SUGAR HOUSE STREETCAR

UTAH TRANSIT AUTHORITY

SUGAR HOUSE STREETCAR TIGER II DISCRETIONARY GRANT PROGRAM ECONOMIC ANALYSIS SUPPLEMENTARY DOCUMENTATION AUGUST 23, 2010

TABLE OF CONTENTS 1. METHODOLOGY .............................................................................................................................. 2 1.1 ESTIMATION OF USER BENEFITS ..................................................................................................... 3 1.2 ESTIMATION OF EXTERNAL BENEFITS ............................................................................................... 4 1.3 ESTIMATION OF COMMUNITY DEVELOPMENT BENEFITS....................................................................... 5 1.4 ADDITIONAL BCA PRINCIPLES ........................................................................................................ 5 2. PROJECT SUMMARY ......................................................................................................................... 6 2.1 BASE CASE AND ALTERNATIVES ...................................................................................................... 7 2.2 EFFECTS ON LONG-TERM OUTCOMES .............................................................................................. 7 2.3 PROJECT COST AND SCHEDULE ....................................................................................................... 8 3. GENERAL ASSUMPTIONS ................................................................................................................... 9 4. RIDERSHIP PROJECTIONS ................................................................................................................... 9 5. BENEFITS MEASUREMENT, DATA AND ASSUMPTIONS............................................................................ 10 5.1 STATE OF GOOD REPAIR ............................................................................................................. 10 5.2 ECONOMIC COMPETITIVENESS ..................................................................................................... 11 TRAVEL TIME SAVINGS............................................................................................................................ 11 SAVINGS IN VEHICLE OPERATING COSTS...................................................................................................... 11 5.3 LIVABILITY ............................................................................................................................... 14 COMMUNITY DEVELOPMENT.................................................................................................................... 14 LOW INCOME MOBILITY .......................................................................................................................... 17 5.4 SUSTAINABILITY ........................................................................................................................ 18 5.5 SAFETY ................................................................................................................................... 19 6. SUMMARY OF FINDINGS AND BCA OUTCOMES.................................................................................... 20 7. BCA SENSITIVITY ANALYSIS ............................................................................................................. 22 8. ECONOMIC IMPACT ANALYSIS .......................................................................................................... 25 8.1 SHORT-TERM EMPLOYMENT FROM CONSTRUCTION SPENDING ........................................................... 25 8.2 LONG-TERM EMPLOYMENT IMPACTS ............................................................................................ 27 9. COST AND BENEFIT ESTIMATES BY YEAR ............................................................................................. 28

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 1

This document provides detailed technical information on the economic analyses conducted in support of the Grant Application for the Sugar House Streetcar project. Section 1 introduces the conceptual framework used in the Benefit-Cost Analysis. Section 2 provides an overview of the project, including a brief description of existing conditions and proposed alternatives; a summary of cost estimates and schedule; and a description of the types of effects that Sugar House Streetcar is expected to generate. Section 3 discusses the general assumptions used in the estimation of project costs and benefits, while estimates of travel demand and traffic growth can be found in Section 4. Specific data elements and assumptions pertaining to the long-term outcome selection criteria are presented in Section 5 along with associated benefit estimates. Estimates of the project’s Net Present Value (NPV), its Benefit/Cost ratio (BCR) and other project evaluation metrics are introduced in Section 6. Next, Section 7 provides the outcomes of the sensitivity analysis. Detailed economic impact estimates can be found in Section 8, along with descriptions of the data sources and modeling tools used in the analysis. Additional data tables are provided in Section 9, including annual estimates of benefits and costs, as well as intermediate values to assist DOT in its review of the application.

1. Methodology Benefit-Cost Analysis (BCA) is a conceptual framework that quantifies in monetary terms as many of the costs and benefits of a project as possible. Benefits are generally broadly defined. They represent the extent to which people to whom they accrue are made better-off, as measured by their own willingness-to-pay. In other words, central to BCA is the idea that people are best able to judge what is “good” for them, what improves their well-being or welfare. BCA also adopts the view that a net increase in welfare (as measured by the summation of individual welfare changes) is a good thing, even if some groups within society are made worse-off. And a project or proposal would be rated positively if the benefits to some are large enough to compensate the losses of others. Finally, BCA is typically a forward-looking exercise, seeking to anticipate the welfare impacts of a project or proposal over its entire lifecycle. Future welfare changes are weighted against today’s changes through discounting, which is meant to reflect society’s general preference for the present, as well as broader intergenerational concerns. The specific methodology developed for this application borrows from the above BCA principles and is consistent with the TIGER II guidelines. In particular, this approach involves: •

Establishing existing and future conditions under the build and no-build scenarios, and considering an alternative to the full build;

•

Assessing benefits with respect to each of the five long-term outcomes identified in the Notice of Funding Availability (NOFA)1;

•

Describing the indirect effects of the project on land use and community development;

1

U.S. Federal Register, Federal Register / Vol. 75, No. 104 / Tuesday, June 1, 2010 / Notices, Notice of Funding Availability for the Department of Transportation’s National Infrastructure Investments Under the Transportation, Housing and Urban Development, and Related Agencies Appropriations Act for 2010, http://www.dot.gov/docs/TIGER_II_Discretionary_Grant_Program_Final_Notice_1_June_2010.pdf.

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 2

•

Measuring benefits in dollar terms whenever possible and expressing benefits and costs in a common unit of measurement;

•

Using DOT guidance for the valuation of travel time savings, safety benefits and the reduction in air emissions, while relying on industry best practice for the valuation of other effects;

•

Discounting future benefits and costs with the real discount rates recommended by the USDOT (7 percent and 3 percent); and

•

Conducting sensitivity analysis to assess the impacts of changes in key estimating assumptions.

The BCA framework recognizes and estimates three broad categories of benefits: •

User Benefits: Benefits to users of the transportation system (including those who would travel in the base case, referred to as “existing users”; and those who would travel only in the build scenario, referred to as “new users”);

•

External Benefits: Changes in emission volumes, changes in the number and severity of accidents, and other changes that may impact users and non-users of the transportation system alike; and

•

Community Development Benefits: Existence and option value of the proposed transportation investment, along with livability improvements brought about by the investment (e.g., more destinations within a walking distance; increase in productivity associated with densification; and other community attributes that people value).

1.1

Estimation of User Benefits

The framework used in the estimation of user benefits is based upon the theory of demand, and involves the estimation of changes in consumer surplus. The demand for travel is an inverse relationship between the number of trips “demanded” and the generalized cost of travel, which includes both travel time and out-of-pocket costs (such as vehicle operating and parking costs for auto users, or fare payments for transit riders). That relationship is depicted in Figure 1 below. The term “consumer surplus” refers to the area between the demand curve and the actual cost of travel at any point in time. It is a measure of welfare to the extent that people who are traveling at that cost are “paying” less than what they would be willing to pay; in other words the value they are placing on a trip (as measured by their willingness-to-pay along the demand curve) is higher than what they are actually paying. The proposed transportation investment would reduce the general cost of travel and result in benefits to both exiting and new trip-makers. Benefits to existing trip-makers are represented by the red rectangle in Figure 1. They are estimated as the difference between the generalized cost of travel in the base case and the generalized cost of travel in the build scenario times the number of existing trips.

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 3

In addition, as the generalized cost of travel is being reduced, additional trips (beyond those diverted from other modes) are expected. These induced trip-makers represent a portion of all potential trip-makers who did not make a trip (or as many trips) in the no-build scenario, but are now “attracted” to the lower generalized cost allowed by the investment. User benefits resulting from new trips are depicted by the blue triangle in Figure 1. They are estimated using the “rule-of-a-half”. Please note that the change in generalized cost from nobuild to build conditions only represents the change in user costs (travel time plus out-ofpocket costs). Social costs, including air emissions, accident occurrences, and congestion externalities are assumed not to affect trip making or modal decisions in this analysis. The elasticity of demand (the slope of the demand curve) is estimated based on existing knowledge about travel costs in the corridor and ridership forecasts developed by the Project Team. Figure 1: Framework for the Estimation of User Benefits Generalized Travel Cost

Reduction in Travel Costs

Benefits to Existing Trip Makers Base Case Cost of Travel

Benefits to Induced Trip Makers

Alternative Case Cost of Travel

Demand For Trips

Existing

New

Number of Trips

Induced Trips

1.2

Estimation of External Benefits

External benefits (changes in air emissions and accident costs) are calculated as the difference between total costs in the base case and total costs in the alternate, build scenario. As explained later in this document, the unit cost estimates used in these calculations are those identified in Appendix A of the Notice of Funding Availability.

