Presented to theTransportation Summit December 12, 2012
Presentation Outline• The Transportation Sector in Maryland• Conceptual Foundations: Supply and Demand Side Effects• Demand Side Effects: multiplier effects, regional effects, employment effects.• Supply Side Effects: – Employment effects – Property value effects – Productivity effects• Transportation Finance• Concluding Comments
The Maryland Transportation Sector in Context
The Maryland Transportation Sector by Region
Changes in the MarylandTransportation Sector over Time
Jobs by Skill Level by Industry120 Percent of Jobs by Skill Levels100 80 60 40 20 0 High-skill Middle-skill Low-skill
The Maryland Transportation Sector• Proportionately smaller than US, Virginia, and New Jersey;• Proportionately largest in Western Maryland, Southern Maryland and the Upper Eastern Shore;• Growth stopped in the 2000s; and• Employs a large proportion of low skilled workers.
Demand-Side Effects ofExpansion in theTransportation Sector • Direct Effects • Multiplier Effects Price S • Most effective in recession— P1 P0 like now; • Higher proportionate effects in D’ Eastern and Western Maryland Q0 Q1 Quantity D • Larger benefits for low skilled workers.
Multiplier Effects of Expenditure on Transportation
Supply-Side Effects ofExpansion ofTransportation Sector • Employment Effects – Localization economies • Property Value Effects Price S S’ – Access capitalization • Productivity Effects P0 P1 – Production costs D – Time cost savings Q0 Q1 Quantity
Transit Impacts on Property Values
Maryland’s One Percent
Importance of Maryland’s One Percent• 1.2% of land• 38.8% of all jobs• Compared to the rest of the state, Maryland’s Economic Centers feature— – High employment densities – High industrial diversity – High relative wages – High employment growth – High share of total trips – High transit share of trips – Shorter trip lengths.
Determinants of Job Growth in Maryland’s Economic Center• # firms in the same industry (+)• # firms in different industry (+)• Average firm size (-)• Property Value (-)• Average Peak Hour Speed (+)• Distance from Highway ramp (-)• Distance from Highway (-)• Distance from Nearest Bus Stop (-)• Within half mile of transit station (+)
Dollar Value of Freight Flows 17 Source: 2009 IMPLAN data, EcoNorthwest Haul-Choice Model of truck-dependent industries
Freight Flows in Dollars to Baltimore 18
Congestion in 2030
There’s No Free Lunch• Raise $800 million in net new annual funding for transportation through a combination of net new revenues and bonding.
Gasoline Prices and Taxesin Other States and Nations
External Costs of Driving• The National Academy of Science estimated external damages on a per-gallon basis, with a range of 23 to 38 cents per gallon (with gasoline vehicles at 29 cents per gallon).
Who Pays the Gas Tax? • Most analysts agree: gas taxes are regressive. • Persons in the bottom half of the income distribution average 0.85 percent of income. • ―Nevertheless the magnitude of the tax burdens is moderate enough so that, when combined with a reasonably simple compensation scheme, gasoline tax increases could be implemented that would generate substantial revenues and provide efficiency benefits, yet protect the poor from undue hardship.‖HOWARD CHERNICK & ANDREW RESCHOVSKYNational Tax Journal, June 1997
Concluding Comments• Transportation plays a critical role in the Maryland economy--as everywhere else;• Transportation expenditures stimulate demand and job growth—especially during recessions;• Capital investments in transportation infrastructure can reduce costs, spur productivity, and increase property values;• Increases in gas taxes would push prices closer to true marginal social cost.