A Brief History of Economic Development and Highways

Martin Weiss, Transportation Specialist, FHWA

1200 New Jersey Avenue, S.E., Washington, DC 20590

202-366-5010 (v) 202-366-3713 (f)

Author's Note: Just before beginning work on this article, I was speaking with Glen Weisbrod of Economic Development Research Group, Inc, who was co-chair for a soon to be held TRB conference on the subject of "Transportation and Economic Development". I discussed my idea for a brief history of the subject, went through it in outline, and, at the end said, "that's the end of the world as I know it". Glen recognized this line as the title of a song by the group REM that appears on the 1987 album, Document and is also on the soundtrack of the 1996 movie Independence Day I had previously used music as an organizing principle for a TRB paper and it had positive results as a mnemonic for people to remember the paper. Thus, I was inclined to use the Document album to organize this paper. As I kept writing, the sections reminded me of other songs on the album and I then used them, or parts of them, as section headings. Subsequently to this, I was speaking with Miriam Roskin, of Roskin Consulting. She was the editor of the TRB publication for the conference papers. She told me that she lived near the REM guitarist Peter Buck and enjoyed seeing the section headings and other references.

Finest Worksong

Although the early roads, water port, canals and railroads had major effects on the economic development of the country, this brief history of economic development in transportation begins with the Interstate since it was the subject of the first quantitative study of any credibility in the US in the subject of Transportation. The pioneering study in this subject examined employment trends between 1958 - 1963 (a.k.a. an ex-post study) and found dramatically higher job growth (by percentage) in areas with Interstate access^[1]. About this time it was believed by some that economic models would soon solve our transportation decision making problems^[2]. Some people still believe this. Similar studies on the Interstate system in the following decade ^{[3] [4]} essentially ended the era of national empirical studies of the Interstate system^[5]. This ended era was one in which it was not unusual to add 2000 linear miles of new interstate to the system in a single year. The next era, which began before the previous era ended and continues to this day was characterized by numerous empirical bypass studies^[6], far more numerous predictive studies (a.k.a. ex-ante studies), interview studies and modeling and thoughts on these subjects ^{[7] [8] [9]} (a more complete rearranged 'what we want and what we need' discussion of many of these sources is contained in the report for a 1999 TRB conference on Small and Medium Sized Cites entitled, "Economic Growth from Transportation Improvements, Does It or Doesn't It). Toward the end of this next era a typical year adds 30 linear miles to the Interstate System and about 30 linear miles to the Appalachian System.

These reports and studies were interesting to national policy considerations but, in fact, they did not result, even in a cumulative sense, with anything that could be used by transportation planners in the carrying out the duties required by planning and project development regulations e.g., developing STIPs and EISes^[10]. This was simply because the national reports and studies did not provide answers or create analytical methodologies suitable to the resources (e.g., data, staff, time) available to those who were assigned to carry out those duties. The during early part of this period there was a federally funded 'Economic Growth Center' formula program in which some $600 million was obligated for highway improvements and about $250 million for rail improvements^[11]. No analytical product was performed to assess the results of this program. In the mid 90s, some empirical work and modeling work began to appear which examined the relationship between economic development and highway improvement at the regional and county levels^{[12] [13] [14] [15] [16]}(again, see 1999 TRB conference report for more complete discussion of some of these studies) and some prospective studies were a direct result of those^[17]. Some similar empirical and prospective work began to appear regarding the relationship between urban economic development and high speed rail ^{[18] [19] [20]}and high speed ferries ^[21]. In 1998, the words 'economic growth' and 'economic growth and development' found their way into a transportation authorization (State/regional/local context)^[22]. During subsequent Appropriations Acts for the US DOT, Congress made a number of economic development related earmarks in various discretionary programs and other parts of the US DOT budget as well as provided economic development guidance language (county context)^[23].

Welcome to

As of the beginning of calendar year 2001, the state of knowledge, bad and educated, primitive and wild, regarding economic development was roughly as follows:

1. National economic development studies were being performed, finding, with increased nuance, that increased productivity is a good thing, finding, also with increased nuance, that the freight industry likes better roads, likewise finding that a decrease in congestion would, in the abstract, be welcome, likewise finding that there are difficult to quantify externalities (e.g., sprawl, air pollution).
2. Regional economic development studies had come to the point where economic progress could be correlated with highway improvements but with a lag times of a half decade or more.
3. Regional economic development had established that the correlation could sometimes be illustrated much better at a county or smaller level and in the case where highway improvement was essentially complete.
4. Bypasses had been shown to be neither the local economy saviors for which local improvement advocates had hoped nor the job killers that some anti bypass groups feared, but in general were, after about a 2 year lag time, a net help to the local economy for urban areas more numerous than about 5000-15,000 in population.
5. Highway improvement advocacy groups still advocate improvements based on the basis of the relationship of economic development and highway improvement.
6. State, county and municipal economic development organizations nearly always cite interstates and airports in every 'locate here' ad they place in industry publications.
7. Elected representatives are willing to commit highway trust fund dollars to highway (and other modes) economic development projects, even without an authorized 'economic development' program.
8. Highway improvement opponent groups still advocate no improvements on the basis that economic harm is a result of highway improvement
9. Urban economic development seems to be correlated with premium transportation service in the right kind of business climate but any empirical studies would be complicated by the complexity endemic to any urban area.
10. Local (county, parish) highway economic development studies have shown, quite decisively, that improved highways, by themselves, are not a economic development tool but that improved highways combined with other programs seem to have the power to make a difference in employment rates on a county level basis.

