Cost Benefit Analysis - PowerPoint by pub14358

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									                   Cost-Benefit Analysis:
    Seattle Link Light Rail, Initial Segment

                               Your presenters:
                                Annie Gorman
                              Hazel-Ann Petersen




Public Expenditure Analysis                        May 4, 2007
     “…to improve mobility within the urban
      areas by providing travel alternatives
      so they may grow comfortably while
      preserving rural areas for future
      generations."



Public Expenditure Analysis               May 4, 2007
                              Presentation Agenda



•   Background
•   Costs
•   Benefits
•   Reconciliation and Conclusions




Public Expenditure Analysis                         May 4, 2007
                       Background



Public Expenditure Analysis         May 4, 2007
                              Context
• Regional light rail, with 40 miles of track, by 2030?
• Initial segment is 13.9 miles long, reaches from
  downtown Seattle south almost to the airport
• Monorail vs. light rail




Public Expenditure Analysis                         May 4, 2007
                          Big Plans for Light Rail




Public Expenditure Analysis                      May 4, 2007
                      Traffic in the Seattle Area
• WSDOT 2006: Longer travel times, slower
  speeds, longer congestion peaks, less
  reliable travel time
• Seattle-Tacoma 8th worst nationally for travel
  delays
• I-90 / I-5 interchange is 18th worst bottleneck
  nationally
• Regional population, especially in non-urban
  areas, growing over 5% per 5 years


Public Expenditure Analysis                    May 4, 2007
                    Project Costs



Public Expenditure Analysis         May 4, 2007
                Original vs. Projected Budget




                        Discrepancy is over 100%


Public Expenditure Analysis                        May 4, 2007
                              Operating Expenses




     Actual Operating Expenses show larger growth than other transit
     activities while Fare Revenues also show lower growth.


Public Expenditure Analysis                                      May 4, 2007
                    National Expense Averages




Recovery ratio (also known as working ratio) is the percentage
of operating funds applied (operating expenses) paid through fare revenues.

 Source: http://www.soundtransit.org/x1190.xml


 Public Expenditure Analysis                                      May 4, 2007
                                   Cost PV of Funding Sources
                                    At Various Discount Rates
                         percent of
                         collections attributed
                     61% to Link Project                1999           2000           2001          2002          2003          2004         2005           2030
                                                     7000000         347900         347900        347900        347900        347900       347900        7000000
T-Bill bond                               4.0%    1152000000                                                                           1152000000     1152000000
Inflation                                 2.5%
 Tax collection                                   268,057,646   262,108,773    268,057,646   262,108,773   267,963,295   284,333,144   303,015,925   507371564.9
 State                                              1,074,019    12,664,160      1,074,019    12,664,160     1,515,202       803,946     6,748,806   10826217.35
 Federal                                           41,084,546    34,459,131     41,084,546    34,459,131    27,017,205    93,655,552   126,739,497   39617164.46
Discount Rate                            6.5%
 PV Bond1                  $     1,413,787.97        7000000    -326666.6667   -306729.264   -288008.699   -270430.703   -253925.543   -238427.74    -993711.2326
 PV Bond2                  $ 182,975,386.56                                                                              266987125.8 1152000000        -238622991
 PV Tax collection         $ 4,586,528,458.26     268,057,646   246,111,524    236,335,512   216,986,510   208,294,057   207,529,313 207,667,152       72,025,832
 PV State                  $    97,491,780.56       1,074,019    11,891,230        946,919    10,484,013     1,177,802       586,785    4,625,187       1,536,876
 PV Federal                $ 853,880,668.95        41,084,546    32,355,992     36,222,571    28,526,960    21,001,097    68,357,393  86,858,901        5,624,003
 $     5,537,900,907.77    $ 3,206,748,234.61

T-Bill bond                                3.5%
Inflation                                  2.5%
Discount Rate                              6.0%
PV                         $       1,004,287.10      7000000    -328207.5472   -309629.761   -292103.549   -275569.385   -259971.118 -245255.772     -1149783.883
PV2                        $     145,341,692.15                                                                          206169968.1 1152000000      -268414422.3
 PV Tax collection         $   4,863,208,650.44   268,057,646   247,272,427    238,570,351   220,071,580   212,252,028   212,470,266 213,614,270       83,338,235
 PV State                  $     103,416,727.88     1,074,019    11,947,321        955,873    10,633,073     1,200,182       600,755   4,757,642        1,778,259
 PV Federal                $     897,661,116.89    41,084,546    32,508,614     36,565,100    28,932,551    21,400,157    69,984,877  89,346,344        6,507,311
                           $   3,444,653,867.64

