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3 Reasons to Invest in a Transit Economic Blueprint

The President’s federal budget proposal proposes $2.4 Billion in transportation spending reductions – including significant cuts in federal transit programs. Meanwhile, states from Georgia to Oregon and places in-between have looked to increase state transit funding and there is growing discussion about the role of public-private-partnerships (PPP)’s in funding transit improvements. These changes create an environment in which transit systems and proponents must make a more compelling case than ever before to business and economically savvy audiences demonstrating their economic role.

It is time for states and regions to take stock of what is really at stake in transit investment. A State or Regional Transit Economic Blueprint can be understood as a regional study showing the role of transit in the economy, and mapping out the rationale for future investment strategies.

Areas like Hampton Roads, Virginia, Fairbanks Alaska and Austin Texas in the last year have undertaken significant efforts to define the role of transit in regional economies and assess the return on investment for continuing and expanding transit capabilities. Furthermore in recent years the American Public Transportation Association (APTA) has undertaken significant studies on the role of transit in both the overall US national economy and its regional and state economies.

Without such blue-prints, most stakeholders and decision makers either under-estimate or have difficulty locating the true economic role and benefit of transit. It is easy to overlook critical economic opportunities if looking only at the ridership in the transit market, or only thinking of transit’s role in terms of congestion relief. Even when a very small percentage of trips are carried by transit on an uncongested system, transit can be central to the engine of a region’s transportation economy because:

(1) Transit plays a special role in industry value-chains: A good study of the economic role of transit can demonstrate the industry value chains in the economy where transit is particularly important. For example, many citizens may believe that if they or their customers do not use transit directly, they are economically independent of transit services. However, in reality more businesses depend on transit than even typical employees or customers realize. For example, in a hospital even if only 5% of workers use transit – and these are certified medical assistants, custodial and food service staff, the entire operation of the hospital, ranging from routine appointments to million dollar surgeries would be unsustainable without this transit-dependent aspect of the operation. In the same way, resort, hotels and tourist establishments that bring millions of dollars of revenue into local economies often depend on transit for key occupations without which entire establishments or even industries would be in-viable at existing locations. Understanding the value-chain role of transit in the economy is vital to developing (and building consensus around) a responsible transit investment strategy.

(2) Transit creates productivity by enhancing workforce accessibility: Transit does more than simply moving people efficiently. If you are a business manager or owner, there are cases where transit can expand the potential pool of applicants for any given job, enabling your business to be more productive. Imagine that you opened an engineering firm, and needed a mechanical engineer. Imagine 5 people apply. Suppose another 5 would have applied, but were unable to make it to your location within a reasonable commuting time? Would a firm with 10 applicants to choose from find a better engineer, or the firm with only 5? In cases where BRT, rail transit and other options expand the accessible labor pool, businesses can be more productive. In this way, even if relatively few people ride transit, the impact of the access it provides can have a profound effect on the business environment. This is such a powerful benefit that private firms like Google actually operate some of the largest transit fleets in America. APTA conducted a study in 2014 demonstrating how this effect plays out in multiple cities throughout America. Understanding the role of transit access in the productivity of the business environment is another key advantage to having a transit economic blueprint.

(3) Transit reduces the amount of money spent to move people: The “modal efficiency” of transit has long been understood in terms of attracting riders who would otherwise drive cars - (thus reducing the cost of operating and accommodating a separate vehicle for every commuter). However, the greatest efficiency may well be riders who do not own cars at all. For many transit riders (especially in cities with small and medium-sized transit systems), the absence of transit could mean either (1) foregoing employment and other activities entirely or (2) imposing costs on friends, neighbors or others to share rides by adding additional travel time and cost to other commuting trips above and beyond the cost of congestion. Hence the efficiency of offering transit service is not simply the idealistic desire to attract drivers to a more efficient mode – but in many cases affects employers, co-workers, friends family and an the entire support system of a transit user.

A Transit Economic Blueprint can readily identify and quantify (in terms of dollars, jobs, business sales and household income) how and where these and other critical economic efficiencies of transit occur. Furthermore, a good blueprint can compare investment strategies, assess the efficiency of the transit-land use relationship and identify emerging occupational, consumer and even new business-attraction segments for transit. Investing in this type of planning and market intelligence may be among the most responsible actions a state, metropolitan planning organization or transit authority can take.

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Innovative Infrastructure Finance

Every four years, the American Society of Civil Engineers (ASCE) grades the condition of U.S. infrastructure on a scale of A through F. Since 1998, America’s infrastructure has earned persistent D averages. Underinvestment is a much-studied topic. EDR Group’s recent report on this issue to ASCE "Failure to Act: Closing the Infrastructure Investment Gap for America’s Economic Future” found that the most significant investment gap across all types of infrastructure is in the transportation sector, where $1 trillion in additional investment is needed over the next ten years.

