Cost-Benefit Analysis of Transit Projects: Current Practice and Methodological Advances

Cost-Benefit Analysis of Transit Projects: Current Practice and Methodological Advances Elena Safirova Presented at New York University October 26, 2011

Outline What is Cost-Benefit Analysis? Benefits of Transit Transit Infrastructure CBA: State of Practice Transit Benefits: Potential Drawbacks FTA LUSTRE Project Project Goals LUSTRE Framework Work Description Concluding Remarks

What is CBA? A cost-benefit analysis is a systematic evaluation of the economic advantages (benefits) and disadvantages (costs) of a set of investment alternatives A sum of discounted benefits is compared to a stream of discounted costs. Benefit/cost ratio should be greater than 1 to justify the investment

Benefits of Transit (1) Benefits to System s Users Travel time reduction Travel cost reduction Non-user Benefits Congestion reduction Social Benefits Related to overall VMT reduction Environmental Benefits Accident Reductions

Benefits of Transit (2) Benefits to vulnerable populations Significant reductions in costs to individuals Reduction in agency costs (e.g. paratransit) Benefits of Transit-Oriented Development (TOD) Changes in travel patterns Changes in lifestyle (e.g. health benefits) Increase in land values

Costs of Transit Projects Not significantly different from other infrastructure projects Cost escalation due to project delay and initial cost underestimation Solution: cost management in a riskanalytic framework

Transit CBA in Practice: Menu of Programs FTA: New Starts DOT: TIGER I TIGER II TIGER III State and MPO-level programs

Transit CBA: Methodology Usually: a collection of disjoint categories of benefits Inclusion of a particular benefit is largely data-driven Due to the fragmentary approach, positive changes in benefits may be included while negative are omitted

Common Drawbacks of Practical Approach High probability of double-counting E.g. travel-related benefits an TOD-related benefits High probability of omitting large categories of benefits Fragmentary nature of accounting Inconsistencies between benefit categories

Benefits of Travel and TOD TOD and travel are interconnected TOD affects the demand for travel TOD changes spatial distribution of economic activity in the entire region, and, as a result, changes the demand for travel However, travel-related benefits are projected using regional travel demand model, and TOD benefits are estimated separately using different methods

FTA LUSTRE Project Objectives Develop proof of a concept framework that demonstrates a relationship between transportation and environment benefits of transit projects Investigate the ratio of transportation and environment benefits Advance evaluation methodology of transit projects

Land Use, Strategic Transport, Regional Economy (LUSTRE) Literature Review Spatially Distributed Households Spatially Disaggregated Transportation Industry Modeling General Equilibrium Effects LUSTRE Overview LUSTRE=START+RELU Data and Calibration November 11

Washington-START Model Transportation simulation model Developed by RFF researchers using START modeling suite Designed for quick policy analysis Evaluation of policies using a consistent economic framework Not politically constrained Calibrated for Washington, DC metro area November 11

RELU Model Features Spatially disaggregated general equilibrium model of economic activity without predetermined location of residents and firms Some extras 4 income classes Employed and unemployed Explicit modeling of housing Developers and landlords decisions Income and property taxes November 11

LUSTRE Model Overview LUSTRE GCT START Supply-Side Module Route Network Rail Systems Bus System Parking Facilities Demand-Side Module Logit Tree: Purpose/Origin (given) Trip Generation Destination Mode Time Route Trips Generalized Costs of Travel Wages & Trips Real Estate Labor Supply/ Wage Developers RELU Individuals Discrete Choices: Choice of Work Status Choice of Work Location Choice of Residence Continuous Choices: Housing Consumption Retail Goods & Services Producers Retail Agriculture Manufacturing Business Services Constr/Demo Labor Capital Stock Rent I/O* Space Price Rent Rent I/O Freight Landlords Generalized Costs of Travel *Intermediate demand for finished goods and services, also referred as Input/Output (I/O) tables.

