June 17, 2005

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Estimating Economic Impacts of Border Wait Times

SANDAG, with the assistance of HLB Decision Economics, has developed an economic impact model to assess the impacts of delays at the San Diego region-Baja California ports of entry (POEs) on crossborder personal trips for tourist, shopping, and work purposes. This model takes a crossborder approach to evaluating economic impacts on the binational regional economies.

Growth in crossborder travel and trade, coupled with enhanced security screening, has resulted in increased congestion and delays at the San Ysidro-Puerta México, Otay Mesa-Mesa de Otay, and Tecate-Tecate POEs. More than 60 million trips are made across these three POEs annually.

Survey results show that more than half of those trips are for shopping or recreation. Nearly ten million trips or about 15 percent are for work purposes. Over 90 percent of the crossborder trips are local as they begin or end in the San Diego region or the Tijuana/Tecate region.

Crossborder travel generates significant revenues to the retail, hotel and lodging, and recreation sectors on both sides of the border. However, increasing congestion and delays may constrain the growth of crossborder personal trips and result in output and employment losses, relative to a situation where steps would be taken to alleviate these delays.

Economic Impact of Delay on the San Diego Region: At today’s level of delay at the border (about 45 minutes daily average as reported by survey respondents), the San Diego region loses more than eight million trips per year that may result in $1.28 billion in additional revenues (direct impact), after adjusting for revenue gains due to U.S. trips not made to Mexico. The retail sector is by far the most affected.

In addition, more than three million potential working hours are spent in waits at the border, which may result in $42 million in lost income. After accounting for the indirect and induced impacts of the estimated revenue losses, the total impact is more significant. On an annual basis, it exceeds $2.2 billion in production losses (about 1.2 percent of San Diego County’s total product) and more than 31,000 lost jobs (about 1.7 percent of the county’s labor force). Most of these jobs are in the retail sector (about 13 percent of the labor force in the county’s retail sector jobs).

Taking into account uncertainty surrounding the estimating assumptions, the risk analysis shows with an 80 percent confidence interval, that the loss in output for San Diego County is between $2 billion and $2.5 billion, and the job loss is between 28,000 and 35,000 jobs.

Economic Impact of Delay on Baja California: While the economic impact on the Mexican side of the border is smaller in magnitude, it is still significant. At today’s level of delay, Baja California loses about two million trips annually that may result in about $120 million in additional revenues (direct impact) after adjusting for revenue gains due to local forgone trips to the United States.

The Retail and Food & Lodging sectors account for more than 95 percent of the impacts. In addition, more than half a million potential working hours are spent in delays at the border, which may result in over $10 million in income loss.

Again, when taking into account indirect and induced impacts, the estimated revenue losses are more significant. On an annual basis, they represent approximately $170 million in production losses (about two percent of the total regional output) and more than 1,300 jobs lost, primarily in the food and lodging sectors.

With an 80 percent confidence interval, after accounting for uncertainty surrounding the estimating assumptions, the loss in output for Baja California is between $100 million and $230 million, while the job loss is between 800 and 1,900 jobs.

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