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 4

1.3

Estimation of Community Development Benefits

Community development benefits are estimated on the basis of expected changes in residential and commercial property value beyond and above growth projections in the base case. A benefit transfer approach is employed to predict the extent of property appreciation along Sugar House Streetcar alignment following completion of the project. To avoid double counting, the capitalized value of future expected transportation cost savings are netted out of the resulting development benefit estimates. Alternative approaches to estimating the extent of incremental benefits are explored as sensitivity analysis.

1.4

Additional BCA Principles

The following principles guide the estimation of benefits and costs: •

Only incremental benefits and costs are measured o The incremental benefits of the project include the transportation cost savings for the users of the service, as well as increases in asset values as a result of the implementation of the transportation improvements. For instance, as explained above, only the incremental real estate value associated with the implementation of the project is considered a benefit of the project. Increases in values associated with benefits measured elsewhere, such as those that are a product of additional, unaccounted for investment, or that are a result of the general economic cycle are not considered in the estimation of station area development benefits. o The incremental costs of implementation of the project include initial and recurring costs. Initial costs refer to the capital costs incurred for design, ROW, rolling stock and construction of the streetcar facility. Recurring costs include incremental operating costs in addition to administration and marketing expenses. Only additions in costs to the current operations and planned investments are considered in this analysis.

•

Benefits and costs are valued relative to the next-best alternative. o The benefits stemming from the implementation of the transportation improvement are those above and beyond the benefits that could be obtained from the next-best transportation alternative. For instance, the transportation cost savings for users are measured relative to the best existing alternative, which may be using personal automobiles or bus services on the roadway, depending on the type of user. The benefit in this case is the net cost saving in transportation costs relative to the best alternative. o The costs imputed to the project only include those incremental costs that represent an opportunity cost to the funding entities. Expenditures are considered foregone opportunities to investment in the next-best alternative.

•

All benefits and costs are estimated in 2010 dollars. The valuation of benefits makes use of a number of assumptions that are required to produce monetized values for all non-

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 5

pecuniary benefits. The different components of time, for instance, are monetized by using a “value of time” that is assumed to be equivalent to the user’s willingness to pay for time savings in transit. These, as with all other values used in the analysis are taken from the USDOT guidance on the preparation of TIGER II applications. Where USDOT has not provided valuation guidance or a reference to guidance, standard industry practice has been applied. Estimates used in the monetization of benefits include the cost of operating a vehicle, including fuel, maintenance, repair, and depreciation. The exact values applied in the economic analysis are provided in this document. •

Annual costs and benefits are computed over a long-run planning horizon and summarized through a lifecycle cost analysis. The project is assumed to have a useful life of at least 20 years; that is the time horizon of the analysis. Construction costs are incurred within the first three years of implementation of the project, but operating costs continue through the whole horizon of the project. Benefits also accrue during the full operation of the project.

•

The opportunity cost associated with the delayed consumption of benefits and the alternative uses of the capital for the implementation of the project is measured by the discount rate. All benefits and costs are discounted to reflect the opportunity costs of committing resources to the project. Real discount rates are applied to all future costs and benefits as a representation of how the public sector evaluates investments.

2. Project Summary As part of a transit system plan to accommodate Salt Lake Valley’s regional population growth and urban sprawl, the City of Salt Lake, the City of South Salt Lake, and the Utah Transit Authority is proposing a modern streetcar project to connect the Sugar House neighborhood with the already successful TRAX light rail system. The Sugar House Streetcar (“The Project”) will be built over an abandoned rail track behind warehouses and densely populated residential neighborhoods on UTA existing rail right-of-way. It is a 2-mile alignment that connects to the already successful light rail UTA TRAX on the west end. The east end connects to the Sugar House Center where there are many retail stores and restaurants. Though Light Rail (TRAX) serves this area at 2100 South and approximately 200 West, it serves north/south travel, with no options for east/west travel through South Salt Lake and into Sugar House. Additionally, as a major arterial, 2100 South is congested at peak and non peak travel times, and Salt Lake City has no desire to increase capacity for this roadway, nor does the community support this option. The nearby Interstate 80 (I-80) travels parallel to the proposed streetcar line is a high speed/high capacity facility, and is not conducive to community oriented travel and development. Aside from improving local circulation, the Sugar House Streetcar project is expected to bring about long-term impacts that will support sustainable community and economic development, and complement other components of the local and regional transportation system.

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 6

2.1

Base Case and Alternatives

The base case of this analysis is a no-build scenario, where the Sugar House Streetcar is not built. The alternative to this, then, is the project completed as described above.

2.2

Effects on Long-Term Outcomes

The streetcar project is expected to transform and reinforce livability and sustainability of the Sugar House neighborhood. In terms of immediately users of the streetcar, commuters are expected to connect between the TRAX and Market Station. Other riders are provided with improved access to local cultural and commercial amenities. Additionally, low income residents and those with limited mobility traveling within the region are served with a reliable alternative and lower cost mode of transportation. More precisely, users of the streetcar will experience benefits of this project such as travel time savings, vehicle operating savings and accident reductions. Local and regional residents of the Salt Lake Valley will also experience benefits such as community development, pavement maintenance savings and congestion and pollution reduction. Table 1 below describes each of the benefits estimated in this analysis. Table 1: Benefits and Description by Evaluation Criteria Long-Term Outcomes

Benefit Categories

State of Good Repair

Economic Competitiveness

Description

Monetized

Pavement Maintenance Savings

Reductions in pavement maintenance costs due to changes in roadway usage

Yes

User Cost Savings (Travel Time Savings and Vehicle Operating Cost Savings)

Door-to-door travel time savings to transit users and remaining roadway users and Reductions in monetary costs to drivers switching to public transit

Yes

Community Development

Option value and amenity value of proposed transit alignment, as measured in property appreciation (net of capitalized travel cost savings)

Yes

Low Income Mobility

Portion of total trip cost and time savings accruing to low income users

Yes

Reductions in Air Emissions

Reductions in pollutants and green house gasses due to changes in private vehicle use relative to base case

Yes

Livability

Environmental Sustainability

Quantified

Qualitative

Yes

Yes

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 7

Long-Term Outcomes

Benefit Categories

Reductions in property losses, injuries and deaths due to modal shifts

Accident Reduction

Safety

2.3

Description

Monetized

Quantified

Qualitative

Yes

Project Cost and Schedule

The project is estimated to cost $55.48 million, in 2011 dollars, over three years of construction beginning in 2011 and 20 years of service immediately after. Operations and Maintenance costs are $1.5 million annually. The present value of the capital and operation and maintenance costs, discounted at 7 percent is $62.1 million. The sum consists of $48.6 million in total capital and $13.4 million in total operation and maintenance. Key components of capital cost include vehicle procurement, track construction and traction power construction (sitework), as shown in Table 2. Theses costs, shown in 2011 dollars are converted to 2010 dollars for use in the CBA. Table 2: Costs by Category FTA Cost Category

Cost Category

2011 Base Year Cost ($ millions)

10

Guideway and Track Elements

$5.40

20

Stations

$1.14

30

Support Facilities

40

Sitework

$12.32

50

Systems

$8.90

60

Right of Way (including UTA ROW)

$7.00

70

Vehicles

$12.00

80

Professional Services

$2.72

90

Unallocated contingency

$6.00

Total

$0

$55.48

For the BCA, construction of the streetcar is assumed to begin in 2011 and end in 2013. By the end of 2011, slightly less than three quarters of pre-construction work and utility relocation will be completed. Over 90 percent of track construction and traction power construction is expected to be completed by the end of 2012. Service is to begin immediately after construction in January 2013. The study period of this analysis starts in 2011 at the beginning of construction until 2032 (twenty years after year of opening service in 2013) to accrue twenty years of benefits.

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 8

3. General Assumptions The BCA measures benefits against costs throughout the study period beginning at the start of construction and including twenty years of operations. The monetized benefits and costs are estimated in 2010 dollars with future dollars discounted in compliance with TIGER requirements at a real 7 percent rate with sensitivity testing at 3 percent. The methodology makes several important assumptions and seeks to avoid overestimation of benefits and underestimation of costs. Specifically: •

Input prices are inflated to 2010 dollars from their source year dollars.

•

The analysis period begins in 2010 and ends in 2032. It includes construction years (2011-2013) and twenty years of operations (2014-2032).

•

A 7 percent discount rate is assumed throughout the study. A 3 percent discount rate is used for sensitivity analysis. Results presented are for a 7 percent discount rate unless otherwise specified.

