APPENDIX I BENEFIT COST ANALYSIS OF THE NORTH SOUTH CORRIDOR TRANSPORTATION PLAN

Transcription

1 APPENDIX I BENEFIT COST ANALYSIS OF THE NORTH SOUTH CORRIDOR TRANSPORTATION PLAN The following pages contain the Benefit-Cost Analysis of the North-South Corridor Transportation Plan - Final Report as presented on November 5, Appendix I

2 Appendix I North South Transportation Initiative Final Report, February 2004

3 Ohio-Kentucky-Indiana Regional Council of Governments Benefit-Cost Analysis of the North-South Corridor Transportation Plan Final Report Volume 1: Analysis of Build Alternatives November 5, 2003

4 BENEFIT-COST ANALYSIS OF THE NORTH-SOUTH CORRIDOR TRANSPORTATION PLAN FINAL REPORT VOLUME 1: ANALYSIS OF BUILD ALTERNATIVES Prepared By: HLB DECISION ECONOMICS INC Colesville Road, Suite 910 Silver Spring, MD November 5, 2003 HLB Reference: 6717

5 TABLE OF CONTENTS List of Figures... i List of Tables... i Executive Summary... i 1. Introduction Issues Facing Greater Cincinnati Investment Alternatives Analysis Framework Plan of the Report Profile of the I-75 Corridor Geographic Study Area Demographic Profile Socioeconomic Profile Employment Income Traffic Conditions Base Case and Investment Alternatives Corridor Improvement Alternatives Mainline I-75 Improvements Parallel Roadway Improvements Alternatives for Evaluation Base Case Four-Lane Continuity HOV Lane Light Rail Transit Peak Period Truck Restriction Combination Methodological Framework Benefit-Cost Analysis Principles Valuation A Note on Valuing Non-Market Goods and Services The Opportunity Cost of Capital Evaluation Benchmarks of Economic Merit Risk Analysis Principles Application Measurement of Transit Benefits and Costs Economic Framework for Measuring Benefits from Transit Investments... 1 HLB DECISION ECONOMICS INC. Table of Contents i

6 5.2 Methodology for Estimating Congestion Management Benefits Travel Time Savings Other Travel Cost Savings Methodology for Estimating Affordable Mobility Benefits Low-Income Mobility Benefits Cross-Sector Benefits Methodology for Estimating Locational Value and Economic Development Benefits Socioeconomic Profile of the I-75 Corridor Use of Development Influence Factors Change in Residential and Commercial Property Values Measurement of Highway Benefits and Costs Economic Framework for Measuring Benefits from Highway Improvements Methodology for Estimating Highway Travel Cost Savings Travel Time Savings Vehicle Operating Cost Savings Accident Cost Savings Emission Cost Savings Methodology for Estimating the Benefits and Costs of Peak-Period Truck Restriction Methodology for Estimating Induced Demand Combined Evaluation of Transit and Highway Investments and Evaluation Criteria Economic Framework for Measuring the Combined Impact of Transit and Highway Investments Project Evaluation Criteria Net Benefits and Project Worth Project Risk Project Timing Congestion Management Benefits Travel Time Savings Other Travel Cost Savings Vehicle Operating Cost Savings Accident Cost Savings Emission Cost Savings Total Congestion Management Benefits Affordable Mobility Benefits Overview Economic Value of Affordable Mobility Estimation of Affordable Mobility Benefits Cross-Sector Benefits Total Affordable Mobility Benefits Locational Value Benefits Transit Investment, Economic Development, and Locational Value Evaluation Methodology Station Area Economic Development Potential Locational Value Benefit Estimates... 1 HLB DECISION ECONOMICS INC. Table of Contents ii

7 10.2 Highway Improvements and Locational Value Evaluation Methodology Locational Benefit Estimates Alternatives Life Cycle Costs Four-Lane Continuity Costs HOV Lane Costs LRT Costs Peak Period Truck Restriction Costs Combination Alternative Costs Disruptions during Construction Benefit-Cost Analysis and Conclusions Four-Lane Continuity HOV Lane Light Rail Transit Peak Period Truck Restriction Combination Summary of Findings Risk Analysis Timing and Sustainability of Benefits Nature of Economic Benefits Sensitivity Analysis... 1 Appendix 1: Risk Analysis Expert Panel... 1 Appendix 2: RAP Primer... 1 Appendix 3: Supplementary Data Tables and Assumptions... 1 Overview... 1 Highway Accident Rates... 1 Emission Factors... 1 Speed-Flow Factors... 1 Vehicle Operating Costs... 1 Appendix 4: I Traffic Statistics...1 Appendix 5: Induced Demand Technical Appendix... 1 Appendix 6: Impact of Changes in the Real Discount Rate... 1 Appendix 7: Overview of the OKI / MVRPC Regional Travel Demand Model... 1 Appendix 8: Time Profile of Congestion Management Benefits... 1 Appendix 9: Time Profile of Changes in Emissions... 1 Appendix 10: Risk Analysis Assumptions... 1 References and Data Sources... 1 HLB DECISION ECONOMICS INC. Table of Contents iii

