I-69 Personal Income Growth, Build / No Build comparison

On December 18, 2003 an INDOT press release announced the completion of the TIER #1 FEIS for SIU #3, the I-69 Evansville to Indianapolis Environmental Impact Study. The concluding paragraph of this press release started with,

The INDOT Lie:
"I-69 will serve as an economic development engine for Southwest Indiana and generate $3.5 billion in additional personal income growth and 4,600 additional permanent jobs by 2025"

This statement has been adopted by many elected officials and is presented as reason for supporting I-69 on New Terrain.
By carefully studying the facts from the EIS below, the study of truth will show the deception inherent in this INDOT statement.

In short, what is demonstrated below is that all growth in income in the region is the result population movement and growth.

The DEIS documents that each individual will have more money in hand if I-69 is not built, known as NO-BUILD, than if any one of the alternatives are selected, known as BUILD.

Economic Impact	1	2A	2B	2C	3A	3B	3C	4A	4B	4C	5A	5B
Net Change in Real Disposable Income (Millions of 2001 Dollars)	$52	$88	$99	$130	$133	$165	$162	$98	$106	$135	$125	$142
Change in Real Disposable Income Per Capita (Thousands of 2001 Dollars)	$0	$0	$0	$0	$0	$0	$0	$0	$0	$0	$0	$0
Change in Transfer Payments per Capita (2001 Dollars)	-$3	-$5	-$6	-$8	-$8	-$10	-$10	-$6	-$6	-$8	-$8	-$9
Change in Population	1800	2900	3300	4300	4400	5400	5500	3200	3500	4400	4200	4800
Change in Young-Working Age Population	800	1400	1500	2000	2100	2600	2600	1500	1600	2100	2000	2300

“5.2.3 Real Disposable Income Impacts

Real disposable personal income was identified as an economic performance measure in the Purpose and Need Statement. Income measures are forecast in nominal dollars, and REMI simultaneously forecasts a personal consumer expenditures (PCE) price index that is used to convert values from nominal to real dollars.

Table 5.5 summarizes the forecasts of real disposable income and real disposable income per capita in 2025. Compared to the No-Build Alternative, the build alternatives are forecast to generate between $52.1 million and $164.6 million additional real disposable income in 2025, depending on the alternative, a change of 0.1 to 0.3 percent. Each alternative results in increases in employment and personal income. The REMI model also takes into account the tendency of individuals to relocate to or to remain in an area (when they otherwise would have moved out) to take advantage of enhanced economic opportunities. When this population growth is taken into account, we find that the real disposable income per capita for the build alternatives does not differ significantly from the 2025 forecast for the no build alternative. The economic analysis does estimate that there will be a significant growth in the labor force, especially among younger workers, partially due to increased wage rates.”

End quote from Technical Report 6.7.4 Economic Impact Summary, p. 37.

Our Analyses:

Capital construction cost of 3 "segments of independent utility" (SIUs):
(SIU 4) Ohio river crossing in Evansville:                    $700M
(SIU 3) 3C between I-64 and I-465:                        $1.78B
(SIU 2) Extra lanes on I-465 around Indianapolis:       $800M
Total:                                                                       $3.28B

SW Study Area only:
1998 population: 1,982,300
2025 population: 2,353,500 (5500 of which is attributed to I-69)
2025 I-69 related regional real disposable personal income: $162M*

(*In the FEIS this has been increased to $173M without any documentation.)

Thus, to assess the benefit to each individual SW IN resident, calculate the return expected for each dollar invested: capital construction cost/population = per capita investment cost;

disposable income growth/population = per capita disposable income growth (i.e., return on investment).

Note: a benefit/cost ratio of 1.00 means that you break even-- benefits = costs. Ratios greater than 1 mean that the investment brings a profit, and ratios less than 1 signal a losing proposition.

Analysis 1:

Personal Income Growth Forecast for the SW IN Study Area relative to the costs of constructing only 1 section of I69 (SIU3 “3C”), assuming only SW IN residents would pay for the construction.

