March 16th, 2011

ECONOMICS OF CONSTRUCTION

Optimize Mobility, by Catherine Higgins.
    Do road improvement projects help the local economy?

    Reconstruction activity on 3500 South in West Valley City

    UDOT has asked experts to study the complicated relationship between the local economy and transportation projects.

    To find answers about how construction impacts local businesses, a team of BYU researchers reviewed other studies, identified key indicators of economic activity, established  statewide norms for each indicator and collected and analysed data from local areas.

    Three indicators — sales tax revenue, VMT, and employment — were identified. Data reflecting each indicator was collected from the vicinity of construction projects three years before and after construction. Local data was compared to statewide growth rates.

    Redwood Road sales tax collection, an example

    Sales tax has been shown to be an indicator of economic growth — more taxes collected mean more spirited economic activity. For the UDOT study, researchers looked at tax revenue growth around the construction zone compared to to the statewide rate.

    Positive trend

    This graph shows a positive trend in the growth of sales tax revenue when compared to the statewide rate.  Similar positive trends were observed when looking at other economic indicators– VMT and employment. While the results of the study are not conclusive, the numbers show that the relationship between road construction and economic activity is generally positive when compared to the statewide norm.

    The study adds to the body of knowledge about how transportation projects can help the local economy, but more study is needed.

    More information:

    The study, “Understanding the Economics of Transportation in Utah” is posted on the UDOT website.

    Read a newsletter article by UDOT Planning Director John Thomas.

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Responses to “ECONOMICS OF CONSTRUCTION”

  1. I found this article informative.As a business owner I am constantly monitoring how local projects are affecting my business.

  2. Thanks for letting us know you appreciated the article.

    Catherine Higgins at March 25, 2011 1:44 pm
  3. So glad that we are studing this. Experience doing PI for UDOT has convinced me that the stress of road construction may be the greatest for adjacent business owners, who must do extra work to maintain their customer base while the construation is underway. Any information we can provide, early in the process, that will help them fucus on the possibility of a better future for their business as a result of the construction is good for them and UDOT. If business owners see construction as a positive means to an end, they are more likely to cooperate with us while its happing. I hope we can build on this research as a tool for working with our customers in the future.

    Evelyn Tuddenham at April 19, 2011 9:44 pm
  4. I’m curious how contruction activity can spur growth? I would think consumers would steer away from the construction. Or does the article imply the economic activity after the contruction is complete?

  5. The study referenced in the article shows a few economic measures that coincide with construction projects. Really, there’s not enough information to draw firm conclusions. More studies are needed. However, people who work on behalf of UDOT with businesses during construction usually get lots and thanks and appreciation for making the road better. A smoother or wider road is better for everyone on a corridor — customers, employees and commuters — this is anecdotal information but good to hear nonetheless.

    Catherine Higgins at May 9, 2011 7:11 pm
  6. California had a 1% temporary sales tax hike to save its budget shortfall. I dont know about the impact on economic growth but it made it very difficult for residents. Thankfully the new governor did not extend this tax and it expired this month.

  7. Thanks for sharing this very interesting analyze about the relationship between transportation projects and local economy. I am interested about that because I plan to start my business pretty soon.

  8. I’m really glad that they’re looking at the impact of construction on businesses. I’ve worried that they’ll decide to do construction on the road where my business is, and I’ve wondered what it would do to my revenue.

  9. It makes sense to me that road improvement has a positive effect on businesses near to the project. During the construction there must be some significant decrease in business. How long it takes to make up for that loss, is a factor which seems to need to be taken into consideration. For businesses, being pro-active as soon as it is known that there will be some burden placed on their returning customers, would likely play an important role on a case by case basis. So, it certainly is not an easy calculation to quaantify to what extent road improvement projects help a local economy.

  10. I found this article informative. As a business owner I am constantly monitoring how local projects are affecting my business.

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