LUSTRE features Consistent spatial disaggregation Non-monocentricity Agent heterogeneity Unemployment Frictions Income and real estate taxes Congestible alternative modes November 11

2000 Census SF1A & SF3A CTPP Data Sources BEA production data Consumer Expenditure Survey MWCOG transportation data Land use data November 11

Wage and Income Information for LUSTRE Baseline Average Net Income* (2000$/year) Average Gross Wages Rates (2000$/hour) Income Tax Rates.. Quartile 1 15779 6.8 14.3% Quartile 2 25815 14.1 16.6% Quartile 3 43943 22.5 22.3% Quartile 4 91805 47.0 31.5% *Net of taxes and commuting costs November 11

Population Distribution Over the Region Quartile 1 (relative to active population) Quartile 2 (relative to active population) Quartile 3 (relative to active population) Quartile 4 (relative to active population) Total (relative to active population) All Study Area Active Population Employed 1480873 830601 (56.1%) 941310 738659 (78.5%) 1244120 1144755 (92.0%) 472832 461014 (97.5%) 4139134 3175031 (76.7%) Population Distribution for the Downtown Core Quartile 1 (relative to active population) Quartile 2 (relative to active population) Quartile 3 (relative to active population) Quartile 4 (relative to active population) Total (relative to active population) Downtown Core Residents Workers from All Zones Active Population Employed Total per year 25265 13402 70323 (53.0%) 14083 10528 85331 (74.8%) 16139 14317 183792 (88.7%) 7388 7152 104990 (96.8%) 62874 45402 444437 (72.2%) November 11

Trips Distribution for LUSTRE Baseline Distribution over Time Periods All Study Area Ending at Downtown Core Commuting Shopping All Trips Commuting Shopping All Trips Trips Trips Trips Trips (Thousands (Thousands (Thousands (Thousands (Thousands (Thousands /Day) /Day) /Day) /Day) /Day) /Day) AM Peak 1454 321 1775 226 11 238 PMPeak 60 883 943 6 24 30 Off Peak 908 1090 1998 108 31 139 Total 2423 2294 4716 341 66 407 AM Peak : From 6:30 am to 9:30 am PM Peak : From 3:30 pm to 6:30 pm Distribution over Mode of Transportation Bus Rail SOV HOV Walking / Biking All Study Area Commuting Shopping All Trips Trips Trips (Thousands (Thousands (Thousands /Day) /Day) /Day) SOV : Single Occupancy Vehicle HOV : High Occupancy Vehicle Ending at Downtown Core Commuting Shopping All Trips Trips Trips (Thousands (Thousands (Thousands /Day) /Day) /Day) 86 32 118 29 15 45 234 13 246 163 7 169 1641 997 2638 91 10 101 291 1109 1401 40 14 54 171 142 313 18 21 39 November 11

Modeling area November 11

Dulles Rail Project 23-mile extension of the existing Metrorail system Will connect Downtown Washington DC with Dulles International Airport and surrounding area The project will include 11 new stations

Zoom-in Tool Zoom-in Land Use Module Zoom-in Transportation Module Approaches: Little LUSTRE Little RELU + Simplified transportation module (STM) Simplified RELU + Little START Simplified RELU + Simplified transportation module (STM)

Simplified Transportation Module 3 suggested versions Start Lite Simple mode choice model Likely a Logit based mode choice, with a very simple route structure. (No parking search, etc) Econometric model We can calibrate this model by using START model runs

Simplified RELU Several features could be suppressed/simplified: Shopping modeling Features of Closed Economy Modified developers module Goal: to retain consistency in welfare measurement while capturing key land use metrics

Integration between Big LUSTRE and zoom-in tool Complete Integration (iteration until convergence on several aggregate parameters, e.g. residents, jobs, etc., trip times) Partial integration Focusing on population movements and transportation cost equivalency Post-processing (loose connection)

Assumed Unchanged Big LUSTRE Calibration Area Population Initial Building Stocks Transportation Infrastructure Except for the Dulles rail project Initial Income Levels Big LUSTRE Structure Long-term equilibrium framework

Resulting framework capabilities Consistent (or largely consistent) welfare measurement Account of population and job movement Changes in travel patterns in response to infrastructure improvement/construction Changes in wages, rents, incomes, etc.

