1. Economic Impacts of Highway Conditions
Rough Roads Ahead
The Oregon Department of Transportation (ODOT) is dedicated to provide a safe, efficient transportation system that supports economic opportunity and livable communities for Oregonians. In order to do this it is necessary to anticipate and plan for the future needs of Oregon.
Economic Impacts of Highway Conditions
Oregon Transportation Commission October 23, 2014 Presented by: Jerri Bohard, ODOT Transportation Development Division Administrator

2. Outline Roads will deteriorate under current funding conditions
Transportation is critical to the Oregon economy
Economic impacts

3. Economic impacts of deterioration
Fewer jobs (more than 100,000 jobs lost)
Reduced Gross Domestic Product (GDP)
Higher freight and auto user costs
You have heard from Paul that conditions of system are going to get worse under current funding levels. Will cost more to fix in the future if we don’t act now. So why do we care…..

4. Transportation moves the Oregon economy

5. Goods moved by heavy trucks are important for Oregon’s economy
The economy of every region of Oregon relies on the movement of goods and services.
The Portland metropolitan area and the Mid-Willamette Valley have more diversity in goods production. Although these regions produce the majority of heavy goods in the state, the smaller share of regional production reduces the impact of weight restrictions to the regional economy. This region also has more redundancy in the transportation system, providing more options than areas with more sparse road system. Areas outside the Willamette Valley have greater shares of production in heavy goods. As a result, these regional economies within the state would be affected much more by restrictions in the transport of heavy goods. The more rural areas are at risk being isolated from their markets if bridge weight restrictions are put into place, especially for long periods of time.
The final outcome was different than initial proposals and enabled the Agency to avoid unintended consequences.
Freight accessibility is key to a thriving economy. Using the statewide model we were able to illustrate:
Freight is the Oregon economy in motion. The state is diverse as a whole, with regional diversity as well. Expenditures to repair or replace components of the transportation infrastructure serve two purposes. The investment in state and local bridges maintains accessibility, avoiding loss of jobs and productivity growth in the long term. Money spent on bridges throughout Oregon will also sustain family wage construction jobs in the near-term. These jobs, in turn, generate income that is spent on goods and services and income taxes for the General Fund.
Some regions are dependent on truck transportation to access markets
Some regions are dependent on heavy goods production
Repairing high volume network is not necessarily the best economic approach
Maintaining accessibility to markets is the primary economic issue
The Statewide Model was used to evaluate several options and develop a solution that provided the best economic return

6. Heavy trucks carry many commodities
There area wide range of goods moved throughout Oregon. Some of those goods are more dependent upon the ability to move in heavy trucks than others.
the Oregon Office of Economic Analysis recently noted the large size of the Oregon manufacturing and resource industries sets us apart from other states. These industries are highly productive and generate a great deal of secondary economic activity. Oregon manufacturers employ nearly 180,000 workers. While manufacturing employment as a share of total employment has dropped considerably since 1970 (from 1 in 3 jobs to 1 in 10), Oregon has maintained employment in this industry better than many other states. Oregon’s share of the nation’s manufacturing employment has increased nearly 50% since 1980, rising from about 1% to 1.5%. Manufacturing and resource industries rely on the highway system to get their goods to markets. Long range planning for the highway system must account for such needs in order to support a competitive economy.
Not sure if you want to say anything about this….
The bulk of state truck freight tons (85 percent) is moved in trucks over 64,000 lbs. (Figure 9). Roughly 30 percent of truck tons are moved in trucks over 80,000 lbs. This equates to percent of truck trips. Heavy commodities typically transported in trucks that exceed 80,000 lbs. include products such as lumber, agriculture and food products, fuel, sand and stone, and heavy equipment. Trucks over 105,500 lbs. make up less than one percent of these truck trips but many carry non-divisible loads that cannot be redistributed into lighter trucks (e.g., industrial process equipment, bridge beams and construction equipment).
For example - Manufacturing and resource industries are just two of the many industries that are important to the Oregon economy:
- Secondary economic activity
- Export oriented
- Transportation dependent
The large size of Oregon manufacturing and resource industries sets us apart from other states.
These export oriented industries are also transportation-dependent industries
May want to keep the household theme going here as well – maybe say something like– Oregon businesses and households rely on these products

