Prioritization Methods For Multimodal Investments, Including Return on Investment Project Overview and Initial Research

1. Prioritization Methods For Multimodal Investments, Including Return on InvestmentProject Overview and Initial Research9/13/07 James Lambert Megan Kersh Asad Saqib Matthew Schroeder Ward Williams

2. Project Overview and Scope • Purpose: Develop and test prioritization methods for multimodal investments • Paying special attention to monetization of return on investment • No systematic quantitative comparison of predicted and actual benefits from past multimodal investments • However, will identify and review studies for the purposes of understanding sources of uncertainty for multimodal transportation

3. Deliverables • Review of literature • Databases for test cases • Metrics for prioritization • Methods for return on investment • Automated Excel workbook • Various products of on-call consulting • Interim and final reports and project website

4. U.S. Government Accountability Office Report 2005 • Measuring and calculating costs and benefits can be difficult • Predicted costs and usage are not always accurate • Options to make more informed decisions • Improve quality of data and transportation modeling • Improve cost-benefit analysis methods • Evaluate outcomes of completed projects • Implement incentives/mandates to increase use of analytic info U.S. Government Accountability Office – Report to National Committees January 2005 – Highway and Transit Investments: Options for Improving Information on Projects’ Benefits and Costs and Increasing Accountability for Results http://www.gao.gov/new.items/d05172.pdf

5. Methods Used to Evaluate • Cost Benefit Analysis • Risk/Sensitivity Analysis • Return on Investment (ROI) • Present Value • Software – HEAT, STEAM, MicroBENCOST, StratBENCOST, STEAM, HDM 4, NET_BC, and HERS

6. Cost Benefit Analysis • California’s Life-Cycle Benefit/Cost Analysis Model • For highway and transit projects • Given inputs, produce summary below

7. Cost Benefit Analysis

8. Cost Benefit and Risk Analysis -Washington • Transportation improvement between two cities • Evaluating 3 alternatives • Use Cost/Benefit Analysis and Risk Analysis predicting the next 30 years • Net Present Value • Internal Rate of Return • Cost/Benefit Ratio • Opportunity Cost • Timing

9. The three alternatives to the base case are as follows: Cost Benefit and Risk Analysis -Washington • Alternative 1 – The Build Alternative. This scenario is to construct a 6 mile limited access highway to connect roads. • Alternative 2 – Widening of road. This scenario would involve the addition of another general purpose traffic lane. • Alternative 3 – Transit Enhancement. This scenario would involve the building of a light rail system This would be the first direct east-west transit link between the two cities.

10. Estimating Transportation Improvements Benefits

11. Detailed Tangible Benefits

12. Detailed Benefits, Costs, and Net Benefits

13. Examples of Cost Benefit Analysis/Revenue Generation • The Saginaw Metropolitan Area Transportation Study (SMATS) 2035 Metropolitan Transportation Plan (MTP) identifies the significant transportation system improvements that are proposed for development over the next 28 years. • The Federal regulations state that the MTP must be financially constrained and that it must include a financial plan that shows how projects can be implemented. • In essence, this requires identifying the projects that can be implemented using current revenue and those that will require proposed revenue sources, while also demonstrating that the existing system can be adequately operated and maintained. • This process is intended to eliminate unrealistic projects that are simply a “wish list” that cannot be built . The resulting plan is “financially constrained” in the sense that it includes only those projects for which there will be sufficient revenue to complete. • Long Range Plan Revenue Estimate Methodology explains the process that MDOT (Michigan Department of Transportation) used to project the revenues. http://www.saginawcounty.com/SCPlanning/Pdf%20Documents/2035_mtp_chapter_6_financial_analysis.pdf

14. Examples of Cost Benefit Analysis/Revenue Generation http://www.saginawcounty.com/SCPlanning/Pdf%20Documents/2035_mtp_chapter_6_financial_analysis.pdf

15. Examples of Cost Benefit Analysis/Revenue Generation

16. Examples of Cost Benefit Analysis/Revenue Generation

17. Examples of Cost Benefit Analysis/Revenue Generation

18. Transbay Terminal/Caltrain Downtown Extension/Redevelopment Project • Provided a financially constrained Regional Transportation Plan (RTP). • The proposed project has three major components: • A new, multi-modal Transbay Terminal on the site of the present Transbay Terminal • Extension of Caltrain commuter rail service from its current San Francisco terminus at Fourth and Townsend Streets to a new underground terminus underneath the proposed new Transbay Terminal • Establishment of a Redevelopment Area Plan with related development projects, including transit-oriented development in the vicinity of the new multi-modal Transbay Terminal. http://www.transbaycenter.org/TransBay/uploadedFiles/Documents/Environmental/Final_EIS-EIR/FEIS_Ch6.pdf

19. Rebuilt Transbay Terminal and the underground Caltrain Extension would cost between $1.898 and $2.141 billion in 2003 dollars • The financial plan has been formed to address costs and revenues in Year of Expenditure (YOE) dollars. • Project cost estimates are originally prepared in current-year dollar amounts (such as 2003 dollars) • In the financial analysis, these costs are escalated by an assumed inflation rate to calculate what the future project costs are likely to be in the year that the construction activities will occur. • The resulting Year of Expenditure cost for this alternative is $2.083 billion (YOE).

20. Transbay Terminal/Caltrain Downtown Extension/Redevelopment Project

21. Transbay Terminal/Caltrain Downtown Extension/Redevelopment Project

22. Transbay Terminal/Caltrain Downtown Extension/Redevelopment Project The Transbay Terminal is expected to have a positive cash flow on the order of $4 to $5 million per year in constant 2003 dollars

23. Computer Modeling • TransDec • For multicriteria and multimodal investment analysis • “TransDec provides a framework within which to define the problem, select measures appropriate to the problem, and evaluate results using the weighted emphasis placed on project objectives.” • “Development of a Computer Model for Multimodal, Multicriteria Transportation Investment Analysis”, Research Results Digest, September 2001, Number 258. http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_rrd_258.pdf

24. Computer Modeling • HEAT - analytical software used by Georgia and Montana • To determine costs and benefits of highway projects • Can also do test scenarios • Multi-Region impact information • Calculates commodity specific impacts

25. Methods for identifying future needs for transportation infrastructure investment. Methods for identifying future needs for transportation infrastructure investment. Percent of states (n = 46) Percent of states (n = 46) Chi-square (df = 3) Chi-square (df = 3) Current Methodologies Utilized Mode & system non-network models Mode & system non-network models 67 67 .87 .87 Benefit-cost analysis Benefit-cost analysis 48 48 1.09 1.09 Mode specific network models Mode specific network models 26 26 7.27* 7.27* Passenger network model, but no freight model Passenger network model, but no freight model 24 24 1.76 1.76 Regional economic impact models Regional economic impact models 24 24 2.46 2.46 Single integrated network model Single integrated network model 15 15 3.88 3.88 Separate passenger & freight network models Separate passenger & freight network models 9 9 1.07 1.07 Other: HPMS package, system-wide model is under development. Person trip model, separate transit model. Policies. Public involvement Regional prioritized needs. REMI for economic impact analysis. Other: HPMS package, system-wide model is under development. Person trip model, separate transit model. Policies. Public involvement Regional prioritized needs. REMI for economic impact analysis. 13 13 .00 .00 Differences significant at the .10 level. Differences significant at the .10 level. Differences significant at the .10 level.