November, 2003 - produced by HDR, Inc under the direction of AECOM Consulting

Imperial Valley (California) Corridors Initiative

Project Type: Connectivity and circulation/access improvements

Project Objectives: Promote commercial development, congestion relief, improve quality of life, and facilitate changing he character of employers in the corridor

Outcomes Metric: Expected gains in employment, output, income, and tax revenues

Economic Environment: Economy is dominated by the government, agriculture, and retail trade sectors, which comprise approximately 70% of employment

Economic History: Strong population growth and very high unemployment. A major challenge for the region is providing sufficient jobs to keep pace with the projection of high population growth

Distinguishing Features: The attraction of the Brawley Beef processing plant to Brawley, CA in 2002, and the ability of the region to facilitate international and interstate movement of goods due to its location.

I. Existing Conditions

Imperial County is more sparsely populated and considerably less economically developed than the densely settled coastal and inland valleys of the San Diego, Los Angeles, San Bernardino, and Riverside areas to its west and northwest. However, its economy and transportation system are closely linked with these areas. Incorporated cities are El Centro, the county seat; Calexico; Brawley; Imperial; Holtville; Calipatria; and Westmorland.

Population growth in Imperial County has been strong. The county experienced an increase of 30 percent between 1990 and 2000 compared to approximately 13 percent for the state and the nation. Even more dramatic growth of 50 percent is projected for the 2000 - 2010 period. Providing sufficient jobs to keep pace with the expanding population is a major challenge for the region.

Exhibit 1: Imperial County Population Growth 1990 to 2000

Source: U.S. Bureau of the Census

Among Southern California counties, Imperial County is the fastest growing. Its population is projected to grow at an annual rate of 3.3 percent between 2000 and 2025. This compares to 1.2 percent for the Southern California Association of Governments (SCAG) region as a whole, 2.6 percent for Riverside County and less than 1.0 percent for Los Angeles County. ^[1] San Diego County population is forecast to grow by 1.8 percent between 2000 and 2030. ^[2]

The economy of Imperial County is dominated by the government, agriculture, and retail trade sectors. These three industries comprised 70% of the total employment in 2000. Exhibit 2 shows the employment by sector for Imperial County in 2000.

Exhibit 2: Imperial County Employment by Sector Industry, 2000

Source: California Employment Development Department, Labor Market Information Division, 2000 Benchmark

The high level of government employment is partially a result of the number of prison facilities located in the Valley. California's Employment Development Department projects that, of the non-farm sectors, the highest absolute growth in jobs over the period 1999 - 2006 will occur in the government (2,200), trade (1,700) and services (900) sectors. However, the current downturn in California's economy and the resulting serious decline in state and local government revenues introduce additional uncertainty for the outlook in the government sector.

Counties with a significant agricultural sector tend to have greater seasonal variations in employment, and as a result, tend to have higher unemployment rates. Even so, unemployment is a more significant problem in Imperial County than in most California agricultural counties. As the city manager of El Centro, Abdel Salem, said, "The level of unemployment here is just plain unacceptable." [3] A 12-year history of Imperial Valley unemployment compared to California and national averages are shown Exhibit 3. Imperial County has historically experienced some of the highest unemployment rates in California. Local officials attribute the improvement between 2000 and 2002 largely to the opening of a major new employer, the Brawley Beef plant.

Exhibit 3: Persistent Unemployment in Imperial County

Source: California Employment Development Department, U.S. Bureau of Labor Statistics

II. Highway Projects

At the same time as the Economic Development Corridors Initiative research was being conducted, the Imperial County Transportation Plan, Highway Element, was in the process of being updated. On September 26, 2002, the Final Draft of the 2002 Plan Update was approved by the Imperial Valley Association of Governments Regional Council. The selection of roadway projects for study under the Corridors Initiative by the Advisory Committee was informed by the planning process that occurred as part of the 2002 Plan Update. Two highway projects from this list were selected by the Advisory Committee for study as part of the FHWA Imperial County Corridor Initiative and the typology of each project is shown in Exhibit 4:

1. The SR-78/111 Brawley Bypass; and
2. I-8/Imperial Avenue Interchange Improvements in the city of El Centro.

Exhibit 4: Typology and Objectives of Selected Projects

The objectives of the SR-78/111 Brawley Bypass project, established by Caltrans, are as follows:

• Relieve congestion on State Route 78 (SR-78) in the City of Brawley by reducing the volume of truck traffic;
• Provide continuity in the "NAFTA Net" -- a series of transportation projects designed to accommodate increased trade due to the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT);
• Facilitate international and interstate movement of goods; and
• Reduce travel time through the Brawley area.

