation Productivity ...........................................................................................................

Through productivity. environmental quality. Employment or unemployment rates. Transportation improvements are often advocated for economic development. etc. to identify truly optimal policies. but others are often overlooked or undervalued. Economic development is sometimes a primary planning objective but other times overlooked. More comprehensive analysis considers economic. often measured as full time equivalents (FTEs) Production of goods and services as measured by Gross Domestic Product (GDP) Efficiency and productivity compared with competitors. Value of capital investments Value of tax revenue Transport costs relative to income. poverty and outcomes (longevity. employment and profits of transportation-related industries. 5 . social and environmental objectives together. On people’s ability to access to economic activities (schooling. groups and locations. and there is often debate over which transport policies best support economic objectives. health. Economic development (also called macroeconomics) refers to progress toward a community’s strategic economic goals and objectives. Some of these impacts are widely recognized in transport policy and project evaluation. Table 1 Economic Development Objectives and Indicators Performance Indicators Average or median wage rates and employee or household incomes. longevity. Objectives Income Employment Productivity Competitiveness Business activity Profitability Property values Investment Tax revenues Affordability Equity Desired outcomes This table summarizes various economic development objectives and their indicators suitable for evaluating economic development impacts. Gross sales volumes. On consumer expenditures and their economic impacts. life satisfaction. Through impacts on location and land use development patterns. etc. On the cost burdens imposed on different activities. employment and shops) and therefore engage in economic opportunities. Both extremes can lead to bad decisions: economic development strategies that contradict other planning objectives. or decisions to achieve social and environmental objectives that contradict economic development. which affects production and distribution costs. or changes in those values. Transport expenditures by income class. businesses and resources. the delivery of services).Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Introduction Transportation enables economic activity by connecting people. Health. Differences in wealth. Transportation planning decisions can affect economic development in various ways: • • • • • • As an input to economic activities (shipping. This report explores these issues and provides guidance on practical ways to incorporate economic development objectives into transport policy and planning decisions. Value of land and buildings. crime. Business profits or return on investment. business travel. Not all impacts need be considered in every evaluation.) between groups. education. such as those listed in Table 1.

but it is also economically inefficient if people are forced to drive for trips that can easily be performed by walking or bicycling. etc. district or industry offset by losses to others? To what extent are benefits offset by increased costs. It defines economic development concepts. investigates the role that transportation plays in economic production. 6 . better schools. Efficient transport policies result in optimal mobility: neither too little nor too much mobility. lower taxes. how transport improvements contribute to economic development. and discusses transport policies that help achieve economic development objectives. so excessive mobility can be as economically harmful as too little. describes factors to consider when evaluating transportation economic impacts and methods for evaluating these impacts. For example. including indirect and external costs? Is the proposal really the best way to improve transportation and access? Could better management of existing facilities satisfy demands at lower costs? Are subsidies justified? Would it be more efficient and equitable to recover costs directly from users? • • • This report provides guidance for evaluating the economic development impacts of specific transportation policies and planning decisions.) be more cost effective overall? Does the proposal really increase overall productivity? Are some perceived benefits are really economic transfers? Are benefits to one business. with each mode used for what it does best. Transportation economic development evaluation should consider questions such as: • Are transportation improvements really the best way to support economic development? Could other policies or projects (utility improvements.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Although transportation contributes to economic productivity it also imposes significant economic costs. it would be economically inefficient if people are forced to carry heavy loads on their back instead of using vehicles. This maximizes productivity and therefore economic development.

which can include raw materials. money or risk required to reach resources and services) increased productivity. and so favor automobile-oriented transportation improvements and sprawled land use development. Cost Savings Lower transport costs per mile. which tests users willingness to pay for roads and parking. trip. Economic efficiency increases if transport resource costs (including time. miles-per-gallon. Economic Efficiency and Productivity Economic efficiency refers to the ratio of total benefits to costs. clients and distributors. The ultimate goal (or output) of transportation is accessibility. Accessibility-based analysis expands the range of impacts and options considered in transport planning. For example. business meetings. improve service quality (more frequent deliveries). This is why efficient road and parking pricing. or person Economic Efficiency More outputs (benefits) per unit of input (costs) Productivity More goods and services produced Economic Development Progress toward economic objectives such as employment and wealth Increasing transport system efficiency provides productivity gains that filter through the economy in various ways. such as if a freight or service vehicle with a $100 per hour opportunity cost is given priority over vehicles with only $10 per hour opportunity cost. 7 .Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute How Transportation Affects Economic Development This section discusses basic concepts related to transport economic analysis. a 5% reduction in transport costs increases profits 10%. services and markets. which increases economic development. can increase transport system efficiency even if this reduces total vehicle traffic. as illustrated below. if a business has an 8% annual return on investment and transport represents 16% of its costs. reduced shipping costs may increase business profits. Even modest efficiency gains can provide significant benefits. professional services. transport system efficiency can be increased if higher value trips are given priority over lower-value trips. cents-per-passenger-mile and ton-miles-per-dollar. people and industry’s ability to access desired resources. accessibility-based analysis recognizes that land use sprawl can increase the distances between destinations and therefore accessibility costs. reduce retail prices. and that telecommunications and delivery services can substitute for physical travel. which reflect the speed and affordability of vehicle travel. worksites. For example. Increased economic efficiency increases productivity (quantity of goods produced). land. For example. Conventional planning tends to be mobility-based: it assumes that transportation means vehicle travel and evaluates transport system performance using such as vehicle traffic speeds. Logistics is the discipline concerned with maximizing transport system efficiency. Increased accessibility (a reduction in the time. risk and energy) are reduced or if the value provided by transport activity increases. labor. allow tax increases or a combination of these. For example.

more accessible locations. public transit. in many situations business will find it more cost effective to efficiently manage parking facilities (using more sharing. insurance. etc. Table 2 Mobility Versus Accessibility Transport Improvements Mobility Improvements Reduced Costs Per Travel Mile or Kilometer Other Accessibility Improvements Other ways to reduce access costs • • • • • • Road and parking facility expansion (reduced traffic and parking congestion) Increased vehicle fuel efficiency Reduced per-mile crash rates Reduced per-mile emission rates Reduced driver wages Improved travel comfort (reduced discomfort costs). smart growth land use policies. for example. such as high-occupant and freight vehicles). ridesharing. This distinction between mobility and accessibility is becoming more important. As a result. carsharing. rising future fuel prices. encouraging use of alternative modes. including some strategies that reduce total vehicle travel. ridesharing. increased urbanization. connected. public transit.) than to expand parking facilities. increasing road and parking facility expansion costs. encouraging more efficient use of existing transport resources (such as more efficient road. etc.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Accessibility-based planning expands the range of solutions that can be applied to solve transport problems. Accessibility-based analysis allows these opportunities to be identified. For example. cycling.) Improved logistical management More efficient pricing Improved mobility substitutes (telecommunications and delivery services) Improved user information Mobility-based transportation improvements reduce travel costs and so tend to increase VMT.) than to continue to expand roadways. cycling.). and fuel pricing. by improving alternative modes (walking. multi-modal) land use development. and improved communications technologies. including increasing traffic and parking congestion. These strategies can result in more efficient use of transport resources. etc. so higher value vehicles (freight. urgent personal errands. etc. bus. parking. mixed. • • • • • • More accessible land use (reduced travel distances to reach goods and activities) Improvements to alternative modes (walking. efficient pricing. cycling. and roadway management that favors more efficient modes and higher value trips. encouraging use of alternative modes. etc. telework) when feasible. for example. and improved mobility substitutes (telecommunications and delivery services). service. policies and projects that encourage more efficient use of existing transportation resources are likely to provide greater economic returns that simply expanding road and parking facility capacity. taxi. more accessible (more compact. Other strategies improve accessibility in ways that often reduce vehicle travel. Various trends are reducing the marginal economic benefits of increased automobile travel and increasing demand for alternative modes (Litman 2006a). by encouraging travelers to shift to more resource efficient modes (walking.) can travel unimpeded by congestion. and transport agencies will find it more cost effective to efficiently manage roadways (using HOV priority. public transit. 8 . efficient pricing.

an increase in fuel consumption is a resource cost. In general. Vertical Equity With Regard to Income. people working in one location rather than another) is an economic transfer. but an increase in fuel taxes is an economic transfer since the additional cost to consumers is offset by an increase in government revenue. but equity analysis can be incorporated comprehensively so all policies and programs are evaluated with regard to equity objectives.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Resource Impacts Versus Economic Transfers When evaluating economic impacts it is important o make a distinction between resource impacts (a change in the supply of scarce resources such as time. 3. which may require extra resources and subsidies. but a shift in the location of business activity (for example. which reduces healthcare costs. transport is most equitable if it provides the greatest benefits and least costs to lower-income people. Improving accessibility for disadvantaged groups provides both efficiency and equity and benefits. businesses benefit if better mobility and accessibility expand their pool of lower-wage workers). Equity Analysis Equity relates to the distribution of impacts and the degree this is considered fair. Horizontal Equity (also called “fairness”). rather than only providing special services for wheelchair users. a reduction in business costs (such as parking requirements or employee travel time) is a resource savings. and improves their ability to access medical services and healthy food. including people with special needs and constrains. and therefore their productivity (for example. Policies that provide relatively large benefits to lower-income groups are called progressive and those that burden lower-income people are called regressive. For example. 9 . Conventional transportation planning often considers a limited set of equity impacts and treats them as special issues to be addressed with special programs. For example. For example. Similarly. improves their access to education and employment. Horizontal equity implies that consumers should “get what they pay for and pay for what they get. There are several types of transport equity objectives: 1. According to this definition. and affordable housing is located in accessible locations. Vertical Equity With Regard to Mobility Need and Ability. overall public transit service quality is improved. This assumes that everyone should enjoy at least a basic level of access. such as extra expenditures to accommodate people with disabilities or targeted subsidies. This is concerned with the fairness of impact allocation between individuals and groups considered comparable in ability and need. changes in resource consumption affects economic productivity and efficiency issues. a broader effort to enhance equity also insures that all transport facilities and services accommodate people with disabilities. 2. improving affordable. accessibility options directly benefits disadvantaged people.” unless a subsidy is specifically justified. while economic transfers are equity issues. land or fuel) and economic transfers (a shift of resources from one person or group to another).

through regulations or pricing. charge Underpricing Many motor vehicle costs Unpriced roads 10 . Table 3 Principle Consumer options and information Transport Market Distortions (Litman 2006b.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Table 5 identifies transport equity indictors that can be used to evaluate specific policies and programs. it would be inefficient for transportation planning to arbitrarily favor automobile travel over other modes. For example. Clarke and Prentice 2009) Distortion Markets often offer limited alternatives to automobile transportation and automobile-oriented location Examples Poor walking and cycling conditions Inadequate public transit service Lack of vehicle rental services in residential areas Lack of affordable housing in accessible. Whether individual consumers bear the costs they impose. Public policies should not arbitrarily favor one good over others. • • Current transportation markets often violate these principles. Whether lower-income people save and benefit overall. Improves basic mobility and accessibility. unless specifically justified. basic shopping) are favoured. and subsidies minimized unless specifically justified. medical access. Economic Efficiency Principles The following market principles tend to maximize economic efficiency and productivity: • • User options (also called consumer choice or consumer sovereignty). multi-modal locations Potential Reforms Improve alternative modes. Economic neutrality. Correcting these market distortions tends to increase transport system efficient and therefore supports economic development. for example. Equity Objectives Horizontal equity Individuals bear the costs they impose Progressive with respect to income. cycling and public transit Integrate alternative modes Improve location options. The additional travel that results tends to be economically inefficient: its marginal costs can exceed its marginal benefits. Table 5 Transportation Equity Indicators (Litman 2002) Indicators Whether similar groups and individually are treated equally. to achieve equity objectives or achieve strategic objectives. Efficient pricing. Whether people with mobility constrains (such as physical disabilities) benefit overall. Benefits transport disadvantaged. as summarized in Table 3. particularly affordable modes such as walking. Prices (what consumers pay for each good) should reflect the marginal costs of producing that good unless a subsidy is specifically justified. This table indicates examples of transportation equity indicators. particularly affordable housing in accessible areas As much as feasible. Higher value trips and more efficient modes get priority over lower value trips and less efficient modes. commuting. Prioritization. More options helps users obtain the combination that best meets their needs. Whether more socially valuable trips (emergencies.

Evaluating Transportation Economic Development Impacts
Victoria Transport Policy Institute

are fixed or external.

Unpriced parking Fixed insurance and registration fees Low fuel prices Tax policies that favor vehicle use

motorists directly for roads, parking and emissions, and convert fixed costs, such as insurance and registration fees, into variable costs

Transport Planning Practices

Transportation planning and investment practices favor automobile-oriented improvements, even when other solutions are more cost effective

Dedicated highway funds Transport system performance indicators that only consider vehicle traffic conditions, ignoring impacts on other modes Planning and evaluation tools that overlook many impacts and options

Apply least-cost planning so alternative modes and demand management strategies are funded if they are the most cost-effective transport improvement option. Develop more comprehensive, multi-modal evaluation tools Smart growth policy reforms that help create more accessible, multi-modal communities Pricing that reflects the lower costs of providing public services in more accessible locations.

Land Use Polices

Current land use planning policies encourage lowerdensity, automobileoriented development.

Generous minimum parking requirements Restrictions on compact, mixed land use development Development fees, utility rates and taxes that fail to reflect location-based costs

This table summarizes transportation market principles, common distortions, and appropriate reforms which tend to increase economic efficiency, productivity and development.

Consider a specific example. Vehicles require parking spaces. There are two general ways to supply it: include parking with building space, so building occupants pay for parking spaces regardless of whether or not they demand1 them (called bundled parking), or charge users directly for using parking spaces (called unbundled parking). In developed countries most communities have minimum parking requirements which require parking to be bundled with buildings, such as two parking spaces per housing unit, reflecting average vehicle ownership rates. However, not all households own an average number of vehicles. We can divide households into four categories:
1. Owns fewer than two vehicles and would demand fewer than two parking spaces. 2. Would own fewer than two vehicles if parking spaces were unbundled but will own two vehicles if bundled. 3. Owns two vehicles and so demands two parking spaces regardless of code requirements. 4. Owns more than two vehicles and so demands more than two parking spaces.

Current parking requirements are economically inefficient because they force some households to pay for parking spaces they do not want and encourages some households to own more vehicles than they would if parking were efficiently priced. In typical
1

Demand refers to the amount of a good that consumers would choose to purchase at a particular price.

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Evaluating Transportation Economic Development Impacts
Victoria Transport Policy Institute

situations the total number of parking spaces would decline by 10-30% if users paid directly for parking. This indicates that current parking practices significantly increase vehicle ownership and use, and therefore associated problems such as traffic congestion, accidents, pollution and sprawl. Of course, there are reasons that governments mandate that parking be bundled with building space: it is more convenient to users, because it guarantees that parking spaces will be available, and it is more convenient to governments because it avoids spillover problems (motorist parking were they are not wanted) and the need to enforce parking regulations. It is therefore understandable that many people accept the inefficiency of bundled parking. Special interests often argue that a particular transportation industry or activity provides social benefits that justify market distortions such as underpricing and subsidies. However, the mere existence of benefits does not justify such policies (Rothengatter 1991). Only if an activity provides significant marginal external benefits (you benefit if your neighbors increase their vehicle travel) are subsidies efficient. Transportation systems sometimes have scale economies, particularly during a growth phase when new technologies are developing and networks expanding, but once mature there is seldom marginal efficiency gains from underpricing. External benefits seldom last because rational economic agents capture them. For example, if vehicle manufacturing provides local economic benefits manufacturers demand subsidies for locating in a community.

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Evaluating Transportation Economic Development Impacts
Victoria Transport Policy Institute

Production Versus Consumption Travel Impacts Transportation economic development benefits result primarily from increased production efficiency (savings to businesses and governments). Reductions in consumer costs provide user benefits but do not necessarily increase productivity, employment or incomes. As a result, economic productivity and development impacts vary by travel purpose, as indicated in Table 4. Freight, service delivery, and business travel improvements tend to provide the largest economic development benefits. Commute travel improvements can increase productivity if it increases education and employment opportunities, improving the match between workers and jobs. Personal travel improvements (cheaper or faster travel for errands, social and recreation) benefits users but do not generally increase productivity, employment and income. Retail access improvements can attract more shoppers to a particular store, only supports regional economic development if consumers would actually spend less overall, or if more concentrated shopping provides significant scale economies.
Table 4 Economic Impacts by Trip Purpose
Typical Portion of Total Travel 15% 20% 30% Economic Productivity Impacts Directly affects economic efficiency and productivity. Can affect educational attainment, employment rates, and the match between employees and jobs. May affect where people shop, and may allow agglomeration efficiencies (i.e., bulk retail stores, medical clinics, specialized services), but rarely affects total regional retail activity. Affects user benefits, but little economic productivity impacts. May affect the number of tourist who can visit an area, and the number of residents who can leave and spend money elsewhere.

Type of Trip Freight, service and business travel Commuting Personal errands (e.g. shopping, trips to school and recreation. Social and recreation Holiday

25% 10%

This table illustrates the ways that different types of trips affect economic productivity. Freight, service and business travel represent a small portion of total travel.

Goals, Objectives and Performance Indicators It is important that people involved in economic evaluation understand the relationships between goals (what we ultimately want), objectives (specific ways to achieve goals) and performance indicators (practical ways to measure progress toward goals). The ultimate goal of economics is to maximize social welfare (total happiness in society) and equity (the fair distribution of impacts). Increased productivity and wealth are objectives. Increased productivity and incomes are commonly used performance indicators.
Table 6 Economic Goals, Objectives and Performance Indicators
Examples Social welfare (happiness), equity, future legacy Increased economic productivity, wealth, improved opportunity for disadvantaged people Gross Domestic Product (GDP), average incomes, employment rates, wages, income distribution

Goals – What people ultimately want Objectives – specific ways to achieve goals Performance Indicators – practical ways to measure progress toward goals

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and non-market goods (personal time. employment opportunity. and some people may prefer early retirement. but additional mobility tends to provide less marginal benefit although external costs. although these actions reduce productivity and therefore GDP. two industries may have the same productivity and gross revenue. but indicate little about its quality. people may be forced to work more than optimal. but one provides much more local employment. Similarly. An increase from low to middle incomes tends to provide large social welfare benefits. in addition to indicators of productivity and wealth. and Slattery 2006). If jobs are inflexible or living costs excessive. GDP is stimulated by policies that increased working hours. to a combination of walking.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Commonly-used economic performance indicators tend to measure the quantity of economic activity (the amount of production and consumption that occurs). sustainable development indictors reflect health and longevity. even if it results from public policies that reduce the availability of alternative modes or increase sprawl and therefore the distances people must travel to access goods. family and friendship. health. from only walking. social and environmental outcomes. fitness and health. Similarly. medical problems that increase healthcare costs. an increase from low to moderate mobility (for example. education attainment. Two groups can have the same income but one is much happier than the other due to policies that affect their costs of living. These distinctions become increasingly important as society becomes wealthier and more mobile. social equity. policies that reduce affordable housing options (such as favoring single-family homes over townhouses and apartments) and transport modes (walking. even if lower-income households are no better off. and opportunities in life. cycling. For example. 14 . and so does more to support local economic development. leading to harmful policies (Talberth. Similarly. et al 2007). For example. They generally consider any increase in GDP incomes desirable. services and activities. such as congestion. Conventional indicators fail to account for these factors. It applies a wider set of performance indicators that account for economic. can force consumers to spend more than optimal. business activity and tax revenue than another. community livability and environmental quality. but once people’s basic material needs are satisfied additional wealth provides less incremental benefit. Some parents may prefer to work less to spend time with their children. Cobb. and so can provide distorted guidance. accidents and pollution. due to diminishing marginal benefits. More comprehensive analysis. Similarly. attempts to more clearly reflect society’s goals (Marsden. continue to increase as indicated in Figure 1. respect) become relatively more important. and increased cost of living (the cost to purchase basic goods). they assume that any increasing in vehicle travel is desirable. which increases GDP but reduces consumer welfare. public transit and automobile travel) tends to provide large benefits. sometimes called sustainable economics. cycling and public transit).

but marginal benefits tend to decline as incomes and mobility increase. cycling. accidents. All of these should be considered in economic evaluation. public transit) and from sprawled land use should be recognized as increasing transportation costs and reducing economic productivity. while total costs (including external costs such as congestion. Use accessibility-based indicators rather than just mobility-based indicators. externalities associated with energy consumption. and pollution emissions. objectives (specific ways to achieve goals) and performance indicators (practical ways to measure progress toward goals). Account for diminishing marginal benefits. barrier effects. the reduced accessibility that results from degradation of alternative modes (walking. delivery services and more accessible land use should be considered equally with strategies that increase mobility. including traffic congestion. Transportation facilities and activities can impose various external costs. • • 15 . mobility and economic opportunity for people with low incomes and physical disabilities. Account for weaknesses of common performance indicators. such as changes in incomes. accident risk and pollution costs) increase linearly. Although a certain amount of mobility may provide large benefits. Measure the distribution of economic impacts. Similarly. additional mobility tends to provide less incremental benefits.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Figure 1 Social Benefits and Costs Diminishing Marginal Benefits and Linear Costs Costs Benefits Minimal Moderate High Very High Increased Income and Mobility Increasing from minimal to moderate income or mobility provides large benefits. road and parking facility subsidies. For example. Account for indirect and external costs. strategies that improve accessibility by improving telecommunications. This suggests that accurate evaluation of transportation economic development impacts should reflect the following: • • • • Clearly define goals (what you ultimately want).

Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Transportation Productivity Trends This section considers how transportation productivity (the mobility provided per dollar or hour of travel) changed in the last century and is likely to change in the future.S.8% 2.2% 3.8% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Transportation services declined as a portion of the U. since costs are already low. This indicates large increases in fright transport productivity.9% 2.1% 3. Figure 3 3.15 $0.05 $0. employment devoted to transportation services declined during the last decade. the portion of U. This resulted from technological improvements such as larger. many major efficiency improvements have been fully implemented.10 $0. Despite growing freight volumes.1% Transportation and Warehousing Services (BLS 2008.0% 2. It is unlikely that productivity will continue to increase at this rate in the future. Freight Transport Figure 2 shows how rail freight costs declined over a 150 year period. economy during the last decade.20 $0. faster and more efficient vehicles.S.00 1850 1900 1950 2000 Shipping costs per ton-mile declined significantly during the last 150 years. Figure 2 Railroad Freight Costs (Garrison and Levinson 2006 p.0% 3. as illustrated in Figure 3. and more efficient loading and operations (such as containerization and automated dispatching). and rising fuel prices may offset some future efficiency gains.25 $0.9% 2. 16 . Table 3-4a) Portion of GDP 3. 290) Average Dollars Per Ton-Mile $0.

transatlantic steamship fares cost $35 to $100 (about $1. This map is now quite accurate if measured in hours rather than days.000 in current dollars). currier services can ship small packages to almost any major city within a day or two. Figure 4 is an 1888 map showing travel times from England to other world locations. and now. to San Francisco required 10-20 days. this declined to about $150 ($1.000 to $3.600 in current dollars). Passenger fares have also declined significantly. and all of Australia required 40 days or more.000 to $6. and typical transcontinental airline fares were $300 ($3. Figure 4 Isochronic Distance Map of the World (Bartholomew 1888) This 1888 map shows days of travel time from London to other world locations. These represent huge increases in interregional transport productivity. and electronic communication allows nearly instantaneous information transmission. It indicates that travel to New York required 5-10 days. one-way transcontinental economy class airfares are now typically about $600. A typical longdistance trip costs just 1% to 10% of time and money required a century ago. In the 1880s. By the 1940s. most of South America and Africa. they are likely to be smaller than what occurred during the last century and partly offset by rising fuel costs and congestion. primarily due to improved operations. transcontinental rail fares were $70 to $100 ($250 to $350 in current dollars). indicating that during the last century long-distance travel speeds increased about 24 fold. and transcontinental rail fares $100 to $200 ($3. These greatly increased economic productivity. Although some transport productivity gains are likely to occur in the future. Indentured servants typically worked three to seven years to repay their transport from Europe to Colonial America. it is unlikely that travel from London to New York will be significantly faster or cheaper in 2050 than it is now. It is now approximately accurate if measured in hours. 17 .200 in current dollars) by the 1960s.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Personal Transport Personal travel also experienced large productivity gains.000 in current dollars). indicating average travel speeds increased more than an order of magnitude during the last century. and to much of Asia. For example.

and more dispersed land use development patterns (sprawl) which reduced accessibility. 18 . comfort. Seatbelts and roadway improvements reduced crash injuries but more recent safety features such as air bags and anti-lock brakes have higher costs and smaller benefits. cup holders. Effective speed is unlikely to increase significantly in the foreseeable future. parking subsidies. Described differently. including time spent earning money to pay transport expenses). Although mobility increased significantly the benefits were partly offset by the high costs of owning and operating vehicles. accidents and pollution damages.) increase user convenience and comfort. Rogers and Tan 2001) 30% Portion of Total Expenditures 25% 20% 15% 10% 5% 0% 1918 1950 1960 1972 1986 The portion of household budgets devoted to transport increased significantly during the last century. Automobile travel is not significantly cheaper or faster in 2009 than it was in 1999 or 1989.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Automobile transport has a different efficiency profile. but this imposed significant financial costs on households. as illustrated in Figure 5. speed and other costs) changes during the last century. although average vehicle speeds increased during much of the Twentieth Century. Most recent improvements (electric door locks. Vehicle reliability improved but repair costs increased as parts and servicing became more specialized. sound systems. and increasing indirect costs such as congestion. but not productivity. fuel efficiency and reliability. Productivity (vehicle miles per dollar and minute) appears to have peaked around 1980. while congestion and fuel costs increased. During the Twentieth Century vehicle and roadway improvements increased travel speed. Table 7 summarizes automobile transportation performance (operating costs. Some externalities (pollution and crashes) declined when measured per vehicle-mile but these benefits were offset by increased vehicle travel and congestion. Figure 5 Household Transportation Expenditures (Johnson. in recent decades there has been little increase in effective speed (total time devoted to travel. etc. automatic seat adjusters.

000 annual miles per vehicle. 2020 Fuel efficient vehicles This table indicates that vehicle and roadway improvements increased travel productivity (vehicle-miles per dollar and hour) significantly between 1900 and 1980 but further increases are unlikely. It indicates that per capita vehicle travel grew steadily during the Twentieth Century but peaking in most countries about the year 2000 and has declined slightly since due to demographic Sources: Annual Vehicle Distance Traveled In Miles And Related Data. High risk. Horse-drawn wagon 1920 Ford Model T 1940 Ford Model A Moderate.org/wiki/Ford_Model_T). High. Model T (http://en.pdf). high fuel costs (for feed) Moderate. Purchase prices moderate to high. High air and noise pollution. Moderate. Likely to decline slightly. Interstate Highway System completed. High air and noise pollution. Figure 6 illustrates vehicle travel trends in various industrialized countries. Fuel economy and fuel prices increasing. Air and noise pollution.pdf). top speed was 40 MPH and few roads were paved. but in recent years marginal productivity gains appear to have peaked and probably declined somewhat due to rising congestion and fuel prices.dot. Most vehicles can reach 75 MPH. 1960 Large sedans and station wagons Ford Taurus and Honda Accord SUVs and vans 1980 2000 Moderate. Although faster than a horse. High air pollution.gov/ohim/summary95/vm201a.wikipedia. Vehicle Mileage Low. Improved electronics. Roads increasingly congested. Virtually all automobiles can reach 65 MPH and most roads paved.com/vehicle/z7025/Ford-Model-A. Other Costs Requires lots of road and parking space. Moderate.aspx). Relatively small size. Moderate.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Table 7 Year 1900 Changes In Vehicle Transport Productivity (cost per vehicle-mile)2 Typical Vehicles Vehicle Operation Costs High. Moderate. Low air and noise pollution.000-6. Short operating life.000 current. Low. Low. Purchase prices moderate to high. Averaged about 9. Moderate. Table VM-201A. Moderate purchase price. Low air and noise pollution. Averaged about 14 MPG. Low. Improved comfort.500. This is happening in most economically developed countries. Larger vehicles increased some externalities.500 annual miles per vehicle. Averaged about 9. 2 19 . Averaged about 12. Few people used personal vehicles daily. 1936 – 1995. About 15 MPG.fhwa.conceptcarz. About 15 miles per gallon (MPG). Low. causing per capita vehicle travel to decline.000 annual miles per vehicle. Relatively large size. Travel Time Costs Very high.vtpi. Probably 2. Rising incomes and increased vehicle productivity stimulated automobile ownership and use. The 1930s $385$570 price equals about $5.000 annual miles per vehicle. Roads increasingly congested. Purchase prices moderate to high. The Future Isn’t What It Used To Be (www. Model A (www.000 annual miles per vehicle. Averaged about 16 MPG. Averaged about 21 MPG. Increased congestion. 5-10 miles per hour (MPH) High. Averaged about 9. Top speed was 60 MPH and many roads paved. Moderate. FHWA (www. 1915 $440 purchase price is about equivalent to $10.org/future.000-7.

Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland U. many of these strategies are market and planning reforms that increase economic efficiency. other types of transport efficiency improvements such as increased fuel efficiency. In the future. road and parking facility costs. 20 . FHWA. although increased automobile travel and speed made major contributions to overall economic development during the Twentieth Century. Various Years) 25. improvements to alternative modes. such as India and China. rising fuel costs. Demographic and economic trends are reducing per capita vehicle travel demand in wealthy countries.000 5. better telecommunications and delivery services are likely to contribute more to economic development.000 0 1970 1980 1990 2000 2007 U.). Many countries are now implementing mobility management strategies reduce problems such as congestion. due in part to differences in transport and land use policies (fuel taxes. and is about twice as high in North America as in other industrialized countries.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute and economic trends (aging population. As described later in this report. infrastructure investments. but such increases are likely to be small compared with what occurred during the last century.000 15.).000 Annual Passenger Kms Per Capita 20.S. but has since leveled off and is much lower in European countries than in the U. The level at which per capita vehicle travel peaks varies from one country to another. this is unlikely to continue in the future. etc. This indicates that. If properly implemented these policies can significantly increase transport system productivity (the amount of accessibility provided per dollar of expenditures.S. In developed countries total vehicle travel may continue to increase somewhat with population growth. hour of time and acre of land). increased urbanization. etc. and to help achieve health and environmental objectives. land use development patterns. Year Per capita vehicle travel grew rapidly between 1970 and 1990. Per capita vehicle travel is likely to increase in developing countries.000 10.K. Figure 6 International Vehicle Travel Trends (EC 2007.

emergency transport). such as more pricing. But mobility tends to experience declining marginal benefits. There is no doubt that a certain amount of mobility (physical travel. The first examines data showing both positive and negative relationships between mobility and economic productivity. In addition. high levels of VMT can result from reduced accessibility (more money. employees to commute. As discussed in a previous section. and in part because increased productivity increases wealth. and products to be distributed. in part because improved mobility contributes to productivity. Negative relationships are evident when comparing higher-income regions. The third section examines the economic productivity impacts of various mobility management (also called transportation demand management) strategies. more neutral transport planning and funding. Vehicle Travel and Economic Development This section discusses the relationships between vehicle travel and economic development. VMT and GDP increase together. 21 . are classified as mobility management strategies by transportation professionals. These strategies tend to increase productivity and so support economic development. schools and jobs). which allows consumers to purchase more mobility. This includes various policy reforms advocated by economists to increase efficiency. middle. reduces transport system efficiency and increases costs.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Mobility. business travel. time and land needed to reach services and activities such as shops. It discusses ways that automobile transport can increase and reduce productivity. business meetings to occur. Measured in some ways. Positive relationships are evident when comparing regions at very different levels of development (low. in automobile-dependent regions there is often a negative relationship between mobility and productivity: cities and neighborhoods with less per capita VMT due to their more efficient transport systems are more economically productive. typically measured as vehicle-miles-traveled or VMT) contributes to economic productivity: it allows resources to be shipped. The next three sections explore these issues. and an increasing portion of vehicle-miles consist of consumer travel. and high income countries). which are policy and planning reforms intended to increase transport system efficiency. transportation efficiency improvements contributed significantly to economic productivity gains during the last century. and how these impacts are perceived by different perspectives and measurement units. The second section examines in more detail the relationships between automobile transportation and productivity. As a result. As per capita mobility increases a declining portion serves productive travel (freight and service delivery. and more accessible land use development.

Similarly. economist Randall Pozdena (2009) claims that Figure 8. so policies that increase motor vehicle travel (subsidized roads and parking facilities. Figure 7 US VMT and GDP Trends (HUA 2009) The Highway Users Alliance claims that this graph proves that a reduction in vehicle travel will reduce economic productivity. gradual and predictable fuel tax increases can be economically beneficial by encouraging energy conservation and reducing the wealth transferred to oil producers.S. although the U. because VMT and GDP are correlated. residents. He concludes that. but correlation does not prove causation. although oil price spikes harm oil consumers. and mobility management strategies that reduce vehicle travel are economically harmful. and case studies of the effects of oil price spikes on economic productivity.46 percent in the long run (20 years). 22 . efforts to reduce vehicle travel must reduce economic productivity. and Norway appear close together in the graph.” But this analysis misrepresents these issues. The graph includes countries with very different levels of development.S. The log-log format in Figure 8 exaggerates the relationships between energy and economic development.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute How Vehicle Travel Affects Economic Productivity Some people claim there is a direct relationship between motor vehicle travel and productivity. Similarly. For example. For example. the Highway Users Alliance (HUA 2009) claims that the graph below proves that. industrialized countries. inexpensive fuel.9 percent change in GDP in the short run (2 years) and a 0. Increased vehicle travel in very poor countries such as Zimbabwe and Liberia has very different productivity impacts than in wealthy. “a one percent change in VMT/capita causes a 0. prove that policies which reduce vehicle travel reduce economic development. Norwegians actually consume about half as much fuel per capita as U. automobile-oriented land use development) supports economic development.

Vehicle travel imposes external costs (congestion. HUA and Pozdena emphasize this factor. and accident damages increase. as figures 7 and 8 indicate. A certain amount of motor vehicle travel increases productivity and supports economic development. although social welfare does not necessarily increase. Motor vehicle increases economic productivity when it supports productive activities such as freight and service delivery. During this phase there is a strong positive relationship between motor vehicle travel and economic productivity. particularly with increases from low to moderate income. 3. 23 .Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Figure 8 Per Capita GDP Versus Barrels of Oil (Pozdena 2009) Pozdena claims this graph proves that increased energy consumption increases economic productivity. which increases some economic activities (expenditures on vehicle repairs and medical services) although it reduces and social welfare. accident and pollution damages. which increases GDP. but this reflects several different factors: 1. Certainly energy use. But as vehicle travel increases the marginal benefits decline while economic costs such as congestion. oil import costs). Increased wealth allows some wealthy households to choose more accessible locations. productivity increases if motor vehicles replace headloading. 5. pushcarts and animal wagons for freight transport. A log-log graph such as this exaggerates such relationships. For example. allowing them to reduce their vehicle travel. reducing accessibility. O’Fallon 2003). infrastructure costs. This increases vehicle travel and associated costs. and if motorized commute transport expands labor pools. as illustrated in Figure 9. and land use becomes more dispersed. Automobile-oriented land use patterns increase the amount of travel needed for a given level of accessibility. Baird 2005. 2. vehicle travel and GDP tend to increase together. Among developed economies the relationship between vehicle travel and economic development is actually weak (SACRA 1999. 4. Increased wealth tends to increase vehicle ownership and use.

marginal benefits decline and eventually becomes negative as external costs and inefficiencies increase. while factors 2-5 result from increased wealth. doubling VMT increases GDP about 10%. but at higher levels of per capita VMT. Factors 4 and 5 partly reflect the increased economic activity that results if more automobile travel is required to maintain a given level of accessibility. However. which increases GDP but does not increase social welfare.000 (1997 U. 4 and 5 cause negative relationships. The researchers conclude that.485 $24.496 Income Quintile (Average Annual Income) Increased wealth causes declining marginal increases in VMT. since vehicle expenditures account for 10-20% of personal consumption and a significant portion of government and business consumption. vehicle travel marginal costs outweigh marginal benefits (Kenworthy. Factor 1 causes wealth to increase.” 24 .” and. For example. so all else being equal. et al. It is therefore unsurprising that VMT and GDP correlate. An international study found that per capita vehicle ownership peaks at about $21.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Figure 9 900 800 700 600 500 400 300 200 100 0 Annual Per Capita Vehicle Mileage By Income Quintile (BLS 2007) Additional VMT per Addtional $1. Empirical evidence suggests that increasing from very low to moderate levels of mobility increases productivity since motor vehicles are used for high-value trips. Similarly. while factors 3.500 kilometers annual motor vehicle travel per capita.986 $49.195 $12.S. 1997).000 Income $6. force parents to spend more money on vehicles and fuel. Factors 1 and 2 cause positive relationships between VMT and GDP. dollars) annual income (Talukadar 1997). policies that improve walking and cycling conditions may reduce VMT in ways that support economic development and increase social welfare overall. a World Bank study found that beyond an optimal level (about 7. “there are no obvious gains in economic efficiency from developing car dependence in cities. this does not necessarily reflect true economic development that increases social welfare.579 $18. since it actually reflects increased costs and harms to society. “There are on the other hand significant losses in external costs due to car dependence. although consumers and society could be worse off overall. In such situations. public policies that favor automobile travel over walking and bicycling for children’s travel to school. with considerable variance due to geographic and economic factors).

000 12.S. The U.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Among wealthy countries there is considerable variation in per capita vehicle ownership and use.000 8.000 to more than 15. Economically successful countries such as Norway and Germany have half the per capita VMT as in the U. cities. due largely to differences in transport and land use policies.000 average annual vehicle-kilometers) as most other OECD countries (5. Figure 10 shows the variation in vehicle travel among peer countries. Birmingham or Durham.S. Sacramento and Chicago are less economically successful than high VMT cities such as Atlanta. Figure 11 16.000 20.000 6. annual per capita vehicle mileage varies significantly among U. than in other industrialized countries.000 2. due to policies and planning practices that increase transport system efficiency. averages more than twice the per capita vehicle travel (about 20.S. There is no evidence that lower VMT cities.000 15. C Yo c M -F De Atl Hou ingh Dur vis New rame Chi Port Bu gton Bo Pho Se De llas m Da ac h in Da B ir S s Wa Per Capita Annual Vehicle Travel Selected U. Similarly.S.000 10.000 to 10.000 4.000 average annual vehicle-miles per capita.S. Cities (FHWA 2007) Per capita vehicle travel varies from fewer than 5. troit anta ston am ham . Norway and Sweden drive about half as much as in the U. as illustrated below.W. Figure 10 Annual Vehicle-Kms Per Capita 25.S.000 14. in part. Annual VM T Per Capita 25 .000 0 ited Un Sta tes ly Ita na Ca da nm De a rk Fr a nce Fi n lan d it Sw zer d la n rw a No y Sw e ed n in dK gd om ite Un Ge rm y an rl the Ne d an s Sp ain an Jap Po lan d Per Capita Annual Vehicle Travel By Country (OECD 2009) Per capita vehicle mileage is significantly higher in the U. such as New York. Residents of wealthy countries such as Switzerland. cities.000 average annual miles among U.000 average annual vehicle kms).000 0 A rk nto ago land ffalo DC ston enix attle nver iami .000 10.S. This variation results. from different transport and land use policies. from fewer than 5.000 5.000 to more than 15.

