Kevin Downing, a reader in Portland, got me hooked on a fascinating exercise: trying to figure out how long it takes a road expansion to pay for itself. Let’s take a look at how this might work. (But please stick around for all the caveats at the end.)
Consider, for example, the Delta Park Project in north Portland. It’s a $60 million endeavor that will add one lane in each direction to a 1.2 mile-long segment of Interstate 5, which currently has two lanes in each direction. So the question is: will road-users on that segment pay for the $60 million price tag?
Here’s how I see the numbers. Assuming fuel efficiency of 22.5 miles per gallon, on average, a typical passenger vehicle would burn a bit more than 0.05 gallons of gasoline to drive that 1.2 miles of roadway. Multiply the fuel usage by the federal gasoline tax of 18.4 cents per gallon, as well as by the Oregon gasoline tax of 27 cents per gallon (a figure that includes the 3 cent per gallon add-on for Multnomah County), and you find that a single trip on that section of road yields a little less than 2.5 cents in revenue.
So far so good. Now let’s assume that the average daily traffic volume is 124,833 vehicles. (That’s the average of the official numbers I got from ODoT from four monitoring points.) If each of those vehicles generates the average revenue, then a day’s worth of travel nets $3,015. That’s not much. In fact, in order to pay for the $60 million investment, you would need nearly 20,000 days of travel revenue. Put in simpler terms, it would take road-users more than 54 years to pay for the road expansion.
And it’s probably much worse, because my simplistic accounting leaves out a lot.
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For one thing, I’m assuming that the revenue from fuel burned on all six lanes of the expanded freeway is used to pay off the cost of the two new lanes. If the two new lanes had to pay for themselves, then the payback period could be more like 150 years.
I’m also not factoring in any financing costs. Nor am I accounting for overhead related to administration, contract management, or other government costs that aren’t directly included in the Delta Park Project budget. (And I’m not discounting future tax receipts or doing anything fancy like that.) If the real price tag is greater than $60 million, then we’re looking at a longer payback period.
Plus, I’m assuming that vehicle fuel efficiency stays unchanged for the next 54 years. If cars get more efficient, then each trip will generate less revenue, and therefore require a longer time period to pay for the road expansion.
On the other hand, I should be fair: the tax rate could go up faster than fuel economy improves (or some other tax, like the mileage tax, could kick in) and revenues from driving could come in faster than I’ve calculated, making for a shorter payback period. Well, maybe.
I’ve also assumed that the traffic volume remains unchanged over the next 54 years, but it may not. If driving gets more expensive—whether because of new taxes or rising world oil prices—then it’s likely that people will drive fewer miles. And a lower traffic volume on that road segment would, once again, make for an even longer payback period.
Of course to be fair, the traffic volume on that section of I-5 could increase. Road widening often encourages more driving, which would mean more revenue, and therefore a shorter payback period. Interestingly, however, the Department of Transportation does not believe there will be any increase in traffic volume because of the new lanes.
Then there’s all the other stuff I didn’t factor in. When I say that the road pays for itself in 54 years, I’m not counting the direct costs that a road incurs such as cleaning, maintaining, resurfacing, and repairing it. Nor I am counting the cost of lighting it, policing it, and so on. What’s more, I’m not counting the costs of any of the “externalities” of road use, including the carbon emissions that contribute to climate change, the air pollution that harms human health, the water pollution that degrades rivers and lakes, or the noise that reduces quality of life and property values alike; nor am I counting the economic costs of property damage, injuries, and fatalities that arise from collisions on the road segment.
That said, the road widening may help reduce the cost of some current externalities, such as time lost to traffic congestion. It’s difficult to make such a calculation. And it’s made harder by the fact that the construction itself usually causes further congestion, and even the congestion benefits of new lanes tend to be short-lived.
What else didn’t I calculate? Trucks for one. Trucks in Oregon are subject to a weight-mile tax that, in theory, is designed so that truckers pay the cost of their disproportionate impact on roads. For the purposes of my chicken-scratch calculation here, I’ve simply assumed that trucks actually do pay for themselves, which may not be a safe assumption.