The proposed State Route 78/111 Brawley Bypass would be a four-lane divided expressway from SR-86 north of the City of Brawley to 1.5 miles south of the eastern junction of SR-111 and SR-78 in Imperial County. The estimated cost for the preferred alternative is $108 million (2004 dollars). Exhibit 5 shows the location of the project. SR-78 currently passes through downtown Brawley as Main Street.

Exhibit 5: Maps of Brawley Bypass (left) and I-8/Imperial Avenue Interchange (right)

The objectives of the I-8/Imperial Avenue project, established by Caltrans, are as follows:

• Provide access to the south side of El Centro from I-8;
• Relieve congestion on adjacent overcrossings and interchanges; and
• Improve safety by upgrading the existing design to current standards.

This project would reconstruct the existing two-lane trumpet-design interchange into a four-lane diamond interchange in the City of El Centro. The interchange reconstruction would allow the City of El Centro and Imperial County to extend Imperial Avenue to the south as far as McCabe Road. The extension of Imperial Avenue is not part of the Caltrans study, but is necessary to achieve the benefits of increased access to the area south of I-8. The cost of the extension is approximately $3 million for two lanes. A map showing the project area, El Centro and its neighboring cities is provided in Exhibit 5.

III. Coordination of Projects and Other Economic Development Strategies

There are some specific programs and projects currently underway whose inclusion may enhance the understanding of the region's economic development environment. The following is a brief summary of each of these items. Several of the programs and projects pertain to the whole region, while others are included because of their relationship to the selected highway projects:

1. The Imperial Valley Economic Development Corporation (IVEDC) has contracted with DADCO Consulting to prepare an updated economic development action plan due in early 2003.
2. IVEDC has contracted for feasibility studies for a major cargo airport to be built by private investors. Imperial County and the Imperial Irrigation District have provided the funding for the studies.
3. Several special incentive zone designations have been obtained for portions of the Imperial Valley. Some apply to the county as a whole.

Both highway projects serve the region's existing economic goals. Completion of the Brawley Bypass is a key component of the infrastructure development. The Brawley Bypass will provide better access to a specific existing employer, Brawley Beef, the region's major economic development success story to date. The beef processing operation opened in January 2002 and in a matter of months became one of the county's leading employers. The addition of 700 permanent jobs with good employee benefits was a hard-fought victory. Brawley Beef's owners have pointed toward the incentives in the Manufacturing Enhancement Area (MEA) as crucial to their decision to locate in the Imperial Valley. Community leaders were careful to safeguard the fledgling beef plant by negotiating for bypass design options that would preserve its future access and viability.

The bypass will also encourage new compatible employers to locate in the area of Brawley Beef, which local officials hope will become known as a new production and distribution center. Zoning, annexation and planning activity by the City of Brawley has focused on attracting industrial and commercial activity that will be synergistic with the beef plant, the bypass and Brawley Airport in north and northeast Brawley. The Luckey Ranch specific plan envisions mixed use development that includes industrial, commercial, residential and public/institutional uses. Along with domestic industries, the community hopes to attract manufacturing operations complementary to maquiladora plants in Mexicali that will be drawn by the improved access to the border, Los Angeles Basin and the rest of the nation via I-10.

Finally, the bypass will encourage the growth of the proposed Brawley campus of San Diego State University (SDSU). Upgrading the skills of the workforce through the provision of improved educational and training opportunities is a key component of the region's development strategy. According to SDSU officials, the decision to locate a campus near Brawley was made prior to the finalization of plans for the bypass. Nevertheless, the university welcomes the improved access the project will provide for its students and faculty.

