Chapter Six

Findings

The findings presented in this chapter taken together suggest transportation investments can have an effect on the state's economic prosperity that is not factored in ConnDOT's current planning processes or investment decisions. Further, the interaction between ConnDOT and the Department of Economic and Community Development (DECD) does not facilitate a strategic planning orientation to sustain economic growth.

The previous chapters provided a detailed description and analysis of ConnDOT's planning, priority-setting, and funding processes as well as an examination of the interaction between the Department of Economic and Community Development and ConnDOT upon which the committee based a number of findings presented below.

Role of Transportation in Economic Development

Economic growth can be linked to targeted investments in transportation infrastructure. The literature on transportation's effect on economic growth suggests investment in infrastructure has positive impacts in a number of areas including total economic output of a region, productivity of workers and firms, employment growth, the rate of private investment, location decisions of firms, and household and employment relocation decisions. In order to understand the implications of transportation investments, policies need to be targeted and evaluated

Targeting. There are several economic activities toward which transportation policy can be directed. The Transportation Research Board (TRB), a unit of the federally chartered National Academy of Sciences, indicates there are two principal distinctions between the various objectives that can be pursed. Objectives generally relate either to the distribution of economic activity (e.g., distribution of personal income or employment) or the growth in the volume of economic activity (e.g., growth in productivity or economic product). According to the TRB, transportation policies and investments are generally more effective at promoting productivity.

Thus, productivity is the key to economic growth and targeted capital investments are the key to improved productivity. Transportation infrastructure investments contribute to productivity by reducing the costs of producing and distributing goods and services, as well as ensuring people move through the transportation network in an efficient manner. A proper understanding of the economic implications of transportation choices can facilitate identifying the most effective way to direct public and private investment in infrastructure and prioritize investments.

Economic growth in Connecticut is threatened by congestion in key transportation corridors and diminishing or inadequate connections to national and global markets by air, sea, rail, and road. These problems impact the performance and productivity of Connecticut's transportation network and influence the state's overall economic success.

Productivity, though, is not an end unto itself. Growth for growth's sake is not an appropriate centerpiece for public policy. The environmental effects of growth, for example, have economic as well as moral consequences that need to be considered. Nonetheless, growth through sustainable development (i.e., acceptable means and acceptable costs) is the only way to sustain living standards and the appropriate quality of life in Connecticut. The notion of living standards should encompass a fairly wide range of benefits and costs. When the overall gains exceed losses, then such a choice may be regarded as economically efficient.

Evaluating. Not every investment in infrastructure provides the prospect of economic growth. At a minimum, decision-makers need to assure themselves that policies and programs will make a net contribution to economic growth and they must be able to compare various alternatives. A number of techniques are available to assist decision makers in this process. Using measures of worth, such as cost/benefit analysis, rate of return, and net present value, can facilitate the evaluation of various investment choices.⁴

When considering the economic effects of transportation investments, the question is will the economy of the state as a whole be better off by undertaking a project rather then not undertaking it or by undertaking an alternative project instead. Many considerations besides economic efficiency are brought to bear in policymaking, planning, and program implementation. While not the sole determinant of a projects overall worth, these methods can provide a way to introduce the economic effects of infrastructure improvements into the transportation planning process.

A number of states have targeted specific transportation investments to assist in economic development efforts. Appendix G provides some details on a few selected state efforts. Some examples include:

• the State of Washington gives priority to projects that relieve congestion. In addition, the state has established a funding mechanism to support emergent economic development needs and one element of this effort relies on partnerships with private and public entities;
• the State of Florida is using a variety of mechanisms to provide over $2.5 billion to accelerate a number of projects aimed at enhancing the state's economic prosperity. One initiative uses a Fast Track Selection/Advisory team made up of executives outside of the department that created a quantitative methodology to screen and score projects. The selection committee recommended projects to be funded to the secretary of the department; and
• the State of Minnesota uses investment criteria, such as net present value, rate of return, and benefit/cost ratios, tempered by an evaluation of community values and social impacts to rank transportation investments and compare opportunities among modes

ConnDOT's Planning and Priority Setting Processes

The organization, process, and orientation of the state's transportation planning efforts do not adequately respond to the state's overall economic needs. The transportation planning processes and apparatus of the state are elaborate and complex. Federal and state laws require the development of several different plans and have certain mandates as to who must be involved and what their decision-making authority is. Transportation planning is heavily influenced by federal and ConnDOT funding priorities. However, there is no overarching guiding vision for the transportation system nor is there a strategic plan to prioritize the state's investments.

Transportation system planning is constrained by limited financial investment goals. Two events, one a disaster and the other a crisis, have conditioned the current investment orientation of the department. After a period of under-investment in the transportation system, the disaster of the Mianus river bridge collapse in 1983 spurred an effort that resulted in the creation of a 10-year infrastructure renewal plan and the Special Transportation Fund with the commitment of a predictable revenue stream over the 10-year period. In the early 1990s, the state was experiencing a fiscal crisis and an economic recession, resulting in a reduction in the size of the capital investment program. It is this legacy that directs ConnDOT's investments mainly toward system maintenance, while retaining a narrow view of economic development and assigning the lowest priority to capacity improvements. Consequently, any plans developed by the department represent a revenue-constrained view of future needs.

