July 1998
Congress established the Appalachian Regional Commission (ARC) in
1965. The intent was to foster and
promote the economic and social development of the Appalachian Region which
includes all of West Virginia and portions of 12 other states from Mississippi
to New York.
The Appalachian Development Highway System (ADHS)
In order to promote economic development in the Region, Congress
authorized the Commission to carry out a number of programs, including the
development of the Appalachian Development Highway System. The ADHS is
envisaged as a 3,440 mile network of highways (with 3,025 miles authorized for
improvements by the ARC) providing essential transportation access for
improving the Appalachian Region's economic position. The ADHS has 26 corridors and, to date, is 75% complete.
This Economic Impact Study
This
study focuses on 12 of the 26 ADHS highway corridors that are largely complete
and determines the extent to which these corridors have helped the Region's
economy. By restricting the study to 12
of the 26 corridors, the counties impacted are limited to 165 counties of the
total 399 counties in the Appalachia Region.
These counties are most affected by improvements in the 12
corridors.
A primary objective of this study is to measure, in retrospect, the extent to
which the completed portions of the ADHS have contributed to the economic
well-being of Appalachia. If the completed corridor segments have succeeded,
then it bodes well for the economic development potential of the remainder of
the ADHS corridors that are not yet funded and/or built.
This Executive Summary
This brief report summarizes a study conducted by Wilbur Smith Associates
in 1998 that included a comprehensive data collection effort and a thorough
economic impact analysis. Highlighted in this report are the economic benefits created from the 12 ADHS corridor
improvements, the benefit/impact-cost analysis, and a summary of the
conclusions and implications. The full details of the analysis are documented in a study volume entitled "Appalachian
Development Highways: Economic Impact Studies," dated June 11, 1998.
Key Study Issues
The study focuses specifically on the ability of the ADHS highways to contribute
economic value and development to the Appalachian Region. Based on transportation data and an economic
model, which utilizes the transportation data, the study addresses the
economic impact that the improved ADHS corridors have had and will have on the
Appalachian Region.
As
part of this analysis, systematic economic benefits and economic costs are
presented based upon the travel efficiencies created from the improved
highways, which accrue to both automobile and truck users who utilize the
improved facilities. These travel efficiencies are in the form of reduced travel time, reduced vehicle operating
costs, and a reduced number of accidents.
The improved travel efficiency along the ADHS corridors ultimately leads
to an increase in economic production, job opportunities, wages, population,
and travel benefits to the people and the communities the highways serve. A major objective is to quantify and present
these impacts.
ADHS Corridors Included In This Study
This economic impact study focuses exclusively on those ADHS corridors and
corridor segments that are already built and open to traffic. The 12 corridors
included and evaluated in this study are illustrated on the following map and
labeled as A/A-1 (Georgia), B (North Carolina, Tennessee, Virginia,
and Kentucky), D (Ohio and West Virginia), E (West Virginia and
Maryland), F (Tennessee and Kentucky), I (Kentucky), J
(Kentucky and Tennessee), L (West Virginia), P (Pennsylvania),
Q (Virginia and West Virginia), and T (Pennsylvania and New York).
The Economic Evaluation Process
The effectiveness of the ADHS in creating economic
opportunity is estimated by the use of a regional economic model (the REMI
model). The REMI model is a
comprehensive economic forecasting and simulation model that has been employed
in the evaluation of a wide array of issues, including investments in
infrastructure. Travel efficiency
benefits (shorter travel times and reduced vehicle operating costs) are inputs
into the REMI model which generate the regionally specific economic development
impact estimates, as measured by jobs, wages and value-added.
Economic Efficiency Results
The ADHS corridors were evaluated from both a travel
efficiency perspective and a regional economic development perspective. The table at the bottom of the page displays
the results of these evaluations. Included in the table is the net present
value (NPV), the internal rate of return (IRR), and the benefit/cost ratio
(impact/cost ratio for the economic development perspective) of the ARC's
investment into the ADHS. From the
perspective of travel efficiency, the table indicates that:
- The net present value created from the travel efficiencies is $755 million
over the course of the study time frame.
- The constant dollar economic return is an attractive 7.87%.
- The life cycle economic travel efficiency benefits exceed the costs (benefit/cost
is 1.18). For each $1.00 invested in the ADHS, the ADHS has yielded $1.18
in travel efficiency benefits.
- The corridors as a whole seem to have been reasonable investments from a
travel efficiency perspective.
