Abstract George is in charge of a project to resolve the issue of significant traffic delays in

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Abstract

George is in charge of a project to resolve the issue of significant traffic delays in a freeway in Houston, TX. The proposed resolution is to add a lane to each side of the freeway to provide more capacity George needs to review the needs of numerous stakeholders with competing interests and recommend a resolution to his supervisor. This early case for business ethics courses offers an example of the challenges managers face in the public sector while providing an opportunity for students to practice stakeholder analysis.

Learning Outcomes

By the end of this case study, students should be able to:

For each possible alternative outcome for the proposed freeway expansion, identify the various stakeholders and how each possible outcome would affect those stakeholders.

During major public construction projects like a freeway expansion, private property is often taken through condemnation. The eminent domain laws of each state determine how compensation will be calculated for the parties whose property will be taken through condemnation. Review the potential impact on the various stakeholders of applying these laws.

Compare the application of consequentialism and non-consequentialism as it relates to a major public project like the proposed freeway expansion. Compare how this analysis would differ for a private company undertaking a project that would not involve eminent domain.

Analyze and defend proposed outcomes or solutions

Disclaimer

The situation and the characters in this case are fictional. However, the nature of the circumstances has been repeated throughout the United States as our automobile-dependent society needs more roadways.

Background

America's fourth largest city, Houston, Texas, is one of the fastest growing cities in a state that has experienced rapid growth as well. Famously similar to Los Angeles, residents are dependent on their cars to travel around the large geographic area. Near the center of Houston, three major freeways intersect: Interstate 45, running north-south and connecting Dallas, Houston and Galveston; Interstate 59, now numbered Interstate 69 as a result of NAFTAi, running from northeast of Houston to the southwest and the Mexican border; and Interstate 10, connecting Houston to San Antonio to the west and to New Orleans to the east. One feature of this downtown road system is the Pierce Elevated,

which allows converging traffic from these major freeways to flow over the congested city streets below.

Jorge "George" Romero, age 30, is a Project Manager for the Regional Transportation Agency. After completing his MBA, he was hired for his current position and assigned progressively larger projects. He has now been tasked with coordinating with various authorities to evaluate a possible expansion of the Pierce Elevated.

The Project and Its Impact on the Community

Multiple transportation departments, from the City of Houston through the Texas Department of Transportation, TxDOT, and the Federal Highway Administration, examine the traffic patterns of various areas and evaluate the wisdom of expanding existing freeways, building new freeways, along with other options, including public transportation, toll roads, and high occupancy vehicle lanes, HOVs.

The Pierce Elevated is one of the most congested sections of highways in Texas. It is listed as number 1 in Texas with over one million hours of delays each year per mile. A proposal has been made to widen the elevated freeway with two additional lanes in each direction for a distance of approximately five miles. The cost of adding a lane to an existing freeway is estimated at $2 to $10 million per lane per mile. Because of the cost of obtaining the rights of way in an urban area and the elevated nature of the project, the cost will likely be on the high side of these estimates. The massive project will require significant funding and coordination to allow minimal disruption to the over 150,000 commuters who use the roadway each day.iv One aspect of the project would also include acquisition of the necessary land for the project.

Throughout the United States there are major cities, including Washington, D.C., New York, Houston and Los Angeles, with highway systems that have major traffic delays, especially during morning and evening rush hours. The cost associated with tens of thousands of commuters sitting in long traffic delays is substantial. The costs include the value of each person's time; the cost of repairs, and in some cases, human life, when there is an accident; air pollution from increased emissions while in heavy traffic; and increased load factors on freeway surfaces and overpass and bridge supports. As more freeways are constructed to try to reduce these issues, other costs are incurred. Either tax monies or tolls are required to pay for expanded freeways or alternative transportation alternatives. While many such projects are financed with bonds, such bonds represent debts that will need to be paid in the future.

The project is also somewhat of a political "hot potato" since residents of outlying communities including Galveston, Pearland, The Woodlands, and Katy—who travel to central Houston or cross the Pierce Elevated to reach other Houston areas—may benefit from reduced gridlock and commuting times of two hours or more in some cases Representatives of these communities began to call George to encourage quick adoption and implementation of the project.

George was also beginning to field calls from four major construction companies with the capabilities to work on such a large project. Two companies were based in Texas, and two were based outside of Texas. While public projects like this are announced for competitive bidding, often the construction companies assist with the project design to gain an edge in the bidding process.

Labor unions, while not especially strong in Texas, as they represent only four percent of the total workforce in Texas, vs nine percent of the workforce nationally, lobbied for the project due to the volume of high paying construction jobs such a large project would produce.v The project would involve a combination of Federal and state funds. When a project receives Federal funds, a law called Davis-Bacon requires workers on the project be paid a "prevailing wage."vi This wage is usually the local union shop wage. The average construction laborer wage in Houston is $14.60 per hour, but the union wage can be as much as $10 per hour higher. Unionized construction companies are therefore more competitive in bidding for such projects against the non-union contractors. Union on elected Federal officials produced calls to George from local Congressional offices that indicated they would support Federal financial aid for the project.

Not all the calls were in favor of the project. George received calls from representatives of both major and smaller environmental groups opposed to any increase in traffic through the city. They contended that the increase in capacity of the Pierce Elevated would only contribute to urban sprawl, increase air and noise pollution and by paving yet more of the area, increase flooding and subsidence. He also received calls from concerned citizens echoing similar anti-growth sentiments.

