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Benefit/Cost Analysis of Value Pricing Projects. Presented to the 2012 Symposium on Mileage-Based User Fees and Transportation Finance Summit Presented By Michael Lawrence April 29, 2012. Jack Faucett Associates and ECONorthwest.

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Benefit/Cost Analysis of Value Pricing Projects

Presented to the 2012 Symposium on Mileage-Based User Fees and Transportation Finance Summit

Presented By Michael Lawrence

April 29, 2012

Jack Faucett Associates and ECONorthwest

the cost of congestion public responsibility and private opportunity
The Cost of Congestion – Public Responsibility and Private Opportunity*
  • The overall cost of congestion (based on wasted fuel and lost productivity) reached $101 billion in 2010
    • Approximately $713 for every U.S. traveler.
  • The total amount of wasted fuel in congestion topped 1.9 billion gallons
    • A week’s worth of fuel for the average U.S. driver.
  • The amount of wasted time totaled 4.8 billion hours
    • Nearly one full work week (or vacation week) for every traveler.

*Source: Texas Transportation Institute’s 2011 Urban Mobility Report

analyst s perspective
Analyst’s Perspective
  • Public Sector Uses Benefit Cost Analysis to
    • Reduce Societal Loses
    • Seek Efficiency in Government Facility Operations
    • Achieve Equity for All Users
    • Prepare for Emergency Responses
    • Provide Safe Systems
  • Private Sector Uses Cash Flow and Profitability Analysis to
    • Seek Infrastructure Investments
    • Seek Investments with Low Risk of Default
    • Seek Returns on Investment
  • Today’s Talk Is About Public Sector Decision Making
uncertainties in costs and benefits
Uncertainties in Costs and Benefits
  • Extent of Congestion Relief
    • Time Savings
    • Emissions
    • Energy
  • Level of Fee Required
  • Cost of User Fee Collection Systems
  • Time and Cost Related to Transition from Current Revenue System to Future Revenue System
  • Modal Capacity Required
solution charge marginal cost for use
Solution: Charge Marginal Cost for Use?
  • Achieving Many Public Sector Goals
    • Reduce congestion
    • Improve travel times
    • Encourage transit use
    • Reduce vehicle emissions
    • Reduce energy consumption
    • Fund transportation programs and projects
    • Promote regional economic development
  • Pricing Mechanisms Available
    • FuelTax
    • Mileage-Based User Fees
    • Roadway Tolling
    • Managed Lane Pricing (Value Pricing)
selecting the best option public sector
Selecting the Best Option (Public Sector)
  • Use Benefit/Cost Analysis (BCA)
    • Determine the Benefits and Costs of individual project financing alternatives
    • Justify roadway pricing mechanisms
    • Provide transparency and accountability for investment decisions
    • Evaluate alternatives using existing methods and data
  • A BCA quantifies the benefits and costs of a particular project structure to determine whether an investment is justifiable
  • BCA must express all benefits and costs in monetary terms
  • The benefit/cost ratio is the net present value of benefits divided by the net present value of costs
steps to perform bca
Steps to Perform BCA
  • Establish Objectives
  • Define Alternatives
  • Forecast Performance
  • Estimate Benefits and Costs
  • Analyze Risks
  • Rank Alternatives and Make Recommendations
existing fhwa bca tools
Existing FHWA BCA Tools
  • BCA.Net
    • Evaluates the benefits and costs of resource allocation and investment decisions through the analysis of alternative strategies for highway management and improvement
  • STEAM
    • Assesses the efficiency of multimodal transportation alternatives and demand management strategies on a corridor or regional level
  • NBIAS
    • Evaluates the economic impacts of the condition and performance of bridges on highway users and agencies
  • HERS-ST
    • Evaluates the economic impacts of the condition and performance of highways on highway users and agencies
hot bca tool objective
HOT-BCA: Tool Objective
  • Three common options under consideration by transportation planners
    • Construct new, variably-tolled Express Lanes
    • Convert existing HOV lanes to variably-tolled Express Lanes
    • Convert all lanes of a conventionally-priced toll road to variable pricing
  • Three optimization alternatives in HOT-BCA
    • Maximize Revenue
    • Maximize Throughput
    • Maintain Level of Service
hot bca the data collection effort
