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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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They reduce transportation costs and increase transport system efficiency. Many mobility management strategies reflect basic market and planning principles.000 $40. which increases economic productivity and development.000 $60.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Figure ES-3 GDP Versus Fuel Prices $1.25 $1. which tends to increase costs and reduce efficiency.75 Gasoline Prices Per Liter .2004 $1. • • 3 .50 $1.50 $0. particularly in oil consuming countries. but once a basic highway system exists.25 $0.000 R = 0. When evaluating the economic impacts of specific transportation policies and projects it is important to ask critical questions.75 $0.0338 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.00 $0 $20. 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. More efficient management is generally more cost effective and beneficial overall. 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.00 $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.

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

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

how transport improvements contribute to economic development. describes factors to consider when evaluating transportation economic impacts and methods for evaluating these impacts. 6 . investigates the role that transportation plays in economic production. This maximizes productivity and therefore economic development. so excessive mobility can be as economically harmful as too little. It defines economic development concepts. 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. Efficient transport policies result in optimal mobility: neither too little nor too much mobility. lower taxes. etc. and discusses transport policies that help achieve economic development objectives. but it is also economically inefficient if people are forced to drive for trips that can easily be performed by walking or bicycling. better schools. 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. with each mode used for what it does best. district or industry offset by losses to others? To what extent are benefits offset by increased costs.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. For example.) 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.

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

and improved communications technologies. etc. etc. • • • • • • More accessible land use (reduced travel distances to reach goods and activities) Improvements to alternative modes (walking. more accessible (more compact. efficient pricing. encouraging more efficient use of existing transport resources (such as more efficient road. These strategies can result in more efficient use of transport resources. and roadway management that favors more efficient modes and higher value trips.) than to continue to expand roadways. urgent personal errands. parking. in many situations business will find it more cost effective to efficiently manage parking facilities (using more sharing. multi-modal) land use development. cycling. bus. As a result. encouraging use of alternative modes. such as high-occupant and freight vehicles). service. 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). cycling. carsharing. public transit. including some strategies that reduce total vehicle travel. rising future fuel prices. by improving alternative modes (walking. encouraging use of alternative modes.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. Various trends are reducing the marginal economic benefits of increased automobile travel and increasing demand for alternative modes (Litman 2006a). For example. for example. ridesharing. by encouraging travelers to shift to more resource efficient modes (walking. connected. mixed. increased urbanization. This distinction between mobility and accessibility is becoming more important. including increasing traffic and parking congestion. etc. 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. increasing road and parking facility expansion costs. for example. more accessible locations.) can travel unimpeded by congestion. public transit.) than to expand parking facilities. etc. smart growth land use policies. efficient pricing. 8 .). Accessibility-based analysis allows these opportunities to be identified. ridesharing. so higher value vehicles (freight. public transit. and fuel pricing.) 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. and improved mobility substitutes (telecommunications and delivery services). and transport agencies will find it more cost effective to efficiently manage roadways (using HOV priority. Other strategies improve accessibility in ways that often reduce vehicle travel. taxi. insurance. cycling. telework) when feasible. etc.

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

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

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

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

9% 2. as illustrated in Figure 3.S. Table 3-4a) Portion of GDP 3.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.25 $0. the portion of U.05 $0. faster and more efficient vehicles.1% Transportation and Warehousing Services (BLS 2008.0% 2.9% 2. Freight Transport Figure 2 shows how rail freight costs declined over a 150 year period. Figure 3 3.8% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Transportation services declined as a portion of the U. 290) Average Dollars Per Ton-Mile $0. It is unlikely that productivity will continue to increase at this rate in the future. since costs are already low.10 $0. This resulted from technological improvements such as larger. many major efficiency improvements have been fully implemented.00 1850 1900 1950 2000 Shipping costs per ton-mile declined significantly during the last 150 years. employment devoted to transportation services declined during the last decade.15 $0. and rising fuel prices may offset some future efficiency gains. and more efficient loading and operations (such as containerization and automated dispatching).8% 2.2% 3. This indicates large increases in fright transport productivity.S. Despite growing freight volumes.20 $0. economy during the last decade. Figure 2 Railroad Freight Costs (Garrison and Levinson 2006 p.1% 3.0% 3. 16 .

it is unlikely that travel from London to New York will be significantly faster or cheaper in 2050 than it is now.000 in current dollars). A typical longdistance trip costs just 1% to 10% of time and money required a century ago.600 in current dollars). These represent huge increases in interregional transport productivity.000 in current dollars). In the 1880s. they are likely to be smaller than what occurred during the last century and partly offset by rising fuel costs and congestion. By the 1940s. indicating average travel speeds increased more than an order of magnitude during the last century. and to much of Asia. currier services can ship small packages to almost any major city within a day or two. It is now approximately accurate if measured in hours. primarily due to improved operations. to San Francisco required 10-20 days. transatlantic steamship fares cost $35 to $100 (about $1. one-way transcontinental economy class airfares are now typically about $600. indicating that during the last century long-distance travel speeds increased about 24 fold.000 to $6.200 in current dollars) by the 1960s. this declined to about $150 ($1. and all of Australia required 40 days or more. For example. and typical transcontinental airline fares were $300 ($3. Passenger fares have also declined significantly.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Personal Transport Personal travel also experienced large productivity gains. Figure 4 Isochronic Distance Map of the World (Bartholomew 1888) This 1888 map shows days of travel time from London to other world locations. and electronic communication allows nearly instantaneous information transmission. Figure 4 is an 1888 map showing travel times from England to other world locations. Although some transport productivity gains are likely to occur in the future. 17 . and now. It indicates that travel to New York required 5-10 days. These greatly increased economic productivity. and transcontinental rail fares $100 to $200 ($3. transcontinental rail fares were $70 to $100 ($250 to $350 in current dollars). most of South America and Africa.000 to $3. This map is now quite accurate if measured in hours rather than days. Indentured servants typically worked three to seven years to repay their transport from Europe to Colonial America.

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

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

). infrastructure investments. In developed countries total vehicle travel may continue to increase somewhat with population growth. improvements to alternative modes.K. and is about twice as high in North America as in other industrialized countries. such as India and China. etc. The level at which per capita vehicle travel peaks varies from one country to another.S. but such increases are likely to be small compared with what occurred during the last century. If properly implemented these policies can significantly increase transport system productivity (the amount of accessibility provided per dollar of expenditures.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute and economic trends (aging population. This indicates that. Many countries are now implementing mobility management strategies reduce problems such as congestion.000 15. In the future.000 5.S. FHWA.000 10. Year Per capita vehicle travel grew rapidly between 1970 and 1990.000 Annual Passenger Kms Per Capita 20. Figure 6 International Vehicle Travel Trends (EC 2007. but has since leveled off and is much lower in European countries than in the U. and to help achieve health and environmental objectives. hour of time and acre of land). etc. As described later in this report. land use development patterns. due in part to differences in transport and land use policies (fuel taxes. increased urbanization. better telecommunications and delivery services are likely to contribute more to economic development. Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland U. Various Years) 25. rising fuel costs. Demographic and economic trends are reducing per capita vehicle travel demand in wealthy countries. Per capita vehicle travel is likely to increase in developing countries. although increased automobile travel and speed made major contributions to overall economic development during the Twentieth Century. many of these strategies are market and planning reforms that increase economic efficiency. 20 . this is unlikely to continue in the future.000 0 1970 1980 1990 2000 2007 U. road and parking facility costs.). other types of transport efficiency improvements such as increased fuel efficiency.

