7% return on transportation infrastructure investments; payback in 17 years

At New Geography, Susanne Trimbath reviews the economic benefits of smart transportation investment.

Investments that improve the performance of transportation in the US will pay for themselves in 17 years through increased economic activity and the resulting gains in federal tax revenue. The rate of return for national investments in transportation is 7%, significantly more than the cost of borrowing.

There aren’t many investments returning more than 7 percent. And, as Dr. Trimbath, CEO and chief economist of STP Advisory Services, points out, a 17 year payback period is substantially shorter than the infrastructure’s useful life. She references research conducted for the U.S. Chamber of Commerce in support of her analysis.

Unsurprisingly, just as our state is not keeping up with infrastructure demand, neither is the federal government. Trimbath reports,

Despite repeated outcries for additional funding, transportation spending in the US was more than $100 billion under budget in the first decade of the new century.

Under budget and well below documented need. As a result, we’re lagging in global competitiveness. Acknowledging that there’s “no free ride,” she reviews revenue options, including Public Private Partnerships (P3), user fees, branding (private advertising in public spaces), and demand reduction. Read the whole thing. Trimbath manages to find an upbeat close.

All is not doom and gloom. There is a new, improving trend in the performance of transportation infrastructure in the United States. These improvements are a reflection of broad-based initiatives on both the supply and the demand sides…

Meanwhile, Washington State Wire has a good review of the Washington Roundtable-BCG report we mentioned previously. The report looked at 7 critical projects across the state, projects that have had broad, bipartisan legislative support in the past, according to Roundtable president Steve Mullin. The package would cost $7 billion and return $42 billion in economic benefit, a 6 to 1 payoff. Washington State Wire reporter Peter Jensen summarizes the benefits,

The study estimates the spending would foster 184,000 jobs, mainly construction related, over the 12 years, Mullin said. Some other key findings included reduced the number of hours drivers spend in traffic by 4 million, saving individual drivers $160 per year in wear-and-tear costs, lowering supply-chain costs to businesses by $600 million, and saving the state $650 million in more expensive repairs later on by letting the roads get worse.

The study also estimates significant savings in carbon emissions from the reduction in congestion hours, as it says drivers would burn 1.7 million gallons of fuel less than they do currently.

The Trimbath analysis provides useful, supportive context. Simply,

Transportation provides the foundation for all economic activity.

Timely investment now will pay substantial dividends in the future.