8 LIST OF FIGURES Figure 1: Map of the I-75 Corridor Study Area... 1 Figure 2: Location of Transportation Alternatives... 1 Figure 3: Percent Distribution of Area Employment by Industry, Figure 4: The Demand for Travel... 1 Figure 5: Structure and Logic Diagram for Estimating Delay Savings from Transit Investments 1 Figure 6: Structure and Logic Diagram for Estimating Vehicle Operating Cost Savings from Transit Investments... 1 Figure 7: Structure and Logic Diagram for Estimating Safety Benefits from Transit Investments1 Figure 8: Structure and Logic Diagrams for Estimating Environmental Benefits from Transit Investments... 1 Figure 9: Consumer Surplus Benefits of Transit Investments... 1 Figure 10: Structure and Logic Diagram for Estimating Low-Income Mobility Benefits... 1 Figure 11: Structure and Logic Diagram for Estimating Cross-Sector Benefits... 1 Figure 12: Structure and Logic Diagrams for Locational Value Benefits... 1 Figure 13: Methodology for Measuring the Benefits of Highway Investments... 1 Figure 14: Structure and Logic Diagram for Estimating Highway Investment Benefits... 1 Figure 15: Structure and Logic Diagram for Estimating Travel Time Cost Savings... 1 Figure 16: Structure and Logic Diagram for Estimating Vehicle Operating Cost Savings from Highway Improvements... 1 Figure 17: Structure and Logic Diagram for Estimating Accident Cost Savings from Highway Improvements... 1 Figure 18: Structure and Logic Diagram for Estimating Emission Cost Savings from Highway Improvements... 1 Figure 19: Structure and Logic Diagram for Estimating the Benefits of the Peak Period Truck Restriction... 1 Figure 20: Structure and Logic Diagram for Estimating Highway Vehicle Speed... 1 Figure 21: Evaluation and Comparison of Project Risk, an Illustration... 1 Figure 22: North-South Corridor Average Door-to-Door Travel Speed, Peak Period Only... 1 Figure 23: Transportation Expenditures as Percentage of Household Income... 1 Figure 24: Rate of Return Risk Analysis, 4-Lane Continuity Alternative... 1 Figure 25: Rate of Return Risk Analysis, HOV Lane Alternative... 1 Figure 26: Distribution of Total Benefits, LRT Alternative... 1 Figure 27: Rate of Return Risk Analysis, LRT Alternative... 1 Figure 28: Rate of Return Risk Analysis, Peak Period Truck Restriction Alternative... 1 Figure 29: Distribution of Total Benefits, Combination Alternative... 1 Figure 30: Rate of Return Risk Analysis, Combination Alternative... 1 Figure 31: Annual Economic Value of Reduced Delay under the Four-Lane Continuity and Light Rail Alternatives; HLB DECISION ECONOMICS INC. List of Figures iv

9 LIST OF TABLES Table 1: Study Area Population and Density, Table 2: Study Area Employment... 1 Table 3: Study Area Employment Growth from 1990 to Table 4: Study Area Income per Capita... 1 Table 5: Study Area Household Income, Table 6: The Base Case and Investment Alternatives... 1 Table 7: Door-to-Door Travel Time Survey Results... 1 Table 8: Key Assumptions for the Estimation of Congestion Management Benefits... 1 Table 9: Value of Time Assumptions, Dollar per Hour per Vehicle... 1 Table 10: Present Value of Total Travel Time Savings, Table 11: Annual Travel Time Savings per Trip, Mean Expected Outcomes... 1 Table 12: Unit Vehicle Operating Cost Assumptions, Personal Vehicles... 1 Table 13: Present Value of Total Vehicle Operating Cost Savings, Table 14: Accident Cost Assumptions, Dollar per Incident... 1 Table 15: Present Value of Total Accident Cost Savings, Table 16: Unit Emission Cost Assumptions, Dollar per ton of pollutants... 1 Table 17: Present Value of Total Emission Cost Savings, Table 18: Changes in Emission Volumes, 4-Lane Continuity, , Mean Expected Outcomes... 1 Table 19: Changes in Emission Volumes, HOV Lane, , Mean Expected Outcomes.. 1 Table 20: Changes in Emission Volumes, LRT, , Mean Expected Outcomes... 1 Table 21: Changes in Emission Volumes, Peak Period Truck Restriction, , Mean Expected Outcomes... 1 Table 22: Present Value of Total Congestion Management Benefits, Table 23: Annual Congestion Management Benefits, Mean Expected Outcomes... 1 Table 24: Low-Income Households in the I-75 Corridor... 1 Table 25: Key Assumptions for the Estimation of Low-Income Mobility Benefits... 1 Table 26: Present Value of Total Low- Income Mobility Benefits, Table 27: Annual Low-Income Mobility Benefits per Low-Income Household, LRT Alternative, Mean Expected Outcomes... 1 Table 28: Key Assumptions for the Estimation of Cross-Sector Benefits... 1 Table 29: Present Value of Total Cross-Sector Benefits, Table 30: Annual Cross-Sector Benefits, Mean Expected Outcomes, LRT Alternative, Mean Expected Outcomes... 1 Table 31: Present Value of Total Affordable Mobility Benefits, Table 32: I-75 Light Rail Corridor Communities... 1 Table 33: Economic Development Criteria for I-75 LRT Corridor Station Areas... 1 Table 34: Key Assumptions for the Estimation of LRT Locational Benefits... 1 Table 35: Locational Benefits of LRT Alternative, Table 36: Key Assumptions for the Estimation of Highway Improvement Locational Benefits.. 1 Table 37: Locational Benefits of 4-Lane Continuity, Table 38: Locational Benefits of HOV Lane, Table 39: Locational Benefits of Peak Period Truck Restriction, Table 40: Locational Benefits of Combination Alternative, HLB DECISION ECONOMICS INC. List of Tables v