7. Trucks carry 70% of freight shipments originating in Oregon
Nearly one-third of all trucked goods are shipped in loads between 80, ,000 pounds
Truck
250 million tons annually
Rail
63 million tons annually
Water
56 million tons annually
Air — <1% of total tonnage annually
Trucks move more tons of freight than all other modes combined. Trucks transport roughly 70 percent of total tons and dollar value originating in Oregon (48% in trucks 80K lbs or less, 19% 80K to 105K, and <1% over 105K)
About 17% of total tonnage is moved by rail
and 15% by marine
Goods shipped by air, although less than one percent of total tonnage, include significant high value goods with a high rate of growth.

8. Exports depend on transportation
The previous slides showed the importance of moving goods around Oregon. Part of that movement is to support exports, which are also critical to the Oregon Economy.
Talk about freight dependent industries and export industries, commonality between the two groups
General manufacturing (metals; machinery; food and transportation equipment)
Natural resource-dependent industries (agriculture; forestry; fishing; wood and paper manufacturing)
Governor initiative for exports,
Portland Alliance revised Congestion study includes seismic risk – which directly relates to highway system condition
– Oregon Freight Plan
Freight-Dependent Industries in Oregon
High-value products (computer and electronics manufacturing; wholesale trade; footwear; apparel and recreation products)
Exports depend on transportation

9. Poor bridge and pavement means higher transportation costs
Additional travel time to get around weight restricted bridges
Lighter loads and more trucks to move the same weight and amount of goods
Increased user costs due to rough pavement
(This slide should be developed and enhanced to an example or analogy explaining exactly how higher transport cost impact business, need to demonstrate how higher costs reduce our competitiveness. )
The Oregon economy depends on a well-functioning state transportation system: Of the total 78,228 certified miles of roads and highways in Oregon, 11 percent is state-maintained and carries 58 percent of statewide VMT; 89 percent is maintained by counties and cities and carries 42 percent of statewide VMT. However, Oregon cannot sustain current levels of performance in the long run. According to the Oregon Freight Plan, freight-dependent industries provided the state with 700,000 jobs and generated $29 billion in personal income. An efficient freight system for Oregon supports economic success. Oregon ranks 9th in the nation for trade per capita; 2009 exports totaled $14.9 billion.
2013 Highway Performance Monitoring System data
Oregon Freight Plan, adopted June 15,

10. Evaluated two alternatives
Current Funding (deterioration – may want picture here – maybe use same picture that Paul used)
Maintain current conditions (may want separate slide with picture here as well –maybe use same slide Paul used)
As Paul explained in the previous presentation,
Maintain - We compared the current funding level option against a scenario where ODOT was able to keep bridge and pavement conditions at a level roughly equivalent to what is driven on today. Note that this did not include any modernization improvements. Current estimates project a need of approximately $20B over the next 20 years ($1B/yr) – to maintain just ODOT maintained sections of the network.
Current funding projections - roughly 10B over the next 20 years ($500M/yr), which is an optimistic estimate (assumes revenue rises with inflation, doesn’t decrease with fuel economy, assumed local system had adequate funding to maintain their road networks…)

11. Economic modeling
Land-use, economic, and transportation integrated within one model
Person travel: activity-based model with short and long distance travel by purpose and mode;
Economic module: provides characteristics of the state economy, based on the forecast used for the state revenue forecast produced by the Department of Administrative Services (DAS);
The modeling analysis was conducted using the Oregon Statewide Integrated Model (SWIM). SWIM supports analysis needing to account for intricate connections and feedback amongst Oregon’s economy, land use, and transportation systems within one dynamic modeling environment. The complexity and challenges associated with such interaction is addressed through integrated sub-modules:
Commercial travel: simulates transportation of goods, including raw inputs and value-added goods, final goods; Traffic assignment: assigns travel to the transportation network
Population synthesizer: control totals consistent with official state population estimates, locates households, which provide labor to business production activity;
Complete detailed documentation of the SWIM design is available online: .
Production location module: allocates business productions and transactions,
Aggregate land development: simulates land availability so people and business can choose locations
Don’t need to say this but it is here if you want it …