Strange

It might seem strange and not quite right that after all this time, the phrase 'economic development' has not been defined in transportation. One might even postulate that transportation professionals in general and FHWA in particular have made highway economic development a relatively low profile activity, as if it were glued on the floor. However, there are some policy considerations that need to be recognized before going on with such postulating. With respect to defining 'economic development' or 'highway economic development' or 'transportation economic development', the fact is that without a program need, the FHWA typically doesn't create definitions. Indeed, even with a program, definitions are fairly difficult because of the need to be consistent with other statute (e.g., for this reason, FHWA does not define the word 'research' within the CFR). With respect to having a program, one inhibition is the level of skill, as of the time of this paper. Specifically, the skill in predicting the success of an economic development highway project is low enough that, if, say, there were a federal program, there would be a significant possibility that the federal government would fund very wasteful projects. Another inhibition is that potential programs that benefit some parts of the country using tax receipts from other parts of the country should have to meet the test of stating why such programs are in the overall national interest. There has not been such a statement relative to highway economic development projects. There are, of course, numerous other factors, however, these suffice to explain the lack of emphasis.

Fireplace

Given the inhibiting problems briefly noted above, it might seem that FHWA might just give up and throw the rug and chairs into the fireplace. However, FHWA did not give up, partly because States, locals and various regional groups were doing their own economic development work, partly because of the need to have something to assist the STIP and EIS related requirements of FHWA's own regulations and partly because of the interest of the United States Congress.

With respect to State, local and regional work, the fact that the TRB Conference on Transportation and Economic Development took place at all and the agenda with its numerous presentations in this area gives definitive testimony. With respect to the need to assist the States in meeting FHWA's own requirements, FHWA has funded research, discussed in more detail below, that was specifically initiated for this purpose. Perhaps the most decisive development however, is interest by Congress. As late as the 1991 ISTEA, the phrases 'economic development' and 'economic growth' do not appear in a program or planning context. However, in this legislation some of the considerations of Metropolitan and Statewide planning^[24] could be construed as addressing these subjects and the words 'economic growth do appear as part of the 'finding' which precedes the enumeration of high priority corridors^[25].

More significantly, as noted above, the 1998 TEA-21 stated that 'economic growth was one reason for the National Corridor Planning and Development discretionary program and added 'economic growth and development' as a consideration to be used in selecting projects under the program. The importance of economic development, in a local/county/parish context was illustrated by the fact that, during the administration of this program, FHWA and DOT were visited by numerous delegations seeking grant funds for corridor development. The majority of these delegations were motivated chiefly by the economic development potential they envisioned would result from highway improvements and most of these delegations were comprised of municipal, county, or parish officials (with State officials and private sector officials also being well represented). Later, the report accompanying the Senate version of the DOT 2000 Appropriations Act indicated the Congress's interest in the 1995 FHWA report (noted above) which correlated highway improvements in certain corridors and sustainable employment increases in historically high unemployment counties and parishes^[26]. Subsequently, the report accompanying the joint House/Senate DOT Appropriations Act established the 'Economic Development Highway Initiative (hence called the Initiative), although it did not provide any language indicating the content of the Initiative^[27]. As recent as the end of calendar 2000, there has been additional Congressional interest in comprehensive, but transportation regional economic development in the establishment of the (lower Mississippi) Delta Regional Authority^[28].

It's the End of the World as We Know It

Given all the preceding background and retrospective, where are we today in Transportation, or at least in highway Economic Development. There are three main areas in which there is a status worth discussing: definitions; before-after study (ex-post) methodology; and the Congressionally mandated economic development highways initiative.

Within the area of definitions it seems clear that there are at least three general classes of transportation economic development studies and issues.

The first, is the national class, which I will call TED-n. The studies and issues in TED-n involve estimating the productivity gain from transportation improvements, the productivity loss from congestion, the logistical flexibility gained with adding infrastructure, the benefit/cost ratio of levels of investment and the impact of these primary factors on derivatives such as employment, GNP and so forth. TED-n has been the subject of numerous conferences, numerical modeling tasks and special high-level colloquia in the past.

