Return on Investment for the Department of Transportation...

ReturnonInvestmentfortheDepartmentofTransportation’sWorkProgram

OFFICEOFECONOMIC&DEMOGRAPHICRESEARCH

December2016

ContentsEXECUTIVESUMMARY.................................................................................................................................3

OVERVIEWOFTHESTUDY...........................................................................................................................7

METHODOLOGY...........................................................................................................................................9

PROGRAMFINDINGS.................................................................................................................................11

THEROADSANDHIGHWAYSPROGRAMAREA..........................................................................................12

THERAILSPROGRAMAREA.......................................................................................................................20

THEPUBLICTRANSITPROGRAMAREA......................................................................................................26

THESEAPORTSPROGRAMAREA................................................................................................................32

THEAVIATIONPROGRAMAREA................................................................................................................37

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EXECUTIVESUMMARYBackgroundandPurpose...Duringthe2016Session,theFloridaLegislaturepassedCS/CS/HB7061(Chapter2016-239,LOF),requiringtheOfficeofDemographicResearch(EDR)toevaluateanddeterminetheeconomicbenefits,asdefinedins.288.005(1),F.S.,ofthestate’sinvestmentintheDepartmentofTransportation’sadoptedworkprogram.Thisevaluationeffectivelyprovidestwoanalyses.Thefirstanalysisexaminesthehistoricaleconomicbenefitsoftheimplementedworkprogramoverthepreviousthreefiscalyears.ThesecondanalysisexaminestheforecastedeconomicbenefitsoftheadoptedworkprogramforFY2016-17andthefollowingfourfiscalyears.Ataminimum,theanalysismustprovideaseparatereturnoninvestmentforeachofthefollowingareas:

• RoadsandHighways• Rails• PublicTransit• Aviation• Seaports

Forthepurposeofthisevaluation,determiningthestate’seconomicbenefitsisthesameascalculatingthestate’sreturnoninvestment,andthetermsareusedinterchangeably.Bothincludealldirect,indirectandinducedeffectsofthestate’sinvestmentintheprogram.Neithermeasureaddressesissuesofoveralleffectivenessorsocietalbenefit;instead,theyfocusontangiblefinancialgainsorlossestostaterevenues.Theresultsareultimatelyconditionedbythestate’soveralltaxpolicy.Thereturnoninvestment(ROI)isdevelopedbysummingstaterevenuesgeneratedbyaprogramlessstateexpendituresinvestedintheprogram,anddividingthatcalculationbythestate’sinvestment.Itismostoftenusedwhenaprojectistobeevaluatedstrictlyonamonetarybasis,andexternalitiesandsocialcostsandbenefits—totheextenttheyexist—areexcludedfromtheevaluation.Thebasicformulais:

(IncreaseinStateRevenue–StateInvestment) StateInvestment SinceEDR’sStatewideModel1isusedtodevelopthesecomputationsandtomodeltheinducedandindirecteffects,EDRisabletosimultaneouslygenerate“StateRevenue”and“StateInvestment”fromthemodelsoallfeedbackeffectsmirrorreality.Theresult(anetnumber)isusedinthefinalROIcalculation.AsusedbyEDRforthisanalysis,thereturncanbecategorizedasfollows:

• GreaterThanOne(>1.0)…theprogrammorethanbreakseven;thereturntothestateproducesmorerevenuesthanthetotalcostoftheprogram.

• EqualToOne(=1.0)…theprogrambreakseven;thereturntothestateinadditionalrevenuesequalsthetotalcostoftheprogram.

1SeesectiononMethodologyformoredetails.2TheFloridaDepartmentofTransportation,“The2015FloridaSeaportSystemPlan”,(July2016):2-8.

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• LessThanOne,ButPositive(+,<1)…theprogramdoesnotbreakeven;however,thestategeneratesenoughrevenuestorecoveraportionofitscostfortheprogram.

• LessThanZero(-,<0)…theprogramdoesnotrecoveranyportionoftheprogramcost,andstaterevenuesarelessthantheywouldhavebeenintheabsenceoftheprogrambecausetaxableactivityisshiftedtonon-taxableactivity.

ThenumericalROIcanbeinterpretedasreturnintaxrevenuesforeachdollarspentbythestate.Forexample,anROIof2.5wouldmeanthat$2.50intaxrevenuesisreceivedbackfromeachdollarspentbythestate.OverallResultsandConclusions...

WORK PROGRAM RETURN-ON-INVESTMENT

PROGRAMFY2013/14-FY2015/16

FY2016/17-FY2020/21

ROADS&HIGHWAYS 0.19 0.19RAILS 0.02 0.02PUBLICTRANSIT 0.04 0.05AVIATION 1.37 1.72SEAPORTS 1.76 2.71

AstheTableaboveshows,theresultsweremixed.Twooftheprogramareas(AviationandSeaports)generatedROIsthatweregreaterthanoneinboththehistoricalandforecastedperiods.Theremainingprogramareas(RoadsandHighways,Rails,andPublicTransit)returnedROIsthatwerelessthanone,butpositiveforeachtimeperiod.TwofactorswereultimatelyresponsibleforthestrongROIsassociatedwithSeaportsandAviation.ThefirstfactorwastheirdistinctcontributionstoFlorida’stourismindustry.Florida’sseaportsprovideahometothecruiseindustry.In2015,theFlorida-basedcruiseindustryaccountedfor62%ofallU.S.cruisetrafficandembarkedover15.5millionpassengers.2Similarly,Florida’sairportsactasagatewayforthetouristsvisitingFlorida.AsindicatedbydatacollectedbyVISITFLORIDAforthe2011,2012,2013,2014and2015calendaryears,abouthalfofalltouristsarrivethroughthestate’sairports.3Becausetouristsgenerateconsiderablenewrevenueforthestatefromtheirpurchasesoftaxableproducts,thedirect,indirectandinducedeffectsoftheirspendingareamplifiedrelativetosimilarspendingbyresidents.Asaresult,EDR’sanalysisattributedashareofthespendingbytouriststoboththeSeaportsandAviationprogramareas.Thesecondfactoristhatboththeaviationandseaportindustriesgenerateaconsiderableamountofeconomicactivity.Economicactivitygeneratesjobsandprofits,benefitslocalsuppliersandretailers,andleadstorevenuegenerationforthestate.Theanalysisattributedasizeableshareofeconomicactivitytobothprogramareas.Forairports,theactivityconsistsofgeneralairportoperationsandsupport,aircargoactivityandaviation-relatedbusinesses.A2014FloridaDepartmentofTransportation

2TheFloridaDepartmentofTransportation,“The2015FloridaSeaportSystemPlan”,(July2016):2-8.3VISITFLORIDAresearchandreportsonvisitorestimatesandtravelindustrytrendindicators.

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reportestimatedthattheseactivitiesgenerateover300,000jobs.4Seaportsalsogenerateconsiderableoutput.Thisactivityincludesnavigationofthecargoships;thehandlingandstoringofthefreight,andthetransportationofthegoodstoandfromtheseaport.A2012reportestimatedthattheseaportsgenerateover57,000jobs.5WhileRoadsandHighways,Rails,andPublicTransitalsogenerateeconomicactivity,theyaremoreeasilysubstitutableand—inpart—havenon-taxabledirecteffects.Forexample,theprimarybenefitofboththePublicTransitandRailsprogramareasiscostsavingstoconsumersandbusinesses.Bothprogramsofferacheaperalternativethancommutingbypersonalautomobile.Thesecostsavingstranslateintoincomegains.Additionally,bothprogramareashelprelievetrafficcongestionandleadtoproductivityimprovementsasjobaccessincreases.Unfortunately,thesebenefitsdonottranslatewellintostaterevenue.Thecostsavingsisduetoareductioninpurchasesofautomobile-relatedgoodsandservices.SinceFloridareceivesaconsiderableamountofrevenuefromthetaxationofautomobile-relatedgoodsandservices,thisreductionnegativelyimpactsthecollectionofstaterevenue.Whiletheincomegainsfromthetwoprogramareasstimulateenougheconomicactivitytooffsetpartoftheloss,itisnotenoughfortheprogramareastofullypayforthemselves.Inthistypeofsituation,itisultimatelyuptothelegislaturetodecidethepolicyquestionofwhetherthepositiveexternalitiesandpublicpreferenceswarrantfutureinvestmentsthatessentiallysubsidizethetwoprogramareas.TheRoadsandHighwaysprogramareaisthelargestintheFloridaDepartmentofTransportation’sadoptedworkprogram.EDR’sanalysisgrouped14WorkProgramBudgetCategories(seethesectionfortheRoadsandHighwaysprogramareaforadetailedlist)thatsupporttheplanning,maintenance,andnewconstructionoftheStateHighwaySystem.TheStateHighwaySystem(SHS)iscomprisedofroadsmaintainedbytheFloridaDepartmentofTransportation(DOT).In2015,theSHSrepresented10%ofFlorida’sroadwaynetworkandcarries54%ofalldailytraffic.6Additionally,theanalysisincludedworkprogramfundingofDOT-ownedbridgesandroadsnotpartoftheSHS.Florida’srelianceontheSHSledEDRtoattributeapercentageofFlorida’stotaleconomicoutputtoitsexistence.Thehighwaysystemislinkedtoprivateeconomicoutputbyitsimpactonproductivity—whetherprivatecapitalorlabor.Productivityisaneconomicmeasureofoutputgivenaspecifiedvolumeofinputs(capitalandlabor).Greaterproductivitymeansmoreoutputgiventhesameleveloflaborandprivatecapitalinputs.Basedonacademicresearch,anoutputelasticityof0.15wasapplied.Thiscanbedefinedasfollows:forevery1%increaseofhighwayinfrastructure,totalprivateoutputincreasesby0.15%.TheoutputelasticityattributedasizeableamountofFlorida’sGDP,PersonalIncomeandEmploymenttotheRoadsandHighwaysprogramarea.However,theROIfortheRoadsandHighwaysprogramareawaslessthan1.0.Thisresultispartiallyexplainedbythesubstantialstatecosttooperatethehighwaysystem.Intotal,the14budgetarycategoriescostthestate,onaverage,about$4.3billionperyearinthehistoricalanalysisandabout$4.8billionperyearintheforecastedanalysis.Theprogramreturned

4 TheFloridaDepartmentofTransportation,“FDOTAviationEconomicImpactStudyUpdate”,(August2014). 5PleaseseeMartinAssociates,“2012StatewideEconomicImpactofFloridaSeaports”,FloridaSeaportTransportationandEconomicDevelopmentCouncil.(March2013).6TheFloridaDepartmentofTransportation,“FloridaTransportationTrends&Conditions”,2015:14.

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approximately$1billionintaxrevenueeveryyeartothestate.Whilethisisasizeablecontributiontothestate’srevenues,itisnotenoughtooffsetthestate’sexpense.AnotherreasonfortheRoadsandHighwaysprogramarea’slowROIarisesfromthewidearrayofbenefittingindustries.ThevalueoftheRoadsandHighwaysprogramareaisspreadacrossallindustriesinFlorida.Someoftheseindustriesproduceasizableamountoftaxableoutput;otherindustriesgenerateasizeableamountofnon-taxableactivity.Forexample,anoutputincreaserelatedtoanagriculturalcommoditywillnotleadtoalargeincreaseinstaterevenue.MostfoodproductsareexemptedfromstatesalestaxorareexportedoutofFlorida.Afinalreasonisassociatedwiththenatureofthebenefit,itself.OneofthegreatestbenefitsfromtheRoadsandHighwaysprogramareaistraveltimesavings.Traveltimesavingsisthevalueconsumersplaceonthereductionoftraveltimebetweentwodistinctpoints.Inacost-benefitanalysis,personaltimetravelsavingswouldbemeasuredandcaptured,butsincethisevaluationislimitedtothetangibleeconomicimpactoftheRoadsandHighwaysprogramarea,itisnotincluded.

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OVERVIEWOFTHESTUDYEachyear,thecommitmenttofundtheDepartmentofTransportation’sadoptedworkprogramrepresentsthestate’ssinglegreatestexpenditureoninfrastructureprojects.Everylegislativesession,theDepartmentofTransportationsubmitsatentativeworkprogramtotheFloridaLegislaturethatincludesalltransportationprojectsplannedforthenextfivefiscalyears.Theactualworkprogramlistingiscontinuouslyevolvingaseachyear,newprojectsareaddedandotherprojectsareremovedduetocompletion.Asrequiredbysection55ofCSforCSforHB6071whichpassedduringthe2016Session,thisstudymeasurestheeconomicbenefitsoffivetransportationareasfundedthroughtheworkprogram.ThefiveprogramareasareRoadsandHighways,Rails,PublicTransit,Aviation,andSeaports.Aseparateanalysisisprovidedforeachoftheprogramareas,withthecalculationoftwodistinctreturnsoninvestment(ROI).ThefirstROIcoversthehistoricaltimeperiodbeginningFY2013-14andendingFY2015-16.ThesecondanalysiscoversthefiveyearsintheforecastedtimeperiodbetweenFY2016-17andFY2020-21.Fouroutofthefivelistedprogramareasarefundedbyoneproductcategorywithinthetotalbudgetfortheworkprogram.TheTablebelowshowsthebudgetforeachoftheseprogramareasfromFY2013-14throughFY2020-2021.

TheRoadsandHighwaysprogramareaisthelargestcomponentoftheworkprogramandconsistsofmultipleproductcategories.Thisanalysisgrouped14productcategoriesintotheRoadsandHighwaysprogramarea.TheTablebelowliststhebudgetedamountassociatedwitheachoftheproductcategoriesfromFY2013-14throughFY2020-21.AmoredetaileddescriptionofeachproductcategorycanbefoundintheRoadsandHighwaysProgramAreaSection.

