Transportation Investments and Tourism Development at the Pine Ridge Indian Reservation Corridors in Shannon and Jackson Counties, South Dakota
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About Programs Resources Briefing Room Contact Search FHWA
Transportation Investments and Tourism Development at the
Pine Ridge Indian Reservation
Corridors in Shannon and Jackson Counties, South Dakota
Prepared for the Federal Highway Administration
Summary Report
May 2003
ICF Consulting
9300 Lee Highway
Fairfax, Virginia 22031
Tel 703-934-3000
Fax 703-934-3740
Under direction of AECOM Consult
2751 Prosperity Avenue, Suite 300
Fairfax, VA 22031
Phone: 212-973-2900
Fax: 703-641-9194
OVERVIEW
This study focuses on the Pine Ridge Indian Reservation in South Dakota, an area with limited
private economic activity and a transportation network that suffers from chronic under funding
of construction and maintenance needs (as determined by the Bureau of Indian Affairs). The
transportation conditions facing Pine Ridge Reservation do not currently support opportunities
for economic development. Specifically, the sub-system of the reservation transportation
infrastructure needs improvement in order to provide both efficient linkages to the regional
system and internal connectivity. Not only does the resulting lack of accessibility hinder
residents' access to goods and services, but also the ability of the area to realize the economic
gains that improved accessibility can support.
This study establishes a framework for analyzing the linkages between transportation
investments and economic development by focusing the analysis on tourism, a key sector that
offers great potential for economic development and that is dependent on improvements to
transportation infrastructure. The study pursues a five-step approach that focuses on
determining the transportation needs of the tourism sector and evaluating the economic
impacts of sector development that are linked to highway investments.
Existing socio economic conditions
Pine Ridge Reservation, situated in the southwestern region of South Dakota, is home to the
Oglala Lakota/Sioux. The reservation boasts a rich culture and history, as well as stunning
natural scenery. The north part of the reservation includes the South Unit of Badlands National
Park, which is an area of dramatic ridges, peaks, and mesas.
Despite the cultural and natural assets of the reservation, socio-economic indicators
demonstrate a profound need for economic development. In 1989, Shannon County, which is
entirely within the boundaries of the reservation, was the lowest-income U.S. County with 63%
of the population below the poverty line (1). By 1999, this had improved only marginally, with
53.4% of the population continuing to live below the poverty line, compared to 13.2% for the
state as a whole (2). According to a 1995 Statistical Brief by the U.S. Census, 18.2% of native
American households living on the Pine Ridge Reservation lack complete kitchen facilities, and
58.6% do not have a telephone in their homes (3). Furthermore, there are limited opportunities
for residents and visitors to spend money on the reservation, resulting in excessive leakage
from the economy and limited circulation of money within the economy. The Rapid City SMA is
the center of the Region's economy, accounting for 92% of total personal income and 93% of
total employment in the three-county region of Jackson, Pennington and Shannon (4).
With limited resources, few reservation employment opportunities, excessive leakage of dollars
from the reservation economy, elevated unemployment, and the majority of the population
living below the poverty line, improving the quality of life for the approximately 20,000
reservation residents represents a challenge.
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STUDY APPROACH
The study examines how transportation investments can support local economic development.
As depicted in Exhibit 1, rather than starting with a set of pre-defined transportation
improvements and estimating the associated economic benefits, the approach used in this
study seeks first to examine the region's economic development strategy, and then to
determine the transportation investments that would be needed to support this strategy. In this
study, investment in transportation infrastructure is treated as a necessary, but not sufficient,
condition for economic development. Our approach estimates the benefits of a realistic scenario
of economic activity that could be generated in a key sector (tourism), assuming that all
necessary factors have been implemented, and discusses the transportation infrastructure that
would be necessary to support that sector.
Exhibit 1:Study Approach
Step 1: Assess Region's Economic Development Potential
The first step identified potential areas of economic growth at the reservation, so as to
understand the potential positive impacts of investments in infrastructure. The economic
development projects in the reservation region that are currently at some stage of progress
were assessed, with the objective of determining the focus of the economic benefits to be
measured. This involved site visits to Pine Ridge, interviews of key local officials, and reviews of
relevant studies and data.
