Economic Impact Study of Completing the 

Appalachian Development Highway System 

 Final Report 

June, 2008

prepared for 

Appalachian Regional Commission

prepared by 

Cambridge Systematics, Inc.,

Economic Development Research Group, and 

HDR Decision Economics 

Final report 

Economic Impact Study of 

Completing the Appalachian 

Development Highway System 

You can view and download this report by visiting www.arc.gov. 

For more information about the report, please contact either Gregory Bischak of the 

Appalachian Regional Commission (202-884-7790, gbischak@arc.gov). 

The authors wish to thank the Appalachian Regional Commission for providing the funding for 

the report. 

Appalachian Regional Commission 

1666 Connecticut Avenue, NW, Suite 700 

Washington, D.C. 20009-1068 

The Appalachian Regional Commission’s mission is to be an advocate for and partner with the 

people of Appalachia to create opportunities for self-sustaining economic development and 

improved quality of life. 

Cambridge Systematics, Inc. 

100 CambridgePark Drive, Suite 400 

Cambridge, MA 02140 

www.camsys.com

Economic Development Research Group, Inc. 

2 Oliver Street, 9th Floor 

Boston, MA 02109

www.edrgroup.com

HDR Decision Economics, Inc. 

695 Atlantic Avenue 

Boston, MA 02111 

www.hdrinc.com

© 2008 by the Appalachian Regional Commission 

Reproduction of this document is permitted and encouraged, with credit given to the 

Appalachian Regional Commission. 

Economic Impact Study of Completing the Appalachian Development Highway System 

Cambridge Systematics, Inc. / Economic Development Research Group / HDR Decision Economics i 

Acknowledgments 

This report was funded and prepared for the Appalachian Regional Commission 

(ARC). It was commissioned by the ARC to study the economic impacts, benefits, and costs of completing the Appalachian Development Highway System 

(ADHS). 

The report was prepared by a team of Cambridge Systematics, Inc., Economic 

Development Research Group, and HDR Decision Economics. Daniel Hodge 

(now with HDR) was the project manager. Major sections of the report were 

written by Daniel Hodge, Daniel Beagan of Cambridge Systematics, and Tyler 

Comings and Glen Weisbrod of Economic Development Research Group. Also 

contributing to this study were Alexander Heil, Siddarth Pandit, Branner 

Stewart, and Edward Bromage of Cambridge Systematics, and Brian Baird 

Alstadt of Economic Development Research Group. 

The research, analysis, and report development were guided by Dr. Gregory 

Bischak, Senior Economist with the ARC. Ken Wester, ARC ADHS Manager, 

provided detailed cost analysis of the ADHS system and guidance in identifying 

the remaining corridors to be completed. Keith Witt, ARC GIS Advisor, provided mapping and data analysis. Jason Wang, ARC Senior Transportation 

Advisor, provided assistance in characterizing the remaining corridors to be 

completed. Sang H. Yoo, Research Associate at the Rahall Appalachian 

Transportation Institute at Marshall University, provided detailed GIS data on 

the ADHS corridors. Mark L. Burton, Director of Transportation Economics at 

the University of Tennessee at Knoxville, provided region-wide county-level 

commodity flow data derived from the first iteration of the Federal Highway 

Administration’s Freight Analysis Framework. 

The research team would also like to acknowledge and thank the many individuals and organizations in Corridors H (West Virginia), T (New York), and V 

(Mississippi) who agreed to be interviewed and provided critical input regarding 

the current and future impacts of ADHS corridor completion. 

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Table of Contents 

Executive Summary .................................................................................................. ES-1

Key Study Findings .......................................................................................... ES-3

Travel Efficiency Benefits ....................................................................... ES-3

Direct Economic Benefits ........................................................................ ES-4

Total Economic Impacts .......................................................................... ES-5

Benefit/Cost Analysis ............................................................................. ES-6

1.0 Introduction ......................................................................................................... 1-1

1.1 Background .................................................................................................. 1-1

1.2 Study Objectives and Overview of Impact Measures ........................... 1-3

2.0 Methodology – Models and Data ................................................................... 2-1

2.1 General Approach ...................................................................................... 2-1

2.2 Highway Network and Travel Demand Model ..................................... 2-6

2.2.1 Model Development ...................................................................... 2-6

2.3 Freight Flows ............................................................................................... 2-9

2.3.1 Marshall University Commodity Flow Database ...................... 2-9

2.3.2 Freight Analysis Framework 2.2 ................................................ 2-10

2.3.3 ARC Commodity Truck Database ............................................. 2-10

2.4 Economic and Demographic Forecast ................................................... 2-14

2.5 Economic Development Impacts ............................................................ 2-18

2.5.1 Travel-Cost Response Module ................................................... 2-19

2.5.2 Market Access Response Module .............................................. 2-20

2.5.3 Economic Adjustment Module ................................................... 2-21

2.6 Benefit/Cost Analysis .............................................................................. 2-22

2.6.1 General Methodology for Comparing Costs and Benefits ..... 2-22

2.6.2 Estimation of Market Access Time Lag Effects on 

Economic Growth ..................................................................................... 2-24

3.0 Detailed Corridor Analysis Summaries ......................................................... 3-1

3.1 Corridor T (New York) Analysis Summary ............................................ 3-2

3.1.1 Background ..................................................................................... 3-2

3.1.2 Current Economic Transportation Conditions ........................... 3-4

3.1.3 Economic Impact of Corridor ....................................................... 3-7

3.1.4 Other Issues and Stakeholder Comments ................................. 3-11
Table of Contents, continued 

iv Cambridge Systematics, Inc. / Economic Development Research Group / HDR Decision Economics 

3.2 Corridor V (Mississippi) Analysis Summary ....................................... 3-11

3.2.1 Background ................................................................................... 3-11

3.2.2 Current Economic and Transportation Conditions ................. 3-13

3.2.3 Economic Impact of Corridor ..................................................... 3-16

3.2.4 Other Issues and Stakeholder Comments ................................. 3-19

3.3 Corridor H (West Virginia) Analysis Summary ................................... 3-19

3.3.1 Background ................................................................................... 3-19

3.3.2 Current Economic and Transportation Conditions ................. 3-21

3.3.3 Economic Impact of Corridor ..................................................... 3-25

3.3.4 Other Issues and Stakeholder Comments ................................. 3-28

4.0 Travel Impacts, User Benefits, and Accessibility ......................................... 4-1

4.1 Travel Impacts ............................................................................................. 4-1

4.2 User Benefits ................................................................................................ 4-3

4.3 Accessibility ................................................................................................. 4-6

5.0 Economic Impacts ............................................................................................... 5-1

5.1 Direct Time and Cost Travel Impacts ...................................................... 5-1

5.2 Market Access Impacts .............................................................................. 5-4

5.3 Total Economic Impacts ........................................................................... 5-10

6.0 Benefit/Cost Analysis ......................................................................................... 6-1

6.1 Cost to Complete Summary ...................................................................... 6-1

6.2 Benefit/Cost Analysis Results .................................................................. 6-3

6.2.1 Costs ................................................................................................. 6-3

6.2.2 Impacts and Benefits ...................................................................... 6-5

6.2.3 Benefit/Cost Ratios ...................................................................... 6-11

6.2.4 Conclusions ................................................................................... 6-13

A. Travel Demand Model ...................................................................................... A-1

A.1 Background ................................................................................................. A-2

A.2 Model Development .................................................................................. A-2

A.2.1 Highway Network ....................................................................... A-2

A.2.2 Trip Tables ..................................................................................... A-3

A.2.3 Assignment ................................................................................... A-3

A.2.4 Forecast Trip Tables ..................................................................... A-4

A.2.5 Future Assignments ..................................................................... A-4
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B. Market Access and Economic Development Impacts Modeling .............. B-5

B.1 Market Access Impact Methodology ...................................................... B-5

B.1.1 Process for Estimating Market Access Benefit .......................... B-5

B.1.2 Multiregion Applications: Net and Gross Impacts ................. B-6

B.1.3 Sources of Growth ........................................................................ B-7

B.1.4 Adjusting for Spatial Relocation ................................................. B-8

B.2 Market Access Inputs .............................................................................. B-10

B.3 Estimating the Timing and Magnitude of ADHS Project Impacts ... B-17

Economic Impact Study of Completing the Appalachian Development Highway System 

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List of Tables 

Table ES.1 Summary of User Benefits Due to ADHS Completion ..................... ES-4

Table ES.2 Total Economic Impacts of ADHS Completion in 2020 and 2035 ... ES-5

Table ES.3 Total Present Value of ADHS Completion Impacts .......................... ES-6

Table ES.4 Benefit/Cost Analysis of ADHS Completion ..................................... ES-8

Table 2.1 Commodity Code Equivalencies ........................................................... 2-11

Table 2.2 Truck Payload Factors Tons per Truck ................................................... 2-13

Table 2.3 Alternative Demographic and Economic Forecasts ........................... 2-16

Table 3.1 Major Employers in the Southern Tier ................................................... 3-5

Table 3.2 Major Employers in Lee County ........................................................... 3-14

Table 3.3 Major Private Sector Employers in Corridor H ................................... 3-22

Table 4.1 Daily VHT Based on Global Insight Forecast ........................................ 4-2

Table 4.2 Daily VHT Based on Woods & Poole Forecast ...................................... 4-3

Table 4.3 Summary of User Benefits in 2020 .......................................................... 4-4

Table 4.4 Summary of User Benefits in 2035 .......................................................... 4-5

Table 4.5 Summary of Reliability Benefits in 2020 ................................................ 4-5

Table 4.6 Summary of Reliability Benefits in 2035 ................................................ 4-6

Table 4.7 Increased Accessibility 2035 ..................................................................... 4-7

Table 5.1 ARC Traveler Cost Impacts in 2035 ........................................................ 5-2

Table 5.2 Projected Market Access Growth in Appalachia for Medium 

and High Scenarios in 2035 ...................................................................... 5-7

Table 5.3 Total Economic Impacts for Medium and High Scenarios in 

2035 ............................................................................................................ 5-11

Table 6.1 Miles to Complete by State ...................................................................... 6-1

Table 6.2 Total Cost to Complete ADHS ................................................................ 6-2

Table 6.3 Summary of Cost Schedule ...................................................................... 6-3

Table 6.4 Total Spending on Proposed Improvements to ADHS System in 

ARC Region under Two Inflation Scenarios ......................................... 6-4

Table 6.5 Medium-Growth Scenario Benefits to ARC Region from ADHS 

by Year ........................................................................................................ 6-6
List of Tables, continued 

viii Cambridge Systematics, Inc. / Economic Development Research Group / HDR Decision Economics 

Table 6.6 Medium-Growth Scenario Benefits to ARC Region from ADHS 

by Year ........................................................................................................ 6-7

Table 6.7 High-Growth Scenario Benefits to ARC Region from ADHS by 

Year .............................................................................................................. 6-8

Table 6.8 High-Growth Scenario Benefits to ARC Region from ADHS by 

Year .............................................................................................................. 6-9

Table 6.9 Present Value of Impact Streams from ARC Highway 

Investments, Discounted at Seven Percent per Year .......................... 6-10

Table 6.10 Present Value of Impact Streams from ARC Highway 

Investments, Discounted at Five Percent per Year ............................. 6-10

Table 6.11 Net Present Value and Benefit/Cost Ratio Ranges for ARC 

Highway Investments ............................................................................. 6-12
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List of Figures 

Figure ES.1 ADHS Completed and Uncompleted Corridors ........................... ES-1

Figure 1.1 ADHS Corridors ........................................................................................ 1-2

Figure 2.1 ARC Travel Demand Model Highway Network and TAZs ............... 2-7

Figure 2.2 FAF2 Zones and ARC Region ................................................................ 2-12

Figure 2.3 Components of Economic Impact ......................................................... 2-18

Figure 2.4 Economic Development Impact Modeling Approach ....................... 2-19

Figure 2.5 Years of Significant Impact Along with Fringe Years ........................ 2-24

Figure 3.1 Corridor T in New York and Pennsylvania ........................................... 3-3

Figure 3.2 Corridor V in Mississippi, Alabama, and Tennessee ......................... 3-12

Figure 3.3 Corridor H in West Virginia and Virginia ........................................... 3-20

Figure 5.1 Distribution of Direct Business Cost Savings by Industries ................ 5-4

Figure 5.2 Percentage Change in Population Accessible within a 60-Minute 

Drive ............................................................................................................ 5-5

Figure 5.3 Percentage Reduction in Travel Time to Nearest Airport ................... 5-6

Figure 5.4 Distribution of Market Access Benefits by Industries for 

“Probable” Scenario ................................................................................... 5-9

Figure 5.5 Components of Market Access Impact ................................................... 5-9

Figure 5.6 Estimated Phase-In of the Economic Impact Jobs ................................ 5-12

Figure 5.7 Distribution of Employment Impacts on the Region for Medium 

and High Scenarios ................................................................................. 5-12

Figure B.1 Percentage Reduction in Travel Time to Nearest Intermodal Rail 

Terminal ....................................................................................................... 13

Figure B.2 Percentage Reduction in Travel Time to Nearest International 

Gateway ....................................................................................................... 14

Figure B.3 Percentage Reduction in Travel Time to Nearest Marine Port ............ 15

Figure B.4 Percentage Change in Employment Accessible within a ThreeHour Drive Time (Buyer and Supplier Markets) ................................... 16

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Executive Summary 

The Appalachian Regional Commission (ARC) has commissioned this economic 

impact study to estimate the economic impacts, benefits, and costs of completing 

the Appalachian Development Highway System (ADHS). The ADHS is the first 

highway system authorized by Congress for the purpose of stimulating economic 

development. The ADHS is a 3,571-mile near-interstate grade highway system 

composed of 31 corridors located in 13 Appalachian states with 3,090 eligible for 

improvement (see Figure ES.1). The system is approximately 85 percent finished 

and the completion will link the whole system into an integrated network 

connecting to national markets and trade flows. 

Figure ES.1 ADHS Completed and Uncompleted Corridors 

Source: Appalachian Regional Commission 
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The purpose of this study is to assess the travel performance, trade, and economic 

development impacts directly related to completing the ADHS. In addition, the 

study assesses connectivity, accessibility, and network effects – in other words, 

how do the corridor improvements connect Appalachian people and businesses 

to other highway facilities, multimodal transportation, and economic markets 

(labor force, buyers/suppliers, tourists). The study has produced estimates of 

near- and long-term travel and economic benefits, including benefit/cost analysis to evaluate the expected economic return on investment of completing the 

ADHS to both the ARC region and the U.S. Furthermore, three regional case 

studies have been completed in the north, central and south sections of the ARC 

Region to provide detailed information for calibrating the modeling assumptions 

based on structured interviews with key transportation users and economic 

development experts. 

Prior to this current study, the most recent extensive economic impact analysis of 

the ADHS was a July 1998 report that found positive economic and travel efficiency returns to ADHS investments.1 There are a number of key differences 

between that study and this new effort such that it is difficult to compare 

findings. Those differences include: 1) the 1998 study examined benefits from 12 

already completed highway segments rather than estimating benefits of the 

future completion of the ADHS; 2) that study was based on an analysis of individual highway segments, while this study emphasizes network benefits of a 

complete highway system; 3) this study makes use of national freight flow data 

not previously available, which allows for a more complete analysis of national 

freight system benefits; and 4) this new study estimates an additional benefit not 

examined in the earlier study, which is the potential for economic development 

benefits due to improved market access to labor force, buyers, suppliers and 

multimodal facilities. 

Results of this study include a full range of transportation performance and economic development indicators organized by: 

Travel Efficiency Benefits – Travel-time savings, route diversion, and transport cost savings; 

Direct Economic Impacts – Reduced industry costs as well as economic development and tourism effects stemming from increased market accessibility; 

 

1 Wilbur Smith Associates, Appalachian Development Highways Economic Impact Study, 

Appalachian Regional Commission, July 1998. 
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Total Economic Impacts – Full economic development impacts on the economy of the ARC region in terms of employment by industry, gross regional 

product, and personal income;2 and 

Benefit/Cost Analysis – Benefit/cost ratios and net present value (NPV) to 

measure expected return on investment. 

As described in the full report, significant care was taken to avoid the doublecounting of benefits. Study results are generally presented for two perspectives – 

the ARC region (410 counties in 13 states) and the entire United States. Since the 

ADHS has specific objectives in terms of increasing economic development 

opportunities for the Appalachian Region, the regional perspective on benefits of 

completing the ADHS is essential and emphasizes regional economic impacts. In 

addition, U.S.-level economic efficiency benefits of completing the ADHS are 

provided to demonstrate the national benefits of ADHS investment, and thus the 

national-level results are focused on transportation efficiency and productivity 

gains. 

KEY STUDY FINDINGS

The remainder of this executive summary presents key study findings and 

results organized by the four benefit and impact categories mentioned above. 

Travel Efficiency Benefits 

ADHS corridor improvements will produce significant dollar values of travel 

benefits to individuals and businesses both within and outside the ARC region. 

Total user benefits (travel time, fuel and nonfuel operating costs, and safety) are 

estimated to be valued at $1.6 billion annually by the year 2020, the hypothesized 

year of system completion, and grow to $5.1 billion annually by 2035 under a 

medium-growth scenario (see Table ES.1).3 These are national-level benefits 

reflecting travel efficiency gains for all trips affected by ADHS completion. 

Completion of the ADHS will result in a significant reduction in travel time for 

personal, business, and long-distance freight trips. By 2020, the aggregate savings in travel time is estimated to be over 84 million hours annually (equivalent 

to 303,000 hours daily of travel time saved), which will grow to almost 212 million hours of reduced travel time by 2035. 

 

2 Personal (nonbusiness) travel efficiency benefits are not included in total economic 

impacts. 

3 It is worth noting that relatively conservative assumptions were used regarding value of 

time and the potential for additional reliability and logistics benefits. In addition, this 

study used an innovative travel modeling approach that incorporated terrain factors to 

capture the impacts of mountainous, and often steep, Appalachian corridors. 
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Table ES.1 Summary of User Benefits Due to ADHS Completion 

Medium-Growth Scenario 

Million of 2007 Dollars 2020 2035 

Freight $444.0 $2,993.9 

Non-freight $604.0 $1,140.9 

Business Automobile $92.9 $153.2 

Non-business Automobile $463.3 $764.1 

Total $1,604.2 $5,052.0 

The improvements on the to-be-completed ADHS segments will result in a 

significant increase in traffic using largely rural interstates and expressways. 

Average daily traffic volumes are expected to increase by approximately 

130 percent compared to what would occur if the remaining corridor segments 

are not completed. Despite the increase in traffic volumes, adding new capacity 

will result in lower total travel times with average speeds roughly doubling. 

This is especially true for freight truck trips which are projected to experience a 

400 percent growth in miles traveled on ADHS corridors by 2035, doing so to 

gain shorter travel times and greater efficiency benefit. 

Over 90 percent of automobile and non-freight truck benefits are estimated to 

accrue to the ARC region based on the origin-destination pattern of trips. Nonbusiness auto user benefits include travel savings for reduced commute times 

(primarily within the ARC region). Meanwhile, over 65 percent of benefits to 

freight flows are external to the ARC region, reflecting the long-distance nature of 

the shipments affected and the national importance of completing the ADHS to 

facilitate goods movement into, out of, and through the ARC region. 

Direct Economic Benefits 

Improvements in market accessibility for the ARC region will directly lead to 

increased economic development opportunities for the region. Accessibility 

gains were measured at the county level for labor, customer, tourist, buyer, and 

supplier markets, as well as reduced travel times to seaports, border crossings, 

airports, and intermodal rail facilities. The ARC region is estimated to gain $2.1 

billion annually by 2035 in economic activity (as measured by value added) due 

to market accessibility gains by 2035. These accessibility benefits are estimated to 

gradually phase-in over time based on historic time-series analysis of economic 

gains from completed ADHS segments. 

Over half of the travel efficiency benefits are expected to accrue to businessrelated travel – commodity-based freight truck trips, local nonfreight truck trips, 

and business (on-the-clock) automobile trips as shown in Table ES.1. This is 

partly due to relatively higher values of time for business travel and partly due 

to fast-growing projections of long-distance freight truck travel. Reduced travel 
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time and distance for business-related trips directly impact the costs of doing 

business and the economic competitiveness of firms in the ARC region and 

nationwide. 

Completion of the ADHS also will result in market accessibility improvements 

for large segments of the ARC region. Two hundred thirty-five out of 410 ARC 

counties are expected to see reductions in travel time to the nearest commercial 

airport, with 26 counties experiencing an 8 percent or greater reduction in travel 

time. Three hundred twenty-five out of 410 counties are estimated to increase 

their accessibility to buyer and supplier markets within a three-hour drive, with 

59 counties experiencing an improvement greater than 10 percent. 

Total Economic Impacts 

Total impacts on the economy of the ARC region result from the direct effects of 

reduced business-related travel time and costs, along with increased regional 

growth made possible by market accessibility gains and associated multiplier 

effects. These impacts gradually increase over time and by 2035 are estimated to 

generate approximately 80,500 jobs, $5.0 billion in increased value added per 

year, including $3.2 billion in increased wages per year for ARC region workers 

as shown in Table ES.2. To avoid potential double-counting these results: a) are 

only reported for the ARC region, leaving the analysis of U.S.-level benefits 

focused on travel efficiency and productivity effects; and b) represent net economic gains for the region, subtracting inter-regional relocation of economic 

activity from other parts of the region. 

Table ES.2 Total Economic Impacts of ADHS Completion in 2020 and 2035 

Impacts 2020 2035 

Business Salesa 4,245 10,102 

Value-Addeda 2,099 4,995 

Jobs 33,823 80,491 

Wagesa 1,343 3,197 

a Annual impacts in millions of 2007 dollars. 

The industries in the ARC region projected to benefit most directly from ADHS 

completion in terms of business retention, expansion, and relocation include: 

warehousing and distribution, manufacturing, mining and utilities, professional 

services, and other business services. 

As demonstrated by the three detailed corridor analyses completed for this 

study, there are numerous real world examples of businesses that will directly 

benefit from the completion of highway corridors. For example, there is a strong 

wood products industry in West Virginia along Corridor H that exports many of 

their goods to overseas markets in Europe and Asia. When that corridor is 
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completed (significant sections remain in both West Virginia and Virginia), 

companies will be able to directly ship products to key port destinations such as 

Norfolk, Baltimore and the inland port in Virginia and thus significantly cut 

shipping costs and travel time, increase reliability, and improve safety. 

Benefit/Cost Analysis 

Total undiscounted capital costs to complete the remaining segments of the 

ADHS are estimated to be $11.2 billion (in 2007 dollars).4 However, construction 

costs have been rising faster than the overall rate of inflation, so additional cost 

adjustments were added to the future time series of construction costs, raising 

the total undiscounted capital cost is $16.6 billion. In present value terms, 

applying a 5 percent real discount rate and incorporating future operations and 

maintenance costs, total cost is estimated to be $12.2 billion (in the high-cost 

scenario). 

Table ES.3 presents cumulative impacts by category for the ARC region and the 

United States under a medium-growth scenario. These numbers represent the 

“present value” of a stream of annual travel efficiency or economic growth impacts 

over 30 years, using a 5 percent real discount rate. 

Table ES.3 Total Present Value of ADHS Completion Impacts 

30-Year Analysis 

Millions of 2007 Dollars Medium Growth 

Benefit Description ARC United States 

A Industry Cost Savings 17,310 29,114 

B HH Out-of-Pocket Savings 165 173 

C HH Value of Time Savings 5,482 5,718 

D Market Access Growtha 10,684 2,069 

E Indirect and Induced Growtha 9,551 N/A 

Total Impacts 43,192 37,074 

a Value Added. 

 

4 This cost estimate is slightly lower than the total presented in the ARC 2007 Cost-toComplete Report which included 129 ADHS miles that were under construction. For the 

purpose of this study these miles were treated as completed and not included. 
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Impact categories include: 

A – Industry Cost Savings (travel benefits to business); 

B – Household (HH) Out-of-Pocket Savings (reductions in fuel and nonfuel 

automobile-related costs for passenger travel); 

C – HH Value of Time Savings (travel-time savings for passenger travel); 

D – Market Access Growth (economic development); and 

E – Indirect and Induced Growth (multiplier effects specific to the ARC region). 

Traditionally, Categories A-C are considered to be measures of travel efficiency 

and Categories D-E are considered to be measures of regional economic impact. 

Since a key objective of the ADHS is to improve economic development in the 

ARC region, it is appropriate to compare total regional economic gains to cost to 

determine the likely economic return on investment. 

Two types of benefit/cost (B/C) analysis are examined in this study to determine 

the economic return on investment for the ARC region and the entire United 

States – travel efficiency and total economic benefits (including economic impact 

categories D and E from above). While costs are the same from either perspective, benefits vary in two important ways. Travel efficiency benefits are significant 

for the ARC region but even higher from the U.S. perspective. National efficiency benefits are higher because a significant share of the affected trips are 

long-distance, high-value freight shipments with origins and destinations outside the ARC region. Total economic benefits, on the other hand, include benefits 

from increased market access and induced economic development, which accrue 

primarily to the ARC region,5 in addition to all travel efficiency benefits 

(including personal, non-business travel benefits). 

Table ES.4 (below) presents net present value and B/C ratio results for the ARC 

region and U.S. using a medium-growth forecast, conservative high-cost 

assumptions, and a 5 percent discount rate. For the travel efficiency benefits, the 

present value of benefits is estimated to be 2.9 times the cost at the U.S. level, 

with a B/C ratio of 1.9 for the ARC region. For the total economic benefits 

analysis, the present value of benefits for the ARC region is projected to be 3.6 

times the estimated cost (with a range of 2.5 to 6.3 based on varying discount 

 

5 For purposes of benefit/cost analysis, total economic benefits for the ARC region 

include the value-added created via greater economic development opportunities in the 

region. To account for potential shifts in the location of future economic growth, at the 

national level, this measure only includes net productivity and export gains associated 

with regional economic development. 
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rate, cost and forecast assumptions).6 At the U.S. level, using a medium-growth 

forecast, conservative high-cost assumptions, and a 5 percent discount rate, the 

estimated total economic benefit is 3.1 times the estimated cost (with a range of 

2.2 to 5.4 based on varying discount rate, cost and forecast assumptions). Under 

all scenarios, including conservative cost and discounting assumptions, 

completion of the ADHS is expected to result in significant benefits in excess of 

cost from both the national and ARC regional perspective. 

Table ES.4 Benefit/Cost Analysis of ADHS Completion 

Five Percent Discount Rate, Millions of 2007 Dollars 

 Net Present Value Benefit/Cost Ratio 

Travel Efficiencies ARC Region $10,800 1.9 

United States $22,850 2.9 

Total Economic Benefits ARC Region $31,030 3.6 

United States $24,910 3.1 

These benefit/cost ratios are within the range usually found for individual 

highway projects. They appear stronger than those found for many rural corridors, primarily because: 1) the remaining ADHS segments complete important 

linkages in a long-distance network that serves a growing domestic and global 

trade environment, rather than just serving connections between individual rural 

communities; and 2) these highway segments provide necessary access and connections to/from isolated, mountainous Appalachian communities thus providing 

significant new economic opportunities as detailed in the three corridor analyses. 

It also makes ADHS completion particularly important for supporting the future 

economic competitiveness of the national and ARC regional economies. 

