Transportation project stakeholders consider return on investment
By Ken Buckeye,
MnDOT Office of Financial Management
As MnDOT continues to roll out its vision for a world-class transportation system, it is clear that calculating return on investment will be key to gaining support for both traditional and innovative funding and financing solutions. Commissioner Charlie Zelle made this clear when he recently said that proposals for new highway funding “must present a compelling vision for how dollars will be spent and what the public’s return on investment will be if they are to gain broad public and political support.”
Zelle is a member or the Project Stakeholders Group, which is overseeing this effort. The PSG is a committee of 50-plus organizations representing legislators, agency heads, cities and counties, metropolitan planning organizations, transit, business and labor, among others. It has met twice since August and was scheduled to convene its final meeting on October 31.
A major tool being used to frame the discussion is ROI methodology. The project and the draft methodology specifically focus on the long-term needs of the state highway system — from system preservation to traveler safety, interregional mobility to regional and community priorities, etc.
Efforts to capture and communicate the value of such a broad set of investments pose several challenges. Chief among these is the different scales of potential improvements. Familiar capital investments, including new roads and road-widening, readily allow for traditional transportation benefit-cost analysis (which is one way to describe ROI). System-level investments, such as pavement and bridge preservation, rely more on approaches that weigh trade-offs among different system management strategies.
The mission of the PSG is to support MnDOT as it creates investment options that enable flexible and efficient ways to maintain and enhance the highway system for people- and goods-movement and for supporting and expediting job creation and economic development. The PSG is a sounding board for MnDOT’s project team, advising them on project methodology, responding to work products and reviewing recommendations. The PSG represents their constituents and will communicate back on the progress of the work. Because the PSG is an advisory body, it will not make recommendations or approve them, but rather provide valuable advice and guidance on how to advance highway funding and financing strategies.
The work of the PSG may have important implications for how MnDOT does business in the future. Alternative Transportation Finance Director Phil Barnes said that the development of generally accepted ROI calculations for transportation projects is a step toward better understanding life-cycle costs for transportation assets, and the potential benefit levels of different project selections. As ROI becomes more understood and used, he said it might help match costs of transportation projects to the beneficiaries of the system.
“Greater understanding of current and full life-cycle cost estimates may lead to greater understanding about whether some types of public-private partnerships are a more efficient way to design, build, operate and maintain transportation infrastructure in Minnesota,” Barnes said.