Economic Impact Analysis of the Michigan Transportation Investment Package
MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page i Table of Contents Chapter 1. Introduction.............................................................................................................................1 1.1 Objectives of the Study...................................................................................................................1 Chapter 2. Investment Packages..............................................................................................................3 2.1 The Preferred Vision.......................................................................................................................3 2.2 Goals of Investment Packages........................................................................................................4 2.3 The Four Initial Investment Packages that were Studied..........................................................4 2.4 Investing to Achieve the Vision.....................................................................................................5 Chapter 3. Impacts of the Investment Packages on Michigan’s Economy........................................7 3.1 Investment Impacts on Transportation Modes/Programs .........................................................7 3.2 Direct and Total Effects of the Investment Packages..................................................................9 3.3 The Economic Impact Results ......................................................................................................10 3.3.1 Impacts of the Four Initial Investment Packages that were Studied...............................11 3.3.2 Impacts of the “Investing to Achieve the Vision” Package..............................................11 3.3.3 Impacts of Border Crossing and Aviation Improvements...............................................14 Chapter 4. Regional Economic Impact Analysis of “Investing to Achieve the Vision”.................15 4.1 Definition of the Study Regions...................................................................................................15 4.2 Key Industries................................................................................................................................18 4.2.1 Employment Distribution.....................................................................................................18 4.2.2 Number One Industry in the Study Regions......................................................................19 4.3 Population and Employment Forecast.......................................................................................20 4.4 Investing to Achieve the Vision...................................................................................................21 4.4.1 Regionalization of the IAV....................................................................................................21 4.4.2 Economic Impact of the IAV.................................................................................................22 Chapter 5. Conclusions...........................................................................................................................24 List of Tables Table 1: Allocation of Transportation Funds for the Five Investment Packages over the Period of
2007 to 2030 (in millions of $2005)...........................................................................................................6Table 2: Economic Impacts of the Investment Packages over the Period 2007‐2030......................12Table 3: No. 1 Industry in Each Region in 2003 in terms of Total Employment and Industrial
Output.......................................................................................................................................................20Table 4: Regional Forecast for Population and Employment............................................................21Table 5: Regional Economic Benefits over the Period of 2007 to 2030..............................................23 MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page ii List of Figures Figure 1: Investment Impact on Transportation Modes/Programs....................................................8Figure 2: Direct, Indirect, and Induced Economic Impacts from the Transportation Investment10Figure 3: Cumulative Changes in Gross State Product for the Five Investment Packages...........13Figure 4: Employment Benefits by Industry to the Year 2030 IAV Compared with BAU...........13Figure 5: Map of the 17 Michigan Study Regions................................................................................16Figure 6: Distribution of Personal Income, Total Employment, and Population among the 17
Study Regions for 2003............................................................................................................................17Figure 7: Per Capita Personal Income for the US, Michigan, and the 17 Study Regions for 2003 18Figure 8: Distribution of Industrial Employment for the Study Regions ........................................19
Appendices Appendix A: References .......................................................................................................................A‐1 Appendix B: REMI Model Structure...................................................................................................B‐1MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page iii Executive Summary MI Transportation Plan has set forth a vision for the future development of Michigan’s
transportation system and has identified alternative investment packages that will be necessary
to move toward that vision. The primary focus of this report is to evaluate the economic
impacts and implications arising from the transportation investment packages. To accommodate future economic growth and to meet increasing demand on Michigan’s
transportation system, the Michigan Department of Transportation (MDOT) proposes several
investment packages for improving and maintaining the transportation system assets which it
owns, operates or funds. These investment packages include a base package for “Business as
Usual,” three alternative packages, and an “Investing to Achieve the Vision” package. The
three alternative packages are designated as “Change the Mix,” “Move Ahead” and “Flexible
New Revenue” and represent different investment options to cope with the future demands on
the transportation system. The intent of the investment packages is to improve and provide a
better‐maintained transportation system for Michigan residents and businesses, and offer multi‐
modal connectivity between different transportation modes and programs. In order to assess the various investment packages, MDOT used the REMI Model (Regional
Economic Models, Inc.) to evaluate each investment scenario. The simulation capabilities of the
REMI Model can be found in a detailed description in Appendix B, at the end of this report, and
in the Methodologies of Economic Impacts Report. Economic Impacts of the Transportation Investment to Michigan’s Economy The following table summarizes the impacts on Michigan’s economy associated with each of the
investment packages as compared with a zero‐investment scenario over the life of MI
Transportation Plan. The economic benefits from the “Business as Usual” (BAU) investment
package include a $50.0 billion (measured in 2005 dollars or $2005) increase in gross state
product (GSP) and $38.4 billion increase in personal income over the period of 2007 to 2030.