•

All benefits accrued are incremental benefits. In other words, the benefits measured in BCA are monetized benefits that occur in the alternative scenario that do not occur in the base case (no build) scenario.

4. Ridership Projections The success of a transit system hinges on its ability to provide local and regional connectivity and generate societal welfare in the long run. In quantifying the system’s lifecycle utilization as well as its induced economic worthiness, its level of and growth in demand must be analyzed, given other existing transportation alternatives. Throughout this BCA, various long-term outcomes of the Project are monetized using the outputs of the travel demand model. In particular, traffic volumes of different modes are translated into vehicle-miles traveled (VMT). Given average trip length or other roadway assumptions, existing and projected travel conditions are estimated. Ultimately, economic benefits that stem from reduction in demand for motorized vehicles are computed as changes in VMT and speed improvements throughout the network. Ridership forecasts were developed by Fehr & Peers taking into account population and employment in a quarter mile radius around the streetcar alignment. It is assumed that auto trips diverted to the streetcar will remain constant from 2013 to 2032, but that the new trips in the study area would likely be more 'transit-oriented', which reflects the propensity of developments around transit to induce a higher amount of internal capture, walking, biking and transit use – as opposed to auto use. VMT was also forecasted by Fehr and Peers. Accordingly, it is estimated that 816 auto trips are diverted to the streetcar during the opening year. Estimates of capacity and average speeds on competing roadways and standard speed-flow curve equations (Bureau of Public Roads Updated Speed-Flow Curve) were used to estimate the effect of diversion on remaining 8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 9

roadway users. Table 3 indicates the estimated daily ridership in selected years by mode and in total. Daily ridership per year is shown in Table 36. Table 3: Daily Ridership by Source 2013

2023

2032

2,995

3,585

4,214

Diverted from Auto

816

977

1,148

Diverted from Bus

481

575

676

Diverted from Walking

359

430

506

1,339

1,602

1,884

Total Daily Trips

Induced Demand

Table 4 indicates the estimated daily net reduction in VMT and auto trips for these same years. The table shows 653 daily auto trips reduced. These are calculated from the riders assumed to be using the streetcar. The 816 riders diverted from autos (Table 3) would have previously taken vehicle trips. At a vehicle occupancy rate of 1.25, this translates into 653 vehicles off the road per day. Since the average trip length is two miles, the daily VMT reduced because of streetcar is twice that of the daily auto trips reduced. Table 4: Daily Net VMT and Auto Trip Reduction

Daily VMT Without Streetcar Daily VMT Reduced Because of Streetcar Daily Auto Trips Reduced

2013

2023

2032

879,458

979,022

1,078,231

1,306

1,563

1,837

653

781

919

5. Benefits Measurement, Data and Assumptions This section describes the measurement approach for each category of long-term outcomes estimated in this analysis and provides an overview of the associated data, assumptions, and methodology.

5.1

State of Good Repair

State of Good Repair is measured by quantifying the improvement of the condition of existing transportation facilities, with particular emphasis on projects that minimize life-cycle costs. In the case of the Sugar House Streetcar, the fewer trips made on competing parallel routes by autos generate pavement maintenance cost savings. Also, as discussed in the main application, the existing right-of-way, now owned by UTA, has been out-of-service for approximately three decades. The salvage value of this land to transform it to a community amenity is a viable state of good repair benefit to society.

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 10

Assumptions The analysis combined and estimated per-unit savings of pavement maintenance costs, estimated at $0.003 per vehicle-mile avoided2, with the estimated reduction in VMT. Benefits Estimates The opening year savings in pavement maintenance is calculated at approximately $393, amounting to $5,107 for the study period. Results by calendar year of operation are shown in Table 38. Table 5: VMT Reduction and Pavement Maintenance Savings Variable Annual VMT Avoided

Opening Year

Lifecycle

381,299

9,094,116

$393

$5,107

Annual Pavement Maintenance Savings (discounted)

5.2

Economic Competitiveness

Long-term economic productivity of individuals and ultimately of a region is found to be increased through higher human and physical capital. In many cases, increases in capital accumulation are expected to be achieved by increases in efficiency of resource allocation. For the proposed streetcar project, increases in productivity are quantified by increases in workers’ movement efficiency. In this analysis, two measures of movement efficiency are presented: travel-time savings and vehicle-operating cost savings. Travel Time Savings Travel-time savings for travelers are dependant on their value of time (VOT) and the reduction of time spent on traveling (travel-time). For travelers who remain auto users after streetcar operation begin, they experience a reduction in travel-time as a result of less congestion. Travelers who divert from autos or buses may experience a reduction in travel-time depending on their origin and destination. VOT is then applied to each reduction in travel-time to estimate the travel-time savings. VOT varies between modes of transportation due to multiple factors such as income of riders and level of comfort. Therefore, while a mode may have the most reduction in travel-time, it may not have the greatest travel-time savings because it has a low VOT. The BCA calculates reduction in travel-time and VOT as an average for each mode. Savings in Vehicle Operating Costs Savings in out of pocket costs apply only to auto users and are experienced by remaining auto users and streetcar riders who diverted from autos. Out of pocket costs are composed of four costs; fuel, oil, tires, maintenance, and depreciation. The consumption rates for these costs are derived from the average speed and combined with unit costs for each to estimate total out of 2

See Addendum to the 1997 Federal Highway Cost Allocation Study Final Report (http://www.fhwa.dot.gov/policy/hcas/addendum.htm).

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 11

pocket costs per mile and out of pocket costs per trip. The out of pocket costs are combined with parking to estimate the total out of pocket cost per trip for auto users. The decrease in out of pocket cost in the alternative from the base case scenario represents out of pocket cost savings for remaining auto users. For travelers who divert from auto to streetcar, the out of pocket savings are estimated by subtracting the fare from out of pocket costs. Assumptions As described above, travel-time savings are due to VOT and reduction in travel-time. The VOT is estimate by a weighted average of personal and business VOT. Table 6: VOT Assumption Variable Value of Time (Local Travel – All Modes)

Value

Source

$14.07

USDOT, Inflated from 2007

The reduction in travel-time is a function of speed and distance. The speeds for all modes vary throughout the study horizon as more travelers divert to streetcars and congestion on the roads decreases. The average trip length --two miles-- is assumed the same for all travelers across all modes. Table 7: Average Trip Length Variable Average Trip Length

Value (miles)

Source

2.0

Length of alignment

Out of pocket costs are estimated using consumption rates for fuel, oil, tires, maintenance, and depreciation and are a function of vehicle speed. Unit costs are then applied to these consumption rates to calculate out of pocket costs. The table below lists these unit costs along with other out of pocket costs such as parking and streetcar fares. Table 8: Out of Pocket Cost Assumptions Out of Pocket Cost Components

Value (2010$)

Source

Fuel ($ per gallon) *

$3.42

Retail Gasoline Price, 20-Year Average, US DOE EIA Annual Energy Outlook, 2010

Oil ($ per liter)

$8.07

USDOT, FHWA HERS-ST

Tires ($ per 4 tires)

$348.38

USDOT, FHWA HERS-ST

Maintenance ($ per 1000 mi)

$154.61

USDOT, FHWA HERS-ST

Depreciation (avg. depreciable cost per vehicle)

$20,838

USDOT, FHWA HERS-ST

Parking ($ per day)

$6.00

HDR Assumption

Streetcar Fare

$1.50

From Travel Demand Model

Note: * the fuel cost estimate used in this BCA includes taxes but does not include any external costs, such as those considered by NHTSA in its regulatory impact analysis of corporate average fuel economy standards.

