For Immediate Release:

February 5, 2004

Report: I-69 Costs Clearly Outweigh Benefits

Project's High Cost Threatens Road Projects Statewide

Andy Knott Hoosier Environmental Council 317-685-8800
John Moore Environmental Law and Policy Center 312-848-1238 (cell)
Greg Travis Association of Monroe County Taxpayers 812-391-0988 (cell)
Pat Andrews Marion County Alliance of Neighborhood
Associations 317-856-3341
Tom Tokarski Citizens for Appropriate Rural Roads 812-825-9555

Five citizen groups released a report today that shows the costs of the proposed new-terrain I-69 outweigh the purported benefits of the nearly $2 billion project. [Click here for a copy of the report] The report comes at a key time in the debate over the project as lawmakers have expressed skepticism over funding the enormous cost of I-69.

The report corrects two major flaws in INDOT's cost-benefit analysis for I-69. When corrected, the project's costs would be $499 million more than the purported benefits of the highway. The report's conclusions would translate to a negative cost benefit ratio of 1:0.66, meaning that for every dollar spent on the highway, only 66 cents would be returned in benefits. INDOT had projected a positive cost-benefit ratio for the project of 1:1.7. [Click here for graphic]

"Our groups commissioned Smart Mobility, a highly respected transportation and economic consulting firm, to review INDOT's cost-benefit analysis," said John Moore, senior attorney for the Environmental Law and Policy Center. "Smart Mobility found at least two glaring flaws, and confirmed our suspicion that the highway simply doesn't pay for itself."

Smart Mobility easily identified two major weaknesses in INDOT's user cost-benefit report. The first flaw concerned the value of the project's safety benefits. Most of INDOT's asserted benefits in the cost-benefit analysis result from safety benefits. Remarkably, however, INDOT assumed that accident rates would remain constant from 1991 through 2036, a period of 45 years. In fact, accident rates have fallen for over the past ten years due to continuous safety improvements in vehicle and road design. Smart Mobility more realistically assumed that, as in the past, accident rates would continue to decline. Since accident rate's will drop in the future regardless of whether I-69 is built, the safety benefit is much less than INDOT's unrealistic prediction.

"From the outset, the I-69 project has been marked by fiscal irresponsibility, ignorance of diminishing returns, and misallocation of scarce government investment opportunities," said Greg Travis, executive director of the Association of Monroe County Taxpayers. "The smell of special interests grubbing down at the public pork buffet is almost overwhelming and Hoosier taxpayers have had enough."

Smart Mobility also rejected INDOT's insistence on using an arbitrary 4% "discount rate" when calculating the project's future costs and benefits. The U.S. Office of Management and Budget recommends a 7% discount rate for most federally-funded projects, as does the Federal Highway Administration, and INDOT even used a 7% discount rate in its 1996 user cost-benefit analysis. (A discount rate reflects both the future value of money and the alternative uses for the money.)

"Garbage in - garbage out," said Pat Andrews, vice president of the Marion County Alliance of Neighborhood Associations. "When one input number is changed from a figure dictated by the feds and another input number is a dozen years old, of course the result will be wrong. How fortunate for INDOT it was wrong in favor of building I-69."

The groups also presented cost information from INDOT's long-range plan that shows that the I-69 project threatens other planned highway expansion projects across the state. The $1.9 billion cost of I-69 dwarfs INDOT's annual highway expansion budget of roughly $200 million per year, as well as planned expansion projects in every major metropolitan area of Indiana. Expansion projects include new and widened highways. [Click here for a graphic]

The groups pointed to an analysis by Senate Finance Chair Lawrence Borst that indicated that in order to fund I-69, INDOT would have to forego all expansion projects statewide for 14 years, or raise the gas tax by 5 cents and dedicate the increase to I-69 for 14 years. [Click here for a copy of Senator Borst's analysis]

"Since it is unlikely that INDOT will be allowed to stop projects across the state in order to build I-69, the state would have to raise the gas tax to fund this boondoggle," said Tom Tokarski, president of Citizens for Appropriate Rural Roads. "It is time to stop this fiscal recklessness."

Today's report mirrored a 1997 report by a then-Indiana University professor who is an expert in cost-benefit analysis. That report corrected flaws in INDOT's 1996 cost-benefit analysis and found that the project's costs would exceed benefits by $115 million. The only other cost-benefit analysis conducted by INDOT was in 1990, which found the highway would not be cost effective to build.

"The I-69 project has never passed a credible cost-benefit analysis," said Andy Knott, air and energy policy director for the Hoosier Environmental Council. "It's time for Gov. Kernan to stop fooling the public and pull the plug on this boondoggle."

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