Impacts of Highway Bypasses on Kansas Towns

Executive Summary

This report was prepared by the Institute for Public Policy and Business Research for the Kansas Department of Transportation. It provides literature reviews, empirical findings, and policy analysis related to some of the effects of building a highway bypass around a small town in Kansas.

Modeling and Data Gathering

This report describes three types of models:

1. An origin-destination model of Kansas was developed showing the number of trips that take place between each town and city in Kansas. This model was used to estimate the amount of local traffic and through traffic in every town and city in Kansas.

2. A model was developed and data were gathered to estimate the value of the time-saving generated for through traffic by bypasses in Kansas.

3. A variety of economic impact models were developed and estimated using regression analysis of economic data from several sources. These models were used to quantify the effects of bypasses on business activity in bypassed towns.

Reliability of Results

The findings in this report represent an accurate description of the bare facts, of what has happened in certain Kansas towns that were bypassed. But they also attempt to provide something more: an interpretation of causal relationships, intended as a guide to what is likely to happen in the future. In that broader role, these findings must be viewed with some care. First, for some of the research questions the sample of bypasses was rather small. That leads to possible statistical sampling errors. These potential errors are addressed more carefully in the body of the report than in this summary. Second, empirical measurements of causality are very sensitive to modeling assumptions. In the body of the report, some effort is made to control this problem by using sensitivity analysis, yet some uncertainty will always remain. For these reasons, the following findings should be viewed as probabilistic, even though for convenience they are stated as if they were simple facts.

Findings

Long-term effects on counties and towns

In the long term, bypasses in Kansas typically have not had significant negative effects on the local economy. In fact, many counties and towns have enjoyed some long-term benefits from the construction of bypasses. The major part of this benefit consis ted of an encouragement of basic industries due to the improved transportation system. Growth in basic industry then had second-round effects on local retailing and services.

Short-term average effects on towns and firms

In the first two or three years during and after construction, Kansas bypasses typically have not had negative effects on the bypassed town as a whole. Bypasses have had transitory negative impacts on selected firms. The negatively-impacted firms tend to be concentrated in travel-related businesses, including restaurants, bars, motels, and service stations. However, not all travel-related firms in a bypassed town were negatively impacted in the short term.

Variation across towns and firms

There is much background variation in the experience of individual towns and individual firms. The average effects of bypasses are generally small in comparison to these background effects. However, individual towns and firms could be affected by bypass es in ways that differ considerably from the average effects. In particular, it is possible that some towns suffered permanent gains or losses due to bypasses. Also, some individual firms may have chosen to go out of business rather than adjust to changed circumstances caused by the bypass. Those firms typically were replaced by other firms.

Background effects

The size of the background variation implies that many factors other than bypasses affect the economy of small towns and of individual firms, and these various factors together are substantially more important than bypasses. In particular towns, these factors could either offset or reinforce the effects of bypasses. Two important factors touched on directly in this report are the short-term effects of recessions and the long-term health of small towns in Kansas. The 1990-91 recession had a substantially negative effect on the growth of travel-related firms in small towns, as compared to its effect in the rest of the county. The growth rates for all types of business in small towns were found to be less than the corresponding growth rates in the rest of the county, both before and after the bypass was built.

Benefits of time-saving

Bypasses around small towns in Kansas have been highly beneficial to through traffic. Bypasses of 21 small towns in Kansas generated average time-savings for through traffic that are conservatively valued at upwards of $1 million per year (in 1994 dollars). With a discount rate of 10%, an average bypass would be justified on a benefit-cost test if the present value of all costs was less than $10 million. Assuming that the initial costs of land acquisition and construction constitute at least half of the social cost, then such a bypass would be justified on a benefit-cost test if those initial costs were less than $5 million. However, this figure would vary between different bypasses, depending on the amount of time-saving and the amount of through traffic. Larger initial costs could almost certainly be justified, but doing so would require a more detailed analysis than this report can provide.

Economic impact factors in policies for building bypasses

This report considered whether an objective method is available to take economic impacts into account when deciding whether to build a particular bypass. The report suggests the following policy considerations:

1. While long-term effects may differ between bypasses, it is not feasible at present to predict these differences in an objective manner. Since long-term effects are more likely to be positive than negative, they can reasonably be ignored.

2. For similar reasons, it is reasonable to ignore any short-term effects outside the retail and travel-related sectors.

3. In the case of retailing and travel-related services, policy-makers might want to take short-term adjustment costs into account in the decision to build a bypass. However, developing systematic policies for doing this would require additional research , which is beyond the scope of this study.

This report suggests that additional research in several areas could be of use.

1. Predicting and managing effects of highway construction on individual firms. At present, no models exist that can help an individual firm predict the effects of highway construction on that particular firm. Such models may be feasible.

2. Developing policy guidelines for including adjustment costs of travel-related firms in the bypass decision. The main problem is to develop acceptable and routine ways for measuring adjustment costs.

3. The value of time for automobile travel in Kansas. At present there is no Kansas-specific knowledge on the value that automobile drivers and passengers place on time-saving.

4. Predictive Origin-Destination models of Kansas. It would be possible to extend the O-D model developed in this study so that it can be used to make predictions over a ten year horizon.

5. Effects of highways on growth and development in Kansas. The models developed in this study could be used to quantify various effects of highways on economic development in Kansas.

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