manhattan east side access project second avenue subway pea team: jay horwitz bryan mullins muyiwa...

Manhattan East Side Access ProjectSecond Avenue Subway

PEA Team:

Jay Horwitz

Bryan Mullins

Muyiwa Teriba May 3, 2004

2

Overview of Presentation

I. Introduction

II. Funding and Finance

III. Costs

IV. Benefits

V. Synthesis

3

INTRODUCTION

4

What is SAS?

• 8.5 mile subway project from 125th Street to the financial district in Lower Manhattan

• Will include 16 new stations along path under Second Avenue

• Purpose to provide faster travel for current transit riders and relieve severe overcrowding conditions on Lexington Avenue line

• Construction time estimated to start in 2004 and last 17 years

5

On the Table for Nearly a Century

• Population density of East Side increased dramatically at turn of century

• Proposals to build north-south subway line along Second Avenue date back to 1929

• During 1960s a two-track subway line from the Bronx to Lower Manhattan resulted in construction of several tunnel segments

• However, construction suspended in 1970s due to City’s financial crisis

6

Transportation Problems have Renewed Interest in SAS Proposal

• Lexington Avenue express service (4/5/6) operates with passenger loads that exceed New York City Transit guidelines

• Overcrowding expected to increase

• Access (1/4 to 1/2 mile) to subway service is lacking on farEast Side of Manhattan

• Overcrowding lengthens trip times and causes service delays

• Majority of rush hour buses are crowded and travel speeds are slow due to traffic congestion

• Severe traffic congestion on local streets and FDR Drive contribute to New York City’s inability to meet National Ambient Air Quality Standards

7

SAS Wins Favor Among Officials, Community Groups, General Public

• No-Build Alternative: Examined future impacts of inaction

• Transportation System Management (TSM) Alternative:Bus service improvements

• Build Alternative 1: New subway line under Second Avenue from 125th Street to 63rd Street with connection to Lower Manhattan via Broadway subway line

• Build Alternative 2: 125th Street to 63rd Street subway line with addition of light rail transit line linking Lower East Side to Union Square and Lower Manhattan

• Build Alternative 3: Full-length Second Avenue Subway from125th Street to financial district in Lower Manhattan

8

Map of SAS and System Interconnection

Source: MTA MESA Study, “Supplemental Draft Environmental Impact Statement,” April 2001

9

FUNDING

10

Project Funding: Preliminary Consideration and Commitment

Sources of Funding ($ in millions)

Federal Government $4,984

New York City $530

Coliseum Sale Proceeds $145

Investment Income $245

Triborough Bridge and Tunnel Authority $60

Carryover from Prior Capital Program $225

Subtotal $6,189

Debt Restructuring Initiative $3,011

Revenue Bonds $8,262

Total $17,462

Source: MTA, FTA

11

Where are we in the process?

2001 2002 2003 2004 2005

Environmental Analyses

Preliminary engineering

Final design

Construction

X X

X

X

?

X: Federal approval received Decision Pending

2021

Est. 17 years

X

12

COSTS

13

Costs Overview

• $1.05 billion for 2000-2004 Capital Program

• $728 million for 2000-2004 Capital Program personnel costs

• $16.8 billion total capital cost from 2004-2021

– $16.18 billion for project management, design, construction, right-of-way

– $624.9 million for rolling stock

• $348.6 million annual operating cost starting in 2021 over 50 years at 2004 present value of $2.8 billion

• $1.13 billion cost per mile

• $210 incremental cost per incremental rider*

* This figure is exceptionally high because of the difficulty of attracting new transit riders in a market in which the majority of commuters already use transit.Source: Annual Report on New Starts 2003 (November 2002), LowerManhattan.info

14

Elements of $16.8 bn Total Capital Cost

• Northbound and Southbound twin tunnels (8.5 miles each)

• 16 new stations

• 30-35 fan plants

• Numerous pump rooms

• Electrical power substations

• 1-2 new or expanded train storage and maintenance yards

• Connections to existing stations

Source: PEA Team Research

15

2000-2004 Capital Program Allocates $1.05 Billion for SAS

Preliminary Engineering

Final Design

Construction$625,000,000

$270,337,039

$154,662,961

Source: MTA Capital Construction, March 2004

16

2000-2004 Capital Program Also Yields Personnel Costs

$728 mn(average annual increase of 3.8%)

2000 2001 2002 2003 2004

Source: Metropolitan Transit Authority Note: The MTA did not disclose assumptions regarding changes in staffing levels

17

Cost-Per-Mile of Major Transit Projects Shows Magnitude of SAS

1970s 1990s 2004-2021

Source: Common Patterns, PEA Team Research

$81 mn

1980s

$152 mn

$197 mn

$300 mn

$1.13 bn

SAS

2001 Dollars

Bay Area Rapid Transit

MARTA(Atlanta)

D.C.Metro

Los Angeles Red Line

18

Cost Timeline

* $16.8 bn figure distributed evenly over 17 years; PV of annuity formula using 17 years, 5% interest rate** Present value discounted back 17 years to 2004 at 5% interest rateSource: PEA Team Research