 

6 This range reflects various uncertainties inherent in any forecast such as discount rate, 

future cost escalation, the success of economic development initiatives, and baseline 

economic and demographic forecasts. 
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1.0 Introduction 

1.1 BACKGROUND

The Appalachian Development Highway System was originally designated and 

funded to help generate economic development in the economically distressed 

Appalachian region by enhancing access in isolated areas and better connecting 

Appalachia to the interstate system. Significant transportation, trade and economic analysis of the Appalachian Development Highway System (ADHS) has 

been completed over the past 15 years, demonstrating the positive economic 

growth effects of the ADHS and the importance of trade route connections to 

domestic and international markets outside of the Appalachian Region. With 

15 percent of the ADHS yet to be completed, this new study uniquely captures 

not only the economic benefits (and costs) of completing the remaining segments 

of the ADHS, but also the network benefits of a fully connected and linked 

ADHS, including national freight flows benefiting from this major highway system. See Figure 1.1 for a map of the ADHS corridors complete and yet to be constructed and thus open to traffic. 

Prior to this current study, the most recent extensive economic impact analysis of 

the ADHS was a report from July 1998 that found positive economic and travel 

efficiency returns to ADHS investments.7 It differs significantly from this current 

effort in several key ways that are worth noting so as to avoid unproductive 

comparison: 

First, the 1998 study focused exclusively on the 12 completed ADHS corridors and corridor segments rather than completion of the entire system. The 

earlier study modeled segment-level traffic conditions rather than a fully 

networked system depicted by a travel demand model. 

Second, freight flow data has improved significantly since the 1998 report, 

thus allowing for a more thorough and detailed estimation of local, regional, 

and national freight flows. The current study uses the most current Federal 

Highway Administration (FHWA) Freight Analysis Framework (FAF) historical (2002) and projected freight flow data (2020 and 2035) building on a 

county-level freight flow database developed for ARC by Marshall 

University and Wilbur Smith Associates. 

Third, while the 1998 study does estimate economic development effects 

based on travel efficiency gains, it does not include additional regional economic development gains due to improvements in market accessibility and 

 

7 Wilbur Smith Associates, Appalachian Development Highways Economic Impact Study, 

Appalachian Regional Commission, July 1998. 
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network connectivity. Further, this new study incorporates findings from 

recent statistical research on how ADHS economic development benefits vary 

in timing and magnitude depending on the type of county (rural, distressed, 

adjacent to metropolitan areas, etc.). 

Fourth, this study includes three detailed case studies of ADHS corridors that 

provide real world context for the economic and trade benefits accruing to 

and expected from corridor completion. These detailed analyses, with input 

from local businesses, economic development officials and freight shippers 

and receivers was used to validate and calibrated the economic development 

benefits estimated in the quantitative modeling approach. 

Figure 1.1 ADHS Corridors 

Source: Appalachian Regional Commission 
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Outputs from this study include a full range of transportation performance and 

economic development indicators, including: 

Travel-time savings, route diversion, and market accessibility; 

Direct user benefits, and additional economic development and tourism effects; 

Total economic impacts (e.g., employment by industry, gross regional product, personal income); and 

Benefit/cost ratios and net present value. 

Results are presented for two perspectives – the ARC region (410 counties in 13 

states) and the entire United States. Since the ADHS has specific objectives in 

terms of increasing economic development opportunities for the Appalachian 

Region, the regional perspective on benefits of completing the ADHS is essential 

and informative. In addition, U.S.-level economic efficiency benefits of completing the ADHS are provided to demonstrate the national benefits of ADHS 

investment. Reflecting the unavoidable uncertainty inherent in any forecast, 

estimates of future benefits are provided in terms of a range of likely effects. 

The remainder of Section 1.0 provides an overview of the study approach, while 

the report is organized into the following sections and appendices: 

Section 2.0 Methodology – Models and Data; 

Section 3.0 Detailed Corridor Analysis Summaries; 

Section 4.0 Travel Impacts, User Benefits and Accessibility; 

Section 5.0 Economic Impacts; 

Section 6.0 Benefit/Cost Analysis; and 

Technical Appendices – (A) Travel Demand Model, and (B) Market Access 

and Economic Development Impacts. 

1.2 STUDY OBJECTIVES AND OVERVIEW OF

IMPACT MEASURES

The primary objective of this study is to estimate the economic impacts of a completed ADHS network, focused on the benefits of completing the final corridor 

segments. To do so requires the development of two travel and economic forecasts: 1) a “build” scenario with all remaining ADHS corridors fully completed; 

and 2) a “no-build” scenario that includes ADHS corridors already built or under 

construction, but does not include the remaining 15 percent of the system. Differences between these two future scenarios are estimated in terms of numerous 

factors: 
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Travel Performance Impacts – Comparisons of travel performance between 

the “build” and “no-build” scenarios within the networked travel demand 

model (which includes a thorough highway network of interstate, state, and 

local highways in and surrounding the ARC region) produces raw travel efficiency metrics such as vehicle hours of travel (VHT), vehicle miles of travel 

(VMT), and average speed for all trips (freight, nonfreight truck trips, and 

automobile). 

User Benefits – Applying values of time and vehicle operating cost parameters to the travel performance impacts produces monetary benefits to the 

users of the ADHS corridors (and other regional highways experiencing 

changing traffic volumes). User benefits are measured in terms of travel-time 

savings, vehicle operating costs (fuel and nonfuel) and safety, varying by trip 

purpose (business, personal, commute) and vehicle type.8

National, Regional, and Local Freight Flows – As briefly mentioned above, 

this study incorporates comprehensive freight flow data based on FHWA’s 

FAF historical and projected trade data, as well as detailed county-level origin-destination trade flows to allow the estimation of benefits to short- and 

long-haul goods movement. For example, over 65 percent of freight benefits 

are external to the ARC region, reflecting the long-distance nature of the 

shipments impacted and the national importance of completing the ADHS to 

facilitate goods movement throughout the ARC region. 

Improvements in Market Access – In addition to more traditional travel efficiency user benefits, this study also estimated improvements in market accessibility due to increased travel speeds in parts of the ARC region. Measuring 

accessibility is especially important in more remote areas that typically do not 

have high-traffic volumes or congestion, but where improvements in accessibility to other transportation facilities or destinations can create a more competitive business environment. Market accessibility was measured in terms of: 

– Increase in labor force accessible within a typical commute time (e.g., 

60 minutes); 

– Increase in buyers/suppliers within a three-hour one-way drive; and 

– Reductions in travel time to nearest transportation facilities (e.g., airport, 

marine port, intermodal rail yard, international gateway). 

Economic Development and Tourism Effects – Improvements in market 

access for ARC counties and communities increases regional competitiveness 

and thus can lead to expanded economic growth opportunities. These effects 

are estimated using the Local Economic Assessment Package (LEAP), a 

framework originally developed for ARC together with statistical analysis 

 

8 Reliability benefits were also estimated as part of this study but are not included in the 

results within this report based on what were deemed unrealistically large effects. 
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findings on the timing and size of ADHS economic benefits. These estimates 

also take into account regional and national offsets (i.e., the extent to which 

expanded growth in one part of the region could mean lower growth in other 

parts of the region). 

Total Economic Impacts – Expansion of economic activity, driven by the 

direct effects on business cost savings, market access growth, intermodal 

connectivity improvements and associated economic multiplier effects. The 

Transportation Economic Development Impact System (TREDIS) was used to 

estimate both the direct effects on costs, market access, and connectivity, and 

the total effects on expansion of industry in the region. Economic growth 

was measured in terms of jobs, business sales, gross regional product (valueadded), and wages. 

Benefit/Cost Analysis – To gauge the economic return on investment and 

place these benefits in appropriate context, benefit/cost ratios and estimates 

of net present value are estimated from both the regional and national perspectives. The ARC regional perspective includes economic competitiveness 

gains not reflected in the national economy, while the national perspective 

includes all travel-related economic efficiency benefits (including ARC region 

through-trips). Future predictions of cost-to-complete the ADHS incorporate 

accelerated construction inflation assumptions consistent with recent historical data on cost escalation. 

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2.0 Methodology – 

Models and Data 

This section describes the overall analysis approach used in the study, and 

describes how a set of state-of-the-art transportation and economic analysis 

models were applied to calculate impacts and benefits of completing the ADHS. 

2.1 GENERAL APPROACH

The general approach for analysis in this study involves two steps: 

1. Classification of the different ways in which completion of the ADHS can 

lead to transportation and economic impacts; and 

2. Application of appropriate tools to estimate the travel efficiency and regional 

economic impacts of completing the ADHS. 

In general, ADHS completion leads to a sequence of changes affecting travelers, 

households, and businesses that are either located in Appalachia or otherwise 

using Appalachian Development Highways. The resulting changes in transportation efficiencies, accessibility enhancement, and business productivity lead to 

broader impacts on the economy of the entire Appalachian region, as well as outside areas.9 The classes of impacts and the analytical processes applied to estimate them are described below. 

A – Traveler Impacts. All of the travel impacts are estimated by using a highway 

network and travel demand forecasting model to represent the changes in traffic volumes, distances, speeds, VMT, VHT and safety. This is more fully explained in 

Section 2.2. The model is applied to represent future conditions for both the 

existing highway network and an improved network in which all elements of the 

ADHS have been completed. To accomplish this, traffic growth also is forecast 

on the basis of population and employment growth projections, which are more 

fully explained in Section 2.4. This process captures the following effects. 

Travel Distances – Completion of ADHS routes will reduce highway travel 

distances between some origins and destinations, which can save time and 

vehicle operating expense for all vehicles using these routes. The distance 

reduction effect can occur in three ways: 1) through development of new 

highway routes that are more direct; 2) through upgraded alignments on 

 

9 It is worth noting that the study has made explicit attempts to measure net economic 

changes by accounting for potential spatial reallocation of economic activity within and 

outside of the ARC region. This is described more fully in Section 2.5. 
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existing routes that reduce curves in the road; and 3) through development of 

safer and more reliable highways that divert traffic from alternative routes 

that are longer in length but previously used because of their safety and reliability. In addition, it is possible that some trips will be diverted to faster, but 

longer ADHS corridors rather than local highways. All of these impacts on 

travel distances are captured through use of a highway network and travel 

demand model that forecasts changes in traffic volumes, travel distances, and 

route selection – yielding systemwide measure of the change in vehicle miles of 

travel (VMT). 

Travel Speeds – Completion of the ADHS routes will reduce average travel 

times on many routes. The time savings effect can occur in three ways: 1) by 

raising highway capacity through additional travel lanes, which reduces 

congestion slowdowns and thus raises normal speeds; 2) by enhancing the 

capability to pass slow-moving vehicles through broader shoulders and special passing lanes, which also raises daily average speeds by reducing periodic slowdowns; and 3) by reducing highway travel distances and travel 

times. In addition, speed calculations explicitly account for terrain (flat, 

rolling, mountainous) which is especially relevant for the many steep ADHS 

corridors. All three impacts on travel times are captured through the use of 

that same highway network and travel demand model, as it accounts for 

changes in driving conditions affecting travel speeds, distances and volumes – yielding a systemwide measure of the change in total daily vehicle 

hours of travel (VHT). 

Traffic Safety – Completion of the ADHS routes will enhance safety by 

improving roadway design geometrics (i.e., curves, embankments and 

shoulders), as well as roadway capacity (through additional passing and 

travel lanes). Altogether, these factors act to reduce traffic accidents, 

including vehicle damage, human injuries, and deaths. Accidents are estimated by first using the highway network and travel demand model to: 

1) represent how ADHS completion changes roadway classification in terms 

of lane width, curves, and inclines; and 2) estimate the traffic volumes (and 

volume/capacity ratios) along those various roadway classes. Then, average 

accident rates for the various types of roads are applied. The effective safety 

impact is expressed in terms of forecast changes in average collision, injury, and 

death rates (per thousand vehicle miles of travel).10

B – User Benefits. The value of travel benefits depends on the volume and mix 

of users of the highway system. In the case of passenger travel, users are drivers 

and passengers of cars, and the passengers of buses. In the case of freight 

 

10 It is worth noting that by using average accident rates by functional class, it is likely 

that safety benefits are understated in this study (which did not have the resources to 

do a segment-level safety analysis) since it is known that there are segments of the tobe-completed ADHS that have relatively high crash rates. 
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movement, the users are the shippers and receivers. In both cases, the user benefits are based on the dollar valuation of travel-time (VHT) savings, travel distance (VMT) savings, and safety improvement. However, characteristics of the 

traffic movement on Appalachian highways also affects user benefits in three 

ways: 1) the mix of trip purposes (personal or business travel) affects the valuation of time savings; 2) the car/truck vehicle mix affects vehicle operating cost 

and accident cost savings; and 3) the mix of commodities carried by trucks affects 

the value of time and reliability savings for shippers. These mix characteristics 

are tracked by the highway network and travel demand model, and generally 

accepted unit valuation factors are applied to calculate the total user benefits. In 

addition, a distinction is made between benefits that directly affect the flow of 

dollars in the economy (such as gasoline and business worker time savings) and 

societal benefits that have value but do not directly affect the flow of dollars 

(such as personal time savings). The traffic mix is discussed at the end of 

Section 2.2, freight flow mix is discussed in Section 2.3, and the benefit valuation 

factors are discussed in Section 3.0. This framework explains the different types 

of travel savings from which user benefits are computed: 

Business Worker and Vehicle Cost Savings – Completion of the ADHS routes 

will save business costs for their “on-the-clock” worker travel, due to faster 

speeds and more direct routes. The benefits include reduced driver and/or 

worker labor time costs incurred while traveling for business, as well as 

measurement of changes to vehicle operating costs (e.g., less fuel costs from 

less VMT) and safety (e.g., fewer accidents and thus lower insurance costs). 

This is expressed in terms of reduced business operating costs. 

Business Freight Processing Cost Savings – Completion of the ADHS routes 

also will save businesses travel-related costs for their freight shipments. This 

can be expressed as labor cost savings from reduced driver time or in terms of 

greater labor productivity (as more deliveries can be made per vehicle and 

driver in a given day). It also comes in the form of reduced logistics-related 

costs – which may be expressed as savings in idle loading dock worker time 

(while waiting for late pickups and deliveries) or in terms of savings in 

scheduling costs (as there is less padding of schedules to allow for freight 

delivery time uncertainty). There also may be vehicle operating cost and insurance savings for corporate truck fleets. 

Household Cost Savings – Completion of the ADHS routes will save households vehicle fuel and maintenance expenses insofar as vehicle mileage is 

reduced, and they also may save on medical or insurance costs insofar as 

accident rates are reduced through safer roadways. This can be expressed as 

an increase in disposable income, or as a decrease in the cost of living. 

Personal Time Savings – Completion of the ADHS routes, with shorter 

travel distances and faster travel speeds, also provides a time savings benefit 

for personal travel (that is not business-related). This is a societal benefit, as 

the value of personal time savings does not directly affect disposable income. 
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C – Access Impacts. Beyond saving time and money for travelers based on 

existing population and business forecasts, the ARC region will benefit from 

expanded transportation access and connectivity. These benefits are distinct 

from travel efficiency impacts in that they do not stem from changes in the 

routing or speed of trips that already are occurring (or forecast to occur in the 

future). Rather, they reflect a more dynamic and competitive economic environment in the ARC region, where businesses and consumers are better able to 

meet their needs. More specifically, ADHS will reduce isolation by enhancing 

access – including population access to jobs, medical care, shopping, and services, 

as well as business access to customer delivery markets and intermodal facilities. 

It also will improve transportation system connectivity to highway, intermodal rail 

facilities, airports, marine ports and international border and gateway facilities. 

In fact, the effects on access and connectivity were core elements of the justification 

for initial funding of the ADHS. For this study, the access impacts are measured 

in terms of expanded labor market size and delivery market size for each county 

population center. The connectivity impacts are measured in terms of travel time 

reductions to those intermodal connectors and facilities from each county population centers. All of these impacts are calculated using the highway network and 

travel demand model discussed in Section 2.2. This process captures the following 

effects. 

Job Market Access – Completion of ADHS routes will provide the residents 

of Appalachian communities with greater job opportunities. This same effect 

can be seen as providing business locations within Appalachia with greater 

workforce access, thus making locations within the region more attractive for 

business investment. This effect is measured by the highway network model 

in terms of increased population markets within a 60-minute travel time of each 

county’s population center. This same effect also can be viewed as an increase 

in availability of shopping and services to residents. 

Business Delivery Customer Market Access – Completion of ADHS routes 

also will provide businesses in some locations with broader truck delivery 

markets to buyers and suppliers. This effect is measured at the county-level by 

the highway network model in terms of increased business activity (measured 

by employment) within a three-hour delivery time, which represents a maximum for same-day truck runs. 

Connectivity to Intermodal Facilities – Completion of ADHS routes also will 

provide businesses improved access to airports, intermodal rail facilities, marine 

ports, and international borders or air/sea gateways. These effects are measured 

by the highway network model in terms of reduced travel times to the closest 

commercial facility of each type. 

D – Economic Impacts. Improvements in the highway network – with their associated transportation efficiencies, user benefits and market access – all lead to 

changes in business activity and associated income and jobs. These effects occur 

insofar as ADHS completion affects business volume, operating costs, household 

spending, and business productivity. These impacts play out differently at both 
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the regional and national levels. All of these impacts are estimated using a regional 

economic impact model. That model is discussed in Section 2.5. This framework uses 

the estimates of business-related travel efficiency savings and improved accessibility to compute the economic impacts of completing the ADHS. 

Direct Cost Savings Effects – Completion of ADHS routes will reduce travel 

times which will lead to reduced business operating costs, although these cost 

savings differ by the type of business due to variation in their reliance on 

trucks and workforce costs. In the economic model, the cost savings to business-related transport induce greater worker and business income as a result 

of enhanced business competitiveness, leading to increases in new investment and resulting industry growth. 

Direct Access Improvement Effects – Completion of ADHS routes also will 

lead to enhanced business productivity by generating economies of scale 

from access to larger population, a more diverse workforce, and delivery 

markets, as well as enabling greater efficiency of operations with access to 

intermodal connectivity. In the economic model, these economies of scale 

generate greater productivity and business attraction, leading to increases in job 

and income growth. (Careful calculation is done to isolate the new effect of 

market and connectivity improvements from the effect of reduced travel 

times that already is captured under direct cost savings.) 

Regional Economic Adjustment Effects – Completion of ADHS routes also 

will lead to additional effects on other sectors of the economy. These include 

indirect effects on expansion of businesses that supply goods and services to 

the directly benefiting businesses. They also include induced effects of greater 

worker spending on goods and services as a result of the increased jobs and 

income. In addition, the economic model adjusts for changes over time associated with shifts of business activity locations between the ARC region and 

rest of the United States, as well as within the ARC region. 

E – Benefit/Cost Analysis. To place the estimation of economic and total benefits in proper context, standard benefit/cost analysis tools have been applied to 

measure the economic return on investment to the ARC region and nation as a 

whole in terms of pure travel efficiency gains and also total economic benefits. 

Benefit/cost ratios are presented in terms of a likely range, reflecting uncertainties in terms of future demographic forecasts, construction inflation rates, and the 

discount rate. State-by-state cost-to-complete estimates for 2005 were adjusted to 

future years by incorporating more realistic assumptions about construction cost 

escalation based on data from the Bureau of Labor Statistics’ bridge and highway 

construction producer price index (BHWY PPI). 

The remainder of this section describes the highway network and travel demand 

model, the forecasting assumptions, the freight composition calculations, and the 

economic model processes. 
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2.2 HIGHWAY NETWORK AND TRAVEL

DEMAND MODEL

This section describes the preparation of the travel model that was used to analyze the impacts of interaction of automobile and freight truck travel as a result 

of the completion of the Appalachian Development Highway System (ADHS). 

The travel demand model allows the impacts on total travel to be quantified and 

to identify the travel-time and reliability benefits that will accrue to autos and 

trucks as a result of the completion of the ADHS. 

2.2.1 Model Development 

A Travel Demand Model highway network was created in TransCAD. 

TransCAD is standard package travel demand model software, commonly used 

in transportation planning that provided the attributes necessary to fully test the 

impacts of the ADHS completion and to provide measures of its performance as 

outputs to economic development models. The highway network was based on 

the TransCAD highway network created for FHWA’s Freight Analysis Framework 

(FAF) project.11 That highway network provides information, including origin 

and destination points, for all major highway movements beginning at counties 

in the ARC region and surrounding areas. By inspection it was determined that 

the FAF network includes either the ADHS corridors or the highways that ADHS 

corridor improvements are intended to replace. From the FAF highway network, 

a ring of major highways surrounding the ARC member counties was selected for 

inclusion in the ARC travel demand forecasting (TDF) model. The inclusion of 

highways beyond the ARC region allows the impact of ADHS completion on the 

diversion of trips to begin at major diversion points, such as the interstate system, outside the ARC region. 

Accompanying the highway network, a set of Traffic Analysis Zones (TAZ) was 

defined at the county level, both inside the ARC region and outside the ARC 

region extending to the model boundary. These counties served as the points for 

assigning the origins and destinations of automobile and truck trips that were 

developed by the TDF model. The highway network and counties are shown in 

Figure 2.1. 

External stations were coded at the edge of the highway network. These external 

stations serve as the means to assign automobile and truck trips between those 

counties included within the model and the remainder of the United States. The 

network of major highway outside of the model boundary was used with 

national commodity truck patterns (as discussed in the next section) that have an 

origin and/or a destination outside of the ARC region, to identify the external 

station(s) which are used to enter or exit the travel model. 

 

11 Freight Analysis Framework Version 1.0, TransCAD highway network, FHWA. 
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To support the analysis of the calculation of accessibility to airports, intermodal 

terminals, marine ports and international borders, these facilities were coded as 

zones in the travel demand model. Where the facilities were located within the 

travel demand model boundaries, the locations were coded directly within the 

model. When those locations were located outside of the model boundary (e.g., 

Port of Savannah, Brownsville, Texas border crossing), links representing the 

distance to these locations were coded into the network. 

Figure 2.1 ARC Travel Demand Model Highway Network and TAZs 

Links in the ARC travel demand model highway network have an attribute 

which indicates their status as an ADHS segment, including whether the link is 

“completed” or “yet to be completed.” TransCAD maintains one master network 

file where links for scenarios (e.g., base, No-Build/ADHS completed, build/ADHS 

yet to be completed) were turned on or off as needed. These attributes allowed 

the travel and performance on the ADHS segments to be readily identified. 
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The TransCAD software includes a feature known as Origin Destination Matrix 

Estimation (ODME). ODME can allow the “reverse engineering” of the most 

likely trip table that would be consistent with treating the observed traffic counts 

as the assigned volumes of that trip table. The FAF1 highway network used in 

the development of the ARC travel demand model highway network includes 

automobile and truck average (annual) daily traffic (AADT) counts as attributes. 

The ADHS highway segments also include daily AADTs for automobile and 

trucks that were used to update the FAF1 counts. Since the ODME process 

estimates trips between TAZs, consistent with this process and the county TAZ 

structure, the counts used in the estimation process were those on links in the 

model network that cross zone/county boundaries. This estimation process does 

not include trips that travel completely within a county and, therefore, the estimation process excludes those counts that are likely to include a high portion of 

those trips. 

Suitable preliminary trip tables for automobiles and trucks were developed from 

socioeconomic data for TAZ/counties quick response trip generation factors of 

automobile and truck trips per population and employee. The trips were distributed using a simple gravity model and the average travel times between 

zones. The trip table required no further adjustment since it is adjusted during 

the ODME process. 

Non-commodity Trucks 

ODME was run separately for autos and total trucks. The non-commodity trucks 

were calculated by subtraction of the commodity trucks that are discussed in the 

next section from the estimated total truck tables.

The FAF2 commodity truck flows do not include trucks handling retail or commercial deliveries, construction equipment or supplies, service trucks, utility 

trucks, etc. Those trucks are included in the ODME estimate of total trucks. By 

subtracting the commodity truck table from the ODME truck table a table of noncommodity trucks was created. 

Forecasting 

Forecast automobile and non-commodity truck trip tables were created by calculating future trip ends using the 2020 and 2035 socioeconomic forecast for the 

medium- and high-growth scenarios and quick response generation factors of 

automobile and truck trips per population and employee. The ratio of base year 

and future year trip ends were applied in an iterative proportional fitting process 

to create future year automobile and non-commodity truck trip tables. 

The commodity truck trip tables were developed by first creating commodity 

growth rates in trips using the forecast years of the FAF2 and applying these 

growth rates to individual commodity truck shipments. 

The future automobile, non-commodity and commodity truck trip tables were 

assigned in the travel demand model to the No-build and Build highway net-
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works. These assignments were used to create performance measures (e.g., 

travel times and costs) that were used in the economic analysis. 

2.3 FREIGHT FLOWS

This section describes the results of the analysis that developed freight flow projections for the study area. These freight flows were then included in the travel 

demand model in order to analyze the impacts of interaction of automobile and 

freight truck travel as a result of the completion of the Appalachian Development 

Highway System (ADHS). This inclusion of freight flows within the travel 

demand model allows their impacts on total travel to be quantified and to identify the travel-time and reliability benefits that will accrue to freight trucks as a 

result of the completion of the ADHS. 

The analysis was based on two existing sources of freight flow data: the ARC 

Commodity Flow database developed by Marshall University;12 and the FHWA’s 

Freight Analysis Framework 2.2 database. 

2.3.1 Marshall University Commodity Flow Database 

A database of 1998 county to county flows to, from, and within (but not through) 

the ARC has was developed by Marshall University data. This database was 

developed from the FHWA’s Freight Analysis Framework1. Those flows are 

only for commodities moved by truck. The Marshall University database, which 

itself was developed from the FAF1 trip tables, uses a commodity classification 

system known as the Standard Classification of Transported Commodities (STCC). 

Truck Data 

The Marshall database includes separate files for originating and terminating 

traffic for each two-digit STCC. The first letter of the file indicates whether the 

freight flow is originating, O, or terminating, T; traffic and the last two digits 

contain the STCC. For example, OFIP_27 contains records for STCC No. 27 

originating in ARC counties or TFIP_14 contains records for STCC No. 14 terminating in ARC counties. 

OFIP files contain the following variables: 

OFIP – The originating ARC county; 

TST – The terminating state; 

 

12 Rahall Transportation Institute, Marshall University and Wilbur Smith Associates, 

Report No. 4 in a Series of Transportation and Trade Studies of the Appalachian Region Meeting 

the Transportation Challenges of the 21st Century: Intermodal Opportunities in the Appalachian 

Region Economic Benefits of Intermodal Efficiencies, Appalachian Regional Commission, 

December 2004. 
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STCC – Two-digit STCC; 

SUMTON – Estimated annual tonnage; and 

OSTRESS – A 0/1 variable denoting whether or not the originating is ARC 

county designated as distressed. 

TFIP files contain the following variables: 

TFIP – The terminating ARC county; 

OST – The origin state; 

STCC – Two-digit STCC; 

SUMTON – Estimated annual tonnage; and 

TSTRESS – A 0/1 variable denoting whether or not the originating is ARC 

county designated as distressed. 

2.3.2 Freight Analysis Framework 2.2 

Beginning in 1997, and in all subsequent Commodity Flow Surveys (CFS) prepared by the U.S. Census Bureau, a different commodity classification system, 

the Standard Classification of Transported Goods (SCTG), was used. The update 

to the Freight Analysis Framework, know as FAF2, developed by the FHWA 

which has a base year of 2002 and forecast years of 2010 through 2035 in fiveyear increments, also uses the SCTG. 

The FAF2 database includes geographic data, as origins or destinations, for 114 

regions in the United States. Each record contains the originating region, the destination region, the mode of transport, and the annual tonnage for 2002 and each 

forecast year. The ratio of the base year and forecast year tonnage for records 

using the truck mode can be sued to develop growth factors for those flows. 

2.3.3 ARC Commodity Truck Database 

A crosswalk table between the Marshall STCC commodity Codes, the FAF2 SCTG 

commodity codes, and the summary commodity codes was developed for use in 

this study. This table, shown as Table 2.1, was used to accumulate the commodity totals into 11 basic truck commodity flows. 

Tables of freight flows in terms of tonnage were obtained from FAF2 for the 2002 

base year and for the 2020 and 2035 forecast years. The FAF2 has 114 U.S. zones. 

