The Elevated Transportation Company developed plans for a monorail project in and near downtown Seattle. The new

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The Elevated Transportation Company developed plans for a monorail project in and near downtown Seattle. The new "Green Line" would extend 14 miles and serve Seattle Center, downtown, and the stadium district.

Purpose of Project

The project is intended to enhance transit options in a congested area. The predicted benefits include faster, more frequent, and more reliable transit service; savings in automobile operating and parking costs for drivers who switch to the monorail; and reduction in accidents. Three groups stand to benefit from the monorail project: transit riders, former drivers who switch to the monorail, and continuing auto users who may experience a slight decrease in traffic delays because bus and car trips have moved off the road.

Uses of the Results

This analysis will be used by the Elevated Transportation Company to determine if the benefits of the proposed monorail project are sufficient to justify the capital investment.

Agency Perspective

Elevated Transportation Company is the public agency charged with developing the monorail plan and submitting it to the voters. Its concern is whether the value of the benefits gained by implementing the monorail project justifies the public investment.

Base Case

The base case used in this analysis is a transit system without the monorail but with projected improvements in bus service.

Alternatives Considered

The only alternative considered in this case is a transit system with the monorail and the same bus service hours as the base case. The buses will provide feeder service to the monorail.

Type of Analysis

For this analysis the benefit-cost analysis, net present worth, and rate of return methods were used.

Geographic Scope

The monorail project affects the Seattle metropolitan area. The regions most immediately affected by the project will be areas serviced by the proposed green line and the redeployed feeder bus services, including downtown Seattle, the Seattle Center, and the stadium district.

Time Period for Analysis

The time period for the analysis is from 2003 to 2029, which covers construction and 20 years of operation. A base year of 2002 is used for cost and benefit comparison, with values discounted to 2002 dollars.

Benefits, Magnitude, and Value

Travel time savings were valued at $10.10 per hour, which is half the average wage rate for the region in 2002. Those who switch travel modes from automobile to the monorail benefited from parking cost savings, based on the average market value for parking in downtown Seattle, and auto cost savings ($0.365 per mile, with an average trip length of 5.77 miles). In an unusual step, improved transit reliability added 10% of travel time savings. Also unusual was the estimated benefit of freed-up road capacity: trips that switch from roads to monorail added $0.15 per vehicle-mile traveled. The rate of bus accidents multiplied by the average cost per accident gave the value of accident reduction. Riders switching from cars to monorail benefited by the amount of an average cost of accidents per passenger mile.

Other potential benefits attributed to the monorail were also identified but not included in the analysis because they are difficult or impossible to quantify. For example, the monorail will provide a more comfortable ride for transit passengers, and it could promote a more desirable form of development around its stations. Also, many communities with similar rail systems take pride in their transit system, even if they rarely use them.

Benefits for the Forecast Year 2020

Benefit Type Benefit Value (Millions, 2002$)

Benefit Values for Monorail Project

Value of travel time savings $77.1

Parking savings 28.7

Reduced auto operating/ownership costs 11.2

Reliability 7.7

Road capacity for drivers 4.6

Reduction in bus-related accidents 3.7

Reduction in auto-related accidents 2.6

2020 Benefits $135.6

Benefits accrue for 23 years from 2007 through 2029. A discount rate of 7.95% was used to estimate the total benefits, in 2002 dollars. The net benefits were evaluated to be $2,067,263,000.

Costs

The estimated costs for constructing and operating the monorail are $1.68 billion (in 2002 dollars). This includes a total capital cost of $1.26 billion and a total discounted stream of operating costs of $420 million (at approximately $29 million a year), using the same discount rate (7.95%). Operating costs were discounted over a span of 22 years, from 2008 through 2029.

Analysis

Net present value B-C = $390,164,000

Benefit-cost ratio B/C = 1.23

Nominal Rate of Return = 7.95%

Sensitivity Analysis Performed

A team of outside engineers and contractors determined that there is a 60% chance the monorail project would come at or under budget and a 90% chance the project will come under 1.15 times the budget. The travel demand forecasters included a 10% range around their estimate of future monorail ridership. For the case where the costs are low and the benefits are high, a 9.9% return is expected. For the case where the costs are higher than expected and the benefits are lower, a 5.2% return is expected.

Models

Population, employment, and travel demand models developed by the Puget Sound Regional Council made the project forecasts.

Critique Strengths and Weaknesses

This project provides a thorough and straightforward benefit-cost analysis for a proposed transit investment. However, a drawback to the analysis is the lack of other transit alternatives to consider. It would be useful to compare the benefits and costs of a monorail system with that of a light rail system, a bus rapid transit (BRT) system, and perhaps an increase in highway capacity.

A potential methodological weakness is in counting parking charges as user costs, when in reality they are transfer payments, and probably do not fairly represent the actual resource consumption required to provide downtown parking capacity. This is especially true if a significant proportion of parking capacity is publicly owned. The approaches taken to evaluate benefits from improved reliability and freed-up roadway capacity appear fairly arbitrary; however, these two benefit types do not amount to very much.

Source

DJM Consulting and ECONorthwest. Benefit-Cost Analysis of the Proposed Monorail Green Line. Prepared for the Elevated Transportation Company, Seattle, WA. August 28, 2002. Available at: http://sites.google.com/site/benefitcostanalysis/case-studies/monorail/BCA_Report_Final_revised1.pdf?attredirects=0&d=1.

Explain Transportation Projects using a cost-benefit analysis approach in the case.