In this case study, the state department of transportation in a Western state, labeled “Western DOT,” calculated the value of an existing highway by determining the remaining user and social benefits of the facility. By comparing the anticipated lifecycle benefits with and without the highway, Western DOT was able to determine the transportation and social value the highway provides to the traveling public and businesses, helping to justify ongoing investments to keep it in good condition.
Background
Western DOT’s primary driver for calculating and reporting asset value was to comply with the Federal Highway Administration’s (FHWA’s) requirement that State DOTs include a calculation of the value of National Highway System (NHS) pavement and bridge assets in its transportation asset management plan (TAMP). In prior TAMPs, Western DOT employed a straight-line depreciation approach based on investment costs to understand and report asset values. However, this approach does not evaluate or communicate the value these assets provide to the public or the potential transportation or social loss that could result from failure to upkeep their assets. The highway selected for evaluation is a significant freight corridor and failure to upkeep would likely carry economic consequences beyond the vehicles and drivers on the road. The value to the economy is not captured under their traditional approach to asset valuation. Western DOT decided to supplement its calculation methodology by testing an economic value-based approach to estimate the highway’s economic value to the public.
Methodology
Data
Western DOT first determined freight and passenger traffic routing impacts in the absence of the highway and then estimated future volumes, travel time and distances both with and without the facility. Starting with current volumes derived from weigh station counts on both the existing and alternative routes and modes, Western DOT computed mode shifts and loss of demand due to changes in travel time and costs and assembled a comparative inventory of travel times “with” and “without” the highway. This inventory included freight motor vehicle traffic, personal vehicle traffic, and freight movements associated with non-highway modes. The transportation data was supplemented with economic valuation estimates based on US Department of Transportation (USDOT), Western DOT studies, public data on freight movement costs and times, and US Department of Energy (US DOE) guidance.
Economic Value Approach
Western DOT assumed that the highway’s economic value corresponds to the lifecycle benefits it provides to users and freight shippers when the asset is in place and maintained in good working condition. To determine these benefits, Western DOT calculated the travel time loss and additional costs associated with the alternative routing required without the facility. Additionally, Western DOT considered increased costs to shippers associated with quicker but more costly shipping times, changes in crash rates due to the net change in vehicle-miles traveled (VMT) as a result of the anticipated freight mode shifts and personal travel trip making reductions, changes in emissions, loss of mobility for current trip makers who could be expected to avoid trip-making due to the loss of access. There may be further disruptions or changes in the economy. These were not considered in the economic value approach, which focused only on the direct impacts.
Western DOT valued these impacts using USDOT and EPA estimates of travel time and costs, data on the economic cost of delay in freight movements from the academic literature, costs of crashes by type, and the value of GHG emissions. The net value of travel and emissions was calculated for both the “with” and “without” highway scenarios over a thirty-year forecast. The future benefits were discounted based on USDOT guidance for an appropriate discount rate and then summed for each case. The Western DOT compared the total benefits of each case to estimate a loss that occurs in the “without” highway case to determine its net present user and social value.
Results
Table 9-17 details the estimated user and social value by benefit category for both a current dollar and discounted dollar perspective. Consistent with USDOT’s 2024 guidance, the Western DOT applied a 3.1 percent discount rate, except for CO2 which was discounted at 2.0 percent (also per USDOT guidance). The discounted dollar estimate is the better economic value of the highway.
Table 9-17. Asset User and Social Value Results, in millions
| Impact Category | Over a 30-Year Project Lifecycle | |
|---|---|---|
| Constant Dollars | Discounted at 3.1% | |
| Costs of Additional Travel Time | $2,768.6 | $1,729.1 |
| Additional Vehicle Operating Costs | $23,732.7 | $14,821.7 |
| Commodity Delay Cost | -$10,370.9 | -$6,479.9 |
| Total Emission (GHG) Costs | $16,009.1 | $11,454.5 |
| Safety Costs | -$342.8 | -$214.5 |
| Total Benefits | $31,789.5 | $21,306.5 |
Lessons Learned
Lessons learned from the Western DOT’s experience in developing an economic value-based approach for highway asset valuation include:
- For freight corridors, it is essential to consider not only alternative routes, but also alternative modes of transport, assuming that shippers will find a way to move freight regardless of cost.
- For alternative freight modes, there can be a trade-off between time and cost, and both need consideration in order to accurately quantify the net value of the facility.
- Shippers’ behavior in the absence of the highway was estimated for this case study based on data from before the opening of the highway, but also from data covering a prior closure due to flooding.
- Prior event data can be useful for estimating behavior in an alternative scenario.
- Future improvements to this case study could include using a multi-modal travel demand model to estimate more precisely the rerouting travel impacts that may occur with and without the highway
- This might also include a consideration of emerging freight delivery technologies (such as drones and pilotless aircraft) and their impact on the decision making for rerouting.
- Economic valuation of assets is not widely understood but travel benefits are easily grasped by policy makers who intuitively understand the public benefits associated with their assets.
- As a result, an economic valuation is useful for justifying investments to maintain assets over a lifecycle.
- In addition, the estimated asset value reflects the operating conditions of the structure (e.g., traffic volumes and speeds experienced by users), but it does not consider asset deterioration. A variant of this approach could adjust the economic valuation using a measure of asset condition such as a pavement condition index.