I wrote that headline, realized there must be dozens of other identical headlines out there, used The Google and found this one from an Alaska TV station. Anyway, last week the State of Alaska decided the bridge money would be better used elsewhere (Alaska seeks alternative to bridge plan):
Some called it a bridge to the future. Others called it the bridge to nowhere.
On Friday, Alaska decided the bridge really was going nowhere, officially abandoning the project in Ketchikan that became a national symbol of federal pork barrel spending.
See below for my attempt at a benefit estimate for the $400 million bridge.
The $398 million bridge would have connected Ketchikan, on one island in southeastern Alaska, to its airport on a nearby island.
Gov. Sarah Palin, a Republican, said Friday that the project was $329 million short.
“We will continue to look for options for Ketchikan to allow better access to the island,” Ms. Palin said. “The concentration is not going to be on a $400 million bridge.”
Ms. Palin said the best alternative for access to the airport would be to upgrade the ferry system.
Ketchikan is Alaska’s entry port for northbound cruise ships that bring more than one million visitors yearly. Every flight into Gravina Island requires a 15-minute ferry ride to reach the more densely populated Revillagigedo Island.
The town, seven blocks wide and eight miles long, has little room to grow. Local officials have said access to Gravina Island, population 50, is needed for the town and its economy to grow.
The purpose of the bridge to cut travel time so let's say we get 1 million visitors each year. Each visitor makes $100k in income (we're on the high side* with kids, etc). And we'll value time at 33% of the wage rate. Economic growth for a town of 50 is not the business of the federal government so I'm setting those bennies to zero. The benefit of the bridge is the avoided cost of the ferry ride:
- $100,000 in income with 2000 work hours each year is $50 per hour
- .25 of an hour is 15 minutes and the cost of travel is $12.50
- Valuing the leisure cost at .33 of the wage brings us down to a cost of $4.125 per visitor
- Aggregating over 1 million visitors each year gives us benefits of $4,125,000
- Aggregating over time (into perpetuity) at a 2% rate gives us present value of benefits of $206,250,000. A higher discount rate will make these benefits even lower.
The present value of benefits of the bridge is impressive but the net benefits of the bridge is a woeful negative $193,750,000. The B/C ratio is only 0.52. That bridge would have been a very inefficient way to spend federal money.
*Note: I'm also assuming the ferry ride has no value. I love ferry rides so I think we are overestimating benefits of the bridge.