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 12

Benefits Estimates Travel-time cost combined with out of pocket cost make up the general trip cost for each traveler. The table below lists the estimated general travel cost per mile for autos, bus, and streetcar for the opening and final years of analysis. Results by calendar year for generalized cost of travel are shown in Table 39. Table 9: Generalized Cost of Travel by Mode Mode of Transportation

Opening Year Cost per Mile

Final Year Cost per Mile

$6.91

$8.18

Time

$3.06

$4.22

Out of Pocket

$3.85

$3.96

Auto (Alternative)

$6.89

$8.20

Time

$3.04

$4.17

Out of Pocket

$3.84

$4.03

$7.83

$7.83

Time

$6.33

$6.33

Out of Pocket (Fare)

$1.50

$1.50

$7.18

$7.18

Time

$5.68

$5.68

Out of Pocket (Fare)

$1.50

$1.50

Auto (Base Case)

Bus

Streetcar

The second table lists the savings calculated from each traveler who remain auto users and those who divert to streetcar. Induced riders are included in these benefits. Since induced riders previously did not travel, and therefore have no generalized trip cost, their willingness to pay is assumed to be half of the “next best” alternative (“rule of the half”). The next best alternative is considered to be bus because it is the cheapest transit other than streetcar. Table 10: Generalized Cost of Travel Savings by Mode Travelers

Generalized Trip Cost Savings, discounted Opening Year

Lifecycle

Remaining Autos

$878,046

$13,866,183

Diverted from Autos

-$52,579

$463,144

Diverted from Bus

$74,406

$966,735

Diverted from Walking

$590,059

$7,666,506

Induced Riders

$103,611

$1,346,201

$1,593,543

$24,308,768

Total General Trip Cost Savings

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 13

5.3

Livability

Community cohesiveness stems from individuals’ mobility and goods and services’ accessibility. In this BCA two types of livability improvements are presented: community development and low income mobility. Community Development A majority of benefits from the transit alignment result from economic development of the community and appreciation of land and building values to nearby properties. This type of benefits is associated with the amenity effect of the transit line, which is found to induce property value appreciation that is often referred to as transit premium. For a new3 property near the transit alignment, its market price or rental rate at the time of purchase or lease is assumed to capture the expected lifecycle stream of benefits. The amount of transit premium is then realized by the property owner or lessee annually at an increasing rate to reflect growing certainty over time. As a result of these two assumptions, the transit premium rate (as a percentage of property value) is applied to once to the price of new property only, and the dollar amount of benefits is spread over the analysis horizon, subject to time discounting. There are five key components in estimating transit premium: property number and growth rate, property value and growth rate, and transit premium rate. The first four are derived through historic, current, and forecast (or planned) land use and property data of the impact area. These estimates are assumed to remain unchanged with or without transit. The last component, transit premium rate, is estimated based on current literature of transit impacts on property value generated by comparable systems. Since many studies rely on data after transit opening, this analysis only applies the transit premium rates to new properties after streetcar opening and not during construction. To standardize the results from the various studies, the premium rates found are weighted by each the corresponding system ridership and city population. Table 11 provides the list of studies and corresponding premiums applied in this BCA. Table 11: Transit Premium Studies System DART LRTSouth

City Dallas, TX San Diego, CA

Ridership

City Population

Rider/ Population Ratio

Residential

229,200

2,412,827

9.50%

12.20%

103,900

3,001,072

3.46%

Premium Applicable Condos

Commercial

3.50%

-9%

3

A new property is one that is newly impacted by transit. All existing properties are considered new in the first year of transit operation, while only those that are newly constructed in subsequent years will be considered for the remaining lifecycle of the transit alignment.

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 14

System

LRT- East LRTDowntown LRTNorth LRT LRT LRT • • • •

•

City

Ridership

City Population

Rider/ Population Ratio

103,900

3,001,072

3.46%

103,900

3,001,072

3.46%

103,900

3,001,072

136,400

San Diego, CA San Diego, CA San Diego, CA Los Angeles, CA San Jose, CA St. Louis, MO

Premium Applicable Residential

Condos

Commercial

6.40%

-1%

2.20%

4.40%

3.45%

3%

71.90%

3,849,378

3.54%

-6.20%

0.65%

34,400

929,936

3.70%

45%

59,000

347,181

16.99%

32%

5.10%

Weinstein, Bernard and Clower, Terry (2002), “An Assessment of the DART LRT on taxable property valuations and transit oriented development.” Center for Economic Development and Research, University of North Texas. Cervero R and Duncan M (2002c) “Land Value Impacts of Rail Transit Services in San Diego County.” Report prepared for the National Association of Realtor and the Urban Land Institute. Cervero, R and Duncan, M (2002a), “Transit’ Value-added: Effects of Light and Commuter Rail Services on Commercial Land Values.” Transportation Research Record 1805, 1-18. Weinberger, R. "Light Rail Proximity: Benefit Or Detriment in the Case of Santa Clara County, California?" Transportation Research Record 1747, (2001): 104-113. Garrett, T., 2004. “Light-Rail Transit in America: Policy Issues and Prospects for Economic Development.” St. Louis: Federal Reserve Bank of St. Louis, pp.1-30.

Property prices are multiplied by the transit premium rates to compute lifetime amount of value appreciation due to the streetcar project. For any property, it will take 30 years for all premiums to be realized, independent of this BCA’s horizon. The rate at which premium amount is realized over time is computed following Table 12. The first ten years of streetcar service is assumed to be a ramp-up period and the ramp-up parameters (a and b) are chosen for formulation continuity. Table 12: Economic Development Estimation Time Horizon First Ten Years

Formulation a * Property Price* Transit Premium Rate / b + (1-a) Property Price* Transit Premium Rate / b *(Years of Service+1)/ (Years of Gradual Realization+1)

Rest of Realization Years (=20) Parameters: a=0.3, b=26.5

Property Price* Transit Premium Rate / b

Assumptions The following tables show the assumptions for the estimation of Sugar House community development. Presented in Table 13 are the baseline property data obtained from 2009 Salt Lake City Recorder’s Office, mapped to the study area using a 0.25-mile buffer from the alignment using ERSI ArcGIS.

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 15

Table 13: Property Assumptions by Type Property Type

Base Year Value (in 2009)

Residential

Commercial

Total

Property Number

1,870

360

2,230

Average Property Value in $2010

$177,996

$691,612

$260,911

The annual growth rates of property number and construction is obtained from Salt Lake City in 2009, for property growth potential from 2012 to 2030. In terms of future property value growth, the estimates for residential homes are based on Federal Housing Finance Agency’s Salt Lake City Home Price Index from 2001 to 2010, adjusted for inflation. As for commercial properties, the rates are estimated from Moody’s Real Commercial Price Index (excluding apartments) from 2001 to 2010, adjusted for inflation. The estimates are reported in Table 14. Table 14: Property Growth Rates Property Number Growth Rate

Property Value Growth Rate

Residential

Commercial

Residential

Commercial

2.70%

4.84%

1.20%

0.60%

The GIS parcel data show that the impact area contains a number of light industrial warehouses along the alignment. In addition, information from market research shows that there is substantial economic development within the area (refer to Market Insights at the end of this section). Based on these observations, the transit premium rates selected from the list of studies presented earlier are of the high range. The rates that are applied reflect the high economic development potential due to the streetcar and they are presented in Table 15. Table 15: Transit Premium Rates Residential

Commercial

7.42%

22.02%

Benefits Estimates Over the study horizon there will be $87.9 million economic development benefits generated the streetcar project. The majority of the estimated premium amount will be due to commercial development, summing to about $65.0 million, which is over 70 percent of the total for all property types. Table 16 provides the estimated transit premium amount by property type. Table 16: Community Development Benefits in Millions of 2010 Dollars Residential

Commercial

Total

Total Value

$22.86

$65.03

$87.89

Value as a Percentage of Total, By Property

26.01%

73.99%

100%

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 16

In Table 40, the details of the benefits in community development are reported by calendar year. Incremental Community Development Benefits The community development benefits presented so far may capture other impacts of the streetcar that are also capitalized in property values. These other impacts are indeed estimated in this analysis and they include travel-time savings as well as vehicle-operating cost savings. To avoid double-counting and provide to the conservative estimates in the BCA, travel cost savings are completely removed from community development benefits. Details of the estimation can be found in Table 17. Table 17: Benefits of Community Development Property Type

Average Property Value in Year 2013 (discounted)

Number of Properties Affected in Year 2013

Residential Commercial Total

$186,694 $691,612 $273,194

2,080 430 2,510

20-Year Lifecycle Benefits ($ millions, discounted) $22.86 $65.03 $87.89

20-Year Lifecycle Benefits NET of Capitalized Travel Cost Savings ($ millions, discounted) $16.54 $47.05 $63.58

Market Insight Accordingly the development experts of the Salt Lake City Office of Economic Development, there will be 1,170 newly constructed residential units within the impact area of the Sugar House Streetcar Project by the year 2015. Additionally, there will be over 236,000 square feet of newly commercial and retail space. This source does not provide information regarding property prices; however, based on the average residential property value in 2009 and the methodology used in this analysis, those new residential units may capture about $13.1 million of community development benefits and almost three times as much of the amount may be captured in commercial properties. These benefits are intended to be auxiliary to the community development benefits explained above and not included in the BCA. Low Income Mobility Low Income Mobility is the portion of General Trip Cost Savings from low income riders. Low income riders tend to benefit the most from additional transit implementation in urban areas. Assumptions The diversion of low income riders comes from bus, another inexpensive transit option. The table lists the assumption made on the percentage of low income riders on the Sugar House Streetcar. Table 18: Low Income Ridership Variable