10 Table 41: Present Value of Total Locational Benefits, Table 42: Four-Lane Continuity Capital Costs... 1 Table 43: Annual Four-Lane Continuity O&M Costs... 1 Table 44: HOV Lane Capital Costs...1 Table 45: Annual HOV Lane O&M Costs... 1 Table 46: LRT Capital Costs... 1 Table 47: Annual LRT O&M Costs... 1 Table 48: Peak Period Truck Restriction Capital Costs... 1 Table 49: Annual Peak Period Truck Restriction O&M Costs... 1 Table 50: Combination Alternative Capital Costs... 1 Table 51: Disruption Cost Assumptions... 1 Table 52: Present Value of Total Disruption Costs... 1 Table 53: Simulation Results, 4-Lane Continuity Alternative... 1 Table 54: Simulation Results, HOV Lane Alternative... 1 Table 55: Simulation Results, LRT Alternative... 1 Table 56: Simulation Results, Peak Period Truck Restriction Alternative... 1 Table 57: Simulation Results, Combination Alternative... 1 Table 58: Summary of Findings, Mean Expected Outcomes... 1 Table 59: Economic Risk Analysis of Proposed Alternatives... 1 Table 60: Sensitivity Analysis under Different Build Alternatives, Mean Expected Outcomes... 1 HLB DECISION ECONOMICS INC. List of Tables vi

11 EXECUTIVE SUMMARY The Ohio-Kentucky-Indiana Regional Council of Governments commissioned HLB Decision Economics Inc. (HLB) to measure and compare the economic benefits, costs and net benefits (benefits minus costs) of five strategies to address mounting traffic congestion in the region s principal north-south travel corridor (Summary Figure 1) over the coming 30-years. The benefits, costs and net benefits of each strategy are compared against a common baseline called the base case. The base case constitutes a series of modest improvements that seek to make the most productive use of existing infrastructure capacity through moderate up-grades and innovative traffic management initiatives. Summary Figure 1: Map of the I-75 Corridor Study Area The five strategic alternatives to the base case are as follows: Alternative 1 -- Four-Lane Continuity. This option would fill in gaps along the Interstate system so as to provide four continuous general purpose traffic lanes in each direction along I-75 through Hamilton County. HLB DECISION ECONOMICS INC. List of Tables vii

12 Alternative 2 -- Four-Lane Continuity plus HOV. A modification of Alternative 1, this strategy would reserve one traffic lane in each direction for high occupancy vehicles (a minimum of two passengers) only. Alternative 3 -- Light Rail Transit (LRT). This strategy represents the construction of a light rail line along an alignment covering sections of both the I-75 and I-71 corridors. Alternative 4 -- Peak Period Truck Restriction. Under this option, trucks a major source of congestion in the North-South Corridor, would not be permitted to use I-75 during morning and evening peak travel times. Alternative 5 -- Combined Four-Lane Continuity and Light Rail Transit (LRT). This strategy would combine the roadway capacity expansion of Alternative 1 with the light rail development plan of Alternative 3. PRINCIPAL FINDINGS As shown in Summary Table 1, construction of a light rail transit system (Alternative 3) emerges as the highest ranking strategy in terms of net contribution to the economic welfare of the region. With economic benefits that exceed the costs of constructing and operating the system (over 30 years) by more $911 million, the light rail strategy creates an estimated $1.84 of economic value for each dollar of incurred cost. By comparison, the completion of four lanes in each direction along I-75 through Hamilton County the highway strategy (Alternative 1), is forecast to create only just enough economic value to cover its construction and maintenance costs. Against total, 30-year life-cycle costs of $616.7 million, the highway capacity strategy yields 30-year economic benefits of $699.9 million or $1.13 of economic value for each $1.00 of capital and labor resources consumed in the construction and roadway maintenance process. The second highway strategy, which contemplates reserving one travel lane in direction for car pools and van pools, fails to generate sufficient economic value to cover the lifecycle costs of its construction and maintenance (only $0.73 of benefit is foreseen to arise for each $1.00 expended). This is because the number of people projected to form car pools is small relative to the number who would use the three remaining general-purpose lanes, leaving the overall level of congestion higher under Alternative 2 and than under Alternative 1. As a result, Alternative 2 emerges as the least favorable of the five strategies under examination. RISK ANALYSIS The assessment of uncertainty in the forecasts presented above lends further weight to the light rail strategy (Alternative 3) as the highest ranking strategy from an economic perspective. Based on the assignment of probabilities to all of the various technical assumptions entailed in the forecasting process, Summary Table 2 indicates which of the five alternatives exhibit at least a 90 percent likelihood of generating economic benefits VIII

13 that exceed their economic costs (including the opportunity cost of capital employed). As the Table shows, only the light rail option and Alternative 4 (truck restrictions during peak periods) survive this test. None of the other alternatives offer the public a 90 percent assurance of generating more benefits than costs. THE TIMING AND SUSTAINABILITY OF ECONOMIC CONGESTION MANAGEMENT BENEFITS Congestion management benefits under the light rail transit strategy are found to be sustainable: This is not the case under the highway alternative. Whereas the highway capacity strategy (Alternative 1) promises significant short-term improvements in traffic speeds and average journey times, the gains are concentrated in the first seven years. As shown in Summary Figure 2, the propensity of new highway capacity to draw vehicles from other routes would lead travel times to return to pre-widening levels by the end of seven years, and to continue to erode thereafter. In contrast, a light rail system is expected to draw increasing volumes of traffic off the highway system as traffic congestion mounts, leading to stable and increasing congestion management benefits over the longer term. THE NATURE OF ECONOMIC BENEFITS UNDER ALTERNATIVE STRATEGIES Although the lion s share economic value created under each of the five strategic alternatives arises in the form of time savings, the transit option also generates a disproportionate range of benefits of other kinds. One is additional mobility for low income people without access to an automobile. In the absence of public transportation, such individuals use taxis, endure higher unemployment, and rely more heavily on social services than they do when offered access to a greater range of transportation choices. In providing a lower cost alternative to the taxi and in helping alleviate unemployment and pressure on social service agency budgets, the light rail alternative is projected to generate corresponding economic benefits of just under $200 million over a 30-year project life-cycle, or about 10 percent of the total benefits reported in Summary Table 1. IX

