DRAFT

A PRELIMINARY ECONOMIC ANALYSIS OF THE

NORTH SHORE ROAD

DOCUMENT UNDERGOING REVISION

This review analyzes and compares the economic effects of two alternatives. The first is a cash settlement with Swain County of $52 million. The second is completion of the North Shore Road to Blue Ridge Parkway design standards.

The economic impact of a $52 million cash settlement.

Swain county, acting through its Board of Commissioners, has requested a cash

settlement of $52 million. This would be in lieu of any additional road construction.

Swain County proposes that the settlement funds be held in trust for it by the N.C. Local Government Commission. The income would be available to the county annually. The principal could not be spent unless authorized by a vote of two-thirds of the registered voters of Swain County . These restrictions would be imposed by the federal legislation authorizing the cash settlement and appropriating the money.

For purposes of this study, we assume that the County will spend 95 percent of the income annually, and will leave 5 percent in the fund, to be added to the principal, to offset inflation.

The sum of $52 million, invested at five percent, would yield the County $2.6 million a year. Assuming only 95 percent of that is spent, the County would be able to appropriate $2.47 million a year from the settlement fund.

The 2005-2006 budget of Swain County calls for an expenditure of $8,529,865. The income from a settlement fund, at 95 percent, would thus equal about thirty percent of the current budget appropriations.

The only expense the County would incur in the production of this income would be the administrative fee, if any, charged by the N.C. State Treasurer’s office.

We assume that it would take two years for a bill confirming a cash settlement to be passed, and for the funds appropriated by it to flow to Swain County .

The economic impact of completing the road.

Time when economic benefits would commence. Assume the current

Environmental Impact Statement is completed in two years. Assume two or more years in a court challenge following release of the EIS. Assume the court challenge fails, and it then takes five years for actual construction. Using these conservative estimates, it would be ten years at a minimum before there would be revenue producing traffic using the road.

The Cherohala Skyway, in Graham County, N.C. and Monroe County , TN took 34 years to complete. It cost approximate3ly $100 million.

Current traffic available. The N.C. Department of Transportation maintains

traffic counts on all highways. These counts begin to answer the question of where will the vehicles come from to drive on a completed road. Traffic counts for 2000 show the following at various local points.

490 Vehicles per day at Deal’s Gap on the Tennessee State Line

270 “ “ “ on NC 28 at its junction with US 129, near Topoco

280 “ “ “ on NC 28 at the base of Fontana Dam

740 “ “ “ on NC 28 east of Fontana Village

2700 “ “ “ on NC 28 at Almond

6900 “ “ “ on US 74 east of the NC 28 Junction

7100 “ “ “ on US 74 at Bryson City

Historically, traffic counts in Western North Carolina have increased at approximately 2 percent a year. This assumes there is no dramatic increase in fuel prices, no shortages of fuel and no lines at filling stations.

If a completed North Shore Road could divert one-half of the traffic at Fontana Village , that would deliver to it 370 vehicles a day. If traffic increases at 2 percent a year, that would yield a traffic count on the North Shore Road of 489 vehicles a day ten years from now, in 2014.

Capacity constraints. All roads have capacity constraints. To begin with, there

is a design capacity. That can be determined in advance, as well as determined for existing roads. The initial determination takes into account such constraints as (1) functional class (local road); (2) area type (rural); and (3) terrain type (mountainous). In the case of this road, there are other constraints on its capacity, which include the following.

• Capacity and other restraints on the bridge atop Fontana Dam. [To be developed.]

• Constraints in the existing portion of construction in the form of 18 MPH design curves.

• Seasonality of traffic. There is a summer peak in usage, and again in the fall during leaf season. In winter there will be closures due to ice and snow. Regularly there will be closures and restrictions on traffic while maintenance is performed.

Sources of Income from Tourists.

Swain County receives approximately 2 ½ cents from the N.C. Sales Tax levy of 7

cents. This is collected on sales of food, mementos, gasoline, and all other goods. The sale of most grocies is exempt.

In addition to the sales tax, there is a 1 percent lodging tax. This goest to the Tourism Development Authority, not the county.

Estimate of Number of Passengers per Vehicle.

Cades Cove statistics show a vehicle occupancy of 2.3 persons in

the winter and 2.7 persons in the summer.

Blue Ridge Parkway statistics show average vehicle occupancy of

2.5 persons.

For purposes of this study, we estimate 2.5 occupants per vehicle.

Estimate of visitor Expenditures. Most of the statistics available are for

parties that spend one or more nights, and therefore incur lodging expenses. At best a visitor using a completed North Shore Road would stay in its area for one-half a day. Moreover, all of the visitor expenditures would not be made in Swain County .

Non-local day visitors to the Great Smoky Mountains National Park spend between $69 and $79 per party. Blue Ridge Parkway non-local day visitors spend about $63 per day, per party. This is an average of $70 per day, per party. Local visitors spend between $22 and $25 per party, per day.

For purposes of this analysis, we have assumed that all visitors will be non-local.

An expenditure of $70 per party will yield to the county where spent, in sales tax revenue, the sum of $1.75.

Application of these Numbers.

i. Assuming a party size of 2.5 persons per vehicle, and 489 vehicles per

day beginning in 2014, means 489 parties spending $70 per day, or $34,230.00 a day. The sales tax from this would yield $855.75. In 365 days’ time, at this daily rate, the sales tax allocation would be $312,348.75. Some of the revenue producing sales would likely take place in other counties. We have allocated 75% of the sales tax allocation to Swain County , or a total of $234,261.56.

ii. This calculation can be expanded for various assumed traffic levels, using the same data. These would be the revenue yields to Swain County at the following traffic levels.

1000 Vehicles per day Annual revenue of $479,062.50

2000 “ “ “ “ “ 958,125.00

3000 “ “ “ “ “ 1,437,187.50

The capacity of US 441 between the Park Boundary at Cherokee and the Collins Creek Picnic Area is estimated to be between 3000 and 4000 vehicles per day. The roads differ in that a portion of US 441 is a 4-lane divided highway, and the remainder is relatively level with long straight stretches. A North Shore Road would be mountainous, with continuous sharp curves and steep slopes. It would be impossible for a North Shore Road to attract the same number of vehicles as US 441, or to accommodate them if they appeared. A most optimistic projection of usage of a completed North Shore Road would be no more than 1000 vehicles per day.

• Cost of the Road. The cost to complete construction of the North Shore Road

has been estimated at between $150 million and $200 million. At a usage level of 1000 vehicles per day, Swain and neighboring counties together could anticipate sales tax revenue of $638,750.00 per year. Assuming a cost to build the road of $150 million, there would be a return on the investment to the counties of less than one-half of one percent (0.00426). Eyeing that clearly, the numbers add up to absence of cost efficiency.

• Promotion Costs. Tourists will not come to drive on a road like the North

Shore Road simply because it is there. It must be promoted, and the major part of promotion will be advertising costs. Unless Swain County dramatically increases its promotion budget, very few people will be attracted to the North Shore Road . Our estimate is that at least twenty percent of the road induced revenue would have to be spent on promotion.

• Comparison Chart.

Cash Settlement Construct the Road

Expenses	Administrative Expenses	Marketing Expenses
Time before effective	2 Years	More than 10 years
Construction Cost	-0-	$150 - $200 million
Annual Income At 500 Vehicles per day At 1000 Vehicles per day	$2,470,000.00 $2,470,000.00	$191,625.00 $383.250.00

Ted Snyder. 27 January 2004