Value

Source

Low Income Ridership (Peak)

16.8%

U.S. Census Bureau, 2006-2008 American

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 17

Community Survey, % of Individuals Below Poverty Level for Salt Lake City

Benefits Estimates The Low Income Mobility General Trip Cost Savings are listed in the table below. Low Income Mobility General Trip Cost Savings has already been included in the economic competitive section. Table 19: Low Income General Trip Cost Savings Low Income General Trip Cost Savings, discounted Diverted from Bus

Opening Year

Lifecycle

$28,468

$369,877

Diverted from Walking

$21,284

$276,544

Induced Ridership

$79,284

$1,030,125

Total General Trip Cost Savings

$129,037

$1,676,546

5.4

Sustainability

By reducing local and regional dependency of other form of motorized vehicles and thus improving energy efficiency, the proposed streetcar project generates positive environmental impacts in addition to the roadway impacts that have already been discussed earlier in Section 5.1. Reduction in emission volumes are dependent upon the reduction in vehicle-miles resulting from diversion to the streetcar. The emission rates used in this BCA were by Fehr & Peers from the travel demand model. Per-unit emission costs are applied to the emission reduction volumes due to the reduction in VMT caused by modal shifts. Emissions from streetcar operations are assumed negligible. Assumptions There are five types of emissions being measured; carbon monoxide (CO), volatile organic compounds (VOC), nitrogen oxide (NOx), fine particulate matter (PM 2.5), sulfur dioxide (SO2), and carbon dioxide (CO2). The value of each of these emissions is shown in the table below. Table 20: Emissions Cost Pollutant

Cost per Ton*

Source

Carbon Monoxide (CO)

$530

Victoria Transport Policy Institute

Nitrogen Oxides (NOx)

$5,560

Fine Particulate Matter (PM2.5)

$304,160

Sulfur Dioxide (SO2)

$32,510

Final Regulatory Impact Analysis Corporate Average Fuel Economy for MY 2012-MY 2016 Passenger Cars and Light Trucks, March 2010; inflated to 2010 dollars

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 18

Pollutant

Carbon Dioxide (CO2)

Cost per Ton*

Source

$34

Interagency Working Group on the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866; inflated to 2010 dollars; average over 2010 – 2050

* Converted from source into 2010 dollars.

Benefits Estimates The carbon dioxide produced from the streetcar is subtracted from the sum of vehicle emission cost savings to deliver the net emission savings. Table 21 shows the emissions reductions in tons. Table 22 indicates the monetized values for 2013 and the lifecycle of the project. Total lifecycle emissions reductions savings accrue to $1.4 million. Details of annual emissions reductions and savings are shown in Table 41 and Table 42, respectively. Table 21: Emissions Reductions Opening Year Tons Reduced

Lifecycle Tons Reduced

Carbon Monoxide (CO)

11.15

359.61

Nitrogen Oxides (NOx)

2.02

65.13

Particulate Matter (PM)

0.15

4.69

Sulfur Dioxide (SO2)

0.01

0.25

804.94

25,963.34

Pollutant

Carbon Dioxide (CO2)

Table 22: Emissions Reduction Savings, Opening Year and Lifecycle

Carbon Monoxide (CO)

$4,823

Lifecycle Monetized Emission Cost Savings, discounted $79,523

Nitrogen Oxides (NOx)

$9,165

$151,103

Particulate Matter (PM)

$36,098

$595,145

$206

$3,402

Carbon Dioxide (CO2)

$25,340

$598,418

Total Vehicle Emission Cost Savings

$75,633

$1,427,590

Pollutant

Sulfur Dioxide (SO2)

5.5

Opening Year Monetized Emission Cost Savings, discounted

Safety

An efficient and reliable transit system eliminates the likelihood of surface transportationrelated accidents, as other forms of motorized vehicles are expected to reduce in number. The reduction of accident costs, like other variable costs, is dependant on the reduction of vehiclemiles traveled. The reduction in vehicles on the road is combined with a multiplier or per-unit of cost accident. This multiplier is a weighted average of fatal, injury, property damage only (PDO) accidents.

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 19

Assumptions The reduction of accident costs is $0.01 per VMT. Accident rates for the streetcar are assumed negligible. Table 23: Accident Cost Savings Assumption Variable

Monetized Amount, $/VMT

Source

$0.01

Federal Highway Cost Allocation Study, FHWA, 1997

Accident Cost Savings per Avoided VMT

Benefit Estimates In the analysis, the opening year savings in accident costs were calculated at approximately $3,852 and the net accident savings throughout the study period at $50,051. Table 43 shows the annual results. Table 24: Accident Cost Savings Variable

Opening Year

Lifecycle

Annual VMT Avoided

381,299

9,094,116

Annual Accident Cost Savings, discounted

$3,852

$50,051

6. Summary of Findings and BCA Outcomes The table below summarizes the BCA findings. Annual costs and benefits are computed over a long-run planning horizon and summarized over the lifecycle of the project. The project is assumed to have a useful life of at least 30 years; therefore, that time horizon is used in the analysis. Construction is expected to be completed by 2013, but operating costs continue through the whole horizon of the project. Benefits also accrue during the full operation of the project. Included in the total benefits from State of Good Repair, Economic Competitiveness, Livability, Environmental Sustainability, and Safety – are Fare Revenues. Fare revenues, or Agency Benefits are included because agencies use this income to offset operational costs. While fare revenue is considered a transfer of funds between the riders and the agency, not including it in the benefits could lead to double-counting of operational costs. Details of annual BCA results are shown in Table 44.

Table 25: Overall Results of the Benefit Cost Analysis Variable

7% Discount Rate

3% Discount Rate

Total Discounted Benefits (millions $)

$103.3

$182.3

Total Discounted Costs (millions $)

$62.2

$72.5

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 20

Variable

7% Discount Rate

3% Discount Rate

1.7

2.5

Net Present Value (millions $)

$41.1

$109.9

Internal Rate of Return (%)

10.1%

10.1%

13

13

Benefit / Cost Ratio

Payback Period (years)

Given all monetized benefits, the estimated rate of return is 10.1 percent. At a 7 percent discount rate, a $62 million investment results in over $103 million benefits and with benefit to cost ratio of approximately 1.7. At a 3 percent discount rate, a $72 million investment results in over $182 million in benefits and with the benefit to cost ratio of approximately 2.5. The following table shows the benefits estimates by category. Community development, at $63 million discounted at 7 percent, is the largest benefit category for the Sugar House Streetcar. User cost savings of $24 million discounted at 7 percent is the next largest. Table 26: Benefit Estimates by Long-Term Outcome, 2010 Dollars Long-Term Outcomes

Benefit Categories

7% Discount Rate

3% Discount Rate

$5,107

$7,912

State of Good Repair

Pavement Maintenance Savings

Economic Competitiveness

User Cost Savings*

$24,308,768

$38,210,716

Community Development

$63,582,230

$120,550,110

Low Income Mobility**

$1,676,546

$2,597,375

Environmental Sustainability

Reductions in Air Emissions

$1,427,590

$1,929,928

Safety

Accident Reduction

$50,051

$77,541

Agency Benefits

Fare Revenues

$13,913,027

$21,554,635

$89,120,403

$103,286,774

Livability

Total Benefits

Notes: * travel time savings plus out-of-pocket cost savings; ** benefits of low income mobility are not calculated in the total, as they are a subset of User Cost Savings.

The following table shows the distribution of benefits by US Census block group population. These areas of Salt Lake City and South Salt Lake City have suffered from the current recession. Analysis of US Census data shows the weighted average of the median household income for all block groups (weighted by the number of households) is less than Salt Lake City. Furthermore, the median owner occupied home value is less for the study area than for Salt Lake City overall. The following table shows these socioeconomic variables and the distribution of benefits by 8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 21

block group. The block group that receives the most benefits, Block Group 3, has the lowest median household income. Table 27: Distribution of Benefits and Assessment of Equity Impacts Analysis Zone

Median Household Income ($2010)

Median Owner Occupied Home Value ($2010)

Total Benefits (Millions of 2010 $)

Distribution of Benefits*

Block Group 1

$52,398

$157,233

$22.72

22%

Block Group 2

$49,557

$191,229

$28.92

28%

Block Group 3

$39,043

$144,355

$30.99

30%

Block Group 4

$37,882

$157,619

$20.66

20%

Area Average

$44,656

$162,951

$103.29

100%

Salt Lake City

$48,180

$197,410

NA

NA

* Weighted average of Census block group total household

7. BCA Sensitivity Analysis The BCA outcomes presented in the previous sections rely on a large number of assumptions and long-term projections; both of which are subject to considerable uncertainty. The primary purpose of the sensitivity analysis is to help identify the variables and model parameters whose variations have the greatest impact on the BCA outcomes: the “critical variables.” The sensitivity analysis can also be used to: •

Evaluate the impact of changes in the critical variables, of reasonable departures from their “preferred” values; and

•

Assess the robustness of the BCA and evaluate, in particular, whether the conclusions reached under the “preferred” set of input values are significantly altered by reasonable departures from those values.