) Similarly.000 $30.S.000 $40.dot. state.000 $20. Figure 12 Per Capita GDP and VMT For U.bea.edu/ums/congestion_data/tables/complete_data. it includes countries at very different levels of industrialization.000 10.000 2 Per Capita Annual Mileage (2005) Per capita economic productivity increases as vehicle travel declines.xls).gov/policyinformation/statistics/2007/hm72.000 20. as illustrated in Figure 13. data from U.gov/regional/gdpmetro).vtpi.org/Transit2009. based on data from the FHWA’s Highway Statistics (www. States (VTPI 2009)3 $60.000 Per Capita Annual GDP (2004) $50.000 15.000 R = 0. as illustrated in Figure 12.fhwa.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Although the data presented by the Highway Users Federation and Pozdena indicate a positive relationship between VMT and GDP.xls).000 $10. metropolitan regions indicates that per capita GDP tends to increase with per capita public transit travel. 3 Information in this and subsequent graphs is contained in the 2009 Urban Transportation Performance Spreadsheet (www.S. the TTI’s Urban Mobility Report (http://mobility.S.S.2923 $0 0 5. (Each dot is a U. and the Bureau of Economic Account’s Gross Domestic Product By Metropolitan Area (www. which indicates this relationship for U.tamu. 26 . Within developed countries there is a negative relationship between vehicle travel and productivity: per capita GDP is higher in jurisdictions with lower VMT.cfm). states.

Evaluating Transportation Economic Development Impacts
Victoria Transport Policy Institute

Figure 13

Per Capita GDP and Transit Ridership (VTPI 2009)
$90,000 $80,000

Per Capita Annual GDP

$70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 0 200 400 600 800 1,000 1,200 1,400 R2 = 0.3363

Per Capita Annual Transit Passenger-Miles

GDP tends to increase with per capita transit travel. (Each dot is a U.S. urban region.)

Per capita GDP tends to decline with roadway lane miles, as illustrated in Figure 14.
Figure 14 Per Capita GDP and Road Lane Miles (VTPI 2009)
$90,000 $80,000

Annual GDP Per Capita

$70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 0.0 1.0 2.0 3.0 4.0 5.0 R = 0.1132
2

Lane-Miles Per Capita

Economic productivity declines with more roadway supply, an indicator of automobile-oriented transport and land use patterns. (Each dot is a U.S. urban region.)

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Evaluating Transportation Economic Development Impacts
Victoria Transport Policy Institute

Per capita GDP tends to increase with population density, as illustrated in Figure 15. This probably reflects the positive effects of improved land use accessibility, increased transport diversity and agglomeration efficiencies.
Figure 15 Per Capita GDP and Urban Density (BTS 2006 and BEA 2006)
$90,000 $80,000

Annual GDP Per Capita

$70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 0 1000 2000 3000 4000 5000 6000 7000 R2 = 0.1083

Residents Per Square Mile

Productivity tends to increase with population density. (Each dot is a U.S. urban region.)

Figure 16 shows that per capita GDP increases with fuel prices, particularly among oil consuming countries (countries that produce no petroleum).
Figure 16
$1.75

GDP Versus Fuel Prices (Metschies 2005)4

Gasoline Prices Per Liter - 2004

$1.50 $1.25 $1.00 $0.75 $0.50 $0.25 $0.00 $0 $20,000 $40,000 $60,000 R2 = 0.0338
R2 = 0.3157

Oil Consumer Countries Oil Producer Countries Linear (Oil Producer Countries) Linear (Oil Consumer Countries)

Average Annual GDP

Economic productivity tends to increase with higher fuel prices, indicating that high vehicle fees do not reduce overall economic productivity.
Fuel price (www.internationalfuelprices.com), GDP (http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita), petroleum production (http://en.wikipedia.org/wiki/Petroleum); excluding countries with average annual GDP under $2,000.
4

28

Evaluating Transportation Economic Development Impacts
Victoria Transport Policy Institute

Fuel costs range from about 2¢ up to about 15¢ per vehicle-mile for a typical vehicle. Since motor vehicle external costs (congestion, road and parking facility costs, accidents and pollution impacts) are typically estimated to total 10-30¢ per vehicle-mile (Litman 2009a; Vermeulen, et al. 2004), the higher-range fuel prices tend to increase economic efficiency by internalizing a significant portion of these costs. Although fuel taxes are an imperfect vehicle user fee (fees that vary by time, location and vehicle type can be more efficient), they are more efficient than significantly underpriced driving. Several factors probably contribute to this positive relationship between fuel prices and GDP. Higher fuel prices encourage more efficient transportation and fuel conservation. Doubling fuel prices typically reduces vehicle travel by 20-30% and fuel consumption by 50-70% over the long run (“Transportation Elasticities,” VTPI 2008). For oil consuming nations, reduced fuel consumption reduces the economic costs of importing petroleum. For oil producing countries it leaves more product to export, increasing revenues and income. For all countries, reducing VMT reduces costs such as traffic congestion, road and parking facility costs, accident and pollution costs, helps maintain a diverse transportation system (walking, cycling and public transport), and reduces sprawl. In a detailed study of international fuel prices, Metschies (2005) finds that many countries, particularly lower-income oil producers, have inefficiently low fuel prices. Development economists frequently find that regions with abundant natural resources, such as oil, have low rates of economic development, which they refer to as the resource curse or the paradox of plenty.5 This results, in part, from policies such as inefficiently low fuel prices which stimulates wasteful resource use. This suggests that high fuel prices (and therefore, high vehicle operating costs) do not constrain economic activity and competitiveness, on the contrary, they tend to increase productivity and economic development by increasing transport system efficiency and reducing the domestic wealth that must be devoted to importing fuel. Empirical evidence suggests that traffic congestion is not a major constraint on economic productivity. Figure 17 illustrates the relationship between per capita annual traffic congestion delay reported by the Texas Transportation Institute and per capita Gross Domestic Product reported by the U.S. Bureau of Labor Statistics for major U.S. cities. The results indicate that traffic congestion and economic productivity increase together. This does not necessarily mean that congestion stimulates economic productivity, these cities’ productivity would probably increase if congestion were reduced, but it suggests that other factors are much more important. Transportation system efficiency should be evaluated based on overall accessibility, taking into account all transport modes, land use patterns, and mobility substitutes such as telecommunications and delivery services, not just automobile travel speeds.

5

See http://en.wikipedia.org/wiki/Resource_curse.

29

encourage economically inefficient vehicle travel.xls. road and parking facility costs. in which marginal costs exceed marginal benefits. and business travel. VTPI (2009). traffic service costs.000 $30.000 $20.org).vtp. Urban Transport Performance Spreadsheet.S. More efficient pricing and planning practices encourage efficiency.vtpi. The results indicate that traffic congestion and economic productivity increase together. Described differently. at www.000 $10.000 $50. Marginal productivity benefits decline as a declining portion of travel is for productive uses. such as freight and service delivery.196 Annual Per Capita Congestion Delay This table illustrates the relationship between per capita annual traffic congestion delay and per capita Gross Domestic Product for major U.000 Per Capita Congestion Delay Versus GDP6 Annual Per Capita GDP $70. 6 30 .000 $0 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 R2 = 0. accident and pollution damages.000 $40. and so tend to increase economic development. GDP information from the US Bureau of Labor Statistics. etc.).org/Transit2009.000 $60. such as underpricing of automobile travel. Victoria Transport Policy Institute (www. Congestion delay data from the Texas Transportation Institute’s 2007 Urban Mobilty Report. transportation market distortions.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Figure 17 $90. The additional VMT imposes increasing economic costs (vehicle expenses. 2.000 $80. cities. Two factors help explain why GDP tends to decline at high levels of VMT: 1.

2. Freight and public transport systems are efficient.000 annual VMT per capita).000 annual VMT per capita). so motorists gain a competitive advantage. marginal economic benefits decline while costs increase linearly.000 annual vehicle miles per capita overall. A flexible relationship between mobility and economic productivity implies that economies are responsive and creative: if energy and mobility are cheap. service delivery.000-5. 3.000 annual VMT per capita). For example. However. so more productivity is generated per unit of mobility. require large investments in roads and parking facilities. A rigid relationship between mobility and economic productivity implies that economies are inflexible: there is only one efficient way to produce goods. More efficient pricing and better planning encourage consumers to rationally choose economic efficiency transportation options. parking problems and accident damages) increase.000 10. labor pools are limited. but if prices increase or other policies encourage conservation. and personal vehicles are used efficiently.000 Per Capita Annual Vehicle-Miles As per capita vehicle travel increases. and total social costs (congestion. an individual gains speed. the economy becomes more efficient. All else 31 . High levels of vehicle traffic cause traffic congestion. This analysis suggests that there are three general levels of motor vehicle travel: 1. and consumers have difficulty accessing basic services and competitive markets. as more people become motorists the advantages disappear.000 6. optimal VMT will generally seem to be much greater than the social optimal because many costs are external. Experience indicates that public policies can increase transport system efficiency. Excessive (typically more than 5. and cause high traffic accident costs. For individuals. Freight. businesses and consumer use a lot. comfort and status by driving. Optimal (typically 2. increasing economic productivity. beyond about 4. Reduced quality of alternative modes and sprawled land use increase the amount of travel required to maintain a given level of accessibility. and business travel are inefficient. and that economic development requires ever more energy and movement. As a result. Inadequate (typically less than 2.000 8. total costs exceed total benefits.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Figure 17 Vehicle Travel Economic Benefits and Costs Economic Value Benefits Costs 0 2.000 4. This is called decoupling.

32 . policies that increase transport system efficiency (both energy and economic efficiency) increase productivity and competitiveness. as illustrated in Figure 18. and this is likely to become increasingly important as international fuel prices rise.5 0.5 2.5 1. lags many other countries. some much more than the U.0 0.0 2. This reflects an increase in transportation system economic efficiency.5 GDP per Passenger-Kilometer for Various Countries (OECD 2009) United States United Kingdom Sweden Spain Norway Netherlands Japan Italy Germany France Finland Denmark Australia GDP Dollars Per Passenger-Km 4.0 1. Figure 18 4.5 3.S. The U.S.0 3.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute being equal. Virtually all developed countries are increasing transport economic efficiency (GDP per unit of travel).0 1970 1980 1990 2000 2007 Most countries are increasing GDP per passenger-mile.

the analysis indicates that high levels of automobile travel tends to be economically harmful. Expands pool of potential employees. Employee automobiles allow businesses the cost burden of maintaining fleets. The additional mobility may benefit users by increasing motorist convenience.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Automobile Transportation Productivity The previous section indicates that excessive vehicle travel can reduce productivity. It forces motorists to chauffeur nondrivers. accident risk and pollution damages (for example. Automobile dependency imposes indirect costs. in part. • • Automobile transportation increases economic productivity in some ways but reduces it in others. Increases efficiency of business. but does not increase productivity. since alternative modes tend to experience economies of scale. More employees can be available on-call. Increases external costs. Incurs costs to consumers of owning and operating vehicles. reducing overall accessibility. employment or tax revenue. from dispersed land use patterns and reductions in alternative modes which increase the distance that people must travel reach destinations and reduces the efficiency of alternatives. • • Table 8 summarizes automobile transport productivity impacts. However. cycling. The relative speed advantage of driving compared with other modes in automobileoriented communities results. public transport tend to decline). Stimulates sprawled (dispersed) land use patterns. and their cost burdens for roads. Allows more people to attend school (such as college or professional development courses) while working. and working to pay vehicle expenses) is only about 10 miles-per-hour. crashes and pollution damages. Productivity is maximized if public policies limit automobile travel to efficient levels. road and parking costs. which reduces the traffic congestion they face. which increases the mobility required to maintain a given level of accessibility. reduced walking and cycling force residents to devote special time to exercise. vehicle maintenance. accident and pollution damages. and increases traffic congestion. Reduces travel options (walking. automobile travel is often faster and more cost effective than other modes. business owners save money if customers and employees use alternative modes so fewer parking spaces are needed). and so appears to increase productivity. the distances they must travel. 33 . multi-modal community. allowing more activities to be accomplished in a day. Even people who rely entirely on driving can be more productive in an accessible. A typical motorist spends about 10 hours per week driving and another 10 hours per week working to pay vehicle expenses. delivery and service trips. Allows retail efficiencies of regional shopping centers. this increased productivity is offset in various ways: • Owning and operating a vehicle is costly. in fact. The average effective speed (distance divided by total time spent on travel. such as road and parking subsidies. Table 8 • • • • • Automobile Transport Productivity Impacts Increases Productivity Reduces Productivity • • • • Increases traffic and parking congestion. parking. To individuals. comfort and status. their need to chauffeur non-driving friends and family members.

parking. choose more accessible locations. and be better off overall as a result. This indicates that optimal pricing is about three times higher than current vehicle operating costs.005 $0.030 $0. depending on individual needs and preferences. In addition.020 $0.010 $0. telework. This analysis indicates that efficient pricing would approximately triple vehicle operating costs. The additional automobile travel that results from market distortions is economically inefficient: it is vehicle travel that consumers would forego if they had better travel options and more efficient prices. as indicated in Table 9.040 $0. and more housing options in accessible locations).014 $0.010 $0. cycling. accidents and pollution damages) burden the economy.100 $0. ridesharing.005 $0. The additional external costs that result from this travel (congestion. Transportation market reforms that correct these distortions tend to support economic development. reducing productivity. 34 . cost based pricing. mainly due to direct parking fees and distance-based insurance and registration fees. Vehicle travel reductions would probably average 30-50%. estimates these reforms’ travel impacts. public transit. and support other mobility management programs. investigates transport market distortions and reforms.010 $0. economic neutrality). consumers would drive less.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute The study.120 $0. This analysis indicates that in a more optimal market U. delivery services.415 Cost Category Vehicle congestion – delays a vehicle imposes on other vehicles Nonmotorized delays – delays a vehicle imposes on walkers and cyclists Roadway facilities – costs of building and maintaining roads Registration & licensing – existing fees made distance-based Roadway land value – rent paid for road rights-of-way land Traffic services – costs of services such as policing and emergency response Land use impact costs – external costs of sprawl Accidents – cost of traffic accident damages Air pollution – costs of vehicle air pollution Noise pollution – costs of vehicle air pollution Water pollution – costs of vehicle air pollution Parking facilities – costs of parking facilities used by a vehicle Fuel externalities – economic costs of importing and using vehicle fuel General Taxes – average sales taxes. carsharing. insurance and fuel charges averaged per vehicle-mile. It defines efficient market principles (consumer sovereignty. which applied multi-modal analysis and least-cost principles (so alternative modes and mobility management strategies are implemented whenever cost effective).040 $0.S. facility costs. would tend to improve accessibility options (walking.005 $0. Table 9 Optimal Pricing Summary – Middle-Range Values (Litman 2007b) Per Vehicle-Mile $0. if applied to vehicle fuel Total This table summarizes efficient road. and investigates resulting economic impacts. more neutral planning. use alternative modes more. Socially Optimal Transport Prices and Markets (Litman 2007b) investigates the amount of vehicle travel that is economically optimal.006 $0.

many transport market and planning reforms that economics support are classified as mobility management strategies by transportation professionals. Table 10 lists various mobility management strategies. These strategies cause various types of travel changes including shifts in mode (from driving to walking.000 annual fee becomes 8¢ per vehicle-mile. Table 11 Road user fees Congestion pricing Parking pricing Distance-based fees Energy and emission fees Comprehensive planning Neutral funding and pricing Efficient Transportation Reforms (Litman 2009) Description Fuel taxes and road tolls that finance roadway construction and operating costs. Table 10 Mobility Management Strategies (VTPI 2008) Incentives Congestion pricing Distance-based insurance and registration fees Commuter financial incentives Parking pricing (including cash out and unbundling) Parking regulations Fuel tax increases Transit encouragement Land Use Management Smart growth policies Transit oriented development Location-efficient development Parking management Carfree planning Traffic calming Streetscaping Implementation Programs Commute trip reduction programs School and campus transport management Freight transport management Tourist transport management Transport planning reforms Improves Transport Options Transit improvements Walking & cycling improvements Rideshare programs HOV priority Flextime Carsharing Telework Taxi service improvements Guaranteed ride home This table lists various mobility management strategies. Parking fees that finance parking facilities. VTPI 2008). Many of these strategies tend to increase economic efficiency. ridesharing. Some increase land use accessibility (such as locating services closer to residential areas). Lease-cost funding so alternative modes and mobility management strategies are implemented whenever they are most cost-effective overall. Transport planning that considers all options and impacts. Vehicle insurance and registration fees are prorated by mileage. public transit. Road tolls that increase during peak periods to reduce traffic to optimal volumes. time (from peak to off-peak). Strategy This table indicates transport policy reforms that tend to increase economic efficiency.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Mobility Management Economic Impacts Mobility Management (also called Transportation Demand Management or TDM) refers to policies and programs that change travel behavior to increase transport system efficiency (Concas and Winters 2007. etc. Also parking cash out and unbundled. Described differently. Special fuel taxes and vehicle fees based on external energy and pollution costs. so a $500 annual fee becomes 4¢ per vehicle-mile and a $1. as indicated in Table 11. 35 .). destination (closer rather than more distant services). Many include subcategories. cycling. and frequency (consolidating trips and substituting telework for physical travel).

Generally achieves equity objectives Generally achieves equity objectives. Sometimes considered more equitable than pricing. Generally positive. Positive. Positive if raised gradually and predictably. Benefits some consumers but disadvantages others. Generally positive. Mixed.) Location-efficient development. Mixed. Mixed. Generally negative. Table 12 Strategy Congestion pricing Cost-recovery road tolls Distance-based registration fees Cost-recovery parking fees Fuel tax increases TDM marketing (information and encouragement campaigns) No-drive days Impacts of Mobility Management Strategies Efficiency Positive. Consumer (Users) Mixed. Generally very positive as a user option. Reflects efficient pricing. Generally positive. Positive. Generally positive. More flexible zoning (more density. Generally cost effective and beneficial. etc. Positive. Increases motorists’ costs but reduces congestion. provided it meets consumer demands. Generally positive. Generally very positive. Positive. Is cost effective on major urban corridors. Restricts development but increases public service efficiency. Is cost effective on major urban corridors. Mixed. Generally positive. Increases motorists’ costs but provides revenues. Benefits some people but burdens others. Positive. housing types. as indicated in Table 12. Provides basic mobility. Benefits some consumers but disadvantages others. Gives motorists a new way to save money. Generally positive. Equity Mixed. provided it meets consumer demands. Reflects efficient pricing. mix. Generally negative. 36 . Increases motorists’ costs but provides revenues. Improvements justified to meet growing demand. consumer and equity impacts of various mobility management strategies. Generally positive. Generally cost effective and beneficial. Positive. Mixed. Increases motorist costs but provides revenues. since improved user information tends to increase efficiency. Mixed. Urban growth boundaries. Incentives to Choose Efficient Modes Mixed. Generally very positive as a user option. Positive if taxes internalize costs. although overly aggressive campaigns can be annoying. but most strategies reflect market principles and provide equity and consumer benefits. This table summarizes efficiency. Improved Options Transit improvements Walking and cycling improvements Rideshare programs Telework and flextime Carsharing Land use Policies Mixed. Generally positive. More equitable than most other funding. Mixed. Charges users for the costs they impose. Reflects efficient pricing. Generally reflects market principles and reduces public service costs. Provides basic mobility.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Critics sometime claim that mobility management consists of arbitrary and inefficient restrictions on vehicle travel. Mixed. Positive. Generally positive. Generally reflects market principles and increases efficiency. Charges users for the costs they impose. Mixed. Reflects efficient pricing. Benefits some consumers but disadvantages others.

and reduce total vehicle travel. Those strategies tend to increase total vehicle travel and so can exacerbate problems such as congestion. High wholesale fuel prices are economically harmful. road and parking pricing tend to be more effective at reducing traffic congestion if implemented with improvements in alternative modes so travelers can more easily reduce their peak-period vehicle trips. accident reductions. road and parking facility cost savings. Mobility management tends to be most effective if implemented as an integrated program. improved mobility options for non-drivers. Table 13 Comparing Strategies (Litman 2005) Planning Objective Motor Vehicle Travel Impacts Roadway Expansion Fuel Efficient Vehicles Increased Mobility Management Reduced Congestion reduction Road and parking cost savings Consumer cost savings Reduced traffic accidents Improved mobility options Energy conservation Pollution reduction Physical fitness & health Land use objectives Because Win-Win Solutions improve travel options. but implemented together they reduce automobile travel 15% by giving travelers better options and incentives to use alternative modes when possible. For example. per capita GDP tends to increase with fuel prices. but this is not necessarily true. accidents and sprawl. but high fuel taxes tend to be economically beneficial by encouraging fuel efficiency which reduces petroleum import costs and retains more wealth within the regional economy (Clarke and Prentice 2009). As illustrated in Figure 16.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Mobility management strategies tend to provide a variety of economic benefits. encourage use of alternative modes. emission reductions and more accessible land use development. energy conservation. including support for alternative transport 37 . Conventional analysis tends to overlook many of these benefits and so tends to undervalue mobility management relative to strategies such as highway widening to reduce congestion and shifts to more efficient vehicles to conserve energy and reduce pollution emissions. public transit improvements alone might reduce VMT by 5%. particularly in regions that import oil because wealth leaves the economy. particularly in oil consuming countries. although Norway produces petroleum it maintains high fuel prices and has other strategies to encourage energy conservation. For example. Increasing vehicle fuel efficiency and roadway expansion provide fewer benefits. Even among oil producers. including congestion reductions. consumer savings. Critics sometimes argue that increasing fuel prices is economically harmful because it increases business costs. high fuel taxes tend to increase productivity. For example. and parking cash out alone may reduce automobile travel 5%. they support many planning objectives. Market reforms both support and are supported by investments in alternative modes.