12. Highway conditions impact economic activity
Deteriorating conditions lead to:
Fewer jobs
Reduced Gross Domestic Product (GDP)
Increased operating costs
The modeling analysis was conducted using the Oregon Statewide Integrated Model (SWIM). SWIM supports analysis needing to account for intricate connections and feedback amongst Oregon’s economy, land use, and transportation systems within one dynamic modeling environment.
Oregon industry production activity is forecast to increase about 49 percent between year 2020 and 2035 under the current 20-year budget and about 55 percent if highway and bridge conditions are preserved.
2013 Oregon Gross Domestic Product (GDP) reported by the Bureau of Economic Analysis was $219.6 billion, which occurred given current highway conditions. In the event GDP rises 55 percent instead of 49 percent by year 2035, the difference in cumulative year over year GDP is about $94 billion in additional state production (in current dollars) associated with preserved highway conditions. By year 2050, this amount is estimated to be $334 billion, $240 billion more GDP generated over an additional 15 years. This illustrates the value added by maintaining current highway conditions and supporting Oregon’s economic competitiveness. Cumulative year over year is a standard measure of total impacts used in finance.

13. Estimated jobs forfeited due to rising transportation costs associated with declining highway and bridge conditions
Jobs are a very important aspect of the Oregon economy. The state general fund depends on personal income tax, over 80 percent of general fund revenues come from personal income tax.
Looking back at job losses from recent recessions helps put the magnitude of these figures into perspective. From the peak number of jobs in the first quarter of 2007 to the low in the third quarter of 2009 Oregon realized a seasonally adjusted loss of more than 220,000 private-sector jobs. This was one of the most severe recessions to hit Oregon. Total job losses during the 2001 recession (measured between the first quarter of 2001 and second quarter of 2003) numbered about 62,000. In other words, Oregon would face permanent job losses equivalent to the 2001 recession due to a deteriorating transportation system.
Peniston, Barbara, “Unbalanced Growth in Oregon: Two and a Half Years After the Great Recession,” Oregon Employment Department, March

14. Scenario results 2015 and 2035 almost $100 billion less GDP
Economic impacts
2015 and 2035 almost $100 billion less GDP
2035 – 2050 – an additional $240 billion lost GDP
2035 -about 100,000 fewer jobs will exist if highway conditions deteriorate, this number rises to nearly 150,000 by year 2050
Total Jobs come from the Oregon Employment Department for unemployment insurance Covered Employment plus non-Covered plus part-time jobs *Check figures

15. Rough roads increase users costs
Approximately $400 additional cost per year for each auto.
Bankrate.com Estimated Costs
Cost Driving on Smooth Pavement
Cost Driving on Very Rough Pavement
Vehicle Repairs
$380
$646
Gasoline
$942
$1055
Annual Total
$1322
$1701
Pavement condition affects the cost of operating a vehicle as you can see from this table, rough roads will add just under $400 for a medium vehicle.
Using NCHRP estimates in combination with Bankrate.com car ownership costs, potential impacts of pavement condition on Oregon highway user costs can be calculated. The NCHRP tables used for these calculations are provided in Appendix A. Table 5 below illustrates the impact of very rough pavement condition on the fuel efficiency, tire wear and repair and maintenance costs for a medium car. Overall, very rough pavement has the potential to increase overall vehicle auto operating costs by 22 percent for a medium car. Table 6 presents impacts in terms of potential additional dollars spent due to operating on very rough pavement. Higher repair and fuel costs have the potential to rise nearly 30 percent when driving on rough pavement. Transportation costs are a significant budget item for households, so increasing costs in this sector will impact household economic activity.
“While the infrastructure costs borne by road agencies are substantial, the costs borne by the road users are even greater. Therefore, vehicle operating costs should be considered by highway agencies when evaluating pavement investment strategies.”
Note that rough roads would impact truck operating costs as well….further increasing costs of moving goods…
While the infrastructure costs borne by road agencies are substantial, the costs borne by the road users are even greater. Therefore, vehicle operating costs should be considered by highway agencies when evaluating pavement investment strategies.”
NCHRP Report 720 Estimating the Effects of Pavement Condition on Vehicle Operating Costs, “ 2012, Transportation Research Board, Table 7-3 and Table 7-5, 55 mph speed.
NCHRP Report 720 Estimating the Effect of Pavement Condition of Vehicle Operating Costs, 2012
Rougher pavement is likely to cause on average a few hundred dollars each year in higher transportation costs. Household income spent on rising transportation costs will go back into the economy for vehicle repairs and maintenance, oil, tires and fuel. If people were able to avoid the higher costs, they could use the money for consumption goods and services in other economic sectors.
A recent report by the Transportation Research Board’s National Cooperative Highway Research Program (NCHRP Report 720) “Estimating the Effects of Pavement Conditions on Vehicle Operating Costs” developed detailed estimates of the effects of pavement condition on vehicle operating costs, repair and maintenance costs. The NCHRP report points out:

16. Conclusions More than 100,000 jobs lost
Rough roads and weight restrictions on bridges will have a negative impact on both business and households.
More than 100,000 jobs lost
Lower Gross Domestic Product (GDP)
Increased operating costs
Investing in the system to maintain current conditions will reduce the negative economic impacts
Oregon has worked very hard to get to the position we are in now.
We are not arguing for expansion or changing the system, only preserve what we have worked so hard to create; not let it deteriorate needlessly and squander the legacy our predecessors left for us.
1980’s pavement was in poor condition, invested heavily to bring it back up to decent condition
OTIA’s represented major investments across all aspects of transportation system

17. Economies Have Momentum
Industries include different types of jobs, export industries tend to generate family wage jobs
Change in employment by industry sector could result in lower average wages, lower statewide standard of living
Once an industry shifts out of a state, very hard to attract them back
Oregon faced great challenges when we shifted from a natural resource-based economy to a broader mix of industries, include a thriving manufacturing sector. It took decades for Oregon to develop our current economic mix. Preserving the highway system supports the current economic structure and supports continues growth. Changes to the economic environment within the state will affect the future direction of economic evolution.
An economy is like a big ship, it takes a lot of force to steer it out of direction once it moves off course.

18. Scenario Analysis
Analytical technique used to explore impacts of different factors on a measured outcome: OTP scenarios Freight Plan scenarios OTIA 3 scenarios Seismic scenarios Rough roads scenarios (current report)
SWIM is used to analyze scenarios – specific questions involving “what if” conditions
Economic & Bridge Options Report (2003): SWIM was used to examine the economic impacts of expected bridge weight limits throughout the state due to increasing number of cracking problems on aging bridges. The model simulated the response of trucks to bridge weight restrictions and quantified the impacts on statewide and regional industry production and jobs, transportation costs and changes in travel and land use patterns. The model estimated Oregon’s bridge problem could cost the state as much as $123 billion in lost production and 88,000 forfeited jobs over the next 25 years.
Examples: Seismic
This analysis
Seismic Bridge Options Economic Impact Analysis (2013): SWIM was used to produce high level estimates of avoidable economic impacts associated with a major seismic event on the Cascadia Subduction Zone. The analysis provided a general sense of the magnitude and direction of avoidable economic impacts compared to the investment needed for a pre-emptive mitigation program. Findings indicated investing $1.8 billion toward seismic mitigation would avoid the loss of $84 billion in Oregon gross domestic product, which results in a benefit/cost ratio of 46. Accounting for the 12% chance of the earthquake occurring within the next 50 years adjusts the benefit/cost figure to 5.6, further indicating mitigation investment is a sound business decision for Oregon.
OTIA 3 bridge options
Oregon Freight Plan (2010): SWIM was used to evaluate the variation in statewide and regional economic activity and commodity flow in order to evaluate uncertainty associated with economic volatility on alternative Freight Plan strategies. This information enabled decision makers to better assess the robustness of freight strategies and avoid the creation of barriers prohibiting the freight industry from reacting nimbly to economic change.
Side by side these three analysis efforts are like apples and oranges and bananas, because of the different contextual assumptions made to meet the goals of the analysis. Yet, they are linked and consistent because they used the same modeling tool and economic forecast source and Oregon-specific data.
Oregon Transportation Plan Update (2005): SWIM was used for scenario analysis designed to develop a long range plan that is effective and relevant under conditions of uncertainty in several key areas. Two sensitivity scenarios were used to evaluate impacts of higher fuel prices and more relaxed land use policies affecting available land for future development on urban boundaries and rural areas. Four policy scenarios provided information evaluating different funding options, program priorities and other related issues. This modeling analysis earned ODOT an FHWA/FTA Transportation Planning Excellence Award.
Segue to next slide on the current analysis