The second, is the regional class which I will call TED-r. The studies and issues in TED-r involve most of the elements of TED-n, except that, frequently, these elements are less important than the interstate and interregional coordination and implementation issues which regions of the country face (e.g., the preparation by the southeast for Latin America oriented trade, the completion of interregional connectivity in Appalachia, the coordination of comprehensive planning in the lower Mississippi Delta region) and that, at least some empirical work can be done although it is necessarily limited by the fact that implementation of transportation (including highway) improvements is slow when looked at on a regional scale. TED-r has been the subject of conferences also but not to the extent of TED-n.

The third, is the local class, which I will call TED-l. The studies and issues in TED-l generally do not include the productivity, logistics, benefit/cost and similar factors of TED-n and TED-r and only tangentially include the coordination issues of TED-r. Instead, they revolve around the 'what will this improvement do for us (or to us) on the county or local level' issue. This TED-l issue is, of course of concern in developing EIS and STIP products. It is the issue motivating the Initiative. This class can, at least potentially, be addressed via empirical studies. The 2001 TRB Transportation and Economic Development conference is the first such conference on this class of studies and issues. Regarding the meaning of economic development for use in the Initiative, the FHWA has developed a definition of "economic development potential of a highway corridor" for this purpose as,

'The extent to which and/or likelihood that, improvement of a highway corridor will result in:

1. significant reduction in losses of employment; and/or
2. sustained increases in employment; and/or
3. sustained increases in wages, profits, sales and similar indicators, in a geographic area consisting of contiguous counties/parishes, single counties/parishes or portions thereof, which have historically suffered from high unemployment'

An example recently is the completion of a new bridge in Laredo, Texas. In the two year period during which the bridge was opened for traffic, over 4000 new jobs were added to an area with above the national average in employment. The job gains were enough to send the Laredo employment rate up at the same time the employment rate was declining in Texas and the US as a whole.

Within the area of methodology, the FHWA has funded a study (ERDG/CSI as contractor) that resulted in detailed guidelines (actual step by step methods) for conducting three types of before-after studies: multi county corridor, a multi town corridor and a one town corridor. FHWA encourages organizations conducting studies of this nature to use these guidelines. The contractor who produced the guidelines anticipated that if sufficient post project evaluations were completed in a generally compatible manner, it would lead to, among other things, the possibility of substantive meta analysis combining several studies. This in turn would lead to substantially better understanding of the mechanisms and conditions by/in which highway economic development works or doesn't work and the possibility of training courses to convey this and similar information. FHWA generally agrees with this line of thinking but cannot, at this time, commit to funding a meta analysis or training course.

Regarding the Initiative, as noted before, the Congressional language that began the initiative contained a number of thoughts: about corridors, about highways, about counties, about job growth in high unemployment areas. These thoughts were incorporated into the work statement for the contract (AECOM as lead contractor) carrying out the Initiative. As part of the contract, 12 study areas are being studied: two each in Alabama, California and Louisiana; one each in Montana, North Carolina, Pennsylvania, Texas, South Dakota, and West Virginia. The study is to conclude in the early Spring of calendar 2003. As noted above, the definition of "economic development potential of a highway corridor" is being used in this study. The study is to, ultimately, along with the post-project studies noted earlier, increase FHWA's understanding of the relationship between levels of highway improvement, the cost of such improvement, various economic indicators (employment, wages, profits, sales, etc.), synergies with contemporaneous public or private non-highway economic development activities and various quality of life factors. Increased FHWA understanding of these relationships is necessary because, at this time, the FHWA, if asked to distinguish between a number of highway economic development proposals could not clearly distinguish which are great, good or mediocre. Increased FHWA understanding in these matters could reasonably be applied to development of a reauthorization proposal (TEA-21 expires on Sept 30, 2003, hence the end date for the study). One early product of the initiative is a summary of the economic development issues in the 12 areas^[29]. The issues vary fairly widely; lane addition is important in a number of areas, but interchange design, accessibility and connectivity are also issues.

The definitions, the post-project evaluation methodology and the status of the Initiative are the end of the world as known at this time. The FHWA understanding of highway economic development will likely increase in the next few years.

^[1] Benefits of Interstate Highways; FHWA, USDOT; 1970

^[2] See for example the article entitled, "Will Model Building and the Computer Solve Our Economic Forecasting Problems" in Highway Research Record 149; Forecasting Models and Economic Impact of Highways; National Research Council; 1967

^[3] Social and Economic Effects of Highways; USDOT; 1974

^[4] The Impact of Interstate Highway System on Non-Metropolitan Growth; University of Texas for RSPA/USDOT; 1980

^[5] Although anecdotal type studies continue, a recent such study which was essentially observations and interviews from I-40 west of Memphis to eastern New Mexico was printed in the New York Times on July 14, 2001 as a feature article entitled Interstates Giving Boost to Rural Economies by Peter T. Kilborn.