The BAU package also will add 30,000 permanent full‐time equivalent jobs by the year 2030. In
addition, Michigan residents will experience benefits from travel time savings realized through
the investment to maintain and improve the transportation system. The value of commuting
and non‐work travel time savings for personal travel can reach $22.2 billion over the lifetime of
MI Transportation Plan. The “Change the Mix” package has the same level of investment as the BAU, but will re‐allocate
funds between programs/modes. As a result, the economic benefits are very similar to the
impacts from the BAU package. When re‐allocating funds, the “Change the Mix” package will
reduce investments in highway programs that alleviate congestion pressure on roadways and
result in increased personal travel time. Correspondingly, travel time saving benefits will
decrease, though moderately, as compared with the BAU. Both the “Move Ahead” and the “Flexible New Revenue” packages propose to increase
investment funds to expand and improve the transportation services offered by various
modes/programs. The economic benefits to Michigan’s economy are an additional $8.3 billion MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page iv and $18.7 billion in GSP generated in response to the “Move Ahead” and “Flexible New
Revenue” packages, respectively, from 2007 to 2030. This represents growth above and beyond
the $50 billion increase in GSP for the BAU package. Based on the impact results estimated for the BAU and three alternative investment packages,
MDOT developed a fourth alternative called the “Investing to Achieve the Vision” (IAV)
investment package. The IAV proposes investing more funds (about $0.9 billion) than the
“Flexible New Revenue” investment package in the preservation and expansion of several
transportation modes and programs such as aviation and multi‐modal. The IAV package
results in economic returns of nearly $70 billion in GSP and over $80 billion in combined
personal income and travel time savings from 2007 to 2030. In addition, the IAV package will
generate more than 43,000 permanent full‐time equivalent jobs by 2030 as compared to a zero‐
investment forecast.1 Consequently, the return on investment is $1.64 in economic benefits for Michigan residents for every one dollar invested in transportation.2 Notable are the types of jobs that will be supported by the investment in transportation.
Excluding construction, the industries projected to benefit the most in terms of employment
gains include transportation, warehousing and trade, professional, technical, educational and
management services, and tourism industries. This is important because it demonstrates the
ability of the transportation plan to support diverse sections of the state’s economy. The benefit
estimates for these packages should be considered the lower bound of potential benefits
because, due to data limitations, the analysis does not fully account for all of the benefits arising
from the transportation investments. Specifically, the analysis does not fully capture social and
environmental benefits or the full value of logistics cost savings to Michigan businesses, both of
which will have positive impacts on the economy. 1 The economic impact results are also presented in the Investing to Achieve the Vision Report. 2 The economic benefits used for this calculation include Gross State Output and the value of personal time savings. MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page v Economic Impacts of the Investment Packages over the Period 2007‐2030 “Business As Usual” (BAU) “Change the Mix” “Move Ahead” “Flexible New Revenue” “Investing to Achieve the Vision” CumulativeImpactChange from BAUCumulative ImpactChange from BAUCumulative Impact Change from BAU Cumulative ImpactChange from BAUTotal Employment
(in thousands of
Permanent full‐
time equivalent
jobs) 30 300(0.0%) 366(20.0%) 42 12 (40.0%) 43 13(43.3%)Gross State Product
(in billions of 2005) $50.0 $50.1$0.1(0.2%)$58.3$8.3(16.6%)$68.7 $18.7 (37.4%) $69.6$19.6(39.2%)Personal Income
(in billions of 2005) $38.4 $38.5$0.1(0.3%)$45.1$6.7(17.4%)$53.3 $14.9 (38.8%) $54.7$16.3(42.4%)Personal Travel
Time Savings (in
billions of $2005) $22.2 $21.4‐$0.8(‐3.6%)$23.4$1.2(5.4%)$27.0 $4.8 (21.6%) $27.1$4.9(22.1%)Source: Wilbur Smith Associates Economic Impacts at the Regional Level To analyze the economic impacts of the investment packages at the regional level, the state of
Michigan is divided into 17 study regions. As shown in the following table, the economic benefits for the period of 2007 to 2030 vary in
accordance with the magnitude of the economy in each region. For instance, the Greater Detroit
Region (i.e., Region 1B), with nearly 50 percent of the state economy, has the highest impact
generated from the IAV. Over the life of MI Transportation Plan (from 2007 to 2030), the Greater
Detroit Region may see the gross economic benefits of a $42.6 billion (in $2005) increase in Gross
Regional Product (GRP), and a $29.5 billion increase in personal income. Compared with the
“Business as Usual” package, the IAV generates an additional $11.3 billion in GRP and $8.5
billion in personal income for this region. MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page vi Regional Economic Benefits over the Period of 2007 to 2030
“Business as Usual” “Investing to Achieve the Vision”No. Region Name Total Emp. GRPPersonal IncomePersonal Time SavingsTotalEmp. GRP Personal IncomePersonal Time Savings 1A Greater Ann Arbor 152.72.71.4223.9 3.91.81B Greater Detroit 15731.321.016.3225 42.6 29.518.82 Greater Jackson 60.80.80.281.2 1.20.33 South Central MI 121.51.40.4172.2 2.00.64 Greater Benton Harbor 70.70.70.2101.0 1.00.35 Greater Flint 152.12.10.6213.0 3.00.96 Greater Lansing 152.01.70.5222.9 2.50.77A East Central MI 80.70.70.2111.1 1.10.27B Greater Saginaw 141.71.70.4202.4 2.40.68A Greater Big Rapids 40.50.50.260.7 0.70.28B Greater Grand Rapids 253.72.81.1365.2 4.11.59 Northeast Michigan 40.40.40.160.5 0.50.110 Northwest Michigan 60.70.70.291.0 1.00.411 Eastern Upper Peninsula 20.10.10.020.2 0.20.112 Central Upper Peninsula 30.30.30.140.5 0.40.213 Western Upper Peninsula 20.20.20.030.3 0.30.014 West MI Shoreline 50.60.60.380.9 0.90.4 Total 30050.038.422.2430 69.6 54.727.1Source: Wilbur Smith Associates(Employment is in hundreds of full‐time equivalent permanent jobs and other indicators are in billions of