PARTIAL WORK PROGRAM BUDGET FY 2013-14 TO FY 2020-21

13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21

89.66 109.97 76.64 379.14 192.40 154.15 171.86 116.27205.02 214.44 271.51 407.96 274.03 253.22 267.83 262.25178.28 320.94 347.41 262.23 225.33 213.61 210.27 256.15259.90 112.21 94.18 141.25 111.19 109.51 131.75 108.86

AVIATIONSEAPORTS

(MILLIONS OF $) 1STANALYSIS 2NDANALYSISProgramArea

RAILSPUBLICTRANSIT

PARTIAL WORK PROGRAM BUDGET FY 2013-14 TO FY 2020-21

13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21

STATEHIGHWAYSYSTEM(SHS) 1542.45 1911.11 1596.30 2566.05 1663.76 1897.59 1367.84 1545.68OTHERROADS 228.19 232.86 171.16 232.83 171.62 166.32 161.89 165.67RIGHTOFWAYLAND 103.26 126.97 157.48 450.97 351.35 172.97 202.26 203.24SAFETY 7.10 4.64 28.29 10.55 1.28 3.17 0.84 0.25BRIDGES 111.53 98.68 115.61 373.80 137.07 144.08 160.36 128.03RESURFACING 194.92 217.86 279.28 312.39 302.00 316.30 309.06 340.77PRELIMINARYENGINEERING 497.21 644.92 697.92 695.88 492.66 511.36 463.77 526.87CONSTRUCTION&ENG.INSPECTION 225.09 212.97 292.28 314.96 229.84 205.32 196.88 134.98RIGHTOFWAYSUPPORT 50.91 54.71 77.47 92.88 62.62 59.53 55.29 53.40ENVIRONMENTALMITIGATION 32.22 22.50 15.12 37.17 3.48 1.56 3.26 0.41MATERIALS&RESEARCH 33.63 33.28 34.89 35.47 35.80 36.92 38.20 39.53OPERATIONS&MAINTENANCE 620.64 671.49 701.70 701.50 757.64 777.29 805.74 835.25TRAFFICENG.&OPERATIONS 88.87 114.46 131.09 206.26 186.96 181.14 189.34 211.73TOLLOPERATIONS 192.58 257.44 269.16 313.19 302.85 340.71 306.38 309.64ROADS&HIGHWAYSTOTAL 3928.61 4603.89 4567.74 6343.89 4698.94 4814.27 4261.12 4495.45

ProgramArea(MILLIONS OF $) 1STANALYSIS 2NDANALYSIS

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Thisanalysisdoesnotaddressproductcategoriesrelatedtoprogramareasnotspecifiedinthelegislation,nordoesitaddressthosecategoriesthatmaptomultipleprogramareaswhereattributionisanissue.ThelargestproductcategorynotcoveredbecauseofoverlapwasIntermodalAccess.TheIntermodalAccessproductcategoryfundsprojectsusedtoimprovesurfacetransportationaccess(whetherroadorrail)tointermodalfacilities(seaportsandairports).

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METHODOLOGYBroadApproach...EDRusestheStatewideModeltoestimatetheROIfortheprogramsunderreview.TheStatewideModelisadynamiccomputablegeneralequilibrium(CGE)modelthatsimulatesFlorida’seconomyandgovernmentfinances.7Amongotherthings,itcapturestheindirectandinducedeconomicactivityresultingfromthedirectprogrameffects.ThisisaccomplishedbyusinglargeamountsofdataspecifictotheFloridaeconomyandfiscalstructure.Mathematicalequations8areusedtoaccountfortherelationships(linkagesandinteractions)betweenthevariouseconomicagents,aswellaslikelyresponsesbybusinessesandhouseholdstochangesintheeconomy.9Themodelalsohastheabilitytoestimatetheimpactofeconomicchangesonstaterevenuecollectionsandstateexpendituresinordertomaintainabalancedbudgetbyfiscalyear.WhenusingtheStatewideModeltoevaluateappropriation-basedprograms,themodelis“shocked”10usingstaticanalysistodeveloptheinitialordirecteffectsattributabletotheprojectsfundedbythestate.Inthisanalysis,thedirecteffectsareuniquetoeachtransportationprogramareaanddescribedintheirseparatesections.Afterthedirecteffectsaredevelopedandestimated,themodelisthenusedtoestimatetheadditional—indirectandinduced—economiceffectsgeneratedbytheprograms,aswellasthesupply-sideresponsestothenewactivity,wherethesupply-sideresponsesarechangesininvestmentandlaborsupplyarisingfromthenewactivity.Indirecteffectsarethechangesinemployment,income,andoutputbylocalsupplierindustriesthatprovidegoodsandservicestosupportthedirecteconomicactivity.Inducedeffectsarethechangesinspendingbyhouseholdswhoseincomeisaffectedbythedirectandindirectactivity.Alloftheseeffectscanbemeasuredbychanges(relativetothebaseline)inthefollowingoutcomes:

• Stategovernmentrevenuesandexpenditures• Jobs• Personalincome• FloridaGrossDomesticProduct• Grossoutput• Householdconsumption• Investment• Population

7ThestatewideeconomicmodelwasdevelopedusingGEMPACKsoftwarewiththeassistanceoftheCentreofPolicyStudies(CoPS)atVictoriaUniversity(Melbourne,Australia).8Theseequationsrepresentthebehavioralresponsestoeconomicstimuli–tochangesineconomicvariables.9Thebusinessreactionssimulatethesupply-sideresponsestothenewactivity(e.g.,changesininvestmentandlaborsupply).10Ineconomics,ashocktypicallyreferstoanunexpectedorunpredictableeventthataffectstheeconomy,eitherpositiveornegative.However,asusedabove,ashockreferstosomeactionthataffectsthecurrentequilibriumorbaselinepathoftheeconomy.Itcanbesomethingthataffectsdemand,suchasashiftintheexportdemandequation;or,itcouldbesomethingthataffectsthepriceofacommodityorfactorofproduction,suchasachangeintaxrates.Inthecurrentanalyses,ashockisimposedtosimulatetheintroductionoftransportationexpendituresintotheeconomy.

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EDR’scalculationofthereturnoninvestmentusesthemodel’sestimateofnetstaterevenuesandexpenditures.Otherrequiredmeasuresforthisreportincludethenumberofjobscreated,theincreaseordecreaseinpersonalincome,andtheimpactongrossdomesticproduct,allofwhichareincludedinthemodelresults.

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PROGRAMFINDINGSInthepagesthatfollow,theanalysisforeachtransportationprogramareaincludesdiagnostictablesdescribingthecompositionandstatisticsoftheprojectsunderreview.Keytermsusedinthetablesaredescribedbelow:StatePaymentsintheWindow$(M)–Representstheamountofstatepaymentsmadetotheprogramineachfiscalyear.

TotalNetStateRevenues$(M)–Representstheamountofnewstaterevenuegeneratedbytheprogramineachfiscalyear.

PersonalIncome(Nominal$(M))–Reflectsincomereceivedbypersonsfromallsources.Itincludesincomereceivedfromparticipationinproductionaswellasfromgovernmentandbusinesstransferpayments.Itisthesumofcompensationofemployees(received),supplementstowagesandsalaries,proprietors'incomewithinventoryvaluationadjustment(IVA)andcapitalconsumptionadjustment(CCAdj),rentalincomeofpersonswithCCAdj,personalincomereceiptsonassets,andpersonalcurrenttransferreceipts,lesscontributionsforgovernmentsocialinsurance.

RealDisposablePersonalIncome(Fixed2010-11$(M))–Reflectstotalafter-taxincomereceivedbypersons;itistheincomeavailabletopersonsforspendingorsaving.

RealGrossDomesticProduct(Fixed2010-11$(M))–Measuresthestate'soutput;itisthesumofvalueaddedfromallindustriesinthestate.GDPbystateisthestatecounterparttotheNation'sgrossdomesticproduct.

ConsumptionbyHouseholdsandGovernment(Fixed2010-11$(M))–Reflectsthegoodsandservicespurchasedbypersonsplusexpendituresbygovernmentsconsistingofcompensationofgeneralgovernmentemployees,consumptionoffixedcapital(CFC),andintermediatepurchasesofgoodsandserviceslesssalestoothersectorsandown-accountproductionofstructuresandsoftware.Itexcludescurrenttransactionsofgovernmententerprises,interestpaidorreceivedbygovernment,andsubsidies.

RealOutput(Fixed2010-11$(M))–Consistsofsales,orreceipts,andotheroperatingincome,pluscommoditytaxesandchangesininventories.

TotalEmployment(Jobs)–Providesestimatesofthenumberofjobs,fulltimeplusparttime,byplaceofwork.Fulltimeandparttimejobsarecountedatequalweight.Employees,soleproprietors,andactivepartnersareincluded,butunpaidfamilyworkersandvolunteersarenotincluded.

Population(Persons)–Reflectsfirstofyearestimatesofpeople,includessurvivorsfromthepreviousyear,births,specialpopulations,andthreetypesofmigrants(economic,international,andretired).

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THEROADSANDHIGHWAYSPROGRAMAREAOverviewoftheRoadsandHighwaysProgramArea…TheRoadsandHighwaysprogramarearepresentsthelargestportionoftheDepartmentofTransportation’sworkprogrambudget.Thetablebelowliststherelevantpartoftheworkprogramfundingforthisarea,startinginFY2013-14andprojectedouttoFY2020-21.

WorkProgramBudget-Roads&Highways(Millionsof$)Historical Work Program July 1, 2016

13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21

$3,928.6 $4,603.9 $4,567.7 $6,343.9 $4,698.9 $4,814.3 $4,261.1 $4,495.4BoththeFederalandstategovernmentsconsiderhighwayinfrastructuretobeanimportantfactorineconomicgrowth.Thehighwaysystemcontributestoeconomicgrowththroughmultiplepaths.Perhapsmostimportantly,itenablesproducerstoreachnewmarketsortoreachexistingmarketsatacheaperprice.11Onestudyestimatedthatanoverwhelmingmajorityofindustries(32outofthe35industriesstudied)experiencedareductionincostsduetotheestablishmentoftheInterstateHighwaySysteminthe1950s.12Highwayinfrastructurereducesbusinesscostsininseveralways:

1.) ReductioninTravelTime:CongestionisasignificantproblemintheUnitedStates.Theimprovementorexpansionofroadscanreducecongestionwhich,inturn,reducesthetraveltimeformovinggoods.Everyadditionalhourontheroadcoststhetruckingindustryapproximately$67.13The2015UrbanMobilityReportestimatedthatcongestioncostscommercialtrucks$28billioninexpensesandfuel.14

2.) Safety:Improvedhighwayinfrastructurecanleadtoareductioninvehicularaccidents.OnestudyofthetotaleconomiccostsofvehicularaccidentsinUnitedStatesindicatedtheannualcostwas$242billion.15Thecostcomponentsincludeproductivitylossesfrompersonsbeingunabletowork,medicalexpenses,propertyandvehiculardamagesandthelifetimeeconomiccostsofafatalityorseriousinjurytosociety.

3.) ReductioninOperatingCosts:ThemajorityofgoodsproducedandconsumedintheUnitedStateswill,atonepoint,bemovedthroughtheNationalHighwaySystem.Thetransportationofthesegoodsamounttoanadditionalcostthatwillbepassedontothefinalconsumerofthegoodorservices.Byaddingnewroads,improvingoldroadsandeliminatingsubstandardroads,operatingcostscanbereducedastheproducttravelsquickerandcheaper.

11Shatz,H.,KitchensK.,Rosenbloom,S.,&Wach,M.,”HighwayInfrastructureandtheEconomy:ImplicationsforFederalPolicy”,TheRandInstitute.2011:xiv.12Nadiri,Ishaq.,Mamuneas,Theofanis,“ContributionsofHighwayCapitaltoIndustryandNationalProductivityGrowth”,FederalHighwayOfficeofPolicyDevelopment,September1996.13Ellis,David,“TechnicalMemorandum:CostPerHourandValueofTimeCalculationsforPassengerVehiclesandCommercialTruckForUseintheUrbanMobilityStudy”,TexasTransportationInstitute.May2008:5.14TexasA&MTransportationInstitute,“2015UrbanMobilityScorecard”,August2015:17.15Blincoe,L.J.,Miller,T.R.,Zaloshnja,E.,&Lawrence,B.A.“Theeconomicandsocietalimpactofmotorvehiclecrashes,2010.(Revised)”,NationalHighwayTrafficSafetyAdministration.May2015:1.

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Betterhighwayinfrastructurebenefitsconsumers,too.InJune2016,theFloridaDepartmentofTransportation(DOT)estimatedthatover307millionmilesaredrivendailyontheStateHighwaySystem.16Annually,theaverageAmericandrivesapproximately13,476milesayear.17Theyrelyontheroadwaysystemtogettowork,buygoodsandservices,andtoparticipateinleisureactivities.Onestudyevenfoundapositivelinkbetweenpublicinfrastructurespendingandpersonalincomegrowth.18Improvedhighwayinfrastructurebenefitsindividualsbyreducingtravelcostsandincreasinglaborproductivity.Further,theaverageU.S.householdspendsapproximately$8,000onauto-relatedgoodsandserviceseachyear,withalargeportionofthatbudgetdedicatedtooperatingandmaintainingpersonalvehicles.19Thisindicatesthatanyimprovementintheroadinfrastructurecanleadtoareductioninpersonalauto-relatedcosts.Highwayinfrastructurealsoincreasesproductivitybyallowingworkerstoaccessbetter—oratleastagreaterarrayof—employmentopportunities.Thisbenefitstheemployersaswellasemployees,sinceitprovidesaccesstoalargerpoolofqualifiedlabor.Ultimately,theeconomybenefitsasbetteremploymentmatchingleadstohigherlevelsofproductivitygrowth.