Findings
Projects identified were in the following sectors: tourism, manufacturing, waste management,
and services (including business, education and health). In consultation with local stakeholders,
[1]the following measures were identified as goals of economic development for the Pine Ridge
Reservation:
• Job creation
• Increase the numbers of businesses
• Increase revenues to tribe
• Increase 'turnover' or 'circulation' of dollars within the reservation
• Improve access to services, e.g. education and health
Step 2: Towards An Economic Sector Strategy
The second step focused on identifying a sector that would offer economic development
benefits to Pine Ridge. To effectively examine the links between transportation investments and
economic development, this sector should represent an area in which transportation
improvements could play a key role. In consultation with local stakeholders, economic
development projects and plans for the study area were reviewed. Once a sector was identified
based on a review of local economic data, additional research of comparable data was
conducted to determine the potential of the selected sector to generate economic gains.
Findings
In consultation with the stakeholder group, it was determined that this study should focus on
the tourism sector and its linkages to transportation improvements. A review of economic
development projects and plans demonstrated that the preponderance of initiatives were in the
tourism sector. Furthermore, analysis of relevant data supported the hypothesis that tourism
offers the potential for economic benefits to Pine Ridge.
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Capitalizing on assets: Tourism Development
There is a strong regional tourism market in Southwestern South Dakota from which Pine Ridge
can draw. The combination of such nearby destinations as Badlands National Park, Crazy Horse
Memorial, Mt. Rushmore, the Black Hills and Wall Drug (a mega tourism shop) attract more
than two million visitors each year. As shown in Exhibit 2, these tourists have higher levels of
expenditures than do tourists in any other region in South Dakota.
Exhibit 2:Visitor Expenditures by Volume and Regional Share
Region 2001 Volume($) Regional Share (%)
1. Glacial Lakes and Praries 66,206,801 11
2. Southeast South Dakota 1,333,233,526 22.2
3. Great Lakes 75,329,141 12.5
4. Black Hills, Badlands and Lakes 326,512,090 54.3
Entire State 601,281,558 100
Source: Madden
Furthermore, Pine Ridge itself boasts notable cultural and natural resources, which include the
rich Oglala Lakota/Sioux culture, the stunning South Unit of Badlands National Park, the
historically significant site of the Wounded Knee massacre, the Prairie Winds Casino, and the
proposed Lakota Heritage and Education Center.
Despite such on-reservation and nearby assets, tourism is limited at Pine Ridge, and the
economic benefits to Pine Ridge from tourism are minimal. Although the South Unit of Badlands
National Park, which is in the reservation, offers views that are equal to those of the North Unit,
which is not in the reservation, the North Unit receives 27 times more visitors than does the
South Unit. Much of the reason for this disparity can be traced to the fact that the North Unit's
infrastructure supports tourism, while the South Unit has almost no such infrastructure.
The lack of visitation at Pine Ridge converts into limited spending, a pattern compounded by the
lack of opportunities that exist for tourists to make purchases. Unlike nearby tourist areas,
there are few hotels, motels, restaurants, gift shops or other tourism-related goods and
services located on the reservation. Current visitor sales for lodging, eating and drinking
establishments (including non reservation spending) in the Pine Ridge Counties of Shannon and
Jackson are $480,241 and $6,467,501, respectively. This compares to $151,685,199 for the
adjacent Pennington County, where Mount Rushmore, the North Unit of Badlands National Park
and Wall Drug (a retail tourism related store) are located. Indeed, Wall Drug alone, which lies
within 20 minutes of the northern border of the reservation, takes in more than $10 million a
year and draws some two million annual visitors (5).
Past and current initiatives show that local stakeholders envision the potential of tourism as an
economic driver at Pine Ridge. These initiatives include: 1) Lakota Heritage and Education
center, which would also serve as a visitor center to the South Unit of Badlands National Park;
2) expanded Prairie Winds Casino; 3) establishment of a second casino, near I-90; 4) guided
driving circuits, such as the Crazy Horse Scenic Byway; and 5) appropriate treatment of the
Wounded Knee site.
