A Public Investment Question: If You Build It, Will They Come?

The Birmingham-Hoover Metropolitan Area in Alabama is making decisions about whether or not to invest in a 52-mile highway spur that is budgeted at $4.7 Billion. The state and local contribution required to match the federal funds amounts to roughly the entire annual budget of the state’s Department of Transportation. The project was being pushed as a priority for economic development although the road was given a moderate-to-low priority ranking by the local transportation planning body.

The Southern Environmental Law Center, headquartered in Atlanta, and the Ochs Center for Metropolitan Studies contracted with The E.P. Systems Group, Inc., for the core economic impact analysis and other contributions to a critical analysis of the rationales for the road and assessment of its true economic impact.

The EPSG analysis found that construction person-years of work were claimed as permanent jobs, that the time value of money (and all costs and benefits) was ignored, and that there were more cost-effective alternatives available to address an existing highway transportation need the proposed road did not serve well. Discounting costs and benefits revealed that the present value of the cost per job created exceeded $400,000, even if the fact that the local road construction labor supply could not meet the demands of the project, so both construction and spinoff jobs would not necessarily go to Alabamans.

The full report, written to be understandable by non-economists contains methodological and data analytical appendices and is available on-line here

The executive summary is available here

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