The I-8/Imperial Avenue Interchange project also helps support the goal of enhancing road infrastructure in the region. The access and circulation improvements for the southern part of El Centro will support the change in land use from agricultural to residential. Residential growth in the area south of I-8 is proceeding even in the absence of efficient access to the freeway and Imperial Avenue. Improved access would accelerate the pace of that growth and reduce congestion at the 4^th Street Interchange, while improving the quality of life for residents of the area.

El Centro Regional Medical Center (ECRMC), located on Imperial Avenue several blocks north of I-8, is landlocked and cannot expand further. ECRMC and Chamber of Commerce officials see a market for medical office space conveniently located south of I-8 on an extended Imperial Avenue. In addition some future commercial development is projected to support the residential growth if the project is completed.

IV. Analysis Methodology and Results

The approach for estimating the economic impacts of the Brawley Bypass and I-8/Imperial Avenue projects consists of a multi-step process with validation provided by panels of local experts where appropriate. The steps are:

Step 1: Forming an Advisory Committee to Guide the Study;

Step 2: Gathering Background Information to Understand the Existing and Future Regional Conditions;

Step 3: Defining the Corridor and Identifying Highway Project(s) for Study;

Step 4: Reviewing the Technical Literature for Modeling Approaches;

Step 5: Developing a Model;

Step 6: Conducting a Risk Analysis Session with the Participation of Experts;

Step 7: Running Monte Carlo Simulations; and

Step 8: Reporting of Study Results.

Based on its research of modeling approaches from the technical literature, the study team developed a model for the assessment of bypass and interchange projects tailored to local conditions. The overall modeling approach is comprised of four components:

1. Travel Cost Modeling: Imperial Valley Transportation Model outputs and relationships from StratBENCOST, a benefit-cost analysis model for highway investments [4] , were used to evaluate the impact of the project on travel costs (including travel time, accident, and emission cost savings). Project characteristics, and traffic projections and other project documentation were analyzed.
2. Land Use Impact Modeling: a group of experts (including local officials, economic development professionals, individuals representing the farming and business communities, and real estate developers) were gathered to forecast the potential land use impact of the projects. The group was also asked to quantify the likely impacts of travel cost savings and improved access on residential property values and retail activity.
3. Economic Impact Modeling: a simple economic model was developed to estimate the total regional employment, output, income and tax effects associated with the land development projected by the panel of experts.
4. Business Sales Impact Modeling: a simple sensitivity model was developed to forecast the potential loss of business sales resulting from the diversion of pass-by traffic. Traffic projections were used to simulate the change in activity by type of business. This model applies only to the assessment of the bypass project in Brawley.

A flow chart illustrating the overall modeling process is shown in Exhibit 6. The modeling process begins with four data elements. These are: Highway Improvement Projects Characteristics and Location, Baseline Population, Employment, and Traffic Projections, Study Area Socio-Economic Characteristics, and Existing Land Use and Zoning Restrictions. The first three data elements feed into two predefined processes (structured models); these are the Imperial Valley Transportation Model and the StratBENCOST Relationships and Assumptions. The models produce two types of output; these are: Travel Cost Savings ($) and Induced Corridor Traffic (ADT).

Exhibit 6 shows the subsequent steps in the modeling process, as well. All four data elements (i.e., 1, Highway Improvement Projects Characteristics and Location, 2. Baseline Population, Employment, and Traffic Projections, 3. Study Area Socio-Economic Characteristics, and 4. Existing Land Use and Zoning Restrictions), the models (noted in the previous paragraph), and the resulting two types of outputs (1. Travel Cost Savings ($) and 2. Induced Corridor Traffic (ADT)), were reviewed by a Panel of Experts who know the local area. These reviews established land-use Impacts (i.e., square feet of land development by zone) and 2. real estate impacts ($) for key planning years through 2030. The Panel's estimates were refined to capture the subset of development that could reasonably be considered incremental or directly attributable to the projects.