^[6] Recent summary studies which include some bypass information include Current Practices for Assessing Economic Development Impacts from Transportation Investments, NCHRP Synthesis 290, 2000 and Using Empirical Information to Measure the Economic Impact of Highway Investments, Economic Development Research Group, Inc. and Cambridge Systematics, Inc. for FHWA, 2001

^[7] An early compilation of decisionmaking tools was Summary and Evaluation of Economic Consequences of Highway Improvements, NCPHR 122, 1971 and a later compilation of general thoughts was Economic Returns from Transportation Investment, Eco Transportation Foundation, Inc. 1996

^[8] Compilation of marcroeconomic thoughts are contained in such reports as Macroeconomic Analysis of the Linkages between Transportation Investments and Economic Performances, NCPRP 389, 1997 and Information Requirements for Transportation Economic Analysis, TRB Conference Proceedings 21, 1999

^[9] Freight specific studies include such reports as Industry Studies of the Relationship between Highway Transportation and Productivity, Jack Faucett Associates for FHWA, 1994; Measuring the Relationship between Freight Transportation and Industry Productivity, Hickling Lewis Brod Inc. for NCHRP 2-17(4), 1995 and Estimating Marginal Social Costs of Freight Transportation, TRB Special Report 246, 1996

^[10] The planning regulations, including those governing STIPs are contained in 23 CFR part 450; the environmental regulations, including those governing EISes are contained in 23 CFR part 771.

^[11] FMIS printout for 6/20/2001 "Status of Funds Provided for Economic Growth Center Highways - code 106 as of June 20, 2001"; the Economic Growth Center development highways program remains an inactive part of federal law as 23 U.S.C. 143

^[12]Core-Periphery Models, Regional Planning Theory, and Appalachian Development; Tyrel G. Moore of the University of North Carolina at Charlotte; Professional Geographer: Vol 46, no 3, August 1994.

^[13] The Economic Effects of the Appalachian Regional Commission: An Empirical Assessment of 26 Years of Regional Development Planning; Andrew Isserman and Terance Rephann of the University of West Virginia and the Regional Research Institute; Journal of the American Planning Association, Vol 61, No 3, Summer 1995

^[14] Linking the Delta Region with the Nation and the World, An Update by the Federal Highway Administration on Progress Achieved in Transportation and Employment in the Lower Mississippi Delta Region; FHWA with assistance from numerous Federal, State, local and quasi governmental agencies and other individuals and agencies; December 1995.

^[15] Lower Mississippi Delta Development Center, Inc. (LMDDC) Final Contract Report; LMDDC and the University of Memphis for FHWA; Sept. 1996.

^[16] Economic Development of the Appalachian Development Highway System, 1998 Wilbur Smith for the ARC

^[17] The "Latin America Trade and Transportation Study" completed in March 2001 was in some respects a result of the "Linking the Delta Region..." Study.

^[18] Ministry of Public Works, Transportation and Housing. From High Speed to Very High Speed Rail Transportation, the French Know-How. Pais, France. October, 1997. P.4 as quoted in January 1999 TRB Presentation.

^[19] Chambre de Commerce et d'Industrie de Lille Metropole. "Lille Metropole, Key Figures." Summer Edition, 1998 as quoted in January 1999 TRB Presentation material.

^[20] Agence Regionale de Developpement. Note d'Information Economique. "Le Nord Pas-de Calais en 1996." Juin-Juillet 1998 as quoted in January 1999 TRB Presentation material.

^[21] "Clearing the Fog about Ferries", Bob Gorman in the July-Aug 2000 TR News

^[22] Sections 1118 (a) and 1118 (b) (2) (G) of the TEA-21

^[23] For example federal aid earmarks in reports accompanying the FY 2000 and FY 2001 Appropriations Act regarding the National Corridor Planning and Development (i.e., Section 1118) in the FY 2000 and in section 378 of the FY 2001 Appropriations Act and language regarding the Department's own activities in the FY 2000 Appropriations Act report.

^[24] Codified as title 23 U.S.C 134 and 135

^[25] Section 1105(a) of ISTEA

^[26] Senate report 106-55 accompanying S. 1143, May 27, 1999, pg 96

^[27] House report 106-355 accompanying H.R. 2084, September 30, 1999, pg 81

^[28] Conference Report on HR 4577, Departments of Labor, Health and Human Services, and Education, Appropriations Act, 2001 - (December 15, 2000)

^[29] http://www.fhwa.dot.gov/planning/econdev/econdevini.html