14 Summary Table 1: Estimated Costs, Benefits, Net Benefits and Ranking of Alternative Strategies, (for the period , in dollars of present-day value) TOTAL ECONOMIC COST In millions of 2003 dollars TOTAL ECONOMIC BENEFITS In millions of 2003 dollars NET ECONOMIC BENEFITS Benefits minus costs, in millions of 2003 dollars RANK Rank order of contribution to regional economic welfare Alternative 1 -- Four-Lane Continuity $616.7 $699.9 $ Alternative 2 -- Four-Lane Continuity plus HOV $605.6 $439.2 ($167.3) 5 Alternative 3 -- Light Rail Transit (LRT) $1,087.9 $1,999.4 $ Alternative 4 -- Peak Period Truck Restriction $65.0 $385.5 $ Alternative 5 -- Combined Four- Lane Continuity and Light Rail Transit (LRT) $1,704.6 $2,428.3 $ Note: Parentheses denote negative numbers X

15 Summary Table 2: Economic Risk Analysis of Alternative Strategies, (for the period , in millions of present-day value dollars) Net Benefit Forecast with at least 50% Probability of Being Exceeded Net Benefit Forecast with at least 90% Probability of Being Exceeded Alternative 1 -- Four-Lane Continuity $83.2 ($211.2) Alternative 2 -- Four-Lane Continuity plus HOV ($167.3) ($212.7) Alternative 3 -- Light Rail Transit (LRT) $911.4 $196.7 Alternative 4 -- Peak Period Truck Restriction $320.5 $170.6 Alternative 5 -- Combined Four-Lane Continuity and Light Rail Transit (LRT) Note: Parentheses denote negative numbers $723.6 ($184.3) XI

16 Summary Figure 2: Annual Economic Value of Reduced Delay along I-75 in Hamilton County under the Highway and Light Rail Construction Strategies (Alternative 1 and Alternative 3); Lane Continuity Alternative LRT Alternative $250 $200 Annual Benefits ($millions) $150 $100 $50 $0 -$ HLB DECISION ECONOMICS INC. Executive Summary xii

17 1. INTRODUCTION 1.1 Issues Facing Greater Cincinnati The economic vitality of the Greater Cincinnati region is dependent on an efficient transportation network that connects regional job centers, neighborhoods, shopping centers, and attractions. Today s traffic congestion, however, is imposing economic costs on the region of more than $500 million a year. 1 Congestion-related costs take a toll on economic productivity and growth. Slow traffic causes trucks to miss just-in-time delivery commitments, leading carriers to incur late-penalties and their customers to suffer production losses and higher inventory carrying costs. The loss in competitiveness threatens jobs. In the service sector, traffic congestion creates thousands of hours of lost working time each week. Workers sacrifice productive working hours at the office by leaving for meetings earlier than desired in order to arrive on time. Meetings often start late because people are delayed. The economic value of lost working time in Greater Cincinnati exceeded $525 per driver in 1997, an eight-fold increase in cost since Cincinnati, which ranked as the nation s 34 th most congested urban area in 1990, jumped to number 18 by Increased congestion results in costs to the environment and in social costs. Congestion produces higher levels of vehicle emissions and reduces highway safety. The incidence and severity of road accidents rise significantly with increased traffic congestion. The economic and social costs of safety include expenditures for emergency services, medical outlays, repair and replacement of damaged property and, of course, the pain and grief that follows from death and serious injury. The social costs of congestion include increased childcare expenses and other household costs rise that results when people need to leave their homes earlier than desired in order to arrive at work on time. There are also secondary social consequences such as reduced family time and quality of life issues. Thus, congestion tends to reverse the positive effects from the region s economic growth by eroding the increase in living standards and quality of life that such growth would otherwise permit. Economic growth also creates a greater need for affordable transportation and housing. Statistics show that poorer households spend a much larger share of their earnings on transportation (autos, transit and taxis) than people with higher incomes. For lower income households, the potential benefits of growth better housing, nutrition, healthcare and quality of life are diluted by greater outlays for transportation to work, to childcare, and to shops and medical centers. Urban sprawl, moreover, reduces the number of walkable communities where people can get by with less dependency on automobiles. 1.2 Investment Alternatives The North-South corridor transportation plan encompasses a variety of transportation improvements along the I-75 corridor, from the Montgomery County line (North) to the Grant County line (South). These improvements include both corridor alternatives (e.g., widening of I- 75 and transit alternatives), and site-specific alternatives (e.g., local roadway and interchange improvements). 1 The 2001 Annual Mobility Report, Texas Transportation Institute HLB DECISION ECONOMICS INC. Page 1

18 In this report, a total of five transportation alternatives are evaluated relative to a base case scenario: Alternative 1 Four-Lane Continuity, establishing four continuous general purpose lanes through Hamilton County; Alternative 2 Four-Lane Continuity with a High Occupancy Vehicle (HOV) Lane, designating one lane as an HOV lane; Alternative 3 Light Rail Transit (LRT), using combined I-75 and lower I-71 alignment; Alternative 4 Peak Period Truck Restriction, restricting trucks from using I-75 during normal a.m. and p.m. peak periods of congestion; Alternative 5 Combined Four Lane Continuity and Light Rail Transit (LRT), a combination of Alternatives 1 and Analysis Framework The analysis framework has three elements: Benefit-Cost Analysis (the name for business case analysis when conducted in the public sector); Risk Analysis; and, Stakeholder Engagement. Benefit-Cost Analysis measures and compares the economic value of all positive effects (benefits) and negative effects (costs) of the options under review. The principal benefits are those associated with: Congestion relief (including reduced delay and vehicle operating costs, and improved safety and environmental conditions); More affordable mobility; and Better land-use and community development; Benefit-Cost Analysis treats all negative effects as costs. In addition to an option s capital outlays, the analysis accounts for the cost of capital (interest) 2 ; yearly operating expenses; and the costs of maintenance to keep capital assets in good shape. Also included are the disruptive effects of construction, such as noise, detours and the like. Risk Analysis recognizes that Benefit-Cost factors such as cost estimates, traffic forecasts and valuations are subject to uncertainty. The Risk Analysis process assigns each factor a probability range. This range identifies outcomes other than the scientifically most likely. Commonly used in the private sector and in the assessment of major bond issues, Risk Analysis allows decision makers to take account of both downside risk and upside potential in making go/no-go decisions. Stakeholder Engagement is part of the Risk Analysis process. In addition to using scientific evidence to establish the probability range for each cost estimate, forecast and valuation, local 2 More precisely, Benefit-Cost Analysis accounts for the opportunity cost of capital. This reflects a combination of interest and the time-preference of the community for benefits now versus greater benefits later. HLB DECISION ECONOMICS INC. Page 2