Venezuela and Saudi Arabia. a competitive and expanding economy. Norway has one of the world’s highest incomes.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute modes. which reduces domestic consumption. As a result. 18 June 2009) Norway has accumulated huge wealth and a positive trade balance by maintaining high fuel taxes. a positive trade balance. Figure 19 Trade Statistics (Economist Magazine. minimize fuel prices and so are less economically successful because their policies encourage inefficiency and so reduce national income. Other oil producers. such as Russia. 38 . and the world’s largest legacy fund. leaving more oil to export. as indicated in Figure 19.

Table 14 is an example of input-output table results. and so will exaggerate future job creation by industries such as petroleum and automobile production. These models often assume the economy has excess capacity so public projects do not compete with other industries. such models often include some inaccurate or outdated assumptions. 2010).87) and education (27. on average. Lindall and Olson 2005. Without government projects contractors might accept lower-profit but productive projects. which is better than some industries but less than labor-intensive services such as nursing care (36.000 jobs in 2007 (FHWA 2008). though recent analyses by Heintz.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Evaluating Specific Economic Development Impacts This section discusses ways specific transportation policy decisions affect economic development. education and public transit operation are better investments. more labor-intensive industries such as medical services. showing various industries’ direct regional economic impacts ranked from highest to lowest direct employment generation. If economic stimulation is the only objective. Federal Highway Administration estimates that. Seneca. creating approximately 16 state jobs per million dollars spent. Transportation Program Expenditures Transportation policies and planning decisions affect employment and business activity generated by project and program expenditures.S. These impacts can be quantified using Input-Output Tables (REMI 2005.13). For example. Overall. Care is needed when interpreting this information since the data are aggregated and averaged and do not necessarily reflect a specific program or project. each $1 billion of Federal highway spending supported 30. In addition. As a result. Input-output tables are generally static and backward looking in terms for factors such as domestic inputs and productivity. et al. in this case for Washington State. Transport facility investments are only justified if they support other strategic objectives. regional or national). Pollin and Garrett-Peltier (2009) and EDRG (2009) suggest that actual impacts are somewhat lower. For example. which are increasingly automated and dependent on imported imports (such as domestic vehicles assembled with imported engines and electric systems. which is often untrue. the number of regional and national jobs created per million dollars of fuel expenditures is probably far lower than this model indicates. construction expenditures rank about average. BEA 2008. Actual economic impacts can vary significantly depending on the type of project and the geographic scale of analysis (local. such as the jobs and contractor profits from road project and public transit services. arts and recreation (30. Some tend to create more jobs or higher incomes than others. the IMPLAN Model apparently assumes that all service station jobs result from fuel sales. although most sell other goods and fuel is a relatively unprofitable product (Chmelynski 2008). Because input-output modeling is costly to perform it is common to extrapolate available data to a particular situation. 39 . the U.43). which are computer models that track how dollars flow through a regional or national economy. that without government expenditures labor and equipment would be unused. This number has been widely applied.

13 24.78 1.16 1. Hunting.65 0.35 Total Labor Income Per $ Final Demand 0.43 33.57 21.07 2.20 2.30 0.99 1.69 1.90 18.50 9.23 2.461 1.69 0.101 3.73 0.811 6.37 18.28 14.66 0.80 0. Rental and Leasing Other Finance and Insurance Other Manufacturing Food.77 0.341 2.60 7.10 0.814 5.43 14.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Table 14 Washington State Input-Output Multipliers (OFM 2008) Industry Total Jobs Per $million Final Demand 37.12 30.012 2.96 22.51 0.555 Total Output Per $ Final Demand 2.04 22.82 1.21 2.48 0.38 19.05 1.07 0.782 1.26 0.96 5.108 2.88 22.98 0.32 0.94 1.73 1.16 2.682 4.78 14.006 3.89 2.193 5.54 10.84 5.053 2.451 1. and Trapping Textiles and Apparel Forestry and Logging Construction Fabricated Metals Other Information Wood Product Manufacturing Real Estate.95 0.24 2.83 1.95 15.005 2.80 1.085 1.17 2.90 1.04 1.76 12.845 2.20 2.60 0.24 2.50 0.80 1.70 2. Beverage and Tobacco Machinery Manufacturing Wholesale Nonmetallic Mineral Products Primary Metals Credit Intermediation Computer and Electronics Other Utilities Internet Service Providers Telecommunications Water Transportation Paper Manufacturing Electrical Equipment Other Transportation Air Transportation Chemical Manufacturing Electric Utilities Aircraft and Parts Gas Utilities Petroleum and Coal Products This table indicates various industries’ regional economic impacts.82 1. 40 .76 10.54 0.19 36.74 21.221 2.30 2. Construction rates average.30 15.43 0.00 1.71 1.37 0.165 2.052 1.033 1.11 32.99 0.99 21.229 2.64 0.53 17.88 1.408 4.65 14.26 2.99 17.86 13.34 11.26 2.34 12.44 0.234 2.735 2.75 0.320 2.02 2.71 0.17 1.382 9.061 2.001 2.64 0.71 10.623 2.97 1.86 1.50 0.23 Total Employment Per Direct Job 1.48 0.57 0.534 1.49 20.93 9.97 19.81 2.57 0.78 0.762 2.58 0.887 4.38 1.10 1.52 0.41 2.56 12.62 0.61 0.93 1.01 2.48 1.031 2.45 0.22 17.782 2.13 2.344 2.95 0.555 2.15 Animal Production Nursing and Residential Care Administrative Support Food and Drinking Services Arts and Recreation Educational Services Legal /Accounting services Other Transport/Postal Offices Architectural and Engineering Ambulatory Health Care Crop Production Waste Management Retail Truck Transportation Transport/Warehousing/Storage Hospitals Ship and Boat Building Mining Furniture Printing Fishing.773 1.83 0.05 10.995 2.479 1.359 3.47 0.428 2.17 2.11 2.92 21.18 13.61 0.64 1.96 14.01 14.436 3.06 0.727 2.37 23.68 0.87 27.57 3.82 1.63 5.60 10.05 2.79 1.67 0.298 2.550 1.42 11.51 0.89 2.593 1.85 2.68 0.918 2.51 0.765 2.72 1.034 4.

784 19.000 jobs. Public transit investments tend to create relatively large numbers of jobs (GJF 2006. Pollin and Garrett‐Peltier 2009.5 $548. These are upper-bound estimates because they assume resources would otherwise be unused. create more jobs per dollar (little money is required for land acquisition or expensive equipment).090.363 15.973 27. 41 .4% 96. and 17% more than average for federal spending overall (EDRG 2009).9% 97.763 18.784 14.790 9.829 13.154.8% 96. nearly 19% higher than new roadway projects (STPP 2004).8 Construction Oriented Employment Income Construction Oriented Employment Person-Years Supporting Industries Employment Income Supporting Industries Employment Person-years Induced Employment Income Induced Employment Person-years Total Employment Income Total Person-years This table indicates total estimated economic impacts from a million dollar highway expenditure. actual impacts are generally smaller. Transportation maintenance and repair projects are generally faster to implement (minimal delay for planning or land assembly).2 2007 $394. or 36.8% 96. These have declined during the last decade due to improved labor productivity and increased imports of inputs such as fuel.125 37. Table 16 Employment Impacts Per Billion Dollar Infrastructure Expenditure (Heintz.000 jobs. about 9% higher than road maintenance.638 14.6 $222.894 17.416 14.1 and 3.061.3% 96.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Table 15 indicates the national economic impacts of highway expenditure.932 17.7 $1.842 10.182. employ more local workers (fewer tasks require specialized labor). Tables 3.7) Category Energy Transportation Average Roads and Bridges New Construction Repair Work Rail Mass Transit Aviation Inland Waterways / Levees School Buildings Water Direct and Indirect 11. Table 15 Million Dollar Highway Expenditure Impacts (FHWA 2008) 1997 $589.930 18.752 4.5 $545.3 $492. Table 16 summarizes employment generation of various infrastructure investments.747 22.002 17.399 14.814 9.705 13.108 averaged overall.0 $192.169.357.262 19.342 Plus Induced 16.472 20.714 12.9 2005 $428. and spent on transit capital projects about 24.769 Domestic Content 89.7% 96.751 29. and are more geographically distributed than large highway capacity expansion projects (Troth 2009). A billion dollars spent on transit operation typically creates about 41.399 17.9% 96.5 $175. aggregate and steel.9% This table indicates the employment effects of various infrastructure investments.9% 96.698 14 $1.9% 96.577 5. SGA 2010).317 14.029 14.068 4. Transit vehicle purchases tend to have smaller economic impacts because they are mostly imported but this could change if domestic transit vehicle production improves.849 19.266 23.7% 96.0 $1.

105 $13.192 20.5% of budgets) in transit-oriented community.285 $5. air) Total transportation Transportation portion of total Households spend approximately $10. Table 17 2007 Transportation Expenditures By Income (BLS 2008) Overall $49. Average U.658 $506 $14.014 $442 $2.471 $1.592 $10.210 $73 $1. Some generate more regional jobs and business activity per capita than others. Figure 20 Percent Transport Expenditures (Litman 2004a) Portion of Total Household Expenditures Devoted to Transport 25% 20% Transit Orien ted Cities Automob ile-Oriented Cities 15% 10% 5% R2 = 0 . and more including indirect costs such as residential parking and taxes spent on roads.470 24. and therefore household expenditures on vehicles.162 $164 $1.200 Per-Capita Annual Tra nsit Passenge r-Miles The portion of total household budgets devoted to transport (automobiles and transit) tends to decline with transit ridership and is lower on average in transit oriented cities.447 $2.1% Transport Expenditures Average annual expenditures Vehicle purchase and rentals Vehicle finance charges Gasoline and motor oil Maintenance and repairs Vehicle insurance Other vehicle expenses Total vehicle expenses Public transport (transit.350 22.071 $2. providing about $500 in annual savings per resident (Figure 20). 42 .150 $2. so do consumer expenditures.S.418 $693 $1.9% First $20.000 1.752 $7.768 $499 $882 $1.020 $1.046 $271 $471 $950 $4.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Consumer Expenditures Just as transportation program expenditures have economic impacts.5% Second $31.258 2 0% 0 200 400 600 800 1. fuel and public transportation services. compared with $2.594 $4.808 (12.812 $538 $11. rail.596 $19.544 $10.000 on average in total vehicle expenditures. which can have significant economic impacts.021 $171 $4.722 $305 $2. $2.332 (16% of total budgets) annually per capita on transport.220 $2.108 $362 $10.164 24.988 $920 $1.406 $20.426 21.936 $297 $2.0% Third $42.384 $738 $1.7% Fifth $96. Transportation policy and planning decisions affect how and how much people travel. households devote 14-19% of their budgets to transport (Table 17).280 $550 $3.479 24.7% Fourth $57.237 $242 $7.762 $7. This portion tends to increase with automobile use. For example. residents of automobileoriented cities spend an average of $3.304 $1.696 $1.189 $3.638 $3.000 of that for fuel.

500 annually in multi-modal. As a result.139.440 $1.5 jobs to the U. Table 18 summarizes IMPLAN input-output model analysis (Lindall and Olson 2005). Investments in alternative modes and smart growth policies reduced Portland.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute International studies show similar results (Newman and Kenworthy 1999. Household Annual $262 $503 $60 $1.438 $600. distribution and marketing.362 $1.533 $627. These impacts are likely to increase in the future as oil prices rise (Litman 2009b). These studies reflect regional-scale analysis and so understate differences at smaller geographic scales. Oregon per capita vehicle travel about 20% compared with cities that expanded highways. purchasing fuel generates fewer local jobs and less economic activity than most goods.3 31. Table 19 Gasoline Cost Components (EIA 2008) Percent 13% 25% 3% 59% 100% Avg.088. Impacts are usually much greater when analyzed at a local or regional level.000 annual savings per capita. Table 18 Economic Impacts per $1 Million Expenditures (Chmelynski 2008) Value Added 2006 Dollars Expense category Auto fuel Other vehicle expenses Household bundles Including auto expenses Redistributed auto expenses Public transit Employment FTEs* Compensation 2006 Dollars $1. As a result.500 annually on transportation compared with less than $5.188 $2.465 $1.823 12.8). One million dollars of fuel expenditures shifted to a typical bundle of consumer goods adds 4. and each million shifted from general motor vehicle expenditures adds about 3. and each million shifted from general vehicle expenditures (vehicles. and refining tend to leave the region but stay in the national economy.S. economy (17.591. Crude oil is largely imported.3-12.5 jobs to the U.8 13. pp.) adds about 3.292. such as between automobile-oriented and transit-oriented neighborhoods.993 (* FTE = Full-Time Equivalent employees) A million dollars shifted from fuel expenditures to a typical consumer bundle of goods adds 4. McCann (2000) found that households in automobile-dependent communities spend more than $8.S. smart growth communities.013 Location All domestic Mostly domestic Mostly domestic Mostly imported Component Taxes Distribution and marketing Refining Crude oil Totals Most of the money spent on vehicle fuel leaves the regional and national economies.278. 43 .3 $516. Expenditures on public transit create a particularly large number of jobs. These savings tend to provide significant economic development benefits (Goldstein 2007). Dollars spent on taxes. providing more than $1. Modern gas stations are very efficient so only a small portion of fuel expenditures stay in local economies as wages and rents. insurance. 111-117).082 $625.7 17.815. etc.3-13.7). economy.845 $1. fuel expenditure provide little regional employment or business activity.110 $1.6 jobs (17. Table 19 breaks down fuel prices into its components.6 jobs. providing consumer and business savings (Cortright 2007).0 17. servicing.

2 Expenditure Category Automobile Expenditures Non-automotive Consumer Expenditures Transit Expenditures This table shows economic impacts of consumer expenditures in Texas. A US Department of Energy study estimated that dependence on imported petroleum cost the U.4 17. provide comparable indirect economic benefits. per capita fuel consumption would save consumers $300-500 billion annual dollars. and generate 3 to 5 million domestic jobs (Litman 2009b).” Litman 2008a).000 $1. current planning decisions can support future economic development by reducing automobile dependency and increasing fuel efficiency.000 $526. and much more at the regional level. Table 20 $1 Million Economic Impacts in Texas (Miller. a total of $332 billion.9 million (5¢ per mile shifted).000 Regional Jobs 8.200. when oil averaged $35-$45/bbl.S. overall. imported $253 billion in petroleum products and a vehicle trade deficit (vehicle imports minus exports) of $79 billion.0 62. This indicates that policies that reduce vehicle and fuel consumption tend can provide significant economic development benefits. trade deficit can be attributed to petroleum and vehicle imports: in 2009 the U.60 per barrel (Leiby 2007). Even large economic development benefits are likely to result from fuel conservation strategies in countries that rely even more on imported oil.S. transit use.S. 87% of the $381 billion total trade deficit. and excessive dependence on imported oil makes a region vulnerability to price shocks (sudden price increases) and supply disruptions. Excessive vehicle travel is economically harmful (ASTRA 2000. These impacts are particularly high in regions that import large amounts of petroleum and are likely to increase in the future as international oil prices rise.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Table 20 shows the regional economic activity and employment generated by expenditures on automobile use. Robison and Lahr 1999) Regional Income $307. As a result. The majority of the U. Petroleum and vehicle imports transfer wealth from consumers to producers. Another study estimates the external costs of imported oil (described as “a measure of the quantifiable per-barrel economic costs that the U. Although exact impacts are uncertain and impossible to predict with precision. 44 . The last three major oil price shocks were followed by recessions. economy $150-$250 billion in 2005.S. resulting in 226 additional regional jobs. Including even a small portion of military expenses significantly increases these cost estimates. transport policies and investments that halve U.” excluding military intervention costs) to be $13. Each 1% of regional travel shifted from automobile to public transit increases regional income about $2. “Resource Externalities. could avoid by a small-to-moderate reduction in oil imports. and general consumer expenditures in Texas. For example.S. between 2010 and 2020 a million dollars shifted from fuel to general consumer expenditures is likely to generate at least six jobs and after 2020 at least eight jobs in the U.S. so these costs probably increased significantly since (Greene and Ahmad 2005).

rate of return. Economic Development Research Group). and compare the cost-effectiveness of different approaches (such as highway expansion. Various methods can be used to calculate the economic value of such investments. parking facilities.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Transportation Project Cost Efficiency Transportation infrastructure (paths.” VTPI 2008). including life-cycle costs and benefits. These typically compare construction costs and any future operating subsidies with benefits such as travel time savings. routes. the U. if transport policy favors highway investments over alternative modes or mobility management (perhaps because some benefits of multi-modal transport system are overlooked or dedicated highway funding). Transport Analysis Guidance (DfT 2006) provides guidance on: • • • Modeling travel demand by various modes. such as MicroBenCost are used to evaluate the net economic value of specific transportation projects and programs (CalTrans 2006. roads. For example. For example. The option with the greatest net benefits or benefit/cost ratio is considered most economically productive and therefore contributes most to economic development. a few million dollars spent on a highway improvement can leverage tens of millions of dollars on downstream roadway expenditures. etc.K. Comprehensive analysis of transport costs and benefits under various conditions. Predicting the effects of public transit system changes on road traffic congestion. evaluate different project options (different sizes. ports. and designs). They are unsuited to comparing investments in alternative modes or mobility management strategies because they overlook significant economic impacts such as vehicle ownership costs. and road pricing options for reducing traffic congestion on a particular roadway). railroads. public transit service improvements. Such models can indicate whether a particular project is cost effective (benefits exceed costs). More comprehensive analysis can provide more accurate information about economic productivity (Litman 2008a). Project evaluation models. Better evaluation tools are available (“Model Improvements. which stimulates billions of additional consumer expenditures on vehicles and fuel over the projects’ lifetime. fuel cost savings and crash reductions. most of these models were originally developed to evaluate various highway improvement options. parking costs. and so assume that factors such as vehicle ownership and total VMT are constant for each option. Even small biases in transportation project evaluation can have large long-term economic effects. 45 . and payback period (Litman 2001. Cambridge Systematics 2009). net present value.) are among the most valuable assets and most costly investments in most jurisdictions. However. and the additional accidents and emissions caused by highway expansion that would be avoided by alternative options. benefit/cost ratio. costs that could have been shifted had more comprehensive analysis or more flexible funding been applied during the planning process. which leverages hundreds of millions of dollars of development.

support economic development by reducing transportation costs. basic roadway improvements. it may be efficient to invest in alternative modes (walking and cycling facilities. an efficient transportation system reflects the following features: • Well designed and maintained transportation facilities. • • • Transportation improvements are generally incremental: a particular project is being considered to address a particular problem. 46 . parking. insurance and fuel. In general. and an efficient network of railroads. and stimulate additional automobile use and sprawl which reduces transportation system efficiency. excess capacity is costly to maintain and can dissipate demand so no facility operates efficiently. overall transportation system efficiency (the ratio of benefits to costs) tends to increase if the system reflects market principles. which typically includes walking. cycling. including special traffic lanes and parking facilities for freight vehicles and High Occupancy Vehicles (HOVs) where sufficient demand exists. Expanding existing roadways to reduce traffic congestion is not optimal if a combination of improvements to alternative modes. public transit service improvements) even if some individual projects would not be cost effective if evaluated alone. A multi-modal transportation transport system which offers travelers a diverse range of options. ports and airports. taxi services. These facilities should be efficiently sized. more efficient pricing. cycling. so it is important that individual decisions support strategic planning objectives. automobile and truck travel and public transit. and delivery services. in general. a network of walking and cycling facilities. or other incentives to reduce peak-period vehicle travel can reduce congestion at a lower total cost. provided that increased development in that area that is served is desirable. However. efficient pricing and neutral public policies. public transit. For example. Pricing and policies that favors higher value trips over lower-value trips. However. including cost-based pricing of roads. Although the combination of options that are optimal vary from one area to another depending on demographic and geographic factors. if improving transportation system diversity is a strategic objective. In general. or an expanded roadway to reduce traffic congestion. which include consumer options. Not every community needs a major port or airport. This includes a network of roadways that accommodate walking. such as a new or significantly improved roadway to improve access to a particular area. Efficient pricing. roadway expansion can have undesirable economic impacts: it can create barriers to walking and cycling. automobile. the more options available the easier it is for users to choose the most efficient options for each trip.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Transport System Efficiency As described earlier. such as paving a gravel road or increasing the load capacity of a bridge. and more efficient modes (such as those that require less road space per passenger-mile under congested conditions) over less efficient modes. individual projects can have many indirect and long-term impacts.

cycling. and external costs such as congestion. increased sprawl and associated costs. vanpools and carpools) given priority under congested conditions? Are policies reviewed to minimize unintended biases favoring inefficient modes? What portion of vehicle travel would decline if transportation planning were more comprehensive and neutral. accident and pollution risk imposed on others. Transport system efficiency can be evaluated by considering the degree to which existing policies and planning practices reflect efficiency principles: • Are all transportation options for which there is suitable demand being provided. What portion of total transportation costs. and business travel) given priority over lower value trips? Are space efficient modes (buses. public transit. expanding highways can have negative overall economic impacts because incremental costs resulting from in induced travel (downstream congestion.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute To the degree that peak-period automobile travel is underpriced (and in most cases it is to a significant degree). Are trips with high economic values (freight and service delivery vehicles. road and parking facility costs. accident damages. taxi. For example. parking facility costs. telework and delivery services. and transportation pricing were more efficient? • • • • • 47 . increased energy imports and pollution emissions) can exceed incremental congestion reduction benefits. is there adequate support for walking. including user costs such as insurance.

