Return on transportation_investments_mehalko

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Return on transportation_investments_mehalko

  1. 1. Return on Transportation Investments September 20, 2007 Denver
  2. 2. “ Investment Decisions are made on Return on Investment analyses or … Instinct or Vision”
  3. 3. A Strong Case for The Great Plains Corridor <ul><li>“… freight transportation enhancements that reduce the costs of moving goods (and services) to and from markets are critical to economic expansion” </li></ul><ul><li>“ Freight Transportation Improvements and the Economy” USDOT/FHWA 2004 </li></ul>
  4. 4. A Strong Case for Investment in The Great Plains Corridor 14% of US GDP 38.5 million citizens $166.7 billion trading region with Canada and Mexico 22.1% of U.S. Agricultural Goods 25% of U.S. ethanol refining capacity NAFTA’s #2 busiest port Great Plains International Conference 2007
  5. 5. Great Plains “Great” GDP Bureau of Economic Analysis 2007
  6. 6. Needs & Investment 70% increase in freight movement by 2030 International trade is forecast to grow faster than domestic trade 28% of production in the United States is based on just-in-time delivery (AASHTO 2002). US logistics costs exceeded $1 trillion in 2000, comprising 10 percent of GDP (Delaney).
  7. 7. Transportation Infrastructure Investment Increased Transportation Capacity, Efficiency, Reliability, and Level of Service Transportation Cost Savings Transit Time Savings (Reliability Improvement) Business Expansion (Relocation and Restructuring) Increased Productivity Increased Competitiveness Increased Economic Growth Transportation Investments & the Economy
  8. 8. Increase in Regional Employment & Income Other Effects Additional Reorganization effects (improved/new products) Third-order Benefits Reorganization effect gains (increases in output/input) Second-Order Benefits Immediate cost reductions (reduced transit times/increased reliability) First Order Benefits Effects of Improved Freight Transportation
  9. 9. Estimating ROTI Construction of Transportation Improvements Improved Transportation Operations Direct Expenditures Improved Access/ Mobility Enhanced Regional Growth Multiplier Effects (REMI Model) <ul><li>Economic Impacts </li></ul><ul><li>Employment </li></ul><ul><li>Personal Income </li></ul><ul><li>Business Benefits </li></ul>
  10. 10. ROTI for the Ports to Plains Corridor Ports to Plains CDMP 2004 $2,537 Funds Needed to Develop Corridor ($331) Committed Funds $2,868 Development Costs $’s in millions (2004 dollars)
  11. 11. Summary of Economic Benefits by Category Ports to Plains CDMP 2004 $216 2,031 Roadside Services (2030) $27.0 280 Tourism (2030) $4,258 39,636 Distribution with some Manufacturing (2030) $41 2,500 Construction (person years) Total Income 2006-2030 (Millions 2004$ @ 7%) Jobs Category
  12. 12. State/Local Fiscal Benefits Millions $2004 @ 7% Discount Rate <ul><li>Jobs and incomes (personal and business) are produced as part of the benefit dollars (local, state and federal) </li></ul>Ports to Plains CDMP 2004 $42 Total Local $1 Hotel $41 Sales Corridor Local Fiscal Benefits $2 Hotel Tax $24 Unemp. Insurance $6 Franchise Tax $17 Fuel Tax $4 Corporate Income $183 Total State $53 Personal Income $76 Sales Tax Corridor State Fiscal Benefits
  13. 13. ROTI for the Ports to Plains Corridor <ul><li>Economic Benefits = $4.5 billion (using 7% discount rate) </li></ul><ul><li>Cost of Corridor (2004) = $2.87 billion </li></ul><ul><li>But thru 2030 (using 7% discount rate) </li></ul><ul><li>= $1.5 billion (period comparable to benefits) </li></ul><ul><li>Producing ROTI = 3.0 : 1 </li></ul>Ports to Plains CDMP 2004
  14. 14. Increase in Regional Employment & Income Other Effects Additional Reorganization effects (improved/new products) Third-order Benefits Reorganization effect gains (increases in output/input) Second-Order Benefits Immediate cost reductions (reduced transit times/increased reliability) First Order Benefits Effects of Improved Freight Transportation
  15. 15. Alabama Auto Suppliers Locations <ul><li>Auto Assemblers cluster at locations featuring one or more four-lane highways </li></ul><ul><li>Majority of suppliers are located within 400 miles (one-day drive) of an assembly plant </li></ul><ul><li>JIT shipments require connectivity to expanded interstate systems </li></ul><ul><li>Majority of auto manufacturers locate within 5 miles of a four-lane US or interstate highway </li></ul>
  16. 16. Alabama Auto Suppliers Locations Auto Assemblers cluster at locations featuring one or more four-lane highways JIT shipments require connectivity Proximity to 4-lane highways
  17. 17. “ on-line” order to shipping the assembled computer with software loaded and tested reduce parts inventory from an industry norm of 75 to 100 days to 6.6 days 36 hours
  18. 18. Third Order Benefits
  19. 19. What Other States Have Found (1) Moore School of Business, 2003 “ The South Carolina Department of Transportation and its Economic Impact on the State of Carolina” (2) Cambridge Systematics, Inc. 2003 “Transportation Improvements Grow Wisconsin’s Economy: The Economic Benefits of Transportation Benefits” 4,300 $156 million increase in personal income Additional $275 million annually Wisconsin (2) Job Creation Economic Benefit Level of Investment State 24,000 $2.1 Billion $950 million annually South Carolina (1)
  20. 20. Creating a Economic Strategy for the Great Plains Corridor <ul><li>Improve access within urbanized area </li></ul><ul><li>Improve connectivity between production/distribution centers </li></ul><ul><li>Access/circulation changes in rural or urban areas </li></ul><ul><ul><li>Serve Existing Employers </li></ul></ul><ul><ul><li>Encourage new compatible Employers </li></ul></ul><ul><ul><li>Quality of Life </li></ul></ul><ul><ul><li>Facilitate Changing Character of Employers </li></ul></ul><ul><li>Jobs Maintained </li></ul><ul><li>Possible new industries & wage growth </li></ul><ul><li>Business Investment likely </li></ul>Primary Economic Development Objectives Ex-Ante Considerations Project Typology
  21. 21. “ Go the Distance…… They will come… they will most definitely come”

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