Population Growth of Orlando and Surrounding Counties Results in Traffic Congestion

Fast growth in the population of the city of Orlando and surrounding counties, Orange County in particular, has resulted in insurmountable traffic congestion. The county has few places to turn for extra money for road improvements except to new taxes. County officials have said that the money they receive from current taxes is insufficient to widen over-crowded roads, improve roads that dont meet modern standards, and pave dirt roads. State residents now pay 12 cents in taxes on every gallon of gas. Four cents of that goes to the federal government, 4 cents to the state, 3 cents to the county in which the tax is collected, and 1 cent to the cities. The county commissioner has suggested that the county get the money by tacking an extra penny-a-gallon tax onto gasoline, bringing the total federal and state gas tax to 13 cents a gallon. This would add about $2.6 million a year to the road-construction budget. The extra money would have a significant impact. With the additional revenue, the county could sell a $24 million bond issue. It would then have the option of spreading that amount among many smaller projects or concentrating on a major project. Assuming that voters would approve a higher gas tax, the county engineers were asked to prepare a priority list outlining which roads would be improved with the extra money. The road engineers also computed the possible public benefits associated with each road-construction project; they accounted for possible reduction in travel time, a reduction in the accident rate, land appreciation, and savings in operating costs of vehicles.

District	Project	Type of Improvement	Construction Cost	Annual O&M	Annual Benefits
I	27th Street	Four-lane	$980,000	$9,800	$313,600
	Holden Avenue	Four-lane	3,500,000	35,000	850,000
	Forest City Road	Four-lane	2,800,000	28,000	672,000
	Fairbanks Avenue	Four-lane	1,400,000	14,000	490,000
II	Oak Ridge Road	Realign	2,380,000	47,600	523,600
	University Blvd	Four-lane	5,040,000	100,800	1,310,400
	Hiawassee Road	Four-lane	2,520,000	50,400	831,600
	Lake Avenue	Four-lane	4,900,000	98,000	1,021,000
III	Apopka-Ocoee Road	Realign	1,365,000	20,475	245,700
	Kaley Avenue	Four-lane	2,800,000	56,000	980,000
	Apoka-Vineland Rd	Two-lane	1,170,000	17,550	292,000
	Washington Street	Four-lane	1,120,000	16,800	358,400
IV	Mercy Drive	Four-lane	2,800,000	56,000	980,000
	Apopka Road	Reconstruct	1,690,000	33,800	507,000
	Old Dixie Highway	Widen	975,000	15,900	273,000
	Old Apopka Road	Widen	1,462,500	29,250	424,200

Assume a 20-year planning horizon and an interest rate of 10%. Which projects would be considered for funding in (a) and (b)?

(a) Due to political pressure, each district will have the same amount of funding, say $6 million.

(b) The funding will be based on tourist traffic volumes. Districts I and II combined will get $15 million, and Districts III and IV combined will get $9 million. It is desirable to have at least one four-lane project from each district.