Thursday, February 16, 2012

Fixing local roads vs. expanding state highways in Wisconsin

There’s a battle going on in Wisconsin.  No, not the one you’re thinking of (although not unrelated).  There is a debate over spending more money on local road repair vs. spending more money on widening state highways.  Without getting into the local specifics, I pass along a few thoughts on the topic I have shared with my friends in the Badger State:
A few key points on local roads (fix-it-first) vs. highway expansion:
·      Local projects tend to use local contractors, while big projects may attract large contractors from farther away.  Generally, the smaller the contract, the more likely the money "stays home" with a local contractor.
·      Similar point: Local, small projects tend to use small, local contractors, such as asphalt pavers.  Big projects usually have large contractors (with larger overhead) and specialist subcontractors from farther away.
·      Related to the above effects, money spent on local projects tends to go out the door and into the economy very quickly, maximizing stimulus effect.  Big projects by their nature take longer and the pay-out may take years.
·      Local projects have a higher proportion of payroll costs.  Bigger projects have more non-payroll costs: materials, equipment rental, and especially right-of-way (land) acquisition.  This again has a direct impact on economic stimulus.
·      On the question of long-term economic development there is no consensus in the field.  Economists will tell you that minimizing the time consumed in transporting goods has a direct economic impact.  On the other hand, commuters tend to value improved reliability over reduced time consumption, which argues for a state of good repair.
·      Failure to keep up with a state of good repair also dramatically increases cost liability over time.  It's a lot cheaper to repair and resurface streets on a regular basis than it is to let them fall apart and have to rebuild them.

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