Mini-RELU Design Focus on developers decisions New development Redevelopment Focus on relocation of residents and businesses within the localized area Don t explicitly model variation in prices and wages in the zoom-in area

Mini-LUSTRE Data Work Define zone structure Consistent with project goals Consistent with data availability Obtain Data RELU data (population, housing, land use, economic fundamentals) Transportation data Calibrate the model

Zone # Description County Tracts 1 Tysons Fairfax 4802.02, 4802.03, 4605.01, 4604 2 Tysons East Fairfax 4712.01, 4712.02 3 Reston North Fairfax 4820.01, 4820.02, 4805.04, 4805.05, 4821, 4822.01, 4822.02, 4822.03, 4819 4 Reston South Fairfax 4812.01, 4812.02, 4823.01, 4823.02, 4823.03, 4814 5 Herndon North Fairfax 4808.01, 4808.02, 4809.01, 4809.02, 4809.03, 4810 6 Herndon South Fairfax 4811.01, 4811.02, 4811.03, 4811.04, 4825.01 7 Sterling/Dulles Town Center Loudoun 6115.01, 6115.02, 6116.01, 6116.02, 6113, 6114, 6117 9 10 8 Ashburn Loudoun 6110.04, 6110.05, 6110.06, 6110.19, 6110.20, 6110.21, 6110.22, 6110.23,6110.24, 6110.25 Cascades Belmont/Landsdowne 11 Leesburg Loudoun Loudoun Loudoun 6111, 6112 6110.02, 6110.09-6110.18 6105, 6106 12 Dulles Airport Fairfax, Loudoun 9802, 9801 13 Great Falls Fairfax 4801, 4804 14 Northeast Fairfax Fairfax 4803, 4802.01 15 Dunn Loring Fairfax 4605.02, 4606 16 Vienna North Fairfax 4608, 4609 17 Vienna South Fairfax 4607.01, 4607.02, 4610 18 South of 66 Fairfax 4616.01, 4616.02, 4617, 4402.01 19 Woodburn Fairfax 4401, 4402.02, 4403 20 City of Fairfax Fairfax C of F + 4405.02+ 4405.01+ 4406 21 North of Oakton Fairfax 4611, 4615, 4612.01, 4618, 4619 22 Wolf Trap Fairfax 4602, 4603, 4824 23 Fairfax Northwest Fairfax 4805.01, 4805.02, 4805.03 24 East of Franklin Farm Fairfax 4815, 4816, 4817.01, 4817.02 25 Fair Oaks/Fair Lakes Fairfax 4612.02, 4917.01, 4917.02, 4917.03, 4917.04, 4918.01, 4918.02, 4918.03 26 Loudon/Prince William Fairfax 4910, 4911.01, 4911.02, 4911.03, 4912.01, 4912.02, 4915.01, 4915.02 27 Chantilly Fairfax 4826.01, 4901.01, 4901.03, 4916.01, 4916.02 28 Arcola/Stone Ridge Loudoun 6118.01, 6118.02, 6118.03, 6118.04, 6118.05, 6118.06

Table 2a: Average Weighted Travel Time Difference (Build - Baseline): Peak Walk to Transit PKWKWTD 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 1-DC Core 0 0 0 0 0 0 0-37 -15-68 -3 1 0 0 0 0 2-DC Other 0 0 0 0 0 0 0-34 -15-64 -5 1 0 0 0 0 3-VA Core 0 0 0 0 0 0 0-35 -15-66 -2 1 0 0 0 0 4-VA Arlington Orange Line 0 0 0 0 0 0 0-32 -13-63 0 1-1 0 0 0 5-VA ARL Columbia Pike 0 0 0 0 0 0 0-30 -12-56 0 1 0 0 0 0 6-Alexandria/Springfield 0 0 0 0 0 0 0-11 -17-58 -9 0 0 0 0 0 7-Vienna Corr 0 0 0 0 0 0 0-13 -6-40 -3 0 0 0 0 0 8-Tysons -30-27 -28-22 -21-17 -15-11 -31-94 -30-12 -7-29 -17-26 9-Dulles Corr -14-14 -12-11 -10-12 -5-32 -18-60 -6-3 -15-17 -4-22 10-Ashburn/Sterling -34-38 -35-42 -37-26 -27-79 -45-5 0-9 -38-33 -48 11-Rest of Loudoun -1-2 -1-14 -7-5 -22-62 -46-8 0-6 -8-3 -4 12-PW County 0 0 0 0 0 0 0-6 -12-53 -12 0 0 0 0 0 13-MTG County 0 0 0 0 0 0 0-14 -16-60 -10 1 0 0 0 0 14-PG County 0 0 0 0 0 0 0-38 -18-57 -10 0 0 0 0 0 15-Outer VA 0 0 0-1 0 0 1-1 -24-85 -36 0 0 0 0 0 16-Outer MD 0 0 0 0 0 0 0-33 -19-56 -11 0 0 0 0 0

