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Briefing on a Cost-Benefit Analysis Framework for Transit Investments in the Washington Region David Lewis Ph.D. Chief Economist HDR|Decision Economics.

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Presentation on theme: "Briefing on a Cost-Benefit Analysis Framework for Transit Investments in the Washington Region David Lewis Ph.D. Chief Economist HDR|Decision Economics."— Presentation transcript:

1 Briefing on a Cost-Benefit Analysis Framework for Transit Investments in the Washington Region David Lewis Ph.D. Chief Economist HDR|Decision Economics National Capital Region Transportation Planning Board - Technical Committee May 2, 2008

2 Comprehensive Value Assessment  Mobility  Congestion Management  Community Economic Development The economic benefits of transit: 2

3 Comprehensive Value Assessment  Time savings to transit users  Cash savings to low income households for reallocation to housing, nutrition, child care …  Cross-sector benefits: reduced financial burden on social services Mobility: 3

4 Comprehensive Value Assessment  Reduced delay  Improved reliability, predictability and productivity  Reduced environmental emissions  Lower vehicle operating costs  Safety (lives, injuries, property) Congestion Management: 4

5 Community Economic Development Location Efficiency Measurement Double Counting?  High density economic activity (retail, commercial …)  Agglomeration economies  Less demand for motorized trips  Reduced auto-ownership requirements, dependence  Higher density life-style  Development benefits manifest and measured as increased economic land value  Capitalization of time savings? Only partially 5

6 Emerging Evidence From Comprehensive Value Assessment (Cost-Benefit Analysis)  Projects can generate value in all three categories of transit value creation  Projects can be economically worthwhile (generate greater economic benefits than the life-cycle costs of construction, operations, maintenance and opportunity cost of capital)  Not all transit investments will generate more benefits than costs  Bus investments can outperform rail alternatives in terms of rate of return, but rail investment can generate greater absolute levels of economic benefit and net benefit  Transit investment can outperform highway alternatives in terms of economic return  Focusing on ridership-related benefits alone can lead to the mistaken conclusion that a project is not economically worthwhile 6

7 Comparing Alternative Alignments Category of Benefits Green LineOrange Line Total Benefits (Million U.S. dollars) Congestion Management Affordable Mobility Community Economic Development Total Cost (Million U.S. dollars) Net Present Value (Million U.S. dollars) $1,369.9 $ $ $ $1,035.4 $ $233.6 $106.5 $ 32.5 $ 94.6 $410.0 ($176.4) 7

8 Comparing Alternative Modes Bus Improvement, Region-wide Light Rail Region-wide New Highway Capacity Total Cost$522$6,218$1,209.1 Total Benefits$1,141$10,784$1,365.2 Net Benefits$619$4,566$156.1 Internal Rate of Return27.1%8.7%4.9% 8

9 A Streetcar Example Mean 90% Probability of Exceeding 10% Probability of Exceeding Congestion Management Benefits Time and Vehicle Operating Cost Savings$13.0$10.4$16.5 Emission Savings$0.4$0.1$0.6 Accident Cost Savings$3.0$0.8$5.8 Total Congestion Management Benefits$16.4$12.3$21.0 Mobility Benefits Trip Cost Savings$35.2$23.9$47.4 Cross Sector Benefits Welfare Cost Savings$0.7$0.5$1.0 Home Care Cost Savings$0.3$0.2$0.4 Total Cross Sector Benefits$1.1$0.7$1.4 Economic Development Benefits Residential$106.9$70.8$143.0 Commercial$272.0$148.5$398.3 Total Economic Development Benefits$378.9$249.5$509.1 Grand Total Benefits$431.6$303.0$565.7 Project Costs Capital Expenditures$75.7$73.7$77.7 Incremental O&M + Disruption Costs$40.1$39.7$40.5 Total Costs$115.8$113.8$117.9 Net Present Value$315.8$186.8$450.4 Benefit-Cost Ratio

10 Risks With Partial Value Project Evaluation  Can understate prospective community value of transit projects  Design risk  Can overlook good transit projects  Inability to compare economic rate of return on alternative uses of funds  Can fail to identify all financing options 10

11 Potential Applications of Cost- Benefit Analysis in The Region  Corridor Cities Transitway, Phases I and II  Purple Line  Potomac Yards Metro Station  Columbia Pike Streetcar  New York Avenue Station  Anacostia Area Streetcar 11

12 Conclusions  Feasible in the case of transit projects  Can reveal economic value not otherwise apparent  Can reveal financing options not otherwise apparent  Can provide a basis for more widespread community support  Would be counter-productive as an added federal requirement Comprehensive Value Assessment: 12

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