$2005.) A detailed background of the methodologies of estimating economic impact results of the
investment packages is found in the Methodologies of Estimating Economic Impacts Report. MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page 1Chapter 1. Introduction Michigan’s transportation system provides the backbone for all economic activities within the
state. The transportation system, including roads, transit, non‐motorized facilities and inter‐
modal facilities, plays an integral role in supporting the state’s economy and the quality of life
for Michigan residents. Transportation investments are part of the state’s overall economic
development strategy, and MDOT identifies the link between transportation and the economy
as their top priority. An efficient transportation system saves time and money for individuals and businesses,
enhancing productivity and competitiveness and promoting economic growth. Statistics
indicate that the demand for transportation grows along with economic activities. In the United
States (US), transportation is a major component of the economy in terms of gross domestic
product (GDP), employment, and expenditure. Transportation is even more important for
Michigan given that vehicle manufacturing is Michigan’s largest industry. The demand for the transportation system is now statewide, and has been rising steadily as the
economy expands and population decentralizes. It has added tremendous pressure on state
government agencies that provide and maintain the major portion of the transportation system.
To meet the increasing demands of the transportation sector, government agencies around the
US are considering increased investments to build new corridors, add capacity, and/or improve
the levels of service for their respective transportation systems. MDOT is also actively taking
into consideration means and methods to enhance the state’s transportation system in order to
accommodate long‐term economic growth and future transportation needs in the state. 1.1 Objectives of the Study The purpose of this report is to examine the potential economic impacts to Michigan’s economy
when MDOT invests in the improvement and maintenance of the state’s transportation system.
Specific objectives of this analysis are to: •Review the Preferred Vision and the alternative investment packages in MI Transportation
Plan. Chapter 2 provides this review. •Estimate the economic benefits to Michigan’s state economy from the investment
packages including “Investing to Achieve the Vision.” Findings are presented in
Chapter 3. (In order to assess the various investment packages, MDOT used the REMI
Model to evaluate each investment scenario. The simulation capabilities of the REMI
Model can be found in a detailed description in Appendix B, at the end of this report,
and in the Methodologies of Economic Impacts Report.) •Examine the distribution of potential impacts generated by the investment packages at
the regional level. Chapter 4 presents the regional findings. MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page 2•Offer some conclusions based on the economic impact results obtained in this analysis.
Chapter 5 presents the conclusions. MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page 3Chapter 2. Investment Packages The Michigan Department of Transportation, (MDOT) through MI Transportation Plan,
answered the challenge by proposing and studying a transportation vision that includes
investments for preserving, modernizing, and adding capacity to Michigan’s transportation
system. Michigan’s Preferred Vision not only lays out actions to be taken to satisfy the future
needs in transportation, but also provides the necessary transportation infrastructure and
flexibility necessary to bring new economic opportunities to Michigan through enhancing
economic competitiveness and diversifying the economic base. 2.1 The Preferred Vision The Preferred Vision of Michigan’s transportation system developed for MI Transportation Plan
requires that the entire system (all modes) be maintained, preserved, and protected as one of the
state’s most important physical assets.3 The Preferred Vision is summarized in nine elements that need to be addressed and achieved
when implementing MI Transportation Plan. These elements are: •Purposeful: Michigan’s 2030 integrated transportation system will be the foundation of
the state’s economic vitality and will sustain quality of life for its residents. •Prioritized: Capacity improvements will be needed, but the first priority will be physical
or technological improvements to enhance efficiency, mobility and access. •Coordinated: All transportation providers will work together to address the system’s
needs holistically. All modes will be maintained, preserved, operated, and protected as
one system, one of the state’s most important physical assets. •Safe: Safety will be a primary goal. It will be addressed, as each improvement is
planned and implemented. Personal and system wide security will be enhanced,
including border security. •Advanced: MDOT will embrace technology and technological development. The
department will use innovation in every aspect of what it builds, how it builds, and in
every service that is provided. •Integrated Choices: System integration will be achieved for both passenger and freight
transportation through improvements in modal services and effective intermodal
connections. The system will be responsive to the public’s demand for more transit,
bicycle and pedestrian choices. The need for freight and passenger movement will be
balanced, and the system will accommodate both without compromising goals for safety
or economic competitiveness. 3 A more detailed discussion is found in the 2030 Preferred Vision for an Integrated Transportation System Report. MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page 4•Appropriate to the Setting: Transportation will be integrated between modes, and also
with land use, economic, and environmental systems. Transportation solutions will be
regionally sensitive, sustainable, and energy efficient. Infrastructure improvements will
be tailored to the community and natural setting and will be planned cooperatively so
customers and partners are satisfied with the result. •Flexibly‐Funded: Transportation financing will be diversified to include new methods
and techniques, but public funds will remain dedicated to transportation purposes.