19. Oregon Values and Beliefs Survey
TRANSPORTATION Investing in what we have is important to Oregonians.
Oregonians want to take care of the roads they have while recognizing that public transportation investments could be a better choice than roads for the future.
Oregonians rank road and highway maintenance (72% taxpayer support) above public transportation like buses and trains (55% support) and new roads and highways (49% support) (S1.12, 13, 23). It appears that Oregonians want to take care of the roads they have while recognizing that public transportation investments could be a better choice than roads for the future.
A majority of Oregonians support more investment in public transit and consider such investment more important than investing further in roads for cars. Oregonians also find it desirable to shift some funding away from road and highway construction and towards public transportation such as better bus services and high speed rail projects. This result is consistent with responses elsewhere in the study for ways to deal with climate change.
A slightly different view emerges when asking respondents to consider a list of public service priorities. In this context, road and highway maintenance receive higher taxpayer support than public transportation such as buses and trains, new roads and highways. Perhaps Oregonians want to take care of what roads they have while recognizing that public transportation is a better future choice than building new roads.
Observations and Conclusions

20. Maintain Current Conditions Scenario
High-level policy analysis provides sense of magnitude and direction
Caveats associated with “high-level” analysis translate into low-end (conservative) estimated impacts
Analysis excludes impacts associated with uncertainty regarding construction inflation (higher than consumer goods inflation); congestion costs; safety; shifting traffic to local roads and highways; bridge restrictions
1. Assumed ODOT purchasing power for materials will remain steady into the future, even though current trends are contrary to this.
2. Ignore congestion impacts – we know congestion will rise as we shift expenditures to maintenance and away from capacity investment to relieve chokepoints (Research done by others describes expectations: The Cost of Highway Limitations and Traffic Delay to Oregon’s Economy,” Economic Development Research Group, prepared for the Oregon Business Council and Portland Business Alliance, 2007; An update of this report in currently in progress and completion expected by the end of 2014.
4. Safety will be impacted by declining highway conditions, but the impacts are not estimated for this analysis.
5. Culverts are a major asset on the state system with declining condition and increasing risk of failures, but are not fully addressed for this high level analysis.
3. ODOT analysis ignored the impacts to county and city roads, as traffic shifts to non-state facilities the local infrastructure will deteriorate faster because it was not build to handle heavy and large volumes of traffic.
6. The same bridge at different locations will age at varying rates. Thus, predicting when a bridge will be restricted is not precise, we used midpoint prediction dates within a 20-year window. Thus, the dates we chose will be correct + or – 10 years.