Theimmediate(orshort-term)benefitofhighwayinfrastructureontheeconomyisthecreationofjobsandincome.Everyhighwayinfrastructureprojectentailscontractingtheworktoprivateconstructioncompaniesthathireworkers,purchaseconstructionsuppliesandequipment,andreinvestordistributeanyremainingprofit.Alloftheseactivitiesbenefitthebroadereconomy.Duetoitsimmediatebenefit,infrastructurespendingisafavoritechoicebygovernmentstostimulatetheeconomy.Whilebusinesssiteselectionsurveyshaveconsistentlyfoundhighwayaccessibilityranksfirstorsecondinimportancefortheselectionofnewlocations,economistshavespentdecadesmeasuringtheexactrelationshipbetweeninfrastructurespendingandeconomicoutput.20Therelationshipisdifficulttomeasureforseveralreasons.First,moststudiesarelimitedbydataavailability.Mostreliabledataonpublicandprivatecapitalinvestmentsstartafter1945.Second,thequestionofcausationexists.Doespubliccapitalincreaseprivateinvestment,ordoesanincreaseinprivateinvestmentleadgovernmentstoinvestinmorepublicinfrastructure?Third,othervariables(suchastechnologicalfactors,population,andeducation)maynotbeaccuratelyaccountedforintheanalysis,leadingtobiasedandunreliableestimates.However,thegeneralconsensusintheacademicresearchsuggestsasignificant,positiverelationshipbetweenpublicinfrastructureandeconomicoutput.Economicoutputincreasesduetotheinfrastructure’simpactontheproductivityofprivatecapitalandlabor.Productivitymeasurestheamountofoutputperunitofproductioninput(whetherlaborandprivatecapital).Greaterproductivitymeansmoreoutputgiventhesameleveloflaborandprivatecapitalinputs.Forexample,anewlyresurfacedhighwaylowersthetruckingindustry’soveralloperatingcostsanddeliverytimes.This16FloridaDepartmentofTransportation,“StateHighwaySystemReport1:AllRoads”,June3,2016:1.17FederalHighwayAdministrationOfficeofHighwayPolicyInformation,“AverageAnnualMilesperDriverbyAgeGroup”,July13,2016.18 KevinDuffy-DenoandRandallW.Eberts,“PublicInfrastructureandRegionalEconomicDevelopment:ASimultaneousEquationsApproach”,FederalReserveBankofCleveland,(August1989).19U.S.BureauofLaborStatistics,“Table8.RegionofResidence:AverageAnnualExpendituresandCharacteristics”,(September2012). 20AreaDevelopmentAnnualSurveysregardingsiteselectionandrelocation.For2015data,andananalysisofrespondentsbyindustryandpositionwithintheorganization,see:http://www.areadevelopment.com/Corporate-Consultants-Survey-Results/Q1-2016/corporate-executive-site-selection-facility-plans-441729.shtml.AccessedDecember,2016.

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benefitstheproductivityofprivatecapitalbecausetheasset(thetruck)depreciatesatamuchlowerrateandlastslonger.Theproductivityoflaborincreasesbecauseitnowtakesthedriverlesstimetocompletethetrip,therebyenablingmoretrips.Therelationshipbetweenpubliccapitalandeconomicoutputwasclearinthe1950sandthe1960s.ManyacademicresearchershavelinkedtherapidU.S.economicexpansionofthe50sand60stothedevelopmentoftheU.S.InterstateHighwaySystem.21Duringthatperiod,theInterstateHighwaySystemestablishedconnectionstoandbetweencitiesandtownsthatwerepreviouslyinefficient.Oneanalysisattributedabout1.4%peryearofU.S.growthbefore1973totheestablishmentoftheInterstateHighwaySystem.22Anotherstudyestimatedthattruckingcostswouldbe19%higherwithouttheInterstateHighwaySystem.23A1989paperlinkedthedeclineinpubliccapitalspendingthatstartedinthelate1960stotheU.S.productivityslowdownwitnessedinthe1970sand1980s.24Morerecentestimatessuggestthatthepositiverelationshipstillexists,butatamuchlowerlevel.Someresearchershavesuggestedthatthegainsinhighwayexpansiondonotofferthesamebenefitsastheinitialconstructionoftheinterstate.25Forexample,theadditionofanewlaneonI-10maylowertravelcosts,butthisvalueislowerthanthevalueoftheinterstate’soriginalconstruction.Itsoriginalcompletionlinkednewmarketsanddramaticallyreducedtravelcosts.Tothispoint,a2006analysisestimatedastrongdeclineintherateofreturnforhighwayinfrastructure.26Thestudyestimatedthereturndroppedfrom54%intheyears1949to1959to13.6%intheyearsof1990to2000.27Also,a2011literaturereviewfoundaconsensusamongpublishedstudiesthattherateofreturnforhighwayinfrastructurehasfallen.28Otherissuescastdoubtontheeffectivenessofhighwayexpansionandimprovement.Onebodyofliteraturesuggeststhatnewhighwaylanesdonoteasecongestionissuesandlowertimetravelcosts.Thisresearchhasfoundthathighwayexpansioninsteadleadstoadditionalvehicleusageonthehighway.Thisconceptisreferredtoas“induceddemand”.29A1996studyestimatedthatcongestionsavingswerematchedona1:1basiswithaproportionalincreaseintraffic.30A1997studyofCaliforniahighwayconstructionfoundthatevery10%increaseinlanesaddedledtoa9%increaseinvehiclemiles

21IshaqNadiriandTheofanisMamuneas,“ContributionsofHighwayCapitaltoIndustryandNationalProductivityGrowth”,FederalHighwayOfficeofPolicyDevelopment,(September1996).22JohnFernald,“RoadstoProsperity?AssessingtheLinkbetweenPublicCapitalandProductivity”,TheAmericanEconomicReview,Vol89,No.3:619-638.23TheodoreKeelerandJohnYing,“MeasuringtheBenefitsofLargePublicInvestment”,JournalofPublicEconomics,Vol36,(1998):69-85.24DavidAschauer,“IsPublicExpenditureProductive?”,JournalofMonetaryEconomics,Vol23,(1989):177-200.25TheofanisMamuneasandIshaqNadiri.,“Production,ConsumptionandtheRatesofReturntoHighwayInfrastructureCapital,”NationalBureauofEconomicResearch,(August2006).26TheofanisMamuneasandNadiriIshaq,“Production,ConsumptionandtheRatesofReturntoHighwayInfrastructureCapital”,NationalBureauofEconomicResearch,August2006. 27Ibid.28 Shatz,H.,KitchensK.,Rosenbloom,S.,&Wach,M.,”HighwayInfrastructureandtheEconomy:ImplicationsforFederalPolicy”,TheRandInstitute.2011:xiv. 29DouglasLee,“InducedTrafficandInducedDemand”,ConceptsofInducedDemand,AppendixB:1:16.30P.Goodwin,“EmpiricalEvidenceonInducedTraffic:AReviewandSynthesis”,Transportation,Vol23:35-54

15

traveled(VMT).31AnotherCaliforniastudyfoundthe“induceddemand”effect,butataslightlylowerrate:a10%increaseinlanemilesaddedledtoa6.4%increaseintraffic.32Awidelyacceptedwayofmeasuringtheimpactofpublicinfrastructureisthroughoutputelasticities.Elasticityisdefinedasthechangeinoutputforagivenpercentagechangeinaninput.Forexample,anoutputelasticityof.20impliesthatforevery1%changeintotalinfrastructure,privateoutputgoesupby0.20%.Aschauer(1989)estimatedthattheoutputelasticityofpubliccapitalrangesfrom.39to.56.33Munnel(1990b)foundtheelasticitybetweenpubliccapitalandoutputtobe0.15.34Amorein-depthlookatcounty-specificdataandtheprovisionofhighwayinfrastructurefoundthata10%percentincreaseinhighwaycapitalleadtoa0.14%increaseineconomicoutput.35Tatom(1991)foundasimilarrelationshipandestimatedanelasticityofoutputof.146.36DescriptionoftheDataandMethodology…TheDOTworkprogramfundstheexpansion,improvementandmaintenanceofthestate-operatedhighwaysystem.TheStateHighwaySystemisanetworkof12,105centerlinemilesofhighwaysownedandmaintainedbythestateorstate-createdauthorities.MajorelementsincludetheInterstateSystem,Florida’sTurnpikeandothertollfacilities.37Thebudgetfundstheadditionofnewlanes;therepavingofexistinglanes;andtherepairandmaintenanceofthehighwaysystemandstate-controlledroadsystem.Thebudgetalsofundsthenecessaryancillarysupportsincludingengineering,landpurchasesandenvironmentalmitigation.Thisanalysisgroups14productcategoriesintotheRoadsandHighwaysprogramarea.Theincludedproductcategoriesandadescriptionofeachcanbefoundbelow38:

• StateHighwaySystem(SHS):Thescopeofworkinthisprogramincludestheconstruction,additionorimprovementoflands,interchanges,ramps,feederroads,tollcollectionfacilitiesandmotoristservicefacilitieswhichareontheStateHighwaySystem.

• OtherRoads:TheOtherRoadsPrograminvolvestheconstructionandimprovementofroadswhicharenotontheStateHighwaySystem(SHS).

• RightofWayLand:TheRightofWayLandProgramprovidesfortheacquisitionofpropertynecessarytosupportthehighwayandbridgeconstructionprograms.

• Safety:ThisproductcategoryaddressesSHSsafetyhazardsthatarenotincludedinprojectsfundedbyotherproductcategories.

• Bridges:TheBridgeProgramfundstherepairandreplacementofbridgesinFlorida.

31M.HansenandY.Huang,“RoadSupplyandTrafficinUrbanAreas:APanelStudy”,TransportationResearch,Vol.31A:205-218.32RobertCervero,“RoadExpansion,UrbanGrowth,andInducedTravel:APathAnalysis”,JournaloftheAmericanPlanningAssociation,Vol69,Issue2:145-163. 33 DavidAschauer,“IsPublicExpenditureProductive?”,JournalofMonetaryEconomics,Vol23,(1989):177-200.34AliciaMunnel,“HowDoesPublicInfrastructureAffectRegionalEconomicPerformance?”,NewEnglandEconomicReview,Sept./Oct.(1990b).35 AliciaMunnel,“Commentson‘IsThereTooLittleCapital?InfrastructureandEconomicGrowth,’byCharlesHultenandRobertM.Schwab,”AmericanEnterpriseInstituteConferenceonInfrastructureNeedsandPolicyOptionsforthe1990s,(February1991). 36JohnTatom,“PublicCapitalandPrivateSectorPerformance”,FederalReserveBankofSt.LouisReview,(May/June1991):3-15.37TheFloridaDepartmentofTransportation,“ProgramandResourcePlan”,(April2015):1-2.38Descriptionofeachproductcategorycamefrom:TheFloridaDepartmentofTransportation,“ProgramandResourcePlan”,(April2015).

16

• Resurfacing:ThisprogramaccomplishestheresurfacingofpavementsontheStateHighwaySystem.

• PreliminaryEngineering:Thisprogramfundstheactivitiesandresourcesofengineeringservicesrequiredforthedevelopment,improvement,andmaintenanceoftheStateHighwaySystem.

• Construction&EngineeringInspection:Thisprogramincludestheactivitiesandresourcesrequiredtomonitor,review,inspect,andadministerhighwayandbridgeconstructionprojects.

• RightofWaySupport:Thisprogramfundstheactivitiesandresourcesnecessarytoacquireandmanagerightofwaypropertyfortheconstructionoftransportationprojects.

• EnvironmentalMitigation:Thisprogramconsistsoftheoffsettingofimpactsfromhighwayimprovementsonwetlandsandsurfacewaters.

• MaterialsandResearch:Thisprogramfundstheinvestigation,design,andanalysisofmaterialsusedintheStateHighwaySystem

• OperationsandMaintenance:Thisprogramiscomprisedofactivitiesthatsupportandmaintainthetransportationinfrastructureonceitisconstructedandoperational.

• TrafficEngineeringandOperations:Thisprogramdevelopsandappliessolutionstotrafficengineeringproblemsthatdonotrequiresignificantstructuralalterationsofexistingandplannedroadways.

• TollOperations:Thisprogramfundstheadministrationofrevenuecollectionactivitiesontollroadsandbridgesthroughoutthestate.

TheanalysisreliedonhistoricalfiscalyearfundingdatabeginninginFY2013-14andendinginFY2015-16.ThelatestadoptedDOTworkprogrambudgetwasusedtoforecastfundinglevelsoverthenextfivefiscalyears,startinginFY2016-17andendinginFY2020-21.DOTalsoprovidedinformationonhistoricalandprojectednewlanemilesaddedtothehighwaysystem;thenumberoflanesimprovedorresurfacedeachfiscalyear;DOTinfrastructureassetdata;andlocalroadcapitaloutlaydata.EDRusedtheStatewideModeltodevelopanROIfortheRoadsandHighwaysprogramarea.AsdiscussedintheMethodologysection,theStatewideModelisadynamiccomputablegeneralequilibrium(CGE)modelthatsimulatesFlorida’seconomyandgovernmentfinances.Theinputsintothemodelwere:

• Anincreaseinexpendituresoninvestmentsingovernment-ownedassets.• Aredirectionofthestatebudgetawayfromthegeneralmarketbasketofgoodsandservices

providedbygovernmenttofundtheincreaseinexpendituresoninvestmentsingovernment-ownedassets.

