In transport planning there’s a lot of talk about ‘cost-benefit analyses’, leading to a “BCR” (benefit cost ratio) for a particular project. Projects with a BCR of greater than 1.0 deliver more benefits than the money expended upon them (and any disbenefits the project generates) and are therefore worth considering spending money upon. In terms of transport projects, the BCR is used to measure a project’s “efficiency” – which together with an analysis of “strategic fit” and “effectiveness” determines whether that project should happen or not. BCRs of between 1 and 2 get a “low” ranking, 2-4 for a “medium” and above 4 for a “high”.
To calculate a benefit-cost ratio there are obviously two things you need to know – one is fairly easy, being the costs. The other, the benefits, is much more complex. Economic theory says that the best cost-benefit analyses capture as many costs and benefits relating to an intervention as possible, but when it comes to transport matters things are a bit narrower.
The “Economic Evaluation Manual” – an incredibly long and complex document, is used for this process. The EEM outlines which benefits are relevant for measurement and how one goes about measuring them. The main benefits are typically the following:
- Travel time savings
- Vehicle operating cost reductions
- Safety benefits
- Travel reliability benefits
For public transport projects, benefits are split into those enjoyed by the PT users themselves and those enjoyed by other people as a result of a PT improvement (people changing mode from driving will mean everyone else can drive a little bit faster). In recent times a lot of thinking has gone into analysing “wider economic benefits” of transport projects – with “agglomeration benefits” (being the benefit arising from economic activity being more closely located) now able to be included in the EEM calculation of any project’s benefit. Agglomeration benefits are usually calculated as a proportion of the travel time savings benefits, with that portion dependent on the type of project being considered.
While a fairly wide range of benefits are outlined above, in the calculation process they are certainly not all considered equally. For most projects, the vast majority of benefit arises in the form of travel time savings – an extrapolation of the old saying “time in money”. A transport project that makes it quicker to get from A to B is said to generate a dollar benefit. This benefit varies depending on whether the trip is for business, commuting or “other” purposes. Add up all the minutes saved, multiply by the dollar amount and you have a project justified.
The problem with this approach, in my opinion, is that it does not properly capture many other benefits and costs. Widening a road to shift traffic faster not only comes at the cost of construction, but also at the cost of a street that’s now probably less friendly for pedestrians and cyclists and has less general amenity. This amenity loss is likely to only show up in analysis of the impact of a project on property values, but that’s not something able to be captured in the evaluation process.
Similarly, a project which slows traffic down to improve things for pedestrians, cyclists and to boost the attractiveness of an area will come out of this process with a negative BCR (not just below 1, but actually below zero) because it slows vehicles down – even if it generates a whole pile of other benefits. This is why NZTA makes no contribution to footpaths, why it is so often extremely difficult to get additional traffic signals put in place for pedestrians and why we end up with horrible roads like Mayoral Drive, Hobson and Nelson streets: because vehicle speed is valued above everything else.
Let us think for a minute what the real benefits of something like the London Underground of New York Subway really are. It’s not in the reduction of congestion: the roads are still full of traffic. It’s not in making traffic go faster: as I said, the roads are still full of traffic. But rather, the real benefit of both projects is that they have enabled each city to grow far bigger and far more prosperous than would have ever been possible without that infrastructure being in place. These underground rail systems enable a simply huge number of people to travel around the cities without destroying the fabric and attractiveness of those cities and without requiring utterly incomprehensibly large amount of space for parking.
These are a different kind of transport benefit from what we’ve measured in the past, and really get to the crux of transport being a “means to an ends” rather than an ends in and of itself. While roading projects could very well be measured in the same way, for some reason they’re not – perhaps because they’d perform rather badly in comparison (they require such a huge amount of space for the benefit they bring).
The crux of this issue is that when the government says that various public transport projects don’t “stack up”, it’s largely because they are being assessed against a system that is flawed and misses out so many of the most significant benefits that something like the City Rail Link would bring. Where’s the assessment of the benefit provided by Auckland’s city centre being able to double in employment count? Where’s the assessment of the benefit from not needing to waste so much space on tens of thousands of carparks? Where’s the assessment of the benefit to property values – not just in the city centre, but also along all the rail corridors?