The outcomes of the quantitative analysis are summarized in the tables below. The table provides the percentage changes in project NPV and other BCA results associated with variations in variables.

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 22

Sensitivity to the Value of Time The first sensitivity analysis, shown in Table 28, examines the value of time assumption. In the baseline, a value of time (VOT) of $14.07 per hour is used, yielding an NPV of $41.09 million. If the low end of the range for assumed VOT (per USDOT4) is used, the project NPV decreases 11.6 percent to $36.32 million. If the USDOT assumption for the high VOT is used, the project NPV increases 8.1 percent to $44.4 million. Table 28: Quantitative Assessment of Sensitivity, Value of Time Variable

Baseline

Low

High

Value of Time

$14.07

$10.01

$16.88

Total Discounted Benefits ($ millions)

$103.29

$98.51

$106.60

Total Discounted Costs ($ millions)

$62.20

$62.20

$62.20

1.7

1.6

1.7

Net Present Value ($ millions)

$41.09

$36.32

$44.40

Internal Rate of Return (%)

10.08%

9.79%

10.28%

13

13

13

Parameter Value

n/a

-29%

19.99%

Total Discounted Benefits

n/a

-4.62%

3.21%

Total Discounted Costs

n/a

0.00%

0.00%

Benefit / Cost Ratio

n/a

-4.62%

3.21%

Net Present Value

n/a

-11.62%

8.06%

Internal Rate of Return (%)

n/a

-2.89%

1.93%

Payback Period (years)

n/a

0.00%

0.00%

Benefit / Cost Ratio

Payback Period (years) As Percent of Baseline Value

Sensitivity to the Economic Development Benefit The second sensitivity test examines the value of economic development on the project BCA outcomes. As Table 29 shows, if only 25 percent of transit premium is used, the project NPV drops to -$6.6 million, a decrease of 116 percent. However, if only 50 or 75 percent of the transit premium is used, the NPV remains positive. The following table shows the results of this sensitivity test. This analysis shows the results are sensitive to the economic development benefits being realized, however that even with only 50 percent of the projected economic development benefits realized, the project still has a positive return on investment.

4

http://ostpxweb.dot.gov/policy/Data/VOTrevision1_2-11-03.pdf

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 23

Table 29: Quantitative Assessment of Sensitivity, Economic Development 25% of 50% of Variable Baseline Baseline Baseline Economic Development Benefits

75% of Baseline

$63.6

$15.9

$31.8

$47.7

Total Discounted Benefits ($ millions)

$103.29

$55.6

$71.50

$87.39

Total Discounted Costs ($ millions)

$62.20

$62.2

$62.20

$62.20

1.7

0.9

1.1

1.4

Net Present Value ($ millions)

$41.09

-$6.6

$9.30

$25.20

Internal Rate of Return (%)

10.08%

6.3%

7.85%

9.08%

13

17

15

14

Parameter Value

n/a

-75%

-50%

-25%

Total Discounted Benefits

n/a

-46%

-31%

-15%

Total Discounted Costs

n/a

0%

0%

0%

Benefit / Cost Ratio

n/a

-46%

-31%

-15%

Net Present Value

n/a

-116%

-77%

-39%

Internal Rate of Return (%)

n/a

-38%

-22%

-10%

Payback Period (years)

n/a

31%

15%

8%

Benefit / Cost Ratio

Payback Period (years) As Percent of Baseline Value

Sensitivity to the Value of Time The next sensitivity test considers changes in opening year ridership, with ridership growing at the same rate in future years. A 25 percent reduction in baseline opening year ridership reduces the project NPV by 62 percent while a 25 percent increase in baseline ridership increases the project NPV by the same percentage. This is expected as ridership is a key driver of all benefit types. The following table shows details these results. Even with these fluctuations in opening year ridership and the long term impacts they carry on system ridership, the investment still yields a positive return on investment. Table 30: Quantitative Assessment of Sensitivity, Ridership Baseline

25% Reduction in Baseline

25% Increase Over Baseline

2,995

2,246

3,744

Total Discounted Benefits ($ millions)

$103.29

$77.82

$128.75

Total Discounted Costs ($ millions)

$62.20

$62.20

$62.20

1.7

1.3

2.1

Net Present Value ($ millions)

$41.09

$15.63

$66.56

Internal Rate of Return (%)

10.08%

8.37%

11.40%

13

15

12

Variable Opening Year Daily Ridership

Benefit / Cost Ratio

Payback Period (years)

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 24

As Percent of Baseline Value Parameter Value

n/a

-25.0%

25.0%

Total Discounted Benefits

n/a

-24.7%

24.7%

Total Discounted Costs

n/a

0.0%

0.0%

Benefit / Cost Ratio

n/a

-24.7%

24.7%

Net Present Value

n/a

-62.0%

62.0%

Internal Rate of Return (%)

n/a

-17.0%

13.1%

Payback Period (years)

n/a

15.4%

-7.7%

8. Economic Impact Analysis 8.1

Short-Term Employment from Construction Spending

The Minnesota IMPLAN Group’s input-output model has been used to estimate the direct, indirect and induced effects of the Sugar House Streetcar, in terms of employment, value added and labor income. Employment represents full-time and part-time jobs created for a full year. Value added represents total business sales (output) minus the cost of purchasing intermediate products and is roughly equivalent to gross regional/domestic product. Labor income consists of employee compensation (wage and salary payments as well as health and life insurance, retirement payments and any other non-cash compensation) and proprietary income (payments received by self-employed individuals as income). The project is expected to generate 687 job-years during the development phase. It is also expected to create $55 million in value added, including $36 million in labor income. A breakdown of short-term impacts by type of effect (direct, indirect and induced) is provided in Table 31 below. Table 31: Direct, Indirect and Induced Impacts during Project Development Phase

Employment* Labor Income** Value Added**

Spending (Millions of 2010 Dollars)

Direct

Indirect

Induced

Total

$41.0

245 $13.34 $17.71

162 $10.05 $15.70

280 $12.88 $22.05

687 $36.26 $55.46

Note: * Employment impacts from IMPLAN should not be interpreted as full-time equivalent (FTE) as they reflect the mix of full and part time jobs that is typical for each sector. On average, the ratio of FTE to full- and part-time jobs is estimated at 90 percent. **Millions of Dollars

Another method to estimate job years from a new project uses the Council of Economic Advisors’ (CEA) methodology5. This assumes that for every $92,000 of government spending, one job year is created. The following table shows the difference in job year estimates using the 5

Executive Office of the President, Council of Economic Advisers, “Estimates of Job Creation from the American Recovery and Reinvestment Act of 2009,” Washington, D.C., May 11, 2009.

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 25

IMPLAN and CEA methodologies. Note that the employment impacts are lower (445 job years) when using CEA’s rule. Table 32: Job Year Estimates with IMPLAN and CEA Methodology Spending (Millions of 2010 Dollars) IMPLAN *

$41.04

Direct

Indirect

Induced

Total

245

162

280

687

445 CEA 285 160 * Employment impacts from IMPLAN should not be interpreted as full-time equivalent (FTE) as they reflect the mix of full and part time jobs that is typical for each sector. On average, the ratio of FTE to full- and part-time jobs is estimated at 90 percent.

