In addition to measuring the ridership and revenue impacts of the SEHSR, KPMG Peat Marwick was also selected to measure the economic and fiscal impacts and transportation benefits of the construction, operations and maintenance of the Southeast High Speed Rail corridor project. This analysis was divided into two parts: 1.) population, employment and development patterns and trends; and 2.) economic impact analysis and estimation.

11.1 POPULATION, EMPLOYMENT AND DEVELOPMENT PATTERNS

As a first round of analysis, KPMG assessed the population, employment and development patterns of the ten counties along the Charlotte to Raleigh section of the SEHSR (Mecklenburg, Cabarrus, Rowan, Davidson, Forsyth, Guilford, Alamance, Orange, Durham, and Wake). These ten counties also hold the three largest urban regions in North Carolina: Charlotte, the Triad (Greensboro-Winston-Salem-High Point) and the Triangle (Raleigh-Durham-Chapel Hill). In this analysis, these ten counties are referred to as the "Piedmont Crescent."

The Piedmont Crescent's population in 1995 was estimated to be 2.5 million, while non-agricultural employment was 1.5 million. This represents 35 percent and 45 percent of the state's population and non-agricultural employment (see figure 11-1).

Figure 11-1: Population and Employment along the SEHSR

Source: DRI/McGraw Hill

Employment in both the state and the Piedmont Crescent is concentrated in the services, trade, manufacturing and government sectors. Since 1975 the state and Piedmont Crescent have been shifting from a manufacturing to a service-based economy. Figure 11-2 shows that this shift will continue.

Figure 11-2: Employment by Major Industry along the SEHSR

* FIRE = Finance, Insurance, and Real Estate Source: DRI/McGraw Hill

Growth in population and employment along the Crescent will be strong through 2015. Between 1995 and 2015, population in the ten county region is projected to grow by 32 percent from 2.5 to 3.3 million, while employment will grow by 40 percent from 1.5 to 2.2 million. This is a faster rate than the rest of the state, which in turn is a faster rate than the US projections. This shows that the Piedmont Crescent will continue to have the lion's share of population and employment in North Carolina.

Overall, the state and the Piedmont Crescent will continue to be an attractive area for residents and businesses due to factors such as a moderate climate, generally lower crime rate, cultural and recreational facilities, superior universities and good health care facilities.

11.2 ECONOMIC IMPACT ANALYSIS

The economic benefits analysis ascertained the following potential impacts:

• Employment and output in the construction, operation, and maintenance of the HSR system
• Purchase of goods and services
• Changes in economic activities as a result of the high speed rail operations
• Tax base changes

KPMG used the RIMS II input-output model to determine the economic and fiscal impacts. The economic impacts specifically are business sales, employee earnings and jobs created as a result of the increased economic activity. It also determines the fiscal impacts on the state such as sales tax revenues, income tax, corporate tax, franchise tax, recordation fees, employment security taxes and property taxes.

The economic and fiscal impacts resulting from construction activities are estimated as a one time impact expressed in 1996 dollars. The impacts from recurring employment are estimated over 20 years. This is a conservative cut-off point, since a high speed rail system's components (apart from the track) have a life of 30 to 40 years. As such, the impact estimates are conservative and would increase in direct relation to the number of years used to estimate impacts.

A summary of the economic and fiscal impacts is provided in Table 11-1. The impact estimates are based on four categories of activities:

• HSR implementation (construction)
• HSR operations and maintenance (O & M)
• Station area construction, by category of use
• Recurring employment accommodated by station area construction

These impacts are stated in Net Present Value 1996 dollars.

The economic impacts also may be expressed in full-time equivalent jobs (FTE) which are estimated for the following activities:

• HSR Construction: 23,952 FTE (1 year duration)
• Station Area Construction: 7,438 FTE (1 year duration)
• HSR Operations & Maintenance: 807 FTE (20 years duration)
• Recurring Employment at Station Areas: 18,980 FTE (20 years duration)

11.2.1 STATION CONSTRUCTION

Another area of benefit is the construction of high speed rail stations. Preliminary estimates underway by another firm estimate the construction value at $41 million, which includes station enhancements, platforms and parking. Note that this is different from station area construction listed in the table above, which measures the development occurring around a high speed rail station. This magnitude of station construction would generate the following additional economic and fiscal impacts:

• FTE : 1,222 jobs of 1 year's duration
• Earnings income from North Carolina residents: $24 million
• Individual state income taxes: $770,000
• Corporate state income taxes: $250,000
• Sales taxes: $475,000
• Employment security taxes: $250,000

11.2.2 REASONABLENESS OF PROJECTIONS

A substantial portion of the economic and resulting fiscal impacts result from the projection of land use scenarios and station areas. To provide a context for these projections of real estate development, an analysis was conducted to relate the station area projections of development to the existing commercial development in 1995. This provides an estimate of the increment to development attributable to the HSR and focused growth land use policies.

It is estimated that about 360 million square feet of commercial development currently is in the Piedmont Crescent, representing an increase of 113 percent from 1980, or five percent per year. The 1995 employment base for the FIRE, retail restaurant, hotel and services is 860,000. Station area development linked to the project is projected at 2.4 million square feet, while FTE from the SEHSR is estimated at 9,000. This shows that the overall impact of the SEHSR would be a one percent increase over current levels, which is both reasonable and achievable.