48 . “During the past two decades. but once a basic paved road system exists. pp. Regions that invest heavily in road capacity expansion fared little better in reducing traffic congestion than those that invested much less (STPP 1998). Weiss (1999) and Horst and Moore (2003) show that rural areas with good highway access experienced more employment growth. Kopp 2006). Other transportation improvements. CBP 2002. Peterson and Jessup (2007) conclude that “some transportation infrastructure investments have some effect on some economic indicators in some locations” but dismiss the idea that such investments are always worthwhile. Utt 2004.05 to -0. but alternative congestion reduction strategies tend to be more cost effective and efficient overall (Hodge. Litman 2007a). Since traffic congestion imposes economic costs. Weisbrod and Hart 2003. actual impacts vary widely.05% to 0. et al. et al (2002) found that new highways significantly affected land development patterns in the Twin Cities region during the 1970s. Undoubtedly. Building the first highway to a region tends to significantly increase local economic productivity.21.” Smith.21%. expanding it provides declining marginal benefit (SACTRA 1999. A significant portion of the perceived economic benefits of incremental highway improvements are economic transfers (some businesses and property owners gain at others’ expense) rather than net increases in productivity (SACTRA 1999). 42-25) provide a detailed review of literature on this subject. However. Chalermpong 2004). After analyzing Washington State highway investment economic impacts. such as public transit investments and mobility management strategies such as congestion pricing and HOV facilities often provide greater economic benefits (Boarnet and Haughwout 2000. the primary objective of highway spending has shifted from expanding the nation's capital stock to maintaining it. meaning that a 1% increase in transport infrastructure investment increases economic productivity 0. the improvement in costs and service from such investments and the concomitant reduction in plants’ inventories cannot compare with those produced by the construction of thousands of miles of new roads. poverty alleviation and industrial diversity than areas that lack such access. They conclude. Cambridge Systematics 1999). Bhatta and Drennan (2003) find elasticity of production costs as a function of transport infrastructure investment ranges from -0.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Roadway Improvements Transportation facility improvements can increase economic productivity and support economic development (TRB 2006). commercial or industrial development. ATA 2008). but these are largely economic transfers from one location to another without overall gain in economic activity (Baird 2005. (2010. Seneca. but once the basic system was completed adding roadway capacity provides less additional residential. Shirley and Winston (2004) found that infrastructure spending increased productivity but returns declined from more than 15% annually in the 1970s to less than 5% in the 1980s and 1990s. highway expansion (more traffic lanes) is sometime promoted to increase productivity (Hartgen and Fields 2006.

(2009) analyzed the relationship between U. and are now probably below the returns on private capital. particularly over the long run in highly congested places. 49 . In a study of 44 US metropolitan regions Nelson and Moody (2000) found that. per capita economic retail and service activity declined as the number of urban beltways increases.S. Their analysis suggests that further highway improvements provide small economic returns: a dollar spent to increase interstate highway capacity could increases private sector output just $0. metropolitan areas. as indicated in Figure 21. et al.15 in the long run (more than a decade). Some studies suggest that highway investments that stimulate sprawl are economically harmful.S. but the existence and direction of these effects depends on highway type and time lags considered. Figure 21 Annual Economic Returns 40% 35% 30% 25% 20% 15% 10% 5% 0% Annual Highway Rate of Return (Nadri and Mamuneas 1996) Highway Capital Private Capital 1950-59 1960-69 1970-79 1980-89 Highway investment economic returns were high during the 1950s and 60s when the U. The analysis suggests that in a large congested city such as Los Angeles a 10% increase in congestion would reduce subsequent long-run employment growth by 4%. controlling for other factors. Jiwattanakulpaisarn. this declined significantly by the 1990s and has probably continued to decline since the most cost effective projects have already been implemented. Interstate was first developed. Jiwattanakulpaisarn. with even smaller productivity gains from expansion of lower functional road categories. suggesting that highway expansion is generally a poor investment.S.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Although highways showed high economic returns during the 1950s and 60s. Noland and Graham (2009) found similar results. The study found that congestion reduces employment growth. The analysis found that employment growth is temporally influenced by annual growth in major highways within the same state and all other states. highway supply and employment using time-series cross-sectional data on roadway lane miles and private sector employment for the 48 contiguous states over the period 1984–1997. but have since declined. Hymel (2009) examined the impact of traffic congestion on employment growth in large U. They concluded that beltways deconcentrate people and businesses to levels that reduce for industrial agglomeration efficiencies.

• • • • This indicates that highway expansion tends to support economic development under certain circumstances: when economic development is constrained by inadequate access and highway improvements are cost effective or are subsidized by others. which can have a negative impact on the economy as it draws scarce resources away from maintenance and operation of existing stocks. Infrastructure investments should be carefully evaluated based on national benefits. or have to reduce such investment in favour of “complementary” capital to compensate for the lack of infrastructure Care should be taken not to get into a situation of oversupply of infrastructure. road improvements can lead to residents traveling elsewhere for shopping and services. the issue of impact is made more complex by the possibility that changes in quality of access can either benefit or harm the area in question. This implies the use of benefit-cost analysis. Travel demand management (including road pricing or improvements in alternative travel modes) should be considered as alternatives to capacity expansion. Additional infrastructure capacity may fail to increase productivity if existing infrastructure is ineffectively utilised. Avoid making infrastructure decisions based on political influence (i. may be most beneficial overall. through pork barrelling or lobbying and coalition agreements) as such decisions may lead to distortion in infrastructure provision.e. Recognise that the reliability of infrastructure is particularly important vis-à-vis its impact on international trade and production costs for small enterprises. For example. in particular. reducing business in that community. At the regional and local level. but these can be either positive or negative.” • • O’Fallon (2003) provides the following guidance for maximizing productivity gains from infrastructure investments: • Improve the efficient use of existing infrastructure through demand management and efficient pricing. 50 .” Transport investments may have broad economic impacts.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute An expert review of economic impact research (SACTRA 1999) concludes: • “The available evidence does not support arguments that new transport investment in general has a major impact on economic growth in a country with an already welldeveloped infrastructure. such as more efficient road pricing. We do not accept the results of macroeconomic studies which purport to identify very large returns from infrastructure investment. particularly in the longer term. Efficient management has the possibility of greatly affecting economic productivity. Poor quality or unreliable infrastructure service provision may mean that firms are reluctant to invest productive capital. Traffic reduction strategies can provide economic benefits by encouraging more efficient use of existing capacity. Some authors have suggested trade-offs should include those between different kinds of infrastructure investment. Alternative approaches.

improving commute options for people with disabilities and low incomes tends to accomplish this objective. suggesting that improving transport system diversity increases productivity and economic development overall (Sanchez.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Basic Mobility . and using alternative modes when possible. including better walking. For example. such as pricing parking will discourage customers. and the quality of local environments. retail businesses often argue that a particular transportation policy change. et al. Impacts depend on specific conditions. ridesharing. automobile ownership also has significant costs. the quality of travel conditions. and the older vehicles that lower-income commuters use tend to be unreliable. and so are vulnerable to traffic impacts such as noise and air pollution.S. such as special reverse commuter transit service (vans and buses from urban neighborhoods to suburban employment centers). These 51 . since only a minority of customers arrive by automobile. Lower-income workers often benefit most if they can minimize vehicle expenses by sharing vehicles and rides. When transportation costs increase. and unattractive road and parking facilities. In automobile-oriented areas. and alternative parking options are nearby. However. In general. These industries are sensitive to the ease and price of access. public transit services. unpriced parking are less successful than commercial centers with priced parking: it turns out that many consumers are willing to pay if they benefit from more convenient parking (a parking space is always available) and a more attractive local environment (Kolozsvari and Shoup 2003). Analysis by Sztabinski (2009) indicates that converting a parking lane into wider sidewalks or bicycle lanes can benefit urban retailers overall. improving walking and cycling conditions tends to improve the attractiveness of the street. providing employment. particularly if workers have difficulty accessing jobs. and vehicle purchase grants. cycling. Yi 2006).Employment Access Economic productivity may be constrained if people lack basic mobility. Increasing transportation system efficiency and affordability can leave consumers with more money to spend on retail goods and tourist services. but many retail centers with abundant. 2008). Transportation policies and programs that improve vulnerable workers’ access to jobs can therefore increase productivity. Shen and Peng 2004. Special “welfare to work” programs are sometimes intended to improve job access. business activity and tax revenues. cities. consumers tend to reduce their spending on restaurant meals and vacation travel (Ferdous. in addition to reducing transportation expenditures. and more affordable housing in job rich areas. High quality public transit can increase labor participation in U. automobile ownership increases unemployed people’s chance of obtaining a job and their average incomes (Blumenberg and Waller 2003). about half of the additional income provided by a car must be spent on vehicle expenses. Retail and Tourism Industries Retail and tourism are major industries.

There is now no economic reason for transport policy to encourage automobile ownership and use.” Such claims are generally outdated (the portion of the U. policies that improve transport options and discourage motor vehicle travel may reduce employment and profits in vehicle and fuel production industries. but it is now mature. since they would therefore have less money to spend on other goods and services which tend to generate more employment and productivity. Impacts on Specific Industries and Businesses Transportation policies and projects often affect the employment. jobs are in the automobile industry” or “Automobile production is a particularly important economic sector. although tourism requires transportation. excessive emphasis on motor vehicle access (for example. and communities in which they are located. can give an area a competitive advantage (Tourism Vermont 2007). and misguided since vehicle manufacturing tends to be overcapitalized and unprofitable compared with other industries. more efficient transport services. with average wages. Policies favoring motor vehicle travel may have been justified decades ago when the automobile industry was expanding. consumers are domestically produced. the U. but such impacts are generally economic transfers (one industry.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute examples illustrate how transportation planning can involve complex tradeoffs among different forms of accessibility and local environmental quality. Advocates of policies favoring automobile transportation sometimes make claims such as “Ten percent of all U.S. expanding highways. As discussed earlier. productivity and profits of specific industries and businesses. cycling and train travel. Advocates for the affected industries often lobby against such policies on grounds that jobs and economic activity will decline. Investments that respond to demand for particular types of travel. Although a region benefits from exporting vehicles and fuel. parking facilities and airports) can spoil the very attributes that attract tourists. or if more of the vehicles purchased by U.S. and therefore economic activity in areas where those industries are concentrated. established industries over newer. so the best strategic goal is generally to allow that sector to contract to a more efficient size and invest in more profitable industries. Rather. consumer expenditures on vehicles and fuel tend to provide relatively little domestic employment and productivity. transport policies encourage domestic consumers to purchase more vehicles and fuel. improving airport transit service may reduce taxi service demand. regardless of their size. Similarly. but there is no overall economic benefit if U.S. may benefit from exporting vehicles to other countries. Similarly. it may be most efficient to help such industries contract. There is generally no overall public policy justification to favor older. such as walking. For example. low profits and excess capacity.S. 52 . business or area benefits at others expense). For example.S. there is generally no economic benefit from policies that stimulate demand for vehicles and fuel by local consumers. economy devoted to automobile production and distribution has declined significantly during the last half-century).

roads and parking) are generally lower compared with employees driving their own automobiles and visitors using taxis. For example.00 $18. improving airport public transit service provides increases productivity: total transport costs (for vehicles. local shops will rely on imports. so low shipping costs leads to more imported vegetables and less local farm production. vegetables are cheaper to grow in California and Florida then in New York and Washington State. if shipping from California imposes $5 in external costs. If a transport policy or project harms certain businesses or industries the best response is often a compensation or transition program to facilitate needed change.00 $1. and cheaper. reducing transportation costs reduces local businesses’ shipping costs but also encourages local residents to shop at more central locations. the result is both economically excessive truck travel and underdevelopment of farming in northern states. underpriced transport often harms local industries.00 $20.00 $5. which over the long-run often reduces local shopping options (SACTRA 1999). reducing local productivity. but it does point out that policies that underprice transport often have negative as well as positive economic impacts.00 $15. If a case of lettuce costs $10 to produce and $5 to ship from California. In these ways. for example. Such impacts should be identified and evaluated in terms of overall economic efficiency. Transportation policies can also affect the competitiveness of local industries.00 $2.00 $5. For example. If travelers spend less money on taxis. Similarly. while local producers cost $15 to produce and $2 to ship. society is better off overall with the locally produced lettuce. However. but local shipping only imposes $1 in externalities. Underpricing freight transport. harming local industries. This is not to suggest that transport costs should be kept artificially high to favor local businesses.00 $17. Table 22 Production costs Transport costs Price External costs Total costs Imported Versus Locally Produced Cost Example Imported $10. The table below illustrates an example of how underpricing transportation disadvantages local producers and is economically inefficient overall. Low transportation costs make locally produced goods less competitive compared with imports. 53 . more convenient local travel may make a city a more attractive destination (which is why many resorts offer special airport transportation services). some of the savings are likely to be spent on other local goods and services.00 Underpriced transport encourages imported good consumption.00 Locally Produced $15. it may be appropriate to help a business or region that currently depends on automobile production to diversify into other products and industries.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Similarly. if trucks pay less than their share of roadway costs or impose significant uncompensated accident and pollution costs.

including businesses. indicating efficiency benefits from accessibility. multi-modalism and agglomeration. Sohn and Moudon (2008) found that the value of recent office developments in the Seattle. In a comparison of European cities Prud’homme and Lee (1998) concludes that urban areas with better public transit and less sprawl are more economically productive overall due to improved employment access. doubling employment density (jobs per square mile) increases patent intensity (patents per capita) about 20%. rather than a single large central business district and central city). 2002). 2007.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Land Use Economic Productivity Impacts Transportation policy and planning decisions can affect land use development patterns in ways that affect productivity (Litman 1995. Graham. et al. Chatterjee and Hunt (2006) found that. public transit. frees up land for other productive uses. improved accessibility. including roads. More accessible (compact. etc. reduced transportation costs. et al. More compact. all else equal. including reductions in the amount of land required for transport facilities such as roads and parking. land values and tax revenues due to the combined effects of reduced land consumption. reduced transportation costs. cities and towns within a metropolitan region. Webber and Athey 2007. This suggests that suburbanization is not economically harmful if new cities and towns reflect smart growth principles. More compact land use development tends to reduce unit costs of providing public services. mixed. and more efficient provision of public services. land values and tax revenues due to the combined effects of improved accessibility. 2002). and schooling (particularly if it reduces school busing costs). Meijers and Burger (2009) found that metropolitan region labor productivity declines with population dispersion (a higher proportion of residents live outside urban centres). such as if transit-oriented communities are developed around regional rail transit systems. up to about 2. It typically provides 20-40% savings per capita compared with providing the same service levels with sprawled development (Burchell.200 jobs per square mile. economic productivity. Carlino. Melo. mixed. The box on the following page describes how this can increase regional economic productivity. utilities. agglomeration efficiencies. farmlands. connected land use patterns tend to increase employment. but automobileoriented sprawl does reduce productivity. Washington region tended to increase with development intensity at central regional locations. More compact development. et al. and reduced land consumption (IEDC 2006). creasing efficient polycentric development patterns. connected. Burchell. and recreation. housing. agglomeration efficiencies (increased productivity as more activities are located close together). emergency services. Agglomeration efficiencies can significantly increase economic productivity (Graham 2007. economic productivity. and more efficient provision of public services (IEDC 2006). and Noland 2009).) land use patterns tend to increase employment. One published study found that doubling county-level density index is associated with a 6% increase in state-level productivity (Haughwout 2000. also see discussion in Muro and Puentes 2004). Bettencourt. and generally increases with polycentric development (multiple business districts. 54 .

Increasing per capita land consumption will not reduce agricultural production if it uses land unsuited for farming. This example illustrates how transportation policies can significantly affect per capita land consumption. parks and industrial facilities) and the quality of land displaced. per space) Roads (15 foot right-of-way width per lane)7 Impervious surface per capita (sq. ft. which leaves more land for farming. ft) Total impervious surface (sq.200 sq. Automobile dependency increases land consumption for buildings. The Netherlands encourages compact development. the actual impacts depend on many factors. interior space per capita) Parking (300 sq. and eastern Riverside and San Bernardino counties) are similar in area (~ 16 thousand square miles) and population (~16 million residents). miles Multi-Modal (Three stories) 400 (2 spaces) 600 (30 lane-feet) 450 1. Several factors account for this differences.fhwa. miles) Portion of 16 thousand sq.582 16% Multi-modal transportation reduces per capita land consumption for housing.500 4. Both have significant agricultural potential. Orange. In the multi-modal community residents consume about 5% of the land base for buildings.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Transportation Policy Impacts On Farm Productivity This example describes how transport land use impacts can affect agricultural productivity. with minimal land consumed for housing. leaving about 11% more land available for productive uses such as agricultural. accounting for less than a billion dollars in direct economic productivity. surface parking and roads. but a major factor is land use policy. The Netherlands and Southern California (Los Angeles. Typical Land Consumption Per Capita (Square Feet) Housing (1.dot. parking and roads.500 2. Ventura. This indicates that transportation policies that encourage more compact development and reduce the amount of land required for roads and parking facilities can increase the productivity of farming or other land-intensive industries. water supply (Los Angeles has less) and economic policy (agricultural is well supported by the Dutch government). 7 Federal Highway Statistics. In can increase the amount of land available for agricultural or other productive uses. The Netherlands produces more than $40 billion annually in agricultural products. The following table compares the amount of land required for 16 million residents with multi-modal and automobile-oriented transport systems.cfm) provides data on road miles in various cities. which in turn is affected by transport policy. parking and roads. ft. including topography (much of Southern California is hilly).450 832 5% Auto-Oriented (One-story) 1. including other land uses (such as residential lawns.gov/policyinformation/statistics/2008/hm71. which can have significant economic impacts. compared with 16% in automobile-oriented areas. Farming was once major industry in Southern California but it is now minor.200 (6 spaces) 1. suggesting that per capita lane-miles range from about 30 in multi-modal communities up to about 100 in 55 . Table 71 (www. Of course. parking and roads.800 (100 lane-feet) 1. but urban development often occurs on agricultural lands (valleys and deltas) and so reduces agricultural production.