• Anincreaseintotaloutputduetohighwayfunding.Theinvestmentincreasesimulatesthedirecteffectofspendingonroadinfrastructure.Theanalysisalsoassumesthatthespendingonthetransportationinvestmentisaredirectionawayfromothergoodsandservicesprovidedbythestategovernment.Therefore,anamountequaltotheincreasedfundingfortransportationwasremovedfromstateexpendituresonamarketbasketofgoods.ThistreatmentisconsistentwithpriorEDRreturnoninvestmentreports.Theincreaseintotaloutputisanestimateoftherelationshipbetweeneconomicoutputandhighwayinfrastructure.Asdiscussedpreviously,theliteraturesuggestsapositiveelasticityofoutput.Based-ontheacademicliterature,theROIevaluationusedanoutputelasticityof.15.Thiscanbedefinedas

17

follows:forevery1%ofnewhighwayinfrastructure,totalFloridaoutputincreasesby0.15%.Thechosenelasticityrecognizestheloweroutputelasticitiesfoundinmorerecentanalyses.Theelasticityofoutputismeasuredinmultipleways,andthoseresultsarethenaggregated.Newhighwayinfrastructureisestimatedaslanemilesaddedeveryyearorresurfacedeveryyear.TheseestimatesarecomparedtothetotalnumberoflanemilesintheStateHighwaySystemtodevelopanoutputelasticity.TheanalysisreliedonDOT’sinfrastructureassetdatatodeterminetheoutputelasticitiesfortheOperationsandMaintenanceandBridgesportionsoftheprogramarea.Finally,theOtherRoadscontributiontooutputwasbased-onin-houseestimatesoflocalcapitaldataandhistoricalLocalHighwayFinanceReportsthatreportcapitaloutlayexpenditures.Highwayinfrastructurecantakeyearstocomplete,withthebenefitstooutputnotmaterializinguntilfinalcompletion.Inthisanalysis,theoutputbenefitsofkeyproductcategories(StateHighwaySystem,OtherRoads,Bridges)weredelayedbyacoupleofyearstorepresentthelagbetweentheprogramcostsandtheprogrambenefits.Duetothelag,thebenefitsofinfrastructurespendingintheyearspriortotheanalysis(FY2011-12,FY2012-13)wereincludedintheanalysis.AnalysisandFindings…

TheROIfortheRoads&Highwaysprogramareaisprojectedat0.19forthehistoricalanalysiscoveringFY2013-14throughFY2015-16.Foreverydollarspentontheprogram,thestateofFloridareceived19centsbackintaxrevenue.TheRoads&HighwaysprogramgreatestcontributionistorealDisposablePersonalIncome,andsecondarilytorealGrossDomesticProduct(GDP).TheanalysisestimatedthattheRoads&HighwaysprogramareaincreasedrealDisposablePersonalIncomebyabout$20.5billioneveryyearandincreasedFlorida’srealGDPbyabout$19.0billioneveryyear.Onaverage,therewereover100,000additionaljobsinthestateeconomyattributabletothespendingontheRoads&Highwaysprogramarea.

StatewideEconomicModelImpactoftheROADS&HIGHWAYSPROGRAM(FY2013-FY2015)2012-2013 2013-2014 2014-2015 Total

3928.6 4603.9 4567.7 13,100.2797.2 810.0 867.2 2,474.40.20 0.18 0.19

Return-on-Investmentforthe3yearperiod 0.19

2012-2013 2013-2014 2014-2015 TotalAverageperYear

PersonalIncome Nominal$(M) 21,973.0 24,070.0 26,668.0 72,711.0 24,237.0RealDisposablePersonalIncome Fixed2010-11$(M) 18,565.0 20,431.0 22,644.0 61,640.0 20,546.7

RealGrossDomesticProduct Fixed2010-11$(M) 17,316.3 18,769.5 20,802.6 56,888.4 18,962.8

ConsumptionbyHouseholdsandGovernment Fixed2010-11$(M) 18,037.1 17,926.0 19,425.7 55,388.8 18,462.9

RealOutput Fixed2010-11$(M) 36,300.1 35,567.1 37,497.8 109,365.0 36,455.0

2010-11 2011-12 2012-13 Minimum MaximumAverageperYear

TotalEmployment Jobs 140,141 101,984 92,523 92,523 140,141 111,549

Population Persons 0 63,648 120,160 0 120,160 61,269

StatePaymentsintheWindow$(M)TotalNetStateRevenues$(M)Return-on-InvestmentbyYear

18

Theanalysisoftheforecastedworkprogram(FY2016-17throughFY2020-21)alsoledtoaROIof0.19.Foreverydollarspentontheprogram,thestateofFloridawillreceive19centsbackintaxrevenue.TheRoads&Highwaysprogramareacontributes$23.5billiontorealdisposableincomeandcontributes$21.6billiontoFlorida’srealGDPinanaverageyear.TheRoads&Highwaysprogram,onaverage,willaddover100,000jobstothestateeconomy.AcriticalassumptionbuttressingtheEDRresultsrelatestotheRoads&Highwaysprogramarea’scontributiontoFlorida’soutput.AsdiscussedintheData&Methodologysection,theanalysisestimatedanoutputelasticitybasedonacademicresearchandDOT’smileageandcapitalassetdata.ForbothROIs,theanalysisestimatedthat,onaverage,alittlelessthan1%ofallofFlorida’soutputcanbeattributedtotheRoads&Highwaysprogramarea.ThisestimatewasthenspreadevenlyacrossallindustriesintheStatewideModel.Torestatetheearlierdiscussion,thisoutputeffectisnotadirectresultofroadspendingontheeconomy.Rather,itisasecondaryimpactthattheroadandhighwaysystemhasonthebroadereconomy.ThebottomlineisthatFlorida’stotaloutputincreasesduetothepositiveproductivityshockonprivatecapitalandlaborinputs.DOT’sspendingonroadsandhighwaysclearlybooststhestate’sGDP,disposablepersonalincomeandemployment.Everyhighwayinfrastructureprojectentailscontractingtheworktoprivateconstructioncompaniesthathireworkers,purchaseconstructionsuppliesandequipment,andreinvestordistributeanyremainingprofit.Thisdirectspendingthenfiltersacrossthebroadereconomythroughinducedandindirecteffects.Theindirectimpactisthespendingbythefirmsthatprovidesuppliestotheinfrastructureprojects.Theinducedimpactistheresultingpurchasesofgoodsandservicesfromworkersemployedattheprojects.Thesecondaryimpacttototaloutputdescribedaboveisthenoverlaidontheseresults.Thestaterevenueimpactispositive,butmuted.Thestate’slargestsourceofrevenueisthestatesalestax.Constructionmaterialsforpublicinfrastructureprojectsareexemptedfromthestatesalestax.Thismeansthattherevenuebenefitprimarilyoccursthroughtheindirectandinducedeffectswhicharenotaslargeasthedirecteffect.

StatewideEconomicModelImpactoftheROADS&HIGHWAYSPROGRAM(FY2016-FY2020)2016-2017 2017-2018 2018-2019 2019-2020 2020-2021 Total

6343.9 4698.9 4814.3 4261.1 4495.4 24,613.6938.1 1,015.4 1,023.4 892.1 903.6 4,772.7

0.1 0.2 0.2 0.2 0.2Return-on-Investmentforthe5yearperiod 0.19

2016-2017 2017-2018 2018-2019 2019-2020 2020-2021 TotalAverageperYear

PersonalIncome Nominal$(M) 25,770.0 30,276.0 31,160.0 26,326.0 24,648.0 138,180.0 27,636.0RealDisposablePersonalIncome Fixed2010-11$(M) 21,908.0 25,730.0 26,502.0 22,342.0 20,823.0 117,305.0 23,461.0

RealGrossDomesticProduct Fixed2010-11$(M) 20,126.4 23,637.6 24,346.8 20,525.1 19,129.7 107,765.7 21,553.1

ConsumptionbyHouseholdsandGovernment Fixed2010-11$(M) 17,683.3 20,861.6 21,548.2 18,245.3 17,071.5 95,409.9 19,082.0

RealOutput Fixed2010-11$(M) 42,065.2 44,774.5 43,419.2 34,396.2 32,335.5 196,990.6 39,398.1

2016-2017 2017-2018 2018-2019 2019-2020 2020-2021 Minimum MaximumAverageperYear

TotalEmployment Jobs 147,462 124,738 99,755 64,221 68,605 64,221 147,462 100,956

Population Persons 0 63,968 129,728 189,568 233,248 0 233,248 123,302


19

TheROIisbelow1.0forseveralreasons.First,theoutputelasticitybenefitsallindustriesinFlorida.Someoftheseindustriesproduceasizableamountoftaxableoutput;otherindustriesgenerateasizeableamountofnon-taxableactivity.Forexample,anincreaseintheoutputofamanufacturerthatproducesintermediategoods39willnotnecessarilyleadtoalargeincreaseinstaterevenue,sincemostofthemanufacturer’sintermediategoodsareexemptedfromthestatesalestax.Italsotruethat,inreality,allindustries(tax-generatingornot)willnotequallybenefit.Second,oneofthelargestreportedbenefitsofhighwayspendingistraveltimesavings.Traveltimesavingsisthevalueconsumersplaceonthereductionoftraveltimebetweentwodistinctpoints.WhileDOTliststhisasacriticalfactorinevaluatingtheoverallbenefitsoftransportationinfrastructure,traveltimesavingscannotbemeaningfullyquantifiedwithintheparametersofthestatutorydefinitionforeconomicbenefit.Variousestimateshavebeendevelopedthatattempttomonetizethesavingsvalue,buttheyhavesofarfailedtoproducealinkagetorealdollarsthatcanbespentintheeconomy.40Inacost-benefitanalysis,personaltimetravelsavingswouldbemeasuredandcaptured,butsincethisevaluationislimitedtothetangibleeconomicimpactoftheRoadsandHighwaysprogramarea,itisnotincluded.Third,therearesubstantialstatecostsassociatedwiththeconstructionandoperationofthehighwaysystem.Intotal,the14budgetarycategoriescostthestate,onaverage,about$4.3billionperyearinthehistoricalanalysisandabout$4.9billionperyearintheforecastedanalysis.Theprogramreturnedapproximately$1billionintaxrevenueeveryyeartothestate.Whilethisisasizeablecontributiontothestate’srevenues,itisnotenoughtooffsetthestate’sexpense.

39IntermediateGoodaregoodsusedasinputsintheproductionoffinalgoods.Forexample,thecircuitboardonasmartphoneisanintermediategood.40Inthisregard,DOT’s2014ValueofTimeTravelofMoneyreportestimatespersonaltraveltimevalue(atthelocallevel)at50%ofthehourlymedianhouseholdincome.In2014,personaltimetravelsavingswasestimatedat$12.25perhour.

20

THERAILSPROGRAMAREAOverviewoftheRailsProgram…TherailindustryhascontributedtotheU.S.economyforover150years.Astheveryfirst,cheapandefficientland-basedtransportationmodel,theintroductionandwidespreaddeploymentofrailservicesadvancedtheU.Seconomytoanotherlevel.Eventoday,railisthemostefficientland-basedcommoditytransportationtool.Theworkprogramfundsrailsafetyinspections,railcorridoracquisition,thedevelopmentofcommuterrailservices,maintenanceandrehabilitationofrailfacilities,andrail-highwaygradecrossingsafetyimprovements.41ThetablebelowidentifiestherelevantfundingintheworkprogrambeginninginFY2013-14andprojectedouttoFY2020-21.

WorkProgramBudget-Rails(Millionsof$)Historical Work Program July 1, 2016

13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21

$89.66 $109.97 $76.64 $379.14 $192.40 $154.15 $171.86 $116.27ThemajorityoftheworkprogramfundinggoestowardpassengerrailsystemsinFlorida.TheSunRailandTri-Railcommuterrailsystemsarebothincludedintheworkprogram.SunRailiscommuterrailsystemthatservesthegreaterOrlandoarea.TheTri-RailSystemprovidespassengerrailservicebetweenPalmBeach,Broward,andMiami-Dadecounties.TheTri-RailSystemrecordedapproximately4.4millionpassengertripsin2014andapproximately4.3millionpassengertripsin2015.42Commuterrailprimarilyservesasanalternativeoptiontoautocommuting.Typically,consumerssavemoneybyswitchingfrompersonalautousetocommuterrail.Inthisregard,a2014AmericaPublicTransportationAssociationreportestimatedthatconsumerssave$845dollarsayearbyswitchingfromcartopublictransportation.43In2013,freightrailroadinFloridamovednearly88.7milliontonsoffreight.44Thatisequivalenttoaround5.3millionheavytruckloads.Asof2013,Floridahadover3,842milesofraillines.45About2,743ofthesemilesaremainlinetrackwhichistheprincipalarterythroughwhichtrainsmoved.46About95%oftherailinFloridaisprivately-owned.47BulkcommodityindustriesinFloridalikefertilizer,timber,andagriculturalproductsrelyonfreightrailtotransportthegoodsoutofFlorida.Floridaalsoreliesonfreightrailtoimportcommoditieslikecars,coalandmachinery.Nationally,railtransported2.1trilliontonsofcommoditiesin2012.48Inthatsameyear,thetruckingindustrytransportedover13.2trilliontonsofcommodities.4941TheFloridaDepartmentofTransportation,“ProgramandResourcePlan”,(April2015):1-29.42SouthFloridaRegionalTransportationAuthority,“SouthFloridaRegionalTransportationAuthorityComprehensiveAnnualFinancialReport”,2015:67.43 AmericanPublicTransportationAssociation,“EconomicImpactofPublicTransportationInvestment”(2014):20.44 FloridaDepartmentofTransportation,“FloridaTransportationTrends&Conditions”,(2015):21. 45Ibid.46Ibid.47FloridaDepartmentofTransportation,”2010FloridaRailSystemPlan—InvestmentElement”(December2010):2-4.48FederalHighwayAdministration,“FreightFactsandFigures2013”(2013):3.49Ibid.

