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Highway Construction Costs Increasing

Report Identifies Two Explanations

Highway Construction Costs Increasing

Environmental regulations have contributed to the rise in highway construction costs.

A report released by the Brookings Institution in mid-July indicates that "costly environmental review delays" are a major reason why the cost of building one mile of interstate highway tripled between the 1960s and 1980s.

The report also suggests that increases in household income and home values also contributed to costlier investments, such as more lanes, ramps, and bridges.

"Changing cost for construction material or labor don't explain the increase in spending over time. Neither do the costs of acquiring rights of way or the costs of planning," the report's authors stated. "And there were no large changes to federal interstate highway construction standards over time."

The authors identified "empirical evidence" consistent with two potential explanations for the rise in highway construction costs:

"The first is that the demand for more expensive interstate highways increases with income, as either richer people are willing to pay for more expensive highways or in any case they can have their interests heard in the political process," they said. "The doubling in real median per capita income over the period accounts for roughly half of the increase in expenditures per mile over the period. Controls for home value also account for a large proportion of the temporal increase; taken together, income and home value increases account for almost all the temporal change in costs."

Authors state that the second explanation centers on what's called the "rise of citizen voice" in the late 1960s and early 1970s - a catch-all term used to describe the impact of the environmental movement, the civil rights movement, and the rise of homeowners as organized lobbyists that empowered citizens with "institutional tools" like environmental reviews to increase the "cost of government behavior," such as mandating the addition of highway noise barriers.

Accommodating the "citizen voice" from an environmental perspective while simultaneously lowering the cost of doing so is one reason more states such as Arizona are seeking National Environmental Policy Act assignment authority. That way, they can comply with federal environmental requirements on their own, allowing them to streamline processes and save time and money.

The California Department of Transportation reported a 30 percent time savings in project delivery after receiving NEPA assignment authority, while the Texas Department of Transportation estimated that it gained time savings of 25 percent.

The U.S. Department of Transportation issued a final rule last year to "rationalize and streamline" the environmental review process across railroad, transit, and highway projects alike.

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November 12, 2019, 3:31 pm PDT

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