 Blog_graphic.jpgThe U.S. funds federal spending on highway and transit projects through a variety of user fees that pay into the Highway Trust Fund (HTF). Fuel taxes contribute the largest share of revenues by far. In FY 2014 they constituted 87% of the HTF’s tax revenues. However, over the past 10 years spending from the HTF began exceeding revenues, a condition forecast to worsen over time (see figure at left, source: Congressional Budget Office). Increased fuel efficiency of gas-powered vehicles and popularity of alternative fuel vehicles is key driver of this trend—one that also affects state transportation funds due to their significant reliance on state fuel taxes.

Starting in 2008, Congress addressed the HTF funding problem by transferring money from elsewhere, primarily the General Fund of the U.S. Treasury. The most recent surface transportation authorization bill, the FAST Act, continued this approach, with 25% of trust fund deposits over a five-year period to come from general tax revenue rather than broad-based user fees.

What’s going on at the federal level with the Highway Trust Fund is just one piece of a much broader conversation about how to fund transportation investments and an increasingly focused legislative, political, and research exploration of creative or alternative financing mechanisms.

The November 2016 elections saw residents in a nearly half of all U.S. states voting on a large range of transportation ballot measures and initiatives with over $250 billion at stake, according to the Eno Center of Transportation. Some passed, some did not, but all grappled with the question: who should pay for transportation infrastructure and services and how can revenue generation mechanisms be structured to support sustained long-term investment in a manner that is both efficient and fair?

EDR Group is currently involved in a number of federal and state efforts that address these questions.

In one project, EDR Group is part of a team funded by the National Cooperative Highway Research Program to develop guidance on the Use of Value Capture to Fund Transportation. Value capture (sometimes referred to as value sharing) is the idea that governments may be able to share some of the commercial value created by the access provided by public infrastructure investment, and use this “captured value” to help finance transportation system investments. The project considers a variety of mechanisms including development impact fees; land value-based fees; betterment levies and special assessment fees. The research will help State DOTs assess whether value is indeed being created by transportation investments and then assess a range of value capture mechanisms based on their efficiency, equity, revenue potential, and sustainability. Key questions being answered are: how can value created by public infrastructure investments be shared; what are the legal means and practical methods for sharing value; who benefits and who pays when value capture is implemented, and how has value capture been implemented in the past. A guidebook for policymakers illustrated with case studies and real-world examples will be produced by this project.

In another project, EDR Group is working with the RUC West, a consortium of 14 western states investigation the feasibility of implementing a Road User Charge (RUC) funding system. There are several on-going projects being sponsored by RUC West, including pilot studies, to assess the financial impacts of moving from a fuel-based tax to a mileage-based fee system. EDR Group assessed “revenue neutral” mileage-based road user fees that would be required to replace current gas tax revenues. A key equity concern for the Western states is whether there would be disproportionate impacts on rural drivers due to the greater distances involved in their daily travel. EDR Group’s analysis showed that due to the combination of travel characteristics, mileage driven, and current vehicle fuel consumption characteristics, rural drivers would actually pay less in terms of total dollars spent each year under a mileage-based fee system than with the current fuel-based tax system.

Going forward, innovative finance will continue to be a key issue in the transportation world. But as we fundamentally change the ways that we pay for our transportation investments, questions about the fairness, sustainability and the ability of these new mechanisms to meet our future investment requirements will need to be addressed. Economic principles and methods can provide the insight required to help make these changes. And fostering communications between policymakers and the public will be essential to gain the acceptance needed to make changes in how we fund transportation infrastructure investments in the future.

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Securing Grant Funding for your Rural or Freight Project

To secure funding for projects through the federal TIGER or FASTLANE grant programs, it is critical to demonstrate not only a great project in terms of benefit-cost ratio, but also why the project has economic consequences. Successful TIGER grants for highway or bridge projects have tended to go to applicants who can show community or regional benefits. The new FASTLANE grant program seeks applications that can demonstrate national freight significance and visible economic outcomes.

Rural and freight projects can easily be overlooked if the sources of benefits are not understood to go beyond the regular travel time, reliability and mileage savings. In rural areas, where traffic volumes are often low – a strong accessibility and livability case can be essential to a strong application. In 2014 EDR Group performed the Benefit-Cost analysis for the largest TIGER award given that year – the Kentucky Mountain Parkway Extension. Access to state parks, health care and other amenities supporting livability and quality of life was an important consideration that may have been overlooked without going beyond typical engineering measures. In writing other winning applications, such as the 2013 Rhode Island Apponaug Bypass and the 2015 Mississippi River Bridge in Missouri, we also relied on important considerations about how projects would affect business operations on the ground and community quality of life.

When it comes to freight projects where generalized models of travel demand tell only a sliver of the story, it becomes important to also demonstrate downstream supply chain effects or business productivity, using freight data.

The deadline for the newest round of TIGER Grant applications is April 29, 2016 (see: https://www.transportation.gov/tiger  ). The deadline for the new FASTLANE grant program is April 14, 2016 (see https://www.transportation.gov/fastlanegrants/fastlane-nofo  ). EDR Group provides consulting service support for both grant programs. Read more about these past awards on EDR Group’s web site at: www.edrgroup/TIGER .

To develop a grant application for your project, please contact Chandler Duncan (This email address is being protected from spambots. You need JavaScript enabled to view it. ), tel +1.617.338.6775 x203

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