19 subject-matter experts and stakeholders are engaged in scrutinizing the numerical analysis and bringing their expert knowledge to bear accordingly. This ensures that scientific evidence is properly adapted to the local situation. 1.4 Plan of the Report The report consists of twelve chapters. A profile of the I-75 corridor can be found in Chapter 2, after this introduction. A description of the base case and investment alternatives is provided in Chapter 3. Chapter 4 describes the analysis framework, a benefit-cost analysis and risk analysis approach to measuring benefits and costs, and comparing the relative economic merits of alternative investment strategies. Chapters 5, 6 and 7 present the methodology used to estimate benefits from transit and highway investments. Chapter 8, 9 and 10 present the findings for congestion management benefits, mobility benefits, and economic development benefits respectively. Chapter 11 examines the incremental capital and operating costs associated with all alternatives under review. The results of the benefit-cost analysis are reported in Chapter 12. A number of appendices provide technical information, supplementary data tables, references and data sources. HLB DECISION ECONOMICS INC. Page 3

20 2. PROFILE OF THE I-75 CORRIDOR The following chapter presents a general overview of the I-75 corridor study. This study is part of the larger North South Transportation Initiative ( Initiative ), a comprehensive evaluation of the transportation needs within the major north/south transportation artery around I-75. The Initiative spans nearly 100 miles from Northern Kentucky, through Cincinnati and Dayton to Miami County. It includes the major cities of Cincinnati, Middletown and Dayton as well as seven counties, 3 twenty-two other cities, six villages and thirteen townships. Principle elements of the Initiative include Interstate 75 and its adjacent north/south railroad lines. I-75 serves as a major link in the country s commerce. It is the oldest interstate in the region. This transportation artery has transported people and freight throughout the Greater Cincinnati and Miami Valley regions and across the country since the late 1950s. Today, I-75 and the parallel railroads are among the Country s busiest for the movement of people and goods. It is among the busiest trucking routes in North America, with truck traffic approaching 6 billion miles annually according to Federal Highway Administration estimates. More than 250 freight trains per day pass through or have destinations within the study area. In addition, the percentage of truck traffic has risen drastically due to the changes in industrial processes which require just-in-time delivery of materials, components and systems so as to eliminate stockpiling and/or backlogs. These issues, along with the fact that the infrastructure in the corridor is old and rapidly deteriorating, are the challenges being addressed by the Initiative. The Initiative brings together, for the first time, the Cincinnati and Dayton metropolitan areas in a joint study. The Ohio-Kentucky-Indiana Regional Council of Governments (OKI) and the Miami Valley Regional Planning Commission (MVRPC) have joined together for a comprehensive analysis of the transportation issues in the corridor. While the study is centered on I-75, it will also address all major transportation issues along the corridor, not just the interstate. The Initiative is currently moving into the final phase of the Major Investment Study (MIS) screening process. The project team has screened and reviewed numerous alternatives against a list of criteria: transportation system performance, community impacts, environmental impacts, economic development and cost. After each level of screening, the alternatives that rated the best moved on for additional evaluation. Now, the project team is continuing to collect public input and refining alternatives in order to recommend its preferred program of projects. This recommendation will include highway, transit, and transportation system management alternatives. The chapter is organized as follows. Section 2.1 provides a geographic definition of the study area. Section 2.2 presents a demographic profile of the study area, and Section 2.3 provides socioeconomic data. A description of the current traffic conditions and issues facing the corridor can be found in Section Boone, Kenton, Hamilton, Butler, Warren, Montgomery and Miami County HLB DECISION ECONOMICS INC. Page 4

21 2.1 Geographic Study Area The Initiative includes portions of Hamilton, Butler, Warren, Montgomery and Miami counties in Ohio, as well as portions of Boone and Kenton Counties in Kentucky, and represents a large community base that lives or works within the study area. More than 45 communities, from the Ohio River to the northern Miami County line, border Interstate 75. The I-75 corridor study area is shown in Figure 1 below. Figure 1: Map of the I-75 Corridor Study Area All five transportation alternatives examined in this report (four-lane continuity, HOV lane, light rail, peak period truck restriction, and combination) are located in a narrow portion of the I-75 corridor study area. This portion is restricted to Hamilton County and North Kentucky within the Cincinnati Beltway. It extends from the I-75 / I-275 interchange in the north to Covington, Kentucky in the south (see Figure 2 below). HLB DECISION ECONOMICS INC. Page 5

22 Figure 2: Location of Transportation Alternatives 2.2 Demographic Profile The 2000 Census reports a population of 2.2 million for the seven counties. Hamilton County, with a population of thousand represents about 38 percent of the total population in the study area. The total population and relative population density for the study area are shown in Table 1 below. Table 1: Study Area Population and Density, 2000 Area in Square Miles County Population Total Water Land Density per Square-Mile of Land Area Butler County 332, Hamilton County 845, ,075.1 Miami County 98, Montgomery County 559, ,210.9 Warren County 158, Kenton County 151, Boone County 85, Total 2,231,878 2, , Source: U.S. Census Bureau HLB DECISION ECONOMICS INC. Page 6