A breakdown of short-term economic impacts (IMPLAN estimates) in terms of employment (job-hours), labor income and value added is provided by quarter in Table 33 below. Table 33: Short-Term Economic Impacts Resulting from Project Development

Period

Spending (Millions of 2010 Dollars)*

Total Job-Hours**

Direct Job-Hours**

Total Labor Income (Millions of 2010 Dollars)

Total Value Added (Millions of 2010 Dollars)

2011 - Q2 2011 - Q3 2011 - Q4 2012 - Q1 2012 - Q2 2012 - Q3 2012 - Q4 2013 - Q1 Total

$5.13 $5.13 $5.13 $5.13 $5.13 $5.13 $5.13 $5.13 $41.04

154,007 154,007 154,007 154,007 154,007 154,007 154,007 154,007 1,232,056

54,885 54,885 54,885 54,885 54,885 54,885 54,885 54,885 439,080

$4.53 $4.53 $4.53 $4.53 $4.53 $4.53 $4.53 $4.53 $36.24

$6.93 $6.93 $6.93 $6.93 $6.93 $6.93 $6.93 $6.93 $55.44

Notes: * includes engineering ($2.7 million), construction ($27.2 million) and vehicle procurement ($11.2 million); ** assuming average weekly hours of 34.5 (Bureau of Labor Statistics estimate).

Table 34 below presents the short-term increase in employment and labor income resulting from the project development in key industries employing low-income people. 372 cumulative job-years (or 54 percent of total job-years) are expected to be created in those industries by the end of 2013, bringing in an additional $15 million in labor income. Table 34: Short-Term Impacts in Key Industries Employing Low-Income People Employment (Job-Years)

Labor Income (Millions of 2010 Dollars)

8

$0.2

Construction

209

$10.5

Retail trade

53

$1.6

Sectors

Agriculture, forestry, fishing and hunting

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 26

Employment (Job-Years)

Labor Income (Millions of 2010 Dollars)

8

$0.4

35

$1.1

20

$0.5

Accommodation and food services

34

$0.7

Personal and laundry services

6

$0.1

372

$15.1

Sectors

Truck transportation Administrative and support and waste management and remediation services Nursing and residential care facilities, home health care services

Total

8.2

Long-Term Employment Impacts

In addition to the short-term job creation effect, the operation and maintenance of the Sugar House Streetcar is expected to generate long-term jobs. Unlike construction, these jobs are permanent and exist throughout the life expectancy of the project. Table 35 presents long-term job creation resulting from operation of the streetcar and the monetary trip cost savings estimated to accrue to riders, i.e. the portion of out of pocket savings that is re-spent by riders. Table 35: Long-Term Job Creation

Estimated incremental spending (Millions of 2010 Dollars) Total jobs *

Annual O&M Expenditures

Annual Cost Savings to Riders

Total

$1.5

$3.7

$5.3

37

48

85

Note: * total long-term job creation is calculated by multiplying the number of jobs associated with the operation and maintenance of the streetcar by the 20 years of operation and then adding the jobs created by the re-spending of out of pocket savings. Using IMPLAN’s social accounting matrix it is estimated that 83 percent of out of pocket savings would be re-spent on goods and services provided in the US.

Because some out of pocket cost components (e.g., fuel) are imported in the study area, the money retailers have to spend to get these commodities is lost to the overall impact (leakage). Overall, only half of out of pocket savings are assumed to result in net impacts. These impacts are derived from IMPLAN’s social accounting matrix (SAM), which shows household expenditures by industry in the study area and the associated indirect and induced effects.

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 27

9. Cost and Benefit Estimates by Year The following section breaks down all the components of the benefits of State of Good Repair, Economic Competiveness, Livability, Sustainability, and Safety annually. These tables provide transparent details for annual estimation. These details allow for the reproduction of calculations for annual ridership, revenues, pavement maintenance savings, user cost savings, community development benefits, emissions reduction cost savings, and accident cost savings. The final table provided shows the total benefits and costs by year used in the benefit-cost metrics. Table 36: Daily Ridership by Source Year

Total Daily Trips

Diverted from Auto

Diverted from Bus

Diverted from Walking

Induced Demand

2013

2,995

816

481

359

1,339

2014

3,049

831

489

366

1,363

2015

3,105

846

498

373

1,388

2016

3,161

861

507

379

1,413

2017

3,218

877

517

386

1,439

2018

3,277

893

526

393

1,465

2019

3,336

909

535

400

1,491

2020

3,396

926

545

408

1,518

2021

3,458

942

555

415

1,546

2022

3,521

959

565

422

1,574

2023

3,585

977

575

430

1,602

2024

3,650

994

586

438

1,631

2025

3,716

1,013

596

446

1,661

2026

3,783

1,031

607

454

1,691

2027

3,852

1,050

618

462

1,722

2028

3,922

1,069

629

471

1,753

2029

3,993

1,088

641

479

1,785

2030

4,065

1,108

652

488

1,817

2031

4,139

1,128

664

497

1,850

2032

4,214

1,148

676

506

1,884

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 28

Table 37: Annual Ridership and Revenue Calendar Year

Project Year

Annual Ridership

Non Discounted Revenue

Revenue Discounted at 7%

2011

1

0

$0

$0

2012

2

0

$0

$0

2013

3

874,540

$1,311,810

$1,070,828

2014

4

890,396

$1,335,595

$1,018,919

2015

5

906,540

$1,359,811

$969,526

2016

6

922,977

$1,384,466

$922,528

2017

7

939,712

$1,409,568

$877,808

2018

8

956,750

$1,435,125

$835,256

2019

9

974,097

$1,461,145

$794,766

2020

10

991,758

$1,487,638

$756,240

2021

11

1,009,740

$1,514,610

$719,580

2022

12

1,028,048

$1,542,072

$684,698

2023

13

1,046,688

$1,570,032

$651,507

2024

14

1,065,666

$1,598,498

$619,925

2025

15

1,084,987

$1,627,481

$589,874

2026

16

1,104,659

$1,656,989

$561,280

2027

17

1,124,688

$1,687,032

$534,071

2028

18

1,145,080

$1,717,620

$508,182

2029

19

1,165,842

$1,748,763

$483,547

2030

20

1,186,980

$1,780,470

$460,107

2031

21

1,208,501

$1,812,752

$437,803

2032

22

1,230,413

$1,845,619

$416,581

20,858,064

$31,287,096

$13,913,027

Total

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 29

Table 38: Annual Pavement Maintenance Savings Year

Annual VMT Avoided

Pavement Maintenance Savings, non-discounted

Pavement Maintenance Savings, discounted at 7%

2013

381,299

$482

$393

2014

388,213

$490

$374

2015

395,252

$499

$356

2016

402,418

$508

$339

2017

409,714

$517

$322

2018

417,143

$527

$307

2019

424,706

$536

$292

2020

432,407

$546

$278

2021

440,247

$556

$264

2022

448,229

$566

$251

2023

456,356

$576

$239

2024

464,630

$587

$228

2025

473,054

$597

$217

2026

481,632

$608

$206

2027

490,364

$619

$196

2028

499,255

$631

$187

2029

508,307

$642

$178

2030

517,523

$654

$169

2031

526,907

$665

$161

2032

536,460

$677

$153

Total

n/a

$11,485

$5,107

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 30

Table 39: Annual User Cost Savings Benefits Non-Discounted

Discounted at 7% Annual User Annual User Cost Savings Cost Savings Benefits to Benefits Street Remaining Auto Car Users Users $878,046 $715,497 $861,044 $688,825 $845,479 $663,658

Year

Total Annual User Cost Savings Benefits, nondiscounted

Total Annual User Cost Savings Benefits, discounted

Annual User Cost Savings Benefits to Remaining Auto Users

Annual User Cost Savings Benefits Street Car Users

2013 2014 2015

$1,952,158 $2,031,562 $2,116,643

$1,593,543 $1,549,869 $1,509,137

$1,075,644 $1,128,653 $1,185,828

$876,515 $902,909 $930,814

2016 2017 2018

$2,206,472 $2,301,353 $2,401,608

$1,470,266 $1,433,167 $1,397,758

$1,246,467 $1,310,799 $1,379,068

$960,005 $990,554 $1,022,540

$830,574 $816,300 $802,630

$639,692 $616,867 $595,128

2019 2020 2021 2022 2023

$2,506,132 $2,618,149 $2,718,652 $2,814,078 $2,933,092

$1,363,170 $1,330,934 $1,291,612 $1,249,484 $1,217,129

$1,450,503 $1,527,430 $1,591,250 $1,648,633 $1,728,108

$1,055,628 $1,090,719 $1,127,402 $1,165,445 $1,204,984

$788,978 $776,468 $755,991 $732,013 $717,103

$574,192 $554,466 $535,621 $517,471 $500,026

2024 2025 2026 2027 2028

$3,058,676 $3,192,651 $3,336,492 $3,501,986 $3,666,565

$1,186,207 $1,157,164 $1,130,185 $1,108,639 $1,084,804

$1,811,758 $1,901,663 $1,999,660 $2,117,206 $2,230,904

$1,246,918 $1,290,987 $1,336,832 $1,384,780 $1,435,661

$702,631 $689,250 $677,354 $670,253 $660,044

$483,576 $467,913 $452,831 $438,386 $424,760

2029 2030

$3,841,606 $4,028,511

$1,062,236 $1,041,044

$2,351,769 $2,482,272

$1,489,837 $1,546,240

$650,284 $641,466

$411,952 $399,578

2031 2032 Total

$4,227,645 $493,505 $55,947,533

$1,021,032 $111,391 $24,308,768

$2,621,999 -$1,165,068 $31,624,544

$1,605,646 $1,658,573 $24,322,989

$633,247 -$262,971 $13,866,183

$387,784 $374,362 $10,442,586

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 31

Table 40: Community Development Benefits in Millions of 2010 Dollars Total Discounted Benefits at 7%