21. Right Tool for the Job: Statewide Integrated Model
Simulates the dynamic activity of people and business
Based on statewide economic forecast
Simulates population demographic characteristics
Simulates businesses by industry – commodities used for production, jobs/workers, shipping patterns of goods going to market
Simulates land use for residential housing, businesses,
The simulation mimics how people and businesses make decisions about where to locate and work – from those decisions transportation patterns are derived for people and goods
Knowing the close links of transportation to the economy and how it plays out through land use, ODOT invested in developing a unique tool for long range planning – the Oregon Statewide Integrated Model.
SWIM is a data driven forecast model designed to represent the Oregon economy with respect to land-use and transportation by simulating the activity and market exchanges made by people and businesses. Household and business location decisions are simulated, as well as the travel generated by activities - such as commuting to work, purchasing commodities for industrial production and transporting final goods to markets within Oregon and outside of the state. It is designed for statewide and regional long range transportation planning and policy analysis. Information from the SWIM is designed to inform other modeling tools, such as metropolitan planning organization travel models, freight models, and regional studies.
SWIM is designed to serve as a testing ground to evaluate “what if” scenarios related to areas we can control, such as public policy related to taxes, fees and land use rules; areas we cannot control such as rising oil prices, national recessions, and population growth; and other issues impacting decisions related to the Oregon transportation system.

22. Economic modeling example: Wheat
Example of How Model Simulates Economic Activity
Oregon wheat producers raise primarily soft white wheat, which is used to make pastries, cakes, pretzels, cookies and ramen noodles. The value of Oregon Wheat and products in 2011 was $355 M, the 5th highest in value for Ag Commodities. (Oregon Agriculture: Facts and Figures from nass.usda.gov) The top producing counties in 2012 were Umatilla, Morrow, Sherman, Linn and Gilliam.
Wheat is shipped for further processing. It is prepared for a variety of uses, such as malt (beer, whisky, malted shakes, malt vinegar, Malted Milk Ball candy, Ovaltine, bagels, and tea biscuits); milling (flour, many different varieties); and feed milling (for final consumption by animals – farm and pets). The intermediate products are processed and reprocessed eventually becoming final goods sold to consumers: groceries, beer, crackers, baked goods, and restaurant foods.
The Oregon Statewide Model simulates the production/consumption activity occurring in the state, including imports/exports. The integrated design provides feedback on activity that causes “reactions” within the model mimicking what would occur under real world conditions. For example, if housing prices are lower in one area relative to neighboring areas, households are more likely to locate where housing is cheaper and commute to work where wages as higher or jobs match worker skills. { the price of transporting goods and services affect where people and business locate….} Using a real world commodity such as wheat is an excellent example of what the model is doing when it is used.
Wheat farmers purchase commodities to conduct their production activity, such as fertilizer, seed, machinery, oil, fuel, and labor. The wheat grown is transported to local grain elevators (truck/rail) and from there go to the Port of Portland. From the Port, grain is shipped out on barge or to closer destinations via rail or truck. About 85% of Oregon Wheat is exported.
This is one example of one business “agent” operating in the state of Oregon. The statewide integrated model simulates millions of activities like this among person activity, household activity, business production activity, and transporting goods (raw material, intermediate goods, and final goods) and people to the locations the activity occurs.
Malting Plant
Milling
Feed Milling

23. Difference between Current Revenues / Deterioration Scenario and Maintain Current Conditions Scenario Forecast Change in Regional Production 2020 to 2035
Economic impacts differ by region of the state. Figure illustrates the difference between the two scenarios’ forecast change in production by region. Regions east of the Oregon Cascades are not negatively impacted in the Current Revenue / Deterioration Scenario. This is also the case for the Southern Valley region. For Mid-Willamette Valley and the Central Oregon Coast between Newport and Florence production levels are mostly the same in both scenarios. Most of the Oregon Coast has lower production levels in the Current Revenue / Deterioration Scenario than the Maintain Current Conditions Scenario, since there are fewer route alternatives as conditions decline. The difference in production growth is greatest for the North Coast where heavy goods production occurs. By far the largest impact on regional production occurs in the Portland Metro area. Regional production is more than 10 percent lower in the Current Revenue / Deterioration Scenario than the Maintain Current Conditions Scenario. Portland is the gateway to Oregon markets and a major internal consumption center. Production across the state becomes more localized, internal trade within Oregon shrinks as well as export trade outside the state as the price of our goods rise due to higher transportation costs and we become less competitive with other states.

24. More Analysis tool – SWIM ODOT studies related to econ impacts
OTIA III bridge options
Seismic Options
This analysis