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

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

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

Empirical evidence suggests that increasing from very low to moderate levels of mobility increases productivity since motor vehicles are used for high-value trips. since it actually reflects increased costs and harms to society. force parents to spend more money on vehicles and fuel. 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). doubling VMT increases GDP about 10%.485 $24. 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.” and. et al. which increases GDP but does not increase social welfare. 4 and 5 cause negative relationships. while factors 2-5 result from increased wealth. but at higher levels of per capita VMT. Similarly. “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. since vehicle expenditures account for 10-20% of personal consumption and a significant portion of government and business consumption. dollars) annual income (Talukadar 1997). The researchers conclude that. a World Bank study found that beyond an optimal level (about 7. 1997).579 $18. Factor 1 causes wealth to increase.S. although consumers and society could be worse off overall. while factors 3. An international study found that per capita vehicle ownership peaks at about $21.496 Income Quintile (Average Annual Income) Increased wealth causes declining marginal increases in VMT. so all else being equal.” 24 .000 Income $6.500 kilometers annual motor vehicle travel per capita. For example. However. It is therefore unsurprising that VMT and GDP correlate.000 (1997 U.195 $12.986 $49. vehicle travel marginal costs outweigh marginal benefits (Kenworthy.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. “There are on the other hand significant losses in external costs due to car dependence. policies that improve walking and cycling conditions may reduce VMT in ways that support economic development and increase social welfare overall. marginal benefits decline and eventually becomes negative as external costs and inefficiencies increase. In such situations. Factors 1 and 2 cause positive relationships between VMT and GDP.

Sacramento and Chicago are less economically successful than high VMT cities such as Atlanta. from different transport and land use policies. Figure 10 Annual Vehicle-Kms Per Capita 25.000 to 10.W. as illustrated below. troit anta ston am ham . Similarly.000 10. Figure 10 shows the variation in vehicle travel among peer countries.000 4. due to policies and planning practices that increase transport system efficiency. There is no evidence that lower VMT cities. in part.000 12.000 average annual vehicle kms). Norway and Sweden drive about half as much as in the U. due largely to differences in transport and land use policies.000 10.S. cities.000 15. annual per capita vehicle mileage varies significantly among U.S.S. such as New York.S. Birmingham or Durham.000 0 A rk nto ago land ffalo DC ston enix attle nver iami .000 average annual vehicle-kilometers) as most other OECD countries (5. The U. This variation results.000 to more than 15.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Among wealthy countries there is considerable variation in per capita vehicle ownership and use.000 20.000 2. from fewer than 5.S. averages more than twice the per capita vehicle travel (about 20. Annual VM T Per Capita 25 .000 14. than in other industrialized countries. Economically successful countries such as Norway and Germany have half the per capita VMT as in the U.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.000 6.S.000 8. 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. Figure 11 16.000 average annual miles among U.000 average annual vehicle-miles per capita. Cities (FHWA 2007) Per capita vehicle travel varies from fewer than 5. Residents of wealthy countries such as Switzerland.S. cities.000 5.000 to more than 15.

000 $20.000 Per Capita Annual GDP (2004) $50.000 R = 0.fhwa.tamu. it includes countries at very different levels of industrialization.xls).vtpi.gov/policyinformation/statistics/2007/hm72.000 15.org/Transit2009.000 $40. state. and the Bureau of Economic Account’s Gross Domestic Product By Metropolitan Area (www. the TTI’s Urban Mobility Report (http://mobility. data from U. based on data from the FHWA’s Highway Statistics (www.S.cfm).2923 $0 0 5.gov/regional/gdpmetro).000 10. Within developed countries there is a negative relationship between vehicle travel and productivity: per capita GDP is higher in jurisdictions with lower VMT. which indicates this relationship for U. 26 .dot.S.S.000 $10. States (VTPI 2009)3 $60.000 20. as illustrated in Figure 13.) Similarly. metropolitan regions indicates that per capita GDP tends to increase with per capita public transit travel.000 2 Per Capita Annual Mileage (2005) Per capita economic productivity increases as vehicle travel declines. as illustrated in Figure 12. (Each dot is a U.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. Figure 12 Per Capita GDP and VMT For U.xls).000 $30.S.bea.edu/ums/congestion_data/tables/complete_data. 3 Information in this and subsequent graphs is contained in the 2009 Urban Transportation Performance Spreadsheet (www. 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

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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

xls. Two factors help explain why GDP tends to decline at high levels of VMT: 1. 2. The results indicate that traffic congestion and economic productivity increase together. More efficient pricing and planning practices encourage efficiency. such as underpricing of automobile travel. Urban Transport Performance Spreadsheet. etc. at www.000 $40. and business travel.000 $50. GDP information from the US Bureau of Labor Statistics.org/Transit2009. such as freight and service delivery. 6 30 .000 $20.vtp.000 $60.196 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. road and parking facility costs. in which marginal costs exceed marginal benefits.000 $10.S.000 $30. Marginal productivity benefits decline as a declining portion of travel is for productive uses.vtpi.org). Described differently. cities.).Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Figure 17 $90. VTPI (2009). accident and pollution damages. Congestion delay data from the Texas Transportation Institute’s 2007 Urban Mobilty Report.000 $0 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 R2 = 0. and so tend to increase economic development. The additional VMT imposes increasing economic costs (vehicle expenses. Victoria Transport Policy Institute (www. traffic service costs.000 Per Capita Congestion Delay Versus GDP6 Annual Per Capita GDP $70.000 $80. transportation market distortions. encourage economically inefficient vehicle travel.

labor pools are limited. as more people become motorists the advantages disappear. High levels of vehicle traffic cause traffic congestion.000 annual VMT per capita). Excessive (typically more than 5. comfort and status by driving. This is called decoupling. Experience indicates that public policies can increase transport system efficiency. total costs exceed total benefits.000 Per Capita Annual Vehicle-Miles As per capita vehicle travel increases. and personal vehicles are used efficiently.000 10. As a result. Freight and public transport systems are efficient. so motorists gain a competitive advantage.000 6. More efficient pricing and better planning encourage consumers to rationally choose economic efficiency transportation options. A rigid relationship between mobility and economic productivity implies that economies are inflexible: there is only one efficient way to produce goods. For individuals.000 annual VMT per capita).000 annual vehicle miles per capita overall. and consumers have difficulty accessing basic services and competitive markets.000 4. businesses and consumer use a lot.000-5. the economy becomes more efficient. increasing economic productivity. and total social costs (congestion. but if prices increase or other policies encourage conservation. For example. marginal economic benefits decline while costs increase linearly. and business travel are inefficient. service delivery. and that economic development requires ever more energy and movement. 3. Reduced quality of alternative modes and sprawled land use increase the amount of travel required to maintain a given level of accessibility. and cause high traffic accident costs. parking problems and accident damages) increase. A flexible relationship between mobility and economic productivity implies that economies are responsive and creative: if energy and mobility are cheap. However.000 8. require large investments in roads and parking facilities. 2. All else 31 . so more productivity is generated per unit of mobility. Inadequate (typically less than 2. an individual gains speed. optimal VMT will generally seem to be much greater than the social optimal because many costs are external. This analysis suggests that there are three general levels of motor vehicle travel: 1. beyond about 4. Optimal (typically 2.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Figure 17 Vehicle Travel Economic Benefits and Costs Economic Value Benefits Costs 0 2. Freight.000 annual VMT per capita).