Property Values and Development Transportation policy and planning decisions can affect property values. but this is often existing infrastructure in urban areas. Accessibility-based performance indicators which measure impacts per capita (per capita transport expenditures. A number of studies indicate growing demand for transit oriented development (Nelson. Commonly-used. a new highway or rail line that improves access to a particular area can stimulate more regional economic activity. a billion dollars invested in a new rail line can stimulate ten billion dollars in nearby property development. More compact. pedestrian and cycling improvements. and traffic calming tend to increase local property values by improving local accessibility and reducing motor vehicle traffic impacts (Cortright 2009). 56 . hours of congestion delay. Similarly. more pedestrians. 2009. an ample labor force. All else being equal. Where conditions are suitable. average travel speeds. and does not recognize the benefits from reduced travel distances. et al. Smith and Gihring (2006) summarize research concerning the effects that high quality public transportation and transit oriented development have on nearby property values and property tax revenues. mixed. taxi and delivery service quality). transport improvements can leverage large amounts of private investment and economic development. The businesses that contributed the majority of growth during that period did not expand into the urban periphery with undeveloped sites. However. and more traffic congestion). and the location and type of development that occurs. small differences in accessibility and traffic impacts can make a large difference in property values and development potential. such as highways and major airports. In competitive markets. commercial and residential development in urban areas. and public transit. Their research suggests that transit service improvements can often be partly or totally funded by the property value increases they provide. CTOD 2008). multi-modal urban land use development tends to be more transportation efficient (transport costs are lower overall) due to proximity (less travel is needed for a given level of access) and transport diversity (good walking and cycling conditions. For example. Adams and VanDrasek (2007) describe methods to evaluate the economic development impacts of specific urban transportation improvements. and appropriate housing for workers. conventional planning methods tend to undervalue these efficiencies. That find that most expanding firms locate near transportation infrastructure. accidents. For example. and vehicle operating costs) often imply that more compact development is undesirable because it reduces travel speeds (due to more intersections. mobility-based transport system performance indicators (roadway level-of-service. real estate values increase with improved access and reduced traffic impacts such noise.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Chapple and Makarewicz (2010) analyzes business growth trends in California between 1990 and 2005. and may support economic development by improving affordable and accessible housing options. They conclude that smart growth development policies need not reduce economic development. such as farming and tourism in rural areas. Rather they seek sites with existing major infrastructure that has developed other urban amenities. and the number of services located near a location tend to recognize these efficiencies.

such as access to health care services.88 per hour. If these costs are $700 per month higher. Transportation and housing affordability can affect economic development (Litman 2008a). local employers must pay an extra $1. Transportation affordability tends to increase with improvements to affordable modes (walking. and a certain amount of social and recreational activities. or have subsidized housing. such as more lower-priced housing in attractive. employers must pay an extra $4. school and work.000 $1. Transportation affordability refers to lower-income households’ ability to afford basic mobility and accessibility. Colleges may have difficulty recruiting students. representing 20-50% of total employment.38 per hour. ridesharing. cycling.50 Unaffordable Transport & Housing $500 $1.38 Monthly Monthly transport costs Monthly housing costs Total monthly costs Monthly wage premium Hourly wage premium This table indicates how unaffordable transportation and housing tends to raise wages. Cost savings are equivalent to increased income. and lower-wage jobs are an important economic input. Businesses may have difficulty filling positions. Some pay no rent because they live with family.000 $300 $1. Workers forced to commute long distances in old cars experience stress and unreliability. basic shopping. For example. have higher turnover. Some may accept inferior 57 . be forced to pay higher wages. If basic transportation and housing costs are $300 per month higher than other communities. These industries are particularly dependent on lower-wage employees: • • • Hospitality/dining Medical/dental Construction • • • Arts Retail Building services • • • Light industry Landscaping Education Unaffordable transportation and housing can constrain economic development. technicians and cleaners.000 $1. The table below illustrates how high transportation and housing costs that increase the cost of living in a community drive up the wages required to attract a given quality of employee. and with more affordable housing in accessible locations. Inaffordability does not affect all employees equally. Table 23 Wage Impacts of High Transportation and Housing Costs Affordable $200 $600 $800 $0 $0 Unaffordable Transport $500 $600 $1. Even high wage industries require numerous lower-wage support employees.500 $700 $4. lawyers and business executives require receptionists.200 $400 $2. physicians.88 Unaffordable Housing $200 $1. and public transit).Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Affordability Affordability refers to the degree that households can afford basic goods and services. own their homes. fewer seniors will retire in the area. multi-modal urban neighborhoods. and more employees working multiple jobs. while artists and innovators may move away due to inaffordability. reducing their availability and work quality.

The Genuine Progress Indicator (GPI) is an economic performance indicator that adjusts Gross Domestic Product (GDP) to account for the costs of crime. Household Wealth Accumulation Households often make trade-offs between housing and transportation costs. controlling for demographic and economic factors. some economists challenge these assumptions (Talberth. this contributes to overall economic development. A 2009 study of 40. and life satisfaction (van den Bergh 2007). Desirable Outcomes As discussed earlier.org) is calculated by multiplying indicators of Life Satisfaction times Life Expectancy and dividing by Ecological Footprint (resource consumption). environmental quality. and location-efficient mortgage policies) support wealth accumulation and economic development (“LocationEfficient Development. the Happy Plant Index (www.” VTPI 2008). and Slattery 2006). 58 . suggesting that living in more multi-modal community increases household economic resilience (NRDC 2010).000 mortgages in three U. But once this pool is tapped businesses must pay higher wages to attract additional employees. policies that help household purchase locationefficient homes (such as more transit-oriented development. As a result. education. environmental degradation. social equity. cities found that. Since homes are an important source of capital (households often borrow against their homes for educations and businesses). foreclosure rates increased as a household’s vehicle ownership rates increased. public infrastructure. particularly in rapid growth communities that wish to expand industries that rely significantly on low.happyplanetindex.S. For example. a household might choose between a cheaper suburban house with high transportation costs or a more expensive urban house with lower transport costs (CNT 2008).and medium-based employees. Transportation inaffordability appears to contribute to home foreclosure. loss of leisure. and economic development should be evaluated based on desirable outcomes such as health. or to attract students and retirees. the ultimate goal of economics is to maximize social welfare (overall human happiness). For example. Cobb.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute housing in exchange for a better quality of life or long-term economic opportunities. providing hundreds of thousands of dollars in additional wealth to households that choose more costly but accessible homes. economic productivity and sales) are inherently desirable. Although conventional economic analysis often assumes that increased material wealth and market activity (such as increased income. They argue that conventional economic indicators overlook important non-market impacts and values. The result is less economic activity and lower profits than would occur with more affordable transportation and housing. volunteering and housework. income inequality. This suggests that policies and programs that increase transportation and housing affordability support economic development. In the short-run their total costs may be equal but over the long-run mortgage payments build much more equity than vehicle expenditures.

reduce negative impacts. Improved health. methods for evaluating them. services and jobs Analysis of employment and productivity of specific industries and businesses Surveys.g. Impacts on transport and housing affordability. Analysis of travel options between affordable housing. Land use development impact analysis. Support for more accessible. Evaluation Methods Regional economic models. Impacts of future consumer transport expenditures. Choose projects with high return on investment or benefit/cost ratios. Various data sources. input-output tables. Identify potential negative impacts and arrange transition and compensation if needed. Table 24 Factor Direct economic impacts Consumer expenditures Transport project cost efficiency Transport system efficiency Basic access Economic Development Impacts Description Jobs and business activity generated by project expenditures. Specific industries and businesses Retail and Tourism Property values and development Land use objectives Affordability Wealth accumulation Desirable Outcomes Property valuation studies. This table categorizes transportation economic development impacts. Capture value for transport project funding. 59 . Surveys of real estate professionals. vehicle and fuel producers. education.) Impacts on local retail and tourism industries Whether policies and projects increase real estate values and development. Improve access and travel conditions. Household wealth created by housing investments. input-output tables Consumer expenditure surveys and regional economic models Comprehensive benefit/cost models that account for all impacts. environmental quality. Whether transport policies support economic objectives Effects on basic mobility for non-drivers (access to shops. Sustainable development indicators. Use efficient pricing and policies that favor higher value trips (such as freight) and efficient modes. Ratio of benefits to costs. efficient land use development. etc. Whether transport facility investments repay costs and optimize value. Favor affordable modes and affordable-accessible housing. Favor policies and projects that reduce future fuel and vehicle expenditures. Favor projects that support strategic land use objectives (smart growth). Support projects that increase property values. Whether transport policies reflect efficient market principles. Support projects that improve commute options for disadvantaged workers. housing quality. etc. and strategies that help achieve economic development objectives. Portion of household spending on housing and transport. Favor projects that help achieve desired outcomes. schooling and jobs) Impacts on specific industries (e. taxis. Transport and housing affordability analysis.. Development Strategies Favor policies and projects with greater job creation. Support location-efficient development.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Economic Development Impact Analysis Summary The table below summarizes various transportation economic development impact categories described in this report and possible methods for evaluating them.

reduce costs to businesses to distribute goods and services. land. so higher-value trips (freight. risk. such as congestion. The box below lists typical logistical improvements. higher load factors). road and parking facility costs. time. reduced downtime). called logistical improvements. accident and pollution damages. and shifts to rail. as indicated in Table 12 They reflect economic efficiency principles and reduce transportation costs such as vehicle and fuel expenses. reduced congestion delays).Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Transportation Economic Development Strategies This section discusses transport ways to help achieve specific economic development objectives. Lower equipment costs (less expensive or more durable vehicles. accident costs and pollution damages. Mobility management and smart growth strategies tend to increase transport system efficiency. Improve Transport System Efficiency As discussed earlier in this report. Transportation efficiency improvements. and costs to the economy from indirect and external transportation costs. Higher travel speeds (faster vehicles. More efficient operations (faster loading. 60 .) required for a given level of accessibility. so improving their efficiency provides large economic development benefits. higher fuel efficiency). and business travel. Transport efficiency improvements contributed significantly to economic development during the last few centuries and. Reduced labor costs (automation. particularly for productive activities such as freight and service delivery. etc. and lower wages and benefits). Typical Logistical Improvements • • • • • • • Increased vehicle loads (larger trucks. business travel and public transit vehicles) have priority in traffic. costs to governments to construct and operate transportation facilities and services. Freight transport supports economic activity and has high marginal costs (a typical freight truck has time costs over $100 per hour considering wages and the time value of the equipment and cargo) so freight transport improvement can provide significant economic benefits. one of the most effective ways to support economic development is to improve transportation system efficiency by reducing the resources (money. congestion delays. Transport system efficiency is also improved by policies that prioritize transport activity by favoring higher value trips and more efficient modes over lower-value trips and less efficient modes. stores located closer to customers. and efficient road pricing. service vehicles. Reduced shipping distance and volume (better distribution. Some types of travel have are particularly valuable. even minor efficiency gains can provide savings throughout the economy and make a particular business or location more competitive. although the rate of improvement is declining. Truck and HOV lanes. reduced packaging).

Alternative modes can provide additional benefits. 61 . and provide particularly large economic benefits if they substitute for more costly modes such as automobile travel. noise and water pollution harm fishing. Although underpricing vehicle travel (for example. courier services. Improving transportation options (improving walking. Improving commute travel efficiency can also increase productivity if it improves education and employment access. but environmental damages impose real economic costs so the actual conflict is often between different industries. road tolls and HOV/HOT lanes increase economic efficiency by allowing higher value vehicles (such as freight and service vehicles. but the main benefit of improvements such as suburban highway expansion is to allow employees to live farther from their worksites. if a neighboring country or state has very low fuel prices it may be impractical to maintain high fuel prices. People sometimes assume that economic and environmental objectives conflict.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Airport transport tends to involve high-value travel (business trips. providing additional savings. more efficient parking pricing and other parking management strategies can reduce parking congestion and reduce total parking costs. delivery services. it reduces overall economic efficiency since the costs are borne elsewhere in the economy. Reducing these impacts supports economic development. parking. and this increases when oil prices rise. providing economic savings and allowing more compact development. Congestion pricing. More efficient road. for example. air. ridesharing. Many countries devote 1030% of their export exchange to petroleum imports. cycling. for example. allowing better match between workers and jobs. Similarly. emergency vehicles. so investments may be justified even if they have relatively high unit costs (cost per passenger-mile). business travelers. insurance and fuel pricing tends to increase efficiency and therefore productivity. financing roads and parking facilities indirectly. public transit. Excessive vehicle traffic reduces nearby property values. By reducing congestion. but such distortions that should be minimized by maintaining the highest feasible price. and higher occupant vehicles) to outbid lower value vehicles for scarce road space. For example. taxi. Efficient pricing may be constrained by policies in nearby jurisdictions. inter-jurisdictional fuel price increases. exercise and recreation. providing consumer benefits but little productivity benefits. increasing their wealth. farming and recreation industries. avoiding congestion delays. and by coordinated. and basic mobility for non-drivers. through general taxes and rents) reduces transport costs. people making urgent trips. so efficiency gains can provide economic benefits. more efficient pricing can avoid the need to expand roadways. Oil producing countries also benefit from domestic energy conservation because it leaves more product to export. Policies and programs that reduce transportation fuel consumption provide economic development benefits that are likely to increase in the future. carsharing. tourism and emergency travel) and impose significant external costs. telework and more accessible land use) can increase economic efficiency if demand exists (new facilities and services are used sufficiently).

improved mobility for non-drivers. total emissions. For example. and mobility substitutes such as telecommunications and delivery services. They can result in solutions to one problem that exacerbate other problems (for example. widening highways although that tends to stimulate VMT and sprawl. large expenditures on roads and parking facilities leave few resources for other modes. and these alternatives are funded whenever they are most cost effective.” VTPI 2008). and automobile-oriented land use (dispersed development along major highways) tends to be inaccessible by other modes. such as efforts to improve mobility for non-drivers and conserve energy. performance indicators. wider roads and increased traffic speeds tend to degrade walking and cycling conditions. transportation planning tends to favor automobile transportation improvements over other modes and facility expansion over demand management strategies.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Transportation Planning Reforms For Efficiency Several planning reforms tend to increase transport system efficiency and therefore productivity. Comprehensive Economic Evaluation Conventional transportation planning tends to focus on a limited set of objectives. and so can result in inefficient solutions. most transport activity it is intended to achieving accessibility (people’s ability to reach desired goods. total accidents. They overlook other planning objectives (parking cost savings. Least-cost Planning and Funding Least-cost planning is a resource planning method that considers demand management solutions equally with capacity expansion. and even accident reductions). and some mobility improvements can reduce overall accessibility. In many cases transportation improvement funds can only be used for roadway improvements. For example. For example. and undervalue alternative modes and mobility management. and inadequate mobility for nondrivers). and so tends to increase other transport problems such as downstream congestion. 62 . Accessibility-based planning accounts for these impacts and expands transport solutions to include improvements to alternative modes. services and activities). Accessibility-Based Planning Conventional planning evaluates transport systems based on mobility (physical travel). mobility management. considering all objectives and impacts (“Least-Cost Planning. and cannot be spent on alternative modes or demand management programs even if they are more cost effective and consistent with strategic planning objectives. impacts and options. But mobility is seldom an end in itself. energy conservation. more accessible land use. such as roadway level-of-service ratings and average traffic speed. tend to evaluate transport systems in terms of motor vehicle mobility. and tend to undervalue “win-win” transportation solutions that provide more modest but multiple benefits. consumer cost savings. with conventional planning.

including the degree that accessibility is improved. cycling and public transit tends to increase property values. and the effects of negative impacts such as congestion. Limited supply and growing demand for use of these modes. improving a highway a city and nearby rural communities may stimulate development and reduce agricultural activity in the area. efficient transport planning (such as least-cost funding. Transit investments are only cost effective employment generators if the resulting services are well used (and therefore respond to consumers’ demand). However. and for living in multi-modal communities. which tends to increase employment and incomes. particularly within a particular area. are integrated into communities (so they provide efficient access) and allow households to reduce their vehicle and fuel expenditures. Public transportation tends to generate relatively large numbers of jobs per dollar spent. efficient transport policies (such as efficient road. Land value increases reflect the capitalized value of transportation cost savings. but fewer farming jobs. Particularly large employment gains tend to result from policies that expand high-quality public transportation systems. and smart growth land use policies that improve land use efficiency tend to increase employment and income.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Employment and Income Growth Policies and programs that increase economic productivity and competitiveness support economic growth. Property Values Transportation improvements can increase nearby property values (Smith and Gihring 2006). The result will be more construction and retail jobs. once a region has highways providing access to a significant amount of land. if demand is high for land with good highway access and supply is limited. so the most cost-effective transportation improvement is selected). 63 . Some transportation projects and activities generate more jobs per dollar spent than others. For example. parking. As described earlier. Proximity to a highway also reduces the value of nearby land that bears negative impacts. in part because of transit service employment and in part because of the reduction in automobile expenditures. which is a productivity gain. Transportation policies that allow households to reduce their vehicle ownership and fuel consumption tend to increase local and national employment. vehicle and fuel expenditures tend to create few jobs. What type of transport improvement provides the greatest value depends on specific conditions. highway improvements may significantly increase nearby property values. and this is likely to decline as vehicle production is more automated and as petroleum prices rise. the amount of demand for such accessibility. particularly local jobs. insurance and fuel pricing). As a result. Some transport policy and planning decisions involve tradeoffs between different industries and consumer expenditures. can result in large property value gains. access to high quality walking. Similarly. marginal increases in highway supply or quality do little to increase productivity or land values. much of the gain in one location is offset by reductions in land values elsewhere in the region. noise and pollution around highways and transit stations. For example.

The following strategies can help increase affordable. public transit. and more efficient parking management.213 $5. Expenditures Per Vehicle Portion of Income $10. Apply reduced and more flexible parking requirements.e. allowing higher FARs and building heights. as indicated in Table 25. for example.388 $6. delivery services) and increasing the supply of affordable housing in accessible locations tends to increase overall affordability and basic accessibility. Improve walking and cycling conditions.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Affordability and Basic Accessibility Improving affordable modes (walking. accessible. Allow and encourage secondary suite development.531 $4. streetscaping and traffic calming. cleaning up older urban industrial sites so they can be redeveloped). such as commute trip reduction programs.460 $5. and efficient road and parking pricing. accessible housing: • • • • • • • • Supporting more infill development and brownfield reclamation (for example.. cycling. Implement mobility management programs. and public transit and taxi service quality. Reduce development and utility costs for more compact. multi-modal development. Unbundling parking from housing costs (i.793 4% Reducing the number of vehicles a household must own can provide substantial savings. Reducing the number of vehicles a household must own can provide significant savings.468 42% $27. and efficient road and parking pricing. Allow more mixed use development. Increase development density limits.691 8% $158. • • • • • 64 . Allow and support conversions of single-family to multi-family housing. such as commute trip reduction programs. which mean that lenders recognize the potential savings of a more accessible housing location when assessing a household’s borrowing ability.054 11% $72.825 17% $46. Table 25 Vehicle Expenses As Portion of Household Income (BLS 2008) Income Quintile Lowest Second Third Fourth Highest Gross Income Avg. Improve public services in smart growth locations to attract more residents and businesses. ridesharing. and public transit and taxi service quality. Improve walking and cycling conditions. streetscaping and traffic calming. sprawled development. Implement mobility management programs. since it generates fewer car trips and reduces the costs of providing public services compared with more automobile-dependent.674 $4. renting parking spaces separately from housing units). such as urban villages (which often involves converting residential to neighborhood commercial) and housing over retail. These savings can be considered equivalent to an increase in household income. Encourage location efficient mortgages.

