Study Calculates Value of Transportation Infrastructure to Florida's Economy

Years of underfunding transportation in this state are beginning to take a serious toll. Given the current and growing backlog of transportation needs, we're deeply concerned about Florida's economic future," states Malcolm Kirschenbaum, Chair of the Florida TransportationCommission (FTC). "If we fail to meet these needs now, we'll pay a high price in terms of economic growth and quality of life within 10 to 15 years. That's the message of our report."
According to that report, titled "Transportation: An Investment in Florida Future," which was recently released by FTC and Floridians for Better Transportation (FBT), with assistance from CUTR, now is the time for taxpayers and decision-makers to consider an increased investment in Florida s transportation system--the engine that runs the state s economy. The booklet, published in June 1996, was developed by FTC and FBT to document the strong relationship between transportation investment and economic strength and to increase the awareness among Floridians of the critical importance of an improved, multi-modal transportation system to future economic prosperity and an attractive quality of life.
Florida s 14 million residents (20 million by the year 2020) rely on a statewide network of roads, rails, airports, and seaports to get themselves and their products and services to important destinations and markets every day. Our 41 million visitors a year (80 million by 2020) rely on our multi-modal network to get themselves around the state. Failure to invest in improvements can result in "a future of missed opportunities, as travel conditions worsen, new markets are lost, tourists fail to return, and our quality of life declines."
International trade and tourism are Florida s top two industries in dollar volume, and both are highly dependent upon a sound transportation system. Florida s agricultural and construction industries are mainstays of the economy, and, along with strong manufacturing, retail, and service sectors, they rely on transportation for timely receipt and delivery of materials and products and access to labor, markets, and customers. Thirteen case studies in the report describe how individual Florida enterprises depend on transportation to "get the job done" and how, in turn, they contribute to Florida's economic strength.
National trend
The Florida economy s reliance on transportation is evident from national trends that strongly suggest that declines in the business productivity growth rate accompany declines in public works spending--with transportation infrastructure being the biggest component of that spending. Because transportation is a significant cost for most businesses, it is a key ingredient to increased business productivity. Transportation improvements that allow businesses to make more efficient use of highways, seaports, airports, and rail have a positive impact on overall business productivity--a beneficial impact that is quantified in the report.
Without exception, all of Florida s economic sectors depend daily on an interconnected, multi-modal transportation system. In one way or another, transportation supports all business and all 6.9 million jobs in Florida. As stated by Dick Nunis, Chairman of the Florida Council of 100, "When businesses are considering relocating to Florida, they ask about our education system and our transportation system. Transportation is key to our ability to attract new businesses and to retain existing companies here."
Return on investment
The construction of transportation facilities provides economic benefits through the creation of jobs and other economic activity related to that construction. The benefits from these jobs are significant and are directly and indirectly received by all Floridians. But there is much more to the story: increases in benefits to users and increases in business productivity resulting from transportation improvements have pervasive and long-lasting positive impacts on the economy.
At the national level, recent studies conducted by the Economic Policy Institute in Washington, D.C., suggest that more than half the decline in productivity growth (growth in goods and services produced per hour worked) in the United States over the past two decades can be explained by lower public infrastructure spending. Increases and decreases in public infrastructure spending have been accompanied by corresponding increases and decreases in productivity growth. Transportation facilities comprise the largest component of non-military public infrastructure in the country.
Analyses conducted by CUTR also suggest a strong link between investments in public infrastructure and economic growth. Of particular interest is the return on investment in state and local roads.
Increased user benefits
The most important and comprehensive overall measure of the value of investments in state and local highways is the net benefits received by users in the form of time savings, improved safety, and lower vehicle operating costs. But while these benefits accrue initially to users of the highway system, they continue to flow into virtually every sector of the economy, creating improved prductivity and competitiveness for firms, higher real wages for workers, and stronger growth for the state economy overall. According to CUTR, every $1.00 invested into just maintaining current highway conditions for the next 20 years will result in an increase in user benefits of $2.86. The resulting net gain of $1.86 includes the value of vital economic resources, such as time savings and reductions in traffic deaths, that are not normally included in the accounting framework for state economic growth.
Increased business productivity
Transportation investment contributes in a major way to Florida s economic growth and vitality. CUTR s analysis indicates that each $1.00 invested in transportation infrastructure in Florida s gross state product will grow by $0.35 annually for the life of the investment, a rate of return of 35 percent. The returns occur in a variety of forms, including the ability of businesses to:

gain more reliable access to supplies and customers, creating better sales and morerepeat business
free up inventory space and reduce inventory costs through use of just-in-time production technologies, rolling warehouses, stockless purchasing, and other productivity-enhancing innovations
reduce delay costs of vehicles trapped in traffic, thus reducing slowdowns on the production line and improving customer service
improve access to qualified labor

If, in addition to these returns, the value of gains from transportation investment that are not normally included in gross state product is accounted for (such as the reduction in traffic deaths), the rate of return on Florida s transportation dollar would be substantially higher.
Willingness to invest additional revenues in transportation will result in increased economic strength through improved overall business productivity, diversification of the economy, flourishing international trade and tourism, and an attractive quality of life for Floridians. As stated by FBT President Don Crane, "For too many years, Florida's business community and political leadershp have taken the state's transportation system for granted. Transportation must be understood for exactly what it is—the engine that runs our economy. Driving that point home in several ways is the purpose of our report." Adds William Birchfield, FBT Chair, "We hope the business and professional communities will join FBT and FTC in a united front to increase transportation funding."
For further information or to request a copy of the report, contact Jane Mathis, Executive Director, Florida Transportation Commission, (904) 414-4105, or FBT President Don Crane, (813) 895-5766.