Leaving trucks out does pose a few analytical hazards though. They put a lot of strain on road surfaces, and they tend to increase congestion and boost the cost of other externalities like air pollution and noise. But because they also burn more fuel than cars, they also generate more revenue from fuel taxes.
Is anyone still reading? Anyone?
So, okay, the bottom line is this: road expansions don’t pay for themselves.
It’s certainly true that getting an accurate accounting requires more workmanship than I’ve put into this blog post, but the balance of factors seems to pretty clearly suggest that the payback period is very long.
You might quibble that the Delta Park Project isn’t a good example; that other projects are less expensive. And I’ll concede that this freeway example includes bridge and ramp reconstruction. Yet it’s also true that there are no right-of-way or displacement costs, and the four existing lanes are functioning okay already. So a new road project is likely to be even more expensive than this one.
What about the really big-ticket project next door, the Columbia River Crossing? Well, someone else will have to do that calculation.
And Seattle’s deep-bore tunnel? (No, I can’t help myself. It’s a sickness.)
It will pay for itself in a mere 14,506 years. (That’s using figures for the “no-toll” scenario.) Just think: if we had built it during the late Upper Paleolithic period, it would have almost paid its own way by now.
Photo depicts the Delta Park area; from the Oregon Department of Transportation.
Outstanding. I’ll need to do similar workups for some of the road projects local to me.
This thought bubble started on my bike commute while pondering the belief, and as it turns out the myth, that car users are paying for the roads themselves through their gas taxes. As you can see from this exercise, an individual user never actually covers the cost of the roads they directly travel on. Those costs come from users long ago as well as those in other parts of the region, much less the country, who don’t now travel on that road. It seems to me that when car drivers decry the use of road fees to pay for bike infrastructure, they first ought to consider the glass (road) house they live in, rather than continuing to hold the mistaken belief they are carrying their own weight.P.S. While Eric got the ultimate calculation correct, I believe his report of 0.5 gallons used to travel the Delta Park improvement section is off by a factor of 10 and should be 0.05 gallons.
Matt the Engineer
There’s a small typo that made me think your calc’s were wrong (I burn half a gallon every mile? That doesn’t sound right!). You mean 0.05 gallons of gas for that 1.2 mile stretch of road. I’ve checked your next figures and this was just a typo, not a miscalculation.”It will pay for itself in a mere 14,506 years.” (head hits desk) That of course assumes it will last that long. In reality, I’d guess there’s a 100 year design life for tunnels. So it will pay for 1/145th of itself at that point.
Eric de Place
Yep, that was a clumsy typo—thanks for catching it guys!(It’s fixed now.)It doesn’t change the calculation at all, but it does remind me why I like writing for this blog: readers actually check the math!
So….how about a calculation for segregated bike paths? (Just for fun!–I don’t really know how to go about this properly.) Construction cost + ROW + maintenance + …injuries, I guess? versus part of the taxes paid by bicyclists + savings from not building new roads, reduced carbon emissions, reduced toxic runoff, reduced need for more oil refineries, etc.? Am I forgetting something important? I guess I’d be surprised if bike paths didn’t pay for themselves a lot faster!
And then there’s the costs of waging wars halfway around the world to secure the resources required to maintain our fossil-fired, auto-dependent economy and lifestyle…. and if exporting more one-half trillion dollars each year to buy oil.Sigh.
But aren’t there revenues that are increased by the traffic? Other tax revenues that benefit from say, increased business and such in BC, Washington, California, and Oregon? Those have indirect benefits to businesses and thus, tax revenues?
Eric de Place
JEC,I think that’s a fair point. In fact, that’s what I was trying to gesture at when I wrote: “…the road widening may help reduce the cost of some current externalities, such as time lost to traffic congestion.” But I think I might have enlarged the point some. As you say, there’s the time-value of being stuck in congestion, and then there are, perhaps, some additional secondary benefits that accrue from shorter travel times. Still, I do think it’s worth pointing out that congestion relief is often illusory. For many road-widening projects, the construction makes things worse for some period; then things get better for a while; but then the road once again fills up and congested conditions return. I didn’t try to do any of that accounting in the post.