5 0.0 0.0 3. Virtually all developed countries are increasing transport economic efficiency (GDP per unit of travel).5 2. some much more than the U.0 1970 1980 1990 2000 2007 Most countries are increasing GDP per passenger-mile. Figure 18 4. 32 .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. and this is likely to become increasingly important as international fuel prices rise.S.5 1. as illustrated in Figure 18. This reflects an increase in transportation system economic efficiency.S.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute being equal. lags many other countries. policies that increase transport system efficiency (both energy and economic efficiency) increase productivity and competitiveness. The U.0 1.0 2.5 3.

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

010 $0.010 $0. which applied multi-modal analysis and least-cost principles (so alternative modes and mobility management strategies are implemented whenever cost effective). This indicates that optimal pricing is about three times higher than current vehicle operating costs. carsharing. mainly due to direct parking fees and distance-based insurance and registration fees. delivery services. Vehicle travel reductions would probably average 30-50%. ridesharing. accidents and pollution damages) burden the economy. economic neutrality). facility costs.100 $0.005 $0. as indicated in Table 9. It defines efficient market principles (consumer sovereignty. if applied to vehicle fuel Total This table summarizes efficient road. estimates these reforms’ travel impacts. Table 9 Optimal Pricing Summary – Middle-Range Values (Litman 2007b) Per Vehicle-Mile $0. investigates transport market distortions and reforms. and investigates resulting economic impacts. insurance and fuel charges averaged per vehicle-mile.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute The study.040 $0. This analysis indicates that in a more optimal market U.020 $0. consumers would drive less.040 $0. and support other mobility management programs. and be better off overall as a result. and more housing options in accessible locations). depending on individual needs and preferences. The additional external costs that result from this travel (congestion. telework. cost based pricing. cycling. In addition. reducing productivity.120 $0.005 $0. more neutral planning.006 $0. Transportation market reforms that correct these distortions tend to support economic development.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. would tend to improve accessibility options (walking.010 $0. 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. choose more accessible locations.005 $0.030 $0.014 $0. use alternative modes more.S. Socially Optimal Transport Prices and Markets (Litman 2007b) investigates the amount of vehicle travel that is economically optimal. 34 . parking. This analysis indicates that efficient pricing would approximately triple vehicle operating costs. public transit.

Transport planning that considers all options and impacts. so a $500 annual fee becomes 4¢ per vehicle-mile and a $1. etc. as indicated in Table 11. 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. Lease-cost funding so alternative modes and mobility management strategies are implemented whenever they are most cost-effective overall. Many include subcategories. cycling. 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. Special fuel taxes and vehicle fees based on external energy and pollution costs. Some increase land use accessibility (such as locating services closer to residential areas).000 annual fee becomes 8¢ per vehicle-mile. Described differently. time (from peak to off-peak). many transport market and planning reforms that economics support are classified as mobility management strategies by transportation professionals. Also parking cash out and unbundled. ridesharing. VTPI 2008). 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. Road tolls that increase during peak periods to reduce traffic to optimal volumes. Vehicle insurance and registration fees are prorated by mileage. 35 . Table 10 lists various mobility management strategies. These strategies cause various types of travel changes including shifts in mode (from driving to walking. destination (closer rather than more distant services). Many of these strategies tend to increase economic efficiency. Parking fees that finance parking facilities. and frequency (consolidating trips and substituting telework for physical travel). public transit.

Is cost effective on major urban corridors. Positive. Mixed. Generally positive. Positive. More flexible zoning (more density. Improvements justified to meet growing demand. provided it meets consumer demands. 36 . Positive. Incentives to Choose Efficient Modes Mixed. Generally positive. Generally negative. Positive. Generally positive. although overly aggressive campaigns can be annoying. Restricts development but increases public service efficiency. Positive. Generally positive. Reflects efficient pricing. Gives motorists a new way to save money. mix. Generally positive. etc. Sometimes considered more equitable than pricing. Increases motorist costs but provides revenues. Generally cost effective and beneficial. Consumer (Users) Mixed. consumer and equity impacts of various mobility management strategies. Equity Mixed. Benefits some people but burdens others. Generally reflects market principles and increases efficiency. Generally positive. Positive if taxes internalize costs. Positive. Mixed. Generally positive. since improved user information tends to increase efficiency. Reflects efficient pricing. Provides basic mobility. Mixed. Improved Options Transit improvements Walking and cycling improvements Rideshare programs Telework and flextime Carsharing Land use Policies Mixed. as indicated in Table 12. Increases motorists’ costs but provides revenues. Mixed.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Critics sometime claim that mobility management consists of arbitrary and inefficient restrictions on vehicle travel. Increases motorists’ costs but reduces congestion. Mixed. Generally positive. Benefits some consumers but disadvantages others. Generally cost effective and beneficial. Benefits some consumers but disadvantages others. Generally positive. Mixed. provided it meets consumer demands. Generally very positive as a user option. Generally very positive. Mixed. This table summarizes efficiency. Reflects efficient pricing. More equitable than most other funding. Urban growth boundaries. Generally very positive as a user option.) Location-efficient development. Provides basic mobility. Generally reflects market principles and reduces public service costs. Generally positive. Increases motorists’ costs but provides revenues. Generally achieves equity objectives Generally achieves equity objectives. Charges users for the costs they impose. Is cost effective on major urban corridors. housing types. 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. Mixed. Positive if raised gradually and predictably. but most strategies reflect market principles and provide equity and consumer benefits. Positive. Benefits some consumers but disadvantages others. Charges users for the costs they impose. Generally negative. Reflects efficient pricing. Mixed.

and reduce total vehicle travel. improved mobility options for non-drivers. although Norway produces petroleum it maintains high fuel prices and has other strategies to encourage energy conservation. energy conservation. particularly in oil consuming countries. Those strategies tend to increase total vehicle travel and so can exacerbate problems such as congestion. Market reforms both support and are supported by investments in alternative modes. high fuel taxes tend to increase productivity. per capita GDP tends to increase with fuel prices. including support for alternative transport 37 . 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. Mobility management tends to be most effective if implemented as an integrated program. Even among oil producers. particularly in regions that import oil because wealth leaves the economy. Increasing vehicle fuel efficiency and roadway expansion provide fewer benefits. 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. For example. 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. and parking cash out alone may reduce automobile travel 5%. consumer savings. Critics sometimes argue that increasing fuel prices is economically harmful because it increases business costs. encourage use of alternative modes. including congestion reductions. As illustrated in Figure 16. For example. road and parking facility cost savings. but this is not necessarily true. but implemented together they reduce automobile travel 15% by giving travelers better options and incentives to use alternative modes when possible. 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). emission reductions and more accessible land use development. accident reductions. accidents and sprawl. For example.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Mobility management strategies tend to provide a variety of economic benefits. High wholesale fuel prices are economically harmful. they support many planning objectives. public transit improvements alone might reduce VMT by 5%.