The tourism sector represents an area in which transportation improvements could play a key
role. Local stakeholders also requested that accessibility to basic goods and services not be
ignored in this study, as it is such an important element in both economic development and
transportation. Infrastructure improvements and economic growth that support tourism would
also bring substantial benefits to basic accessibility.
Assessing the potential of the tourism sector: projected visitation
The number of visits is the key driver of both the transportation analysis and the calculation of
economic benefits for this study. Therefore, considerable time was spent in projecting the
number of tourists that could be expected given a fully developed tourism sector. Sources of
this projection included: 1) analyzing current visitation to regional tourism attractions, (6); 2)
reviewing related forecasts from feasibility studies for the Lakota Heritage and Education Center
and the Prairie Winds Casino expansion; and 3) obtaining comparable statistics from other
Indian reservations and state tourism agencies, e.g. Hualapai Nation, AZ, Navajo Nation, AZ;
and Great Lakes Inter-Tribal Council, WI, Yakama Nation, WA.
Drawing on the above information, it was projected that by year 15, visitations would be
comparable to the current Badlands National Park visitation of approximately one million
visitors per year. As discussed under Step 3 (below), this visitation estimate was then used to
derive an estimated Average Daily Traffic (ADT). The projected traffic volume was then used to
determine the adequacy of the current road infrastructure to accommodate increased tourism
traffic and to assess the infrastructure upgrades that would be necessary.
Step 3: Assess Transportation Needs And Investments Relevant To Economic Sector
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The inadequate transportation conditions facing Pine Ridge Reservation do not currently support
economic development. Although there is a good regional network of roads serving the larger
area, including Interstate 90 and the planned Heartland Expressway (a project that focuses on
widening SD 79 from a two to a four lane facility), the sub-system of the reservation's
transportation infrastructure needs improvement in order to provide efficient linkages to the
regional system and to provide internal connectivity, particularly east-west. There is a chronic
short- and long-term under-funding of construction and maintenance needs. [2]
To determine the transportation investments that are needed to support the economic benefits
associated with a mature tourism sector, discussions were held with the key transportation
stakeholders, including representatives from the Bureau of Indian Affairs Indian Reservation
Roads program, Oglala Sioux Transportation, Federal Highway Administration, and South
Dakota Department of Transportation (SD DOT). In addition, the following key transportation
planning documents that are relevant to the area were reviewed: the Statewide Transportation
Improvement Plan (STIP), the Indian Reservation Roads Transportation Improvement Plan (IRR
TIP), the Heartlands Expressway Feasibility Study, and the Crazy Horse Scenic Byway Proposal.
Based on these consultations and document reviews, and in combination with an understanding
of the locations of key potential tourism attractions, it was determined that the following routes
would form the basis of a transportation network that would serve tourism on the reservation:
SD 18, 73, 44, 79 and BIA 2, 27, 28, 33 and 41.
To gauge the impact of the increased tourism visitation on the network, the analysis involved
estimating the average daily traffic (ADT) at the upper limit of visitation. That upper limit is
expected to occur in the peak tourism month (August) in the final year (year 15) of this study's
projections (please refer to Exhibit 3).