21

Freightrailtransportationisacheaper,moreefficientmethodoftransportationthantrucking.50Onaverage,railisfourtimesmoreefficient.51A2014CongressionalBudgetOfficestudyestimatedthatgeneralfreighttruckingcosts14.85centspertonmilecomparedtoanaveragecostof5.85centspertonmileonfreightrail.52Anysignificantredirectionofthetransportationofgoodstowardsrailwouldbebeneficialtoproducers,consumersandtheoverallgeneraleconomy.Freightrailhasbenefitsbeyondlowertransportationcosts.Accidentsoccurbothinrailandtrucktransportation.Railaccidentsincludecollisionsatrailcrossings,trainderailmentsandfatalitiesinvolvingpeoplestruckbytrains.Truckingaccidentsincludemultiple-vehiclecollisionsorthetruckoverturning.Whilebothrailandtruckaccidentsarecostly,truckingaccidentsoccurmorefrequently.53In2012,thetruckingindustrywasinvolvedinover317,000accidents,incidentsandcrashes.Inthesameyear,therailindustryreportedlessthan5,000accidents,incidents,andcrashes.54A2014CongressionalBudgetOfficestudyestimatedthattheaccidentcostper-tonmilewas1.55centsfortrucksand0.17centsper-tonmileforrail.55Anotherbenefittorailisthereductioninroadmaintenancecosts.Thetruckingindustryisresponsibleforthemajorityofthedamagedonetothehighwaysystem.AU.SGovernmentAccountabilityReportestimatesthateverysemi-truckdoesasmuchroaddamageas9,600cars.56Incontrast,raildoesverylittledamagetothepublicroadsystemasitonlyinteractswiththeroadsystematrailcrossings.Further,sinceover95%oftheraillinesareprivateinFlorida57,mostraillinemaintenanceisperformedbyprivatecompanies.The2014CongressionalBudgetOfficestudyestimatedthatthecostper-tonmileontheroadwaysystemwas0.85centsfortruckingandonly0.055centsfortherailindustry.58Aswitchtorailalsoreducestotalcongestioncosts.ThelatestUrbanMobilityScorecardestimatedthatcongestioncausedAmericanstospendanextra6.9billionhoursintrafficandtopurchaseanextra3.1billiongallonsoffuel.59Thereportalsoprojectscongestiontogetworse.Miami,OrlandoandTampaareinthetop50“worstcongestion”citiesinAmerica.60BothpassengerrailandfreightraillowerscongestiononFloridaroads.OneoftherecommendationsbytheUrbanMobilityReportistoexpandrailcapacity.A2014CongressionalBudgetOfficestudyestimatedthatthecongestioncostper-tonmilewas0.65centsfortrucksand0.01centsfortherailindustry.61

50DavidForkenbrock,“ComparisonofExternalCostsofRailandTruckFreightTransportation”,TransportationResearch.PartA:Vol35(2001):321-337.51AssociationofAmericanRailroads,“TheEconomicImpactofAmerica’sFreightRailroads”,(June2016).52CongressionalBudgetOffice,“Social-CostPricinginFreightTransportation”ConferenceontheRoleofFreightTransportationinEconomicCompetiveness.(December11,2014).53FederalHighwayAdministration,“FreightFactsandFigures2013”(2013):65.54Ibid. 55 CongressionalBudgetOffice,“Social-CostPricinginFreightTransportation”ConferenceontheRoleofFreightTransportationinEconomicCompetiveness.(December11,2014):2.56 U.S.GovernmentAccountibilityOffice,“ExcessiveTruckWeight:AnExpensiveBurdenWeCanNoLongerSupport”,(July16,1979):23. 57FloridaDepartmentofTransportation,”2010FloridaRailSystemPlan—InvestmentElement”(December2010):2-4.58 CongressionalBudgetOffice,“Social-CostPricinginFreightTransportation”ConferenceontheRoleofFreightTransportationinEconomicCompetiveness.(December11,2014):2 59TexasA&MTransportationInstitute,“2015UrbanMobilityScorecard”,(August2015):1.60Ibid.61 CongressionalBudgetOffice,“Social-CostPricinginFreightTransportation”ConferenceontheRoleofFreightTransportationinEconomicCompetiveness.(December11,2014):2.

22

DescriptionoftheDataandMethodology…TheDOTworkprogramfundstheexpansion,improvementandmaintenanceoftherailsystem.Railfundingcanincluderailsafetyinspections,railcorridoracquisition,thedevelopmentofcommuterrailservices,maintenanceandrehabilitationofrailfacilities,andrail-highwaygradecrossingsafetyimprovements.62Themajorityoftheworkprogramfundinggoestowardpassengerrail.TheanalysisreliedonhistoricalfiscalyearfundingdatabeginninginFY2013-14andendinginFY2015-16.Thelatestworkprogrambudgetwasusedtoforecastfundinglevelsoverthenextfivefiscalyears,startinginFY2016-17andendinginFY2020-21.EDRusedtheStatewideModeltodeveloptheROIfortheRailsportionoftheworkprogram.AsdiscussedintheMethodologysection,theStatewideModelisadynamiccomputablegeneralequilibrium(CGE)modelthatsimulatesFlorida’seconomyandgovernmentfinances.Theinputsintothemodelwere:

• Anincreaseininvestmentinlocalrailagencies.• Aredirectionofthestatebudgetawayfromthegeneralmarketbasketofgoodsandservices

providedbygovernmenttofundtheincreaseinexpendituresoninvestmentsinlocalrailagencies.

• Areductionofconsumerpurchasesinauto-relatedgoodsandservicesandanincreaseinincome.

• Areductionintheproductioncostsofgoodsthroughlowertransportationcosts.• Areductioninpublicexpendituresonroadtransportation.• Anincreaseinoverallproductivity.

Theworkprogram’sbudgetwasinputteddirectlyaslocalexpendituresinrail.Theanalysisassumesthatthisspendingisaredirectionawayfromothergoodsandservicesprovidedbythestategovernment.Therefore,anamountequaltotheincreasedfundingwasremovedfromstateexpendituresonamarketbasketofgoods.ThispolicyisconsistentwithpriorEDRreturnoninvestmentreports.TheanalysisreliedondatafromtheFederalHighwayAdministrationandDOT’sMacroeconomicAnalysisofFloridaTransportationInvestmentstoestimatetheamountoftonnageredirectedfromtruckstorail.Theprivateandpublicsavingsthatresultedfromthisredirectioncamefromthe2014CongressionalBudgetOfficeStudy.TheconsumerinputwasestimatedbyEDRbasedonDOT’sworkprogramshareofFlorida’stotalpassengerrailridership;theresultwasusedtogeneratethesavingsfromusingpassengerrail.CommuterraildatawasobtainedthroughDOT’s2014and2015FloridaTransitHandbooksandpublicdocumentsfromtheregionaltransitauthorityagencies.Thesedocumentsprovidedcommuterrailsystems’ridershiplevels,tripdurationandcosts.Auto-relateddatacamefromtheAutomobileAssociationofAmericaandtheU.SBureauofLaborStatisticsConsumerExpenditureSurvey.CongestionsavingswerebasedonhistoricalUrbanMobilityReports.TheUrbanMobilityReportsestimatedhowmuchpublictransportationsavedurbandistrictsinbothautoandtruck-relatedcongestioncosts.Railwasattributedashareofthecongestionsavingsbased-onridership-levels.62TheFloridaDepartmentofTransportation,“ProgramandResourcePlan”,(April2015):1-29.

23

AnalysisandFindings…

TheROIfortheRailsprogramareaisprojectedat0.02forthehistoricalanalysiscoveringFY2013-14throughFY2015-16.Foreverydollarspentontheprogram,thestateofFloridareceived2centsbackintaxrevenue.TheRailsprogramareaincreasedrealDisposablePersonalIncomebyabout$96millioneveryyearandincreasedFlorida’srealGrossDomesticProductbyabout$88.6millioneveryyear.Onaverage,therewereover295additionaljobsinthestateeconomyattributabletospendingontheRailsprogramarea.

StatewideEconomicModelImpactoftheRAILSPROGRAM(FY2013-2015)2012-2013 2013-2014 2014-2015 Total

89.7 110.0 76.6 276.32.0 3.0 0.0 5.00.02 0.03 0.00



PersonalIncome Nominal$(M) 92.0 112.0 119.0 323.0 107.7RealDisposablePersonalIncome Fixed2010-11$(M) 83.0 99.0 106.0 288.0 96.0

RealGrossDomesticProduct Fixed2010-11$(M) 77.4 90.9 97.4 265.7 88.6

ConsumptionbyHouseholdsandGovernment Fixed2010-11$(M) 83.6 97.8 103.4 284.8 94.9

RealOutput Fixed2010-11$(M) 71.5 85.5 82.7 239.7 79.9


TotalEmployment Jobs 357 325 202 202 357 295

Population Persons 0 96 256 0 256 117


StatewideEconomicModelImpactoftheRAILSPROGRAM(FY2016-2020)2016-2017 2017-2018 2018-2019 2019-2020 2020-2021 Total

379.1 192.4 154.2 171.9 116.3 1,013.96.0 6.0 4.0 4.1 5.0 25.10.02 0.03 0.03 0.02 0.04



PersonalIncome Nominal$(M) 173.0 161.0 166.0 182.0 182.0 864.0 172.8RealDisposablePersonalIncome Fixed2010-11$(M) 150.0 144.0 149.0 162.0 163.0 768.0 153.6

RealGrossDomesticProduct Fixed2010-11$(M) 137.8 132.3 136.9 148.8 149.7 705.5 141.1

ConsumptionbyHouseholdsandGovernment Fixed2010-11$(M) 120.9 115.4 120.9 132.0 133.8 622.9 124.6

RealOutput Fixed2010-11$(M) 155.3 117.6 120.4 133.2 131.4 657.9 131.6


TotalEmployment Jobs 1,007 413 312 371 302 302 1,007 481

Population Persons 0 352 512 640 768 0 768 454


24

Theanalysisoftheforecastedworkprogram(FY2016-17throughFY2020-21)alsoledtoaROIof0.02fortheRailsprogramarea.Foreverydollarspentontheprogram,thestateofFloridawillreceive2centsbackintaxrevenue.TheRailsprogramareacontributes$153.6milliontorealDisposablePersonalIncomeand$141.1milliontorealGDPinanaverageyear.TheRailsprogramareawill,onaverage,addover480jobstothestateeconomyeveryyear.ThemajorityoftheRailsprogramareafundinggoestowardpassengerrailsystemsinFlorida.OnlytwopassengerprojectsarefundedbyFDOTandcurrentlyoperating(SunRailandTri-Rail).Together,thetwopassengerrailsystemsrecordlessthan5millionpassengertripsannually.63,64Incontrast,theStateHighwaySystemrecordedover306milliondailyvehiclemilesin201565,andFlorida’sfixed-routebussystemrecordedover270millionpassengertripsin2014.Thecomparativelysmallamountoftripsonpassengerraillimiteditsimpactonthestate’seconomy.AnotherfactoristhenatureoftheFDOTspending.Alotofthecostsarefront-loadedinperiodsbeforethebenefitsarerealized.OnesuchexampleisSunRail.SunRailbeganoperationsinlate2014,butworkprogramexpendituresontherailsystemstartedmuchearlier.Anotherexamplecomesfromthelatestworkprogram’sinclusionofexpendituresforthedevelopmentofan85-milestretchofcommuterrailfromJupitertoDowntownMiami.66Thedatethatthispassengerrailsystemwillactuallybeginoperationsisuncertain.WhiletheexpansionofSunRailisexpectedtobecompletedby2018,theexpansion’simpactontotalSunRailpassengerridershipisuncertain.EDR’sanalysisassumedthataportionofthepassengertripsontherailsystemresultedfromredirectedautomobiletrips.Asmentionedpreviously,thereisacostsavingswhenindividualsswitchfromcarstopassengerrail.ThissavingswasinputtedintothemodelasadditionalincomeforFloridaresidents.Alongwiththeadditionalincome,areductioninautomobile-relatedconsumptionpurchaseswasincluded.Together,theseinputsbenefitFlorida’sGDPandPersonalIncomemeasures.However,theimpactislessclearforstaterevenuecollections,becausethestatecollectsasignificantamountofrevenuefromautomobile-relatedpurchases.InFY2014-15,Floridacollected$3.9billioninstatesalestaxfromautomobile-relatedpurchases.67InFY2015-16,Floridacollected$1.3billioninHighwayFuelSalesTaxandover$1.1billioninMotorVehicleLicenses.68Thepositiveincomechangeoffsetstheimpactonlowerautomobile-relatedpurchases,butnotcompletely.EDR’sanalysisalsomeasuredtheimpactthattheRailsprogramareahasonrailimprovementandrehabilitation.TheanalysisassumedthattheexpendituresonrailimprovementledtoanincreaseinfreightrailinFlorida,withacorrespondingdecreaseincommercialtruckinginFlorida.Asdiscussedinthepreviously,aswitchtofreightraillowersbusinesstransportationcosts,reducescongestion,lowershighwaymaintenancecosts,andreducesaccidentcosts.69Allthesesavingswereinputtedintothe

63SouthFloridaRegionalTransportationAuthority,“SouthFloridaRegionalTransportationAuthorityComprehensiveAnnualFinancialReport”,2015:6764Ruiter,Jason.(2016,April29).SunRailMarks2ndAnniversarywithPlansforGrowth.OrlandoSentinel,Retrievedfrom:http://www.orlandosentinel.com/news/sunrail/os-sunrail-2nd-anniversary-20160428-story.html.65FloridaDepartmentofTransportation,“StateHighwaySystemReport1:AllRoads”,June3,2016:1.66See:http://www.tri-railcoastallinkstudy.com/foramoredetaileddescriptionoftheproposedpassengerrailsystem.67TheDepartmentofRevenueOfficeofTaxResearch,“ValidatedSalesTaxReceiptsData”,March7,2016.Retrieved:http://floridarevenue.com/taxes/pages/colls_from_7_2003.aspx68RevenueEstimatingConference,“RevenuestoStateTransportationTrustFundRevisedForecast”,August16,2016.Retrieved:http://edr.state.fl.us/Content/conferences/transportation/Transresults.pdf 69Pleasesee:CongressionalBudgetOffice,“Social-CostPricinginFreightTransportation”ConferenceontheRoleofFreightTransportationinEconomicCompetiveness.(December11,2014).

25

StatewideModelandledtopositiveincreasesinthereportedeconomicmeasures.However,theeconomicimpactswereminimalgiventhesmallamountoftheRailsprogramareabudgetdevotedtofreightrailimprovements.InthehistoricalROIrun(FY2013-14throughFY2015-16),about25%ofthebudgetwasspentonrailimprovementandrehabilitation.InforecastedROIrun(FY2016-17throughFY2020-21),lessthan4%ofthebudgetwillbespentonrailimprovementandrehabilitation.Sincetheoverwhelmingmajorityoftherailsystemisprivately-owned,howmanypublicdollarswillbespentonrailimprovementthatotherwisewouldnothaveoccurredisunknown.70Thereisaneconomicbenefitassociatedwithrailimprovement,butDOTspendingmaybesimplysubsidizingordisplacingprivatecapitalspendingthatwouldhavetakenplaceintheabsenceofthepublicfunding.BothoftheRailsprogramarea’sfinalROIswerelow.Theincomeandeconomicbenefitsfrompassengerrailandrailimprovementwerenotenoughtooffsetthecostoftheprogram.However,theROIswerenotnegative,indicatingthatFloridadoesbenefitduetoitsspendingontheRailsprogramarea.Inthiscase,theeconomicmeasuresforGDPandPersonalIncomemightbebetterindicatorsofprogramvaluethanthestate’sROI.

