public expenditure analysis may 4, 2007 cost-benefit analysis: seattle link light rail, initial...

Public Expenditure Analysis May 4, 2007

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

Your presenters:Annie Gorman

Hazel-Ann Petersen


“…to improve mobility within the urban areas by providing travel alternatives so they may grow comfortably while preserving rural areas for future generations."


Presentation Agenda

• Background

• Costs

• Benefits

• Reconciliation and Conclusions


Background


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


Big Plans for Light Rail


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


Project Costs


Original vs. Projected Budget

Discrepancy is over 100%


Operating Expenses

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


National Expense Averages

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

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


Cost PV of Funding SourcesAt Various Discount Rates

61%

percent of collections attributed to Link Project 1999 2000 2001 2002 2003 2004 2005

7000000 347900 347900 347900 347900 347900 347900T-Bill bond 4.0% 1152000000 1152000000Inflation 2.5%Tax collection 268,057,646 262,108,773 268,057,646 262,108,773 267,963,295 284,333,144 303,015,925State 1,074,019 12,664,160 1,074,019 12,664,160 1,515,202 803,946 6,748,806Federal 41,084,546 34,459,131 41,084,546 34,459,131 27,017,205 93,655,552 126,739,497

Discount Rate 6.5%PV Bond1 1,413,787.97$ 7000000 -326666.6667 -306729.264 -288008.699 -270430.703 -253925.543 -238427.74PV Bond2 182,975,386.56$ 266987125.8 1152000000PV Tax collection 4,586,528,458.26$ 268,057,646 246,111,524 236,335,512 216,986,510 208,294,057 207,529,313 207,667,152PV State 97,491,780.56$ 1,074,019 11,891,230 946,919 10,484,013 1,177,802 586,785 4,625,187PV 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

5,537,900,907.77$ 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 -245255.772PV2 145,341,692.15$ 206169968.1 1152000000PV Tax collection 4,863,208,650.44$ 268,057,646 247,272,427 238,570,351 220,071,580 212,252,028 212,470,266 213,614,270PV State 103,416,727.88$ 1,074,019 11,947,321 955,873 10,633,073 1,200,182 600,755 4,757,642PV 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

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 -231820.46PV2 214,694,310.22$ 322198267.7 1152000000PV Tax collection 4,334,749,615.34$ 268,057,646 244,961,470 234,131,929 213,958,835 204,427,915 202,725,602 201,912,305PV State 92,099,113.95$ 1,074,019 11,835,664 938,090 10,337,727 1,155,940 573,202 4,497,014PV 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

2,992,428,716.60$

20307000000

1152000000

507371564.910826217.3539617164.46

-993711.2326-23862299172,025,832

1,536,8765,624,003

-1149783.883-268414422.3

83,338,2351,778,2596,507,311

-859411.0468-212255052.5

62,291,5331,329,1674,863,918


Operating Profit for Link Lowest Across All Modes

-100%

-80%

-60%

-40%

-20%

0%

% o

f L

os

se

s

6.0% 6.5% 7.0%Discount Rate Used

Profit (Loss) by Mode

-Bus -Rail -Link

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)$


Projected Funding Cost PV:Negative

$(1.82)

$(5.32)

$(1.31)

$(4.81)

$(1.52)

$(5.02)

$(6)

$(5)

$(4)

$(3)

$(2)

$(1)

$-

Billio

ns

US

D$

6% 6.50% 7%

Discount Rate

NPV valuation for Costs of Sound Light Rail Project

NPV Costs

NPV Costs Estimated


Operating ExpensesBy Mode, 1996-2005 (National)


Nationally, Bus RemainsMost Popular Transit Mode


Project Benefits


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


Baseline Assumptions

• Ridership and segment distribution

• Bus capacity

• Work days per year

• Gas price

• Commuting distance

• Hourly wage

• Parking cost

• Value of commuting time

• What social costs to include

• At what level to value them

• Fare contribution per person

• Rate of increase/decrease of ridership


Baseline Scenario

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

* in 2007 dollars, 6.5% interest rate


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


Cost/BenefitReconciliation


Issues to Address

• Costs: 3 funding scenarios

• Benefits: 8 situational scenarios

• Costs: in 1999 dollars

• Benefits: in 2007 dollars


Full Reconciliation

Range: ($2.71) bn – ($3.22) bn


A HypotheticalBreak-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) $


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


BACKUP SLIDES


Change In ProfitabilityW/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)$

-100.00%

-80.00%

-60.00%

-40.00%

-20.00%

0.00%

% o

f L

os

se

s

6.0% 6.5% 10.0%Discount Rate Used

Profit (Loss) by Mode

-Bus -Rail -Link

public expenditure analysis may 4, 2007 cost-benefit analysis: seattle link light rail, initial...

Documents

public expenditure analysis

background slide

national slide

rate slide

negative slide

light rail slide

costbenefit analysis

popular transit mode