Exhibit 3: Estimating Peak Monthly Traffic Volume
1. Estimate Year 15 Annual Traffic Volume
Estimating Annual Traffic
Volume: Year 15
Trip Type No. Trips
Person Trips
Day 957,479
Model 105,120
Camp 42,516
Total 1,105,115
Auto Trips
# per auto 204
Total # autos 541,723
2. Estimate Year 15 Peak Season Monthly Traffic Volume.
Estimating Monthly Tourist Traffic Volume: Year 15
Jan Feb Mar Apr May June July Aug Sep Oct Nov De
Monthly 5,417 5,417 5,417 10,834 32,503 108,345 135,431 146,265 59,590 21,669 5,417 5,4
Visitation
Seasional 0.01 0.01 0.01 0.02 0.06 0.2 0.25 0.27 0.01 0.01 0.01 0.0
Weights
ADT 181 181 181 361 1,083 3,611 4,514 4,718 1,986 722 181 18
3. Determine monthly ADT
Maximum Monthly Traffic
Trip Type ADT
Tourist 4,718
472
TOTAL 5,190
The projected increased traffic volume of 5,200 ADT was then applied to the key state and local
roads mentioned above so as to ascertain whether these roads, in their current conditions,
could sustain such an increase in traffic, and the levels of investments that would be needed to
provide adequate levels of service to tourists, residents, and other users.
Regional/State Roads
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At the regional level, the impacts of increased ADT in terms of necessary improvements and
investments were discussed with South Dakota DOT, taking into account improvements that
were already planned and detailed in the statewide transportation improvement plan.
Local/BIA Roads
Given the current under-funding of construction and maintenance of BIA IRR roads, it was
expected that increases in ADT at the sub-system level (BIA on-reservation roads) would
require substantial investments both in terms of construction and maintenance to ensure
adequate levels of service.
The impacts of increased ADT at the sub-system level were investigated using a model
developed by BIA that generates estimated costs-to-improve. These costs are a function of
traffic volume, road functional class, surface type, and terrain. Together, these factors are
combined to arrive at an "adequacy design standard". The estimated 'costs-to-improve'
represent the investments that are needed to improve the roads to specified adequacy design
standards.
For the purpose of this study, the model estimated the costs-to-improve based on an increase
in tourism traffic volumes, higher road functional class, improved surface type, and revised
adequacy design standards. Given the higher ADTs projected, all key roads were assigned
asphaltic cement concrete surfaces and elevated to Class 2 (from Class 4) in terms of their
functional systems. These estimated costs-to-improve associated with the tourism sector were
then subtracted from BIA's previously established baseline estimated costs-to-improve (which
were based on the expected growth in traffic volume over the period without the potential
effects of the projected growth in tourism) to yield marginal construction costs invested in Year
1. Final total costs were determined by adding the additional maintenance costs over the fifteen
-year period to the additional construction costs.
Findings
Regional (System)
Based on feedback from SD DOT, it was determined that the regional system of roads (SD 18,
73, 44, 79) could adequately support the projected increase in traffic. Per SD DOT, the
threshold for major road improvements (e.g., widening from 2 to 4 lanes) is traffic volume
above 6,000. SD DOT believes that the projected increases in traffic from a mature tourism
sector may eventually require improvements to turning lanes and signage, and these potential
needs can be examined once the traffic flow increases.
Local (Sub-System)
Using the BIA 'estimated costs-to-improve' model, the marginal costs-to-improve for BIA
Routes 2, 27, 28, 33 and 41 were projected as $61,326,000 (using a 7% discount rate). It was
also estimated that $11,982,000 would be needed over the 15-year period to fill the current
funding gap in maintenance of $3200 per mile (BIA current maintenance costs are $1300 per
mile compared to needed maintenance costs of $4500 per mile). As shown in Exhibit 4, this
study estimates that a total of $73,308,000 in transportation investments (construction plus
maintenance) would be required to provide adequate service.
Exhibit 4: Construction and Maintenance Costs Associated with Tourism Traffic
($000ms)
BIA 2 BIA 27 BIA 28 BIA 33 BIA 41 Total
Construction Costs 14,392 23,879 2,029 13,516 7,510 61,326
Maintenance Costs 7% discount 4,273 3,774 265 1,463 2,206 11,982
Total 18,664 27,653 2,295 14,979 9,716 73,307
Features of an improved road network would include better pavement quality, road dimensions
and characteristics, lighting, and signage.
Step 4: Analyze Economic Benefits of Tourism
To estimate the economic benefits of a mature tourism sector to the reservation, a spreadsheet
model was used that estimates visitor spending in the region and uses multipliers to project
secondary effects. The analysis sought to derive an estimate of: 1) the number of jobs created,
additional income, and additional sales revenue generated from the additional tourists, and 2)
the secondary effects on the local economy.