	Investment cost / per person	$1,780,000,000/ 1,982,300	$897.95	Capital construction (i.e., investment) cost per person
	Increase in SW IN regional per capita disposable income year 2025	$173,000,000/ 2,353,500*	$.735	73.5¢ per person increase in disposable income. (*includes population increase w/I-69)
	Benefit/Cost Ratio per person	$.735/ $897.95	.0008	Bottom line, it will take more than 1220 years!, beginning in 2025 for each Hoosier to recoup his or her investment costs before any personal disposable income benefit might accrue.
BENEFITS: From the table above, it would seem impossible to conclude building I-69 a sound cost / benefit investment .08¢ per dollar invested, but actually it is worse than that: All of the benefits modeled for the I-69 project include the Evansville and Indianapolis regions in the projections, therefore it is reasonable to also include the costs of the ~$700M for the Evansville-KY leg of the I-69 and the ~$800M for the additional lanes needed for I-465 ($800M is the average of the $300M to $1.2B estimate that was given for this SIU in the Corridor 18 study) when asking what this investment might mean to individual IN residents. This brings the cost of I-69 in Indiana up to $3.28 B.

Investment cost / per person	$3,280,000,000/ 1,982,300	$1655	Capital construction (i.e., investment) cost per person
Increase in SW IN regional disposable income year 2025	$173,000,000/ 2,353,500*	$.735	73.5¢ per person increase in disposable income. (*INDOT population forecast includes population increase w/I-69) Benefits as above for the entire region.
Benefit/Cost Ratio per person	$.735/ $1655	.00044	Bottom line, it will take more than 2250 years!, beginning in 2025 for each Hoosier to recoup his or her investment costs before any personal disposable income benefit might accrue.

Investment cost / per person

$1,780,000,000/
5,907,600

$301.31

Capital construction (i.e., investment)
cost per person

Increase in State of Indiana disposable income year 2025

$151,000,000/
7,076,600*

$21.34

$21.34 per person increase in disposable income.

*INDOT statewide population forecast.

Benefit/Cost Ratio per person

$21.34/
$301.31

.07

Bottom line, it will take more than 14 years, beginning in 2025 for each Hoosier to recoup his or her investment costs before any personal disposable income benefit might accrue.

COUNT US! thanks Dr. Lazowski for this view of INDOT FEIS and DEIS data.

Dr. Lazowski's concluding remarks to her study:

Do you have much of a problem allowing the 3 SIUs to be addressed here vs. INDOT always and only focusing on the 3C segment? Their economic simulations do purport to model the entire region or state so it is not like we are excluding benefits that might turn up in studies on those other sections.

In addition, the FEIS Tier I cost estimates do not include cost of utilities or noise mitigation.

Real disposable income is after-tax money that individuals have available to save, invest, or spend. As such, it is considered and index of our standard of living. It is ironic then, that this interstate, which is promoted on the basis of encouraging economic growth via inducing travel demand would actually leave us with less money in our pockets to actually do that. In addition, INDOT acknowledges that vehicle operation and maintenance costs are higher when we are traveling at interstate speeds - so we'll have less money in our pockets to even pay for the gas for these new trips, let alone any money to spend when we get there!

The big picture: more people will move to SW Indiana; there will be a few more jobs- but not as many new jobs as new people, and some of these people and jobs will move from other parts of the state - so economic resources in other Indiana communities will be diminished. We'll be crowding together, trying to travel at interstate speeds, to drive to new super centers and strip malls in order to spend income that we will be less able to afford to spend. State economic statisticians will then be able to report economic growth in SW Indiana while in actuality, all Indiana residents will simply have converted their current dollars into funds for an interstate highway.

F.A.Q. frequently asked questions:
COUNT US! Anticipated questions and objections as well as further justifications that our numbers are conservative:

Q. Dr. Lazowski's study divides the cost of construction by the population now, but then divides the benefits by the projected population. This increases the cost per person and reduces the benefit per person. What's up with that?

A. Hoosiers who are here now are the ones who would to pay for the building of I-69, unless INDOT mortgages our future via selling bonds on future transportation dollars, see the recent HB1446/S9. The purported benefits would not accrue until the future, at which time they will be distributed among a larger population.