Funding will be flexible so that money can be allocated to meet the highest priority user
needs. •Responsive: MDOT will be an open and flexible organization, responsive to customer
needs and with a transparent, accountable decision‐making process. MDOT will be
proactive, adaptable, and able to identify and respond to change as needed. 2.2 Goals of Investment Packages The ultimate goal of improving and expanding Michigan’s current transportation system and
further enhancing its multi‐modal facilities is to create a seamless transportation network
throughout the state for personal travel and commercial transportation. Specific goals of MI
Transportation Plan summarized in other technical reports include:4 •Stewardship: Preserve transportation system investments, protect the environment, and
utilize public resources in a responsible manner; •System Improvement: Modernize and enhance the transportation system to improve
mobility and accessibility; •Efficient and Effective Operations: Improve the efficiency and effectiveness of the
transportation system and transportation services and expand MDOT’s coordination
and collaboration with partners; and •Safety and Security: Continue to improve transportation safety and ensure the security
of the transportation system. To achieve those goals, MDOT is considering different investment options including, but not
limited to, increased expenditures for key transportation modes and programs. Modes and
programs that may benefit from increased funding include urban freeways, highway pavement
reconstruction, intelligent transportation system (ITS), safety, and multi‐modal facilities. 2.3 The Four Initial Investment Packages that were Studied Four long‐term transportation investment strategies are considered in MI Transportation Plan.
These investment packages are referred to as “Business as Usual,” “Change the Mix,” “Move 4 As stated in the Goals, Objectives, and Performance Measures Report and the Revenue Gap and Investment Packages Report. MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page 5Ahead,” and “Flexible New Revenue.” The “Business as Usual” package is the base investment
package while the other three represent alternative funding packages.5 As the name suggests, the “Business as Usual (BAU)” package represents an investment pattern
consistent with historical increases in user fees and an allocation among programs consistent
with today’s policies. The BAU package foresees a steady increase of state and federal funding
for the Michigan transportation system over the life of MI Transportation Plan, with the current
revenue allocation among programs and modes remaining the same. The total amount of
investment for the BAU package is $37 billion (in $2005) over the time period up to 2030. The
BAU package will not be able to meet all the future needs for Michigan’s transportation system
but it assures that the basic needs of the system would be met. The “Change the Mix” package anticipates the same level of funding for the transportation
system as the “Business as Usual” package; however, the allocation of spending is adjusted to
increase investment in those programs most consistent with the Preferred Vision of MI
Transportation Plan. In order to invest in programs consistent with the vision, highway
preservation investment would need to be reduced below “Business as Usual” levels by $2.8
billion (in $2005) over time and would be reallocated to highway modernization programs
including ITS and also to the preservation of multi‐modal programs. The “Move Ahead” package envisions an increase in funding for transportation over the life of
MI Transportation Plan. These additional funds are over and above the investment assumed for
the BAU package for the future development and maintenance of Michigan’s transportation
system. New investment of $6.2 billion would be allocated among freight, highway
preservation, highway modernization, and multi‐modal programs. Meanwhile, the “Flexible
New Revenue” package foresees adding $15.7 billion to highway expansion and in other
transportation modes/programs. For some modes/programs, the increase in investment is
significant. For example, the increase for highway pavement construction reaches nearly $6
billion through 2030, which is 10 times higher than the investment for that program in the
“Move Ahead” package. Table 1 illustrates the allocation of the funds for each of these four investment packages. For
the “Business as Usual” package, total funds and their allocation are shown for transportation
modes and programs. For the other alternative packages, only changes in funds are shown.