• • • • • 65 . including basic mobility for non-drivers and land use impacts. Insure that existing infrastructure is properly maintained before adding more capacity. Use comprehensive analysis of impacts and options to identify the most cost effective and efficient transportation investments. Improve more affordable modes (walking. Emphasize asset management. Implement transportation projects that reflect strategic land use development objectives and future demands. favor investments that maximize jobs. and high occupant vehicles (carpools. cost-based pricing. and encourage fuel efficiency in order to reduce consumer expenditures on vehicle and fuel.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Below is a summary of general economic development strategies: • • • All else being equal. taking into account all objectives and impacts. cycling. telework) and more accessible community development. Favor higher value trips and more efficient modes. ridesharing. Implement policy and planning reforms that reflect efficient market and planning principles. such as improved consumer options. and neutral investment and tax policies. Improve alternative modes when cost effective overall. income and business activity. including freight and business transport. public transit. vanpools and public transit).

impacts on their costs and expenditures. Input-Output tables and other econometric models predict how changes in expenditures affect economic activity in a particular geographic area or industry (REMI. Integrated transportation economic evaluation models such as TREDIS (Transportation Economic Development Impact System. 66 . marine) to quantify costs savings. and input-output table analysis can indicate how a particular policy or project affects employment and productivity. These can be used to calculate incremental changes in employment. vehicle operating costs. For example.tredis. in similar situations. or expect to respond to. Paaswell and Berechman 2008): • Transportation economic evaluation models estimate the value of a transport project or program (CalTrans 2006).Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Evaluation Methods Various techniques and models can be used to evaluate the economic impacts of specific transport policies and programs (Weisbrod 2007. vehicle ownership costs. profits and tax revenues. NRDC 2001). productivity. reliability. Special studies can help evaluate specific economic impacts. and to identify problems and potential improvements.com) take into account personal and freight travel time and cost. Real estate market analysis can be used to predict changes in property value and tax revenue due to improved access and local traffic impacts (Smith and Gihring 2006). congestion. most transportation benefit-cost analysis considers a limited portion of total impacts. the value they place on these changes. and user recommendations for improvement. The results of such analysis should clearly indicate what impacts are and are not considered. and so may result in inefficient planning decisions (“Model Improvements. travel time savings. taking into account equity gains from home ownership). Policy analysis to determine whether specific transport policies and planning practices favor higher value trips and more efficient modes. • • • • • • • • It is important that practitioners and decision-makers understand the limits of these tools. such as how a policy or program affects household affordability (from transportation cost savings) and wealth generation (for example. logistics efficiencies. rail. User and market surveys can be used to determine how people respond to. bus. 2005). www. specific transportation system changes. and accident and emission rates per vehicle-mile) and ignore other impacts (downstream congestion. such as changes in property values. Case studies can be used to predict impacts.” VTPI 2008). but excludes other types of economic impacts. In many cases the impacts that are overlooked may be more important to a community than the impacts that are quantified. Fiscal impact analysis evaluates how incremental public infrastructure and service costs compare with incremental government revenues from development fees and taxes (Edwards 2000. incomes and business growth. employment. More comprehensive analysis can provide more accurate economic evaluation and therefore better indication of truly optimal policies and projects (Litman 2009a). household wealth and external costs. Peters. or equity impacts such as changes in affordability. Most of these models consider only a limited set of impacts (construction costs. aviation. parking costs. induced travel accident and emission impacts). and ground access to intermodal terminals for various modes (of highway.

paths and bike parking can be considered cost effective if their costs per trip is equal or below that of other modes. Table 21 Conventional Transport Planning Evaluation (Litman 2008b) Usually Considered Financial costs to governments Travel speed (reduced congestion delays) Vehicle operating costs (fuel. These savings can be significant. 67 . Improved access to education and employment by disadvantaged people. insurance and fuel pricing) can provide various economic saving and benefits: • • • • • • • Traffic congestion reductions. telework. Commuters that shift from driving to alternative modes. etc. so investments may sometimes be justified even if their unit costs are higher than roadway improvements. public transit. Their cost efficiency depends on whether there is sufficient demand to justify investments.). People sometimes assume that alternative modes are justified primarily for their social and environmental benefits (improved mobility for non-drivers and emission reductions). For example. sprawl reduction) Energy use and pollution emissions Impacts on physical fitness and public health Travelers’ preference for alternative modes Conventional planning tends to overlook many impacts and so tends to undervalue alternative modes. Consumer cost savings.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Evaluating Alternative Modes Improving alternative modes (walking. and provide hundreds of dollars worth of road and parking facility cost savings. energy consumption and pollution emissions. cycling. as indicated below. tolls. parking. and households that reduce their vehicle ownership. Alternative modes may provide other benefits. and basic mobility for non-drivers. Accident reductions. such as exercise and recreation. Road and parking facility cost savings. Conventional planning tends to overlook or undervalue many of these benefits. and incentives that encourage their use (such as more efficient road. but they also provide substantial economic benefits. Energy conservation and pollution emission reductions. tire wear) Per-mile crash risk Project construction environmental impacts Often Overlooked Downstream congestion impacts Parking costs Vehicle ownership costs Mobility for non-drivers Strategic land use objectives (community redevelopment. typically save thousands of dollars annually. ridesharing. Support for more compact land use development and therefore increased accessibility. plus reductions in accidents. investments in sidewalks.

An integrated program can result in substantial mode shifts. Even people who never use these modes themselves can benefit from reduced automobile traffic problems. cycling facilities and public transit services will attract more users and provide more benefits if implemented with commute trip reduction programs. benefits and economic returns. efficient road and parking pricing. 68 .Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute The cost efficiency of alternative modes tends to increase if implemented as an integrated program that includes suitable incentives and land use development. For example. and smart growth land use policies.

which could include more sharing of parking (such as a sharing agreement between an office building and a nearby restaurant). 69 . Management programs are often most cost effective and efficient. Stimulates driving which increases vehicle and fuel expenditures. Favors higher value trips and more efficient modes. Supports downtowns but reduces car travel. Table 27 Parking Subsidies Versus Demand Management Economic Impacts Parking Subsidies Generates construction jobs. bicycle parking. Reduces delays and extra driving when motorists have difficulty finding a parking space. which reduces basic mobility. An alternative to subsidizing parking is to implement demand management programs. Can increase property values with less tax burden. Table 26 identifies economic productivity impacts. More efficient management provides often greater economic benefits overall. This table summarizes productivity impacts of downtown parking subsidies. Table 26 • • Productivity Impacts – Parking Subsidies Increases Productivity Reduces Productivity • • Increases total parking costs. improvements to alternative modes (such as better sidewalks and crosswalks. Subsidizes automobile travel and so increases urban traffic and therefore congestion and other external costs. accidents and pollution costs. Economic Impact Project expenditures Future consumer expenditures Investment cost efficiency – investment economic returns Transport system efficiency Basic mobility and affordability Property values and development Land use development patterns This table compares parking subsidies with demand management strategies with regard to various economic impacts. Supports downtowns but stimulates car travel and therefore sprawl. Parking subsidies can improve motorist convenience and make downtowns more competitive with suburban locations. Often improves basic mobility and affordability. Subsidies are generally inefficient and so reduce economic efficiency. The table below compares the economic impacts of these two alternatives. Demand Management Generates ongoing administration and enforcement jobs.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Examples and Case Studies Some specific examples of transportation economic evaluation are summarized below. Tends to be inefficient. but may increase taxes. rideshare promotion. and public transit service improvements) and commute trip reduction programs. Makes downtowns more competitive with suburban areas. Downtown Parking Subsidies Downtown merchants often advocate government parking subsidies to attract customers and stay competitive with suburban shopping centers that offer abundant. Tends to reduce vehicle travel and therefore vehicle and fuel spending. Often causes automobile dependency. free parking. Can increase downtown property values. better regulation and pricing. and so reduces sprawl. but it reduces productivity by increasing total parking costs and stimulating more vehicle traffic which increases congestion.

with many derelict and abandoned buildings and few customers. it simply shifts its location. the city priced parking with all revenues dedicated to downtown improvements such as street furniture and trees. resulting in extensive downtown redevelopment. Local business activity has grown far faster than in other shopping districts with lower parking prices and nearby malls that offer free customer parking. If a downtown is attractive and manages parking efficiently it can be competitive with relatively few spaces. better lighting. With efficient parking management delivery vehicles and customers can almost always find a convenient parking space. since employees often used the most convenient. consumer cost savings and pollution emission reductions. During the 1970s Old Pasadena’s downtown had declined. Improvements to alternative modes and better parking management may address the problem at a lower total cost. This analysis suggests that downtown parking subsidies generally provide less total economic development than demand management strategies. because they tend to be more cost effective and support other planning objectives such as traffic congestion reduction. Much of the benefit would be an economic transfer from other shopping centers. Empirical evidence indicates that parking subsidies often do little to support economic development: many business districts with abundant and free parking are unsuccessful while others are quite successful despite limited and priced parking. more parking revenue. in part due to the limited customer parking. Parking subsidies stimulate automobile travel which tends to increase problems such as congestion. etc. This indicates that efficient parking pricing with revenues dedicated to local improvements can support urban redevelopment and business activity. and further improvements. pedestrian improvements. on-street spaces. Case studies indicate that parking management can support economic development (Kolozsvari and Shoup 2003). accidents and pollution. marketing. This created a cycle of increased business activity. Charging users directly for parking is generally more efficient and equitable since it rewards people for reducing their parking costs. Table 28 Critical Analysis – Parking Subsidies Questions Does the proposal really increase overall productivity? Is this proposal the best way to support local development? Is the proposal the best way to improve access? Does it provide true economic gains rather than just economic transfers? Do the benefits justify subsidies? Do economic benefits offset indirect costs? Conclusions and Comments A perceived shortage of parking in one area does not generally constrain total shopping activity. and improving alternative modes.) might stimulate more economic activity. more street and sidewalk cleaning. security patrols. Other improvements (streetscaping. 70 .Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Table 28 identifies questions to consider when evaluating parking subsidy proposals. After negotiating with local merchants. and marketing. This table summarizes critical questions to ask when evaluating whether public parking subsidies are an optimal way to support downtown economic development.

Most of this is additional personal travel. Wider roads and increased vehicle traffic often degrade walking and cycling conditions. fuel import. but the added capacity is often soon filled with generated traffic (additional vehicle travel that would not occur). Provides short-term employment. Increases efficiency by favouring higher value trips and more efficient modes. Can increase urban fringe property values.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Roadway Expansion Roadway expansion is often proposed for traffic congestion reduction. consumer. accidents and pollution. The following table compares the economic impacts of these two alternatives. special programs to encourage travelers to choose efficient modes. It often most cost effective and efficient overall. energy imports. and pollution costs. Table 29 identifies ways that roadway expansion affects economic productivity. Economic Impact Project expenditure impacts Future consumer expenditures Investment cost efficiency – economic returns on investments Transport system efficiency Basic mobility and affordability Property values and development Land use development patterns Wealth accumulation (increased home equity value) This table compares the economic development impacts of roadway expansion with mobility management. This includes improvement to alternative modes. Tends to support smart growth. transportation pricing reforms. Mobility management generally provides greater economic benefits overall. Increases Productivity Reduces traffic congestion. Allows households to reduce vehicle costs and invest more in housing. This table summarizes productivity impacts of expanding congested highways. Often increases automobile dependency and sprawl. Is inefficient Tends to reduce basic mobility and affordability by stimulating automobile dependency. Tends to be less cost effective than demand management. which reduces travel options and increases parking. accident. Table 29 • • Productivity Impacts – Roadway Expansion Reduces Productivity • • • Costs per additional peak-period vehicle trip are often high. Table 30 Road Expansion Versus Demand Management Economic Impacts Roadway Expansion Generates construction jobs. Stimulates driving which increases vehicle and fuel expenditures. which provides minimal net economic productivity gain. 71 . and increases external costs such as downstream congestion. Mobility Management Generates construction and ongoing management jobs. Mobility management is an alternative approach to reducing traffic congestion. parking costs. Reduces vehicle travel and therefore vehicle and fuel expenditures. Can increase property values near transit stations. Mixed. and smart growth land use policies. Encourages consumer expenditures on vehicles rather than housing. Many demand management strategies improve basic mobility and affordability. Stimulates sprawl.

but long-term benefits are often small or negative due to generated traffic.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Highway expansion advocates generally assume that traffic congestion significantly reduces productivity. as summarized in Table 32. Mobility management generally provides greater net economic benefits because it increases overall efficiency. and it increases other costs. such as new rail systems and bus rapid transit. so economic development impacts depend on consumer demand for these options. This table summarizes critical questions concerning economic development impacts of road expansion. Public Transportation Investments Major public transportation investments. Building the first highway to an area tends to support economic development. High quality public transit provides various economic benefits. roadway expansion can significantly reduce these costs. most benefits are captured by consumers. To the degree that the roadway expansion induces additional travel it increases external costs that offset some of the direct benefits. and from transitoriented development. Such projects are most efficiently financed by user fees. Congestion is a moderate cost overall so it would be inefficient to reduce it in ways that increase other transport costs such as consumer costs. parking costs or accidents. can improve productivity. although a good basic highway system is important for economic development. but road expansion provides much less marginal benefit. as previously described. Many of these result from reduced automobile ownership and use. Mobility management solutions are generally more productive and economically beneficial overall. expanding highways to reduce congestion is inefficient and can reduce economic development overall. particularly for freight and delivery vehicles. They generally require significant subsidies. so net productivity gains are small. and alternative congestion reduction strategies are infeasible. Improved vehicle traffic flow may be partly offset over the long term by generated traffic and sprawl. Table 31 Critical Analysis – Roadway Expansion Questions Does the proposal really increase overall productivity? Is this proposal really the best way to support local development? Is the proposal really the best way to improve access? Does it provide true economic gains rather than just economic transfers? Do the benefits justify subsidies? Do economic benefits offset indirect costs? Conclusions and Comments Reducing congestion. Highway expansion tends to provide modest long-term congestion reductions. In the short-term congestion is reduced. 72 . This analysis indicates that. are often proposed to increase transport efficiency and support economic development. and whether transport and land use policies support transit. so their overall economic value depends on how much total incremental benefits exceed total incremental costs. increasing productivity. Table 31 identifies critical questions to consider when evaluating the economic impacts of such a proposal. These assumptions are often untrue.

Public transit can impose external costs. Empirical evidence indicates that high quality public transit tends to support economic development (Litman 2004). where there is sufficient travel and land use development demand. road and parking costs. Allowing transit service quality to decline would impose economic costs exceeding $2 billion annually. an enhanced plan would provide a 34% return. 73 . and the Transit-Oriented Development proposed in the regional comprehensive plan would increase the return to 61%. High quality public transit tends to improve accessibility. multi-modal land use development. and so reduces traffic congestion. Some property value increases may be economic transfers. energy consumption and pollution emissions. in conjunction with supportive policies. road and parking infrastructure savings. Transportation cost savings are true economic gains. Table 33 identifies issues to consider when evaluating public transit economic benefits. Allows households to reduce vehicle ownership and so leverages additional reductions in automobile travel and associated costs. Improved efficiency due to scale economies. which provides savings and benefits. Stimulants more compact. and noise pollution. EDRG (2007) estimated that the current Chicago region transit plan provides a 21% annual return on investments. • • • • This table summarizes productivity impacts of expanding congested highways. consumer savings.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Table 32 • • Productivity Impacts – Public Transit Improvements (Litman 2004) Increases Productivity Reduces Productivity • • • It requires substantial subsidies. Such analysis indicates that public transit improvements can be cost effective and increase economic development if constructed in appropriate locations. Figure 13 showed that per capita GDP tends to increase with per capita transit ridership. particularly if implemented with supportive transport and land use policies. Provides short-term employment. etc. accidents. It improves mobility for non-drivers. Costs and subsidies per passenger-mile are often high. This table summarizes critical questions to ask when evaluating whether public transit subsidies are an optimal way to support urban economic development. providing basic mobility and affordability benefits. Attracts travelers who would otherwise drive on major urban corridors. Table 33 Critical Analysis – Public Transit Improvements Questions Does the proposal really increase overall productivity? Is the proposal really the best way to improve access? Does it provide true economic gains rather than just economic transfers? Do the benefits justify subsidies? Conclusions and Comments It can if total benefits (congestion reductions. In some cases. such as barrier effect if it blocks pedestrian access.) exceed total costs.

An optimal transportation system would apply all of these fees. including greenhouse gas emissions. Fuel tax. Reduces profits of vehicle and fuel industries and businesses in automobile-oriented locations. and they tend to increase overall transportation system efficiency by favoring higher value trips and more efficient modes. A vehicle’s emission rate (such as grams per mile) times regional pollution unit costs (such as cents per gram). Charge users directly for parking using time and location based fees. rent and taxes on roadway land. including traffic services. May reduce low-income motorists’ access to school and jobs. Current insurance premiums prorated by annual mileage. and pollution damages. Table 35 identifies ways that pricing reforms affect economic productivity. Weight-distance fee or road tolls. Table 34 indicates the efficient fees for various transport costs. Price to reduce traffic volume to optimum flow. Table 34 Cost Congestion Roadway costs Accidents Parking Pollution Emissions Fuel externalities General taxes Appropriate Pricing Of Various Transport Costs Pricing Method Time and location based vehicle fees or road tolls. although these impacts can be minimized with good planning. Time. Cost allocation applied to all roadway costs. External costs of producing. Increases economic efficiency – encourages efficient use of scarce resources.and location-based fees. or distance-based fees. accidents. This analysis indicates that pricing reforms tend to support economic development in various ways: they encourage consumers to reduce future vehicle and fuel expenditures. Provides revenues. Table 35 • • • Productivity Impacts – Pricing Reforms Increases Productivity Reduces Productivity • • • Often increases transaction costs (costs of collecting fees). This table describes the appropriate way to price various transport costs. General sales and property taxes. they are 74 . Some of these fees increase transaction costs and harm certain industries (automobile and petroleum industries. increased to account for uncompensated accident costs. They can reduce specific transport problems. This table summarizes productivity impacts of pricing reforms. Time and location based fees (if possible) or distance-based fee. importing and consuming fuel. Reduces specific costs such as traffic and parking congestion. General taxes should be applied in addition to special fees. and businesses that depend on automobile-oriented locations). How Calculated Prices are higher under congested conditions.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Transportation Pricing Reforms Various transport pricing reforms can help solve specific problems and increase efficiency. Generally the most efficient and equitable funding source. Table 36 summarizes the economic impacts of transportation pricing reforms. Fees set to recover parking facility costs and maintain 85% maximum occupancy during peak periods.

improve affordable transport options. These externalities total about $3. Mixed. Provides revenue. Is often cost effective compared with alternatives. 75 . Maximizing Economic Benefits Favor locally supplied pricing services if possible. Many pricing reforms encourage use of alternative modes and energy conservation. Impacts are mixed and highly variable. accessible owned housing (condominiums and singlefamily homes). although overall impacts depend on the quality of alternatives available and how revenues are used. but newer systems are largely automated. vehicle operating costs (the variable costs of driving). Increase supply of affordable. If some costs cannot be efficiently priced other fees may be justified on second-best grounds. Use positive financial incentives. Favors higher value trips and more efficient modes.S. Apply all types of efficient pricing. Increases efficiency. in conjunction with pricing reforms that favor accessible locations. Figure 22 illustrates the estimated magnitude of various external transportation costs (costs not borne directly by users). Integrate transport and land use policies to maximize the benefits of transport pricing reforms and smart growth. Some pricing methods have high transaction costs that reduce their cost efficiency. it may be appropriate to raise fuel taxes to internalize roadway costs and discourage pollution emissions. so efficient pricing would approximately triple current U. insurance and fuel pricing as much as feasible to encourage use of alternative modes and fuel conservation.500 per vehicle-year or 28¢ per average vehicle-mile. such as parking cash out and PAYD insurance. Most transport pricing reforms support and are supported by smart growth. Tends to support basic mobility but can reduce affordability. Investment cost efficiency – economic returns on investments Transport system efficiency Basic mobility and affordability Property values and development Land use development patterns Wealth accumulation (increased home equity value) This table compares the economic development impacts of roadway expansion with mobility management. Economic Impact Program expenditure impacts Future consumer expenditures Implement efficient road. and integrate with supportive policies such as improvements to efficient modes.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute generally cost effective compared with road and parking facility expansion. and they tend to encourage more accessible land use development patterns. Table 36 Transportation Pricing Reform Economic Impacts Effects of Efficient Pricing Small to moderate. parking. Efficient pricing tends to increase development and property values in accessible locations. Mobility management generally provides greater economic benefits overall. For example. and use revenues to support affordable options and benefit lower-income people. Minimize transaction costs by choosing efficient pricing methods and through good planning. significantly reducing future vehicle and fuel spending. multi-modal areas. but reduce them in automobile-dependent locations. if efficient road tolls or emission fees are infeasible. Integrate transportation and land use planning to maximize the supply of development that can occur in accessible. Older systems that use toll booths have high local labor requirements.