An equivalency table of U.S. counties to FAF2 zones was created (see Figure 2.2). 

This table was used to disaggregate the FAF2 tonnage flows to ARC counties 

using the 1998 ratios of county to FAF2 zone totals from the Marshall database. 
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Cambridge Systematics, Inc. / Economic Development Research Group / HDR Decision Economics Table 2.1 Commodity Code Equivalencies 

SCTG2 FAF2 Abbreviation STCC2 FAF1 Name ARC Name 1 Live Animals/Fish 1 Agriculture Agriculture 2 Cereal Grains 1 Agriculture Agriculture 3 Other Agricultural Products 1 Agriculture Agriculture 4 Animal Feed 20 Food Food and Tobacco 5 Meat/Seafood 20 Food Food and Tobacco 6 Milled Grain Products 20 Food Food and Tobacco 7 Other Foodstuffs 20 Food Food and Tobacco 8 Alcoholic Beverages 20 Food Food and Tobacco 9 Tobacco Products 21 Tobacco Food and Tobacco 14 Metallic Ores 10 Metallic Ores Mining 15 Coal 11 Coal Mining 10 Building Stone 14 Nonmetallic Minerals Mining 11 Natural Sands 14 Nonmetallic Minerals Mining 12 Gravel 14 Nonmetallic Minerals Mining 13 Nonmetallic Minerals 14 Nonmetallic Minerals Mining 16 Crude Petroleum 13 Crude Petroleum Petroleum and Chemicals 20 Basic Chemicals 28 Chemicals Petroleum and Chemicals 21 Pharmaceuticals 28 Chemicals Petroleum and Chemicals 22 Fertilizers 28 Chemicals Petroleum and Chemicals 23 Chemical Products 28 Chemicals Petroleum and Chemicals 17 Gasoline 29 Refined Petroleum Petroleum and Chemicals 18 Fuel Oils 29 Refined Petroleum Petroleum and Chemicals 19 Coal-n.e.c.1 29 Refined Petroleum Petroleum and Chemicals 24 Plastics/Rubber 30 Rubber/Plastics Other Durable Manufacturing 31 Nonmetal Mineral Products 32 Clay, Concrete, Glass Other Durable Manufacturing 32 Base Metals 33 Metal Other Durable Manufacturing 33 Articles-Base Metal 34 Metal Products Other Durable Manufacturing 34 Machinery 35 Machinery Other Durable Manufacturing 38 Precision Instruments 38 Instruments Other Durable Manufacturing 40 Miscellaneous Manufacturing Products 39 Miscellaneous Manufacturing Products Other Durable Manufacturing 25 Logs 24 Lumber Wood and Paper 26 Wood Products 24 Lumber Wood and Paper 27 Newsprint/Paper 26 Paper Wood and Paper 28 Paper Articles 26 Paper Wood and Paper 29 Printed Products 27 Printed Goods Wood and Paper 35 Electronics 36 Electrical Equipment Electrical Equipment 36 Motorized Vehicles 37 Transportation Equipment Transportation Equipment 37 Transport Equipment 37 Transportation Equipment Transportation Equipment 30 Textiles/Leather 23 Apparel Other Nondurable Manufacturing. 39 Furniture 25 Furniture Other Nondurable Manufacturing. 41 Waste/Scrap 40 Waste Waste 43 Mixed Freight 41 Miscellaneous Freight Shipments Miscellaneous Freight Shipments 42 Unknown 0 N/A N/A
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Figure 2.2 FAF2 Zones and ARC Region 

As can be seen from the map, while some FAF2 zones are completely within the 

ARC region (e.g., Pittsburgh, Pennsylvania; West Virginia; Birmingham, 

Alabama; Greenville, South Carolina) most of the ARC counties are located in 

FAF2 zones that also include areas outside the ARC region. It was necessary to 

estimate the portion of the tonnages for these split zones that is originating or 

terminating in counties outside the ARC region in order to develop allocation 

ratios from the Marshall database. The 2002 FAF2 zonal totals, by ARC commodity, back to 1998, was scaled using information from the Marshall University 

databases for those zones wholly with the ARC regions to develop estimated 

1998 tonnages for the portion of the FAF2 zone outside the ARC region. Allocation ratios were developed for ARC counties and the non-ARC portion were 

applied to the 2002 FAF2 data. 
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The ARC county to county tonnages were converted from annual tonnages by 

trucks to daily trucks. The annual to daily conversion was 306 working days 

(6 days per week for 52 weeks less 6 major holidays). The tonnage totals was 

converted to trucks using payload factors (tons per truck) developed from the 

Vehicle Inventory and Usage Survey database. 

By allocating the FAF2 database of national truck flows, converted from annual 

tons to daily trucks, to counties in the ARC by using the Marshall database, trip 

tables of daily truck vehicle flows to, flow, within and through, the ARC region 

were created for each of the Commodity Groups listed in Table 2.2 was created. 

These tables of truck flows were integrated with the table of all truck flows 

described in the Section 2.1 Travel demand Model. The development of the 

travel demand model created trip tables of autos and trucks. The trucks 

included those that carry freight, according to the definition of the Freight 

Analysis Framework which is primarily long-distance shipments and those 

trucks that carry local movements of freight not included in the FAF database 

and trucks that travel for other purposes (for example service trucks, utility 

trucks, construction trucks). The freight truck trip tables were subtracted from 

the total truck table to create a table of non-freight trucks. The freight and nonfreight trucks were used in to report the forecast volumes and performance 

measures used in the economic modeling. 

Table 2.2 Truck Payload Factors 

Tons per Truck 

ARC Commodity Code ARC Name Payload 

1 Agriculture 16.75 

2 Food and Tobacco 14.62 

3 Mining 19.92 

4 Petroleum and Chemicals 17.45 

5 Other Durable Manufacturing 15.47 

6 Wood and Paper 16.04 

7 Electrical Equipment 13.61 

8 Transportation Equipment 11.95 

9 Other Nondurable Manufacturing 11.77 

10 Waste 15.03 

11 Miscellaneous Freight Shipments 15.03 
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2.4 ECONOMIC AND DEMOGRAPHIC FORECAST

A key input to the travel demand network model is the economic forecast for the 

relevant region. A forecast of future employment and population is needed to 

determine the number of automobile and truck trips through the ARC region 

and was essential in developing future year trip tables. The four concepts used 

within the travel demand model were: total population, number of households, 

total employment, and retail employment. 

Since the ARC region is a fairly large area covering multiple states, it is important to consider the potential economic forecast options available for use in the 

travel model. In the past, ARC has used the REMI model to obtain vast historical 

and future year economic data. These efforts have typically grouped the ARC 

counties into south, central and north subregions comprising the entire 410 

counties. In the tables presented below, recent regional REMI forecast data is 

presented along with other forecast options. However, it was cost-prohibitive to 

obtain a REMI model with every ARC county individually, so additional countylevel forecasts were required. 

Other readily available regional and county-level forecast options include: 

Woods and Poole – This commercially available data covers all counties, 

MSAs, and states in the United States and can be combined with regional 

forecasts to produce county-level differentiation in growth rates. The forecast methodology is not as sophisticated as other options, and often produces 

aggressive projections. 

Economy.com – This Pennsylvania-based company provides economic forecasts that are commonly used by states and counties. Its cost is more than 

Woods and Poole but typically less than REMI or Global Insight. 

Global Insight – Typically considered the national leader in economic forecasting, though similar to REMI the costs make it an unlikely choice for every 

ARC region county individually. 

For this study, we compared Global Insight and REMI regional data, and 

Woods & Poole county-level data for all of the ARC region. The tables provided 

below are for three options: 

1. Woods & Poole (W&P) – Aggregating Woods and Poole county-level data to 

the three ARC regions; 

2. REMI – Using the existing REMI regional forecast as control totals, and 

adjusting W&P county-level forecasts to match those regional totals; and 

3. Global Insight – Using the obtained Global Insight regional forecast as control totals, and adjusting W&P county-level forecasts to match those regional 

totals. 
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Forecast Ranges and Sensitivity Testing. As mentioned in the study objectives 

above, an important analytical goal was to develop the ability to test the implications of different forecasts. For example, a careful critic of the analysis might 

suggest that the transportation and economic benefits are dependent on the forecast and that a lower or higher forecast of growth and fewer trips would result in 

lower benefits. For this study, the Global Insight regional forecast totals were 

deemed the most reasonable and generally fall between the more conservative 

REMI forecast and the more aggressive W&P forecast. Therefore, the Global 

Insight forecast was used as the primary forecast for this study. In addition and 

to provide contrast, the W&P forecast was used as a “high” forecast scenario.13

These economic and demographic data forecasts are used to construct current 

and future year automobile and non-commodity truck trip tables. These were 

created by calculating future trip ends from the socioeconomic forecast year data 

for each county TAZ in the model and applying quick response trip generation 

factors. These future trip ends were applied in an Iterative Proportional Fitting 

process (IPF) to create future year trip tables for both the medium (Global 

Insight) and high (Woods & Poole) forecasts. 

 

13 The “low” forecast from REMI could have also been tested in the travel model but the 

research team decided that it was not necessary for two reasons. First, that forecast was 

out-of-date compared to the more current Global Insight and W&P forecasts. Second, the 

relationship between the Global Insight and W&P forecast results are proportionally 

similar in a downward direction if comparing REMI and Global Insight. 
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Population 

W&P W&P REMI REMI GlobIn

POP02 POP20 POP35 POP20 POP35 POP20 

Count 

Central 2,165,769 2,410,785 2,669,888 2,323,094 2,433,729 2,309,8North 10,077,276 10,466,602 11,025,625 10,599,617 11,418,720 10,092,South 10,971,926 13,391,408 15,770,329 13,428,789 14,893,420 13,239,

 

Total 23,214,971 26,268,795 29,465,841 26,351,500 28,745,869 25,641,

Growth Central 11.3% 10.7% 7.3% 4.8% 6.7% 

North 3.9% 5.3% 5.2% 7.7% 0.1% South 22.1% 17.8% 22.4% 10.9% 20.7% 

 

Total 13.2% 12.2% 13.5% 9.1% 10.5% 

Households 

W&P W&P REMI REMI GlobIn

HH02 HH20 HH35 HH20 HH35 HH20 

Count 

Central 865,705 999,905 1,083,904 928,591 972,814 970,466 North 4,013,531 4,278,849 4,362,083 4,221,567 4,547,795 4,157,9South 4,299,382 5,374,975 6,130,505 5,261,419 5,834,652 5,391,0

 

Total 9,178,618 10,653,729 11,576,492 10,411,576 11,355,262 10,519,

Growth Central 15.5% 8.4% 7.3% 4.8% 12.1% 

North 6.6% 1.9% 5.2% 7.7% 3.6% South 25.0% 14.1% 22.4% 10.9% 25.4% 

 

Total 16.1% 8.7% 13.4% 9.1% 14.6% 
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Cambridge Systematics, Inc. / Economic Development Research Group / HDR Decision Economics Table 2.3 Alternative Demographic and Economic Forecasts (continued) 

Total Employment 

W&P W&P REMI REMI GlobIn

TOTEMP02 TOTEMP20 TOTEMP35 TOTEMP20 TOTEMP35 TOTEM

Count 

Central 966,345 1,170,517 1,387,724 1,032,674 1,056,712 1,074,0North 5,316,258 6,200,182 7,168,746 5,748,103 6,078,130 5,823,7South 5,975,375 7,534,110 9,118,174 6,701,051 7,065,052 7,051,7

 

Total 12,257,978 14,904,809 17,674,644 13,481,827 14,199,895 13,949,

Growth Central 21.1% 18.6% 6.9% 2.3% 11.1% 

North 16.6% 15.6% 8.1% 5.7% 9.5% South 26.1% 21.0% 12.1% 5.4% 18.0% 

 

Total 21.6% 18.6% 10.0% 5.3% 13.8% 

Retail Employment 

W&P W&P REMI REMI GlobIn

RETEMP02 RETEMP20 RETEMP35 RETEMP20 RETEMP35 RETEM

Count 

Central 165,581 196,529 228,022 168,166 148,596 174,003 North 947,835 1,076,318 1,210,660 934,222 832,948 935,319 South 1,025,637 1,264,088 1,492,874 1,088,815 1,000,942 1,094,4

 

Total 2,139,053 2,536,935 2,931,556 2,191,203 1,982,486 2,203,7

Growth Central 18.7% 16.0% 1.6% -11.6% 5.1% 

North 13.6% 12.5% -1.4% -10.8% -1.3% South 23.2% 18.1% 6.2% -8.1% 6.7% Total 18.6% 15.6% 2.4% -9.5% 3.0% 
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2.5 ECONOMIC DEVELOPMENT IMPACTS

Following the results of the travel demand model described in the previous 

section, economic impacts to the ARC region were estimated using the 

Transportation Economic Development Impact System (TREDIS). TREDIS is a 

computational framework for estimating economic impacts to a well-defined 

geography following a change in transportation facilities and operating conditions. The overall modeling framework is separated into four “modules” that 

interact to produce results. Figure 2.3 shows the relationship between four key 

economic modeling components: 

The analysis of transport cost savings and associated travel efficiencies; 

The analysis of market access improvements and associated economic 

growth; 

The allocation of the above two benefits among various sectors in the economy; and 

The application of an economic model to estimate total impact of the above 

factors on future economic growth. 

Figure 2.3 Components of Economic Impact 

Allocate Benefits 

to Industries

Economic 

Impact Model

Transport Costs and 

Travel Efficiencies

Transport Costs and 

Travel Efficiencies

Market Access and 

Economic Development

Market Access and 

Economic Development

• Production Costs

• Employment

• Visitor Spending

• Gross Regional Product

• Personal Income

• Employment

Figure 2.4 outlines the five steps in the economic impact analysis process: 

1. A travel model and GIS system was applied to calculate changes in VMT 

(reflecting travel distance improvement) and VHT (reflecting speed 

improvement), as well as impacts on market access and connectivity 

improvements; 

2. A travel-cost analysis was conducted to calculate the net value of the time 

and cost savings for businesses and households, based on forecasts of 

expected future trips; 

3. A market access analysis was conducted to calculate how changes in access to 

population centers, delivery areas and access to intermodal terminals affect 

regional competitiveness and economic growth opportunities; 
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4. A regional economic model was applied to estimate the long-range economic 

impacts and adjustments expected to result from the regional business cost 

and regional access changes; and 

5. A benefit/cost accounting process was applied to calculate benefits and 

impacts from alternative perspectives, and compare them to projected costs. 

Figure 2.4 Economic Development Impact Modeling Approach 

Economic Adjustment Module

Industry Response to Cost Savings

Indirect Impacts

Induced Impacts

Economic Adjustment Module

Industry Response to Cost Savings

Indirect Impacts

Induced Impacts

Market Access Module

Business Relocation

Increased Productivity

Increased International Exports

Market Access Module

Business Relocation

Increased Productivity

Increased International Exports

Travel Cost Module

Cost Savings to Industry

HH Out-of-Pocket Savings

Value of HH Time Savings

Travel Cost Module

Cost Savings to Industry

HH Out-of-Pocket Savings

Value of HH Time Savings

Benefit/Cost Module

Present Value of Cost Scenarios

Present Value of Impacts and Benefits

Net Present Value of ADHS (Range)

Benefit/Cost Module

Present Value of Cost Scenarios

Present Value of Impacts and Benefits

Net Present Value of ADHS (Range)

Travel Models

Changes in VMT, VHT, and Trips

Changes in Access to Markets

Travel Models

Changes in VMT, VHT, and Trips

Changes in Access to Markets

Results from Step 1 are covered in Section 4.0, the other steps are summarized in 

the rest of this section with results in Section 5.0. Appendix B offers a more 

detailed discussion of the economic analysis methodology with emphasis on 

market access. 

2.5.1 Travel-Cost Response Module 

The Travel-Cost Response Module translates travel demand characteristics for 

future scenarios into direct cost savings that accrue to households and businesses. The travel demand characteristics are derived from the travel model 

described above, and they include VMT, VHT, Trips, congestion levels, vehicle 

occupancy, and freight loads. These interact with values of time and operation 

costs of travel to determine direct dollar savings to households and firms. In 

addition, the module also estimates the benefits of improved travel-time reliability, as well as safety benefits. Industry benefits are further segmented among 

industrial sectors based on the region’s commodity mix and each industry’s 

utilization of different travel modes. 
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2.5.2 Market Access Response Module 

The second module estimates benefits to the ARC region from improved transportation accessibility and connectivity. These impacts are distinct from those 

estimated by the Travel Cost Module in that they do not stem from changes in 

VMT or VHT. Rather, they reflect a more dynamic economic environment in the 

ARC Region. Because firms have better access to labor, inputs, and consumers, 

and because consumers have better access to goods, the region as a whole 

becomes more attractive place for business location. These changes further 

enable firms to sell more products abroad increase productivity. Results are 

estimated at the county level based on changes in the following five variables 

(see Appendix B for a more thorough description): 

Access to population within 60 minutes; 

Access to employment with 180 minutes; 

Drive time to closest intermodal rail facility; 

Drive time to closest commercial airport; 

Drive time to closest marine port; and 

Drive time to closest international land gateway. 

The analysis of market access impacts on economic growth are estimated using 

the Local Economic Assessment Package (LEAP), an ARC-supported tool that is 

widely used by economic developers to assess regional competitiveness factors 

affecting future business attraction and economic growth opportunities. It has 

the unique feature that it distinguishes how changes in local access interact with 

other local characteristics of business cost and infrastructure quality to affect 

economic growth opportunities. It functions within the broader TREDIS framework that has been previously discussed. 

Graphs describing the nature of local access changes associated with ADHS 

completion are shown in the Appendix. For each of the 410 ARC counties, these 

variables were estimated for build and no-build scenarios. Changes were used to 

estimate three types of impact: increased productivity, increased international 

exports, and growth through the relocation of productive factors. 

Productivity. Transportation improvements have been linked to increased productivity by enabling economies of scale. Improved access can increase the 

industrial and labor force density in an area, which may in turn facilitate better 

labor force matching, enable businesses to share and build knowledge, and 

improve the quality of goods that firms depend on in production. These mechanisms can thereby increase the productivity of firms, raising output, value 

added, and wages per worker. For this type of impact, the first two access variables (to population within 60 minutes and to employment within 180 minutes) 

were used to estimate the change in effective density in labor, consumer, producer, 

and supplier markets. Impacts are based on the magnitude of those changes, characteristics of the county, and characteristics of other relevant nearby counties.
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International Exports. Improved access to international gateways may enable 

firms to increase production by growing international exports. Empirical 

research has established functional relationships between access to international 

gateways (as measured by driving time) and the total amount of shipments to 

overseas locations on a port-specific basis. Based on this research, changes in 

drive time to an airport, marine port, or international land gateway (to Canada or 

Mexico) are used to estimate potential increased sales (output) in each county. 

Industry-specific impacts are estimated based on the county industry mix and 

utilization of freight modes by each industry. 

Relocation of Productive Factors. Finally, changes in accessibility alter the relative profitability of location for businesses. By increasing access to consumers, 

producers, and intermodal facilities, firms may realize increased revenue potential 

or cost savings. For example, increased accessibility may expand the consumershed of a company, allowing it to increase sales, or firm may use the accessibility 

improvement to improve freight logistics (a process that is dependent upon, but 

distinct from direct travel savings). These changes in the economic landscape may 

induce firms to relocate to the more productive region. In practice, this relocation 

may be the result of physical firm migration, or firm expansion in one location at 

the expense of another (possibly coupled with sectoral decline). This type of 

impact is estimated by simulating the costs and sales for firms in different 

industries at various locations within and outside of the ARC region. 

Accounting for Interregional Effects. The market access impacts described 

above reflect changes in international exports, increased business productivity, 

and the migration of industrial activity. However, because impacts are estimated 

at the county level, when aggregating the results to the broader study region 

(ARC), they must be integrated in such a way as to account for economic “reshuffling” to avoid double-counting impacts. Of the three types of impacts listed 

above, the first two are assumed to aggregate without double-counting. For the 

third impact type, net ARC impacts are estimated by subtracting interregional 

migration (inside the ARC region) from gross impacts. Any remaining (net) 

impacts, therefore, reflect migration of productive factors from outside the ARC 

region to within it. This is done following the same methodology described in 

the previous section, where inter-county migration is estimated for each pair of 

ARC counties (on an industry by industry basis). The final result is net market 

access impacts to the ARC region that do not double-count across counties (see 

Appendix for further description of methodology). 

2.5.3 Economic Adjustment Module 

The third module compiles the direct travel benefits and market access impacts 

described above, and then uses those results to estimate indirect and induced 

effects. Indirect effects reflect economic activity generated through regional 

business-to-business linkages through the supply chain. As an example, if the 

automobile manufacturing sector is forecast to grow in the ARC region, then 

businesses that supply materials and products to that sector also will benefit (as 
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well as their suppliers, etc.). To the extent that these “upstream” suppliers are 

located within the ARC region, it will gain additional benefit. 

Induced impacts stem from increases in local consumer spending following a 

gain in personal income in the region. To follow the previous example, the 

automobile manufacturing sector also may increase total wage outlay. To the 

extent that the increase in wages is spent locally on goods and services, ARC gains 

an additional benefit. These “secondary” economic impacts were estimated by the 

Cost-Response Input-Output (CRIO) model, which uses recent research findings 

by Economic Development Research Group that show how various industries 

absorb costs, invest in their own growth, and/or pass on the costs to other 

industries. Then multipliers from a multiregional version of the IMPLAN®

model are applied to calculate the indirect and induced impacts to the region. 

2.6 BENEFIT/COST ANALYSIS

2.6.1 General Methodology for Comparing Costs and Benefits 

As a final step, the Benefit/Cost accounting module was used to summarize the 

time streams of future impacts, benefits, and costs of transportation investment 

in the ARC region. This module gathers information from the first three modules and organizes them in terms of various economic impact and economic 

benefit measures. It then combines them with cost measures to develop net present values and benefit/cost ratios. 

First, all impacts and benefits were estimated for the years 2020 and 2035 (the 

forecast years for travel modeling) and itemized by type: A) industry savings; 

B) out-of-pocket household savings; C) household time savings; D) market access 

impacts; and E) secondary economic (indirect and induced) growth. All benefit 

types were calculated separately for the ARC Region and for the Total U.S. For 

the first three (A through C) which comprise direct travel efficiency savings, the 

portion of benefits accruing to the ARC region was determined based on the 

number of local versus nonlocal trip ends. The last two (D and E) reflect additional sources of regional economic growth, and for those impacts it was 

assumed that all benefits to the ARC region related to the attraction of business 

activity will cancel out at the national level, leaving only productivity gains and 

increases in international exports. 

Second, each type of impact or benefit was given a time path between forecast 

years and extending out to the year 2045 to facilitate analysis of the present value 

of future benefit and cost streams. These extended values were estimated on the 

basis of: 1) estimated growth rate in the underlying traffic volumes; 2) the 

planned program completion schedule; 3) empirical research on the timing of 

market access impacts (see below); and 4) research on the timing of indirect and 

induced impacts. The application of these phase-in schedules yields dollar levels 

for each impact type for all years in the analysis horizon. 
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In the third step, costs were estimated for each year between 2007 and 2045 based 

on two inflation scenarios. In the “low” inflation scenario, nominal price 

increases in the construction sector are assumed to parallel those of prices in 

general at 3 percent per year. In the second case, prices in the construction sector 

were assumed to increase faster than general inflation. This scenario assumes 

price increases of 10 percent per year between 2007 and 2010, and 4.5 percent 

thereafter. These rates follow from recent price trends in the construction sector. 

In the fourth step, all values were converted to constant 2007 dollars, and a discount rate was applied to determine the present value of the benefit or cost 

stream. The discounting was performed for each of type of impact or benefit (A 

through E), for the high- and medium-growth scenarios, and for two cost inflation scenarios. In addition, calculations were made with two alternative real discount rates – 5 percent and 7 percent. The result of this step is a matrix of present 

values of impacts, benefits, and costs for all the scenarios. 

Finally, impacts, benefits, and costs were compared to determine net present 

values (present value of benefits minus costs) and benefit/cost ratios. The analysis specifically calculated four types of comparisons: 

Comparison of regional travel efficiency benefits to project costs – counting only 

benefits accruing to beneficiaries in the ARC region; 

Comparison of national travel efficiency benefits to project costs – counting all 

travel benefits, including those accruing to beneficiaries outside of the ARC 

region; 

Comparison of total regional economic benefits to project costs – counting net 

increases in economic growth projected for the ARC region regardless of 

whether they are due to economic productivity benefits or business relocation effects (in addition to personal non-business travel efficiency gains); and 

Comparison of total national economic benefits to project costs – counting only 

economic productivity benefits of improved market access and connectivity 

as an additional benefit to travel efficiency gains. 

The first two comparisons represent benefit/cost analyses using traditional 

transportation efficiency concepts. The third comparison represents a mixed 

form of economic impact and benefit/cost analysis, but can here be considered 

an indicator of regional economic return on investment insofar as a primary goal 

of the ADHS is to promote of economic development in Appalachia. The fourth 

comparison effectively represents a more comprehensive economic benefit/cost 

analysis in which industry productivity benefits are added to the transportation 

efficiency benefits. 
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2.6.2 Estimation of Market Access Time Lag Effects 

on Economic Growth 

To better support the analysis of economic growth impacts, a special analysis 

was done for this study to investigate the amount of time and size of impact that 

highway projects had in Appalachia from 1970 to 2000 (see Appendix B for further detail). This involved estimating the differences in effects based on ARC 

counties’ level of distress and metropolitan status thus applying empirical findings of already completed ADHS corridors to help estimate future economic 

effects. The results, shown in Figure 2.5, show the number of years that a highway project took to affect a county’s economic growth as well as the amount of 

impact that the project had on growth. The counties were assembled into three 

groups: metro; non-metro – non-distressed; and non-metro – distressed. 

Figure 2.5 Years of Significant Impact Along with Fringe Years 

Before and After Impact 

Years with statistically significant values (greater than 90% confidence). 

Fringe years with consistent impact but statistical confidence less than 90%.

Non-Metro, Distressed

0

10

20

30

40

1 2 3 4 5 6 7 8 9 10

Years Since Completion

Non-Metro, Non-Distressed

0

10

20

30

40

1 2 3 4 5 6 7 8 9 10

Metro

0

10

20

30

40

1 2 3 4 5 6 7 8 9 10

Years Since Completion Years Since Completion

As seen in the charts, economic growth in non-metro and non-distressed counties 

was affected the earliest of the three groups, with primary impacts occurring in 

the first five years. Interestingly, metro counties (which showed no significant 

differences based on ARC’s economic distress categories) took approximately the 

same time to react as non-metro distressed counties. Distressed counties took 

longer for economic growth impacts to be evident, with most impacts occurring 

in years 6 through 10. However, they ultimately showed a much larger impact 

when those impacts finally occurred. 

The time lag results shown above were used to generate estimates of the economic 

growth impacts of improved market access over time. More specifically, market 

access impacts were phased in based on the anticipated project completion schedule and the timing of impacts based on the three categories of development. 
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3.0 Detailed Corridor 

Analysis Summaries 

This section provides three detailed corridor analysis summaries undertaken 

during the course of this study to provide real world context to the economic 

impact analysis, and help guide and validate the economic development assessments of completing the ADHS. The three corridor analyses are: 

Corridor T in New York which stretches 250 miles between I-90, just east of 

Erie, Pennsylvania to Binghamton, New York; 

Corridor V in Northwest Mississippi – the full corridor travels from South 

Pittsburgh, Tennessee through Northern Alabama and into Northwest 

Mississippi; and 

Corridor H in West Virginia and Virginia which is approximately 150 miles 

between I-79, near Weston, West Virginia to I-81 in Strasburg, Virginia. 