The values in Table 1 are all expressed in millions of 2005 dollars over the lifetime of MI
Transportation Plan. A more detailed explanation of the investment packages is found in the
Revenue Gap and Investment Packages report. 2.4 Investing to Achieve the Vision Based on the analysis conducted for the four initial investment packages, MDOT developed an
additional investment package for achieving the Preferred Vision outlined for the future 5 Detailed discussion of the investment packages and the allocation of the investment funds are presented in the Revenue Gap and Investment Packages Report and the Investing to Achieve the Vision Report. MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page 6development of Michigan’s transportation system. As shown in Table 1, the “Investing to
Achieve the Vision” (IAV) calls for an increase of $16.5 billion (in $2005) over the “Business as
Usual” base investment package during the lifetime of MI Transportation Plan. Table 1: Allocation of Transportation Funds for the Five Investment Packages over the Period
of 2007 to 2030 (in millions of $2005) Base Package Additional Funds for Alternative Packages Mode/Program “Business
as Usual” “Change The Mix” “Move Ahead” “Flexible New Revenue” “Investing to Achieve the Vision” Aviation 2,010 363 Freight 220 50 50 50 Highway Expansion 1,320 1,320 New roads/capacity 206 Capacity improvement (adding lanes) 2,024 Subtotal 2,230 1,320 1,320 Highway Preservation Pavements Resurfacing 5,773 ‐866 569 608 608 Pavements Reconstruction 5,411 ‐812 534 5,720 5,720 Pavements Preventive Maintenance 2,783 ‐418 275 115 115 Subtotal 13,967 ‐2,096 1,378 6,443 6,443 Bridge Rehabilitation and Replacement 3,409 ‐510 336 1,572 1,572 Preventative Maintenance & Special Needs 1,007 ‐151 99 464 464 Big Bridge (all needs) 460 ‐69 45 211 211 Subtotal 4,876 ‐730 480 2,247 2,247 Highway Modernization Operational Improvement, Safety & ITS 2,666 945 1,051 1,658 1,658 Highway Others Borders 2,089 Other Highway Capital 3,178 Subtotal 5,267 Multi‐modal Operations Transit – Capital 775 254 435 530 530 Transit – Operating 4,611 1,499 2,586 3,153 3,153 Intercity Passenger 365 119 205 250 250 Carpool/Park Lots – Preservation 14 5 8 10 10 Bicycle and Pedestrian Improvement 13 4 7 9 9 Subtotal 5,778 1,881 3,241 3,952 3,952 Multi‐modal Expansion Transit Expansion 400 Intercity Expansion 89 Carpool/Park Lots – Expansion 17 0 Subtotal 17 489 Grand Total 37,031 0 6,200 15,670 16,522 Source: Wilbur Smith Associates * There may be small differences between these numbers and those in the Revenue Gap and Investment
Packages report due to rounding.
MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page 7Chapter 3. Impacts of the Investment Packages on Michigan’s Economy The evaluation of economic impacts of each investment package relies on the aggregated
impacts of potential investments for the various transportation modes and programs. This
evaluation differs from traditional analyses for individual transportation projects. At the
project level, very detailed and specific information is available about where the project will be
and which geographic area will be impacted. Then, the economic impacts generated from a
specific transportation project are investigated for defined user groups, and geographic areas.
However, at the aggregated program level, detailed information will not be available or easily
identified. Evaluating comprehensive investment packages for transportation improvements, such as those
by MDOT, requires special attention to the diversion effects between highway and other
transportation modes/programs. The potential traffic diversion from highway to other modes
will mitigate congestion on Michigan’s roadways and provide benefits to the entire
transportation system. For each alternative investment package presented in Chapter 2, the economic impacts on
Michigan’s economy are evaluated to determine the effects of investment decisions that are
different from a zero‐investment scenario. Section 3.2 summarizes the direct economic impacts
and also discusses the total economic impacts. The estimated economic impact results, presented in Section 3.3, reveal economic benefits to
Michigan’s economy, users of the transportation system, and effects of changes or increases in
government spending on various transportation modes and programs.6 3.1 Investment Impacts on Transportation Modes/Programs The investment packages examined in this analysis cover a wide range of transportation
programs and modes. These include highways, bridges, transit, freight, intercity passenger
bus/rail, aviation, border crossings, and bicycle.7 Also considered in the investment packages are operational and safety improvements, intelligent transportation systems (ITS), and
carpool/park and ride lots. As indicated in the Highway and Bridge Technical Report, 38 percent of state‐trunkline vehicle
miles of travel (VMT) were at or approaching congested in 2004. By 2030, this percentage is
forecasted to increase to 55 percent of total VMT. These numbers indicate that there is an
existing strain on highway capacity, which can be directly reduced by investment in the 6 The methods of estimating impacts are presented in detail in the Methodologies of Estimating Economic Impacts Report. 7 The economic impacts of the improved border crossing and aviation are discussed in Chapter 5. MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page 8New Investment in TransportationHighways Expansion, Resurfacing, and ReconstructionMDOT Travel Demand ModelTransitPersonalTravelFreightby TruckIntercity
Bus/RailITSRail FreightImprovements in Roadway Related Travel EfficienciesBorderCrossingAviationCarpoolHighwayPavementsMaintenanceandImprovementof BridgesHighwayModernizationMichigan highway system. In addition, the investment in other transportation modes/programs
can also mitigate congestion pressure. Costs associated with travel time and mileage as measured by vehicle hours of travel (VHT) and
VMT are key drivers in determining impacts of the investment on transportation
modes/programs within an investment package and in determining economic impacts between
alternative investment packages. This section discusses the investment impacts on
transportation modes/programs within an investment package, while the economic impacts
between alternative investment packages is related in Section 3.3. Figure 1 highlights the interrelationship between the transportation modes. Improvements to
highways due to new investment will be captured in VHT and VMT predicted by the MDOT