There is a guaranteed role for the public, as well as, local and regional bodies in the transportation planning process. This includes 15 planning regions in Connecticut and 14 transit districts. Because so many regional and local entities can be involved in the process, it can create complications in improving regional and statewide transportation assets. On the other hand, there is an emphasis on regional fairness in the funding process that diminishes ConnDOT's ability to address critical statewide needs.

Transportation is a basic enabler of economic activity. There is no conscious consideration in the planning and priority setting processes of the economic effect of transportation improvements on a statewide basis when making investment decisions. Certainly providing a well-maintained and safe transportation network has positive economic effects. Economic growth, however, is threatened by conditions that limit accessibility and mobility to the local, national and international transportation network. While the state's planning and funding efforts have improved its approach to the basic maintenance needs of the transportation network, it has not properly recognized the importance of identifying and addressing mobility deficiencies and opportunities in the system. Identified below are some indicators of this, which were fully developed in the briefing document:

• measures of highway congestion in Connecticut show it has increased and is projected to worsen if the current funding priorities are followed, increasing time delays and threatening safety;
• Connecticut's seaports and airports are orientated toward small niche markets. The state is dependant on neighboring airports and seaports to provide connections to the worldwide marketplace, but access to these facilities is difficult;
• neighboring state actions regarding transportation investments are not analyzed by ConnDOT nor is there an on-going relationship with other nearby states to consider mutual strategic needs and concerns; and
• transportation facilities within the state but not under state control are not fully integrated into the state's planning efforts.

The adequacy of resources devoted to the transportation function in the state effects the extent to which the department can respond to the needs (economic or otherwise) of the system. A number of trends indicate the state has reduced its commitment, especially in the capital program, to transportation investments. Specifically:

• the amount the state spends on transportation in relation to the rest of the budget has declined somewhat over the last 10 years. For example, in 1991 and 1992 transportation fund expenditures represented about 8 percent of total state spending. In the last two years it has been about 7 percent;
• the main revenue engine for the state's transportation fund is the motor fuel tax, which accounts for about 56 percent of the fund's revenue; this tax has been cut three times in the last four years, and though there has been some other revenue enhancements, they fall far short of what has been cut;
• from 1985 through 1992, total capital investment in the transportation system averaged about $815 million per year. In the last eight years (1993 through 2000), capital investments have been about $603 million per year; and
• state bonding declined from an average of $355 million in the first eight years to $178 million in the last eight years.

Link Between the State's Strategic Economic Planning Processes and ConnDOT's Planning Processes

Neither the Department of Economic and Community Development nor the Department of Transportation has systematically considered the strategic economic needs of the state and their relationship to the transportation system. The relationship and interaction between the two departments suffers from a lack of strategic vision and planning. The following findings are offered to support this conclusion:

• There is no assessment of economic cluster's infrastructure needs. The state has adopted a cluster-driven strategy for economic development. An industry cluster is defined as a grouping of companies and industries in close proximity, interconnected by the markets they serve and products they produce, as well as the suppliers, trade associations, and educational institutions with which they interact. The role of the state in this effort has been to identify and nurture clusters. While there have been studies issued in conjunction with DECD that have been critical of the operation of Bradley International Airport and its effect on economic development, no assessment has been conducted of the cluster's infrastructure needs and if any changes could assist in promoting this economic development effort.
• Interaction between the departments is limited to either advisory roles or project specific coordination. On the formal and recurring level, DECD's contact and communication with ConnDOT occurs through memberships on several boards and commissions, such as the Bradley International Airport Commission. This is typically a purely advisory function. DECD also works with ConnDOT on an ad hoc, project-by-project basis. This may include membership on specific ConnDOT sponsored project committees (e.g., the Advisory Committee for the Hartford-New Britain Busway and the Interstate-84 Major Investment Study) or project specific coordination (e.g., State Traffic Commission permit coordination).

⁴ These concepts are briefly defined as:

Cost/Benefit Analysis - Analytical procedure used to determine the economic efficiency of an investment, expressed as a relationship between costs and outcomes. Typically, a benefit-cost ratio is developed where present value of benefits are divided by the present value of costs, which indicates dollars of benefit per dollar of cost.

Rate of Return (ROR) - This refers to the percentage of total investment cost recovered in the form of economic benefits on a periodic basis. Benefits may include reductions in vehicle operating costs, time savings, reduced risks of accidents, enhanced business and industry productivity, and other economic enhancements. Rate of return analysis permits decision makers to discern whether transportation polices and investments make a worthwhile contribution to productivity and economic growth. Accounting for negative spillovers in ROR calculations ensures that transportation-related productivity and growth strategies are not at odds with the higher aim of improved living standards.

Net Present Value (NPV) - The costs and benefits of infrastructure investments occur at different times over the service life of the improvement. Calculating the NPV provides a basis to compare the worth of various investments by subtracting the present value of costs from the present value of benefits.

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