The analysis of each corridor is part of a broader effort to assess the economic 

impact of the completion of the ADHS. Specifically, the purpose of each case 

study was to develop an understanding of the economic effects of an area in 

which highway corridor have either been largely completed, or partially completed with significant segments still to construct. The detailed corridor analyses 

assessed the transportation and economic development issues as communicated 

through a series of interviews with local stakeholders in May and June 2007. 
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3.1 CORRIDOR T (NEW YORK) ANALYSIS SUMMARY

3.1.1 Background 

The Appalachian Development Highway System-designated “Corridor T”

stretches 250 miles between I-90, just east of Erie, Pennsylvania to Binghamton, 

New York (see Figure 3.1). Much of this segment, also known as the “Southern 

Tier Expressway,” has been upgraded from NY 17 to interstate status and is now 

designated as I-86. However, despite the change in designation, considerable 

portions of I-86 between Salamanca and Cuba, New York (32 miles) are still 

being constructed as of summer 2007, with only two lanes of traffic (one direction each way) in operation. These improvements, once completed (expected by 

October 2008), will provide trucks and other vehicles with close to a full interstate travel experience between Erie and Binghamton.14 A major intersection in 

Horseheads, north of Elmira, opened in June 2007, and is expected to bring major 

improvements in travel performance to the area. Small parts of NY 17 east of 

Binghamton also have been upgraded to interstate standards (and designated 

I-86). 

Longer term, improvements (mostly grade separation projects) to NY 17 between 

Binghamton and I-87 in eastern New York (Orange County), will develop I-86 

into a 380-mile interstate between Erie and New York City’s northern suburbs. 

With the possible exception of a handful of antiquated interchanges (grade separated, but not conforming to interstate standards), I-86 is expected to be completed by 2014. In addition to the upgrades already taking place on Corridor T, 

these downstream improvements will go a long way toward improving access to 

the New York City region and lower New England from Upstate New York. 

The economic impacts analyzed in this case study focus on the upgrade of NY 17 

to I-86 between Chautauqua County in the west and Broome County in the east. 

The study area also includes Cattaraugus, Allegany, Steuben, Chemung, and 

Tioga Counties. Together, these counties comprise an area known as the 

“Southern Tier.” Although the majority of the highway improvements are 

complete, it must be kept in mind that the full potential of Corridor T cannot be 

appraised completely until construction on several segments is completed. 

 

14 NY 17 between Elmira and Binghamton (55 miles) is mostly a four-lane, gradeseparated highway. A small number of improvements are being planned to address 

curb cuts and substandard geometries that prevent the road from fully complying with 

interstate design standards. 
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Figure 3.1 Corridor T in New York and Pennsylvania 
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3.1.2 Current Economic Transportation Conditions 

The Southern Tier maintains economic assets in its skilled workforce, advanced 

technological capabilities, scenic landscape, fertile land, and a location between 

the Northeastern Megalopolis, stretching from Boston to Washington, D.C., and 

the Midwest industrial heartland. Despite these strengths, the Southern Tier has 

confronted economic headwinds for years, at least in part due to its long-term 

reliance on manufacturing. As manufacturers have shifted production from the 

Northeast and Midwest to lower cost locations, the Southern Tier has seen jobs 

leave and a prolonged out-migration of its population to regions possessing 

stronger employment growth. Today, with the combined strengths of the 

Southern Tier’s technological base, centered on the advanced skill sets of its people 

and the cutting edge research taking place at its corporations and universities, the 

Southern Tier is now showing more economic resilience and is better situated for 

growth in the future. The recently completed and nearly completed improvements to the region’s transportation infrastructure – namely the conversion of 

NY 17 into I 86 – is paramount to supporting the area’s economic revitalization. 

The added ability to connect efficiently to large markets, both in terms of the 

movement of goods and the movement of people, is bringing renewed economic 

optimism to the Southern Tier. For example, regional leaders are promoting the 

region as a crossroads, well-connected economy, highlighting connections to I-81 

and large surrounding markets. 

The Southern Tier continues to have a significant manufacturing presence, with 

major producers of truck engines, furniture, helicopters, subway cars, glass, 

ceramics, avionics, electronics, dairy products, and fabricated metals. After years 

of job losses in manufacturing, many of the region’s larger employers have 

recently made major investments in the region to accommodate expansion and to 

increase research and development activity. Corning, the largest company headquartered in the Southern Tier, saw job losses earlier this decade but has used 

innovation to develop a new stream of products that have succeeded in keeping 

the company at the forefront of the advanced materials technologies used in 

electronics, telecommunications, motor vehicles, and medical equipment. Recent 

expansions on the Southern Tier have been launched by large employers, 

including Cummins Engine, Corning, Alcas, Alstom, TTA, Lockheed-Martin, and 

BAE Systems (see Table 3.1 for size and industry information for these companies). 

The expansions by existing large employers have been complemented by companies, such as Sikorsky (helicopters), Vulcraft (structural steel), Best Buy (distribution) and Shop-Vac (industrial vacuums), choosing the Southern Tier for 

relocation. 
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Table 3.1 Major Employers in the Southern Tier 

County Company Industry Number of Employees 

Chautauqua Cummins Engine Truck Engines 1,100 

Chautauqua Bush Industries Furniture 1,000 

Chautauqua Valeo Engine Cooling Truck Parts 300 

Cattaraugus Dresser Rand Turbines, Compressors 2,200 

Cattaraugus Seneca Allegany Casino Casino 1,200 

Cattaraugus Alcas Cutlery 1,000 

Allegany ABB Air Preheater Air Heaters/Oxidizers 620 

Steuben Corning, Inc. Advanced Materials 4,800 

Steuben Dresser Rand Oil Field Equipment 875 

Steuben Hon Furniture Office Furniture 850 

Steuben Alstom Subway Trains 1,275 

Steuben Mercury Aircraft Metalwork, Pellet Stoves 800 

Steuben TTA Subway Trains 1,000 

Tioga Lockheed-Martin Aircraft and Avionics 4,250 

Broome BAE Systems Aircraft Control Systems 1,250 

Broome Endicott Interconnect Electronics 1,900 

Broome Maines Paper and Food Food Distribution 1,500 

Source: Information obtained through interviews with regional and local economic development officials. 

Competitive Advantages of the Corridor Region 

The Southern Tier combines quality of life attributes (lakes, waterways, culture, 

natural attractions) with historically strong school systems and a productive 

workforce. More than a century of manufacturing expertise has helped provide 

a strong work ethic and gives the region a range of skills needed by industry. 

While the labor force is highly skilled, it is lower cost compared with larger metropolitan areas. The region is advantageously positioned to access the Northeast, 

the industrial Midwest, and Ontario, the center of Canadian economic activity. 

The Southern Tier’s location is particularly advantageous for the manufacturing, 

tourism, and distribution industries. 

The Southern Tier also possesses world-class research in several high-technology 

fields, including ceramics and electronics, supported by corporations such as 

Corning, Inc., Lockheed-Martin, and Endicott Interconnect. Major universities, 

including Binghamton University (SUNY) and nearby Cornell University, also 

lead in innovation and supply the region with specialized skills, particularly in 

electronics and engineering. Several other institutions lining the Southern 

Corridor, including Jamestown Community College, Alfred University, and 

St. Bonaventure University also provide the region with skilled workers and 

advanced research capabilities (e.g., Alfred University in ceramics). 
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Competitive Disadvantages/Obstacles of the Corridor Region 

Although the conversion of NY 17 to I-86 has helped improve mobility and the 

visibility of the Southern Tier, other transportation enhancements are needed to 

more fully leverage the interstate improvements. These include improved northsouth highways, such as NY 60 and U.S. 219 to better reach I-90 and the Buffalo 

region, notably its airport. Air service is poor in the Southern Tier (low frequency and high fares at commercial airports in Jamestown, Elmira, and 

Binghamton), making access to larger airports such as Buffalo-Niagara all the 

more important. Numerous major companies as well as colleges and universities 

located on the I-86 Corridor have expressed a need for improved access to major 

airports to support their operations. 

There also is a need to invest in the Southern Tier’s infrastructure capacity, 

including cost-competitive local water and wastewater systems, natural gas and 

electric service, and broadband telecommunications. Numerous intersections on 

I-86 are not prepared to accommodate growth and the villages farther from the 

interstate often lack adequate infrastructure to compete. Prospective companies 

are looking for “shovel-ready” sites at intersections, but relatively few have infrastructure put in place. The region, in many instances, needs to develop plans to 

more fully capitalize on the I-86 improvements, including coordinated transportation planning with other modes (e.g., rail and intermodal), land use planning 

combined with infrastructure improvements to direct growth, and economic 

development packages to secure business investment. 

The slow pace of population growth in the Southern Tier also is a concern. The 

primary contributor to the slow population growth is domestic out-migration – 

people leaving the region for other parts of the United States. This outflow has 

coincided with the long-term decline in manufacturing jobs and has pushed 

thousands of people to seek opportunities in faster-growing parts of the United 

States. In coming years, the lack of growth combined with an aging population 

raises concerns about the availability of a working age population – people that 

can supply businesses in the region with needed labor. 

High taxes (property and income), high energy costs, and other expenses (unemployment insurance and workers compensation) in the State of New York make 

it more challenging for the Southern Tier to compete with Pennsylvania (and 

other locations) on the basis of cost, especially in attracting manufacturers. 

Economic incentives, including Empire State Development’s “Empire Zone”

program has proved instrumental to help counteract New York’s high costs of 

doing business by providing tax breaks. Major companies in the Southern Tier 

have been beneficiaries of this program and have brought additional jobs into the 

region. This includes BAE Systems, which plans to consolidate a portion of its 

California operations in the Binghamton area. Until New York State’s onerous 

structural costs (taxes and energy) are brought down to levels similar to competitor states, it will be important for these incentives to be maintained, particularly as the Southern Tier competes with other locations to attract and retain 

manufacturers. 
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3.1.3 Economic Impact of Corridor 

Industry Opportunities 

Tourism. The completion of I-86 will provide a new east-west corridor and 

travel alternative to I-90 and I-80. The increase in through-traffic can be tapped 

into as a tourism market and I-86 could be marketed (signage, marketing materials, information centers, travel plazas, etc.) as a corridor, similar to initiatives 

already in place for the New York Thruway (I-90). The increase in the end-to-end 

usage of I-86 is expected to spur travel to area attractions such as Chautauqua 

Institution (160,000 visitors per year), Peek’n Peak (400,000), Allegany State Park 

(1 million), Seneca Casino (over 1 million), the Holiday Valley/Ski areas (1.2 million), Corning Glass Museum (350,000), Finger Lake wineries and cultural attractions (e.g., Dr. Frank’s Vinifera Wine Cellars in Hammondsport, one of 94 

wineries in the Finger Lakes Region, has about 60,000 visitors annually) and 

Tioga Downs (opened mid-2006). 

Manufacturing. The completion of I-86 allows for the development of industrial 

corridors in the Southern Tier. These include a ceramics/advanced materials 

corridor, going from Alfred to Corning, rail equipment and diesel engines from 

Jamestown to Elmira, and an aerospace corridor from Elmira to Binghamton. 

The aerospace cluster includes helicopter manufacturing in Owego and Elmira 

and simulators and avionics (aircraft control equipment) in Binghamton. 

Recently, the Lockheed Martin facility in Owego was awarded with a contract to 

build the presidential (U.S.) helicopter fleet. In order to improve production efficiencies for helicopters, Lockheed and other aerospace-related companies are 

seeking to source more products, such as precision machinery and fabricated 

metals, locally. Improvements on I-86/NY 17 are helping to support the growth 

of an aerospace cluster in the region as it allows for supplies to be shipped and 

delivered more quickly and with greater reliability. 

Facilitating Trade and Market Access 

Tourism and Community Development. The emergence of I-86 has helped to 

boost tourism in Western and Central New York. Visitors seek security and reliability when they travel and will choose to use interstates when possible. People 

prefer to drive on I-86 over state highways, and this has helped the resort areas 

in New York (e.g., Peek’n Peak, Lake Chautauqua, and the Finger Lakes). Additionally, I-86 has tied the Southern Tier together as a tourism region, allowing 

visitors to easily reach the diverse range of attractions, including lakes, waterways, viniculture, performing arts, and nature that stretch along the corridor. 

As an example, the old NY 17 (now NY 352) in the Town of Corning, went through 

a densely settled downtown area, and was a choke-point for trucks and a blight for 

tourism-related traffic – conditions that fostered neither manufacturing nor tourism. Aware of imminent improvements to I-86 that would ease the flow of truck 

traffic by shifting them from downtown to the interstate, companies such as 

Corning Inc. have chosen to invest more intensively in towns like Corning and the 
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Southern Tier region. For Corning, this has included new plants and a $50 million 

expansion to its glass museum, a major tourist draw. Coinciding with the development of I-86, the Town of Corning initiated substantial public-private investments to improve its downtown commercial core, turning it into an area that 

attracts workers, residents, and tourists. The attractive downtown helps to attract 

a new generation of workers that is much more attuned to the livability of a community. These types of highly educated workers choose where they want to live 

and Corning’s downtown helps attract them to the region. These efforts, crucial to 

the vitality of the Southern Tier’s technologically advanced companies, would not 

have succeeded and investments would not have been made without the relocating of NY 17 to I-86 and the removal of trucks from the downtown streets. 

Manufacturing. The development of I-86 is considered a crucial factor behind 

the expansion of several major manufacturers along New York’s Southern Tier. 

Cummins, a world-leading manufacturer of diesel engines, is expanding again 

after consolidating a division of its manufacturing operations at its Chautauqua 

County facility several years ago. Cummins is supplied entirely by truck (150 per 

day) and has a global supply chain. I-86 provides Cummins with a direct interstate link to Midwestern suppliers and the company’s expansion in Chautauqua 

County would not have been as likely without the interstate improvements. Interstate access also was pivotal to Bush Industries, also in Chautauqua County, which 

returned furniture manufacturing jobs to the Southern Tier. 

Corning Incorporated, a company focused on the research and production of 

advanced materials found in telecommunications and other uses, has invested 

$100 million to manufacture state-of-the-art diesel exhaust treatment systems in 

Erwin, and has made additional investments in robotics. The company is 

research intensive and is undergoing a $300 million expansion of its research 

facilities, a project that will bring an additional 300 scientists into the region. 

These new and expanded facilities are located in industrial parks on I-86 in the 

Corning-Elmira area. 

Economic development officials believe these and other manufacturing investments would not have occurred without the I-86 upgrades. In fact, I-86’s effect 

on the retention of manufacturing jobs was a main theme reiterated by Southern 

Tier economic development officials. Without I-86, it was believed that 25 to 

40 percent of the large manufacturers in the region would have been lost and the 

potential for growth would have been effectively eliminated. The older roads in 

the Southern Tier are not reliable for shipping or receiving goods and do not 

work well for “just-in-time” (JIT) logistics strategies. I-86 now provides the 

roadway infrastructure and connectivity needed to compete in the United States 

and global economies. 

Throughout the Southern Tier, numerous business expansions across a wide 

range of industries were fostered by proximity to I-86, including: tobacco, wood 

pallets, potato processing, robotics, ceramics, and artificial joints. 
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Distribution and Logistics. Corridor T’s location between major Eastern and 

Midwestern markets has helped grow and attract several of the largest distribution companies in the United States, as well as the logistics operations of some 

the country’s best-known retailers. This includes the distribution of food products along the entire Eastern Seaboard and consumer electronics for the 

Northeast. Several of these companies have made very large investments in 

Southern Tier locations in recent years, underlining their commitment to remain 

in/expand within the region in the future. I-81, I-88, and NY 17/I-86 provide the 

Southern Tier with excellent access to major markets throughout the Northeast 

Corridor, the eastern part of the Midwest, and points south. I-86 is developing 

into a more viable east-west alternative, allowing truckers to save on I-90 tolls, a 

further enhancement for distributors operating from locations in the Southern 

Tier. 

Ohio Logistics has recognized the advantages of the region and has located a 

distribution center in Painted Post, and is anticipating future growth with the 

completion of the I-86 improvements as well as the conversion of U.S. 15 to I-99, 

providing it with north-south interstate access, as well as east-west. 

On the western segment of Corridor T, Kaman Industrial Technologies, a distributor of bearings, power transmission, electrical, fluid power, and motion 

control products, opened a new branch location in Olean. The company plans to 

serve both regional and national manufacturers from the location. Improvements to U.S. 219 and better access to the Buffalo market will help southwestern 

New York become more competitive as a distribution location. 

The completion of improvements to NY 17 east of Binghamton as part of the 

NY 17 upgrade to interstate standards will further improve access to the New 

York City area and Southern New England while the conversion of U.S. 15 to I-99 

in Pennsylvania will provide a new north-south route that will further enhance 

accessibility for the Southern Tier. Additionally, new interstates will add visibility to the region, making it more likely that other distributors will consider sites 

in the Southern Tier as prospective locations for expansion. 

Connecting People to Jobs, Tourist Attractions, and Services 

I-86 has improved connectivity to markets (labor force, suppliers) and business 

and non-business destinations outside the region. It also has improved commuting and other business travel within the region, benefiting businesses operating within the area. Improved mobility in the western part of the Southern 

Tier has helped attract delivery companies (e.g., FedEx), providing parcel delivery services that are crucial (and expected by businesses) to compete both 

domestically and worldwide. 

Health services have become more accessible and major new healthcare facilities 

on the 285-mile corridor are being built on sites immediately adjacent to the 

interstate (e.g., in Steuben County). In a similar fashion, new libraries, also in 

Steuben County are being built on sites next to the I-86 corridor. 
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Educational institutions, likely due to improved access by students and teachers, 

are selecting locations adjacent to I-86 for expansions. Jamestown Community 

College’s Olean branch recently expanded to a site near the highway and future 

plans call for another satellite campus close to I-86 in Belvidere. 

I-86 serves two major tourist districts, the Lake Chautauqua/Allegany State Park 

area in Southwestern New York and the Finger Lakes region in Central New 

York – both popular for visitors and second homes. Lake Chautauqua, and its 

venerable Chautauqua Institution, has been a popular destination for well over a 

century. I-86 aids access to the institution from the Cleveland area, as well as 

from Central New York. The improved highway also has been a factor spurring 

a $280 million investment at Peek’n Peak to convert the facility into a high-end 

year-round resort, combining ski, golf (including a PGA tour quality course), 

spas, new hotels, and a conference center. Nearby, the Village of Sherman, also 

on I-86, has received a grant to improve its Western-appearing downtown as a 

tourist draw, and the town of Mayville on the north shore of Lake Chautauqua 

has experienced a sharp increase in tourism-related development. 

New hotels and restaurants are being built throughout the I-86 Corridor, both to 

accommodate tourists and increased through-traffic. A well-placed rest stop on 

I-86 with a view of Lake Chautauqua has become a popular spot for drivers, 

attracting 220,000 vehicles in 2006. Many of these people are headed for the 

Seneca Casino in Salamanca, and tourist information has helped raise the 

awareness of the region as a place to visit beyond the casino. Directly on I-86 

frontage in Salamanca, the Seneca Casino has emerged as a leading tourist draw 

in Southwest New York. Cleveland is a key market for the region and I-86 is 

considered a lifeblood. In Central New York, the Finger Lakes Region is experiencing rapid growth as a tourist destination and I-86 is a key route for reaching 

the area from Cleveland, Philadelphia, Pittsburgh, and New York City – cities 

targeted by Finger Lakes’ marketing efforts. 

Overall Economic Development Impacts 

The I-86 improvements help the region’s employers by expanding the labor market. People can cover longer distances in less time and with greater reliability 

(less congestion, fewer unanticipated delays, and better snow removal) on I-86 

than on state and local roadways. For large manufacturers, the ability to draw 

on a bigger, more diverse labor pool is an important competitive factor that helps 

to keep them in the Southern Tier. For example, I-86 has enabled Olean employers to attract workers from as far away as Hornell, helping to meet labor needs. 

Distribution and logistics companies have recognized the advantages of locating 

on I-86 and further expansions are expected as I-86 and I-99 are completed, 

giving the Southern Tier an east-west and north-south interconnection. The 

completion of I-86 will improve access to Boston and New York, while I-99 in 

conjunction with I-390 and I-81 will provide interstate connections from the 

Southern Tier to Washington, Baltimore, the U.S. South, and the large Canadian 

markets. This future east-west and north-south interconnection already is being 
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marketed by Southern Tier economic development agencies even though I-99 

will not be completed until 2010 or 2011. 

Manufacturing companies, as previously discussed, also have been drawn to the 

I-86 corridor and more are expected as the interstate is completed. Industrial 

parks, such as the Airport Corporate Park in Elmira, offering access to both I-86 

and Elmira-Corning Regional Airport, are helping to attract a more diverse 

manufacturing base (e.g., aircraft, steel, and pharmaceuticals) to the Southern 

Tier region. In Elmira, both Sikorsky, a manufacturer of helicopters, and 

Vulcraft, a maker of steel joists, required proximity to an interstate as a condition 

for expansion. Investments such as these are expected to not only bring economic growth to the region but also will help the Southern Tier weather economic downturns. 

Jamestown, New York economic development officials describe I-86 as a boon to 

their area and pivotal for retaining its manufacturing jobs and manufacturing 

suppliers. Looking into the future, the city plans to redevelop it riverfront area 

into a major recreational attraction that would attract thousands of people on a 

yearly basis. The details of the project are being developed but it is clear that the 

prospects for such a proposal would be greatly reduced without the improved 

access that I-86 provides the city. 

3.1.4 Other Issues and Stakeholder Comments 

The towns and attractions nearby I-86 are trying to attract people from the highway, and are dependent on highway signage for marketing, but much of the 

through traffic is not aware of the recreational opportunities in the region. 

Through traffic on I-86 represents the most cost-effective way to market to 

potential visitors and higher traffic levels translate to more tourism dollars. 

However, it has proven very difficult and expensive to add signage to I-86. The 

area needs more signs showing how to obtain information (800-CALLNYS) and 

logo signs at exits pointing to area attractions and services. The logo signs are 

very expensive ($10,000 or more per year) and the process to post a sign is slow. 

3.2 CORRIDOR V (MISSISSIPPI) ANALYSIS SUMMARY

3.2.1 Background 

Appalachian Corridor V stretches from South Pittsburgh, Tennessee through 

Northern Alabama and into Northwest Mississippi (see Figure 3.2). The area 

that was the focus for this case study, however, is the segment between Tupelo 

and Pontotoc, Mississippi. The upgrade of this part of the corridor from a rural 

two-lane road to a separated four-lane highway would provide a four-lane connection between I-55 to the west and U.S. 45 to the east. The current upgrade 

plan has the four-lane highway divert from the old path of Route 6 and connect 

to U.S. 45 Southwest of Tupelo. 
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Figure 3.2 Corridor V in Mississippi, Alabama, and Tennessee 
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Much of the economic development in the region was due to the partial completion of Corridor V according to local experts and stakeholders. The completion 

of the remaining 8.5 miles of this corridor segment is likely to spawn a renewed 

development effort in Lee and surrounding counties especially in light of the 

close proximity to Corridor X and the recent decision of the Toyota Corporation 

to locate a major manufacturing facility just North of Tupelo. 

3.2.2 Current Economic and Transportation Conditions 

The corridor expansion falls primarily within Lee and Pontotoc Counties in 

Northern Mississippi. Both of these counties have traditionally lagged behind 

overall growth in the U.S. economy but have seen improved economic conditions 

in recent years. As of April 2007, the unemployment rates in Lee and Pontotoc 

County were 5.8 and 6.1 percent, respectively. These rates were the lowest 

among the eight neighboring counties in Northeast Mississippi but still nearly 

two percentage points higher than the national average of 4.3 percent in the same 

month. Census data from 2000 indicate median household incomes of $32,055 

and $36,165 in Pontotoc and Lee County, respectively, which was significantly 

below the average of $41,994 for the entire United States in the same year. 

Population in Lee County grew from 65,575 in 1990 to 75,755 in 2000 according to 

Census data. 

Lee County (and Tupelo, in particular) has established itself as the retail trade 

magnet for the surrounding counties. As of March 2007, total retail sales receipts 

in Lee County amounted to $1.3 billion. A large regional mall is located north of 

the city and provides shopping opportunities for residents in nearby towns and 

counties. Access from the south is somewhat more difficult because of increased 

congestion on local roads. 

The completion of Corridor X in Northern Mississippi and Alabama has made 

transportation easier and allowed for improved connectivity in the area. The 

corridor connects with U.S. 78 and combined will be renamed I-22 once all interstate requirements have been met. The new I-22 will further provide connectivity to Memphis and other Southern states, also providing direct benefits to Lee 

and Pontotoc Counties. However, one key area of concern for the area is the lack 

of connectivity between what will become I-22 and Corridor V. Route 15 which 

runs north-south from Pontotoc to North Albany is significantly congested 

during peak periods. One of the reasons is the location of the largest furniture 

manufacturer along this route. Safety is an additional concern according to local 

stakeholders due to the existence of several schools along the same route. 

Route 9 connecting with the future I-22 at Blue Springs, the site of the future 

Toyota plant, also is suffering from increasing congestion. According to local 

stakeholders, these two routes and their respective levels of traffic provide significant transportation problems for the region. 
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Major Employers and Trends 

The case study area is traditionally known for its furniture manufacturing. 

Roughly one-third of total employment in Lee County is a result of manufacturing 

employment. As of January 2007, Lane Furniture Industries was the second 

largest employer in the region with 2,850 employees. Only the North Mississippi 

Medical Center located in Tupelo was a larger employer with 4,286 positions as 

shown in Table 3.2. 

Table 3.2 Major Employers in Lee County 

Companies Number of Employees 

North MS Medical Center 4,286 

Lane Furniture Industries 2,850 

Cooper Tire and Rubber 1,550 

Tupelo Public Schools District 1,200 

JESCO, Inc. 1,000 

Wal-Mart, Sam’s 979 

MTD Products 950 

Bancorp South 800 

Lee County Schools 751 

Super Sagless Corporation 720 

Day-Brite Capri Omega 700 

Tecumseh Products Company 670 

HM Richards, Inc. 620 

City of Tupelo 575 

Berkline Corporation 400 

Hancock Fabrics 400 

Renasant Bank 390 

Lee County 339 

Alan Whit Furniture Company 300 

Source: Community Development Foundation, Executive Profile, January 2007. 

Furniture manufacturing, however, has gone through challenging times in recent 

years. Since 1994, one-third of all manufacturing jobs in this sector have been 

lost. Due to increased competition from China and other Southeast Asian countries, local companies had to lay off workers and generally downsize operations. 

Comprehensive furniture manufacturing has been replaced with assembly of 

products and production of higher value items. The shipping and importing of 

assembled furniture items is difficult because of their size. Hence, local firms 

have increasingly adopted the approach of importing segments and then assem-
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bling items themselves. This is one of the reasons why the loss of jobs in this 

industry has been halted in recent years. In addition, consumers in the United 

States demand relatively short delivery times. The average currently is about 18 

days after the receipt of the order according to local economic development and 

business experts. Production and shipment from competitors in China takes 

more time and, therefore, provides an advantage for local firms. 

The main recent development shaping the economic profile of the region is the 

decision of the Toyota Corporation to locate a major assembly plant just north of 

Tupelo. Current estimates are that the first car may be produced in mid-summer 

2009. The development of the plant is being completed in two phases. Phase 1 

includes a total capital investment of $1.3 billion and will create 2,000 plantbased and another 2,000 supplier jobs. Phase 2 is still being developed but current estimates are that the completion of this phase will likely double the Phase 1 

investment and employment estimates. 

Toyota will be manufacturing Highlander Sport Utility Vehicles at this site. This 

is the first time that Highlanders will be built in the United States and, therefore, 

it will require a new network of parts suppliers, ideally located in or near the 

region. Local economic development experts further estimate that in addition to 

the direct jobs, up to three jobs per one direct job will be created through indirect 

and induced multiplier effects. The siting of the Toyota plant is, therefore, a significant economic development change for the region with potentially very beneficial short- and long-term consequences. 