23 Hamilton County is densely populated with more than 2,000 people per square-mile, as compared to the next largest county, Montgomery County, which has 1,211 people per squaremile. However, while the region s overall population growth averaged 4.4 percent over the last decade, 4 the population of Hamilton County and Montgomery County declined by 2.4 percent and 2.6 percent respectively, the only two counties to experience a decline in population levels. 2.3 Socioeconomic Profile The socioeconomic profile includes employment and income characteristics of the region. The profile is developed from the Census 2000 results. It should be noted that there are still gaps in the Census 2000 with respect to income, especially at the community level. Thus, comparisons are made at the level of data availability and will be updated as new data are released Employment The study area employment grew by 15.9 percent during the decade of , with much of that growth occurring in three counties: Butler, Warren and Boone counties. Total full-time and part-time employment in Boone County soared by as much as 77.7 percent over the period. Hamilton county employment grew by a relatively slower 8.2 percent. As a result, Hamilton County s share of employment fell from 48.6 percent in 1990 to 45.4 percent by Table 2 presents the employment profile for the study area. Table 2: Study Area Employment Year 2000 Year Year Growth County Employment Employment in Employment Butler County 163, , % Hamilton County 685, , % Miami County 56,651 46, % Montgomery County 373, , % Warren County 77,333 45, % Boone County 81,266 45, % Kenton County 73,489 59, % Total 1,510,904 1,303, % Source: Bureau of Economic Analysis One-third of the area employment is in the services industry and trending upwards. Manufacturing industries represented 15.1 percent of total employment in 2000, down from 18.9 percent in Government employment declined by a little more than 1 percent and most employment sectors remained fairly stable in the 1990 s. Figure 3 illustrates the distribution of area employment in percent is the overall 10-year growth rate. Population in the 7-county region grew at an average 0.43 percent per annum between 1990 and HLB DECISION ECONOMICS INC. Page 7

24 Figure 3: Percent Distribution of Area Employment by Industry, 2000 Government 10% Other 0.9% Farm 0.4% Construction 5% Manufacturing 15% Transportation 5% Services 33% Wholesale Trade 6% Finance/Real Estate 8% Retail Trade 17% Source: Bureau of Economic Analysis The nearly 16-percent increase in total area employment was supported by 30+ percent increases in both the Services and Finance, Insurance and Real Estate establishments. Manufacturing and farm employment dropped by 7 percent and 12 percent respectively from 1990 to The shift toward the Services and Finance-related establishments occurred primarily in the suburban counties, as illustrated in Table 3. Table 3: Study Area Employment Growth from 1990 to 2000 County Retail Finance and Trade Related Services Butler County 37% 87% 48% Hamilton County 6% 15% 31% Miami County 28% 48% 27% Montgomery County 1% 17% 17% Warren County 51% 250% 63% Boone County 53% 281% 83% Kenton County 11% 52% 35% Total 13% 33% 31% Source: Bureau of Economic Analysis Income Income levels vary widely within the region. While Hamilton County has the highest per capita income, it has the second lowest median household income. The median household income is considerably higher in the surrounding Butler and Warren Counties in Ohio (north and east) and in Boone County in Kentucky (southwest). This reflects the tremendous growth in employment and population that has occurred in these counties during the 1990s. Table 4 compares income levels by county. HLB DECISION ECONOMICS INC. Page 8

25 Table 4: Study Area Income per Capita County Per Capita Personal Income Median Household Income Butler County $27,878 $51,330 Hamilton County $34,162 $43,911 Miami County $28,064 $47,282 Montgomery County $29,419 $43,045 Warren County $29,827 $62,121 Boone County $28,776 $57,449 Kenton County $28,086 $47,065 Cincinnati-Hamilton, OH-KY-IN (CMSA) $30,384 $47,174 Source: Bureau of Economic Analysis and U.S. Census Bureau; in dollars of 2000 The profile of household income for Hamilton and Butler counties 5 shows that nearly 19 percent of Hamilton County households earn less than $15,000 per year (close to poverty levels), compared to 11.8 percent for Butler County households. Hamilton County also shows a higher concentration of wealth at household income levels above $200,000. The table below presents the disparities in household income levels for these two counties. Table 5: Study Area Household Income, 2000 Percent Distribution of Household Income Number of Households Household Income (2000 Dollars) Butler Hamilton Butler Hamilton Total: 123, , % 100% Less than $10,000 6,912 40, % 11.60% $10,000 to $14,999 7,596 24, % 7.00% $15,000 to $19,999 8,803 20, % 5.90% $20,000 to $24,999 5,200 23, % 6.60% $25,000 to $29,999 5,472 20, % 5.90% $30,000 to $34,999 8,594 27, % 7.80% $35,000 to $39,999 8,838 17, % 5.10% $40,000 to $44,999 7,123 18, % 5.20% $45,000 to $49,999 5,830 15, % 4.50% $50,000 to $59,999 10,122 29, % 8.50% $60,000 to $74,999 15,838 33, % 9.70% $75,000 to $99,999 13,848 34, % 9.70% $100,000 to $124,999 9,530 17, % 5.00% $125,000 to $149,999 5,861 9, % 2.70% $150,000 to $199,999 2,412 6, % 1.80% $200,000 or More 1,038 10, % 3.00% Source: Census 2000 Supplementary Survey Summary Tables 5 U.S. Census 2000 household income data for the other counties in the study area is not yet available. HLB DECISION ECONOMICS INC. Page 9