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

education and public transit operation are better investments. Care is needed when interpreting this information since the data are aggregated and averaged and do not necessarily reflect a specific program or project. Because input-output modeling is costly to perform it is common to extrapolate available data to a particular situation. These models often assume the economy has excess capacity so public projects do not compete with other industries.43). each $1 billion of Federal highway spending supported 30. such as the jobs and contractor profits from road project and public transit services. Table 14 is an example of input-output table results. BEA 2008. Some tend to create more jobs or higher incomes than others. Seneca. Transport facility investments are only justified if they support other strategic objectives. the IMPLAN Model apparently assumes that all service station jobs result from fuel sales. As a result. et al. If economic stimulation is the only objective. which are increasingly automated and dependent on imported imports (such as domestic vehicles assembled with imported engines and electric systems. on average. Lindall and Olson 2005.13). Pollin and Garrett-Peltier (2009) and EDRG (2009) suggest that actual impacts are somewhat lower. although most sell other goods and fuel is a relatively unprofitable product (Chmelynski 2008). Without government projects contractors might accept lower-profit but productive projects. which is often untrue. in this case for Washington State.S. such models often include some inaccurate or outdated assumptions. 2010). which are computer models that track how dollars flow through a regional or national economy. showing various industries’ direct regional economic impacts ranked from highest to lowest direct employment generation. Actual economic impacts can vary significantly depending on the type of project and the geographic scale of analysis (local. Overall. regional or national). the number of regional and national jobs created per million dollars of fuel expenditures is probably far lower than this model indicates. For example. though recent analyses by Heintz. Federal Highway Administration estimates that. more labor-intensive industries such as medical services.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. Transportation Program Expenditures Transportation policies and planning decisions affect employment and business activity generated by project and program expenditures. and so will exaggerate future job creation by industries such as petroleum and automobile production. 39 .87) and education (27. the U. that without government expenditures labor and equipment would be unused. which is better than some industries but less than labor-intensive services such as nursing care (36. arts and recreation (30. creating approximately 16 state jobs per million dollars spent. Input-output tables are generally static and backward looking in terms for factors such as domestic inputs and productivity. These impacts can be quantified using Input-Output Tables (REMI 2005. In addition. For example. This number has been widely applied. construction expenditures rank about average.000 jobs in 2007 (FHWA 2008).

57 3.83 0.34 11.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 37.50 9.23 Total Employment Per Direct Job 1.47 0.031 2. 40 .95 0.555 2.13 24.57 0.65 0.108 2.11 32.053 2.78 1.95 15.67 0.99 0.16 1.64 0.57 0. Hunting.32 0.26 2.221 2.93 1.72 1.52 0.48 0.30 2.69 1.28 14.38 1.782 1.06 0.98 0.81 2.99 17.93 9.07 0.65 14.85 2.762 2.05 2.86 1.89 2.83 1.87 27.918 2.89 2.96 22.41 2.51 0.61 0.408 4.15 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.51 0.80 1.71 10.02 2.78 14.73 1.461 1.64 0.53 17.80 1.70 2.80 0.735 2.54 10.534 1.845 2.436 3.96 14.229 2.012 2.69 0.43 33.30 15.623 2.37 0.550 1.61 0.51 0.555 Total Output Per $ Final Demand 2.811 6.74 21.60 7.04 1.782 2.68 0.13 2.165 2.62 0.82 1.887 4.44 0.727 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.26 2.43 0.773 1.005 2.034 4.04 22.11 2.17 2.37 18.92 21.00 1.82 1.382 9.35 Total Labor Income Per $ Final Demand 0.341 2.58 0.814 5.085 1.71 0.71 1.07 2.23 2.78 0.42 11.20 2.26 0.995 2.99 1.84 5.60 0. and Trapping Textiles and Apparel Forestry and Logging Construction Fabricated Metals Other Information Wood Product Manufacturing Real Estate.451 1. Construction rates average.50 0.18 13.96 5.99 21.77 0.48 0.56 12.24 2.052 1.66 0.90 18.22 17.061 2.95 0.97 1.50 0.19 36.97 19.30 0.298 2.320 2.43 14.593 1.76 10. Rental and Leasing Other Finance and Insurance Other Manufacturing Food.37 23.05 1.10 1.90 1.682 4.88 22.10 0.16 2.033 1.60 10.001 2.79 1.193 5.21 2.82 1.38 19.54 0.05 10.101 3.479 1.64 1.48 1.49 20.63 5.17 2.344 2.57 21.359 3.24 2.94 1.006 3.73 0.76 12.45 0.12 30.234 2.86 13.428 2.75 0.20 2.765 2.88 1.68 0.34 12.17 1.01 2.01 14.

829 13.068 4. or 36.8% 96.7% 96. actual impacts are generally smaller. nearly 19% higher than new roadway projects (STPP 2004).714 12.002 17.747 22.784 14.705 13.7 $1. employ more local workers (fewer tasks require specialized labor).638 14.790 9. about 9% higher than road maintenance.932 17. and spent on transit capital projects about 24.182.6 $222.8 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.2 2007 $394. Tables 3. and 17% more than average for federal spending overall (EDRG 2009).769 Domestic Content 89. These are upper-bound estimates because they assume resources would otherwise be unused.9% 96.090. aggregate and steel.5 $545.169.698 14 $1.9% 97.108 averaged overall.357. A billion dollars spent on transit operation typically creates about 41. These have declined during the last decade due to improved labor productivity and increased imports of inputs such as fuel.363 15.061.8% 96.577 5.262 19.9 2005 $428.752 4.000 jobs.849 19.7) Category Energy Transportation Average Roads and Bridges New Construction Repair Work Rail Mass Transit Aviation Inland Waterways / Levees School Buildings Water Direct and Indirect 11.842 10.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Table 15 indicates the national economic impacts of highway expenditure.5 $548.5 $175.125 37. create more jobs per dollar (little money is required for land acquisition or expensive equipment).399 17.154.317 14.3 $492.9% 96.973 27. Public transit investments tend to create relatively large numbers of jobs (GJF 2006.814 9.751 29.0 $1. 41 . Pollin and Garrett‐Peltier 2009.763 18.472 20.399 14.9% 96. Table 16 summarizes employment generation of various infrastructure investments. and are more geographically distributed than large highway capacity expansion projects (Troth 2009).894 17. Transit vehicle purchases tend to have smaller economic impacts because they are mostly imported but this could change if domestic transit vehicle production improves.342 Plus Induced 16.029 14. Table 16 Employment Impacts Per Billion Dollar Infrastructure Expenditure (Heintz.3% 96. Table 15 Million Dollar Highway Expenditure Impacts (FHWA 2008) 1997 $589. Transportation maintenance and repair projects are generally faster to implement (minimal delay for planning or land assembly).4% 96.266 23.784 19.7% 96.9% This table indicates the employment effects of various infrastructure investments. SGA 2010).0 $192.1 and 3.000 jobs.416 14.930 18.