Economic Development Results
The evaluation of the corridors from the regional economic
development perspective indicates that:
- The net present value created from the travel efficiency is $1.344 billion
over the course of the study time frame.
- The constant dollar economic return is a very attractive 8.29%.
- The economic impacts exceed the costs (impact/cost is 1.32). For each $1.00
invested in the ADHS, the ADHS has yielded $1.32 in economic development impacts.
These impacts are also broken down in terms of the jobs,
population, wages, and value added for the Region, and are displayed for three
selected years in the following table:
Economic Development Impacts
|
Increases Due to ADHS
|
1975
|
1995
|
2015
|
Jobs
|
6,100
|
16,270
|
42,190
|
Population
|
14,690
|
30,420
|
84,480
|
Wages ($ million)
|
$68
|
$426
|
$1,178
|
Value Added ($million)
|
$271
|
$1,002
|
$2,975
|
ECONOMIC EVALUATION RESULTS
|
Perspective
|
Net Present Value
|
Internal Rate of Return
|
Benefit or Impact/Cost Ratio
|
Economic Efficiency
|
$755,743,000
|
7.87%
|
1.18
|
Regional Economic
Development
|
$1,344,376,000
|
8.29%
|
1.32
|
Evaluation Rules: The Appalachian Development Highway System is economically
justified (has an economic rationale) if:
- The Net Present Value is positive (+).
- The Internal Rate of Return is 7.0% or greater.
- The Benefit/Cost Ratio is 1.0 or greater.
SOURCE: Wilbur Smith Associates
|
Study Conclusions
- ADHS Has Created Jobs – By 1995 a net increase of 16,000 jobs are
estimated to have been created that would not have existed without the completed
portions of the ADHS; it is estimated that these twelve corridors will, by
the year 2015, have created a net increase of 42,000 Appalachian jobs. These
jobs occurred because the ADHS made the Region a better place to invest, live,
and work.
- ADHS Has Led to Increased Production - The net increase in value
added was $1 billion in 1995, and will increase to $2.9 billion by the year
2015. The total present value of this increased production is $6.9 billion
(1965-2025). Therefore, the ADHS has been successful in increasing the Region's
production, which results in increased job opportunities and increased wages.
- ADHS Has Created Efficiency - The ADHS highway corridors have created
travel efficiencies valued at $4.89 billion over the 1965-2025 period. Improved
road conditions and access resulted in greater efficiency. By helping the
Region to be more efficient and accessible, economic opportunity has been
expanded.
- The Federal Investment is Warranted - The economic rate of return
from an efficiency perspective is 7.87 percent, and from an economic development
perspective is 8.29 percent per year (in inflation adjusted terms, the rate
of return would be higher). This is a solid return on the investment. Over
the life cycle of the ADHS, for each $1 invested, the return is $1.18 in efficiency
benefits, and $1.32 in economic impact benefits. These are indicative of a
good use of tax payer funds.
- All ADHS Corridors Yielded Benefits - All of the twelve completed
ADHS corridors produce efficiency benefits, from a corridor- specific low
of $59 million to a corridor high of $1.2 billion. The individual corridor
efficiency returns on investment range from 5.44 percent per year to 10.06
percent. While some corridors are better than others, they all appear to have
been reasonable investments.
- Many People Have Benefited – While the most direct beneficiary of
the ADHS is the highway user, non-users of the highways were also positively
impacted—due to job creation, better jobs (wages), and other opportunities.
Therefore, the ADHS highways have benefited the people of Appalachia, even
those who do not use the specific highways.
- The ADHS Has Made Appalachia More Competitive – The ADHS highways
have helped the Appalachian Region to be better able to compete for economic
opportunity. This competitiveness is valued at $2.7 billion over the 1965-2025
period. Clearly, the ADHS has helped the Region to make progress, even though
the system is not yet complete.
The Appalachian Development Highway System, as conceived by
the U.S. Congress, was intended to help the economy of the Appalachian
Region. This study examined the ADHS,
to determine whether the completed portions of the ADHS have attained their
economic development objective.
The ADHS cannot take credit for all growth, or even a
majority of the growth, in Appalachia's prosperity. But it can take credit for enough growth (42,000 jobs, 84,000
people, $2.9 billion wages, $6.9 billion value added) to demonstrate that the
ADHS has been a good investment in Appalachia's, and America's, future.
FOR FURTHER INFORMATION
Appalachian Regional Commission
1666 Connecticut Avenue, NW
Washington, DC 20235
or
Wilbur Smith Associates
1301 Gervais Street
Columbia, South Carolina 29201
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