Competitive Advantages of the Corridor Region 

The Corridor region can be characterized by having several distinct advantages 

that may further facilitate economic development. Generally, the area has good 

school systems, including K-12 as well as higher education. Specifically, the 

University of Mississippi located in Oxford on Corridor V provides a large pool 

of graduates on an annual basis. In addition, the area also has several community colleges which allow students to obtain two-year associate degrees or more 

vocational education. This makes for a relatively skilled workforce and consequently an attractive pool of workers for current or future employers. 

In addition, most companies in the study are non-unionized resulting in more 

competitive wage levels. These lower payroll costs combined with what has 

been perceived as high productivity due to good work ethic also are very attractive for employers. 

The location of the corridor also may be advantageous to economic development. 

In addition to local factors, freight traffic is routed through the area via rail and 

the overall volume of rail and truck shipments will likely increase in the future 

according to local experts. Toyota’s decision to manufacture cars in this area is 

evidence that industry leaders also have discovered the location advantages of 

Northeastern Mississippi and the connectivity to markets such as in Tennessee 

and Alabama. 
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Competitive Disadvantages/Obstacles of the Corridor Region 

Local stakeholders have primarily identified transportation issues as the key 

obstacle for the corridor. In particular, Route 15 is now experiencing significant 

peak-hour congestion which has negatively affected freight and logistics of the 

large furniture manufacturers along this route. This has restricted the feasibility 

of North-South connections between the two highways in the eastern (I-55), and 

western (I-45) parts of the State. 

The completion of Corridor X and the relocation of Corridor V, from north of 

Tupelo to south of the City adjacent to the Regional Medical Center have further 

exacerbated the problem. No direct connection between Corridors X and V is 

planned and with Toyota having located along Corridor X north of Tupelo, this 

may only further worsen the traffic volumes on Routes 15 and 9 which currently 

function as the connectors between these corridors. Also, with most retail trade 

and manufacturing located north of the city, areas to the south may have to catch 

up economically. An industrial park is being developed but the success of such a 

venture will directly depend on the completion of Corridor V. 

3.2.3 Economic Impact of Corridor 

The partial completion of the corridor prompted economic development along 

the old Route 6 all the way from Oxford to just west of Tupelo. This has created 

the need for additional retail trade establishments in the area. For example, a 

Wal-Mart Supercenter is located in Pontotoc County, just adjacent to Corridor V, 

and the retail store clearly makes use of the transportation infrastructure by 

attracting customers from a broad area, especially west of Lee County. Completion of the corridor is likely to continue this trend and some of the additional 

benefits of the completed corridor are described below. 

Industry Opportunities 

The completion of Corridor V is expected to have significant positive impacts for 

local industries. Whereas currently all freight truck traffic going east-west has to 

go west from Tupelo on the old Route 6 in order to ultimately reach four-lane 

roads, the completed corridor would allow freight movements through Tupelo. 

Routing traffic through the city currently is very limited because all through traffic needs to go through the downtown area in order to connect Corridor V with 

I-45. 

The largest development opportunities may be south of Tupelo once the corridor 

is completed. The city has provided the infrastructure in the form of a developed 

industrial park and other available land. Planning has taken into consideration 

that the City’s objective is to balance economic development on the northern side 

with direct job creation on the southern periphery. As a result of this planning 

effort, new automotive parts suppliers for the Toyota facility are expected to be 

attracted to the industrial land south of Tupelo. 
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The completed corridor also would benefit the existing industries, such as furniture manufacturers, because of the improved connections to markets to the 

east, plus I-45. Finally, the Regional Medical Center will gain access to a much 

wider service area and residents in counties beyond Lee and Pontotoc will be able 

to make use of high-quality medical services without incurring large travel costs. 

Facilitating Trade and Market Access 

Together with the completion of Corridor X, Corridor V serves an important 

purpose in the local transportation and distribution system. As a result of the 

improved highway, travel times from the west will be significantly lower. This 

applies to both the through traffic and traffic ending in Tupelo. Trade between 

the different areas of Lee County as well as the surrounding counties and the 

entire State will see improvements. For example, retail trade will benefit from 

improving access to areas west of Tupelo. At the present moment, the retail 

trade catchment area is primarily north and northwest of Tupelo. Retail outlets 

in Tupelo can attract shoppers from as far as Memphis according to some local 

stakeholders. However, only limited access exists from other directions. Since 

there is no good east-west connection, shoppers from the west, for example the 

Greater Oxford area, may prefer to travel north towards Memphis for their retail 

purchases. 

In addition to any retail trade benefits, freight patterns and logistics also will be 

improved for regional and national markets. Much of the freight traffic originating at the Gulf Coast and heading towards Memphis (and points beyond) also 

is directed through Tupelo and currently has no other option but to take 

Corridor X up to Memphis. The completed Corridor V will provide an alternative to that route especially for trucks whose ultimate destination is not Memphis 

but rather points further North and West. 

The completion of the corridor also will benefit the connectivity in regard to 

freight. Approximately 400 trucks each day enter and leave the Ashley furniture 

manufacturing plant. These trucks are in part limited by the incomplete corridor 

infrastructure and experience delay especially on Routes 15 and 9. A lot of the 

congestion in an around Tupelo is driven by these heavy volumes of freight 

movements. A completed Corridor V would allow all freight to avoid the 

downtown area and use the limited access highway to connect to other highways 

in the East or West. 

However, local stakeholders have pointed out that expansion of Route 15 from a 

two- to a four-lane road is at least as important as completion of Corridor V. 

Especially now that the Toyota site has been chosen, a connection between 

Corridor V and X would bring immediate benefits according to local experts. 

Local stakeholders anticipate that the alternative of moving along a completed 

Corridor V east, then north on I-45 would be an inferior travel route. 
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Connecting People to Jobs, Tourist Attractions, and Services 

The completion of Corridor V will significantly improve connectivity in the 

region. For example, commuters from western parts of the county or counties 

west of Lee County currently face a lengthy commute to Tupelo employers. 

With the opening of the corridor, travel times should fall and commuting to large 

employers in the area will become less congested. At the moment, workers from 

11 different counties commute to the furniture manufacturing plant owned and 

operated by the Ashley Corporation. This is a sign that commuting behavior in 

the area has changed to the point where workers are willing to accept longer 

trips, partially due to a relatively scarcity of jobs and potentially higher wages in 

employment centers. Another contributing factor can be found in zoning practices. Much of the residential growth has been driven by land use policies such 

as increased numbers of subdivisions in Lee and Pontotoc County. 

Improved corridor connectivity also will improve the access to services in the 

region. For example, the completed corridor will allow for better access to the 

businesses in downtown Tupelo. Being a center for economic activity in the 

region, Tupelo is home to businesses such as several financial institutions, office 

complexes, and the regional medical center. Hence, residents of the area will be 

able to access these businesses more easily via a completed Corridor V. The 

medical center is one of the largest rural hospitals in Mississippi. It serves both 

the immediate area and also population within a wider radius around Tupelo. 

The completed corridor will consequently allow a larger share of the regional 

population to take advantages of the services offered by the medical facility. 

Tourism has not been identified as a significant issue by most stakeholders. The 

exception is the area around Oxford, on the western end of Corridor V. The local 

economy in Oxford is supported by both the University of Mississippi and tourism and the many small hotels and bed and breakfast establishments. Even 

though the completion of the corridor will improve east-west accessibility for 

visitors, it was pointed out that most tourists may actually reach Oxford via 

Memphis or the Gulf Coast and, therefore, depend primarily on the north-south 

corridor of I-55 to the west of Oxford. 

Overall Economic Development Impacts 

The overall expected economic impact is seen as very positive. A completed 

Corridor V will allow for better connections of freight trucks and employees to 

the employment and manufacturing centers in the area. Some of these centers 

are still in development and it will take several years for the full impact to be felt. 

In addition, there will be a significant benefit from improved transportation to 

retail trade locations. 

However, the incremental impacts of the completion of the corridor will be difficult to measure because of the potentially simultaneous completion or expansion 

of the Toyota plant North of Tupelo. It is this aspect that will likely be the 
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driving force behind future economic growth and development in the 

Northeastern Mississippi region. 

In order to stimulate economic growth and development opportunities, it seems 

essential that Corridor V is completed as soon as possible. There is much economic activity going on in the area and most of its success depends on the flexibility and efficiency of the local transportation system. 

3.2.4 Other Issues and Stakeholder Comments 

The stakeholders that were interviewed for this case study consisted of local 

elected officials and their respective staff, economic development professionals, 

transportation experts, as well as other experts in the field. Without exception, 

the importance of completion of the corridor was identified as a very high priority. However, the capacity of local roads, such as Route 15, was further identified as one of the key bottlenecks which could restrict economic growth 

opportunities in the future. 

Mississippi Department of Transportation officials pointed out that due to the 

changed layout of Corridor V; there is now a lack of funding even if the capital 

improvements were funded as originally planned. Additional funds need to be 

included in the planning in order to allow for a complete four-lane segment of 

highway to be constructed South of Tupelo. 

3.3 CORRIDOR H (WEST VIRGINIA) 

ANALYSIS SUMMARY

3.3.1 Background 

The ADHS-designated “Corridor H” is approximately 150 miles between I-79, 

near Weston, West Virginia to I-81 in Strasburg, Virginia (see Figure 3.3). Portions of this highway corridor have been completed but much remains to be 

built. Completed segments include: 

The western portion of the Corridor (about 40 miles) from I-79 through 

Buckhannon to Elkins and north to Kerens; and 

An approximately 20-mile segment in eastern West Virginia from Moorefield 

to Wardensville (with uncompleted segments to the east and west). 

Significant work on this corridor remains, thus limiting the current effectiveness 

of completed segments. For example, the uncompleted segment from Kerens to 

Moorefield is necessary to more efficiently and cost-effectively ship products to 

eastern markets and seaports such as Baltimore and Norfolk. Furthermore, while 

the completed segment from Moorefield east to Wardensville substantially 

improves travel time and safety, the rural, mountainous two-lane highway that 

remains to the east (connecting to I-81 and Strasbourg in Virginia) limits the 

attractiveness of this route for freight and passenger travel. 
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Figure 3.3 Corridor H in West Virginia and Virginia 
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Feedback from all stakeholders in West Virginia indicates that the environmental 

review process has been completed for the remaining West Virginia segments 

and that the location of the highway corridor alignment is finalized.15 The constraining factor appears to be financial. The State is moving forward, but full 

funding and construction may take upwards of 10 to 12 years to complete. The 

segment from Moorefield west to Scherr currently is under construction. Less 

encouraging, funding and final plans to complete the Virginia section of 

Corridor H are still lacking for the critical connection to I-81, the nearby Inland 

Port, and I-66 connections east to the Washington, D.C. metro market. 

The economic impacts analyzed in this case study focus on the anticipated benefits of completing the entire Corridor H. The study area for this case study is 

focused on the West Virginia counties along the corridor: Lewis, Upshur, 

Barbour, Randolph, Tucker, Grant, and Hardy counties. These counties comprise a combination of the Region VII and Region VIII planning and development councils. In fact, the top priority of the Regional VII Planning and 

Development Council in their Comprehensive Economic Development Strategy 

(CEDS) is completion of Corridor H and thus there is widespread support locally 

and regionally for this project. Although major segments of the highway corridor are incomplete, examples of economic development and industry success 

stories related to the existing segments of Corridor H are provided as indication 

of potential economic effects. 

3.3.2 Current Economic and Transportation Conditions 

Economic and demographic trends in Corridor H West Virginia counties are 

largely flat. Both employment and population are largely unchanged over the 

past five years, though the labor force has grown slightly and the unemployment 

rate has decreased. For a rural section of West Virginia, this is not bad news. 

Indeed, employment gains and retention in various service industries and 

selected manufacturing and natural resources industries are preventing overall 

declines that might be expected with traditional industries such as mining and 

agriculture that have experienced declining employment. Industries and initiatives with developmental potential include: 

The wood products industry, with a mix of raw and finished goods is strong 

in the Corridor with the Appalachian hardwood forest providing in-demand 

wood resources. Many of the larger manufacturing and exporting businesses 

within the region are directly related to wood products, including Armstrong 

and American Woodmark (see Table 3.3). 

 

15 Current alignment is a northern route through Parsons, Davis, Bismarck, and Scherr 

before heading east to connect in Moorefield. Earlier Corridor H alignment plans called 

for a more southern route from Elkins east to Petersburg and then to Moorefield. 
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Table 3.3 Major Private Sector Employers in Corridor H 

County Company Industry Number of Employeesa

Randolph Armstrong Wood Products Hardwood Products 950 

Tucker Kingsford Charcoal 125 

Upshur Weyerhaeuser Wood Products 

Upshur Appalachian Forest Saw Mill Wood Products 75 

Lewis Dominion Energy 150 

Lewis Lynn Energy Energy 153 

Lewis Viking Swimming Pools Manufacturing 125 

Tucker Timberline Four Seasons Resort Management Tourism 

Tucker Canaan Valley Resort Tourism/Ski 277 (Peak Season) 

Randolph Davis Memorial Hospital Health Care 

Randolph Colonial Millworks Lumber 

Hardy American Woodmark Cabinet Making 300 

Hardy Fertig Cabinet Company Cabinet Making 

Hardy Pilgrim Pride Corporation Food Processing (Poultry) 

Hardy Conagra Poultry Food Processing (Poultry) 

Source: Information obtained through interviews with regional and local economic development officials; the Region 8 

PDC Comprehensive Economic Development Strategy 2004-2008; and Region VII PDC Annual Report 

FY 2006-2007 CEDS. 

a As available. 

The cities and towns along the completed section of Corridor H from I-79 to 

Elkins are showing signs of economic vitality with new commercial investment, new housing starts, and positive employment trends. While some of 

the new investment is in industries not normally associated with growing the 

base economy (retail, hotels), the investments by national chains (Lowe’s, 

Hampton Inn, etc.) are an indicator of the economic prospects of the region.16

The poultry and other manufacturing industries near Moorefield have been 

able to offset other business departures with gains partly due to the completed section of Corridor H to the east. 

Relatively new industrial parks are either under development, expansion, or 

being built in most Corridor H counties, as the region leverages completed 

sections of the Corridor or anticipates future growth opportunities by 

focusing on all-important “shovel ready” sites at industrial parks. 

 

16 This is especially relevant given the recent emphasis on attracting prison facilities 

which highlights how the Corridor region, as recently as 5 to 10 years ago was willing 

to recruit any industry that could help provide job opportunities. 
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The Corridor H towns and counties between Kerens and Moorefield remain 

largely rural but with the completion date of the entire Corridor stretching out, 

this very rural, isolated economy struggles to grow and retain its traditional 

industry strengths such as tourism (including two nearby ski resorts) and the 

coal industry. For example, the Canaan Valley Resort in Tucker County has 

recently been losing money and has an out-dated facility. At the same time, the 

State sees the economic benefit of that facility and is working with the resort on a 

major renovation project. The success of that renovation project, however, 

largely depends on the ability of the resort to attract more visitors from the 

booming, large Washington, D.C. metropolitan area, which continues to stretch 

westward. Thus, the completion of Corridor H will enhance these destination 

tourism businesses. 

Another economic area that currently lags behind is the warehousing and distribution industry. Economic development officials note the lack of distribution 

centers or larger trucking companies along Corridor H, and are quick to point 

out that until the Corridor is completed and freight can move efficiently in the 

region, no significant gains in this industry are expected. 

Competitive Advantages of the Corridor Region 

Similar to other areas within Appalachia, Corridor H combines quality of life 

attributes (mountains, lakes, rivers, historic villages, and natural attractions) with 

relatively strong school systems and a productive workforce. A tradition of 

mining and manufacturing expertise has helped provide a strong work ethic and 

gives the region a range of skills needed by industry. While the labor force is 

relatively well-regarded by the private sector and economic development officials, it is still lower cost compared with larger metropolitan areas. It should be 

noted, however, that there is some concern of late about job-ready skills and 

work ethic of younger workers just out of high school, and some counties (e.g., 

Tucker) have such low population that it can be difficult to find enough quality 

workers. 

The state’s traditional energy industry, together with the more recent wind farm 

industry, help to keep energy costs reasonable. Other cost factors, such as land 

and buildings, also tend to be lower than average, though that has changed 

recently along the completed sections of Corridor H. 

Perhaps the region’s biggest competitive advantage currently is the Appalachian 

hardwood forest and the range of wood products industries located in the 

region. Many of these, including Armstrong, Coastal Lumber, and Appalachian 

Forest, produce highly sought wood products that are exported to a range of 

international destinations (Europe and Asia) in addition to other domestic destinations. The success, and in many cases growth, of these industries highlights 

the quality of their product given the tremendous transportation disadvantage 

faced by area industries due to a lack of efficient, safe, cost-effective transportation routes to access international markets. 
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Another major asset for the region, especially on the eastern half of the Corridor, 

is proximity to the Washington, D.C. metropolitan area. Already, housing 

growth (retirees and second homes) in Hardy and to some extent Grant County 

is occurring related to D.C. market proximity. The natural beauty of the area’s 

mountain ranges and valleys combined with relatively low-housing costs and the 

ability to live close enough jobs and business opportunities to the east is 

increasingly appealing to homebuyers. 

While the Corridor H region does not possess significant high-technology or 

research and development firms, the western part of the region has benefited 

from completion of Corridor H, which allows commuters the chance to access 

high-paying, high-skill jobs in the Clarksburg Federal laboratories and biometrics industry (north along I-79). 

Competitive Disadvantages/Obstacles of the Corridor Region 

Without a doubt, the lack of a completed Corridor H is the biggest impediment 

to broader economic growth throughout the region. While congestion in a traditional sense (traffic volumes) may not be a problem on the two-lane roads that 

travel east-west from Elkins to I-81 in Virginia, the windy, mountainous nature 

of those roads creates very slow driving conditions, especially for freight trucks 

(and the vehicles behind them). These limitations lead to increased transportation costs, reduced reliability, and longer distances when shipping via alternative 

routes: 

Local lumber product companies estimate that it is three times more costly to 

ship their wood products to east coast ports (primarily Baltimore and 

Norfolk) than to ship the product from the port to Europe. 

Avoiding the windy two-lane east-west roads to use I-79 and I-68 increases 

travel distance to east coast ports by over 300 miles. 

Local wood products businesses consistently score poorly on customer service because of the unreliability of their shipments, tied to poor east-west 

connections. 

Other competitive disadvantages include infrastructure capacity, particularly the 

availability of cost-competitive local water and wastewater systems, natural gas 

and electric service, and broadband telecommunications. Increasingly, economic 

development officials are developing “shovel-ready” sites near the Corridor, and 

working to provide sufficient water/sewer facilities. 

Another concern is the relative lack of alternative modes of transportation for 

passenger and freight movement. In general, freight rail and air infrastructure 

and service levels are below average. The region, in particular near Buckhannon, 

is working to expand air transport facilities such as extending runways to allow 

for a broader range of private and commercial airplanes. Freight rail service is 

provided by CSX in parts of the Corridor H region, but is infrequent and not 

fully connected to east coast markets. 
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The Virginia Inland Port near the intersection of I-81 and I-66 is the most promising freight facility near the region, providing advanced logistics and customs 

services such that a shipment can flow seamlessly from the Inland Port to a ship 

via rail and containers. However, until Corridor H is completed, the benefits of 

the Inland Port largely are escaping the region’s exporters (e.g., wood products 

industries note that at least 25 percent of their goods are exports). 

A final competitive disadvantage is not specific to the region but is a West 

Virginia statewide issue, as multiple economic development officials note that 

the State has relatively high business taxes. 

3.3.3 Economic Impact of Corridor 

This section of the Corridor H summary is focused on the expected economic and 

industry benefits of completing the entire highway corridor. 

Industry Opportunities 

Manufacturing. The completion of Corridor H will provide immediate benefit 

to the region’s manufacturing industries. With a projected 25-year stock of 

Appalachian hardwood forest, the various wood products firms should expect 

lower shipping costs and increased international export potential as the connections to east coast ports such as Norfolk will be greatly enhanced. The region is 

attempting to develop and recruit more value-added, downstream wood products firms, but the lack of east-west transportation hinders those opportunities. 

In addition, the Corridor region’s other manufacturing industries, such as aluminum, the Kingsford charcoal company, and food products also should benefit 

significantly from Corridor H completion.

Tourism. Every section of completed Corridor H reduces travel time and 

increases travel safety for visitors to the region. In addition to numerous hiking, 

camping, and other natural attractions, the region’s two major ski resorts – 

Canaan Valley and Timberline – stand to benefit greatly from Corridor H completion. The Canaan Valley Resort employs up to 275 people in peak season 

(February) and is Tucker County’s largest private employer. The State recently 

agreed to partner with the resort for major renovations that will expand services, 

including a year-round conference center. Their business plan and the State’s 

investment partnership explicitly incorporate Corridor H completion into their 

plans to attract increasing numbers of visitors from the D.C. market. 

Retail and Services. While traditional economic development analysis focuses 

on “economic base” industries that export goods and services, recent investments 

in a mix of retail, service and hotel industries (Lowes, Wal-Mart, Kmart, Arby’s, 

Pizza Hut, Hampton Inn) along completed Corridor H segments from I-79 to 

Elkins represent a net economic gain for the region. These retail and services 

businesses benefit the region because they provide more accessible retail services 

to local residents and they support the positive population and economic trends 

in this region. These major chain investments may be representative of addi-
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tional economic investment potential upon full completion of Corridor H. While 

not all areas and towns in the Corridor region are likely to see these kinds of 

developments, towns with some commercial base (like Kerens, Parsons, Elkins, 

and Moorefield) are likely to benefit. 

Facilitating Trade and Market Access 

Completion of Corridor H will directly improve market access and trade potential, especially those industries in the Corridor region that already participate 

heavily in international (and domestic) trade. The most likely direct effects 

include: 

Greatly Reduced Shipping Costs for Inbound and Outbound Goods 

Movement – Current freight shipments face cost premiums due to: a) longer 

distances (especially when avoiding two-lane roads) and thus higher costs; 

2) longer transport times (Armstrong estimates that the 48-mile stretch to 

Virginia can take 3 to 4.5 hours); and 3) unreliable delivery windows. Many 

of the region’s firms need access to east coast ports like Baltimore and 

Norfolk and Corridor H will greatly improve access and reduce costs. 

Connections to the Expanding Washington, D.C. Market Area – Whether it 

be tourists, commuters, or suppliers and buyers, Corridor H will greatly 

improve connections to the Washington, D.C. market and the generally affluent Virginia suburbs. 

New Industry Opportunities – The lack of a completed Corridor H, while 

not the only restraining factor for economic development, is a major impediment to economic growth in industries such as distribution centers, or hightech value added manufacturing and services. Without Corridor H completed, 

much of the region simply doesn’t qualify for the early stage site location 

assessments for potential business expansions or relocations. 

Along these lines, it is worth noting some of the current operations and transportation constraints faced by Armstrong Wood Products, by far the largest private sector employer in the Corridor region.17 Armstrong is located in Beverly, 

West Virginia, near Elkins and the eastern part of the completed Corridor H from 

I-79 traveling east. They are part of a national company with other facilities in 

nine other states and thus compete for future expansions and capital investment 

and must remain productive and profitable. They have grown rapidly from 68 

employees in 1990 to 950 employees today with an average hourly wage of 

$12.60 for production workers. They are now the largest producer of prefinished 

hardwood floors in North America, producing more than 1.5 million square feet 

of finished product per week. 

 

17 Much of the information in this section is derived from a presentation on Armstrong 

Wood Products provided and given by Donnie Staten (shipping manager). 
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Armstrong has significant inbound and outbound shipments. Incoming truck 

loads of lumber total 350 per week, with at least 50 percent from West Virginia 

suppliers and the remainder from 10 states and Canada. Armstrong ships 800 

full or partial truckloads per month primarily to the Northeast U.S. and Canada 

via private carriers, with an additional 50 to 100 truckloads per week of byproduct (sawdust) to Virginia (near I-81). Incredibly, total shipments for 2007 

were estimated at over 10,000 compared to 1,700 in 1993 with total inbound and 

outbound shipments at approximately 25,000. Consistent with findings from 

other firms, Armstrong envisions significant shipping benefits from completion 

of Corridor H, including: 1) improved safety, especially in the winter; 2) reduced 

transit times, lower costs and improved customer service; 3) improved contract 

negotiations with private carriers and lumber suppliers; and 4) reduced consumption of fossil fuels as Armstrong currently pays fuel surcharges. 

Connecting People to Jobs, Tourist Attractions, and Services 

Economic development officials and private employers throughout the Corridor 

region noted that many workers commute a significant distance to jobs, and 

employers often recruit a labor force within a 60-mile radius. The completion of 

Corridor H will directly benefit the ability of employers to draw from a larger 

labor force and hopefully reduce turnover during the winter months among 

workers who commute longer distances. 

Completing Corridor H also will provide significantly improved connections to 

the D.C. market area, which is a primary market for tourist attractions in the 

region. They also provide a growing share of new residential development for 

second homes and workers with flexible schedules/locations. Canaan Valley 

Resort noted that their visitors greatly appreciated the completed section of 

Corridor H to their east and the need to finish other sections to draw the number 

of visitors necessary to return to profitable operations. 

Finally, major hospital facilities and specialized health care facilities are relatively sparse along the Corridor region (notably in Barbour County). A completed Corridor H will enhance access to facilities such as Davis Memorial 

Hospital in Elkins for both patients and the workforce. 

Overall Economic Development Impacts 

As noted previously, completion of Corridor H is consistently the top priority for 

local and regional economic development officials, and they tend to be optimistic 

about the likely positive economic benefits of the highway project. This is generally supported by direct input from private employers in the manufacturing and 

tourism industries. Completed segments, namely I-79 to Elkins and Kerens via 

Buckhannon, provide evidence of new private investment, higher traffic levels, 

and the development of “shovel-ready” industrial sites and new/expanded 

companies. A visit to the region and driving the existing windy, mountainous 

two-lane roads makes abundantly clear the transportation constraints voiced by 

various stakeholders. Completion of Corridor H will dramatically lower travel 
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times and provide access to east coast markets that is likely to aid in the retention 

and attraction of business activity. 

At the same time, these encouraging future economic benefits need to be placed 

in context regarding the nature and conditions of the Corridor region’s communities. Many sections of the Corridor region, namely in Grant and Tucker counties, appear unlikely to either want or have the capacity to significantly expand 

economic activity. Consequently, it is appropriate to temper future projections of 

economic development effects of completing Corridor H to those counties most 

likely to fully leverage this future asset. 

3.3.4 Other Issues and Stakeholder Comments 

While work continues on Corridor H to the west of Moorefield, local stakeholders expressed significant concern regarding the political and funding conditions necessary to complete the entire highway project. Consequently, most 

stakeholders are proceeding with their plans mindful of Corridor H but not 

dependent on the completed roadway. The concerns voiced by multiple respondents focused on: 

The Virginia Section of Corridor H from the Border to I-81 – This stretch of 

roadway currently is a fairly windy, two-lane road with limited capacity, no 

passing lanes, and limited shoulders. Stakeholders note that this section of 

Corridor H does not appear to be a priority for Virginia and regularly is not 

included within the State’s near-term program of funded or planned projects. 

A key to Corridor H full connectivity is reaching I-81 (a major north-south 

truck route) and the Virginia Inland Port, and until all sections are complete, 

large trucks will seek to avoid this two-lane facility. 