Interesting post, Eric. Trying to keep the decades-long pricetag in perspective, though, the traffic-bottleneck problem at Delta Park reminds me of the point made by a video that Clark once shared in a post, which also includes a hyperlink to a nifty “java-based computer traffic simulator.” (…Just a little reminder about the history of the Delta Park Project and the problem it’s addressing, as found here.)
Ah, now here’s a road that’ll pay for itself over its lifespan!(h/t to my Mom.:-)
Ross -There was an html error in your comment and we had to delete it. Sorry about that!Please feel free to post it again (although if you pasted anything in, I wouldn’t do that again, what you were pasting could have caused the problem).
Excellent post, and funny too. Makes one think. I suspect the 22.5 miles per gallon figure is WAY ABOVE the average fuel efficiency of cars on the road today, but then again I’m in Kentucky, and we probably have a tad more F150’s here. & “…Upper Paleolithic period”: Totally, and literally, epic.
More mindless analysis. (Aka: Figures don’t lie. But, liars do figure.) First: I-5 isn’t just for local commuters. Trucks and cars from San Diego to Seattle use this highway. Trucks average more like 6 miles per gallon. Redo your math with that number. Second: How much tax do the bicyclists and pedestrians pay to use the road? Third: The trucks and cars won’t stop driving just because there’s one less lane. No, instead they’ll sit for an extra 15-30 minutes bellowing out the pollution for a longer time. Fourth: Many people (self included) drive 30 miles in Washington state before even getting into this 1950s era highway system called Oregon. It would be nice to have modern roads. They’re much safer to drive on. Fifth: You’d be much happier in China. There almost everybody rides a bicyle and salutes the portait of Mao Zedong. He’s your kind of guy.
The calculations in the story above make for an interesting theoretical exercise, but tax collections and Oregon DOT expenditures for roads are brought into balance at a statewide level, not segment by segment. In other words, the gas taxes collected on fuel burned in cars and trucks throughout Oregon on roads that are already paid for, and on local roads that ODOT doesn’t pay for, are available as a contribution to the expenditures for cash-sucking new highway projects like Delta Park.Politically “conservative” think tanks like Heritage, as you may know, make the case that gas taxes pay for roads on a nationwide basis. However, these calculations leave out many externalities. At the same time some (such as me) would claim that the point-to-point, anytime, anywhere freight and personal mobility offered by trucks and cars offer tough-to-account-for benefits that compensate for some of the externalities. In related news, speaking of expenditures and benefits of transportation investments, the Puget Sound Regional Council’s 2040 Metropolitan Transportation Plan for King, Pierce, Snohomish, and Kitsap Counties allocates about 50% of government transportation expenditure over the next 30 years to public transit. Seattle Mayor McGinn voted against the plan because there is too much investment in roads, and because the overall transit mode share rises only to 5% in 2040 from 3% today. I advised PSRC in public testimony to write a plan that would at least double transit market share, but they wouldn’t. Or couldn’t.
Matt the Engineer
[John] A side note to the claim that cars pay for themselves (I know you were speaking nationally, and I haven’t looked at the national data): I recently took a look at our state budget. The Motor Vehicle Fund represented $5.7B in the 2009-2011 budget. The total state budget was $72B. That’s 8% of our total budget going to roads (I excluded another $0.8B in the “Transportation Bond Fund” and $0.6B “Multimodal Transportation Fund” in case they had to do with ferries). Looking at both sides of the balance sheet, we only take in $2.1B in gas taxes and $1.1B in motor vehicle and operator licensing and it actually costs us $0.5B for “Motor Vehicle Fuel Tax Distribution”. So that’s at least $5.7B out vs. $3.2B (-$0.5B?) in. So much for cars paying for themselves.
From Eric’s post:”On the other hand, I should be fair: the tax rate could go up faster than fuel economy improves (or some other tax, like the mileage tax, could kick in) and revenues from driving could come in faster than I’ve calculated, making for a shorter payback period.”Well, a recent Tweet from CBN News with a link to its Oregon mileage-tax article, suggests that maybe the state of Oregon should’nt even consider imposing a mileage tax.From the article:”Some suspect there may be a sneaky environmental agenda going on here: taxing miles to make people want to drive less of them.”