ITE Journal - Sept 2016
Evaluating Return: A Benefit-Cost Calculator for Active Transportation Projects
Gigi Cooper, AICP and Jennifer Danziger, P.E. 2016-08-31 06:20:16
As federal and state funding increasingly emphasizes economic and "triple bottom line" (economic, environmental, social/health) return on transportation investments, there is a need for methods to evaluate that return, particularly since the recession. For example, a key criterion of the Transportation Infrastructure Generating Economic Recovery (TIGER) program (which funds capital investments in surface transportation infrastructure) is that the project can demonstrate generation of economic development.1 The 2010 Government Accountability Office report on statewide transportation planning found that, "in selecting projects, states assigned greater importance to factors such as political and public support than to economic analysis of project benefits and costs."2 Existing tools and methods are inadequate for assessing active transportation projects. Most techniques evaluate broad, regional economic effects of major transportation investments, and are therefore ineffective for most bicycle and pedestrian projects, which are small scale. Projects that have impacts mostly at the local or corridor level will not have a discernable effect when measured at a metropolitan or regional level.3 Also, most calculations are designed for motor vehicles only, particularly freight. This is, in part, because states that do have transportation goals or performance measures related to the economic effects of transportation investments have ones that relate only to freight and goods movement and job creation.4 In addition, transportation projects typically are only evaluated by measuring motor vehicle congestion before and after project implementation but not by measuring increases in other modes. Tools that are specifically devised for active transportation assess effects of a single mode, such as solely transit infrastructure or solely bicycle infrastructure. The tool presented in this paper is designed to meet the need for an effective technique and address these issues. It originally was developed for the California Department of Transportation (CalTrans) Active Transportation Program Cycle 1 grant applications, but it is adaptable to any location and a variety of conditions. Developing a Benefit-Cost Calculator A benefit-cost calculator uses the travel characteristics for an infrastructure project and provides an overall ratio of benefit-to-cost. The steps in developing a benefit-cost calculator are: Identify benefit factors. Develop methods for quantifying or monetizing benefits. Identify costs. Identify appropriate countermeasures and establish crash reduction factors; and Establish the discount rate and apply net present value. Benefit Factors There are two types of benefits: the increase in active transportation, which has multiple effects, and the potential for crash reduction. Increase in Active Transportation To capture the monetized benefits of active transportation facilities, the calculator tool relies on research by the Victoria Transport Policy Institute (VTPI), which includes four categories of effects: improved conditions, increased activity, reduced vehicle travel, and land use impacts (summarized in Table 1). Implementation of active transportation projects directly improves active transportation conditions. User benefits of convenience, safety, and accessibility accrue to both existing users who already are walking and bicycling, and new users, who are attracted to the new facilities. Option value captures the value people may place on having a choice of travel modes. Equity benefits address how costs are shared across the community of users and how well the interests of both lower-income and mobility-impaired residents are protected. Physical activity, even moderate amounts, can have a measurable effect on public health, reducing chronic disease and improving mental well-being. In the U.S. Department of Health and Human Services' Healthy People 2020, its national objectives for improving the health of all Americans include improving the physical environment with sidewalks, bike lanes, trails, and parks, because the presence of these facilities has been shown to increase levels of physical activity within a community.5 Reducing vehicle travel provides numerous benefits to both the individual user and the community. Individual savings arise from vehicle usage, a reduction in time spent chauffeuring others, less time traveling in congested conditions, and parking costs. Community benefits include reduced congestion, energy conservation, pollution reduction, and infrastructure (both roadway and parking facility) savings. Additionally, reducing barriers to active transportation makes walking and cycling easier and consequently decreases vehicle usage. Land development patterns and the supporting transportation network are closely tied. An improved active transportation network allows for more compact and efficient land development with less land dedication to roadways and parking infrastructure. Not all of the factors listed in the table are used in this calculator tool. For example, chauffeuring avoidance likely overestimates savings per mile and parking