T-Bill bond                                4.5%
Inflation                                  2.5%
Discount Rate                              7.0%
PV                         $       1,780,770.80      7000000    -325140.1869   -303869.334   -283990.031   -265411.244   -248047.892   -231820.46    -859411.0468
PV2                        $     214,694,310.22                                                                          322198267.7 1152000000      -212255052.5
 PV Tax collection         $   4,334,749,615.34   268,057,646   244,961,470    234,131,929   213,958,835   204,427,915   202,725,602 201,912,305       62,291,533
 PV State                  $      92,099,113.95     1,074,019    11,835,664        938,090    10,337,727     1,155,940       573,202    4,497,014       1,329,167
 PV Federal                $     813,455,366.27    41,084,546    32,204,795     35,884,834    28,128,915    20,611,296    66,775,114  84,451,878        4,863,918
                           $   2,992,428,716.60


       Public Expenditure Analysis                                                                                                        May 4, 2007
                          Operating Profit for Link
                          Lowest Across All Modes




                                             6.0%                 6.5%                 7.0%
              -Bus            $ (1,181,397,593.02) $ (1,201,274,635.70) $ (1,216,058,679.60)
              -Rail           $ (288,753,598.00) $     (266,394,431.65) $ (246,144,586.86)
              -Link           $ (2,588,275,640.40) $ (2,318,091,160.16) $ (2,078,069,757.57)
                              $ (4,058,426,831.41) $ (3,785,760,227.52) $ (3,540,273,024.03)

Public Expenditure Analysis                                                           May 4, 2007
                   Projected Funding Cost PV:
                            Negative




Public Expenditure Analysis               May 4, 2007
                      Operating Expenses
                  By Mode, 1996-2005 (National)




Public Expenditure Analysis               May 4, 2007
                     Nationally, Bus Remains
                    Most Popular Transit Mode




Public Expenditure Analysis               May 4, 2007
              Project Benefits



Public Expenditure Analysis      May 4, 2007
                              Benefits (Non-costs)
• Fuel costs and vehicle non-depreciation
• Other transportation costs (road capacity
  and parking)
• Time spent commuting
• Social costs: pollution, accidents, etc.

• And a benefit: revenue from paying riders



Public Expenditure Analysis                          May 4, 2007
                              Baseline Assumptions
• Ridership and                      • Value of commuting time
  segment distribution               • What social costs to
• Bus capacity                         include
• Work days per year                 • At what level to value
• Gas price                            them
• Commuting distance                 • Fare contribution per
• Hourly wage                          person
• Parking cost                       • Rate of increase/
                                       decrease of ridership



Public Expenditure Analysis                             May 4, 2007
                              Baseline Scenario




• Revenue contribution $2.8 million*
• Total Y1 benefits $24.8 million*
• Total NBV $423 million*

            * in 2007 dollars, 6.5% interest rate

Public Expenditure Analysis                         May 4, 2007
                              Sensitivity Analysis:
                                Other Scenarios
•   More riders
•   Fewer riders
•   Red Meat
•   Granola
•   Oil Price Spike
•   Equal Time Value
•   Six Miles


                                   Range: $23.4 M – $31.9M, 2007 dollars

Public Expenditure Analysis                                         May 4, 2007
                     Cost/Benefit
                     Reconciliation


Public Expenditure Analysis           May 4, 2007
                              Issues to Address
• Costs: 3 funding scenarios
• Benefits: 8 situational scenarios

• Costs: in 1999 dollars
• Benefits: in 2007 dollars




Public Expenditure Analysis                       May 4, 2007
                              Full Reconciliation




                              Range: ($2.71) bn – ($3.22) bn
Public Expenditure Analysis                                    May 4, 2007
                                 A Hypothetical
                              Break-Even Scenario
• Initial ridership = 16,000 (200% increase)
• Ridership growth rate = 10%
  (333% increase; this means 53,820 riders
  daily in 2030 vs. 7224)
• Per-gallon gas price = $9.78
  (323% increase)
• Average hourly wage = $100
  (617% increase)
                                              $
Public Expenditure Analysis                         May 4, 2007
                              Conclusions
• Likely NPV is ~ ($2.95) bn in 1999 dollars,
  ~ ($5.2) bn in 2007 dollars
• Getting to break-even requires wildly
  improbable new assumptions
• Mass transit isn't worth it on paper




Public Expenditure Analysis                 May 4, 2007
            BACKUP SLIDES


Public Expenditure Analysis   May 4, 2007
                         Change In Profitability
                        W/r/t Discount Rate of 10%




                                             6.0%                 6.5%                10.0%
            -Bus              $ (1,181,397,593.02) $ (1,201,274,635.70) $ (1,231,883,028.64)
            -Rail             $ (288,753,598.00) $     (266,394,431.65) $ (157,962,714.30)
            -Link             $ (2,588,275,640.40) $ (2,318,091,160.16) $ (1,099,693,715.94)
                              $ (4,058,426,831.41) $ (3,785,760,227.52) $ (2,489,539,458.88)

Public Expenditure Analysis                                                       May 4, 2007

								
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