Numbers in parenthesis indicate percentage of $63. time and energy are required to meet transportation needs.7%) $2. compared with 1. Oregon’s transit-oriented neighborhoods own an average of 0.000 $800 $600 $400 $200 $0 Estimated Average Automobile External Costs (Litman 2009a) Non-res.5%) $500 (0.454 (8.93 vehicles and drive an average of 9.8%) $5.514 (8.3%) Difference 1.5%) $1.0 $2.200 $1.7%) Transit-oriented development reduces transportation costs. reducing the amount of travel required to access activities). This suggests that efficiency justifies significantly higher motor vehicle user fees.93 $5.400 $1.657 (4. The 2004 FHWA Conditions and Performance report estimates that $79 billion is needed annually to maintain the Interstate Highway System performance but congestion pricing would reduce this cost by 28% by reducing peak-period traffic demand. and the revenues could cover about 40% of highway costs. Among oil consuming countries.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Figure 21 Average Annual Cost Per Vehic le $1.167 (1. This can provide substantial savings and benefits that support economic development.8 daily vehicle-miles.8 daily vehicle-miles elsewhere in the region (Ohland and Poticha 2006). This provides true resource savings: less money.8%) $930 1.795 2.000 Auto-Oriented 0. Table 37 Automobile and Transit Oriented Development Costs Cost Per Vehicle Vehicles Vehicle Expenses Fuel Residential Parking Public Transit Totals $3.6%) $4.4%) -$400 (0.93 $2.6%) Transit Oriented 1. GDP tends to increase with fuel price.857 (4. 76 .091 average household income.2%) $1.7%) $865 (1.8%) $100 (0.661 (15. Automobile-Oriented Versus Transit Oriented Development Expenses Households in Portland. Offstreet Parking Traffic Congestion Roadway Costs Traffic Services This figure illustrates the estimated annual costs of motor vehicle external costs.085 (1. as indicated in Figure 16.072 $1.6%) $1.253 (3.207 (6.93 vehicles and 21. cycling and public transit) and increases land use accessibility (jobs and services are closer together.255 $1. This occurs because transit-oriented development improves travel options (better walking.2%) $9.

For example.S. which increases housing affordability. This indicates that policies that help accommodate demand for transit-oriented development tend to increase economic development. cycling and public transit. households spent an average of $3. If some households prefer transit-oriented locations but cannot afford that option due to inadequate supply. Less vehicle traffic reduces traffic densities. 77 . In addition to these direct user savings and benefits reduced per capita vehicle travel and shifts to public transit for urban trips tends to provide external benefits (Litman 2004): • Reduced traffic congestion. Table 37 compared typical annual household transport expenditures for these locations. • • To the degree that living in a transit-oriented community is voluntary (consumers could choose other options) the resulting travel shifts provide direct benefits to consumers. Fewer vehicle trips per capita allow the number of parking spaces to be reduced. Residential parking typically costs about $1.S. • • • As described earlier. This indicates that transit-oriented locations provide various user savings. they must be better off overall. Since about 60% of petroleum prices are for crude oil and about 70% of U. even if their travel time increases.255 on fuel per vehicle (BLS 2008). Non-residential parking cost savings. shifting expenditures from vehicles and fuel to other consumer goods tends to increase economic development in most regions since vehicle and fuel have low labor input and are largely imported.207 in annual vehicle. Pollution emission reductions and reduced sprawl. in addition to any indirect or external benefits.7% of average household income. fuel and residential parking expenses. • $4. if households voluntarily choose to live in transit-oriented neighborhoods and as a result drive less and rely more on walking. oil consumed is imported. which reduces total crash risk. everybody is worse off overall.000 per vehicle-year. comfortable and integrated with land use (many schools and worksites are located near stations). A portion of peak period travelers shift from driving to public transportation because the service is efficient. providing financial savings and allowing more compact development.500 per year. Reduced traffic risk. equivalent to 6. and can be considered equivalent to an increase in household income.072 on fixed vehicle expenses and $1. including people who live in more automobile-oriented locations and rely entirely on automobile travel. In a typical city businesses and governments provide 2-6 subsidized parking spaces per vehicle. Since vehicle and fuel expenditures provide relatively little domestic employment and business profits this increases national economic development. each typically costing $500 to $1. a typical household that shifts from an automobile-oriented to a transit-oriented location reduces $456 sent to a foreign country.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute In 2007 U. Parking savings reduce development costs. or they would not have made the change.

Table 38 indicates resulting employment gains.800 $5.000 5. and a million dollars spent on public transit generates 14 additional jobs (Chmelynski 2008). based on the analysis summarized in Table 10 which indicates that a million dollars of vehicle expenditures shifted to general consumer spending generates 3.050 Vehicle cost savings per capita Fuel cost savings Vehicle savings employment gains Fuel savings employment gains Transit employment gains Total employment gains This table indicates national employment gains that result if two million residents shift from automobile-oriented to more multi-modal transportation systems.600 5. Oregon about 20%.000 5.600 45. and more livable neighborhoods (Cortright 2007). More multi-modal transport and land use policies reduced per capita vehicle travel in Portland.000 $1.000 $750 $1. providing economic development. 78 .200 4.200 7. using current multipliers. a million dollars of fuel expenditures shifted to general consumer spending generates 4. consumer savings. Table 38 National Economic Development Benefits of Multi-Modal Transport $2.500 5. Table 39 Regional Economic Development Benefits of Multi-Modal Transport $3.600 $6.500 annual miles and spend $2.600 Vehicle cost savings per capita Fuel cost savings Vehicle savings employment gains Fuel savings employment gains Transit employment gains Total regional employment gains This table indicates estimated regional employment gains that result if two million residents shift from automobile-oriented to more multi-modal transportation systems.600 57.00 $1.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Multi-Modal Transportation Economic Development Benefits The following analysis estimates the economic benefits of more multi-modal transportation planning in a two-million population urban region.000 24.000 5.00 $1.00 $1.600 5.550 21.750 9.000 $1.600 19.5 jobs.500 in fixed vehicle expenses.000 7.000 36.250 5.00 $1.000 18.250 7.300 Fuel Prices $3.00 $5.000 16. assuming a million dollars shifted from vehicles to general consumer spending generates 8 regional jobs.000 5. reduced pollution.600 17.000 $1.00 $4.00 $1.500 16.000 $500 7.500 annual miles per capita and spend about $3. Residents of automobile-oriented regions typically average 12.500 per capita in fixed vehicle expenses. while residents of multi-modal communities typically average 7.00 $1. better health.000 $750 16.200 6.6 national jobs.000 $1.600 39.000 $1.200 11. and a million dollars shifted from fuel to general consumer spending generates 12 jobs.000 $1.250 16.600 24. Table 39 indicates estimated future regional employment gains resulting from more multi-modal transport.600 51.000 30.600 Fuel Prices $4. These impacts are much greater at the regional level and are expected to increase in the future as international oil prices rise. using future multipliers.

S. Other industries are more profitable and have more future potential. You benefitted as your neighbors purchased more vehicles and drove more annual miles because this helped reduced your costs and expand the road system. At one time. and technological innovation (McShane 1994). motor vehicle and fuel expenditures provide fewer jobs and less business activity than most other consumer spending.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Automobile Industry Subsidies In exchange for building or maintaining production facilities in a particular jurisdiction. including reduced taxes and utility fees. and Canadian fuel efficiency standards were kept low in response to political pressure from the domestic automobile industry. policies that favor automobile travel or encourage the purchase of fuel intensive domestic vehicle are likely to reduce economic development (Litman 2009b). For many years. profits. U. special infrastructure such as access roads. when all public costs are considered. pitting one jurisdiction against another. At that time. and efforts to encourage use of alternative modes are sometime opposed on the assumption that reduced demand for vehicles and fuel is economically harmful. policies that encouraged automobile ownership and use may have supported economic development. As described earlier in this report. 79 . automobile manufactures often demand subsidies. The world automobile industry is now overcapitalized. with far more production capacity than justified by demand. Since North American vehicle manufactures tend to earn their greatest profits from large. transportation policies are also affected. Encourage inefficient business practices and prevent industries from restricting as needed to be productive in the future. when the North American motor vehicle industry was expanding (between 1910 and the 1960s) it was a leader in wages. and various loans and grants. fuel inefficient vehicles. real profits (excluding subsidies) are small or negative. and for most manufactures. Advocates argue that these subsidies support economic development but critics argue that they: • • • Reduce or eliminate the economic benefits. During that period vehicle and road production experienced scale economies. As a result. Are largely economic transfers. and far less than public transit expenditures. so increased domestic demand reduced unit costs.

and therefore the portion of household expenditures exported to purchase vehicles and fuel: goods which tend to provide relatively little domestic economic development. when evaluating the economic benefits of improvements to alternative modes and mobility management strategies that reduce vehicle ownership and use. 80 . and resulting impacts on downstream congestion.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Best Practices Transportation economic development analysis should be comprehensive. low fuel taxes. conventional economic analysis focuses on congestion costs and congestion cost savings. accidents. conventional economic analysis places no value on local employment and business activity benefits from policies that reduce future household expenditures on vehicles and fuel. Similarly. but tends to ignore parking costs. Generated traffic and sprawl effects. including various types of economic impacts. For example. Parking facility costs and its impacts on development patterns and affordability. per capita vehicle costs. although these are among the largest economic costs. Increased traffic speeds and reduced congestion delay Reduced vehicle operating costs. Conventional transportation project evaluation tends to focus on some economic impacts but often overlooks other impacts of equal or greater magnitude. but overlooks how current transport planning decisions affect future consumer expenditures. roadway expansion. but the evaluation assumes that the total number of vehicles in a community are not reduced). impacts and options. and vehicle ownership costs. energy consumption and pollution emissions. considering all significant objectives. Similarly. and perspectives of different groups and geographic scales. For example. conventional analysis tends to focus on short-term employment and business activity impacts. • • • • This table identifies economic impacts that are often overlooked in conventional analysis. Economic analysis should reflect various issues and perspectives when evaluating a particular policy or project. schooling and employment.) and undervalue the benefits of alternative modes and mobility management strategies. Project impacts on local employment and business activity. although this is increasingly significant if oil prices rise in the future. Table 40 • • • Transportation Economic Impact Analysis Generally Considered Often Overlooked • Impacts on future consumer expenditures on vehicles and fuel. etc. These omissions tend to exaggerate the economic benefits of automobile-oriented improvements (parking subsidies. Basic mobility and non-drivers’ ability to access services. and their effects on future local employment and business activity. conventional analysis generally places no value on the parking and vehicle ownership cost savings (vehicle operating savings are often recognized. Mobility management options as alternatives to conventional solutions. sprawled land use development.

81 . Transportation project cost efficiency – Project net benefits should be compared with various alternatives. road and parking facility costs. Direct economic impacts . and life satisfaction. and increases in land values. and subsidies. Impacts that cannot be quantified should be described. Outcomes – Indicators such as community health. Indirect and external costs – Analysis should identify indirect and external impacts.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Transportation economic analysis should reflect basic economic and planning principles. and their impacts on employment and business activity. or reducing sprawl). including alternative modes and mobility management strategies. energy imports. It should identify and consider a variety of options. The following factors should be considered when evaluating economic impacts: • • • • Transportation system efficiency . longevity. The planning process should acknowledge analysis limitations. so stakeholders understand what is and is not included in analysis. particularly for vehicles and fuel. Basic mobility and affordability . it should highlight when a particular policy increases mispricing or in some way biases planning decisions. accidents. For example.Impacts on basic mobility. • • • • • Analysis of specific policies and projects should critically consider the following issues: • • • • • Does the proposal really increase overall productivity? Is this proposal really the best way to support local development? Is the proposal really the best way to improve transportation and access? Does it provide true economic gains rather than just economic transfers? Do direct economic benefits offset indirect costs and subsidies? Transportation economic impact analysis should report as many of these impacts as possible.Jobs and business activity generated by project expenditure.Household wealth created by housing investments. education attainment. Wealth accumulation .Whether the policy or program increases economic efficiency and productivity. Consumer expenditures – Impacts on future household expenditures. including other modes and demand management. and transportation and housing affordability. pollution emissions. and the direction of any biases. Land use impacts – Impacts on strategic development objectives (such as redevelopment of older neighborhoods. including downstream traffic congestion. particularly for freight and service delivery.

ports and airports. in general. the more options available the easier it is for users to choose the most efficient options for each trip. cycling. Excessive capacity is costly to maintain and can dissipate demand so individual railroads. and new parking facilities to reduce parking problems. In general. insurance and fuel. To the degree that peak-period automobile travel is underpriced (and in most cases it is to a significant degree). These facilities should be efficiently sized. including consumer options.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Characteristics of An Efficient Transportation System An economically efficient transportation system reflects market principles. public transit. such as roadway expansion to reduce traffic congestion. Efficient pricing. and delivery services. Not every community needs a major port or airport. and more efficient modes (such as those that require less road space per passenger-mile under congested conditions) over less efficient modes. including cost-based pricing of roads. more efficient pricing. An overbuilt transportation system is inefficient. 82 . accident damages. increased sprawl and associated costs. efficient pricing and neutral public policies. such as paving a gravel road. taxi services. It therefore includes: • Well designed and maintained transportation facilities. basic roadway improvements. cycling. and an efficient network of railroads. automobile and truck travel and public transit. increased energy imports and pollution emissions) often exceed the incremental congestion reduction benefits. parking facility costs. Although the combination of options that are optimal vary from one area to another depending on demographic and geographic factors. provided that increased development in that area is desirable. parking. or other incentives to reduce peak-period vehicle travel can reduce congestion at a lower total cost. It is therefore important to apply strategic regional planning to transportation system development. automobile. a network of walking and cycling facilities. A multi-modal transportation transport system which offers travelers a diverse range of options. ports and airports operate below their efficient capacity. which typically includes walking. Pricing and policies that favors higher value trips over lower-value trips. This includes a network of roadways that accommodate walking. • • • Characteristics of An Efficient Transportation Improvement Project Transportation improvements are generally incremental: a particular project is implemented to address a particular problem. including special traffic lanes and parking facilities for freight vehicles and High Occupancy Vehicles (HOVs) where sufficient demand exists. expanding highways can have negative overall impacts on economic development because incremental costs resulting from in induced travel (downstream congestion. supports economic development by reducing transportation costs. However. excess capacity is costly to maintain and can dissipate demand so no facility operates efficiently. expanding existing roadways to reduce traffic congestion is not necessarily cost effective if some combination of improvements to alternative modes.

and other types of business travel. crashes. Reducing costs such as congestion. Conventional economic analysis tends to focus on employment and GDP impacts. This contributed significantly to economic development. The following transportation improvements are especially likely to support economic development: • • • • • • Improving freight and service delivery. including direct and indirect impacts on employment. Although some transportation productivity gains may occur in the future due to improved technology. neutral planning. Some vehicle travel is more beneficial than others. more accessible land use development. Increase education and employment access. It is important that transport policy and planning evaluation include comprehensive economic impact analysis. and how current planning decisions will affect future consumer expenditures on vehicles and fuel. and mobility management strategies (improvements to alternative modes. and least-cost planning). excessive mobility can be as economically harmful as too little mobility. such as parking and vehicle ownership costs. Transportation policies and planning practices tend to support economic development when they reflect economic efficiency and good planning principles: adequate consumer options. cost-based pricing (unless subsidies are specifically justified). property values. competitiveness. and business travel) tends to support economic development much more than improving personal transport. its marginal costs exceed its benefits. Improving producer transport (freight and service delivery. Conventional transport policy and project evaluation tends to focus on some economic impacts but ignores or undervalues others of equal or greater magnitude. The key to increasing transport system 83 . productivity. During the last century transportation productivity increased substantially: the money and time costs of travel declined more than order of magnitude. tax revenues. such as a nascent tourism industry.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Conclusions Transportation policy and planning decisions can have various economic impacts. energy imports and pollution. but other indicators. and comprehensive. industrial activity. Larger economic benefits are likely to result from improved mobility substitutes (better teleconferencing and delivery services). These strategies are often the most cost effective way to improve transportation and support economic development. Economic development objectives can vary depending on specific needs and priorities. affordability and wealth accumulation. may also be important. Just as consuming too much food is as harmful as consuming too little. they may be partly offset by rising congestion and energy costs. equity. efficient road and parking pricing. profits. such as increased affordability. Reducing total expenditures on imported vehicles and fuel. and an increasing portion of vehicle travel is economically inefficient. Improving access to an area with undeveloped economic potential. Stimulating industries with growth potential.

With more efficient pricing. Mobility contributes to economic productivity. accident risk. Many of these strategies reflect basic market and planning principles. Many economically successful countries and cities have relatively low per capita vehicle travel.000 annual VMT per capita) tends to increase economic productivity. making the overall transportation system more efficient and reducing problems such as congestion. there is little gain from additional vehicle travel. consumers would forego low-value vehicle travel. Within North America. High quality interregional highways support economic development. Some people claim there is a direct relationship between mobility and economic productivity. so efforts to reduce vehicle travel are economically harmful. provided there is sufficient consumer demand and supportive transport and land use policies. This analysis should consider a wide range of impacts and options. increasing from low to moderate mobility (less than 1. expanding its capacity to reduce congestion has negative as well as positive impacts. and pollution damages.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute efficiency is to facilitate the high value trips while discouraging low-value trips. High quality public transportation provides many economic benefits and so can be cost effective. accidents and consumer costs. land use density and fuel prices. and so tend to increase productivity and economic development. By stimulating automobile dependency (fewer travel options) and sprawl it tends to reduce transportation system efficiency and increase external costs such as parking costs. • • • 84 . all indicating that more diverse and efficient transportation system tends to increase economic productivity and support economic development. reduce specific costs such as traffic congestion. Comprehensive analysis of economic impacts indicates that: • Parking subsidies are generally an inefficient way to support downtown economic development. More efficient parking management is generally more cost effective and beneficial overall. and provide basic mobility for non-drivers. but beyond an optimal level marginal benefits decline. Such strategies tend to be particularly beneficial if implemented as an integrated program. Mobility management strategies tend to increase transport system efficiency and economic productivity. Economic productivity also tends to increase with public transit travel. This report describes various factors to consider when evaluating the economic development impacts of specific transport policies and programs. and road.000 up to about 4. This analysis suggests that underpricing vehicle travel is economically harmful. but once this basic highway system exists. regions with lower per capita VMT tend to be more economically productive. accidents and pollution emissions. and declines with increased roadway supply. Although. parking and fuel prices can increase significantly without reducing economic productivity.

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