Investments in local roads and trunk highways show positive returns

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Photo: David Gonzalez, MnDOT

Transportation engineers and planners see firsthand the many positive impacts of transportation investments on economic development. They are frequently challenged, however, to demonstrate that relationship to the public and to elected officials entrusted with prioritizing investment decisions for all their communities’ needs.

“We don’t have enough funding for transportation, in part because we don’t have good evidence to show the benefits of transportation and give political leaders the incentive to invest,” says Jerry Zhao, an associate professor with the University of Minnesota Humphrey School of Public Affairs.

Local agencies in particular need a way to demonstrate the value of transportation investment by showing its impact on economic development. To accomplish this goal, Zhao led a research project to quantify the relationship between transportation investment and economic development, represented by the effect of investment on a county’s property tax base.

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Researchers began by examining county-level transportation financial data from several sources, and then analyzing data about property tax capacity, levies, and revenues to quantify the benefits while controlling for unrelated factors that would affect tax revenues. Next, they applied the model to calculate the impact of both local road and trunk highway investment on the property tax values of the county and its neighboring counties.

According to the research findings, long-term accumulated investments in both local roads and trunk highways have positive returns—though the two types of roads affect regions differently, Zhao says. On average, $1 of local road investment within a county increases total assessed property value by $1.25 for the county. However, while the overall impact of these investments is still positive, they can have a negative impact on the property values of neighboring counties as the result of inter-local competition.

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On the other hand, trunk highways yield a somewhat lower return on investment for the county where they are made but generate significant benefit spillovers to neighboring counties, he says. On average, trunk highway investments produce about $3 in assessed property values in the region for every $1 invested.

“There’s been an understanding for years that investment in roads and bridges pays by facilitating economic development, serving citizens, and promoting safety,” says Alan Forsberg, an engineer in Blue Earth County, Minnesota. “This study provides objective data that shows that investment does in fact pay.”

The results of this research are statewide averages, but the benefits of investment for individual projects may vary. “While our research shows that trunk highways generally have greater regional benefits than local roads, individual projects will still need to be assessed for their specific impacts,” Zhao says. “For example, some local roads function more like trunk highways in the way they connect communities. This research shows that roads with the most regional significance provide the greatest benefits.”

The project was sponsored by the Minnesota Local Road Research Board. Researchers believe the results of the project will provide a valuable tool for local agencies and the Minnesota Department of Transportation to use in communicating the economic value of transportation investments and gaining support for these investments from elected officials and the general public.


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Michael McCarthy