statewide travel demand model. Based on the relationship between transportation
modes/programs as established in the existing research and studies, there will be traffic
diversion from highways to other modes as a result of the investment. The level of diversion
depends on the level of investment for a specific mode/program. To capture the effects of the
traffic diversion from highway to other modes, the VHT and VMT estimated from the travel
demand model need to be adjusted to reflect the reduction in highway demand. Figure 1: Investment Impact on Transportation Modes/Programs
Source: Wilbur Smith Associates. (Note that the dotted arrow lines express the potential diversion from highway to other modes).MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page 93.2 Direct and Total Effects of the Investment Packages In the previous section, we discussed the adjustment of traffic data to capture diversion effects
from highway to other transportation modes. After adjustments, the traffic data associated with
the investment packages, including the zero‐investment scenario, are ready for economic
impact analysis. The economic impact analysis intends to estimate the total economic effects, including the
direct, indirect, and induced effects, between an investment package and the zero‐investment
scenario. The direct effects comprise benefits from transportation system users and new
government spending. The indirect effects represent additional industrial activities supported
by the direct effects, and the induced effects represent the ripple effects arising as spending of
increased wages and salaries cycles through the state’s economy. Specific direct effects from transportation system users include travel time savings, vehicle‐
operating cost savings, and safety cost savings. Travel time savings for business travelers and
freight transportation will help businesses reduce costs. Vehicle‐operating costs, which include
fuel and maintenance, are affected by changes in speed, fuel price, and other factors. These
costs have impacts on people’s consumption patterns and business operations. If the vehicle‐
operating costs are reduced, people can spend more money on other products and services, and
businesses will realize savings. Less congestion on highways reduces the probability of
accidents, which also reduces costs for businesses.8 Figure 2 depicts the relationship between the direct economic impact and the indirect and
induced impacts and also presents key components associated with each type of impact. The
estimation of the direct impacts and the economic model used are described in detail in the
Methodologies of Estimating Economic Impacts Report. 8 See the Methodologies of Estimating Economic Impacts Technical Report for detailed discussion of w to estimate the direct effects of user’s benefits. MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page 10Figure 2: Direct, Indirect, and Induced Economic Impacts from the Transportation
Investment Direct ImpactUsers’ Benefits• Travel Time Saving• Vehicle Operating Cost Saving• Safety Cost SavingGovernment Spending/InvestmentInduced ImpactIndustries
•Reduction in cost of doingbusiness• Supply materials and provideservices to respond the
transportation investment• Increase production to respondthe increase spending from
householdsIndirect ImpactHouseholds•Increase in income• Increase in spending Source: Wilbur Smith Associates 3.3 The Economic Impact Results The estimated economic impact results indicate that the public investment in transportation will
not only improve and maintain the transportation system, but also make substantial
contributions to Michigan’s economy. Though the size of economic impacts depends on the
level of investment committed and the amount of investment for each transportation
mode/program, the returns on the public investment could be significant. MDOT’s current investment strategy focuses investments on the preservation of the existing
transportation system and on the delivery of a limited number of capacity improvement
projects. However, the investment program selected for inclusion in this analysis utilized
different strategies. The investment packages were selected in order to maximize the reduction of congestion and
delay. These projects are primarily located on high‐volume roadways in urbanized areas,
representing the very best return of investment, and are in keeping with the high‐level analysis
being performed for MI Transportation Plan. MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page 113.3.1 Impacts of the Four Initial Investment Packages that were Studied Table 2 summarizes the estimated economic impacts that are generated by the four investment
packages. The estimated economic impacts indicate that the investment packages can have
positive effects on the Michigan economy over the life of MI Transportation Plan. The economic benefits from the “Business as Usual” (BAU) investment package include a $50.0
billion (in $2005) increase in GSP and a $38.4 increase in personal income over the period of
2007 to 2030. Also, the BAU investment package will add 30,000 permanent full‐time
equivalent jobs by 2030 (compared to zero investment). In addition, Michigan residents will
experience benefits from travel time savings when compared to no public investment to
maintain and improve the transportation system. The value of travel time savings from
personal travel can reach $22.2 billion over the life of MI Transportation Plan. The “Change the Mix” package has the same level of investment as the BAU package, but will
re‐allocate funds between programs/modes. As a result, the economic benefits are very similar
to the impacts from the BAU package. When re‐allocating funds, the “Change the Mix”
package will reduce investments in highway programs that will alleviate less congestion
pressure on roadways and result in increase in personal travel time. Correspondingly, travel
time saving benefits may decrease, though moderately, as compared with the BAU package. Both the “Move Ahead” and the “Flexible New Revenue” packages propose to increase
investment funds to expand and improve the transportation services offered by various
modes/programs. As presented in Table 2, the GSP will increase by an additional $8 billion and
$19 billion for the “Move Ahead” and “Flexible New Revenue” packages, respectively, over the
$50 billion increase in GSP for the BAU package. Those increases are more than a 17‐ and 37‐
