Description of Project
Rock County Airport is a cargo-oriented airport in Southern Wisconsin with two runways. To allow the airport to serve larger and heavier aircraft, a project was proposed to reconstruct, strengthen, and extend an existing runway and taxiway from 5,400 ft. to 7,300 ft. and to install an instrument landing system (ILS).
Purpose of Project
The shorter runway and resulting weight restrictions prevented fully loaded large cargo aircraft (i.e., 727s and DC-8s) from landing at the airport. The runway extension project was intended to eliminate excess costs incurred because extra flights were required to compensate for the restrictions.
Uses of Results
Under Federal Aviation Administration (FAA) rules, large capital projects require a detailed benefit-cost analysis to be eligible for federal funding. Accordingly, Wisconsin DOT sponsored the benefit-cost study as part of its application for project funding from the FAA.
While the airport is municipally owned, Wisconsin DOT was the lead agency in the benefit-cost study. FAA regulations required the state to include the project in its State Airport System Plan, sponsor the benefit-cost analysis, and include it as part of its application for federal aviation funds.
The base case was defined as the lowest-cost, but feasible, scenario. It was determined that a base case of "no capital investments" was not realistic, since reconstruction of the runway in question would be needed even without any runway extension, due to its age (22 years), increasing maintenance costs, and need to be brought up to FAA's "line of sight" design and safety standards. Reconstruction of the runway within the next two years was a more cost-effective option than allowing the runway to degrade.
Base Case: Reconstruct the existing 5,400 ft. runway and taxiway. This is necessary to maintain the functioning of the runway.
Alternative Base Case: No Capital Investment. In the short term, this forces the airport to bear increasing costs over time for basic maintenance. In the long term, it is infeasible as the runway would eventually become unusable.
Project Case: Reconstruct and strengthen the existing 5,400 ft. runway and taxiway, extend it to 7,300 ft., and install new ILS. This alternative makes it possible for the airport to serve the larger aircraft needed by some area businesses.
Alternative Project Case: Reconstruct and strengthen a different existing 6,700 ft. runway and taxiway, extend it to 7,300 ft., and relocate the ILS. This presents significant adverse environmental impacts and precludes the possibility of future expansion.
Type of Analysis
The study computed both benefit-cost ratios and net benefit minus cost.
The project area was Rock County Airport. The analysis was based on a profile of the major users of Rock County Airport as provided by the airport manager. These were businesses located within the airport service area (Rock County, Wisconsin) that either owned their own aircraft or relied on local cargo air carriers or air taxi services for their cargo shipping.
Time Period for Analysis
The study developed annual forecasts of airport demand, with existing runway constraints and with proposed runway improvements, for the period from 2002 to 2035. This time period was used for calculation of the net present value of all benefits and costs.
The project benefits used in benefit-cost calculations were limited to user cost savings. They included air and ground time for travelers, air and ground vehicle operating costs, and cargo processing costs. Since Rock County is a cargo-oriented airport, the usually dominant benefit measure for airports — airplane passenger time and cost savings — was deemed inappropriate for this case. Wisconsin DOT, in consultation with FAA staff, determined that the "users" of air cargo flights were the freight shippers and receivers, in this case, area businesses involved in manufacturing automobiles and automobile parts and distributing perishable food products. They all depend on rapid or just-in-time aviation logistics for shipping incoming supplies and outgoing products. Unable to use large aircraft at Rock County Airport, these users were incurring higher costs associated with a combination of three situations:
Some were using several smaller cargo aircraft for major shipments instead of a single larger aircraft, resulting in higher total aircraft operating costs;
Some were trucking cargo to or from a more distant airport with longer runways, resulting in higher ground transportation costs;
When neither option was available or feasible, some users experienced late or incomplete delivery of incoming cargo, resulting in higher costs from overtime labor or lost revenue from production slowdowns.
Additional safety and environmental benefits that could not be quantified in dollar terms were noted in the benefit-cost study, but excluded from the calculation of a benefit-cost ratio. Economic development benefits for retention of the area's automotive manufacturing cluster were identified and assessed, but they were also excluded from the benefit-cost analysis.
Costs were defined as capital costs for runway and taxiway construction, capital costs for instrument landing equipment, and ongoing maintenance costs. Capital costs expressed in constant 2001 dollars were $5.1 million for Alt. #1, $0 for Alt. #2, $15.0 million for Alt. #3 and $14.1 million for Alt. #4. Annual maintenance costs varied over time.
Using the State of Wisconsin's official 7% discount rate, the analysis found that both of the project alternatives had a significantly higher benefit than the base case. For purposes of sensitivity analysis, the project scenarios were compared to two different base cases — the more realistic "reconstruction" case and the more dramatic "no build" base case. Although Alternative #4 had a slightly higher B/C ratio, Alternative #3 was still selected due to its much lower environmental impacts and its capability for future expansion. The analysis was submitted to and approved by the Federal Aviation Administration in 2001, and the project was constructed in 2003.
The calculation of benefits and costs was conducted using the Airport Benefit-Cost (ABC) software, developed for Wisconsin DOT by Economic Development Research Group with Cambridge Systematics. This system combined three different functions: (1) it implemented the FAA guidebook for individual project benefit-cost evaluation, (2) it served as a statewide database for ranking and evaluating all projects in the State Airport System Plan, and (3) it calculated the economic impacts of airports. Only the first function was relevant for this study.
Critique — Strengths and Weaknesses
Strength: This study fully covered a broad range of user benefits and project costs. It measured cost savings to freight users in a more comprehensive manner than most transportation studies. Its inclusion of impacts on freight handling and processing costs, in addition to cargo travel costs, appears logical but is still beyond standard practice in some states.
Weakness: This aviation project was one part of a multi-modal package (including road and rail crossing improvements) developed by Wisconsin DOT to improve freight transportation in Rock County. Because funding for each mode was from different sources, the need for and effectiveness of this individual project was evaluated in isolation, and joint costs were not included. There was also no sensitivity study concerning how the findings might be affected by future airport demand.
Economic Development Research Group. Benefit-Cost Analysis for the Rock County Airport (JVL) Runway Extension. Prepared by Economic Development Research Group for Wisconsin Department of Transportation - Bureau of Aeronautics, submitted to Federal Aviation Administration. 2001. Available at: http://www.edrgroup.com/library/aviation/benefit-cost-analysis-for-the-rock-county-airport-jvl-runway-extension.html.