The West Virginia Section from Kerens to Davis – Stakeholders note that 

this segment of Corridor H within national and state forest territory is likely 

to be the final segment completed within West Virginia. There are a number 

of expensive bridges and land grading projects that are needed to upgrade 

the existing highways, and stakeholders fear that it could take years to secure 

the funding and complete the engineering/construction of this section. 
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4.0 Travel Impacts, User Benefits, 

and Accessibility 

This section describes results of completing the Appalachian Development 

Highway System (ADHS) in terms of: 

Travel Impacts. The highway capacity additions that corresponded to the completion of ADHS corridors were coded into the multi-region travel model 

described in Section 2.0. The model measures changes in the driving conditions 

for autos and trucks (further separated into non-freight trucks and commoditybased trucks), generating estimates such as traffic volume, aggregate travel time, 

and speeds. 

User Benefits. Based on the results of the travel network model, user benefits 

due to highway improvements (travel-time savings, operating costs, emissions 

cost, and safety) are estimated in monetary terms and compared to the no-build 

scenario. The value of time varies depending on trip purpose and vehicle. 

Accessibility. In addition to monetized user benefits, the travel model results 

also are used to determine accessibility gains to workforce, employment centers, 

transportation facilities such as airports, and other regional points of significance. 

The theory behind this analysis is that by improving highway speed, travelers 

would be able to access destinations and markets farther away within the same 

drive time radius. 

4.1 TRAVEL IMPACTS

The travel model for the ADHS study area was run using several population 

growth scenarios. As pointed out earlier in this report, Woods & Poole (W&P) 

provided a scenario that was slightly more aggressive than the forecast supplied 

by Global Insight (GI). As a result of the two forecast alternatives, the travel 

model produced two alternative travel impact scenarios. In essence, travel 

impacts are measured by determining the difference in total VMT and VHT in 

the no-build and the alternative build case (ADHS completion). The resulting 

difference is the effect that the ADHS completion has on transportation system 

performance. Travel impacts are reported for two forecast years – 2020 and 2035. 

Table 4.1 shows VHT results for the Global Insight forecast. 
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Table 4.1 Daily VHT Based on Global Insight Forecast 

Thousands 

Thousand VHT Total All Trucks Automobile Non-freight Trucks 

2020

No-Build 11,966 2,852 8,024 1,091 

Alternative 11,664 2,741 7,895 1,028 

Difference -303 -111 -128 -63 

2035 

No-Build 20,658 7,163 11,695 1,801 

Alternative 19,901 6,728 11,491 1,681 

Difference -758 -435 -203 -119 

Source: Cambridge Systematics, Inc. 

Travel impacts based on the Global Insight forecast show a decline in daily 

travel-time savings (VHT) for all vehicle categories (trucks, autos and non-freight 

trucks) in 2020 reflecting the travel efficiencies of completing the system. The 

VHT impacts for 2020 were approximately equal for all trucks and automobiles. 

Total VHT reduction in 2035 is projected to be significantly larger, reflecting the 

growth of traffic volumes and benefits from completing the ADHS. In 2035, 

truck VHT reductions constitute more than half of total VHT decline in that year. 

In Table 4.1, the VHT difference for the Global Insight forecast across all vehicles 

types is estimated to be approximately 303,000 per day in 2020 and 758,000 per 

day by 2035. In annual terms, this corresponds to approximately 212 million 

fewer hours of travel in 2035 as the growth in travel-time savings from 2020 to 

2035 reflects savings compared to traffic volumes and congestion without the 

completed corridors. A significant share of the total VHT savings is for freight 

truck trips due to: a) the long-distance nature of the trips; b) strong annual 

growth in freight truck tonnage (2.5 percent per year); and c) strong diversion to 

significantly faster and/or more direct routes. 

Over the same time period, total VMT across the entire highway network is 

projected to increase slightly by 2035 after an initial decline in 2020. This increase 

in traffic was driven by the growth in vehicle miles traveled for the automobile 

trip category. Route diversion for auto trips onto the ADHS corridors is 

projected to substantially increase projected VMT on ADHS highways. The 

increase in VMT on ADHS completed corridors is 124 percent in 2020 and 

142 percent in 2035, indicative of improved travel performance on these routes. 

Changes in VMT due ADHS completion can stem from two dynamics: 

1) reductions in VMT based on the use of more direct routes offered by ADHS 

corridors; and 2) increases in VMT as some trips divert from more direct but 

slower local roads to faster but less direct ADHS corridors. In the case of truck 

trips, the resulting drop in VMT in 2020 and 2035 for both forecast scenarios 
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implies that on net, the more direct routes offered by ADHS corridors reduces 

truck VMT as compared more circuitous routes often chosen by trucks to stay on 

major (e.g., Interstate) roadways. While truck VMT in the entire ARC region are 

estimated to fall slightly, freight truck VMT on ADHS corridors is estimated to 

increase dramatically. Consistent with the travel efficiency-based user benefits, 

freight truck VMT on to-be-completed ADHS corridors is expected to be four 

times greater in 2035 than under no-build conditions. 

The travel impacts based on the Woods & Poole population and economic forecasts (Table 4.2) show a similar pattern. VHT decreases significantly across all 

categories over the study period. Additionally, VMT decreases slightly for all 

modes by 2020 while in the longer term VMT goes up as a result of the increase 

in VMT for autos. 

Table 4.2 Daily VHT Based on Woods & Poole Forecast 

Thousands 

Thousand VHT Total All Trucks Automobiles Non-freight Trucks 

2020 

No-Build 12,467 2,967 8,322 1,178 

Alternative 12,136 2,840 8,195 1,102 

Difference -330 -127 -127 -76 

2035 

No-Build 20,321 7,607 12,714 2,074 

Alternative 19,540 7,115 12,426 1,919 

Difference -781 -493 -289 -155 

Source: Cambridge Systematics, Inc. 

It also is worth noting that the inclusion of terrain factors was a significant 

adjustment factor in this analysis. States, such as Tennessee, are increasingly 

including terrain factors into their travel models to reflect slower speeds 

(especially for trucks) with mountainous, steep grades. Visits to the selected corridors (e.g., Corridor H in West Virginia) confirms the exceptional differences in 

travel speeds between completed and uncompleted corridor sections due to 

steep grades on two-lane roads. 

4.2 USER BENEFITS

User benefits as a result of the completion of the ADHS consist of a variety of different factors: 

Travel-Time Savings. The travel model estimates the difference in VHT as a 

result of the to-be-completed ADHS corridors. The time savings are monetized 

by using values of time differentiated for autos, $13, and trucks, $29 consistent 
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with values from FHWA’s Highway Economic Requirements System (HERS). 

These are relatively conservative assumptions compared to other published 

reports (e.g., Texas Transportation Institute’s Urban Mobility Report uses an 

hourly commercial vehicle operating cost of $77.10/hour in 2005 dollars). 

Fuel and Nonfuel Costs. These costs are calculated by using the difference in 

VMT for the build and no-build scenario and applying it to cost factors. For 

example, fuel costs are valued at $2.98 per gallon for autos and $2.83 per gallon 

for trucks. 

Safety Benefits. Highway crash fatalities and injuries can be significant costs for 

businesses and households. In the case of capacity expansion of the ADHS network and changes in functional class, accident rates are expected to decline and 

the resulting difference in accidents (segmented by property damage only, 

injuries, and fatal accidents) is monetized using estimates for such costs from 

FHWA, differentiated by travel modes. 

Travel-Time Reliability. Reliability can be measured by assessing the variability 

of travel time or the time that is needed to be on time at least 95 percent of the 

time. These time savings, such as reduced planning time due to system 

improvements, can be monetized by applying the same unit costs as for traveltime savings calculations. 

Total user benefits in 2020 for both population and employment forecast scenarios, as well as differentiated by trip purpose and vehicle type are shown in 

Table 4.3. In total, both scenarios show approximately $1.4 billion in user benefits with a significant share of benefits accruing to the nonfreight truck categories. Travel-time reliability benefits have been excluded from this table. 

Table 4.3 Summary of User Benefits in 2020 

Million 2006 Dollars Global Insight Woods & Poole 

Freight $375.87 $400.81 

Nonfreight $511.29 $614.56 

Business Automobile $78.63 $77.60 

Nonbusiness Automobile $392.20 $387.05 

Total $1,357.98 $1,480.01 

Source: Cambridge Systematics, Inc. 

As shown in Table 4.4, user benefits net of reliability benefits are significantly 

larger in 2035 compared to 2020. More than half of total user benefits are now 

generated by freight trucks, which is consistent with the strong growth rate of 

goods movement projected by the FAF data, strong diversion of freight trucks to 

newly completed ADHS corridors, as well as the long-distance hauls impacted. 

When the two growth scenarios are compared, the Woods & Poole scenario creates total user benefits that are nearly 20 percent greater than the Global Insight 

numbers based on higher volumes of traffic. 
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Table 4.4 Summary of User Benefits in 2035 

Million 2006 Dollars Global Insight Woods & Poole 

Freight $2,534.36 $2,708.79 

Non-freight $965.76 $1,259.34 

Business Automobile $129.67 $186.36 

Non-business Automobile $646.81 $929.57 

Total $4,276.61 $5,084.07 

Source: Cambridge Systematics, Inc. 

Over 90 percent of automobile and non-freight truck benefits are estimated to 

accrue to the ARC region based on the mostly local origin-destination pattern of 

trips. However, over 65 percent of benefits to freight flows are external to the 

ARC region, reflecting the long-distance nature of the shipments impacted and 

the national importance of completing the ADHS to facilitate goods movement 

into, out of, and through the ARC region. 

Reliability Benefits. In addition to the traditional user benefits, the impacts 

from improved reliability of transportation as a result of the project have been 

estimated. Reliability benefits are based on the concept that extra time needs to 

be planned in order to be on time at least 95 percent of the time. Hence, reliability benefits are measured by calculating the time savings due to the reduction in 

“planning time” as a result of the transportation improvements. In short, these 

benefits are the sum of monetized time savings due to the improved travel conditions stemming from ADHS completion. 

For the entire ADHS region, these reliability benefits were estimated as equal to 

between $2.2 and $2.4 billion in 2020 and figures roughly five times as large in 

2035 (Tables 4.5 and 4.6). The majority of these reliability benefits in 2035 accrue 

to freight trucks. The estimation of reliability benefits is relatively new and 

untested, and is, therefore, viewed as a standalone component of this analysis 

and has not been included in the benefit/cost analysis or the development of 

regional economic impacts in TREDIS. 

Table 4.5 Summary of Reliability Benefits in 2020 

Million 2006 Dollars Global Insight Woods & Poole 

Freight $756.78 $815.20 

Non-freight $843.85 $1,041.61 

Automobile $575.78 $573.05 

Total $2,176.41 $2,429.85 

Source: Cambridge Systematics, Inc. 
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Table 4.6 Summary of Reliability Benefits in 2035 

Million 2006 Dollars Global Insight Woods & Poole 

Freight $9,195.74 $9,977.73 

Nonfreight $2,144.38 $2,876.69 

Automobile $1,083.98 $1,692.99 

Total $12,424.10 $14,547.41 

Source: Cambridge Systematics, Inc. 

4.3 ACCESSIBILITY

Improved accessibility to labor, customer, buyer, supplier, and tourism markets 

can lead to net business attraction/retention gains. Expanded markets are gauged 

by determining the additional population and employment that is accessible 

within a given travel time due to ADHS highway network completion (e.g., 

population that is within a one-hour drive for customer and labor markets; 

employment that is within three hours for buyer and supplier markets). By 

reducing travel times, the completion of ADHS will effectively enlarge the 

catchment areas on which businesses can draw labor, customers, and suppliers. In 

the analysis, the size of the employment and population catchment areas was 

compared for the build and no-build scenarios in both growth scenarios. The 

differences, in percentage terms, show the gains in market accessibility (access to a 

larger number of consumers), and business attraction (in response to improved 

access to labor, suppliers, buyers, and other modal facilities) resulting from the 

interstate improvements. The accessibility measures include the following: 

Labor and Consumer Markets – Percentage change in population accessible 

within a 60-minute drive time, which is a rough indicator of the impact of 

ADHS completion on the size of labor markets (representing available workforce and job opportunities), as well as the size of typical shopper markets; 

and 

Buyer and Supplier Markets – Percentage change in employment (by place 

of work) accessible within a three-hour drive, representing the likely reach of 

same-day truck deliveries for parts suppliers to manufacturers and 

distributors. 

Table 4.7 shows the aggregate results of this analysis. For the Global Insight 

growth scenario, the analysis shows improved accessibility for both labor and 

consumer markets, as well as buyer and supplier markets. Specifically, population accessibility increased by 3.7 percent due to ADHS completion while 

employment accessibility increased by 4.6 percent. 
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Table 4.7 Increased Accessibility 2035 

Build versus No-Build 

 Global Insight Woods & Poole 

Population 3.71% 3.91% 

Employment 4.58% 4.64% 

Source: Cambridge Systematics, Inc. 

For the Woods & Poole scenario, the growth in population and employment 

accessibility is equal to 3.9 and 4.6 percent, respectively. 

In addition to the employment and population measures, the accessibility analysis also includes connectivity measures to specific transportation system components. This analysis is based on the average drive time reduction in each county 

to transportation facilities. This study includes the following four connectivity 

measures: 

Intermodal Rail Terminals; 

International Gateways; 

Marine Ports; and 

Airports. 

The results of the accessibility analysis, i.e., the incremental changes resulting 

from the completion of the ADHS, are presented in maps presented in Section 4.2 

and Appendix B. 

Regardless of which forecast was used, the overall benefits attributable to the 

ADHS completion across the study area are measurable and demonstrate the 

positive economic impacts the system has on the counties that are part of the 

network. 

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5.0 Economic Impacts 

Using the methodology from Section 2.0 and the travel impacts from Section 4.0, 

this section presents the estimated economic impacts on the region and United 

States due to the completion of ADHS highway corridors. The direct effects are 

derived from travel-cost savings and market access impacts. These effects were 

run through the economic model in TREDIS to arrive at the total economic 

impact. The regional economic effects are presented in terms of: 

Travel-Time and Cost Impact – Includes travel-time and travel distance 

impacts, which in turn also affect traveler fuel use, safety, cost of living, and 

business operating expenses. User benefits in this section of the report are 

narrowed to focus on those accruing to the ARC region based on origindestination patterns, while full national-level user benefits are incorporated 

within the benefit/cost analysis. 

Market Access Impact – Includes effects beyond the cost of travel, that affect 

the nature of freight delivery markets, logistics, labor markets and the business productivity of operating in alternative locations. 

Total Economic Impact – Represents: 1) travel cost savings to industries; 

2) market access impacts; and 3) spin-off economic activity from these effects, 

including multiplier effects. Total economic impacts are measured in terms 

of jobs, value added, and wages to the ARC region. 

The impacts were generated for the “medium” (Global Insight) and “high”

(Woods & Poole) growth scenarios to account for uncertainty in future population growth and travel demand. These scenarios are subsequently used to form 

ranges of likely benefits in the benefit/cost analysis. They also are provided for 

three regions of Appalachia: North, Central, and South. 

5.1 DIRECT TIME AND COST TRAVEL IMPACTS

Direct travel impacts reflect savings to industry (both time and expense), time 

savings to households, and out-of-pocket household savings. However, the 

results indicate that large benefits accrue primarily to industry due to the magnitude of freight volume moving through the region, the high number of miles 

per trip, and the relatively high value of time for freight operations. Businesses 

are affected through reduced travel time for workers who are “on-the-clock” and 

for the value of freight which includes time reliability for deliveries. Households 

are affected through commuting and personal trips mostly by reduction in travel 

time. They may not have high “out-of-pocket” savings (e.g., gas costs) but they 

do show significant benefits from reduction in travel time. This savings in time 

is translated into monetary benefits based on their value of time. 
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These impacts phase-in gradually as highway construction projects are completed. After the construction completion, they are assumed to be growing at a 

constant rate until 2044; this is due to population and traffic levels growing over 

time. For purposes of this study, the year 2035 was chosen. By this time, the full 

impacts will have been phased in. 

The total annual traveler savings for 2035 in the ARC region, seen in Table 5.1, 

range from $3.1 to $3.9 billion for the medium- and high-growth scenarios for the 

ARC region. These numbers do not include pass-through traffic – trips that do 

not start or end in the ARC region – which account for $2 to $2.1 billion in 

savings. 

Table 5.1 ARC Traveler Cost Impacts in 2035 

Annual Travel Impact in 2035 (Millions 2007 Dollars) 

Cost Savings Category North Central South ARC Total Rest of Nation 

Medium-Growth Scenario

Industry Savings 951 192 1,185 2,328 1,925 

Household Cost Savings 8 2 13 22 1 

Household Value-of-Time Benefit 261 58 419 737 38 

Region Total 1,220 252 1,616 3,088 1,964 

High-Growth Scenario 

Industry Savings 1,140 233 1,455 2,828 2,073 

Household Cost Savings 15 3 24 42 2 

Household Value-of-Time Benefit 371 83 596 1,050 55 

Region Total 1,526 319 2,075 3,920 2,130 

Source: Economic Development Research Group and Cambridge Systematics, Inc. 

The benefit measures include the dollar value of all congestion-related travel 

time, travel expense and travel safety impacts that are averted by implementing 

the highway projects in Appalachia. These traveler impacts in turn affect industry savings, household cost savings, and household value-of-time benefit. When combined, these groups of benefits represent the measure of “transportation system 

efficiency” used in the benefit/cost analysis. 

Industry Savings ($2.3-$2.8 Billion). Businesses save travel costs due to faster, 

more direct routes than would otherwise occur under current conditions. The 

benefits include reduced driver or traveler time spent en route, as well as 

reduced scheduling costs related to delivery time uncertainty. 

Household Cost Savings ($22-$42 Million). Households save incurring the 

higher out-of-pocket travel expenses than would otherwise occur under previous 

conditions due to improved conditions. The benefits include lower vehicle operating expenses (fuel, etc.) and accident costs; this avoided cost represents 
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additional disposable income. In Appalachia, this is relatively small for households because most of their savings comes from driving times rather than 

distances. 

Household Value-of-Time ($737-$1,050 Million). Households receive a benefit 

in the form of time savings for personal travel (that is not business-related) from 

highway improvement. It should be noted that although household travel-time 

savings are a measurable (and real) benefit to the region, these benefits do not 

enter into the calculus of economic impacts, as they typically are not capitalized 

into any economic exchange. These benefits are included in the benefit/cost 

analysis. 

Rest of Nation (Pass-Through) ($1.96-$2 Billion). These are generated from 

trips that go through the ARC region or those trips that either originate or terminate outside the region. This mostly affects longer truck routes who incur less 

travel costs due to faster routes. They are taken into account in the national 

benefit/cost analysis as they are benefits for the United States but not 

Appalachia. 

The distribution of benefits is concentrated in the North and South regions in 

Appalachia, consistent with the number of counties, corridor projects, and economic size of those regions. Correspondingly, the Central region has 8 percent of 

the total user benefits. 

Figure 5.1 shows the distribution of savings by industry for both the mediumand high-growth scenarios. The total magnitude of savings is higher for the 

high-growth scenario while the relative impact amongst industries is the same. 

Wholesale trade and manufacturing are the industries that receive the largest 

cost savings. These industries rely heavily on freight movement by truck. Service sectors such as healthcare and education, professional and business serves, 

and retail trade also are highly affected; most likely due to the reduction in time 

for the commute of workers in these industries. 
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Figure 5.1 Distribution of Direct Business Cost Savings by Industries 

Medium- and High-Growth Scenarios 

0

500

1,000

1,500

2,000

2,500

3,000

Medium High

2007 Dollars (in Millions)

Other Services

Healthcare and Social

Professional and Business

Info and Financial

Transportation and Warehousing Retail

Wholesale

Manufacturing

Construction

Mining and Utilities

Agriculture

Source: Economic Development Research Group. 

5.2 MARKET ACCESS IMPACTS

In the previous section, travel-time and cost savings represented benefits to 

existing households and industries in the region. This section provides access 

benefits to the region which are mostly due to businesses relocating to the 

region – these are a benefit to Appalachia but not to the United States. However, 

market access impacts also include benefits from access improvements to 

existing businesses that are over and above the travel-cost savings – these are 

benefiting both the region and the United States. 

Figure 5.2 shows the changes in access to markets for consumers and labor force 

and Figure 5.3 demonstrates reductions in travel time to the nearest commercial 

airport (see Appendix B for maps of other accessibility measures). While the 

market access changes to most counties were negligible, there were 50 counties 

(in the medium-growth scenario) with more than a 10 percent increase in access 

to labor and consumer markets, seen in the dark shaded counties in map. 

Beyond the impact on costs for existing travel, improved highway access can 

have an additional impact of on regional competitiveness for business attraction 

and expansion. The ease of access to delivery and labor markets are of the 

utmost importance to businesses deciding where to locate. Other transportation 

linkages are important and taken into account in the model, including: access to 

airport, marine port, intermodal rail facility, other international border. 
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Figure 5.2 Percentage Change in Population Accessible within a 

60-Minute Drive in 2035 

Labor and Consumer Markets 
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Figure 5.3 Percentage Reduction in Travel Time to Nearest Airport in 2035 

The blue markings on the map indicate the location of new ADHS projects. As 

expected, most of the counties receiving a significant improvement in access lie 

near a highway project. When faced with difficulties in market access businesses 

can adjust their warehousing and logistics processes to stock more inventories, 

provide distribution from a larger number of locations, deploy more delivery 
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vehicles and drivers, or reduce guarantees for delivery times. All of these 

adjustments still involve increased costs or reduced revenue that go beyond the 

direct change in travel time and expense. 

The market access impact for the ARC region includes the added activity from 

business that moves from outside Appalachia to within the region due to economies of scale associated with further market reach. Table 5.2 shows the projected 

direct business growth impact associated with improved access for Appalachia. 

This represents the net impact on new business investment in Appalachia. Business relocations within Appalachia are not counted. When viewed at the 

national level, the market access benefits associated with economic migration 

(relocations) cancel out, and only the productivity and export components of market access impacts remain. In all cases, the market access impacts are measured 

in terms of “value-added” economic activity (aka Gross Domestic/Regional 

Product), which represents the sum of worker income and business profit income 

generated in the region. 

Table 5.2 Projected Market Access Growth in Appalachia for Medium and 

High Scenarios in 2035 

Annual Market Access Impact for 2035 (Value Added Millions 2007 Dollars) 

 North Central South Total 

Medium-Growth Scenario 

Potential 1,127 145 1,242 2,513 

Probable 935 115 1,010 2,060 

High-Growth Scenario 

Potential 1,130 169 1,430 2,729 

Probable 940 137 1,193 2,270 

Source: Economic Development Research Group, using the Local Economic Assessment Package (LEAP). 

There are two scenarios for market access benefits – “potential” and “probable” – in 

addition to the medium and high estimates of underlying economic and population growth. The estimates for “probable” market access impact represent a more 

conservative estimate, as it assumes that the region successfully achieves some but 

not all of the “potential” opportunities. It is a more realistic assumption as it 

accounts for the likelihood that some of the region’s current constraints to economic competitiveness (such as workforce characteristics) may remain after the 

ADHS addresses the major access limitations. 

The market access impact of ADHS completion is estimated to yield business 

growth that will increase over time, rising to the range of $2.1 to $2.3 billion 

annually by the year 2035. As with the travel-cost savings, most of the impacts 

are expected to occur in the North and South parts of the ARC region. This 

reflects the location of the highway projects remaining to be completed, as well 

as the smaller size of population and employment base in the Central region. 
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Figure 5.4 shows a breakdown of market access impacts by industry, which are 

largely those dependent either on access to skilled labor (information, financial, 

and professional services) or delivery access (manufacturing) to broader national 

markets. These results are for the previously mentioned “probable” scenario for 

both medium and high growth. They are less evenly distributed than the results 

for travel-cost and time savings in the previous section. This is an indication of 

how much more important access to markets is to the select industries that show 

a large market access impact. 

As previously noted, market access impacts consists of three elements: exports, 

productivity, and relocation. The analysis results in Figure 5.5 show the distribution of those impacts (applicable for both medium and high scenarios). The three 

elements of impact are defined as follows: 

1. Exports – Impacts on business growth from exports arise due to improved 

access to airports, marine ports, and international borders. These represent 

benefits both to the region and to the U.S. 

2. Productivity – Impacts on business productivity (output per unit of dollar 

input cost enabled by the logistics and scale economies in production and 

distribution systems that result from travel-time and reliability enhancement 

for isolated areas. They also may reflect access to a more diverse workforce 

and set of suppliers, which may reduce costs and increase quality of those 

inputs. This impact also is a benefit for the nation, as well as for the region. 

3. Relocation – This category represents the bulk of the market access benefits. 

This occurs when access to markets is improved and businesses are more 

attracted to locate in the region. This affects businesses that rely on close 

proximity to labor, consumer and delivery markets. This represents a benefit 

to the region but not to the United States since it is assumed that business 

relocate from elsewhere in the United States. 
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Figure 5.4 Distribution of Market Access Benefits 

by Industries for “Probable” Scenario 

2007 Dollars (in Millions)

Other Services

Healthcare and Social

Professional and Business

Info and Financial

Transportation and Warehousing Retail

Wholesale

Manufacturing

Construction

Mining and Utilities

Agriculture

0

500

1,000

1,500

2,000

2,500

Medium High

Retail

Source: Economic Development Research Group, using the Local Economic Assessment Package (LEAP). 

Figure 5.5 Components of Market Access Impact 

Relocation, 80%

Productivity, 19%

Exports, 1%
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5.3 TOTAL ECONOMIC IMPACTS

This analysis included the evaluation of regional economic growth impacts, 

reflecting the impacts of travel-cost savings as well as market access effects. The 

direct travel-cost savings accrue to existing (and projected future) trip patterns, 

while the market access effects enable new activities and trips that would not 

otherwise occur. Both increase economic competitiveness and hence lead 

directly to the expansion and attraction of additional business activity in the 

region. They also lead to “spin-off” activity through indirect effects (spending on 

suppliers) and induced effects (spending of worker income). All of these effects 

are calculated using the regional economic simulation and forecasting model in 

TREDIS. The following is a more detailed explanation of the components of the 

total economic impact which includes only those effects on Appalachia not on 

the United States. 

Economic Impact of Travel-Time and Cost Savings – Business-related travel 

time and expense changes affect local cost of doing business, while household expense savings affect local cost of living. Changes in these cost savings 

end up shifting local spending patterns and prices, affecting local business 

activity and investment, and thus employment for some industries. The economic analysis system also recognizes that not all of these changes are 

absorbed in the local economy; some are passed on to customers outside of 

the region. 

Changes in travel time for personal (non-business) trips have a value to society. However, they do not directly affect the flow of dollars in the economy, 

so their value is counted in the benefit/cost analysis but is not counted in the 

calculation of impact on the regional economy. 

Economic Impact of Market Access Changes – Changes in access times also 

lead to effective changes in labor market and product delivery market areas, 

as well as access to intermodal transportation connections. These access 

changes end up shifting productivity and thus regional competitiveness for 

attracting various manufacturing, service, and office industries. Only the 

“probable” market access impacts were used which allowed for a more conservative impact. 

Table 5.3 shows the economic benefit of implementing the new ADHS projects as 

opposed to current road conditions remaining in place. Therefore, it also could 

be construed as the loss to the region if the projects were not implemented. All 

numbers shown here reflect annual impacts as of the analysis year 2035. Benefits 

for earlier years will be smaller and benefits for later years will be even larger. 
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Table 5.3 Total Economic Impacts for Medium and High Scenarios in 2035 

Total Economic Impact for 2035 (Millions 2007 Dollars) 

 North Central South Total 

Medium-Growth Scenario 

Economic Measure 

Business Sales 4,165 555 5,382 10,102 

Value-Added 2,129 264 2,602 4,995 

Jobs 33,232 5,306 41,953 80,491 

Wages 1,345 178 1,674 3,197 

High-Growth Scenario

Business Sales 4,433 667 6,429 11,529 

Value-Added 2,251 317 3,112 5,679 

Jobs 35,260 6,282 50,128 91,670 

Wages 1,421 213 2,001 3,635 

Source: Economic Development Research Group. 