The final part of the modeling process depicted in Exhibit 6 shows that the estimates of Land-Use and Real Estate Impacts produced by the Panel of Experts were combined with an additional data element, the IMPLAN Regional Purchase Coefficients and Multipliers. These three quantities serve as inputs into the Economic Impact Model (a predefined process). The Economic Impact Model produced three outputs: 1. Total Employment Impacts (FTE), 2. Total Income Impacts ($) and 3. Total Tax Impacts ($)

Exhibit 6: Overview of the Modeling Process

Brawley Bypass Results

The development forecast is provided in Exhibit 7. Shown alongside gross acreage developed (Column F) is the estimate of the portion of total development that is incremental to the project (Column G). Exhibit 8 presents the attractive risk profile for direct employment.

Exhibit 7: Brawley Bypass Development Forecast - Mean Expected Outcome

Source: HLB calculations

Exhibit 8: Brawley Bypass - Probability Distribution of Projected Incremental Full TimeEquivalent Jobs, 2030 (Steady State)

Source: HLB calculations

Exhibit 9 presents the forecast of direct employment together with the effects of downtown traffic diversion. Losses in business sales from pass-by traffic diverted away from downtown are converted into employment reductions and deducted from the direct employment to arrive at a net employment increase. The project capital cost per net job (at the mean expected outcome) is approximately $29,000, providing a rough measure of project cost effectiveness. Provided in the lower portion of Exhibit 9 is the projection of the increase in downtown residential property values that stems from reduced traffic noise and pollution. Exhibit 10 summarizes the total incremental impact of the project on the regional economy.

Exhibit 9: Brawley Bypass - Summary of Business Sales, Employment, and Residential Property Value Effects, 2030 (Steady State)

Notes:

Source: HLB calculations

Exhibit 10: Brawley Bypass - Summary of Economic Impacts, 2030 (Steady State), (Annually, In Thousands of 2002 Dollars Except for Employment)

Source: HLB calculations

I-8/Imperial Ave Interchange Results

The development forecast for the interchange is provided in Exhibit 11. The study area for the interchange consists of a single zone. The estimated range for the incremental portion of total development is shown in the bottom row.

Exhibit 11: I-8/Imperial Avenue Interchange - Probability Distribution of Development Forecast

Source: HLB calculations

The risk profile of forecast employment stemming from the development shown above is provided in Exhibit 12. The project capital cost per job (at the mean expected outcome) is approximately $101,000, providing a rough measure of project cost effectiveness in the creation of jobs. The bypass project is more cost effective than the interchange, largely because the bypass is projected to generate a much greater percentage of non-residential development. Exhibit 13 summarizes the total incremental impact of the project on the regional economy.

Exhibit 12: I-8/Imperial Avenue Interchange - Probability Distribution of Projections of Incremental Full Time Equivalent Jobs (Cumulative)

Source: HLB calculations

Exhibit 13: I-8/Imperial Avenue Interchange - Summary of Annual Economic Impacts, 2030 (Steady State), (Annually, In Thousands of 2002 Dollars Except for Employment)

Source: HLB calculations

While each of the two Imperial Valley projects examined in this study (the Brawley Bypass and the I-8/Imperial Avenue Interchange Improvements) display an attractive risk profile (though different degrees of cost-effectiveness) it is the process of identifying and designing the projects, not happenstance, that generated that outcome. The two projects outlined above were both short-listed and designed for detailed analysis with a view to maximizing development potential while minimizing the risk of failure to achieve any economic development. The study team finds that both projects provide excellent opportunities to add hundreds of permanent jobs and millions of annual tax revenues to the local economy over and above the direct effects associated with construction. The risk analysis shows ranges of probable outcomes regarding the positive economic development benefits for the region from either project.

[1] Southern California Association of Governments, 2001 RTP Socio-Economic Forecast Report,

[2] SANDAG, Preliminary 2030 Cities / County Forecast

[3] Ad Hoc Advisory Committee meeting, December 12, 2001

[4] For more information on StratBENCOST see www.hlbde.com/products/stratbencost_1.html.