26 2.4 Traffic Conditions Interstate-75 and the parallel railroads make up the major North/South Transportation artery carrying international, national and regional traffic including freight. It has been the catalyst for the economic development in the area. The corridor has boosted productivity and helped sustain a more than tenfold increase in the gross regional product since it opened in While the traffic volumes vary greatly in the corridor, volumes exceeding design capacity by 160 to 173 percent are not uncommon. The North South Initiative reports that currently: 6 An average of 150,000 or more vehicles per day travel between I-275 and the Brent Spence Bridge in Cincinnati; Nearly 100,000 vehicles per day use I-75 in all other segments within the Study Area; An average of 100,000 vehicles per day use I-75 in downtown Dayton; More than 15,000 trucks per day use I-75 throughout the Study Area; this number is far greater between I-275 and the Brent Spence Bridge in Cincinnati; Motor carrier operators spend more than $10 billion each year in the I-75 corridor; and Trucks move an estimated $24.5 billion in commodities annually along I Source: HLB DECISION ECONOMICS INC. Page 10

27 3. BASE CASE AND INVESTMENT ALTERNATIVES The base case and investment alternatives to be considered in the benefit-cost analysis are presented in this chapter. The investment alternatives being reviewed under the North South Transportation Initiative are described in Section 3.1. The specific alternatives that HLB proposes to evaluate are presented in Section Corridor Improvement Alternatives The North South Transportation Initiative is evaluating alternative approaches that will maintain and/or improve the mobility of the I-75 corridor for the next 30 years. The analysis includes traffic, safety and congestion issues, as well as enhancements to the economy. The goals of these alternatives are to link people and jobs, facilitate economic development, enhance mobility, and provide service to people who are transit-dependent. The transit options being studied include enhancements to the existing bus services and the addition of new rail service that would operate on its own right-of-way. The North South Transportation Initiative is evaluating various highway alternatives, both for the mainline interstate and parallel roads to help improve the mobility and the safety of the corridor. A number of alternatives have been reviewed during the initial Level I and Level II screening processes and the list of corridor alternatives narrowed. The current Level III Screening Procedure will evaluate the remaining alternatives. The highway alternatives being studied address mainline and interstate interchanges, as well as roads, which operate parallel to the interstate. The alternatives being examined are those that correct design deficiencies (such as low design speeds), improve capacity for current conditions and future growth and interstate mobility, and/or have the potential for substantial economic development. Non-highway alternatives include a light rail option Mainline I-75 Improvements Each interchange and mainline highway section is being examined to determine which approach best improves interstate mobility. Below are specific examples of interchange and mainline alternatives under consideration: Providing at least four through-lanes in each direction on I-75 from downtown Cincinnati to I-275; Modifying the Michael A. Fox Highway interchange and extending the highway to Cox Road; Providing capacity improvements to the Tylersville Road interchange; Correcting ramp deficiencies at the SR 122 interchange; Upgrading the South Dixie interchange in Dayton; and Improving ramp deficiencies at the CR 25A (exit #78) interchange. HLB DECISION ECONOMICS INC. Page 11

28 3.1.2 Parallel Roadway Improvements Parallel roadways are important assets to the interstate. They provide an alternative to I-75 when an accident or congestion occurs, and offer local residents with options for shorter trips. The Initiative is evaluating several possible improvements to parallel roadways throughout the corridor, including: Restricting parking and improving signal coordination on Central Parkway in Hamilton County; Widening Cincinnati-Dayton Road to provide lane continuity through Butler and Warren counties; Providing capacity improvements to SR 741 in Miami and Montgomery counties; and Widening North Dixie Highway to provide lane continuity and increased capacity in Montgomery County. 3.2 Alternatives for Evaluation Corridor alternatives are those alternatives that affect the entire corridor; they include adding a lane to the interstate (either in the urban and/or the suburban areas), and a number of transit alternatives (express bus, light rail, and commuter rail). Site-specific alternatives are those alternatives that are specific to one area such as local roadway and/or interchange improvements. As stated in the introduction, this analysis will be restricted to the evaluation of corridor alternatives. A total of five (5) transportation alternatives will be evaluated relative to a base case scenario. The base case scenario and investment alternatives are presented in Table 6 below. Table 6: The Base Case and Investment Alternatives Alternative Base Case Alternative 1 Alternative 2 Alternative 3 Alternative 4 Alternative 5 Description Transportation System Management (excluding major highway capacity expansion) Four Lane Continuity, establishing four continuous lanes through Hamilton County Four Lane Continuity with a High Occupancy Vehicle (HOV) Lane, designating one lane as an HOV lane Light Rail Transit (LRT), using combined I-75 and lower I-71 alignment Peak Period Truck Restriction, restricting trucks from using I-75 during normal a.m. and p.m. peak periods Combined Four Lane Continuity and Light Rail Transit (LRT), a combination of Alternatives 1 and 3 HLB DECISION ECONOMICS INC. Page 12

29 The five alternatives under review are described below Base Case The Base Case scenario (or baseline) includes only those highway, intersection, and interchange improvements planned as part of the transportation improvement plan and the transit service improvements listed under the FTA TSM Baseline. These exclude the addition of any major new capacity Four-Lane Continuity This highway capacity option calls for widening I-75 through the addition of one (1) generalpurpose lane in each direction inside I-275 in Hamilton County. This represents an unrestricted increase in highway capacity by 25 percent in this heavily traveled and congested segment. The expansion will provide four (4) continuous through-lanes HOV Lane This option calls for a widening of I-75 by one (1) High Occupancy Vehicle (HOV) lane in each direction inside I-275 in Hamilton County. This option is similar to Alternative 1, except that the highway capacity expansion is restricted during peak travel hours. This alternative seeks to reduce congestion further by encourage multi-ride automobile use during peak travel periods Light Rail Transit This option evaluates an investment in a fixed guideway intracity light rail service, as an alternative to a major highway capacity expansion. The LRT would operate in conjunction with the base case scenario, which includes only minor new highway capacity additions. The proposed 22-mile LRT would follow the Central Parkway alignment. As an alternative, intracity light rail service provides mobility within a city. It would operate with frequent stops at regular intervals throughout the day. The frequency of the service could be expanded to accommodate peak travel periods, during rush hour or special events. Intracity fixed guideway rail service would likely operate in exclusive travel lanes or could mix with automobile traffic. Intracity rail is a dependable, non-polluting form of transportation that makes suburban communities more attractive for business and residential growth. Since connections to local bus service could be made available, intercity and intracity services provide a wide range of travel options for commuters Peak Period Truck Restriction This option is designed to reduce I-75 traffic congestion by re-diverting truck traffic onto a bypass around the City of Cincinnati during peak periods. Under this scenario, trucks will have to bypass the Cincinnati urban area, along the I-275 beltway during the morning and evening peak hours. HLB DECISION ECONOMICS INC. Page 13