This table shows impacts on the regional economy, which can be measured in 

terms of total business sales, value-added, jobs, and wages. The impact on 

business sales is between $10.1 and $11.5 billion annually; this is not entirely felt in 

the region since the cost of intermediate inputs is included. The impact on valueadded, the amount of revenue minus intermediate inputs, is between $5 and $5.7 

billion. Arguably, the most important effect – employment – is increased in range 

of 80,491 to 91,670. In turn, these new jobs would generate between $3.2 and $3.6 

billion in wages annually to Appalachia. 

These total impacts were phased in gradually based on the time lag effects and 

growth rates that research implies for the completion of highway projects (see 

Section 2.5.1 for further description). Impacts are expected to be generated as 

soon as construction is completed and to be fully realized by 2035. The market 

access impacts were phased in based on the time lag effect and multiplier effects 

(indirect and induced) which were implemented based on a review of economic 

development literature and specific regional research conducted for this report 

(see Section 2.6.2 above). After 2035, the impacts grow at a constant rate based 

on assumed travel demand. Figure 5.6 shows the phase-in of total economic 

impact in terms of jobs in the entire ARC area for the medium-growth (Global 

Insight) and high-growth (Woods & Poole) scenarios. 
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Figure 5.6 Estimated Phase-In of the Economic Impact 

Jobs

0

20,000

40,000

60,000

80,000

100,000

120,000

2005 2010 2015 2020 2025 2030 2035 2040 2045

Woods & Poole

Global Insight

Figure 5.7 shows the breakdown of projected regional employment impacts by 

industry. That breakdown reflects a combination of the travel-cost incidence, the 

market access impact incidence, the response of affected industries to enhanced 

productivity and competitiveness, and the pattern of indirect (supplier) and 

induced (worker spending) effects. 

Figure 5.7 Distribution of Employment Impacts 

on the Region for Medium and High Scenarios 

Other Services

Healthcare and Social

Professional and Business

Info and Financial

Transportation and Warehousing Retail

Wholesale

Manufacturing

Construction

Mining and Utilities

Agriculture

Retail

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Medium High

Jobs
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6.0 Benefit/Cost Analysis 

6.1 COST TO COMPLETE SUMMARY

This section describes the estimate of the cost-to-complete the Appalachian 

Development Highway System (ADHS), the scheduling of these capital expenditures and the expected operation and maintenance cost once the road network 

is completed. In total, the total project calls for the addition of 453.2 miles of 

highway to the ADHS as shown in Table 6.1. 

Table 6.1 Miles to Complete by State 

State Total Miles 

Miles Completed 

until FY 2012 

Remaining Miles 

beyond FY 2012 

Alabama 69.9 6.4 63.5 

Georgia 31.6 0.0 31.6 

Kentucky 22.6 15.8 6.8 

Maryland 2.5 0.0 2.5 

Mississippi 20.5 16.3 4.2 

New York 7.7 6.6 1.1 

North Carolina 24.7 1.4 23.3 

Ohio 23.3 5.3 18.0 

Pennsylvania 125.2 20.6 104.6 

South Carolina 4.3 0.0 4.3 

Tennessee 26.4 25.0 1.4 

Virginia 32.2 1.0 31.2 

West Virginia 62.3 29.6 32.7 

Total 453.2 128.0 325.2 

Source: Cost-to-Complete Study, Appalachian Regional Commission. 

The table shows that the State of Pennsylvania is the recipient of the largest portion of infrastructure with 125 miles, approximately one-third of the total. West 

Virginia and Alabama are projected to receive additions in excess of 60 miles. 

New York and South Carolina are planned to receive the smallest addition to the 

ADHS in their respective states. A little less than one-third of the capacity will 

be added by FY 2012 with the remaining capacity planned to be in construction 

and completed by FY 2020. 

The total capital expenditures are projected to be approximately $10.5 billion of 

which $2.4 billion will become state obligations. The total cost estimate, also 

broken down by state, is shown in Table 6.2. The allocation of costs among states 
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mirrors the scheduled capacity additions. By far, Pennsylvania and Alabama are 

projected to incur the greatest share of cost with expenditures in excess of $2.5 

and $2.8 billion, respectively. Virginia is projected to incur the third largest cost 

burden with roughly $1.2 billion. 

Table 6.2 Total Cost to Complete ADHS 

Projected ADHS Annual Obligations 

Total ADHS Completion Cost 

(Thousands) 

Total State Obligations 

(Thousands) 

Alabama $2,806,978 $256,400 

Georgia $369,339 $0 

Kentucky $736,707 $514,480 

Maryland $145,036 $0 

Mississippi $79,721 $63,200 

New York $99,198 $85,600 

North Carolina $715,880 $41,260 

Ohio $413,253 $94,000 

Pennsylvania $2,592,429 $426,450 

South Carolina $41,315 $0 

Tennessee $577,742 $546,720 

Virginia $1,178,875 $36,800 

West Virginia $790,461 $375,840 

Total $10,546,934 $2,441 

Source: Cost-to-Complete Study, Appalachian Regional Commission. 

The project costs are allocated on an annual basis between FY 2007 and FY 2019 

based on estimates and construction plans provided by the Appalachian 

Regional Commission (ARC). According to ARC, 26 percent of the planned 

capacity additions will be completed by 2012. No detailed construction 

schedules exist beyond FY 2012. For the purpose of this assumption, it has been 

assumed that the remaining miles will be evenly allocated over the next seven 

fiscal years with all construction completed in FY 2020. 

Transportation infrastructure needs to be properly maintained in order to maximize its useful life and minimize the life-cycle cost of owning the facilities. 

Operation and maintenance expenditures as well as repavement costs have been 

scheduled between FY 2007 and FY 2045 in order to account for the appropriate 

annual cost that will have to be incurred by individual states. These cost estimates for O&M and repavement have been developed using the Highway 

Economic Requirement System (HERS). In particular, it has been assumed that 

each mile scheduled for construction consists of two lanes and that the annual 
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cost of maintenance per lane mile is $2,000. Repavement of the road is assumed 

to occur every 15 years of operation with an expected cost of $351,500 per lane 

mile. 

The projected ongoing cost estimates result in figures presented in Table 6.3. For 

instance, in FY 2015, the cost of capacity expansion is equal to $1.1 billion and 

annual operations and maintenance costs are equal to $1.07 million. 

Table 6.3 Summary of Cost Schedule 

Million 2005$ FY 2007 FY 2010 FY 2015 FY 2020 FY 2025 FY 2030 FY 2040

Capital Expenditures $1,008 $392 $1,071 $0 $0 $0 $0 

O&M Expenditures $0.17 $0.38 $1.07 $2.00 $2.00 $2.00 $2.00 

Repavement $0 $0 $0 $0 $12 $33 $12 

Total Cash Flow $1,008 $392 $1,072 $2 $14 $35 $14 

Percent of Mileage Completed 0% 18% 49% 100% 100% 100% 100% 

Source: Cost-to-Complete Study, Appalachian Regional Commission, and Cambridge Systematics, Inc. 

6.2 BENEFIT/COST ANALYSIS RESULTS

This section provides a comparison of the costs, impacts, and benefits of completing the entire ADHS network. The nature of this analysis is discussed in the 

text that follows. 

6.2.1 Costs 

Cost-to-complete the remaining ADHS corridor projects are estimated under two 

different scenarios. The first assumes that the purchasing power of spending in 

the construction sector will parallel overall inflation, which is assumed to be 

3 percent per year. As such, this is the “low-cost” scenario. The second assumes 

that purchasing power of spending in the construction sector declines relative to 

other sectors. In this second scenario, we assume that prices in the construction 

sector rise at 10 percent per year over the period 2007 through 2010, and prices 

will rise at an average rate of 4.5 percent thereafter.18 The accelerated price 

increases over the early period reflects a continuation of recent trends in the construction sector. Table 6.4 shows costs by year for each scenario, including the 

present value of costs discounted at 5 percent per year.19

 

18 The Bureau of Labor Statistics’ bridge and highway construction producer price index 

(BHWY PPI) grew by 35.3 percent from 2003 to 2006, equivalent to 10.6 percent per year. 

19 The application of a discount rate is standard practice within benefit/cost analysis to 

account for the time value of money (i.e., money today can be invested for a return in 

the future) and thus prepare costs and benefits in present value terms. 
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Table 6.4 Total Spending on Proposed Improvements to ADHS System 

in ARC Region under Two Inflation Scenarios 

All Values in Millions Constant 2007 Dollars 

Total Outlay (2007 Million Dollars) Percent of Spending on 

Year 

Low-Cost 

Scenario 

High-Cost 

Scenario 

Capital 

Expend 

Operation and 

Maintenance Refurbishment 

2007 1,070 1,233 100.0% 0.0% 0.0% 

2008 424 525 99.9% 0.1% 0.0% 

2009 520 692 99.9% 0.1% 0.0% 

2010 416 594 99.9% 0.1% 0.0% 

2011 553 801 99.9% 0.1% 0.0% 

2012 256 377 99.8% 0.2% 0.0% 

2013 1,137 1,695 99.9% 0.1% 0.0% 

2014 1,137 1,720 99.9% 0.1% 0.0% 

2015 1,137 1,745 99.9% 0.1% 0.0% 

2016 1,137 1,771 99.9% 0.1% 0.0% 

2017 1,138 1,797 99.9% 0.1% 0.0% 

2018 1,138 1,824 99.8% 0.2% 0.0% 

2019 1,138 1,851 99.8% 0.2% 0.0% 

2020 2 3 0.0% 100.0% 0.0% 

2021 2 4 0.0% 100.0% 0.0% 

2022 34 57 0.0% 6.3% 93.7% 

2023 15 25 0.0% 14.5% 85.5% 

2024 17 31 0.0% 12.1% 87.9% 

2025 14 26 0.0% 14.7% 85.3% 

2026 18 33 0.0% 11.5% 88.5% 

2027 10 18 0.0% 21.9% 78.1% 

2028 37 68 0.0% 5.8% 94.2% 

2029 37 69 0.0% 5.8% 94.2% 

2030 37 70 0.0% 5.8% 94.2% 

2031 37 71 0.0% 5.8% 94.2% 

2032 37 72 0.0% 5.8% 94.2% 

2033 37 73 0.0% 5.8% 94.2% 

2034 37 74 0.0% 5.8% 94.2% 

2035 2 4 0.0% 100.0% 0.0% 

2036 2 4 0.0% 100.0% 0.0% 

2037 34 71 0.0% 6.3% 93.7% 

2038 15 31 0.0% 14.5% 85.5% 

2039 17 38 0.0% 12.1% 87.9% 

2040 14 32 0.0% 14.7% 85.3% 

2041 18 41 0.0% 11.5% 88.5% 

2042 10 22 0.0% 21.9% 78.1% 

2043 37 85 0.0% 5.8% 94.2% 

2044 37 86 0.0% 5.8% 94.2% 

PV (5%) 8,283 12,159 

PV (7%) 7,342 10,679 
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6.2.2 Impacts and Benefits 

There are five categories of ADHS impact that are covered in this study: 

A) business cost savings; B) household out-of-pocket savings; C) household 

value of time savings; D) business growth due to improved market access; and 

E) indirect and induced economic growth (multiplier effects). Traditionally, 

Categories A-C are considered to be measures of travel efficiency benefit and 

Categories D-E are considered to be measures of regional economic impact. 

However, since the ADHS is specifically intended to help address economic distress by improving access in a relatively isolated region, the impacts on economic 

growth in the ARC region also can be viewed as an indicator of societal benefit 

and economic return on investment. 

The various impacts described in the preceding sections are estimated for the 

years 2020 and 2035. In order to estimate present values, these impacts are 

phased in based on: 1) growth rate of underlying traffic volumes from 2020 to 

2035; 2) the planned project rollout schedule; 3) empirical research on the timing 

of market access impacts (see Section 2.5 and Appendix B); and 4) research on the 

timing of indirect and induced impacts. Tables 6.5 to 6.9 show the annual 

impacts for each growth scenario, as well as both discounted and undiscounted 

benefits. 

The resulting present values for each impact category are shown in Tables 6.5 

and 6.6 using different discount rates. 

These tables reaffirm the results of the preceding sections, where within the ARC 

region, benefits result primarily from industry savings, market access impacts, 

and secondary economic effects. For the nation as a whole, the latter two 

impacts are greatly diminished, and benefits flow primarily from industry user 

savings (travel efficiency and lower costs). Meanwhile, lowering the discount 

rate to a real 5 percent significantly increases the present value of total benefits as 

future benefits retain more value. 
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Table 6.5 Medium-Growth Scenario Benefits to ARC Region 

from ADHS by Year 

Undiscounted (2007 Million Dollars) 

Year 

Industry User 

Savings 

HH Out-ofPocket 

Savings 

HH Value of 

Time Savings 

Total Travel 

Efficiency 

Benefits 

Market 

Access 

Growth 

2005 0 0 0 0 0 

2006 0 0 0 0 0 

2007 0 0 0 0 0 

2008 30 0 9 40 1 

2009 61 1 19 81 2 

2010 85 1 27 113 4 

2011 110 1 35 146 6 

2012 149 1 47 197 9 

2013 188 2 60 250 12 

2014 245 2 77 325 19 

2015 303 3 96 402 27 

2016 384 4 121 509 39 

2017 467 4 148 619 55 

2018 581 6 184 770 78 

2019 699 7 221 927 113 

2020 851 8 270 1,129 158 

2021 1,009 10 319 1,338 226 

2022 1,178 11 373 1,562 317 

2023 1,354 13 429 1,795 431 

2024 1,500 14 475 1,989 576 

2025 1,652 16 523 2,191 753 

2026 1,756 17 556 2,329 920 

2027 1,864 18 591 2,473 1,114 

2028 1,937 19 614 2,570 1,282 

2029 2,013 19 637 2,669 1,433 

2030 2,069 20 655 2,744 1,582 

2031 2,127 20 674 2,821 1,683 

2032 2,182 21 691 2,894 1,789 

2033 2,238 21 709 2,968 1,866 

2034 2,283 22 723 3,028 1,938 

2035 2,328 22 737 3,088 2,060 

2036 2,375 23 752 3,150 2,102 

2037 2,422 23 767 3,213 2,144 

2038 2,471 24 783 3,277 2,187 

2039 2,520 24 798 3,343 2,230 

2040 2,571 25 814 3,410 2,275 

2041 2,622 25 830 3,478 2,320 

2042 2,675 26 847 3,547 2,367 

2043 2,728 26 864 3,618 2,414 

2044 2,783 27 881 3,691 2,462 

2045 2,838 27 899 3,764 2,512 
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Table 6.6 Medium-Growth Scenario Benefits to ARC Region 

from ADHS by Year 

Discounted at Five Percent (2007 Million Dollars) 

Year 

Industry User 

Savings 

HH Out-ofPocket 

Savings 

HH Value of 

Time Savings 

Total Travel 

Efficiency 

Benefits 

Market 

Access 

Growth 

2005 0 0 0 0 0 

2006 0 0 0 0 0 

2007 0 0 0 0 0 

2008 28 0 9 38 1 

2009 55 1 18 73 2 

2010 74 1 23 98 3 

2011 91 1 29 120 5 

2012 116 1 37 154 7 

2013 141 1 45 186 9 

2014 174 2 55 231 13 

2015 205 2 65 272 18 

2016 247 2 78 328 25 

2017 287 3 91 380 34 

2018 340 3 108 450 46 

2019 389 4 123 516 63 

2020 451 4 143 599 84 

2021 509 5 161 676 114 

2022 567 5 179 751 152 

2023 620 6 196 822 198 

2024 654 6 207 868 251 

2025 686 7 217 910 313 

2026 695 7 220 922 364 

2027 703 7 223 932 420 

2028 695 7 220 922 460 

2029 688 7 218 912 490 

2030 674 6 213 893 515 

2031 659 6 209 875 522 

2032 644 6 204 855 528 

2033 629 6 199 835 525 

2034 611 6 194 811 519 

2035 594 6 188 788 526 

2036 577 6 183 765 511 

2037 561 5 178 743 496 

2038 544 5 172 722 482 

2039 529 5 168 702 468 

2040 514 5 163 681 455 

2041 499 5 158 662 442 

2042 485 5 154 643 429 

2043 471 5 149 625 417 

2044 458 4 145 607 405 

2045 444 4 141 590 393 
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Table 6.7 High-Growth Scenario Benefits to ARC Region 

from ADHS by Year 

Undiscounted (2007 Million Dollars) 

Year 

Industry User 

Savings 

HH Out-ofPocket 

Savings 

HH Value of 

Time Savings 

Total Travel 

Efficiency 

Benefits 

Market 

Access 

Growth 

2005 0 0 0 0 0 

2006 0 0 0 0 0 

2007 0 0 0 0 0 

2008 36 1 13 50 1 

2009 74 1 27 103 3 

2010 103 2 38 143 4 

2011 134 2 50 186 6 

2012 180 3 67 250 9 

2013 229 3 85 317 13 

2014 297 4 110 412 21 

2015 368 6 137 510 29 

2016 466 7 173 646 43 

2017 567 8 210 786 61 

2018 705 11 262 978 86 

2019 849 13 315 1,177 124 

2020 1,034 15 384 1,433 174 

2021 1,225 18 455 1,698 249 

2022 1,431 21 531 1,983 349 

2023 1,644 25 610 2,279 475 

2024 1,822 27 676 2,525 635 

2025 2,006 30 744 2,780 830 

2026 2,133 32 792 2,957 1,014 

2027 2,264 34 840 3,139 1,227 

2028 2,353 35 873 3,262 1,413 

2029 2,444 37 907 3,388 1,578 

2030 2,513 38 933 3,483 1,743 

2031 2,583 39 959 3,581 1,854 

2032 2,650 40 983 3,673 1,971 

2033 2,718 41 1,009 3,767 2,056 

2034 2,772 41 1,029 3,843 2,135 

2035 2,828 42 1,050 3,920 2,270 

2036 2,884 43 1,071 3,998 2,315 

2037 2,942 44 1,092 4,078 2,361 

2038 3,001 45 1,114 4,160 2,409 

2039 3,061 46 1,136 4,243 2,457 

2040 3,122 47 1,159 4,328 2,506 

2041 3,185 48 1,182 4,414 2,556 

2042 3,248 49 1,206 4,502 2,607 

2043 3,313 50 1,230 4,593 2,659 

2044 3,380 51 1,254 4,684 2,712 

2045 3,447 52 1,279 4,778 2,767 
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Table 6.8 High-Growth Scenario Benefits to ARC Region 

from ADHS by Year 

Discounted at Five Percent (2007 Million Dollars) 

Year 

Industry User 

Savings 

HH out-ofpocket 

Savings 

HH Value of 

Time Savings 

Total Travel 

Efficiency 

Benefits 

Market 

Access 

Growth 

2005 0 0 0 0 0 

2006 0 0 0 0 0 

2007 0 0 0 0 0 

2008 35 1 13 48 1 

2009 67 1 25 93 2 

2010 89 1 33 124 4 

2011 110 2 41 153 5 

2012 141 2 52 196 7 

2013 171 3 63 237 10 

2014 211 3 78 293 15 

2015 249 4 93 345 20 

2016 300 4 111 416 27 

2017 348 5 129 483 38 

2018 412 6 153 572 50 

2019 473 7 175 655 69 

2020 548 8 203 760 92 

2021 619 9 230 858 126 

2022 688 10 255 954 168 

2023 753 11 280 1,044 218 

2024 795 12 295 1,102 277 

2025 834 12 309 1,155 345 

2026 844 13 313 1,170 401 

2027 853 13 317 1,183 462 

2028 845 13 313 1,171 507 

2029 836 12 310 1,158 540 

2030 818 12 304 1,134 568 

2031 801 12 297 1,110 575 

2032 782 12 290 1,085 582 

2033 764 11 284 1,060 578 

2034 743 11 276 1,029 572 

2035 721 11 268 1,000 579 

2036 701 10 260 971 562 

2037 681 10 253 944 546 

2038 661 10 245 917 531 

2039 642 10 238 890 516 

2040 624 9 232 865 501 

2041 606 9 225 840 487 

2042 589 9 219 816 473 

2043 572 9 212 793 459 

2044 556 8 206 770 446 

2045 540 8 200 748 433 
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Table 6.9 Present Value of Impact Streams from ARC Highway 

Investments, Discounted at Seven Percent per Year 

All Figures Shown in Million 2007 Dollars 

Medium Growth High Growth 

Impact Type ARC National ARC National 

A. Industry User Savings 11,388 18,781 13,831 21,793 

B. HH Out-of-Pocket Savings 109 113 207 215 

C. HH Value of Time Savings 3,607 3,754 5,133 5,343 

D. Market Access Growtha 6,514 1,261 7,176 1,390 

E. Indirect and Induced Growtha 5,541 N/A 6,302 N/A 

Total Impacts 27,159 23,909 32,649 28,741 

a Value Added. 

Table 6.10 Present Value of Impact Streams from ARC Highway 

Investments, Discounted at Five Percent per Year 

All Figures Shown in Million 2007 Dollars 

Medium Growth High Growth 

Benefit Description ARC National ARC National 

A. Industry User Savings 17,310 29,114 21,023 33,737 

B. HH Out-of-Pocket Savings 165 173 314 328 

C. HH Value of Time Savings 5,482 5,718 7,803 8,137 

D. Market Access Growtha 10,684 2,069 11,769 2,280 

E. Indirect and Induced Growtha 9,551 N/A 10,862 N/A 

Total Impacts 43,192 37,074 51,771 44,482 

a Value Added. 

Although the magnitudes are somewhat higher for the Woods & Poole growth 

scenario, the patterns are very similar. Within the ARC region, direct travel 

savings account for roughly half of overall impacts (with industry receiving a 

disproportionate share), while market access impacts and secondary economic 

growth account for the other half. Moving to the National perspective, most of 

the market access impacts are lost (by accounting for “reshuffling” of the location 

of existing businesses and jobs), but direct travel savings are greatly increased by 

including benefits of “through” traffic.20 These larger impacts arise because a 

 

20“Secondary” indirect and induced impacts are not considered at the national level due 

to constraints on labor mobility into and out of the United States. 
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large number of firms utilize the improved infrastructure, but are located outside 

the ARC region. 

6.2.3 Benefit/Cost Ratios 

Total impact results are summarized in Table 6.11. They are shown both as: 

1) travel efficiency benefits (reflecting industry savings, household out-of-pocket 

savings and household time savings); and as 2) total economic benefits (reflecting 

the combined impacts of direct travel-cost savings, market access improvements 

and indirect and induced growth). All values are expressed in terms of the present value of future benefit and cost streams over 30 years, expressed in constant 

2007 dollars. 

The comparison of benefits and costs are shown as net present values (representing benefits minus costs) and as benefit/cost ratios (representing benefits 

divided by costs). They are shown as ranges, reflecting varying assumptions 

about future construction cost increases and future baseline growth forecasts: 

The lower bound of the ranges reflect the high-cost scenario (accelerated cost 

increases in the construction sector above the general rate of inflation), along 

with Global Insight’s medium baseline growth scenario. 

The upper bound of the ranges reflect the low-cost scenario (construction 

costs following the general rate of inflation), along with the higher baseline 

growth scenario from Woods and Poole. 

Finally, all results are displayed using both a 7 percent real discount rate and a 

5 percent real discount rate. While Office of Management and Budget (OMB) 

guidelines had in the past recommended a 7 percent discount rate for program 

evaluation, most economists today recognize a 5 percent real discount rate as a 

more reasonable measure of the opportunity cost of capital. (It represents the 

private sector cost of borrowing, over-and-above the rate of inflation. While 

government bonds have a lower cost of borrowing, they come at the cost of displacing private sector borrowing.) 

Economic return on investment also was calculated from two perspectives: 

1) the ARC region; and 2) the entire United States. While costs are assumed to be 

the same from either perspective, benefits vary in two important ways: 

Travel efficiency benefits are significant for the ARC region but even higher 

from a national perspective. That is because a significant share of the affected 

trips are long-distance freight shipments that have a high value and extend to 

origins and destinations beyond the ARC region. 

On the other hand, total economic benefits are high for the ARC region but 

lower from a national perspective. That is because benefits of increased market access, including induced economic growth and development, accrue 

largely to the ARC region via regional economic impacts, although there are 

also productivity and export gains for the rest of the United States in addition 

to direct travel efficiency benefits. 
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Table 6.11 Net Present Value and Benefit/Cost Ratio Ranges 

for ARC Highway Investments 

Net Present Value 

(Million Dollars) Benefit/Cost Ratio 

Using a Five Percent Discount Rate 

Travel Efficiency Benefitsa

(A+B+C) 

ARC 10,797-20,857 1.9-3.5 

National 22,845-33,919 2.9-5.1 

Total Economic Benefitsa

(A through E) 

ARC 31,032-43,488 3.6-6.3 

National 24,914-36,199 3.1-5.4 

Using a Seven Percent Discount Rate 

Travel Efficiency Benefitsa

(A+B+C) 

ARC 4,425-11,829 1.4-2.6 

National 11,969-20,009 2.1-3.7 

Total Economic Benefitsa

(A through E) 

ARC 16,480-25,307 2.5-4.5 

National 13,230-21,399 2.2-3.9 

Source: Economic Development Research Group and HDR Decision Economics. 

a Lower-range value reflects high-cost and medium-growth (Global Insight) scenarios; upper-range value 

reflects low-cost and high-growth (Woods & Poole) scenarios. 

As shown in Table 6.11, the key findings are as follows: 

No matter the scenario, the perspective, the assumptions, or the inclusion of 

more narrow or expansive measures of economic benefit, completing and 

maintaining the remaining ADHS corridor segments is expected to generate 

benefits in excess of costs. 

Travel Efficiency (U.S.) – The present value of travel efficiency benefits at the 

national level is estimated to be at least 2.9 times the cost (using a 5 percent 

discount rate). With alternative assumptions regarding the discount rate, 

construction costs and growth forecasts, that value may range from 2.1 to 5.1. 

This represents the traditional measure of travel efficiency and even the most 

conservative assumptions produce a national economic return of over $2 for 

every $1 of cost. 

Travel Efficiency (ARC Region) – Regardless of the assumptions made, travelcost savings accruing to people and businesses within the ARC region 

amount to approximately two-thirds of the national value and thus a 

benefit/ratio in excess of 1.0. 

Total Economic Benefits (ARC Region) – The present value of total estimated 

economic benefits for the ARC region is at least 3.6 times the estimated cost 

(using a 5 percent discount rate). With alternative assumptions regarding the 

discount rate, construction costs and growth forecasts, that value may range 

from 2.5 to 6.3. This represents the increase in total economic effects, 
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including value added due to increased business activity, as well as travelcost savings. Since a goal of the ADHS is to promote economic growth in the 

region by reducing isolation, these total economic impacts are indicative of 

how completing the ADHS can help achieve that goal. 

Total Economic Benefits (U.S.) – At the U.S. level, the estimated total economic 

benefit impact is 3.1 times the estimated cost (using a 5 percent discount rate). 

With alternative assumptions regarding the discount rate, construction costs and 

growth forecasts, that value may range from 2.2 to 5.4. This impact represents 

the modest additional increase in value added due to productivity and export 

gains from travel-cost savings and access/connectivity improvements. The 

value is lower than the economic impact for the ARC region since business location shifts are assumed to cancel out at the national level. However, the value is 

higher than the national-level travel efficiency impact shown above, due to the 

inclusion of effects beyond pure travel-cost savings. 

