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Minnesota's Road to Recovery: An Analysis of Transportation Recovery Projects

June 30, 2009 By Conrad deFiebre, Transportation Fellow

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Creaky old timber bridges are being replaced. Rough roads are getting new pavement. Deteriorating regional airport runways are being rehabbed. Twin Cities transit riders will hop on new diesel-sipping hybrid buses. Suburban drivers will ply new interchanges and a freeway extension. And a rusting Minnesota icon, Duluth's Aerial Lift Bridge, is receiving the final phase of a once-in-a-lifetime paint job.

It's all thanks to the American Recovery and Reinvestment Act, the $787 billion federal economic stimulus package enacted to counter a recession that has obliterated 5.4 million U.S. jobs in past year, 99,7000 of them in Minnesota.

While the plan will support worthwhile efforts from education, health care and unemployment benefits to clean water, housing and senior nutrition, the earliest and most visible impacts in Minnesota are on the roads, bridges, transit services and other transportation assets that put our economy on the move.

Minnesota is expected to reap about $4 billion from the act over two years, creating or preserving tens of thousands of jobs. Some of the biggest employment boosts will come with a new emphasis on shoring up public infrastructure.

That's a long-overdue development, and one of the most effective and best-targeted strategies for renewed economic vigor. Mark Zandi, chief economist at Moody's Economy.com and an adviser to U.S. Sen. John McCain, estimates that every dollar of infrastructure spending boosts domestic output by $1.59. The $959 million of stimulus aimed at Minnesota infrastructure will produce nearly 26,000 jobs5 and an economic gain of more than half a billion dollars.

Among the hardest-hit Minnesotans in this downturn are construction workers. In just the 12 months from March 2008 to March 2009, 20,200 construction jobs in the state disappeared. That was a 17.7 percent falloff, nearly five times Minnesota's overall job-loss rate of 3.6 percent.

And those figures don't reflect the many construction workers now relegated to part-time duty at part-time pay, said Dave Semerad, chief executive officer of Associated General Contractors of Minnesota. As much as 70 percent of Minnesota's construction industry has been idled, he said. "That's a huge economic engine sitting on the sidelines ready to go to work," he added.

John Engler, the Republican former governor of Michigan and now president of the National Association of Manufacturers, hailed the stimulus package's advantages for the private sector. "Public investments that improve and modernize our transportation infrastructure at this time of great uncertainty will help prepare the nation for its rebound by keeping steel mills going, cement trucks rolling, equipment manufacturing lines moving and Americans employed," he said.

The strong federal recovery package also is a step toward reversing Washington's decades-long withdrawal from support of the nation's capital assets. Between 1980 and 2004, the federal share of all U.S. spending on transportation and water infrastructure dropped from 38 percent to 24 percent.


The Minnesota Department of Transportation's draft statewide transportation plan projects $65 billion in needs for the highway system over the next 20 years, including $16 billion for road and bridge preservation alone. The total revenue expected over that period: only $15 billion.

Amid challenges this massive, the recovery act won't fix all the roads and bridges that need attention in Minnesota. And it won't solve all the problems in the construction industry, especially its once-booming residential and commercial building sectors, now mired in a virtual depression.

But the one-time spike in transportation spending, about half the state's typical yearly budget for roads and bridges, will reverse heavy construction job losses while producing safer, more efficient, prosperity-boosting ways to get around for decades to come. Now it's up to the state to capitalize on this one-time funding by maintaining road, bridges and transit in the years to come.

Key Findings

  • The $787 billion American Recovery and Reinvestment Act offers a once-in-lifetime opportunity to catch up on lagging federal infrastructure investments, which fell from 38 percent of all such U.S. spending in 1980 to 24 percent in 2004.
  • Over the same period, Minnesota ran up a $5 billion infrastructure deficit, according to the American Society of Engineers. The Minnesota Department of Transportation envisions an even greater shortfall just to meet performance standards for state highways over the next 20 years: $65 billion in needs, only $15 billion in projected revenue.
  • Minnesota has already allocated a total of $585 million in stimulus dollars to repair, maintain and improve roads, bridges, airport runways and public transit systems. The recovery act's impact on Minnesota infrastructure is both broad and deep, covering every corner of the state. Many of the projects had been delayed for years for lack of funding.
  • Less than half the pavement on Minnesota's arterial routes is rated in good condition; the rest ranges from poor to fair. The average Minnesota driver pays a hidden tax of $347 a year in extra vehicle costs because of bad roads.
  • MnDOT has already signaled a return to its long-stated policy of "preservation first" for trunk highways. That will begin to reverse disastrous deterioration of the system during much of this decade. And it comports with an historic shift in Minnesota travel patterns toward transit and intercity rail and away from driving and airliners.
  • Conservative economists have endorsed New Deal-style infrastructure stimulus to reduce unemployment and set the stage for a strong recovery. Mark Zandi, an adviser to U.S. Sen. John McCain, estimates that every dollar spent on infrastructure boosts domestic output by $1.59.
  • Infrastructure spending is particularly welcome in this deep recession, when 20,200 Minnesota construction jobs, more than one in six, disappeared. Construction's 17.7 percent job loss in Minnesota is nearly five times the state's overall rate. Infrastructure projects financed by the recovery act are estimated to support 26,000 jobs.
  • Minnesotans may be skeptical of federal spending to bail out failing banks and automakers, but they support a recovery package that is transforming the state before their eyes, in near-record time. The Minnesota Department of Transportation obligated half of its $502 million in recovery funds for roads and bridges in half the time required by the federal government. Creaky timber bridges are being replaced with concrete and steel. Highway interchanges are being upgraded. Rough roads are being resurfaced. New fuel-sipping hybrid buses are on the way. And Duluth's iconic Aerial Lift Bridge is getting a paint job to reverse decades of rust.

Recommendations

  • While the recovery act provides a fine model for Minnesota to keep chipping away at its infrastructure deficit, its funding source - federal deficit spending - does not. The state will need sustainable revenue from transportation users long after the recovery act has expired.
  • That means state leaders, sooner or later, will have to increase collections from fuel taxes, vehicle registrations, congestion-based tolls and probably transit fares as well.
  • Last year, legislators took an important first step, raising some of those user charges for the first time in 20 years. By then, inflation had stripped a third of the gas tax's buying power, and it still hasn't nearly caught up to its real value in 1988. Minnesota policymakers should consider automatically adjusting the rate for inflation.
  • The federal gas tax of 18.4 cents a gallon hasn't been raised since 1993, reducing its buying power to 12.5 cents today. Inflation doesn't reduce income, sales and property tax revenue because they automatically follow changes in wages and prices. As Congress votes on new surface transportation funding authorization this year, it should also adopt an inflation adjustment in fuel or mileage tax rates.
  • As driving's share of travel declines, further road and bridge expansions should be carefully chosen from projects offering the very best returns in safety, economic efficiency and congestion reduction. Meanwhile, greater emphasis must be put on transit and fast intercity passenger trains, which are gaining popularity despite fare increases, service cuts and funding shortfalls.


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