costs vary depending on location, therefore, these factors were not included. The final column in Table 1 provides an average monetized benefit based on mileage traveled. These values were derived from a variety of sources and studies and compiled by VTPI. The benefits apply to either increased person miles traveled (i.e., the number of miles traveled by a person using an active transportation mode) or reduced vehicle miles traveled. The calculator estimates the reduction of vehicle mileage using a substitution ratio that depends on the increased person miles. A simple 1:1 ratio implies that for every active mile traveled, a corresponding reduction of one vehicle mile occurs. However, the evidence suggests that active travel often results in a greater reduction in vehicle miles traveled and that a ratio as high as 1:7 may be appropriate in some communities. Benefits of reduced vehicle travel and land use impacts will be higher than average in urban areas and lower than the average in rural areas. These benefits also will be higher for active transportation uses during peak hours in urban areas more than off-peak. Crash Reduction Reducing crashes and improving safety are two of the most important reasons that communities invest in active transportation. However, calculating the benefits based on a potential reduction in the number of crashes for a given facility may not be possible because many facilities have few bicycle or pedestrian crashes. Not only are the number of bicycle and pedestrian crashes for a roadway system relatively low, but also the specific crash locations are somewhat random and do not necessarily indicate that these sites carry higher risk than other sites. The calculator tool was developed following CalTrans' guideline for calculating a benefit/cost ratio for safety improvement investments. The process is based on calculating the benefits based on a potential reduction in the number of crashes for a given facility using crash modification factors. Because many facilities have no bicycle or pedestrian crashes, no crash reduction benefit may be realized in the calculations. The Highway Safety Manual offers a predictive methodology based on facility characteristics that could be incorporated as an additional tool to estimate the potential savings associated with improving the safety of active transportation infrastructure.6 Costs The primary costs are capital costs–the construction, operation, and maintenance associated with the project. Estimated capital costs for various bicycle and pedestrian infrastructure improvements such as crosswalks, bike lanes, and multi-use paths should be provided by each municipality, using local information, as costs vary by geographic location. Two other key factors in capital cost variability are new projects versus retrofit (retrofit costs typically are higher) and per unit cost savings with larger quantities. In order to make comparisons, costs must be consistent by using equivalent dollars (adjusted to the same year), and consistent widths (e.g., comparing a six-foot sidewalk to a six-foot sidewalk). The Highway Research Center at the University of North Carolina produced a guide in 2013 that provides costs for pedestrian and bicycle improvements in 30 categories. The study uses 1,747 observations of costs from 40 states.7 Locally provided cost estimates can be verified against this guide. The second cost type included in the benefit-cost calculator is user cost. As with vehicle ownership, there are some user costs associated with increased walking and bicycling. These costs are monetized based on increased person-miles traveled. Incremental costs are not included in this tool. They can be considered but are highly variable depending on assumptions and conditions, are difficult to measure, and their effects are small relative to capital and user costs. These are: ● Delays to motor vehicle traffic or parking; ● Costs to users of equipment such as shoes and bicycles; ● Increases in travel time costs due to slower modes; ● Increases in crash risk; and ● Increases in some development costs. Countermeasures and Crash Reduction Factors Crash countermeasures are the safety improvements proposed as part of the active transportation improvement project. Typical active transportation countermeasures are to install various types of pedestrian crosswalks (markings, signs, signals, curb extensions, raised, etc.), sidewalks, bike lanes and boxes, and separators such as raised medians, refuge islands, overpasses, and underpasses. Crash reduction factors (CRF) or crash modification factors "quantify the change in average frequency as a result of geometric or operational modifications to a site that differs from set base conditions."8 Each state department of transportation provides sources for CRFs. For demonstration purposes, the benefit-cost calculator tool uses the CalTrans CRFs. Discount Rate and Net Present Value It is important to integrate the principles of economic analysis in order to calculate the life cycle benefits and costs of transportation infrastructure. One concept used from economic analysis is lifecycle cost and benefit. This approach acknowledges that benefits accrue over time and that operations/maintenance costs, not just the construction cost, should be included. To