6.2.4 Conclusions 

The analysis reported here indicates that completion of the ADHS will result in 

significant benefits in excess of costs, under all scenarios and assumptions 

regarding costs, growth, and discount rates. The benefit/cost ratios associated 

with ADHS completion are within the range usually found for individual highway projects that are funded, which tend to be between 1.2 and 3.521 and also 

within the range of coordinated transportation investment programs. The 

benefit/cost ratios of ADHS completion actually tend towards the upper end of 

the range for the ratios found for rural corridors in the United States. There are 

several reasons for this result: 

The remaining ADHS highway projects complete important linkages in a 

long-distance network, rather than just serving connections between individual communities; 

Many of these projects open up access for isolated, mountainous areas, rather 

than merely expanding system capacity; 

Benefits of the remaining segments leverage benefits of already-completed 

parts of the system; and 

These highway segments are projected to serve a mix of trips with a high portion 

of long-distance truck travel, which has a particularly high value of time savings. 

The importance of these network-related factors is amplified by the growing 

national and global nature of industries and markets. These findings underscore 

the role that a completed ADHS can make to the future economic competitiveness of the ARC region and the United States. 

 

21 This range is based on results of highway benefit/cost studies conducted in Wisconsin, 

Indiana, Oregon, California, Montana, New York State, and Canada. 

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 A. Travel Demand Model 

The purpose of the Appalachian Region Commission (ARC) travel demand 

model is to evaluate the future conditions upon completion of the Appalachian 

Development Highway System (ADHS). The proposed ADHS was evaluated 

using the ARC travel demand model to determine the impact on the travel performance. Highway projects such as adding capacity to a roadway, adding 

additional mileage of roadways, and relocation or removal of roadways were 

analyzed using the travel demand model. 

Forecast travel demand models traditionally consist of four steps. During the 

first step, Trip Generation, the number of trips being produced and attracted to 

or by an area is estimated based on the land use of the area and generation rates 

which are usually derived from a survey. The second step, Trip Distribution, 

determines the number of trips from the Trip Generation step that are going 

between areas. The third step, Mode Split, predicts by which mode of transportation the trips will occur. The final step, Trip Assignment, assigns the trips to a 

network that represents the modeled area. 

The travel demand model developed for the ARC travel demand model is not a 

four-step model. The ARC travel demand model uses an Origin-Destination 

Matrix Estimator (ODME) procedure to estimate the trip tables used in the 

model. The ODME procedure replaces the traditional trip generation and distribution steps of the four-step modeling procedure. ODME is an accepted practice 

that estimates trip tables based on traffic count data. Traffic count data is generally more readily available than the socioeconomic data that is required for trip 

generation, and since ODME does not need survey data to derive trip rates and 

lengths, the procedure is dramatically less costly to implement. 

The mode split step in not included in the model. However, three different 

modes/purposes were used in the model. Trip tables were developed for automobiles and trucks, with the truck being further classified as commoditycarrying trucks and non-commodity-carrying trucks. 

The assignment step from the four-step model is used in a similar manner in the 

ARC travel demand model. Commodity and non-commodity trucks are 

assigned to the network together with automobile trip table in a multiclass 

congested equilibrium assignment. 
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 A.1 BACKGROUND

The analysis for the completion of the ADHS requires forecasts of the traffic volumes on the all of the roadways in the ARC region that will vary in response to 

the ADHS improvement alternatives. While there is no travel demand model for 

the multistate Arc region, the basic functionality of such a model; i.e., trip tables 

and networks, were developed as part of this project. A highway network was 

being developed and trip tables were being estimated from observed traffic 

counts using an origin-destination matrix estimation (ODME) technique. The 

TransCAD travel demand modeling software used in this study has an ODME 

feature available as a standard option. 

 A.2 MODEL DEVELOPMENT

A.2.1 Highway Network 

A TransCAD highway network for the United States was developed as part of 

FHWA’s Freight Analysis Framework – Version 1 (FAF1)22 project. It provides 

basic infrastructure and connectivity information for major highways in the 

United States. The FAF1 highway network of the United Sates uses counties as 

loading points. 

This highway network includes sufficient detail to analyze the ADHS performance. It includes highway throughout the United States, far beyond the boundaries of the ARC region. The FAF1 highway network includes automobile and 

truck traffic counts on all links in the highway system. Those traffic counts are 

those reported by the state department of transportation, primarily through the 

FHWA’s Highway Performance Monitoring System. The HPMS submittals also 

provide lane, speed, and capacity information that were included in the FAF1 

network. Only major roads were included in the highway network model. 

The boundaries chosen for the ARC travel demand model highway network, was 

selected to include not only the highways in the ARC region, but the major 

highway decision points, for example the interstate highways nearby the ARC 

region, where a traveler could chose to use or not use a route involving an 

improved ADHS road, based on the quality of service that was being provided. 

Therefore, rather than just the 417 counties (and incorporated cities in Virginia) 

as TAZs in the model, and a total of 697 counties are included as TAZs in the 

model, 280 of which are in a “halo” of TAZs/counties within the model boundary but outside the ARC region. The highway network includes not only 23,042 

miles of intestates and other major highways within the ARC region but 76,634 

 

22 Battelle Memorial Institute, Freight Analysis Framework Highway Capacity Version 1: 

Methodology Report, Office of Freight Management and Operations, Federal Highway 

Administration, April 18, 2002. 
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miles outside of the ARC region for a total of 99, 676 miles of major highways in 

the entire model area. 

At the edge of the model region, 125 external stations were coded to provide for 

travel between these external stations and the remainder of the United States. 

The inclusion of these stations allows the inclusion of automobile and truck trips 

that travel from the rest of the United States to the ARC model TAZs, to the rest 

of the United States from the ARC model TAZs, or from the western United Stets 

to the eastern United States passing through the highway in the Arc model 

region. 

A.2.2 Trip Tables 

Absent a traditional “four-step” model covering the ARC region, including the 

“halo” of counties surrounding the Arc region, an alternative method had to be 

identified to develop base year trip tables. The Origin Destination Matrix 

Estimation technique implemented in TransCAD was used for this purpose. 

This technique builds the statistically most likely trip table that is consistent with 

the highway network and its observed traffic counts. This feature is included as 

a standard feature in TransCAD. The method is improved with the use of a 

“seed” trip table. An unvalidated “seed” table was created by applying standard 

national trip generation rates to the base year socioeconomic data in the model 

and then distributing those trips based on the average highway travel times 

between TAZs in the model using a standard gravity model trip distribution. 

When assigned to the highway network, the base year trip table will produce 

average daily trips between counties and the external stations that match the 

average daily traffic counts. Separate counts were provided for trucks and autos. 

This information was used to estimate separate automobile and truck trip tables. 

The truck trip table is based on observed truck volumes, which include both 

freight and non-freight trucks. The 2002 FAF2 commodity freight truck table 

was allocated from FAF2 regions to the ARC model counties using the county 

percentages by commodity from a 1998 commodity flow freight database 

developed for ARC by Marshall University. This table includes additional detail 

about the contents of those freight trucks. These commodity tables were 

subtracted from the original ODME truck table. This will result in an automobile 

trip table, a non-freight truck trip table, and additional freight truck trip tables by 

commodity. 

A.2.3 Assignment 

The trip tables can be assigned to the highway network in a conventional manner 

using the congestion on the highway links to determine the shortest paths. 

Changes in the physical attributes of the highway system can be coded and used 

to test how traffic volumes will change in response to highway improvements. A 

terrain code was added to all roads in the Arc highway network which characterizes the highway section as “flat,” “rolling,” or “mountainous.” That terrain 
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code was based on average terrain in the county. Before calculating congested 

speeds a Passenger Car Equivalent of 1.5, 2.5, or 4.5, for flat, rolling and mountainous terrain respectively was applied to the assigned volume of trucks prior to 

comparing the total volume on the highway to the capacity of highways when 

the congested speed is computed. The congested speeds are used in an equilibrium assignment that ensures that each vehicle traveling between two zones ahs 

the same congested travel time, regardless of which route is chosen. 

A.2.4 Forecast Trip Tables 

The estimated trip tables are prepared independently of trip generation and distribution steps so these steps cannot be used to produce forecasts. Forecast trip 

tables are produced by factoring the estimated trip table based on changes in 

county-level employment and population. Standard trip generation rates were 

applied to the Global Insight (medium- growth scenario) 2020 and 2035 population and employment and for the Woods and Poole (high-growth scenario) 2020 

and 2035 population and employment forecasts. Those rates were applied to the 

base automobile and non-commodity freight truck trip tables using the ratio of 

the base and future control totals by county using an Iterative Proportional 

Fitting technique (i.e., Fratar). The future freight truck table was developed by 

allocating the FAF2 2020 and 2035 trip tables in exactly the same manner that the 

base year commodity trip table was created. 

A.2.5 Future Assignments 

The development of future year trip tables together with the existing and future 

highway networks provided the ability to forecast future highway volumes for 

those future networks. The No-Build highway network was created by updating 

the base year network with ARC “Cost to Complete” GIS database. That database was used to identify ADHS improvement that have been completed or will 

be completed by others, in addition to ADHS projects where construction is 

committed by ARC. Those projects define the No-Build highway network. 

Those ADHS project for which funding has not yet been secured are part of the 

Build scenario. The ARC “Cost to Complete” GIS database was used to determine the proposed number of lanes and the proposed design speed for widen 

section of ADHS highway, and the design and location of new roads. 
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 B. Market Access and Economic 

Development Impacts 

Modeling 

Section 2.5 summarized the methodology for estimating economic development 

benefits, using the Transportation Economic Development Impact System (TREDIS). 

This appendix presents additional information regarding that methodology. It is 

organized into three parts: 1) process for analysis of market access changes and 

business attraction impacts, 2) description of market access changes, and 

3) analysis of economic impact timing and magnitude. 

 B.1 MARKET ACCESS IMPACT METHODOLOGY

B.1.1 Process for Estimating Market Access Benefit 

This section expands upon the description of the market access impact analysis 

process that was provided in Section 2.5.2 of the main report. In summary, this 

process estimates the extent of new economic activity created by changes in 

transportation connectivity and access – effects that are beyond the traditional 

“travel efficiency benefit” measures of travel time, cost, and safety changes. It 

covers two types of transportation changes created by completion of the ADHS: 

(A) Impacts from expanded market reach, facilitating agglomeration economies 

(i.e., operational efficiencies associated with working in larger markets); and 

(B) Impacts from enhanced intermodal connectivity, resulting from either 

enhanced service levels or enhanced connectivity to those services. 

For each county within Appalachia, market reach change is measured in terms of 

size of the labor market (measured as population accessible within 60 minutes of 

the county population center), and size of the same-day truck delivery market 

(measured in terms of employment within three hours one-way truck delivery 

time from the county populations center). Intermodal connectivity is measured 

in terms of the change in travel times from each county to the nearest commercial 

airport, marine port, intermodal rail facility and international freight gateway. 

The methodology for estimating market access impacts in TREDIS is drawn from 

the Local Economic Assessment Package (LEAP) economic development analysis 

process. Impacts are estimated at the county level based on the access change 

variables, shown above. The steps are as follows. 

First, the groups of ARC counties are compared to non-ARC counties in the same 

states to determine whether the extent to which they exhibit “gaps” in economic 
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mix or growth performance. This gap analysis is performed at the industry level. 

Second, the relative strengths and weaknesses of transport and non-transport 

factors are assessed. This step identifies whether any economic development 

potential in the study area can be achieved by improving access factors (as, say, 

improving the quality of the labor force). After the potential benefit from 

improving transport access is identified, the market access module utilizes the 

inputs shown above to determine the extent of the access improvements. This 

leads to the final step of estimating the magnitude of economic development 

impact. 

The magnitude of the impact is determined by cross-referencing three “pools” of 

data. These are: 1) the mix of industry observed in the study area; 2) each 

industry’s utilization of and sensitivity to different modes in select markets; and 

3) the extent of improvement of these modal accessibilities. The markets considered in the present study include the labor market, final demand consumer markets, supply-chain delivery markets, and markets for international imports and 

exports. 

B.1.2 Multiregion Applications: Net and Gross Impacts 

The Market Access module is based on the theory that locational advantage 

strengthens an area’s potential for conducting business. In practice, given a 

change in access to markets, subsequent growth may reflect either local productivity gains or relocation of productive activity from other areas (or some combination thereof). Activity shifts may reflect actual firm migration or local 

industrial expansion coupled with contraction elsewhere. This can include shifts 

from outside areas to the Appalachian region, or shifts within the Appalachian 

region. Clearly, there is a need to adjust for the latter case to avoid doublecounting of economic impacts. 

In a multistate regional analysis as 

applied in this study, TREDIS accounts 

for potential offsets within the 

broader study area with a spatial 

adjustment module. This module 

distinguishes the extent to which 

business attraction and relocation 

occurs within the Appalachian region 

or from outside to the Appalachian 

region. This makes it possible to 

estimate the net economic development impact for the overall 

Appalachian region. 

Rest of Country

Project Area

Study

Regions
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B.1.3 Sources of Growth 

The spatial adjustment module is sensitive to several types of growth following 

an access-improving transportation investment. These fall into three categories: 

increased productivity, increased export activity, and relocation of productive 

factors. 

First, an access improvement may raise the productivity of the directly affected 

region. In this category, we use the term “productivity” to mean the ratio of output per worker (as opposed to “expansion of output”). This productivity gain 

stems from the benefits of increased agglomeration. These positive externalities 

have been well-established in the literature,23 and reflect the mechanisms of better labor matching, better selection of intermediate inputs, and knowledge spillovers. The ensuing productivity gains are realized as increased output and value 

added relative to employment. In other words, access (and resulting agglomeration) allows firms to make better use of existing labor and capital inputs without 

necessarily increasing local employment. As such, any local benefits from market access improvements do not necessarily come at the expense of other parts of 

the study area. In fact, research indicates that productivity gains from agglomeration are more likely to have positive spatial externalities – that is, local gains 

may improve the economic performance of neighboring areas. 

The second possible effect is a gain in industrial output (sales) through increased 

exports. Results are based on research relating exports (sales) to accessibility to 

different types of international gateways. As such, improvements in access may 

increase industrial output in the host region such that: 1) technology does not 

necessarily change – that is, the ratio of output and income to employment may 

remain constant; and 2) economic benefits to one region do not necessarily come 

at the expense of others, because the increased outputs helps satisfy international 

demand (which is assumed to be highly inelastic). 

Finally, accessibility improvements may change the geography of profitability 

for spatially competitive firms. Access changes have the potential to increase 

revenue potential or decrease costs at a particular location relative to other locations. The increased revenue potential may come from increased accessibility to 

consumers of a particular type; decreased costs may come from industrial or 

logistical reorganization capitalizing on access changes (these are distinct from 

travel-time and travel-cost savings). In either case, an access improvement may 

induce migration of productive factors to take advantage of the new economic 

landscape. The key point here is that the migration is due to relative cost changes 

between regions in spatial competition. In practice, this “migration” occurs over 

relatively long-time scales (5 to 10 years), and may be observed as either physical 

 

23 For a review of the theory and empirics of agglomeration-productivity relationships, 

see reviews by Rosenthal and Strange (2003), Puga (2003), Fujita and Thisse (2002), or 

Eberts and McMillen (1999). 
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relocation of a single business, through firm birth/death that benefits one region 

at the expense of another, or it could reflect the opening of branch offices in one 

location at the expense of another. In any of these cases, local economic growth 

comes at the expense of other competing jurisdictions, and, therefore, must be 

accounted for when considering the net impact to each in a multi-region project. 

B.1.4 Adjusting for Spatial Relocation 

The Market Access module estimates the impacts due to each of the three effects 

described above separately. Because the first two effects are assumed to have no 

relocation impacts on neighboring areas, only the third impact type is used to 

determine net impacts to a group of distinct study regions. More specifically, the 

spatial accounting module estimates the spatial relocation of employment

resulting from market access improvements that affect relative cost or revenue 

factors. 

The module begins by considering the estimated economic development gains in 

employment to a “destination” area within the larger study region. These gross 

impact numbers reflect potential benefits to an area as though it were the only one 

impacted by a project. The destination area is then compared, in a pair-wise fashion, to all the other areas within the broader study region. For each pair, 

employment relocation is estimated from the “source” area to the “destination”

area based on several factors (discussed below). After all interproject area pairs 

have been cycled through, the module moves to another “destination” area, and 

all pair-wise comparisons are performed again. This sequence is repeated for as 

many times as there are areas within the broader study region. 

Each pair-wise comparison is made on an industry-specific basis. In other 

words, the module asks: “if the destination area is forecast to gain X jobs in a 

specific sector, then how many of those jobs may be drawn from the ‘origin’

area?” The result is based on several factors, including sector properties, the 

distance between the two areas, and the industry trends of the origin area. 

Sector Properties – For any area-to-area pair within the broader region, the 

magnitude of relocation depends on the specific industry under consideration. This accounts for different levels of mobility among different types of 

production. For example, service sector firms are more mobile than manufacturing firms because the latter are more capital intensive and, therefore, 

moving costs are higher. Furthermore, revenues for service firms are typically more spatially dependent than manufacturing firms. Finally, industries 

that are nationally or globally serving may be less sensitive to cost differences 

between two areas. Other things equal, locally serving sectors are modeled 

as more mobile, and more likely to be drawn from nearby areas, whereas 

more nationally serving industries are modeled as less mobile, and as more 

likely to be drawn from anywhere in the area (rather than only nearby areas). 
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Inter-county Travel Times – For those sectors that are more locally serving, 

the amount of industrial relocation is modeled as declining with distance 

between origin and destination area. The reason for this distance decay is 

that mobile, locally serving industries are more likely to move in response to 

observed access improvements, and the likelihood of observing these 

improvements declines with distance. The net impact to nationally serving 

firms also diminishes with distance, but the effect is much less pronounced. 

Travel times are estimated using Oak Ridge county-to-county “impedances,”

which reflect travel times with an “average” amount of highway congestion. 

Other things equal, distance diminishes the amount of inter-county industrial 

mobility predicted in the model (the effect varies based on sector, as discussed in the previous bullet). 

Industry Trends – Finally, the mobility of industrial activity between two 

firms is modeled as being a function of industry trends in the “source” area. 

This accounts for the fact that growing economies are less likely to lose 

industrial growth than declining ones. TREDIS measures this by trend 

analysis. If, in recent history, the “origin” area has seen growth in employment higher than the United States average, then that area is less likely to 

contribute to the destination area’s growth impact. It is important to note 

that growth is measured relative to United States trends, so an area with 

declining employment may still be considered “healthy” if employment is 

declining at a slower rate than the United States (for that sector). 

To estimate the net economic impact to each study area, the above factors are 

accounted in such a way to normalize the effect for the size of the larger project 

region relative to the rest of the country. This may be explained conceptually by 

noting how the model behaves for project areas of increasing size. Consider a 

region with only two counties as study areas. These counties may net very little 

employment from each other, but may net a large number of jobs from the rest of 

the country. As the project area expands, a greater amount of inter-region mobility cancels itself out, because a greater amount of employment is drawn from 

within the project region as compared to the rest of the United States. Taken to its 

limit, for an analysis where the project area is defined as the entire United States, 

all employment migration will net to zero – that is, the model will estimate the 

net impact to each county in such a way that this impact sums to zero across all 

counties. It is important to note that TREDIS may still predict a net productivity

or export impact at the United States level, but no new employment will be forecast as a result of inter-region mobility. 
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B.2 MARKET ACCESS INPUTS

These tables provide summaries of the changes in market access from no-build to 

build. The amount in each cell is the number counties that fall into the corresponding category for each variable. 

Table B.1 provides the change in the accessible markets by 2035 for ARC due to 

the improved highway access for the medium scenario. 

Table B.1 Changes in Accessible Population (Number of Counties) by 2035 

Medium Scenario (Global Insight) 

Percentage Change Consumer/Labor Market (60 Minutes) Delivery Market (180 Minutes) 

0% 335 97 

<5% 11 215 

5%-10% 14 34 

10%-20% 18 25 

20%-30% 7 18 

>30% 25 21 

Table B.2 provides the improvement in access time to all modes of transportation 

for counties in Appalachia for the medium scenario. The last column shows the 

number of counties that had the largest impact in terms of minutes for any given 

mode (for example: 37 counties received no improvement for access to any 

mode). 

Table B.2 Changes in Mode Access (Number of Counties) by 2035 

Medium Scenario (Global Insight) 

Change in Access 

Time (Minutes) 

International 

Gateway Rail Air Water 

Largest Mode 

Change 

0 94 117 152 137 37 

< 5 Minutes 217 243 215 199 240 

5 to 10 Minutes 34 13 14 14 20 

10 to 20 Minutes 29 15 21 47 59 

20 to 30 Minutes 25 7 6 10 30 

>30 Minutes 11 15 2 3 24 
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Table B.3 shows the modes that had the largest impact – shown by the number of 

counties. This explains that while a majority of counties received a small impact 

on mode access; however, 119 counties had a mode access improvement greater 

than 10 minutes. 

Table B.3 Largest Mode Access Change (Number of Counties) by 2035 

Medium Scenario (Global Insight) 

Change in Access 

Time (Minutes) 

International 

Gateway Rail Air Water Total 

< 5 Minutes 95 71 36 52 254 

5 to 10 Minutes 12 6 2 1 21 

10 to 20 Minutes 15 5 12 33 65 

20 to 30 Minutes 19 4 2 5 30 

>30 Minutes 9 13 0 2 24 

Tables B4 through B6 are provided for the high scenario; they correspond to the 

preceding tables shown for the medium scenario. 

Table B.4 Changes in Accessible Population (Percent of Counties) by 2035 

High Scenario (W&P) 

Percentage Change Consumer/Labor Market (60 Minutes) Delivery Market (180 Minutes) 

0% 333 85 

<5% 16 231 

5%-10% 14 35 

10%-20% 12 27 

20%-30% 8 13 

>30% 27 19 
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Table B.5 Changes in Mode Access (Number of Counties) by 2035 

High Scenario (W&P) 

Change in Access 

Time (Minutes) 

International 

Gateway Rail Air Water 

Largest Mode 

Change 

0 102 104 175 165 29 

< 5 Minutes 235 268 198 176 259 

5 to 10 Minutes 15 6 10 12 19 

10 to 20 Minutes 44 16 22 53 72 

20 to 30 Minutes 12 4 4 3 18 

>30 Minutes 2 12 1 1 13 

Table B.6 Largest Mode Access Change (Number of Counties) by 2035 

High Scenario (W&P) 

Change in Access 

Time (Minutes) 

International 

Gateway Rail Air Water Total 

< 5 Minutes 105 90 34 39 268 

5 to 10 Minutes 13 3 1 2 19 

10 to 20 Minutes 25 4 12 36 77 

20 to 30 Minutes 11 4 2 1 18 

>30 Minutes 1 11 0 1 13 

Figures B1 through B4 show the changes in accessibility for the Medium (Global 

Insight) Forecast. The darker shadings indicate larger improvements in access 

for that county. The blue markings show the locations of the AHDS projects. 
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Figure B.1 Percentage Reduction in Travel Time to Nearest Intermodal Rail 

Terminal in 2035 
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Figure B.2 Percentage Reduction in Travel Time to Nearest International 

Gateway in 2035 
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Figure B.3 Percentage Reduction in Travel Time to Nearest Marine Port in 

2035 
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Figure B.4 Percentage Change in Employment Accessible within a ThreeHour Drive Time (Buyer and Supplier Markets) in 2035 
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B.3 ESTIMATING THE TIMING AND MAGNITUDE OF 

ADHS PROJECT IMPACTS

An analysis was conducted of the relationship between the timing of highway 

improvements and the magnitude and timing of subsequent economic growth 

impacts. This work updates the Twin County Study conducted by EDR Group in 

2007.24 The previous study compared growth rates of earnings and income from 

391 counties in the ARC to “twin” counties of similar characteristics that were 

located elsewhere. It tested the impact of the Appalachian Development 

Highway System on economic growth in the counties of the ARC. For this 

research, a panel data set was used with each observation consisting of both a 

county and year – for the purpose of capturing the lagged effect of new lanes on 

economic growth. While the previous study measured the cumulative effect on 

growth through 1991 and 2000, this new study estimated the length of time that 

the opening of a highway (or added lanes) took to affect growth in ARC counties. 

To capture this impact the variable annual income growth was regressed on new 

lines miles per area on the current year and up to 10 years before. The hypothesis being that a county’s level of distress or metropolitan status could affect the 

length of time that highway takes to impact growth. 

The counties were broken into three groups: metro, non-metro – distressed, and 

non-metro – non-distressed.25 These categories were created based on whether 

the county was part of a metropolitan area and its classification of distress level 

by the ARC. The regression results are illustrated in Figure B.5. They show that 

distressed counties – after taking longer to react – actually had a larger economic 

growth impact from non highway development than non-distressed counties. 

 

24 This section is drawn from a working paper by Glen Weisbrod and Tyler Comings, 

Economic Development Time Lag from Highway Improvements in Appalachia, using a “twin 

county” dataset constructed by Theresa Lynch, The Impact of Highway Investments on 

Economic Growth in the Appalachian Region, 1969-2000: Update and Extension of the Twin 

County Study, Sources of Regional Growth in Nonmetro Appalachia –Volume 3 

Statistical Studies of Spatial Economic Relationships, Economic Development Research 

Group, MIT Department of Urban Studies and Planning, 2007. 

25 The metro group was not broken into two groups because there was no significant 

difference between distressed and nondistressed counties in metropolitan areas. 
Economic Impact Study of Completing the Appalachian Development Highway System 

B-18 Cambridge Systematics, Inc. / Economic Development Research Group / HDR Decision Economics

Figure B.5 Regression of Annual Income Growth on New Lane Miles 

Timing of Statistically Significant Impacts Are Shown 

Non-Metro, Distressed

0

5

10

15

20

25

30

35

40

1 2 3 4 5 6 7 8 9 10 11 12 13

Years Since Highway Completion

Non-Metro, Non-Distressed

0

5

10

15

20

25

30

35

40

1 2 3 4 5 6 7 8 9 10 11 12 13

Years Since Highway Completion

Metro

0

5

10

15

20

25

30

35

40

1 2 3 4 5 6 7 8 9 10 11 12 13

Years Since Highway Completion

Note: Black bars: years with statistically significant values (greater than 90 percent confidence). 

 Grey bars: fringe years with consistent impact but statistical confidence less than 90 percent. 
Economic Impact Study of Completing the Appalachian Development Highway System 

Cambridge Systematics, Inc. / Economic Development Research Group / HDR Decision Economics B-19

The estimated impact clearly differs among the different settings. The nonmetro – distressed group shows highly significant impact occurring six years 

after the project. The non-metro – non-distressed has highly significant impact 

three, four, and five years after project completion. This result is believable and 

promising as distressed areas should have more potential to grow than other 

areas. When comparing metro and non-metro categories, it was apparent that 

nonmetro counties exhibited more of an impact. This result was expected since 

the ADHS program targets rural areas that lack highway connectivity. Also, 

highways are concentrated in metro areas; therefore, it seems reasonable that 

rural areas would be more quickly affected from construction of a new highway. 

However, it is still a curious result that metro counties are positively affected 

eight or nine years after project completion. 

This analysis, when breaking the counties into groups, provided outcomes that 

were close to expectations. One implication was that treatment of counties in 

metropolitan areas should not depend on level of distress. However, it is interesting to note that the estimated effect was similar for metropolitan areas to distressed counties not in metropolitan areas, though the latter group received a 

much larger impact. Treating the nonmetro counties based on their distress level 

was important. The implication here was that nondistressed counties in rural 

areas were the fastest to respond to added lanes or new highway construction. 

Distressed counties that were not in metropolitan areas took longer to respond to 

the stimulus but had a more intense reaction. 

This analysis gave the powerful conclusion that the presence of new highways 

acted as a catalyst in disadvantaged areas; creating a much needed surge, albeit a 

delayed one, in economic growth. Therefore, transportation and economic 

development planners should not anticipate a rapid recovery for these counties 

when accessibility is improved.