Nobody Knows the Economic Impact of Transit Projects

The first is that no peer-reviewed studies have ever been conducted to determine the economic impact of transit or livability investments. There is no reliable literature on this subject. Whenever Secretary Ray LaHood or APTA or the Sierra Club touts the economic benefits of building more transit or building more bike lanes they are guessing and basing their guesses more on political objectives that economics.

Second, the quality of the general economic analysis of the Tiger Grants is “pretty bad.” Tiger Grants are part of the American Recovery and Reinvestment Act. These grants are for all modes of transportation. For the first round of Tiger Grants, using a benefit-cost analysis on a scale of 1-4 where 1 is not useful at all and 4 is very useful, the average score is 2.09 which translates to marginally useful. For the second round of Tiger Grants the average score of a project that received federal funding is 2.3 and the average score of a project that did not receive funding is 1.9. Still a score of 2.3 on a 1-4 scale leaves a lot to be desired. Most public sector agencies especially small cities and counties do not have the expertise to conduct economic analysis. Jack mentioned that the DOT is putting together some information to help them, but acknowledged that more guidance is needed in this area. Transportation projects overall but especially transit projects need better economic analysis.

Third, the quality of analysis by mode differs. The best analysis is in the railroad sector because freight railroads have been performing economic analysis for the shareholders for years. The worst analysis is in the publicly run port sector since most ports have less experience in economic analysis.

If the Obama administration is serious about performance-based metrics, DOT and Secretary LaHood should put more time and emphasis into improving Economic Analysis. Although since LaHood has been touting economic benefits of transit and livability projects that his own department experts know are not fact based, I am not convinced he cares about objective analysis.