The study estimated the economic impact of visitor spending on the reservation economy that
could be associated with a growing tourism sector over a 15-year period. For this part of the
analysis, the Michigan Tourism Economic Impact Model (MITEIM) was used. This model is
especially well suited to assess the effects on increased tourism in rural areas with limited
economic development. [3]
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Developed at Michigan State University, the model relies on specific profiles of visitor spending
(either default values or project-specific profiles can be used) for each type of traveler, each of
which is a "visitor segment." The types are divided according to whether the visitor stays at a
hotel, camps, or is simply a day visitor. Surveys show that these segments have different
spending profiles. The spending profiles are used to estimate total direct spending by visitors
and are then combined with a set of sector-specific multipliers to produce an estimate of
secondary and, then, total economic impacts of visitor spending. The model estimates spending
in up to 12 categories for as many as 12 visitor segments.
In sum, using the number of visits projected, the breakdown of visitor segment, and the
average spending per visitor (by segment), the model applies economic ratios and multipliers to
derive an estimate of direct, secondary, and total effects measured in terms of jobs, sales, total
income, and value added.
Determining model inputs
Using a series of assumptions for each input, the study projected the number of visits over the
15-year period, the breakdown of visit segments, and associated spending per visit. The
following assumptions were made for this study:
• Visits:the number of visitors increases as more tourism facilities and attractions are
developed, arriving at final-year visitation that is comparable to the current visitation
of approximately 1 million at the Badlands National Park. (Note that this study does
notproject that the reservation will receive the far-higher number of visitors that go to
Mt. Rushmore).
• Visit segment:the percentage of total visitors who spend one night or more at the
reservation increases over the 15-year period, as the reservation offers more options
to overnight visitors.
• Spending:the average spending per person increases over the 15-year period, as the
local economy becomes more complex and offers more opportunities for visitors to
spend.
Findings
As shown in Exhibit 5, at the end of the 15-year analysis period, the cumulative economic
benefits of a mature tourism sector are estimated at $153,026,000 (using a 7% discount rate).
By 2020, job created would be 1,375.
Exhibit 5: Economic Benefits of a Mature Tourism Sector ($000ms)
Year 1 (2006) Year 15 (2020) 15-Year Total
Visits (party night) 111,611 404,948 4,189,073
Total Visitor Spending ($000's) 12,737 47,436 446,425
Total Sales ($000's) 15,123 51,931 500,245
Total Jobs 409 1,375 n/a
Total Income ($000's) 5,257 18,020 175,292
Total Value Added ($000's) 8,634 28,948 281,558
Total Value Added (discounted @ 7% $000's) 8,069 10,492 153,026
To capture the increasing economic benefits over the period, it is anticipated that the tourism
sector on the Pine Ridge Reservation would mature to offer a range of goods and services that
could include the following: restaurants; hotels; arts and crafts shops; other goods and services
located in the main centers of economic activity (e.g., retail); development of related industries
that are needed to support the tourism industry through backward linkages (e.g., linen services
and food producers); and tourism-related services (e.g., travel services and tour operators).
Though the businesses and institutions offering goods and services are not tourism attractions
by themselves, their development is key to supporting a thriving tourism sector. Thus, as the
economy becomes more complex and offers more opportunities for tourists to spend, the
economic benefits rise over the 15-year period, generating the extent of direct and secondary
effects estimated by the analysis.
Step 5: Linking Economic Benefits To Transportation Investments
Improvements in transportation infrastructure represent one of the key investments that would
support development of a successful tourism sector. The study assumes that without the
identified highway improvements, a mature tourism sector at Pine Ridge would not develop.
Capturing the full benefits of tourism is therefore linked to and dependent on these
transportation improvements. However, as highway economic development studies have
shown, improved highways need to be part of a suite of investments, programs, and policies
that together can generate sustained economic development benefits. As such, the study also
examines the additional features of a successful tourism sector.
