Value-Based Investing for Government Infrastructure: Financing Virginia's Roads

It is more difficult for government agencies to invest wisely than it is for business firms; bureaus usually do not generate revenue from their investments, so they do not have the price system to guide them. This disadvantage can be overcome by using economic value estimates in place of actual prices. Value estimates can be calculated by finding the market prices of similar services and adjusting them to new circumstances. The author did this for two construction projects proposed by the Virginia Department of Transportation. Using California's 91 ExpressLanes as a reference value, he was able to calculate value estimates for I-81 in Roanoke and I-66 in Fairfax. Using these estimates, he was able to discover how much revenue could be generated from each investment. $7 million in gross revenues could be generated yearly from the I-581 project; $38 million in gross revenues could be generated yearly from the I-66 project. Since the costs of these two projects are about equal, investing in I-66 generates considerably more value than investing in I-581. By creating a Bureau of Economic Value Estimation and giving it the power to prioritize road investments, the Virginia legislature could institutionalize the efficient investment of its scarce capital resources in roads, thus furthering growth at home and serving as a model for other States,

  • Supplemental Notes:
    • This document is disseminated under the sponsorship of the Department of Transportation University Transportation Centers Program.
  • Corporate Authors:

    George Mason University

    4400 University Drive
    Fairfax, VA  United States  22030

    Research and Innovative Technology Administration

    Office of University Programs, 1200 New Jersey Avenue, SE
    Washington, DC  United States  20590
  • Authors:
    • High, Jack
  • Publication Date: 2009

Language

  • English

Media Info

  • Media Type: Print
  • Edition: Final Research Report
  • Features: Appendices; Tables;
  • Pagination: 42p

Subject/Index Terms

Filing Info

  • Accession Number: 01146806
  • Record Type: Publication
  • Files: UTC, TRIS, USDOT
  • Created Date: Dec 16 2009 11:22AM