220 $2. households devote 14-19% of their budgets to transport (Table 17).418 $693 $1.479 24. $2.071 $2.332 (16% of total budgets) annually per capita on transport.936 $297 $2. rail. For example. Some generate more regional jobs and business activity per capita than others.768 $499 $882 $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.105 $13.762 $7.280 $550 $3.258 2 0% 0 200 400 600 800 1. which can have significant economic impacts.447 $2.722 $305 $2.5% of budgets) in transit-oriented community.108 $362 $10.812 $538 $11.000 of that for fuel.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Consumer Expenditures Just as transportation program expenditures have economic impacts.5% Second $31.808 (12. Transportation policy and planning decisions affect how and how much people travel.189 $3.658 $506 $14.020 $1. Average U.164 24.988 $920 $1.162 $164 $1. Table 17 2007 Transportation Expenditures By Income (BLS 2008) Overall $49. providing about $500 in annual savings per resident (Figure 20).150 $2.9% First $20.1% 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.470 24. compared with $2.021 $171 $4.384 $738 $1. so do consumer expenditures.210 $73 $1.285 $5.000 1.014 $442 $2. and more including indirect costs such as residential parking and taxes spent on roads. 42 .638 $3.406 $20. and therefore household expenditures on vehicles.S. air) Total transportation Transportation portion of total Households spend approximately $10.304 $1.046 $271 $471 $950 $4.592 $10.350 22.696 $1.0% Third $42. residents of automobileoriented cities spend an average of $3.544 $10.237 $242 $7.000 on average in total vehicle expenditures.192 20.752 $7.594 $4.7% Fifth $96.426 21.7% Fourth $57.471 $1. This portion tends to increase with automobile use.596 $19. 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 . fuel and public transportation services.

Table 19 breaks down fuel prices into its components. Investments in alternative modes and smart growth policies reduced Portland. providing consumer and business savings (Cortright 2007). Table 18 summarizes IMPLAN input-output model analysis (Lindall and Olson 2005).465 $1. pp. smart growth communities. purchasing fuel generates fewer local jobs and less economic activity than most goods. These savings tend to provide significant economic development benefits (Goldstein 2007). distribution and marketing. economy.3 31. etc. These studies reflect regional-scale analysis and so understate differences at smaller geographic scales.3 $516. Oregon per capita vehicle travel about 20% compared with cities that expanded highways.188 $2. insurance. McCann (2000) found that households in automobile-dependent communities spend more than $8.) adds about 3.362 $1.8 13.815.0 17.6 jobs (17. economy (17. and refining tend to leave the region but stay in the national economy.088. Household Annual $262 $503 $60 $1. 111-117). These impacts are likely to increase in the future as oil prices rise (Litman 2009b).823 12.278. One million dollars of fuel expenditures shifted to a typical bundle of consumer goods adds 4. Impacts are usually much greater when analyzed at a local or regional level. 43 .139. Dollars spent on taxes. Crude oil is largely imported.591. such as between automobile-oriented and transit-oriented neighborhoods. Table 19 Gasoline Cost Components (EIA 2008) Percent 13% 25% 3% 59% 100% Avg. fuel expenditure provide little regional employment or business activity. and each million shifted from general motor vehicle expenditures adds about 3.5 jobs to the U. As a result. Modern gas stations are very efficient so only a small portion of fuel expenditures stay in local economies as wages and rents.082 $625.5 jobs to the U.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute International studies show similar results (Newman and Kenworthy 1999.500 annually on transportation compared with less than $5.110 $1.7). 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.S.533 $627.S.6 jobs.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. servicing. As a result. and each million shifted from general vehicle expenditures (vehicles.440 $1.8).292.500 annually in multi-modal.3-13.993 (* FTE = Full-Time Equivalent employees) A million dollars shifted from fuel expenditures to a typical consumer bundle of goods adds 4. Expenditures on public transit create a particularly large number of jobs.438 $600. providing more than $1.845 $1.3-12.7 17.000 annual savings per capita.

Excessive vehicle travel is economically harmful (ASTRA 2000. current planning decisions can support future economic development by reducing automobile dependency and increasing fuel efficiency. 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.” Litman 2008a). and general consumer expenditures in Texas. The majority of the U.S. transport policies and investments that halve U. Table 20 $1 Million Economic Impacts in Texas (Miller. 87% of the $381 billion total trade deficit.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Table 20 shows the regional economic activity and employment generated by expenditures on automobile use. so these costs probably increased significantly since (Greene and Ahmad 2005). provide comparable indirect economic benefits. Each 1% of regional travel shifted from automobile to public transit increases regional income about $2. A US Department of Energy study estimated that dependence on imported petroleum cost the U. resulting in 226 additional regional jobs. As a result.” excluding military intervention costs) to be $13. “Resource Externalities. 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. economy $150-$250 billion in 2005.000 $526.000 $1. when oil averaged $35-$45/bbl.S. 44 .4 17. and generate 3 to 5 million domestic jobs (Litman 2009b).S.200. Including even a small portion of military expenses significantly increases these cost estimates.2 Expenditure Category Automobile Expenditures Non-automotive Consumer Expenditures Transit Expenditures This table shows economic impacts of consumer expenditures in Texas.60 per barrel (Leiby 2007). per capita fuel consumption would save consumers $300-500 billion annual dollars. could avoid by a small-to-moderate reduction in oil imports. 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. The last three major oil price shocks were followed by recessions.S. a total of $332 billion. This indicates that policies that reduce vehicle and fuel consumption tend can provide significant economic development benefits. For example. Even large economic development benefits are likely to result from fuel conservation strategies in countries that rely even more on imported oil. imported $253 billion in petroleum products and a vehicle trade deficit (vehicle imports minus exports) of $79 billion.0 62.9 million (5¢ per mile shifted). trade deficit can be attributed to petroleum and vehicle imports: in 2009 the U. overall. Although exact impacts are uncertain and impossible to predict with precision. Robison and Lahr 1999) Regional Income $307. and much more at the regional level.000 Regional Jobs 8. transit use.S. and excessive dependence on imported oil makes a region vulnerability to price shocks (sudden price increases) and supply disruptions.

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

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

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. is there adequate support for walking.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). cycling. and external costs such as congestion. 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. telework and delivery services. increased energy imports and pollution emissions) can exceed incremental congestion reduction benefits. What portion of total transportation costs. increased sprawl and associated costs. and transportation pricing were more efficient? • • • • • 47 . public transit. and business travel) given priority over lower value trips? Are space efficient modes (buses. parking facility costs. accident damages. Are trips with high economic values (freight and service delivery vehicles. road and parking facility costs. taxi. expanding highways can have negative overall economic impacts because incremental costs resulting from in induced travel (downstream congestion. including user costs such as insurance. For example.