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Findings
To develop a tourism sector that attracts one million tourists per year, local BIA roads on the
Pine Ridge Indian Reservation will need to be upgraded and maintained. Therefore, realizing the
full economic benefits of a mature tourism sector is, in part, dependent on transportation
improvements that form a core tourism asset network (see Exhibit 6).
Exhibit 6: Pine Ridge Reservation and Vicinity: the Badlands are on the Northern
Border of the Reservation and the Black Hills, Rapid City and Mt. Rushmore are just
Northwest of the Reservation. I- 80 is Just North of the Reservation Serves Rapid City
By enhancing accessibility to the Pine Ridge Indian Reservation and internal connectivity within
the reservation, transportation improvements can help the reservation capitalize on its
comparative advantage in tourism. Improved accessibility will support an increased number of
tourists and total spending within the local economy, enhance residents' access to basic goods
and services, and support the long-term development of other industries, thereby promoting
economic development.
Nonetheless, transportation improvements, by themselves, will not bring about the projected
economic benefits. Other actions that will need to be taken include: full development of
"anchor" destinations; implementation of a communications and marketing strategy; and
creation and organization of local tourism related institutions. As a result, the full costs of
developing the tourism sector are greater than the $73 million in transportation investments
that this study estimates as necessary.
On the other hand, the full benefits of those transportation investments are also not captured
here. Other benefits from such investments (not analyzed in this study) include: better access
to basic goods and services, including health and education services and greater support for
non-tourism economic activities. As a result, the full potential benefits of the transportation
investments that are needed to support a mature tourism sector would be greater than the
$153 million that this study estimates from tourism alone.
SUMMARY
Insufficient transportation infrastructure is one of the key obstacles to the development of a
tourism industry in the Pine Ridge Reservation. Elements of this insufficiency include limited
access to key tourism regions within the reservation, a severe lack of informational signage and
other marketing tools targeted to tourists; and poorly maintained and inadequate road
conditions on the reservation. The problems with transportation combine with a lack of well-
developed tourism facilities to produce a highly under-performing sector relative to its potential,
in terms of economic benefits.
This study finds that, assuming implementation of a suite of supportive initiatives, a mature
tourism sector at Pine Ridge could attract more than one million visitors each year, translating
into an estimated total economic effect of more than $153 million over a 15-year period. By
year 15, tourists would generate more than one million auto trips/year. An average of 5,200
vehicles day would be added to the reservation road network during the peak tourism month.
Local transportation infrastructure enhancements that would be needed to provide adequate
levels of service include upgrading the functional class of key roads and performing adequate
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maintenance throughout the life-cycle of the improved roads. The costs of these transportation
investments are estimated at $73.3 million.
REFERENCES
1. Aoki and Chatman. An Economic Development Policy for the Oglala Nation, Harvard
Project on American Indian Economic Development, Harvard University, 1997, Book 2,
Page 7; citation from County Income and Poverty Estimates; 1990 Census Estimates:
South Dakota, 1989.
2. United States Department of Commerce, Census Bureau. Census 2000.
3. U.S. Department of Commerce. Housing of American Indians on Reservations -
Equipment and Fuels. Bureau of the Census, Economic and Statistics Administration,
April 1995.
4. Propst, Dennis, Stynes, Daniel and Sun, Ya-Yen. Economic Impacts of Badlands
National Park Visitor Spending on the Local Economy, 2000 Michigan State University,
January 2002.
5. New York Times, 1999 as posted on the Wall Drug website, http://www.walldrug.com/
[1]A key feature of the study was the establishment and involvement of a stakeholder advisory
committee. Members included economic development and transportation officials from the
Oglala Sioux Tribe (OST); the superintendent of Badlands National Park; the Director of the
local Empowerment Zone; representatives of the Bureau of Indian Affairs Indian Reservation
Roads; the Director of the Lakota Fund, a non-profit micro-enterprise venture capital fund.
Local representatives of FHWA were also involved, as was South Dakota Department of
Transportation.
[2]The Bureau of Indian Affairs Indian Reservation Roads (IRR) program oversees the local
road system.
[3]The model has been applied previously to visitation at Badlands National Park.
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