calculate the life-cycle benefit-cost ratio for a project, the net present value (NPV) of all benefits and costs over the life of a project must be calculated. Present value is calculated by dividing the future value (in constant dollars) by the discount rate plus 1 raised to the power that is the number of years. The key assumption in this calculation is the discount rate that is used to estimate the future value of a project feature in terms of present day value. This tool uses the CalTrans discount rate of 4.0 percent for demonstration purposes.9 Using the Calculator The calculator inputs are: ● Project type (primarily walking or primarily cycling) ● Current year ● Existing and forecasted demand (person daily trips) ● Project length (miles) ● Increased person-miles to reduced vehicle-miles ratio ● Pedestrian and bike crash history (if available) ● Existing and forecast vehicular average daily traffic ● Crash history ● Crash reduction factors ● Project costs (capital construction and annual operations and maintenance) ● Beginning construction year ● Opening year ● Discount rate (to calculate NPV) The output page, the "benefit/cost summary," shows the construction years, in which most of the costs are expended, and the operating years, in which the benefits are accrued and some operating costs are expended. The tool adds the total benefits from increased active transportation to the crash reduction benefits and divides the sum by the total costs. The resulting ratio is the benefit-cost. A ratio above 1 means that the expected benefits of the active transportation improvement are greater than the costs. Projects may have a ratio below 1, but may nevertheless be valuable for achieving community objectives. Figure 1 shows the input sheet and output sheets of the calculator tool. Conclusion The benefit-cost calculator tool can be used not only for comparing different active transportation projects in different locations to each other, but also for comparing different treatments in the same location, by changing the crash countermeasures inputs. It is flexible in its applicability to type of active transportation project, location (urban or rural), and project size. References U.S. Department of Transportation. "TIGER Discretionary Grants." updated March 8, 2016, www.transportation.gov/tiger. U.S. Government Accountability Office, "Highlights of Statewide Transportation Planning: Opportunities Exist to Transition to Performance- Based Planning and Federal Oversight, GAO-11-77." A report to the Chairman, Committee on Transportation and Infrastructure, House of Representatives. December 15, 2010. www.gao.gov/products/GAO-11-77. Center for Neighborhood Technology, "Economic Effects of Public Investment in Transportation and Directions for the Future." Prepared for State Smart Transportation Initiative (2012). page 60. Center for Neighborhood Technology, Table VI.1, 35–36. U.S. Department of Health and Human Services, Office of Disease Prevention and Health Promotion, "Healthy People 2020: Leading Health Indicators, Social Determinants." Last modified July 21, 2016. www.healthypeople.gov/2020/leading-health-indicators/2020-lhi-topics/Social-Determinants. American Association of State Highway and Transportation Officials, Highway Safety Manual (Washington, D.C: 2010). www.highwaysafetymanual.org. Max A. Bushell, et al., Costs for Pedestrian and Bicyclist Infrastructure Improvements: A Resource for Researchers, Engineers, Planners, and the General Public (Chapel Hill, NC: University of North Carolina Highway Safety Research Center, October 2013), prepared for the Federal Highway Administration. http://katana.hsrc.unc.edu/cms/downloads/Countermeasure%20Costs_Report_Nov2013.pdf. 8. American Association of State Highway and Transportation Officials, 2010. CalTrans, "Life-cycle Benefit-Cost Analysis Economic Parameters." 2012. www.dot.ca.gov/hq/tpp/offices/eab/benefit_cost/LCBCA-economic_parameters.html. Gigi Cooper, AICP has worked on multiple stages of transportation projects, from developing plans and feasibility studies to identifying funding sources and writing grant applications and preparing National Environmental Policy Act (NEPA) documents, implementation plans, and permit applications. She has 20 years of experience on multimodal, highway, transit, airport, freight, and energy infrastructure projects at the federal, state, and local levels. She has a master's degree in Urban and Regional Planning from Portland State University and a bachelor's degree from Barnard College. Jennifer Danziger, P.E. has more than 25 years of experience in transportation planning, traffic engineering, project management, and community involvement. She has worked throughout the Northwest U.S. preparing long-range system plans as well as impact studies for municipal and private development clients. Jennifer's planning work has focused on identifying community transportation needs and she has developed multimodal projects and practical and implementable solutions to meet those needs. She has also prepared traffic studies for single and mixed use developments, several large sports facilities, and comprehensive plan/zone changes. She has a bachelor of science in civil engineering from Cornell University.
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