HOT-BCA: The Data Collection Effort
  • Challenges
    • Few Candidate Facilities (~10 domestically)
    • Poorly maintained data on volume and composition
    • Projects differ on many dimensions
    • Limited available data on site, though calls to some regional DOT and facility operators proved fruitful
    • Sufficient data was only available for less than half of the surveyed facilities
  • Corridor Volumes
  • Demographic Conditions
  • Carpool Policies
  • Traffic Composition
  • Tolling Objectives
  • Facility Geometry
  • Pricing Methodology and Limits
  • Hours of Operation
hot bca simulated data econorthwest
HOT-BCA: Simulated Data - ECONorthwest
  • Toll Optimization Model
    • Equilibrium lane volumes
    • Toll levels
    • Revenues
    • Associated travel times for tolled highway facilities
  • Smaller Optimization Kernel
    • Reduced form of the Toll Optimization Model includes modified:
      • Variations in segment characteristics
      • Traffic characteristics and composition
      • Toll policies
      • Operating constraints
  • HOT-BCA: The Final Product
    • A Reduced Form Excel-based Tool that has the relationships that have been revealed through this analysis
hot bca user inputs
HOT-BCA: User Inputs
  • The following elements are required for to use the HOT-BCA tool:
    • Project years for which to analyze the project lifecycle (base case and project case)
    • Tolling objective for each project year
    • Five time periods (such as: AM peak, Midday, PM peak, Evening, Night)
    • Time period start and end times
    • Tolling methods for each time period (Dynamic, Static, or None)
    • Vehicle class names (SOV, HOV2, HOV3, COM, MTK, HTK)
    • Passenger car equivalents (PCE) for each vehicle class
    • Value of time (VOT) for each vehicle class, in $/hr
    • Managed lane access rules for each vehicle class (base case, versus project case)
    • Free flow speed
    • Capacity for general purpose (GP) and managed lanes
    • Minimum level of service for managed lanes
    • Number of segments for the managed lane facility
    • Segment length and direction
    • Number of GP and HOT lanes per segment, per time period, for base case and project case
    • Volumes for each vehicle class, per segment, per time period
hot bca benefits estimated
HOT-BCA: Benefits Estimated
  • The following are calculated by HOT-BCA and converted to dollars (where identified):
    • Travel time savings, in dollars
    • Vehicle miles traveled
    • Vehicle hours traveled
    • Disbenefitsfrom tolls, in dollars
    • Revenues from tolls, in dollars
    • Energy savings from fuel consumption reduction, in dollars
    • Criteria Pollutants and Greenhouse Gases
  • The tool user provides the following items used in the benefit/cost calculations:
    • (Benefit) Annual safety benefits in the base year and project year
    • (Cost) Construction cost of the project
    • (Cost) Annual operating cost of the facility
transition cost minimization
Transition Cost Minimization
  • Problem:
    • One of the highest cost for implementing MBUF is the transition from fuel tax revenue to mileage-based revenue systems as envisioned by MBUF
    • High transition costs are a political challenge
  • Solution:
    • Allowing users to choose payment systems minimizes transition costs
    • Green Charging provides incentives for users to choose value priced systems for travel
      • Hot Lanes
      • Priority Parking
      • Ride Sharing
transition cost minimization1
Transition Cost Minimization
  • Problem:
    • Electric Vehicles (EVs) don’t buy gas or pay fuel taxes
    • EVs cannot continue to be exempt from user fees
  • Solution
    • Develop an EV user fee payment system
    • Link the EV payment system with a green charging transition process.
    • Utilize the EV’s GPS technology to incorporate mileage-based user fees
our team
Our Team
  • Jack Faucett Associates (www.jfaucett.com)
    • Michael Lawrence, Principal Investigator ([email protected])
    • Jon Skolnik, Senior Economist
    • Devon Cartwright-Smith, Economist
  • ECONorthwest (http://econw.com/)
    • Randall Pozdena, Ph.D, Co-Principal Investigator
    • Carl Batten, Senior Economist
    • Sean Wallace, Senior Analyst
contact information
Contact Information

Michael F. Lawrence

JFA President

4550 Montgomery Avenue

Suite 300N

Bethesda, MD 20814

Phone: (301) 961-8835

Fax: (301) 469-3001

[email protected]

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