Table 2b: Average Weighted Travel Time Difference (Build - Baseline): Peak Drive to Transit PKDRWTD 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 1-DC Core 0 0 0 0 0 0 0-59 -28-70 -6 1 0 0 0 2-DC Other 0 0 0 0 0 0 0-44 -19-61 -5 1 0 0 0 0 3-VA Core 0 0 0 0 0 0 0-36 -15-53 -5 0 0 0 0 4-VA Arlington Orange Line 0 0 0 0 0 0 0-43 -16-64 0 1-1 0 0 5-VA ARL Columbia Pike 0 0 0 0 0 0 0-42 -17-58 -2 1 0 0 0 6-Alexandria/Springfield 0 0 0 0 0 0 0-23 -18-58 -9 0 0 0 0 0 7-Vienna Corr 0-1 0 0 0 0 0-31 -13-48 -3 0-2 -1 0 0 8-Tysons 1 1 1 1 2 1 0 0-1 -47-1 0 1 1 2 9-Dulles Corr -11-12 -7-10 -8-9 -6-43 -16-62 -5-3 -17-14 0-11 10-Ashburn/Sterling -32-35 -30-47 -35-34 -46-108 -78-22 -3-25 -43-37 -31 11-Rest of Loudoun -18-21 -18-34 -24-21 -47-102 -92-25 -3-25 -28-25 0-15 12-PW County 0 0-1 -4 0 0-3 -39-30 -72-22 0 0 0 0 0 13-MTG County 0 0 0 0 0 0-1 -24-21 -65-12 0 0 0 0 0 14-PG County 0 0 0 0 0 0 0-43 -20-60 -10 0 0 0 0 0 15-Outer VA 0 0 0 0 0 0 0-24 -20-77 -27 0 0 0 0 0 16-Outer MD 0 0 0 0 0 0 0-42 -21-57 -11 0 0 0 0 0

Long-Term Growth in Residents 25 21 Zone # 17 13 9 5 1 0 200 400 600 800 1000 1200 1400 Change in number of Residents

Long-term Change in Single Family Housing 26 21 Zone # 16 11 6 1 0 200000 400000 600000 800000 1000000 1200000 Floor Space

Long-term Change in Multi Family Housing 25 21 Zone # 17 13 9 5 1 0 20000 40000 60000 80000 100000 120000 140000 160000 Floor Space

Long-Term Change in Commercial Building Space 25 21 Zone # 17 13 9 5 1 0 200000 400000 600000 800000 10000001200000140000016000001800000 Floor Space

Mini-LUSTRE Summary Residential Growth: 10,791 (3.1%) Single Family Housing Growth: 8,300,000 sq. ft. (2.35%) Multi-Family Housing Growth: 876,000 sq. ft. (2.31%) Commercial Building Floor Space Growth: 10,355,000 sq.ft. (1.73%)

Residential Movement in "Big" LUSTRE Change 0.04 0.03 0.02 0.01 0-0.01-0.02-0.03-0.04 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 Zone #

Caveats Model is calibrated on 2000 data 2000 Census No new infrastructure included (e.g. ICC) No natural population growth, economic growth, technological progress, etc. The outcome is static long-term equilibrium Only marginal effects are displayed; policy interactions are ignored

Concluding Remarks There is a wide gap between theory and practice of evaluating benefits of transit investments Various categories of benefits are interconnected and should not be estimated separately from disconnected sources Improvements in accuracy of demand estimates is likely to lead to more accurate CBAs in general