30 3.2.6 Combination This alternative is the combined initiative of the light rail option (Alternative 3) with a highway capacity expansion (Alternative 1). As with the other four alternatives, Alternative 5 will be evaluated against the base case scenario. HLB DECISION ECONOMICS INC. Page 14

31 4. METHODOLOGICAL FRAMEWORK The analysis framework used here is identical in concept to business case evaluation in the private sector. A private firm needs to assess whether the costs, returns and risks of undertaking major investments will yield profit and shareholder value. The only difference in public sector investment appraisal is the nature of the costs, returns and risks considered in the evaluation. Since the shareholder is the taxpayer, all the effects of a project on the community at-large must be considered. The analysis framework has two key components: Benefit-Cost Analysis (the name for business case analysis when conducted in the public sector); and Risk Analysis. 4.1 Benefit-Cost Analysis Benefit-Cost Analysis evaluates the fundamental merit of undertaking possible investments. The basic idea is straightforward. An investment option A is worthwhile if its economic benefits exceed its economic costs. Importantly, the benefits of the next best alternative to option A are viewed as costs of option A. This is because the alternative benefits are lost if A is implemented. So the Benefit-Cost rule is: Option A is economically worthwhile only if its net benefits (benefits minus costs) exceed the net benefits of the next best alternative Principles Benefit-Cost Analysis counts all the negative and positive economic effects of an investment, regardless of how they are paid for. The fact that the federal government, the Cincinnati taxpayer, the road user or the passenger might pay this or that share of a project s costs under different financing plans cannot change the project s fundamental economic merit. It is fundamental merit with which we are concerned here. Benefit-Cost Analysis treats all negative effects as costs. In addition to a project option s capital outlays, the analysis accounts for the cost of capital (interest) 7 ; yearly operating expenses; and the costs of maintenance to keep capital assets in good shape. Also included are the disruptive effects of construction, such as noise and detours. On the other side of the coin, Benefit-Cost Analysis treats all the positive effects as benefits. The principal categories of benefit considered in this study are those associated with: Congestion relief (including delay, vehicle operating costs, safety and environmental factors); Mobility; and 7 More precisely, Benefit-Cost Analysis accounts for the opportunity cost of capital. This reflects a combination of interest and the time-preference of the community for benefits now versus greater benefits later. HLB DECISION ECONOMICS INC. Page 15

32 Land-use and locational value. In reviewing the list above, it is important to recognize that the Benefit-Cost Analysis framework does not count any benefit more than once. This is important because the economic value of some effects can arise in more than one category on the list. Locating a transit stop near residential properties will save homeowners travel time (item 1 on the list) and the improved proximity to transportation might in turn raise property values (item 3 on the list). It would be wrong to add these two benefits (travel time and locational value) together since one is simply an economic manifestation of the other. On the other hand, if property values increase in part because transit has led the community to become more walkable and attractive from an amenity (as distinct from travel time) perspective, the increase in property value can be added to the value of travel time saved Valuation To permit the ready comparison of options, Benefit-Cost Analysis measures benefits and costs on one scale, namely value. For convenience, value is expressed in units of monetary exchange, namely dollars. Not everything of course can be assigned value in the form of a monetary equivalent. Neither this nor any Benefit-Cost Analysis promises to attach a monetary-equivalent value to every possible negative or positive effect of a project. Some effects must be anticipated in qualitative terms and set out along side the numbers. Some researchers believe for example, that the additional walking entailed in the use of transit options leads to improved cardiovascular health and a reduction in healthcare costs. While clearly an economic effect, science has yet to measure its monetary equivalent value. Benefit-Cost Analysis must thus be satisfied with its qualitative presentation. From a decision-making perspective, however, it is unrealistic to avoid valuation entirely. Whenever option A is superior to option B on one count and inferior on another, a refusal to weigh up the relative value of each count implies only one possible decision, Do both. Doing both is obviously not possible in most circumstances. Benefit-Cost Analysis is a framework within which practical trade-offs can be considered. How are the monetary equivalent values measured? The valuation of some effects, both negative and positive, is made easy by the existence of markets and market prices. The cost of building a light rail station or a lane-mile of highway, for example, hinges on the market price of land, labor and materials prices that are easily observed. The valuation of non-market effects, such as safety, environmental pollution or predictable journey times, is based on measurements of how much individuals are willing to pay to acquire the benefits or avoid the costs. For example, a recent California-based study found that people are willing to pay about $0.17 a minute ($10.20 an hour) to save travel time and about twice that rate for a reduction in travel time variability. 9 8 Adding up also requires that the increased property value does not represent a decrease in the value of some other property elsewhere in the region. 9 HLB Decision Economics Inc. and University of California, Irvine, Valuation of Travel-Time Savings and Predictability in Congested Conditions for Highway User Cost Estimation, Transportation Research Board, National Research Council, NCHRP Report 431, HLB DECISION ECONOMICS INC. Page 16