(2010. 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). but once the basic system was completed adding roadway capacity provides less additional residential. Undoubtedly. commercial or industrial development. 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. 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. After analyzing Washington State highway investment economic impacts. Cambridge Systematics 1999). ATA 2008).21%. Since traffic congestion imposes economic costs. Building the first highway to a region tends to significantly increase local economic productivity. Utt 2004. the primary objective of highway spending has shifted from expanding the nation's capital stock to maintaining it. However. et al (2002) found that new highways significantly affected land development patterns in the Twin Cities region during the 1970s. Bhatta and Drennan (2003) find elasticity of production costs as a function of transport infrastructure investment ranges from -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. et al. 42-25) provide a detailed review of literature on this subject. Other transportation improvements. actual impacts vary widely. “During the past two decades. 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. but alternative congestion reduction strategies tend to be more cost effective and efficient overall (Hodge. but these are largely economic transfers from one location to another without overall gain in economic activity (Baird 2005. Seneca. Kopp 2006).05 to -0.” Smith. Weisbrod and Hart 2003. Weiss (1999) and Horst and Moore (2003) show that rural areas with good highway access experienced more employment growth. Litman 2007a). They conclude.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Roadway Improvements Transportation facility improvements can increase economic productivity and support economic development (TRB 2006). Regions that invest heavily in road capacity expansion fared little better in reducing traffic congestion than those that invested much less (STPP 1998). 48 . expanding it provides declining marginal benefit (SACTRA 1999. meaning that a 1% increase in transport infrastructure investment increases economic productivity 0. highway expansion (more traffic lanes) is sometime promoted to increase productivity (Hartgen and Fields 2006. Chalermpong 2004).21. CBP 2002. pp. poverty alleviation and industrial diversity than areas that lack such access.05% to 0. but once a basic paved road system exists.

controlling for other factors. Noland and Graham (2009) found similar results. Hymel (2009) examined the impact of traffic congestion on employment growth in large U.S. They concluded that beltways deconcentrate people and businesses to levels that reduce for industrial agglomeration efficiencies. 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%. metropolitan areas. (2009) analyzed the relationship between U. 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.S. this declined significantly by the 1990s and has probably continued to decline since the most cost effective projects have already been implemented. particularly over the long run in highly congested places. 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. but the existence and direction of these effects depends on highway type and time lags considered. 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. et al. 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 $0.15 in the long run (more than a decade). with even smaller productivity gains from expansion of lower functional road categories.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Although highways showed high economic returns during the 1950s and 60s. per capita economic retail and service activity declined as the number of urban beltways increases. and are now probably below the returns on private capital. but have since declined.S. In a study of 44 US metropolitan regions Nelson and Moody (2000) found that. as indicated in Figure 21. Some studies suggest that highway investments that stimulate sprawl are economically harmful. Jiwattanakulpaisarn. 49 . suggesting that highway expansion is generally a poor investment. Jiwattanakulpaisarn. Interstate was first developed.

Recognise that the reliability of infrastructure is particularly important vis-à-vis its impact on international trade and production costs for small enterprises. reducing business in that community. Some authors have suggested trade-offs should include those between different kinds of infrastructure investment. such as more efficient road pricing. road improvements can lead to residents traveling elsewhere for shopping and services. Traffic reduction strategies can provide economic benefits by encouraging more efficient use of existing capacity. Travel demand management (including road pricing or improvements in alternative travel modes) should be considered as alternatives to capacity expansion. Efficient management has the possibility of greatly affecting economic productivity. This implies the use of benefit-cost analysis.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. Infrastructure investments should be carefully evaluated based on national benefits. may be most beneficial overall. 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. • • • • 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. 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. We do not accept the results of macroeconomic studies which purport to identify very large returns from infrastructure investment. 50 .e. which can have a negative impact on the economy as it draws scarce resources away from maintenance and operation of existing stocks. Additional infrastructure capacity may fail to increase productivity if existing infrastructure is ineffectively utilised. Poor quality or unreliable infrastructure service provision may mean that firms are reluctant to invest productive capital. At the regional and local level. particularly in the longer term. through pork barrelling or lobbying and coalition agreements) as such decisions may lead to distortion in infrastructure provision. For example. Avoid making infrastructure decisions based on political influence (i. 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. in particular. Alternative approaches.” Transport investments may have broad economic impacts.

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

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

Transportation policies can also affect the competitiveness of local industries. Similarly. For example.00 $18. if shipping from California imposes $5 in external costs. reducing transportation costs reduces local businesses’ shipping costs but also encourages local residents to shop at more central locations.00 $20.00 Locally Produced $15. Low transportation costs make locally produced goods less competitive compared with imports. roads and parking) are generally lower compared with employees driving their own automobiles and visitors using taxis. the result is both economically excessive truck travel and underdevelopment of farming in northern states. but it does point out that policies that underprice transport often have negative as well as positive economic impacts. some of the savings are likely to be spent on other local goods and services. reducing local productivity. Table 22 Production costs Transport costs Price External costs Total costs Imported Versus Locally Produced Cost Example Imported $10.00 $1. 53 . society is better off overall with the locally produced lettuce. Such impacts should be identified and evaluated in terms of overall economic efficiency. local shops will rely on imports. For example. for example. more convenient local travel may make a city a more attractive destination (which is why many resorts offer special airport transportation services). but local shipping only imposes $1 in externalities. if trucks pay less than their share of roadway costs or impose significant uncompensated accident and pollution costs.00 $5. underpriced transport often harms local industries.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Similarly. If a case of lettuce costs $10 to produce and $5 to ship from California. vegetables are cheaper to grow in California and Florida then in New York and Washington State. while local producers cost $15 to produce and $2 to ship.00 $15. harming local industries. which over the long-run often reduces local shopping options (SACTRA 1999). In these ways. If travelers spend less money on taxis. This is not to suggest that transport costs should be kept artificially high to favor local businesses.00 $2. and cheaper. it may be appropriate to help a business or region that currently depends on automobile production to diversify into other products and industries. so low shipping costs leads to more imported vegetables and less local farm production.00 $5.00 $17. improving airport public transit service provides increases productivity: total transport costs (for vehicles. However. The table below illustrates an example of how underpricing transportation disadvantages local producers and is economically inefficient overall. 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 Underpriced transport encourages imported good consumption. Underpricing freight transport.