Calendar Year

Project Year

Residential

Commercial

Total

2013

1

$0.39

$0.90

$1.30

2014

2

$0.47

$1.10

$1.58

2015

3

$0.56

$1.31

$1.87

2016

4

$0.64

$1.54

$2.18

2017

5

$0.73

$1.77

$2.50

2018

6

$0.82

$2.01

$2.83

2019

7

$0.91

$2.27

$3.18

2020

8

$1.01

$2.54

$3.55

2021

9

$1.10

$2.83

$3.93

2022

10

$1.20

$3.13

$4.33

2023

11

$1.31

$3.44

$4.75

2024

12

$1.35

$3.62

$4.96

2025

13

$1.39

$3.83

$5.22

2026

14

$1.43

$4.07

$5.50

2027

15

$1.47

$4.32

$5.80

2028

16

$1.52

$4.60

$6.12

2029

17

$1.56

$4.91

$6.47

2030

18

$1.61

$5.24

$6.85

2031

19

$1.66

$5.60

$7.27

2032

20

$1.72

$5.99

$7.71

$22.86

$65.03

$87.89

Total

Note: Benefits in this table are inclusive of user cost savings. To avoid double counting, user cost savings are deducted from the total community development benefits when these are included in the BCA calculations.

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 32

Table 41: Annual Emissions Avoided, tons Year

Carbon Monoxide (CO)

Nitrogen Oxides (NOx)

Particulate Matter (PM)

Sulfur Dioxide (SO2)

Carbon Dioxide (CO2)

2013

11.1

2.02

0.15

0.008

805

2014

11.7

2.12

0.15

0.008

843

2015

12.2

2.22

0.16

0.009

883

2016

12.8

2.32

0.17

0.009

926

2017

13.4

2.43

0.18

0.009

970

2018

14.1

2.55

0.18

0.010

1,016

2019

14.7

2.67

0.19

0.010

1,064

2020

15.4

2.80

0.20

0.011

1,115

2021

16.2

2.93

0.21

0.011

1,168

2022

16.9

3.07

0.22

0.012

1,224

2023

17.8

3.22

0.23

0.012

1,282

2024

18.6

3.37

0.24

0.013

1,343

2025

19.5

3.53

0.25

0.014

1,407

2026

20.4

3.70

0.27

0.014

1,474

2027

21.4

3.87

0.28

0.015

1,544

2028

22.4

4.06

0.29

0.016

1,618

2029

23.5

4.25

0.31

0.016

1,695

2030

24.6

4.46

0.32

0.017

1,776

2031

25.8

4.67

0.34

0.018

1,860

2032

27.0

4.89

0.35

0.019

1,949

Total

359.6

65.13

4.69

0.251

25,963

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 33

Table 42: Annual Emissions Cost Savings, Discounted 2010 Dollars at 7% Year

Carbon Monoxide (CO)

Nitrogen Oxides (NOx)

Particulate Matter (PM)

Sulfur Dioxide (SO2)

Carbon Dioxide (CO2)

2013

$4,823

$9,165

$36,098

$206

$25,340

2014

$4,723

$8,974

$35,344

$202

$25,774

2015

$4,624

$8,786

$34,606

$198

$26,216

2016

$4,527

$8,603

$33,883

$194

$26,665

2017

$4,433

$8,423

$33,175

$190

$27,122

2018

$4,340

$8,247

$32,482

$186

$27,586

2019

$4,250

$8,075

$31,803

$182

$28,059

2020

$4,161

$7,906

$31,139

$178

$28,540

2021

$4,074

$7,741

$30,488

$174

$29,029

2022

$3,989

$7,579

$29,851

$171

$29,526

2023

$3,905

$7,421

$29,228

$167

$30,032

2024

$3,824

$7,266

$28,617

$164

$30,546

2025

$3,744

$7,114

$28,019

$160

$31,070

2026

$3,666

$6,965

$27,434

$157

$31,602

2027

$3,589

$6,820

$26,861

$154

$32,143

2028

$3,514

$6,677

$26,299

$150

$32,694

2029

$3,441

$6,538

$25,750

$147

$33,254

2030

$3,369

$6,401

$25,212

$144

$33,824

2031

$3,298

$6,267

$24,685

$141

$34,403

2032

$3,230

$6,137

$24,170

$138

$34,993

Total

$79,523

$151,103

$595,145

$3,402

$598,418

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 34

Table 43: Annual Accident Cost Savings, Discounted 2010 Dollars at 7% Year

Annual VMT Avoided

Annual Accident Cost Savings, non-discounted

Annual Accident Cost Savings, discounted

2013

381,299

$4,719

$3,852

2014

388,213

$4,805

$3,665

2015

395,252

$4,892

$3,488

2016

402,418

$4,981

$3,319

2017

409,714

$5,071

$3,158

2018

417,143

$5,163

$3,005

2019

424,706

$5,256

$2,859

2020

432,407

$5,352

$2,721

2021

440,247

$5,449

$2,589

2022

448,229

$5,548

$2,463

2023

456,356

$5,648

$2,344

2024

464,630

$5,750

$2,230

2025

473,054

$5,855

$2,122

2026

481,632

$5,961

$2,019

2027

490,364

$6,069

$1,921

2028

499,255

$6,179

$1,828

2029

508,307

$6,291

$1,740

2030

517,523

$6,405

$1,655

2031

526,907

$6,521

$1,575

2032

536,460

$6,639

$1,499

Total

n/a

$112,553

$50,051

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 35

Table 44: Benefit Cost Analysis Results by Calendar year in Millions of Dollars Calendar Year

Project Year

Total Undiscounted Benefits

Total Undiscounted Costs

Undiscounted Net Benefits

Discounted Net Benefits at 7%

Discounted Net Benefits at 3%

2011

1

$0.00

$24.16

-$24.16

-$22.58

-$23.46

2012

2

$0.00

$24.16

-$24.16

-$21.11

-$22.78

2013

3

$2.99

$7.17

-$4.17

-$3.40

-$3.82

2014

4

$3.50

$1.50

$2.00

$1.53

$1.78

2015

5

$4.09

$1.50

$2.59

$1.85

$2.23

2016

6

$4.76

$1.50

$3.26

$2.18

$2.73

2017

7

$5.53

$1.50

$4.03

$2.52

$3.28

2018

8

$6.42

$1.50

$4.92

$2.87

$3.88

2019

9

$7.44

$1.50

$5.94

$3.24

$4.55

2020

10

$8.60

$1.50

$7.10

$3.62

$5.28

2021

11

$9.92

$1.50

$8.42

$4.01

$6.09

2022

12

$11.44

$1.50

$9.94

$4.42

$6.97

2023

13

$13.17

$1.50

$11.67

$4.85

$7.94

2024

14

$14.55

$1.50

$13.05

$5.07

$8.63

2025

15

$16.19

$1.50

$14.69

$5.34

$9.43

2026

16

$18.05

$1.50

$16.55

$5.62

$10.31

2027

17

$20.17

$1.50

$18.67

$5.93

$11.30

2028

18

$22.59

$1.50

$21.09

$6.26

$12.39

2029

19

$25.35

$1.50

$23.85

$6.61

$13.60

2030

20

$28.51

$1.50

$27.01

$7.00

$14.95

2031

21

$32.11

$1.50

$30.61

$7.41

$16.45

2032

22

$36.24

$1.50

$34.74

$7.86

$18.13

$291.62

$84.00

$207.62

$41.09

$109.87

Total

8403 Colesville Road, Silver Spring, Maryland 20910 USA Telephone: (240) 485-2600 • Fax: (240) 485-2635 • http://www.hdrinc.com Page | 36