A possible alternative would be to increase public mass transit. Houston has a high water table due to its elevation near sea level. Therefore, the city cannot construct subways. Some years ago, local government installed a light rail line in a limited part of central Houston; residents did not use this line heavily except for special events like Houston's hosting of the Super Bowl. Houston recently expanded its light rail to several other areas in town, but the line does not provide any relief for outlying communities.viii In fact, light rail ridership declined from 2016 to 2017.ix

Some large organizations, including churches, non-profit organizations, and large and small businesses had facilities in the potential path of the expansion project under review. Most wanted to insure that their interests were considered, though not all of them were outright opposed to the project.

The Law of Eminent Domain

Recently, George had returned to school to earn his MBA. One comprehensive business law course introduced him to business ethics, where he learned the basics of how the government can take property for public works projects, or eminent domain. George consulted the current Texas law on the subject,x learning that a public entity is obligated to pay "adequate" compensation when taking private property, based on the current market value of the property. While there were special rules for partial takings, for the proposed project, partial taking rules rarely applied. Texas law also provided for reasonable relocation costs. For more background on the subject, George consulted a recent law review article proposing reforms to Texas property appraisals for taking by eminent domain.

Ethics and Public Works Projects

The business ethics section of George's business law course also introduced the concept of stakeholder analysis, an approach to insure that important organizational decisions involved a variety of parties whose interests were all considered. While stakeholder analysis helps to identify stakeholders, it does not help to make a decision about the treatment of the various stakeholders.

George recalled two fundamental approaches to ethical decision making: consequential and non- consequential. With consequential analysis, you consider the outcome as part of the decision; that is, the benchmark for an evaluation is the best outcome for the most people. In turn, non-consequential analysis involves the goodness of a decision, rather than an analysis of the outcome. George considered himself a person with high moral principles and leaned toward using the non- consequentialist approach. However, public works projects are traditionally based on utilitarian ethical principles: doing the greatest good for the greatest number of people.

An Individual Stakeholder

In the midst of evaluating the stakeholders for the project, George received a call from Tiffany Eula Jones, the granddaughter of Eula Mae Washington. Her grandmother's house stood in the path of the proposed expansion. Tiffany, a recent law school graduate, spoke of the problem for her grandmother, providing the following background:

In 1955, Eula Mae Washington and her late husband, Earnest Washington, purchased a frame house on St. Charles Street close to downtown Houston. The house has 1,041 square feet, two bedrooms, and one bathroom, with a small yard. Earnest had served in the Army in the Korean War and worked as a mechanic before his retirement. The couple used his VA home loan benefits to purchase the modest cottage.

Eula worked in a cafeteria as a dishwasher, working her way up to chief cook until her retirement in 1995. Neither Earnest or Eula had any retirement benefits other than Social Security. Earnest died in 2001 and Eula has lived on her own in the family home since that time. She suffers from arthritis and diabetes, but is independent. Each of her three adult children, none of whom live in the Houston area, have invited her to live with them. With the impairment of her eyesight due to diabetes, she was forced to stop driving her car in 2009 at age 79. She lives on a monthly Social Security check of $979.00. Her home has a tax appraisal of $42,000, which Eula feels is high, but she pays little real estate tax due to the Texas Homestead Exemption,xii and her over-65 exemption.

Because the house was appraised for $42,000, this was all the money her grandmother would be eligible to receive from a condemnation of her house, other than a small amount for relocation. A quick survey of available options indicated that there are no homes Eula Washington can afford in the area with $42,000 in cash and her Social Security earnings. The average cost of housing is over $145,000 or $1,600 a month to rent a two-bedroom apartment in an independent living community. Eula did not want to move in with either her children or grandchildren. Further, family members do not have the resources to contribute the additional funds she would need each month beyond her Social Security once the payment for her home was exhausted. For example, Tiffany noted that she has $100,000 in student loans from college and law school. The cottage and the city of Houston were Eula's home, and she did not want to leave. She did not want to give up her present freedom because she could walk to where she needed to buy groceries or catch the bus. She did not need a car to get around.

Tiffany concluded by asking George to make sure that the Regional Transportation Agency and the other parties "did the right thing" for her grandmother.

The Analysis

George sat down to analyze and prioritize the various parties with interests in the expansion project. He kept thinking about Tiffany's recent call to him about her grandmother. George knew that the most direct option, and the one his manager would expect him to follow, would be to expand the Pierce Elevated. In reviewing the various stakeholders, this would provide the largest number of satisfied parties. Other somewhat related options included building an elevated express lane over the existing section of highway; developing an HOV option for the elevated freeway; placing a toll on either the current freeway to discourage traffic, or to expand the freeway and pay for the expansion with a toll; or propose new highway segments that would bypass the Pierce Elevated. All of these options came with increasing price tags and perhaps more resistance from various stakeholders. While doing nothing was clearly not an option, he considered a mass transit alternative that might satisfy some commuters and would be more pleasing to the pro-environment stakeholders. This might be one of the few options that would not involve the condemnation of Grandma's home.

Discussion questions

1. Consider the possible approaches to solve the problem of traffic congestion on the Pierce Elevated. For each approach, list and then analyze the positive and negative outcomes?

2. Identify the various stakeholders and evaluate the needs of each; establish which stakeholders should take priority and then develop possible options available for George to recommend to his supervisors?

3. Give an ethical analysis of the project from both consequentialist and non-consequentialist ethical perspectives/

4. Regarding Eula Washington, because of her personal situation, should she be treated differently than other stakeholders? Should the rules for eminent domain be changed for all property owners? If so, explain how. If not, explain why the rule should remain the same?