Q. I have never heard INDOT use any number greater than $1.8 Billion dollars. Where are you coming up with the $3.28 billion dollars in costs for I-69?

INDOT always looks at costs for 3 SIUs separately and never adds the costs of the independent studies, yet the benefits are looked at on a region wide basis. They have been mandated by Congress to divide Indiana into four (SIU) sections of independent utility.
The 3.28 billion is the current average cost for the studies that INDOT and the Federal Highway Administration have completed so far.

The first SIU mandated (SIU#1) is existing I-69 which has long been recognized as the most congested section of road in the state of Indiana. This section has not been studied yet and we are being kind to INDOT by allowing this omission to be ignored. If this study were completed, the costs would be increased with little new benefit, we would assume. The known costs for studies of I-69 are shown on a PDF collected from the studies and presented to us by Monroe County Surveyor Kevin Enright.

Further we would point out that almost exclusively the costs are contained within the fences that would define the built I-69, while the benefits extend to an area beyond even the counties through which the built highway would be built. The FEIS includes no costs for frontage roads. At this time it is not known if the state or the counties would be responsible for these costs. There is no calculation for increased travel time and fuel due to closed and detoured crossing points. The appendix to the Evansville to Indy DEIS included a table that said 60% of the roads crossed would be closed, despite the fact that they maps included in the DEIS and the FEIS 90% of the roads crossed as "potential intersections or grade separations." Studies conclude that costs over-runs are in fact the result of optimistic selling of construction projects and not actually errors in calculations. Our presentation above conservatively accept the rosy calculations of the Evansville consulting firm's FEIS.

Q. I wrote a letter to my elected official and have received a letter back that quotes a large increase in the Personal Income Growth of the Region with the construction of I-69. My legislator in fact presents this as one of the main reasons for supporting I-69. How does this differ from the the data that you are presenting on this page?

A. It does not. In fact that is why we have put this page up. INDOT has provided to our legislators the rosy picture of Personal Income Growth as a reason for building I-69 and we have found that almost every elected official has chosen to cut and paste this into their letters to us as reason that we are wrong. We hope you will go to our printable version of the data presented on this page and make your legislator look at the facts. The fact are: All studies of proposed road constructions projects this big must be compared to "no build." In this case the "No Build" scenario provides more benefit than the build, because the costs are $0. The growth that produces higher personal income figures is due to a growth in population; whereas, per capita, individual taxpayers are not better off. Every person in the region or in the state will individually have less money. Therefore the term "personal income growth" would seem to be a misnomer.

Q. Where is the Table 5.5 that you have presented above?

A. This information was presented as a supporting technical document of the Draft Environmental Impact Statement that can be downloaded from INDOT's I-69 project site at http://www.i69indyevn.org/ by clicking the Reports tab and locating the technical report listed as "Economic Impact Summary Report." The file is dated 9-27-2002. Table 5.5 is presented on p. 37.

Also worth noting in that same report was that the DEIS projection of # of SW IN jobs gained via I-69 was listed as 4300 in Table 5.1, page 31, but if you add the numbers in the 3C column, it only adds up to 4200 jobs. So even in the DEIS they had an addition error that led them to overstate the # of jobs by 100 and then in the FEIS they increased this number to 4600 jobs with no documentation on what led them to increase their estimates...(continued next question)

Q. Which one?

Technical Report: Economic Impact Summary Report          Sep. 27, 2002
    Pages 1-24
    Pages 25-48

This tech report with the "latest news" logo the file itself is 48 pages long so you need both parts but the tables we address are in the second half. once this file is downloaded you'll see the official title with the 6.7.4. Thanks!

We have the pdf file of this report but it is quite large for storage on our site.

Investment cost / per person	$3,280,000,000/ 5,907,600	$555.22	Capital construction (i.e., investment) cost per person
Increase in State of Indiana disposable income year 2025	$151,000,000/ 7,076,600*	$21.34	$21.34 per person increase in disposable income. *INDOT assumed population increase.
Benefit/Cost Ratio per person	$21.34/ $555.22	.038	Bottom line, it will take more than 26 years, beginning in 2025 for each Hoosier to recoup his or her investment costs before any personal disposable income benefit might accrue.