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

Several factors account for this differences.fhwa.500 2. The Netherlands produces more than $40 billion annually in agricultural products.200 (6 spaces) 1. Both have significant agricultural potential.200 sq. Of course. parking and roads. which can have significant economic impacts. which leaves more land for farming.450 832 5% Auto-Oriented (One-story) 1. Orange. The Netherlands encourages compact development. including other land uses (such as residential lawns. Automobile dependency increases land consumption for buildings. 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. Farming was once major industry in Southern California but it is now minor. miles) Portion of 16 thousand sq. and eastern Riverside and San Bernardino counties) are similar in area (~ 16 thousand square miles) and population (~16 million residents).582 16% Multi-modal transportation reduces per capita land consumption for housing. compared with 16% in automobile-oriented areas. but a major factor is land use policy. leaving about 11% more land available for productive uses such as agricultural. The Netherlands and Southern California (Los Angeles. Increasing per capita land consumption will not reduce agricultural production if it uses land unsuited for farming.dot. This example illustrates how transportation policies can significantly affect per capita land consumption.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. The following table compares the amount of land required for 16 million residents with multi-modal and automobile-oriented transport systems.500 4. miles Multi-Modal (Three stories) 400 (2 spaces) 600 (30 lane-feet) 450 1.800 (100 lane-feet) 1. which in turn is affected by transport policy. including topography (much of Southern California is hilly). but urban development often occurs on agricultural lands (valleys and deltas) and so reduces agricultural production. accounting for less than a billion dollars in direct economic productivity. parking and roads. parks and industrial facilities) and the quality of land displaced. ft. surface parking and roads. water supply (Los Angeles has less) and economic policy (agricultural is well supported by the Dutch government). Ventura.cfm) provides data on road miles in various cities. 7 Federal Highway Statistics. In can increase the amount of land available for agricultural or other productive uses. parking and roads. interior space per capita) Parking (300 sq. with minimal land consumed for housing. per space) Roads (15 foot right-of-way width per lane)7 Impervious surface per capita (sq. the actual impacts depend on many factors. In the multi-modal community residents consume about 5% of the land base for buildings.gov/policyinformation/statistics/2008/hm71. ft) Total impervious surface (sq. Table 71 (www. ft. Typical Land Consumption Per Capita (Square Feet) Housing (1. suggesting that per capita lane-miles range from about 30 in multi-modal communities up to about 100 in 55 .

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

representing 20-50% of total employment. reducing their availability and work quality. Transportation and housing affordability can affect economic development (Litman 2008a).000 $1. lawyers and business executives require receptionists.50 Unaffordable Transport & Housing $500 $1.000 $1. such as more lower-priced housing in attractive. while artists and innovators may move away due to inaffordability. local employers must pay an extra $1. own their homes.500 $700 $4.88 per hour. Even high wage industries require numerous lower-wage support employees. If these costs are $700 per month higher. be forced to pay higher wages. Transportation affordability refers to lower-income households’ ability to afford basic mobility and accessibility. Transportation affordability tends to increase with improvements to affordable modes (walking.38 per hour. and a certain amount of social and recreational activities. and lower-wage jobs are an important economic input. If basic transportation and housing costs are $300 per month higher than other communities. For example. and more employees working multiple jobs. Inaffordability does not affect all employees equally. and with more affordable housing in accessible locations. basic shopping. Workers forced to commute long distances in old cars experience stress and unreliability.88 Unaffordable Housing $200 $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. Some may accept inferior 57 . Colleges may have difficulty recruiting students. technicians and cleaners. employers must pay an extra $4. Some pay no rent because they live with family.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. and public transit). or have subsidized housing.000 $300 $1.200 $400 $2. such as access to health care services. Businesses may have difficulty filling positions. school and work. ridesharing. cycling. multi-modal urban neighborhoods. have higher turnover. physicians. Table 23 Wage Impacts of High Transportation and Housing Costs Affordable $200 $600 $800 $0 $0 Unaffordable Transport $500 $600 $1. Cost savings are equivalent to increased income.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Affordability Affordability refers to the degree that households can afford basic goods and services. fewer seniors will retire in the area. 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.

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

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

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

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

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

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

cleaning up older urban industrial sites so they can be redeveloped). Implement mobility management programs. The following strategies can help increase affordable. delivery services) and increasing the supply of affordable housing in accessible locations tends to increase overall affordability and basic accessibility. such as urban villages (which often involves converting residential to neighborhood commercial) and housing over retail. such as commute trip reduction programs. for example. Apply reduced and more flexible parking requirements. Reduce development and utility costs for more compact. public transit.531 $4. and more efficient parking management. Improve walking and cycling conditions. renting parking spaces separately from housing units).. Allow and encourage secondary suite development. since it generates fewer car trips and reduces the costs of providing public services compared with more automobile-dependent.054 11% $72. Expenditures Per Vehicle Portion of Income $10.674 $4. and efficient road and parking pricing. streetscaping and traffic calming. Unbundling parking from housing costs (i.e. These savings can be considered equivalent to an increase in household income.213 $5.468 42% $27. Increase development density limits. accessible. accessible housing: • • • • • • • • Supporting more infill development and brownfield reclamation (for example. and public transit and taxi service quality. streetscaping and traffic calming. sprawled development. Reducing the number of vehicles a household must own can provide significant savings.388 $6. such as commute trip reduction programs. as indicated in Table 25. and public transit and taxi service quality. multi-modal development. Encourage location efficient mortgages. Allow more mixed use development. Implement mobility management programs. Improve walking and cycling conditions.691 8% $158. ridesharing. Allow and support conversions of single-family to multi-family housing. • • • • • 64 . Table 25 Vehicle Expenses As Portion of Household Income (BLS 2008) Income Quintile Lowest Second Third Fourth Highest Gross Income Avg.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Affordability and Basic Accessibility Improving affordable modes (walking.460 $5. Improve public services in smart growth locations to attract more residents and businesses. allowing higher FARs and building heights.793 4% Reducing the number of vehicles a household must own can provide substantial savings. and efficient road and parking pricing.825 17% $46. cycling. which mean that lenders recognize the potential savings of a more accessible housing location when assessing a household’s borrowing ability.

cost-based pricing. public transit. Improve alternative modes when cost effective overall. 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. vanpools and public transit). such as improved consumer options. favor investments that maximize jobs. telework) and more accessible community development. Favor higher value trips and more efficient modes. Use comprehensive analysis of impacts and options to identify the most cost effective and efficient transportation investments. and neutral investment and tax policies. cycling. taking into account all objectives and impacts. income and business activity. Emphasize asset management. including basic mobility for non-drivers and land use impacts. ridesharing. Insure that existing infrastructure is properly maintained before adding more capacity. and high occupant vehicles (carpools. • • • • • 65 . Implement policy and planning reforms that reflect efficient market and planning principles. including freight and business transport. Improve more affordable modes (walking. Implement transportation projects that reflect strategic land use development objectives and future demands.

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

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

and smart growth land use policies. 68 . Even people who never use these modes themselves can benefit from reduced automobile traffic problems. For example. benefits and economic returns.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. efficient road and parking pricing. An integrated program can result in substantial mode shifts. cycling facilities and public transit services will attract more users and provide more benefits if implemented with commute trip reduction programs.