70FloridaDepartmentofTransportation,“FloridaTransportationTrends&Conditions”,(2015):21.

26

THEPUBLICTRANSITPROGRAMAREAInthispaper,PublicTransitisdefinedasafixed-routebusoperatingsystem.InFlorida,29publictransitsystemsoperateinurbanareasacrossthestate.71Oneofthesesystems,theTri-Rail,canbecountedbothasapassengerrailandafixed-routebusoperatingsystemsinceitrunsbusestoandfromtherailsystem.Forthepurposeofthissection,itisexcludedfromthefollowingdiscussion.Generally,theworkprogramassistsintheexpansion,renovationandimprovementofthetransitsystemsinFlorida.Thetablebelowidentifiestherelevantfundingintheworkprogramforthisarea,startinginFY2013-14andprojectedouttoFY2020-21.

WorkProgramBudget-PublicTransit(Millionsof$)Historical Work Program July 1, 2016

13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21

$205.02 $214.44 $271.51 $407.96 $274.03 $253.22 $267.83 $262.25Thetablebelowliststhetop8transitagenciesinFlorida,andtheirtotalnumberofpassengertripsinboth2013and2014.ThelargestisMiami-DadeCountyTransitAuthority,whichoperates1,032vehicles.Smallertransitsystemsexistinlessdensepopulations.72Forexample,theHernandoCountyTransitSystemrunsonly4routeswithlimitedhoursandnoservicesavailableontheweekend.73

TotalPassengerTrips,2013and2014

TransitAuthority LocationTotal2013

PassengerTripsTotal2014

PassengerTripsMiami-DadeTransit Miami-Dade 110,289,327 109,674,441

BrowardCountyTransit Broward 40,850,926 40,825,445LYNX Orlando 29,082,988 29,367,232

HillsboroughAreaRegionalTransit Hillsborough 15,028,441 15,334,839PinellasSuncoastTransitAuthority Pinellas 14,150,506 14,184,320

JacksonvilleTransportationAuthority Duval 12,299,409 12,225,824PalmBeachCountyTransportationAgency PalmBeach 12,018,198 11,426,791

GainesvilleRegionalTransitSystem Alachua 10,832,674 10,814,433AllofthemajortransitsystemsinFloridaoperateatalossandaresubsidizedbycounty,stateandfederalagencies.Ananalysisof28Floridatransitagenciesrevealedthatoperatingrevenue(passengerfares)coveredonly28%ofthetotaloperatingexpenseofthetransitsystems.ThisisnotuniquetoFlorida.TheNationalTransitSummary&TrendsproducedbytheU.SOfficeofBudgetandPolicyestimatesthatonly32%oftransitoperationsarecoveredbyfares.74Inthisanalysis,localgovernmentcoversabout30%ofpublictransitoperatingexpenses;stategovernmentabout26%;and,theFederalgovernmentabout8%.75

71Thisanalysisonlyaddresses28fixed-routebusroutes.Inotheranalyses,boththeSunRailPassengerRailSystemandtheTri-RailSystem(whichincludesbusroutes)areincludedinatotalreportedtransitsystemcountof30.ThesepassengerrailsystemsareanalyzedintheRailsProgramAreaSection.72FloridaDepartmentofTransportation,“2015FloridaTransitHandbook”,(2015):8.73Ibid74NationalTransitDatabase:OfficeofBudgetandPolicy,“NationalTransitSummary&Trends”,(February2015):14.75Ibid.

27

Publictransitisheavilysubsidizedbygovernmentbecauseitofferssomanysocialandeconomicbenefits.Thefirstbenefitisthatitprovidesatransportationalternativetotravelbyautomobile.Carownershipisexpensive.The2011ConsumerExpenditureSurveyestimatesthattheaverageAmericanhouseholdspendsover$8,000onautomobiletransportationeveryyear.76Manylow-incomehouseholdsareunabletoaffordreliablevehiculartransportation.Thisimpactstheirabilitytogotoschool,toworkandtoappointments.Empiricalevidencesuggeststhatarelationshipexistsbetweenpublictransitavailabilityandworkerproductivityandemployment.A2014studyfoundasimilarrelationshipbetweenlimitedtransitaccessandhigherunemploymentratesinNewYorkCity.77Thestudyrecommendedtheexpansionofrapidbustransitinthecity.78AnearlierstudyfoundarelationshipbetweentransitaccessibilityandlaborrateparticipationintwoU.S.cities.79A2015studyonintergenerationalmobilityfoundthatareaswithsignificantlylowercommutingtimestowork(throughbettertransitoptions)havehigherlevelsofupwardeconomicmobility.80Thisproblemhasbecomeespeciallyacuteoverthepast40yearsasjobopportunitieshaveshiftedawayfromurbanareastothesuburbanringsurroundingtheurbancore.Thisproblemisreferredtoasspatialmismatch,anditespeciallyimpactslow-incomefamilieswhocontinuetoliveinurbancore.81Thesehouseholdsnowexperiencemuchlongerandexpensivecommutesandincurhighersearchcoststofindjobs.Viablepublictransitisonewayoflesseningtheimpactofspatialmismatch.Eveniftheemploymentimpactofpublictransitisdisregarded,consumerssavemoneybyswitchingfromautomobilestopublictransit.Theaverageautomobiletripisaround5miles.82GiventheAmericanAutomobileAssociationaveragecostpermileof59centsin2015,theaveragecarridecoststherideraround$3.00.Theaveragefive-miletaxicabfareinFloridaisabout$16.00.83TheaveragefarepaidinFloridaforbustransitwasabout$1.00in2015.84Publictransitisclearlythecheapestoption,andwhatamountstosmalldifferencespertripcancumulativelyturnintosubstantialconsumersavingsgiventhatover270milliontripsoccuronpublictransitinFloridaeveryyear.85Thesecondbenefitofpublictransitisthereductionofcongestioninurbanareas.Thisbenefitseveryone,includingnon-usersofpublictransitsuchasautomobiledriversandthetruckingindustry.The2015UrbanMobilityReportestimatedthatdriversspendapproximately6.9billionhoursintrafficandwasted3.1billiongallonsoffuel.86Thecostissharedbetweenpersonalautomobileusers(83%)andthe76U.S.BureauofLaborStatistics,“Table8.RegionofResidence:AverageAnnualExpendituresandCharacteristics”,(September2012).77Kaufman,Moss,HernandezandTyndall,“Mobility,EconomicOpportunityandNewYorkCityNeighborhoods”,(November2015).78Ibid.79ThomasSanchez,“TheConnectionBetweenPublicTransitandEmployment”,PreparedforPresentationattheAssociationofCollegiateSchoolsofPlanningAnnualConference.(November1998). 80Chetty,Hendren,KlineandSaez,“WhereistheLandofOpportunity?TheGeographyofIntergenerationalMobilityintheUnitedStates”(June2014).81JohnKain.“TheSpatialMismatchHypothesis:ThreeDecadesLater”,HousingPolicyDebate,Vol3,Issue2.(1992):371:392.82AmericanPublicTransportationAssociation,“EconomicImpactofPublicTransportationInvestment”(2014):20.83U.S.AToday,“Citieswiththehighest,lowesttaxicabfares”,Retrieved:http://www.usatoday.com/story/travel/2013/04/29/taxi-fares-us-cities/2121967/84FloridaDepartmentofTransportation,“2015FloridaTransitHandbook”,(2015):8.85Ibid. 86TexasA&MTransportationInstitute,“2015UrbanMobilityScorecard”,(August2015):1.

28

truckingindustry(17%).87Publictransitisoneoptionforrelievingcongestion.AnearlierUrbanMobilityreportestimatedthatpublictransitsaved$331millionincongestioncostsacross5Floridametropolitanareasin2012.88DescriptionoftheDataandMethodology…TheDOTworkprogramfundstheexpansion,improvementandoperatingcostsofpublictransitinFlorida.Itdoesthisthroughtheprovisionofgrantstolocaltransitagenciestopurchaseequipment,subsidizepassengerfares,andincreasepassengercapacity.TheworkprogramalsofundstheFloridaCommissionfortheTransportationDisadvantaged.TheCommission’smissionistoensuretheavailabilityofcost-efficient,cost-effective,andqualitytransportationservicesforthedisadvantagedinFlorida.Amongotherservices,theyprovidetransportationtothedisadvantagedwhoneedaccesstomedicalcare,thegrocerystoreorwork.EDR’sanalysisreliedonhistoricalfiscalyearfundingdatabeginninginFY2013-14andendinginFY2015-16.Thelatestworkprogrambudgetwasusedtoforecastfundinglevelsoverthenextfivefiscalyears,startinginFY2016-17andendinginFY2020-21.EDRusedtheStatewideModeltodevelopanROIforthePublicTransitprogramarea.AsdiscussedintheMethodologysection,theStatewideModelisadynamiccomputablegeneralequilibrium(CGE)modelthatsimulatesFlorida’seconomyandgovernmentfinances.Theinputsintothemodelwere:

• Anincreaseinlocalexpendituresonpublictransportation.• Aredirectionofthestatebudgetawayfromthegeneralmarketbasketofgoodsandservices

providedbygovernmenttofundtheincreaseinexpendituresonpublictransportation.• Areductionofconsumerpurchasesinauto-relatedgoodsandservices,withacommensurate

increaseinpersonalincome.• Areductionintheproductioncostsofgoodsthroughlowertransportationcosts.• Anincreaseinoverallproductivity.

Theworkprogram’sbudgetwasinputteddirectlyaslocalexpendituresonpublictransit.Theanalysisassumesthatthespendingisaredirectionawayfromothergoodsandservicesprovidedbythestategovernment.Therefore,anamountequaltothefundingwasremovedfromstateexpendituresonamarketbasketofgoods.ThispolicyisconsistentwithpriorEDRreturnoninvestmentreports.TheconsumerinputwasestimatedbyEDRbasedonDOT’sworkprogramshareofFlorida’stotaltransitpassengers.TheanalysisreliedonDOT’s2014and2015PublicTransitHandbookstogeneratetheworkprogram’sshare.Thehandbooksprovidedinformationbytransitsystemforthetotalnumberofpassengers,averagefarepertrip,andtotaloperatingexpensesandrevenues.AutomobilecostscamefromboththeAutomobileAssociationofAmericaandtheAmericanPublicTransportationAssociation’s2014EconomicImpactofPublicTransportationInvestmentReport.CongestionsavingswerebasedonhistoricalUrbanMobilityReports.Thesereportsprovideanestimateofthepublictransportation-relatedsavingsforFlorida’smetropolitandistrictscomingfromcongestionreductionsforpersonalautomobilesandtrucks.Transitwasattributedashareofthesavingsbased-onridership-levels.

87Ibid.88TexasA&MTransportationInstitute,“2012UrbanMobilityScorecard”,(December2012):50-54.

29

AnalysisandFindings…

TheROIforthePublicTransitprogramareaisprojectedat0.04forthehistoricalanalysiscoveringFY2013-14throughFY2015-16.Foreverydollarspentontheprogram,thestateofFloridareceived4centsbackintaxrevenue.ThePublicTransitprogramareaincreasedrealDisposablePersonalIncomebyabout$446.3millioneveryyearandincreasedrealGrossDomesticProductbyabout$411.7millioneveryyear.Onaverage,therewereover1,300additionaljobsinthestateeconomyattributabletospendingonthePublicTransitprogramarea.

StatewideEconomicModelImpactofthePUBLICTRANSITPROGRAM(FY2013-FY2015)2012-2013 2013-2014 2014-2015 Total

205.0 214.4 271.5 690.98.9 8.0 11.9 28.80.04 0.04 0.04



PersonalIncome Nominal$(M) 403.0 468.0 612.0 1,483.0 494.3RealDisposablePersonalIncome Fixed2010-11$(M) 364.0 423.0 552.0 1,339.0 446.3

RealGrossDomesticProduct Fixed2010-11$(M) 339.5 388.6 507.1 1,235.2 411.7

ConsumptionbyHouseholdsandGovernment Fixed2010-11$(M) 368.1 410.7 537.1 1,315.9 438.6

RealOutput Fixed2010-11$(M) 314.0 340.0 442.1 1,096.0 365.3



Population Persons 0 356 708 0 708 355


StatewideEconomicModelImpactofthePUBLICTRANSITPROGRAM(FY2016-FY2020)2016-2017 2017-2018 2018-2019 2019-2020 2020-2021 Total

408.0 274.0 253.2 267.8 262.3 1,465.320.0 16.0 13.0 15.1 14.2 78.30.05 0.06 0.05 0.06 0.05



PersonalIncome Nominal$(M) 862.0 686.0 692.0 766.0 792.0 3,798.0 759.6RealDisposablePersonalIncome Fixed2010-11$(M) 777.0 619.0 624.0 690.0 714.0 3,424.0 684.8

RealGrossDomesticProduct Fixed2010-11$(M) 713.8 568.7 573.3 633.9 655.9 3,145.6 629.1

ConsumptionbyHouseholdsandGovernment Fixed2010-11$(M) 625.7 500.2 507.6 562.0 584.2 2,779.6 555.9