11.2.3 TRANSPORTATION INVESTMENT & ECONOMIC AND FISCAL IMPACTS

HSR Rail implementation has exact economic impacts. If the SEHSR system is not constructed, interindustry sales do not occur and earnings incomes are not generated. Absent increases in earnings incomes, none of the fiscal impacts from a broadened and deepened tax base occur.

An issue arises when attributing recurring impacts to the SEHSR. One argument is that the development and recurring employment and sales would have happened anyway, perhaps in a different location. The problem with this argument is the vague tone regarding where the development would occur. Development seeks advantaged locations. Transportation investments provide specific locations with advantages to attract economic growth. The growth lost to the corridor may be lost to the state as well.

Focusing on a site specific example, HSR improves the competitive advantage of the tourism industry in Salisbury. Without the HSR service, the number of visitors is less than with HSR service. For Salisbury this is a straight forward case for arguing the impact of the SEHSR on construction activities. With HSR more tourists come to Salisbury and generate demand for more retail. The retail construction only occurs because of the influence of HSR on tourist travel patterns.

The analysis becomes more complex once it moves from construction to recurring impacts. Retail sales increase in Salisbury. There are more tourists and more retail opportunities to spend money. This is represented in the analysis by increases in earnings income and taxable sales. The argument will be raised, however, that these sales would have taken place somewhere else and the sales are just a transfer that happens to benefit Salisbury. Tourists do not have more money because of the SEHSR, but are more likely to spend the money in Salisbury. Restaurant sales are the more telling example. These sales will go up in Salisbury because of the SEHSR and increased tourism. This implies that, absent the SEHSR, tourists would have spent the money on something else, somewhere else, not in North Carolina.

Looking toward capital markets can broaden the argument regarding the impacts associated with high speed rail. The investment in construction and the resulting recurring impacts have significant positive effects on the local economy. The capital investment is triggered in part by the improved accessibility offered by the SEHSR. Furthermore, the capital is attracted from national (and even international) sources, which acts as an economic infusion into the local, regional, and state economies.

An issue exists with respect to linking development and absorption of commercial space with SEHSR service. The development scenario in the SEHSR impact analysis projects for Charlotte 1.4 million square feet of mixed-use space being developed in the HSR station area. Beyond the argument that this would have happened anyway, is the argument that it would have happened in Charlotte and/or somewhere else in North Carolina. Investment in high speed rail, however, is analogous to investment in airports. Without the investment in an airport, for example, there would be no construction impacts. The competitive transportation advantage of the region also would be extremely negatively impacted and would be the cause of the loss of jobs and the commercial development to accommodate the jobs. Without an airport, for example, Charlotte would lose the professional basketball and football teams. Ultimately, it probably would wipe out most upper and middle management jobs, which then makes many support jobs irrelevant.

Similar cases in North Carolina can be developed for impacts that do not occur because of lack of an operational HSR system. Without the SEHSR, Salisbury loses a valuable advantage to increase tourism. With respect to Charlotte, the analogy to the airport becomes realistic in the context of an integrated rail system of which the Southeast Corridor in one segment. Eliminating Charlotte from this type of rail system would have significant negative effects on maintaining aggressive economic growth targets and broadening the land uses in the expanding downtown.

Pursuing another example, the prospects for attributing development are quite logical in Greensboro, since presently there is not much commercial and retail activity near the future downtown intermodal center and the high speed rail system will cause concentrations of people, which generates commercial opportunities. In effect, the investment in the SEHSR will serve as the primary catalyst for any development that occurs in the station area.

The general argument for transportation investments is one of accommodating economic growth. This follows the logic that a city (Charlotte, for example) will grow at some percentage per year, given the industry mix, the growth rate in the overall economy and the growth rates in key industries. Growth can not occur on a continuous basis without investments in various infrastructure, transportation being one infrastructure investment category. From a land use perspective, cities focus growth via zoning and other methods in areas served by transportation improvements such as high speed rail. Therefore, the argument is not that high speed rail causes growth, but that investments in high quality transportation infrastructure combined with land use policies can be joined to focus and enhance growth.

It is helpful to view the SEHSR in the context of a larger system, which then has greater impact in capturing auto and airplane trips. Then the argument becomes a multimodal issue where HSR contributes to a transportation system that enhances mobility for fostering economic growth. Finally, the region attains a competitive advantage over other regions, since without key multimodal investments there is far less of an infrastructure capacity to accommodate growth. The HSR alone does not cause the growth, but HSR as a (or the) key investment in a multimodal transportation network enables the growth to occur.

11.3 SUMMARY AND CONCLUSIONS

The SEHSR will have substantial positive fiscal impacts for the State of North Carolina. The State will collect over $719 million in tax revenues from the construction and operation of the SEHSR. A vast majority of that will be recurring income over the life of the project.

Construction of the SEHSR will also create thousands of jobs and billions in income for North Carolina residents. Conservative estimates are that the construction of the SEHSR will generate over 31,000 jobs, while recurring employment from the operations and maintenance of the SEHSR will create over 19,000 long-term jobs.

The SEHSR will give North Carolina a competitive advantage in promoting economic growth. Transportation investments like high speed rail provide specific locations with improvements to attract economic growth. Since development and capital investments seek advantaged locations, the SEHSR will provide NC with the infrastructure needed to remain competitive.