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

Case studies indicate that parking management can support economic development (Kolozsvari and Shoup 2003). This table summarizes critical questions to ask when evaluating whether public parking subsidies are an optimal way to support downtown economic development. because they tend to be more cost effective and support other planning objectives such as traffic congestion reduction.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Table 28 identifies questions to consider when evaluating parking subsidy proposals. resulting in extensive downtown redevelopment. more street and sidewalk cleaning. This analysis suggests that downtown parking subsidies generally provide less total economic development than demand management strategies. consumer cost savings and pollution emission reductions.) might stimulate more economic activity. accidents and pollution. security patrols. Other improvements (streetscaping. it simply shifts its location. and marketing. since employees often used the most convenient. etc. During the 1970s Old Pasadena’s downtown had declined. and further improvements. 70 . the city priced parking with all revenues dedicated to downtown improvements such as street furniture and trees. This created a cycle of increased business activity. With efficient parking management delivery vehicles and customers can almost always find a convenient parking space. If a downtown is attractive and manages parking efficiently it can be competitive with relatively few spaces. marketing. and improving alternative modes. Parking subsidies stimulate automobile travel which tends to increase problems such as congestion. Improvements to alternative modes and better parking management may address the problem at a lower total cost. pedestrian improvements. 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. 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. in part due to the limited customer parking. on-street spaces. more parking revenue. better lighting. This indicates that efficient parking pricing with revenues dedicated to local improvements can support urban redevelopment and business activity. Local business activity has grown far faster than in other shopping districts with lower parking prices and nearby malls that offer free customer parking. Charging users directly for parking is generally more efficient and equitable since it rewards people for reducing their parking costs. After negotiating with local merchants. with many derelict and abandoned buildings and few customers. Much of the benefit would be an economic transfer from other shopping centers.

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

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

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

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

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

091 average household income. Automobile-Oriented Versus Transit Oriented Development Expenses Households in Portland. cycling and public transit) and increases land use accessibility (jobs and services are closer together.795 2. Offstreet Parking Traffic Congestion Roadway Costs Traffic Services This figure illustrates the estimated annual costs of motor vehicle external costs.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute Figure 21 Average Annual Cost Per Vehic le $1.000 Auto-Oriented 0.167 (1.3%) Difference 1.8%) $930 1.2%) $1.6%) Transit Oriented 1.000 $800 $600 $400 $200 $0 Estimated Average Automobile External Costs (Litman 2009a) Non-res.255 $1. and the revenues could cover about 40% of highway costs. This can provide substantial savings and benefits that support economic development.0 $2.072 $1.8 daily vehicle-miles.8%) $5. Numbers in parenthesis indicate percentage of $63.6%) $1. Table 37 Automobile and Transit Oriented Development Costs Cost Per Vehicle Vehicles Vehicle Expenses Fuel Residential Parking Public Transit Totals $3.2%) $9.8 daily vehicle-miles elsewhere in the region (Ohland and Poticha 2006).200 $1.93 vehicles and drive an average of 9.657 (4.8%) $100 (0.7%) $2.5%) $1. This occurs because transit-oriented development improves travel options (better walking.93 $5. GDP tends to increase with fuel price.7%) $865 (1. Among oil consuming countries.400 $1. reducing the amount of travel required to access activities). Oregon’s transit-oriented neighborhoods own an average of 0.253 (3. 76 .5%) $500 (0. 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.93 vehicles and 21.6%) $4. time and energy are required to meet transportation needs. This provides true resource savings: less money.4%) -$400 (0.454 (8. This suggests that efficiency justifies significantly higher motor vehicle user fees.085 (1.514 (8.661 (15.7%) Transit-oriented development reduces transportation costs. as indicated in Figure 16.207 (6. compared with 1.857 (4.93 $2.

072 on fixed vehicle expenses and $1. even if their travel time increases. 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. Residential parking typically costs about $1. each typically costing $500 to $1.207 in annual vehicle. and can be considered equivalent to an increase in household income. or they would not have made the change. everybody is worse off overall. • • 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.000 per vehicle-year. • • • As described earlier. For example. 77 . If some households prefer transit-oriented locations but cannot afford that option due to inadequate supply. Table 37 compared typical annual household transport expenditures for these locations. which increases housing affordability. • $4. including people who live in more automobile-oriented locations and rely entirely on automobile travel. a typical household that shifts from an automobile-oriented to a transit-oriented location reduces $456 sent to a foreign country. Since about 60% of petroleum prices are for crude oil and about 70% of U. oil consumed is imported.7% of average household income. This indicates that transit-oriented locations provide various user savings. equivalent to 6. Parking savings reduce development costs. they must be better off overall. A portion of peak period travelers shift from driving to public transportation because the service is efficient. Since vehicle and fuel expenditures provide relatively little domestic employment and business profits this increases national economic development. if households voluntarily choose to live in transit-oriented neighborhoods and as a result drive less and rely more on walking. Reduced traffic risk. This indicates that policies that help accommodate demand for transit-oriented development tend to increase economic development. Non-residential parking cost savings. Fewer vehicle trips per capita allow the number of parking spaces to be reduced.Evaluating Transportation Economic Development Impacts Victoria Transport Policy Institute In 2007 U. in addition to any indirect or external benefits.255 on fuel per vehicle (BLS 2008). comfortable and integrated with land use (many schools and worksites are located near stations).500 per year. 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. In a typical city businesses and governments provide 2-6 subsidized parking spaces per vehicle. cycling and public transit. Less vehicle traffic reduces traffic densities. households spent an average of $3.S. which reduces total crash risk.S. Pollution emission reductions and reduced sprawl. fuel and residential parking expenses. providing financial savings and allowing more compact development.

000 5.000 16.500 in fixed vehicle expenses. assuming a million dollars shifted from vehicles to general consumer spending generates 8 regional jobs.500 5.600 5.600 51. providing economic development. using future multipliers.000 $1.000 5.250 5.600 5. and a million dollars spent on public transit generates 14 additional jobs (Chmelynski 2008).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. Table 38 indicates resulting employment gains.00 $1.000 30.300 Fuel Prices $3.00 $1.500 16.250 7.00 $4.500 annual miles per capita and spend about $3.800 $5. consumer savings.00 $5. better health. Residents of automobile-oriented regions typically average 12. based on the analysis summarized in Table 10 which indicates that a million dollars of vehicle expenditures shifted to general consumer spending generates 3. Table 38 National Economic Development Benefits of Multi-Modal Transport $2. using current multipliers. a million dollars of fuel expenditures shifted to general consumer spending generates 4.200 4.000 $1. while residents of multi-modal communities typically average 7.000 $1.500 annual miles and spend $2.000 $1.600 $6.000 $500 7.600 17.200 11.750 9.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 5.600 24. 78 .600 45.000 $750 16.00 $1.600 19.600 Fuel Prices $4.000 5.5 jobs. Table 39 Regional Economic Development Benefits of Multi-Modal Transport $3.6 national jobs.000 18.250 16.000 $750 $1.000 24.200 6. Oregon about 20%. reduced pollution. and more livable neighborhoods (Cortright 2007).600 57.00 $1.00 $1.00 $1. More multi-modal transport and land use policies reduced per capita vehicle travel in Portland.000 36. These impacts are much greater at the regional level and are expected to increase in the future as international oil prices rise.500 per capita in fixed vehicle expenses.550 21.000 7.600 39. and a million dollars shifted from fuel to general consumer spending generates 12 jobs.000 $1. Table 39 indicates estimated future regional employment gains resulting from more multi-modal transport.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.000 $1.200 7.

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

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

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

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

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

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

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