RealOutput Fixed2010-11$(M) 702.0 508.1 510.0 569.7 596.3 2,886.1 577.2



Population Persons 0 800 1,216 1,536 1,888 0 1,888 1,088


30

Theanalysisoftheforecastedworkprogram(FY2016-17throughFY2020-21)ledtoanROIof0.05forthePublicTransitprogramarea.Foreverydollarspentontheprogram,thestateofFloridawillreceive5centsbackintaxrevenue.ThePublicTransitprogramareacontributes$684.8milliontorealDisposablePersonalIncomeand$629.1milliontorealGrossDomesticProductinanaverageyear.ThePublicTransitprogramareawill,onaverage,addnearly1,600jobstothestateeconomyeveryyear.ThemajorbenefitofthefundingforthePublicTransitprogramareaiscostsavingsforconsumersandbusinesses.Thecostssavingsoccurinmultipleways.Thelargestcostsavingsistoindividualswhoswitchfromtheuseofcarsortaxistopublictransit.Asmallerbenefitisrelatedtothereductionincongestioncosts.Lowercongestionreducespersonalautomobileoperatingcostsandlowersbusinesstransportationcosts.Thesecostsavingstranslateintogainsinpersonalincomeandbusinessprofit.ThelargepositiveincrementsofrealGDPandrealDisposablePersonalIncomethatareattributedtothePublicTransitprogramareareflectthesebenefits.However,thebenefitsofpublictransitdonottranslateintostrongrevenuegainsforthestate.Theincomegainsarerelatedtofewerpurchasesofautomobile-relatedgoodsandservices.Floridareceivesaconsiderableamountofrevenuefromthetaxationofautomobile-relatedgoodsandservices.InFY2014-15,Floridacollected$3.9billioninstatesalestaxfromautomobile-relatedpurchases.89InFY2015-16,Floridacollected$1.3billioninHighwayFuelSalesTaxandover$1.1billioninMotorVehicleLicenses.90Thereductioninautomobile-relatedpurchasesdecreasesstaterevenuecollection.Theincomegainsincreasestaterevenuecollectionsthroughadditionalspendingongoodsandservices.Sincethespendingrelatedtoincomegainsisspreadacrosstherangeofallgoodsandservices,itrequiresmoreoverallspendingtofullyoffsettherevenuelossfromautomobile-relatedbusinesses.Thissituationoccursbecausesomeofthegoodsandservicesarenon-taxableortaxedatdifferentrates.91InEDR’sanalysis,theincomebenefitsincreasedspendingjusthighenoughtomakenetrevenuepositiveforthestate.Anotherleakagedevelopswhensomeoftheincomegainsaresavedratherthanredirectedtowardstheconsumptionofothergoodsorservices.Savingseffectivelydefersconsumptionuntilamuchlaterdate.Thismeansthatsomeoftheincomegainsmightnotbespentuntiltheindividualretires,perhaps20or30yearslater.ThisisstillbeneficialtoFlorida,butintheverylong-run.EDR’sanalysislooksatathree-yearhistoricalperiodandaforecastedfive-yearperiod.Neitheroftheseperiodscaptureverylong-runimpacts.Theanalysisalsoattemptedtomodeltheproductivitybenefitsofpublictransit.Asdiscussedintheintroductiontothissection,publictransitbenefitslaborproductivitybyexpandinganindividual’saccesstoalargerjobmarket.Thisalsobenefitsemployerswhonowhaveaccesstoalargerpoolofqualifiedlabor.Theeconomybenefitsasbetteremploymentmatchingleadstohigherlevelsofproductivitygrowth.Theanalysisassumedthatintheabsenceofpublictransit,employerswouldhavepaida“wage

89TheDepartmentofRevenueOfficeofTaxResearch,“ValidatedSalesTaxReceiptsData”,March7,2016.Retrieved:http://floridarevenue.com/taxes/pages/colls_from_7_2003.aspx90RevenueEstimatingConference,“RevenuestoStateTransportationTrustFundRevisedForecast”,August16,2016.Retrieved:http://edr.state.fl.us/Content/conferences/transportation/Transresults.pdf 91Forexample,anindividualredirectshisspendingawayfromgasolinetofooditems.Thefooditemsareexemptfromstatesalestax,andthestatelosesrevenuebecausegasolinewastaxable.

31

premium”toattractthesameemployees.92Inthisanalysis,the“wagepremium”isequaltothecostdifferentialbetweenusingacarandpublictransit,forcertainemployment-specificuses.Inthemodel,thiscostwasaddedtothetotallaborbillofFloridaindustries.TheweightoftheaddedcostloweredoverallproductionandnegativelyimpactedGDPandrevenuecollection.Overall,theresultsweremixed.BothanalysesestimatedlargereturnstorealGDPandrealPersonalIncome.However,theROIswereonly0.04and0.05.ThelowROIwasprimarilyattributabletotransit’sroleindecreasingautomobileuseandthenatureofFlorida’staxsystem.TheFloridataxsystemreliesheavilyonconsumption-basedtaxes.Since,theprimaryimpactoftransitisareductionawayfromautomobileconsumption,therevenueimpactismuted.

92AmericanPublicTransportationAssociation,“EconomicImpactofPublicTransportationInvestment”(2014):20.

32

THESEAPORTSPROGRAMAREATheSeaportsprogramareaassistsintheexpansion,renovationandimprovementoftheseaportsysteminFlorida.ThetablebelowidentifiestherelevantfundingintheworkprogramstartinginFY2013-14andprojectedouttoFY2020-21.

WorkProgramBudget-Seaports(Millionsof$)Historical Work Program July 1, 2016

13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21

$259.90 $112.21 $94.18 $141.25 $111.19 $109.51 $131.75 $108.86SeaportsareamajorcomponentofFlorida’stransportationsector.Asthemostefficientandcheapestformofinternationaltransportation,businessesthatimportorexporttoglobaldestinationsdependheavilyontheirexistence.Asinternationaltradehasincreasedsubstantiallyoverthepastfewdecades,sohavetheneedforseaports.About90%ofallinternationaltradeoccursthroughtheworld’sseaports.Florida’sgeographicproximitytoLatinAmericaandits1,350milesofcoastlinehasallowedittotakeadvantageofallformsofwaterbornetrade.Currently,Floridahas15publicseaports.In2015,fourofitsseaports(Miami,PalmBeach,Everglades,andJacksonville)experiencedsomeofthefastestgrowthintheUnitedStatesforcargoexports.93In2015,Floridaseaportshandledover103milliontonsofgoods.94TenofFlorida’sseaportscanhandlecargoships.ThelargestportintermsoftonnageistheTampaBayPort.In2015,theTampaPorthandledover37milliontonsofgoods.95Nationally,theTampaBayPortisthe17thbusiestportintheUnitedStates.96ThetablebelowsummarizestotaltonnagebyFloridaseaport.

Imports,ExportsandDomesticShipmentsofWaterborneTonnagePort Imports Exports Domestic Total

PortofTampaBay 8,143,620 5,934,608 23,296,064 37,374,291PortEverglades 9,417,910 3,563,468 11,020,285 24,001,663

JAXPORT 7,393,365 2,659,230 7,652,142 17,704,737PortMiami 4,567,926 4,045,813 0 8,613,739

PortManatee 6,358,960 158,772 0 6,517,732PortCanaveral 3,128,965 83,830 938,931 4,151,726

PortofPalmBeach 380,739 1,168,550 544,780 2,094,069PortPanamaCity 975,532 1,036,552 20,342 2,032,426PortofFernandina 22,348 281,633 0 303,981PortofPensacola 68,923 56,622 92,150 217,695

93TheFloridaDepartmentofTransportation,“The2015FloridaSeaportSystemPlan”,(July2016):1-5.94TheFloridaDepartmentofTransportation,“The2015FloridaSeaportSystemPlan”,(July2016):3-2.95Ibid.96 UnitedStatesDepartmentofTransportation,“Table1-57:TonnageofTop50WaterPorts,RankedbyTotalTons(a)”,(July2016).

33

Besideshandlingcargo,sevenFloridaseaportssupportthecruiseindustry.In2015,22cruiselinesdocked74shipsatoneofthesevenports.97Thecruiseindustryoperatebothone-dayandmulti-daytripsoutofFlorida.Theprimarymarketformulti-daytripswastheCaribbean.In2015,theFloridacruiseindustryrecordedover15millioncruisepassengers.98Thisnumberisupbyover17%since2010.ThemajorityofFloridacruisepassengerswereout-of-statevisitors.ThetablebelowsummarizestotalpassengersbyFloridaseaport.

TotalCruisePassengersatFloridaSeaportsPort 2010 2011 2012 2013 2014 2015

PortMiami 4,145,043 4,018,161 3,774,452 4,078,529 4,939,062 4,915,576PortCanaveral 2,802,951 3,144,668 4,004,283 3,986,994 4,193,005 4,168,666PortEverglades 3,674,226 3,932,843 3,757,320 3,600,636 4,001,354 3,773,386PortTampaBay 802,775 875,611 974259 854,260 888,343 867,114PortofKeyWest 953,462 1,007,494 906068 832,887 800,752 804,624

JAXPORT 347,136 377,452 390,852 371,263 363,994 366,021PortofKeyWest 284,884 303,000 341,004 345,827 364,829 350,932

Total 13,010,477 13,659,229 14,148,238 14,070,396 15,551,339 15,246,319ManyjobsinFloridaaretiedtoFloridaseaports.Directseaportemploymentincludespilots,customhousebrokers,vesselagents,stevedoresandterminaloperators.However,theseaportsalsobenefitrelatedindustries.Forexample,therailandtruckingindustriesshareinseaport-inducedbusinessastheyarecalledontopickuporoff-loadcargofromtheseaports.Inaddition,tourist-relatedindustriesbenefitfromthecruiseshiptraffic,sincethecruiseshipsattractadditionalvisitorstothestate.Mostout-of-statevisitorsspendafewadditionaldaysinFlorida,visitingotherattractionsbeforeorafterthemulti-daycruise.Thisvisitorspendingbenefitslocalhotels,restaurants,shoppingmallsandattractions.DescriptionoftheDataandMethodology…TheDOTworkprogramfundstheexpansionandimprovementofseaportsinFlorida.TheSeaportsprogramareafundsprojectssuchassecurityinfrastructure,landacquisition,dredging,constructionofstoragefacilitiesandterminals,andacquisitionofequipmenttomovecargoandpassengers.99EDR’sanalysisreliedonhistoricalfiscalyearfundingdatabeginninginFY2013-14andendinginFY2015-16.Thelatestworkprogrambudgetwasusedtoforecastfundinglevelsoverthenextfivefiscalyears,startinginFY2016-17andendinginFY2020-21.EDRusedtheStatewideModeltodevelopanROIfortheAviationportionoftheworkprogram.AsdiscussedintheMethodologysection,theStatewideModelisadynamiccomputablegeneralequilibrium(CGE)modelthatsimulatesFlorida’seconomyandgovernmentfinances.Theinputsintothemodelwere:

97TheFloridaDepartmentofTransportation,“The2015FloridaSeaportSystemPlan”,(July2016):3-12.98TheFloridaDepartmentofTransportation,“The2015FloridaSeaportSystemPlan”,(July2016):3-11.99 The FloridaDepartmentofTransportation,“ProgramandResourcePlan”,(April2015):1-38.

34

• Anincreaseinlocalagencyexpendituresontheseaports.• Aredirectionofthestatebudgetawayfromthegeneralmarketbasketofgoodsandservices

providedbygovernmenttofundtheincreaseinexpendituresonseaports.• Newspendingattributabletovisitorstiedtothecruiseindustry.• Anincreaseinoutputbasedonjobandpayrollestimatesattheseaports.

Theworkprogram’sbudgetwasinputteddirectlyaslocalexpendituresattheseaports.Theanalysisassumesthatthespendingisaredirectionawayfromothergoodsandservicesprovidedbythestategovernment.Therefore,anamountequaltotheincreasedfundingwasremovedfromstateexpendituresonamarketbasketofgoods.ThispolicyisconsistentwithpriorEDRreturnoninvestmentreports.VisitorexpendituredatawasestimatedbasedontheSeaportsprogramshareoftotalvisitorsinFlorida.Seaports’visitorsharewasbasedonpassengercruiseshipembarkmentdata.Theanalysisassumesthatthecruisewastheprimaryreasonforthetourists’visittoFlorida;therefore,theanalysisattributedallofthein-statespendingbythesevisitorstotheseaports.TotalseaportoutputwasestimatedbyEDRbasedonemploymentandwagedataobtainedthroughtheFloridaSeaportTransportationandEconomicDevelopmentCouncil’s“2012StatewideEconomicImpactofFloridaSeaports”andtheCouncil’s2016report:“TheStatewideEconomicImpactsofFloridaSeaports”.RIMSIImultiplierdatawasusedtoestimateoutput.Theanalysisincludedoutputassociatedwithmaritimeservicesattheseaports.Thisincludescargoterminaloperations,pilotingandtowing,freightforwardersandwarehousingattheports,andbargeoperations.Railandtruckingoutputdependentonthetransportofgoodstoandfromtheportswasalsoincluded.AnalysisandFindings…

StatewideEconomicModelImpactoftheSEAPORTSPROGRAM(FY2013-2015)2012-2013 2013-2014 2014-2015 Total

259.9 112.2 94.2 466.3367.2 264.7 188.2 820.1

1.4 2.4 2.0Return-on-Investmentforthe3yearperiod 1.76










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TheROIfortheSeaportsprogramareawas1.76forthehistoricalanalysiscoveringFY2013-14throughFY2015-2016.Foreverydollarspentontheprogram,thestateofFloridareceived1dollarand76centsbackintaxrevenue.TheSeaportprogramareaincreasedrealDisposablePersonalIncomebyabout$6.92billioneveryyearandincreasedrealGrossDomesticProductbyabout$6.4billioneveryyear.Onaverage,therewerenearly55,000additionaljobsinthestateeconomyattributabletospendingontheSeaportsprogramarea.

Theanalysisoftheforecastedworkprogram(FY2016-17throughFY2020-21)ledtoaROIof2.71fortheSeaportsprogramarea.Foreverydollarspentontheprogram,thestateofFloridareceived2dollarsand71centsbackintaxrevenue.TheSeaportprogramareacontributes$8.27billiontorealDisposablePersonalIncomeand$7.59billiontorealGrossDomesticProductinanaverageyear.TheSeaportprogramareawill,onaverage,addover52,000jobstothestateeconomyeveryyear.TheSeaportprogramarea’sROIwasdriven,inlargemeasure,bytouristspending.PassengercruiseshipsoperateoutofsevenFloridaseaports.In2015,thecruiselineindustryrecordedover15millionpassengers.100EDR’sanalysisattributedashareofthesepassengerstothehistoricalROIanalysisandattributedanestimateoffuturecruisepassengerstotheforecastedROIanalysis.Alargepercentageofthesepassengersareout-of-statevisitorswhowillspendafewadditionaldaysinFloridavisitingattractions,stayingatlodging,eatingmealsandpurchasinggoodsandservicesatretailstores.Alargemajorityofthesepurchasesaretaxable,andthefactthatbothROIsareabove1.0reflectsthetaxablespendingimpact.Floridaseaports’handledover103milliontonsofgoodslastyear.101Asignificantamountofeconomicactivityisgeneratedtohandlethefreight.Thisactivityincludesnavigationofthecargoships,handlingandstoringthefreight,andtransportationofthegoodstoandfromtheseaport.ThisanalysisattributedashareofthisoutputtotheSeaportprogramarea.ThistreatmentalsocontributedtoROIsabove1.0.