percent increase in GSP, respectively, for the two packages, relative to the BAU package. 3.3.2 Impacts of the “Investing to Achieve the Vision” Package Table 2 also presents the economic benefits for the IAV and makes a comparison with the
impacts from the BAU package. Because the IAV makes more investments than other
alternative investment packages studied above, the relative economic impacts are higher than
the results from those packages. When compared to a zero‐investment forecast the IAV
package results in economic returns of nearly $70 billion in gross state product (GSP) and over
$80 billion in personal income and travel time savings over the period of 2007 to 2030. In
addition, the IAV package will generate more than 43,000 permanent full‐time equivalent jobs
by 2030. This translates into $1.64 in economic benefits for Michigan residents for every one
dollar invested in transportation.9 In comparison, the Business as Usual program gives rise to nearly $50 billion in economic impacts and nearly 30,000 permanent full‐time equivalent jobs. In terms of job increases, notable are the types of jobs that will be supported by the investment
in transportation. Excluding construction, the industries projected to benefit the most in terms 9 The economic benefits used for this calculation include gross state output benefits and the value of personal time savings. MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page 12of employment gains include transportation, warehousing and trade; professional, technical,
educational and management services; and tourism industries. This is important because it
demonstrates the ability of the balanced transportation plan to support the necessary
transitioning of the state’s economy. Due to data limitations, the analysis does not fully account
for all of the benefits arising from the transportation investments. Specifically, the analysis does
not fully capture social and environmental benefits or the full value of logistics cost savings to
Michigan businesses, both of which will have positive impacts to the economy. Table 2: Economic Impacts of the Investment Packages over the Period 2007‐2030 “Business As Usual” (BAU) “Change the Mix” “Move Ahead” “Flexible New Revenue” “Investing to Achieve the Vision” Cumulative ImpactChange from BAUCumulative ImpactChange from BAUCumulative Impact Change from BAU Cumulative ImpactChange from BAU Total Employment
(in thousands of
Permanent full‐
time equivalent
jobs) 30 300(0.0%) 366(20.0%) 42 12 (40.0%) 43 13(43.3%) Gross State Product
(in billions of
$2005) $50.0 $50.1$0.1(0.2%)$58.3$8.3(16.6%)$68.7 $18.7 (37.4%) $69.6$19.6(39.2%) Personal Income
(in billions of
$2005) $38.4 $38.5$0.1(0.3%)$45.1$6.7(17.4%)$53.3 $14.9 (38.8%) $54.7$16.3(42.4%) Personal Travel
Time Savings
(in billions of
$2005) $22.2 $21.4‐$0.8(‐3.6%)$23.4$1.2(5.4%)$27.0 $4.8 (21.6%) $27.1$4.9(22.1%)Source: Wilbur Smith Associates MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page 130.02.04.06.08.010.012.0Tourism RelatedConstructionManufacturingTransp, Warehousing, TradeFIREProf, Tech, Edu, Mgmt ServicesHealth Care, Social AssistOtherFull‐time Equivalent Jobs (in thousands)IAV (ʺInvesting to Achieve the Visionʺ) BAU (ʺBusiness as Usualʺ)Figure 3 demonstrates the cumulative changes in gross state product for the five investment
packages at time intervals of five years up to the year 2030. The figure clearly shows that the
expected economic benefits increase as public investment increases over time. Figure 4 shows a comparison of employment benefits by industry to 2030, between the BAU
and IAV. It graphically illustrates the employment advantages of the IAV over the BAU. Figure 3: Cumulative Changes in Gross State Product for the Five Investment Packages 715253650716253650818294258921355069922355070-1020304050607020102015202020252030B
i
l
l
i
o
ns$2005Business as UsualChange the MixMove AheadNew RevenueInvesting to Achieve the Vision Source: Wilbur Smith Associates Figure 4: Employment Benefits by Industry to the Year 2030 IAV Compared with BAU
Source: Wilbur Smith Associates Note: FIRE = Finance, Insurance, and Real Estate. MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page 143.3.3 Impacts of Border Crossing and Aviation Improvements This section discusses the economic impacts relating to Michigan’s border crossing and aviation
improvements. Though both services are part of the transportation system, they are less likely
to generate diversion effects. However, the improvements of both services are important to
Michigan’s economy and deserve special attention for analysis. The border crossings examined in this analysis are the Ambassador and Blue Water Bridges, as
capacity improvement projects have been planned for these two crossings. These
improvements will have positive benefits to Michigan’s economy. (Analysis of these two border
crossings is for a snapshot in time and involved the most current data that was available. Data
in other reports may not match due to the ongoing development of each project.) As the cost of
doing business for industries in Michigan decreases, and with the potential for increasing
spending in Michigan by Canadian visitors after delays at the border crossings are reduced,
GSP and personal income will have moderate increases from 2007 through 2030. Investments
for border crossings are expected to add $1.6 billion (in 2005 dollars) to GSP and $0.8 billion (in
2005 dollars) to Michigan’s economy. It is worth noting that the positive economic benefits can only be obtained if the conditions of
the border crossings are improved. These economic benefits include but are not limited to
reduction in freight and passenger travel time, reductions in the costs of conducting business,
congestion mitigation, and capacity improvements that could entice border crossing users to
relocate to Michigan. If border improvements in Michigan are not implemented
commensurately with alternative border crossings outside Michigan, then businesses
dependent on international trade may relocate to other states with better border crossings,
giving rise to an out‐migration of jobs and population. The economic impact results for the aviation improvements in the initial four investment
packages will increase Michigan’s GSP by $0.7 billion (in 2005 dollars) and personal income by
$0.4 billion (in 2005 dollars) over the period of 2007 to 2030. Since specific improvements
associated with the IAV investment package are unknown, an analysis of the additional
investment could not be performed.
MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page 15Chapter 4. Regional Economic Impact Analysis of “Investing to Achieve the Vision” This chapter presents the economic impact analysis of the IAV at the regional level. It begins
with the definition of the study regions and follows with a discussion of regional economic
profiles and key industries in Michigan. The economic impacts for the study regions over the
life of MI Transportation Plan are also presented. 4.1 Definition of the Study Regions The definition of the study regions is an important step for the economic analysis. The
economic analysis intends to examine the impacts of the IAV at the study region level. The IAV
and other investment packages have been analyzed at the state level and the economic impact
results have been reported in Chapter 3. Several criteria are considered for defining the study regions. These include specifying study
regions based on areas defined as state planning and development regions, areas surrounding
major cities, areas along major corridors, and areas enclosing metropolitan planning
organizations, or existing MDOT regions. After evaluating these criteria, the study planning
regions were selected. After selecting a base for defining the study regions, adjustments to the state planning and
development scheme was made to separate major cities such as Detroit and Ann Arbor into two
individual areas. As a result, study planning Region 1 (Southeast Michigan Council of
Governments) was split into two study regions – Regions 1A and 1B. While Region 1A covers
the Greater Ann Arbor area, Region 1B encompasses the city of Detroit with five surrounding
counties. Similar adjustments were made for study planning Regions 7 and 8, which then
became Regions 7A, 7B, 8A, and 8B. The final number of economic study regions is 17 for the
state of Michigan. Figure 5 shows a map of the economic study regions. MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page 16Figure 5: Map of the 17 Michigan Study Regions
MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page 17Within the state of Michigan, economic conditions, population density, and business
concentration vary considerably and resulting demand for transportation services varies. As
shown in Figure 6, a high concentration of population and job opportunities in Detroit and the
surrounding areas makes the city significantly different from any other area within the state.
Though other areas show lower concentration than Detroit in terms of population and
employment, the economic conditions vary for each area. As illustrated in Figure 6 nearly 44 percent of Michigan’s population lives in and more than 45
percent of the total jobs in Michigan are also located in the Greater Detroit Region (i.e., Region
1B). Because of high‐paying manufacturing jobs concentrated in that area, more than 50 percent
of Michigan’s total personal income is earned by people living in the Greater Detroit Region.
Only one other region, Region 8B (or the Greater Grand Rapids Economic Region), has more
than 10 percent of the total jobs in Michigan. All other economic study regions represent
around five percent or below of the statewide totals in each of three economic indicators –
personal income, employment, and population. Figure 6: Distribution of Personal Income, Total Employment, and Population among the 17
Study Regions for 2003 0%5%10%15%20%25%30%35%40%45%50%1A1B234567A7B8A8B91011121314P erso nal Inco meTo tal Emplo ymentP o pulatio n Source: The REMI Model (Regions 1A=Greater Ann Arbor, 1B=Greater Detroit, 2=Greater Jackson, 3=South Central MI, 4=Greater
Benton Harbor, 5=Greater Flint, 6=Greater Lansing, 7A=East Central MI, 7B=Greater Saginaw, 8A=Greater
Big Rapids, 8B=Greater Grand Rapids, 9=Northeast MI, 10=Northwest MI, 11=Eastern Upper Peninsula,
12=Central Upper Peninsula, 13=Western Upper Peninsula, and 14=West MI Shoreline) The per capita personal income for the state of Michigan as a whole was almost the same as the
US average ($31,472) in 2003 (the latest year for which data was available). As shown in Figure
7, the per capita personal income for the Greater Detroit and Greater Ann Arbor Economic
Regions (i.e., Regions 1B and 1A) exceed the US average and reach $35,935 and $37,488,
respectively. The per capita personal income for the Greater Grand Rapids economic Region
(i.e., Region 8B) was $29,569 in 2003, just behind the US average. MDOT State Long‐Range Transportation Plan Economic Impact Analysis of the Michigan Transportation Investment Packages ______________________________________________________________________________ Page 18
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