100TheFloridaDepartmentofTransportation,“The2015FloridaSeaportSystemPlan”,(July2016):3-11. 101 The FloridaDepartmentofTransportation,“The2015FloridaSeaportSystemPlan”,(July2016):3-2.

StatewideEconomicModelImpactoftheSEAPORTSPROGRAM(FY2016-2020)2016-2017 2017-2018 2018-2019 2019-2020 2020-2021 Total

141.3 111.2 109.5 131.8 108.9 602.7318.5 297.6 286.8 378.3 349.4 1,630.6











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Overall,theROIfortheSeaportprogramareawasverystrong.BoththehistoricalandforecastedROIswereabove1.0,indicatingthatthestatemorethanrecoupeditsinvestmentinFloridaseaports.Also,thesizableamountofassociatedeconomicactivitybenefittedFloridathroughhigheremployment,higherGrossDomesticProduct,andhigherPersonalIncome.

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THEAVIATIONPROGRAMAREAAviationprovidesanecessaryandveryimportantcontributiontoFlorida’seconomy.AviationfacilitatesthetravelofgoodsandpeopletoandfromFlorida.ItallowsFloridianstotravelacrosstheglobeforbothpersonalandprofessionalreasons.FundsprovidedtotheAviationprogramareaassistintheexpansion,renovationandimprovementofFlorida’spublicairports.Thetablebelowliststherelevantpartoftheworkprogramfundingforthisarea,startinginFY2013-14andprojectedouttoFY2020-21.

WorkProgramBudget-Aviation(Millionsof$)Historical Work Program July 1, 2016

13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21

$178.28 $320.94 $347.41 $262.23 $225.33 $213.61 $210.27 $256.15Floridahasover129public-useairports.Ofthisnumber,19arecommercialserviceairports.Commercialserviceairportsarepublicly-ownedairportsthathaveatleast2,500passengerboardingseachcalendaryearandprovidescheduledpassengerservice.102Theremainingairportsareclassifiedasgeneralaviationairports.Thetablebelowprovidesinformationonthetop8busiestcommercialairportsinFlorida.Collectively,Florida’scommercialairportsservicedover71millionpassengersin2013.103

2013AviationTotalEnplanements,DomesticandInternational

AirportNameDomestic

EnplanementsInternationalEnplanements TotalEnplanements

MiamiInternational 10,029,011 9,596,802 19,625,813OrlandoInternational 15,404,416 1,950,588 17,355,004

Ft.LauderdaleInternational 9,949,181 1,805,599 11,754,780TampaInternational 8,214,410 263,556 8,477,966

PalmBeachInternational 2,797,236 51,196 2,848,432SouthwestFlorida 3,754,984 116,134 3,871,118

PalmBeachInternational 2,797,236 51,196 2,848,432JacksonvilleInternational 2,399,206 165,375 2,564,581

Theremaining110airportsareclassifiedasgeneralaviationairports.Generalaviationairportsaredefinedaspublic-useairportsthatdonothavescheduledserviceorhavelessthan2,500annualpassengerboardings.104Generalaviationairportsbenefitthelocalareabyprovidingaeronauticalfunctionsthatareeithernoteconomicallyviableatthenearestcommercialserviceairportordistance-prohibitive.Thiscanincludeaeromedicalflights,aerialfirefighting,lawenforcementhelicopters,agriculturalfunctions(likeaerialapplicationoffertilizersandpesticides)andcorporateflightsorself-

102U.S.DepartmentofTransportation:FederalAviationAdministration,“ReporttoCongress:NationalPlanofIntegratedAirportSystems2017-2021”,(2016):3.103TheFloridaDepartmentofTransportation,“FDOTAviationEconomicImpactStudyUpdate”,(August2014):5-4. 104U.S.DepartmentofTransportation:FederalAviationAdministration,“ReporttoCongress:NationalPlanofIntegratedAirportSystems2017-2021”,(2016):3.

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pilotedbusinessflights.105TheFederalAviationAdministrationestimatedthatover$12billionisspentregularlyatgeneralaviationairportsintheUnitedStates.106In2015,Floridahosted106.6millionvisitors,andapproximately50%ofthemarrivedthroughoneofFlorida’commercialserviceairports.107Floridaairportsareespeciallycrucialtoattractinginternationalvisitorsasairtravelmaybetheonlyviabletransportationmodefortheseleisureandbusinesstravelers.TheFDOTAviationEconomicStudyestimatedthatthecommercial-useairportsbroughtinover7.26millioninternationalvisitorsin2013,withthemajorityarrivingateitherMiamiInternationalAirportorOrlandoInternationalAirport.108Thepublic-useairportsystemgeneratesasignificantamountofoutputandemploysalargeamountofpeopleonairportgrounds.The2014DOTeconomicimpactstudyestimatedthat170,000jobsoccuron-airportgroundsinFlorida.Additionally,someFloridaindustriesaredependentontheFloridaaviationsystem.TheseincludeaircargooperatorsthattransportlargeamountofgoodstoandfromFloridaonadailybasis.The2014studyestimatedthatover52,000jobsarelinkedtotheaircargoindustryinFlorida.Acloselylinkedeconomicimpactinvolvesaviation-relatedbusinessesinFlorida.Thiscanincludeaircraftmaintenance,aircraftrepairandaircraftproduction.ThecivilianaircraftsandpartsindustrywasoneofFlorida’slargestexportbusinesssectorsin2014and2015.Theaircraftsandpartsindustryexported$4.8billionin2014and$4.7billionin2015.109Thisrepresentsabout8%ofallcommoditiesexportedfromFlorida.110The2014economicimpactstudyestimatedaviation-relatedemploymentatover76,000inFlorida.DescriptionoftheDataandMethodology…TheDOTworkprogramfundstheexpansionandimprovementofaviationinFlorida.FundingfortheAviationprogramareaassistsaffectedlocalgovernmentsinplanning,designing,constructing,andmaintainingairportfacilities.Qualifiedprojectsincludesafety,security,planning,capacityenhancement,landacquisition,facilitypreservation,andeconomicdevelopmentprojects.111EDR’sanalysisreliedonhistoricalfiscalyearfundingdatabeginninginFY2013-14andendinginFY2015-16.Thelatestworkprogrambudgetwasusedtoforecastfundinglevelsoverthenextfivefiscalyears,startinginFY2016-17andendinginFY2020-21.EDRusedtheStatewideModeltodevelopanROIfortheAviationprogramarea.AsdiscussedintheMethodologysection,theStatewideModelisadynamiccomputablegeneralequilibrium(CGE)modelthatsimulatesFlorida’seconomyandgovernmentfinances.Theinputsintothemodelwere:

• Anincreaseinlocalagencyexpendituresontheairports.• Aredirectionofthestatebudgetawayfromthegeneralmarketbasketofgoodsandservices

providedbygovernmenttofundtheincreaseinexpendituresonairports.• Theadditionofexpendituresattributabletovisitors.

105U.S.DepartmentofTransportationFederalAviationAdministration,“GeneralAviationAirports:ANationalAsset”,(May2012):2.106Ibid.107ForabriefoverviewofFloridavisitorssee:http://www.visitflorida.org/resources/research/research-faq/108TheFloridaDepartmentofTransportation,“FDOTAviationEconomicImpactStudyUpdate”,(August2014):5-4.109UnitedStatesCensusBureau,“TotalU.S.Exports(OriginofMovement)fromFlorida.”110Ibid. 111 The FloridaDepartmentofTransportation,“ProgramandResourcePlan”,(April2015):1-16.

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• Anincreaseinoutputbasedonjobandpayrollestimates.

Theworkprogram’sbudgetwasinputteddirectlyaslocalexpendituresattheairports.Theanalysisassumesthatthespendingisaredirectionawayfromothergoodsandservicesprovidedbythestategovernment.Therefore,anamountequaltothefundingwasremovedfromstateexpendituresonamarketbasketofgoods.ThispolicyisconsistentwithpriorEDRreturnoninvestmentreports.Visitorexpendituredatawasestimatedbasedonaviation’sshareofFloridatourismactivity.PriorreturnoninvestmentreportshaveassignedtourismactivitytoVisitFlorida,theprivatemarket,andbeachrenourishment.Inthisreport,anadditionalshareoftourismactivitywasassignedtotheSeaportsprogramarea.AportionoftheremainingtourismactivitywasassignedtotheAviationprogramarea.VisitorcountsandspendingwereobtainedthroughVisitFloridareports.TotalaviationoutputwasestimatedbyusingemploymentandwagedataobtainedthroughDOT’s2014FloridaAviationEconomicImpactStudyUpdateandRIMSIIMultiplierdata.Theanalysisincludedoutputassociatedwithon-airportactivities,aircargoactivity,andaviation-relatedbusinesses.On-airportactivitiesincludeairportmanagement,airlinesandfixed-basedoperators(fuelingservicesandaircraftmaintenance).AirCargobusinessesengageinprovidingairtransportationofcargowithouttransportingpassengers.Thiscomponentalsoincludesbusinessactivityrelatedtosorting,storingandtransportingtheaircargo.Aviation-relatedbusinessisdefinedasanybusinessengagedinaircraftmaintenance,aircraftmanufacturingorsalesbythemanufacturer,andserviceofaircraftpartsandcomponents.AnalysisandFindings…

TheROIfortheAviationprogramareaisprojectedat1.37forthehistoricalanalysiscoveringFY2013-14throughFY2015-16.Foreverydollarspentontheprogram,thestateofFloridareceived1dollarand37centsbackintaxrevenue.TheAviationprogramareaincreasedrealDisposablePersonalIncomebyabout$9.9billioneveryyearandincreasedFlorida’srealGrossDomesticProductbyabout$9.1billion

StatewideEconomicModelImpactoftheAVIATIONPROGRAM(FY2013-2015)2012-2013 2013-2014 2014-2015 Total

178.3 320.9 347.4 846.6260.3 486.4 410.2 1,156.9

1.5 1.5 1.2Return-on-Investmentforthe3yearperiod 1.37










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everyyear.Onaverage,therewerenearly72,000jobsinthestateeconomyattributabletospendingontheAviationprogramarea.

Theanalysisoftheforecastedworkprogram(FY2016-17throughFY2020-21)ledtoanROIof1.72fortheAviationprogramarea.Foreverydollarspentontheprogram,thestateofFloridareceived1dollarand72centsbackintaxrevenue.TheAviationprogramareacontributes$10.4billiontorealDisposablePersonalIncomeand$9.6billiontoFlorida’srealGDPinanaverageyear.TheAviationprogramareawill,onaverage,addnearly59,000jobstothestateeconomyeveryyear.TwofactorscontributedtothestrongROI.ThefirstfactorwastheallocationoftouriststotheAviationprogramarea.Theanalysisattributed,onaverage,about2.31milliontouriststotheAviationprogramarea.AccordingtoVisitFlorida,theaveragetouristspendsabout$145adayandstays4.5nightsinFlorida.Themajorityofthisspendingistaxableatthestatelevel.Thesetaxablepurchasesincludehotellodgings,mealsatrestaurants,carrentals,gasolinepurchases,souvenirandgiftpurchasesatretailoutletsandticketstosportingeventsandthemeparks.Someofthesepurchasesaresubjecttothestatesalesandusetax.Carrentalsandgasolinepurchasesaresubjecttoarentalcarsurchargeandfueltax.Thisspendinginduceslargeincreasesinthesalesandusetaxof$762millionduringthehistoricalperiodand$1.3billionduringtheforecastedperiod.ThesecondmajorfactorinvolvestheallocationofoutputtotheAviationprogramarea.Forthispurpose,totaloutputisdefinedastheongoingactivityofbusinessesthateitheroccurswithinFlorida’spublicaviationsystemorisdependentuponthatsystem.Theassignmentofoutputaffectsthemodeldirectlyandincludesexpendituresonsuppliesandthesalariesofemployees.Theindirecteffectsarethechangesinemployment,incomeandoutputbythelocalsuppliersthatprovidegoodsandservicestotheaviationindustryinFlorida.Theinducedeffectsarethechangesinhouseholdspendingwhoseincomeisaffectedbythedirectandindirectactivity.Thelargedirect,indirectandinducedimpactsfromaviation-relatedoutputwasasignificantfactorinthehighROI,thelargeincreaseinGDPandPersonalIncome,andtheimpactonemployment.

StatewideEconomicModelImpactoftheAVIATIONPROGRAM(FY2016-2020)2016-2017 2017-2018 2018-2019 2019-2020 2020-2021 Total

262.2 225.3 213.6 210.3 256.1 1,167.5328.5 333.9 367.5 421.8 554.3 2,006.0











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Someoftheindustriesincludedintheanalysishadhigher-than-averageeconomicmultipliers.AviationmanufacturingandaircargodeliveryhavegreaterimpactsonFlorida’seconomythanmoretraditionalFloridaindustries,likehospitalityandfoodservice.Bothindustrieshaveaveragewagesthatarehigherthanthestateaverage,andthisleadstoagreatereconomicimpact.Inaddition,manufacturinghaslargeinputpurchasesandstrongerbackwardlinkagestolocalsuppliers.Bothofthesefactorsledtogreatereconomicimpacts.Overall,theROIisstrong.Florida’sairportsareasubstantialandnecessarycomponentofFlorida’seconomy.Theyfacilitatevisitsbytouristsandattractaviation-relatedindustries.Theindustry,itself,isdirectlyresponsibleforasignificantamountofeconomicoutput.TheROIsof1.37and1.72reflectsthesefactors.

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