2000Capital

ProgramStart

2071

$348,600,000 Annual Operating Cost Over 50 YearsPV 2004** =

$2,776,598,933

2004SAS

ConstructionStart

2021SAS

Opening

$16,804,900,000Total Capital Cost

PV 2004* = $11,144,679,758

$1,778,000,000Capital

Program(Sunk Cost)

PHASE 3PHASE 2PHASE 1

19

Baseline Cost Figure

ITEM COST*

Total Capital Cost from 2004-2021 $11,144,679,758

Annual Operating Cost from 2021-2071 $2,776,598,933

BASELINE $13,921,278,691

* Figures in 2004 PV dollarsSource: Annual Report on New Starts 2003 (November 2002), LowerManhattan.info, PEA Team Research

20

BENEFITS

21

Benefits (Qualitative Overview)

• New York City’s Economic Priorities:– Retain/Expand diversified workforce– Improve competitiveness in economic cycles– Improve growth in outer boroughs

• Improved commute to Manhattan, which generates more than one-third of wages and one-quarter of jobs in tri-state region

• 70,000 full-time jobs created during SAS construction

• 600,000 riders will experience shorter commutes/time savings

• Auto trips reduced by 30,000 per day

• Improved security of transit networkSource: The Economic Benefits of the Second Avenue Subway, December 2003, Regional Plan Association; Transportation Choices and the Future of the New York City Economy 2003/2004, Partnership for New York City

22

Benefits (Quantitative Overview)

• $7 billion gain in wages

• $7.4 billion gross increase in city’s productivity

• $1.26 billion in benefits from time savings

• $319.1 million in ridership

Source: The Economic Benefits of the Second Avenue Subway, December 2003, Regional Plan Association; Transportation Choices and the Future of the New York City Economy 2003/2004, Partnership for New York City

23

Methodology for Estimating Benefits

+

+


Category of Benefits # trips Time saved Days $/hr Hours saved Total ValueTime Savings Those who Switch to SAS 591,000 10 300 30 98,500.00 $886,500,000

Those who remain on Lex 214,000 5 250 30 17,833.33 $133,750,000Overcrowding Avoidance Those who Switch to SAS 110,000 2 250 30 3,666.67 $27,500,000

Those who remain on Lex 214,000 2 250 30 7,133.33 $53,500,000Reliability gained Both SAS and LEX users 81,000 5 250 30 6,750.00 $50,625,000Transfers Avoided Users travelling West 142,000 5 300 30 11,833.33 $106,500,000

Totals 1,352,000 $1,258,375,000

Traveller Benefits

includes job growth, commercial development and residential developmentEstimates low $11,130,000,000

Medium $12,620,000,000High $14,120,000,000Mean $12,623,333,333 over 50 years

Economic Development Benefits

Annual Fare Box Revenues $319,100,000Fares

24

Total Benefits• $21.02 billion comprising:

– $12.62 billion in economic development benefits including job growth, commercial development and residential development

– $8.4 billion in transportation benefits including time savings and ridership

**Figures cover a 50-year period


40%

60%

Economic Development Transportation Benefits

25

Benefits CritiqueJobs

• 70,000 jobs from SAS over 17 years worth $1,000,000 per job

– No explanation of where these jobs will come from• New jobs, or job movement/reallocation?• What kind of jobs? Value?

– 22,500 direct construction jobs estimated, majority of which will be short term in nature

– No reference to jobs lost resulting from construction• No analysis of net jobs created (some jobs will be

permanently lost due to subway, e.g. taxi drivers)


26

Benefits Critique

Time Savings

• Estimated $1.26 billion in time savings

– No discussion or analysis of how much of this time savings value will be translated into dollars

– No estimation of “net” time savings taking into account time wasted as a result of delays caused by construction

– Time savings valued at today’s estimation to time value


27

Benefits Critique

Changes to “Time Savings” Benefits





Totals 1,352,000 $1,258,375,000

Traveller Benefits




Totals 1,352,000 $838,916,667

Traveller Benefits

vs.

28

SYNTHESIS

29

Context: This Project Must Inevitably Compete for Scarce Resources

• Total New York City budget FY2005: $46.9 billion– SAS equals a non-trivial fraction

• Financial pressure on City anticipated– Budget deficits expected to range from $3.7 billion to $4.2 billion

annually from 2006-2008– Debt service increases from $2.4 billion in 2004 to $4.3 billion in

2008

• However, New York City pays $11.4 billion more in federal taxes and $2.6 billion more in state taxes than it receives in funding*

* 1999 FY analysis

30

What should we count?

• Depending on how you look at who has standing, things change:– Do federal dollars mean national standing?– Or, is it New York City’s turn at the federal transit pot?

• New real estate development?– Where is the marginal benefit?

• Jobs?– Construction? Business relocation?– Looks like redistribution of federal funds

• Nearly $2 billion in sunk costs?– Planning, design and assessment are all expensive; these costs

cannot be recouped if project is a “no go”

31

What is an appropriate discount rate?

• OMB Guidelines (public investment) = 7%– “approximates marginal pre-tax rate of return on an average

private investment”

• U.S. Treasury bond rate (30 year) = 5.2%

• New York City municipal bond rate = 6.5%

• This is a long-lived project with high up-front costs—it matters

Source: Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs, OMB 1992, US Treasury Bond Rate for April 2004; NYC Municipal Bond rate based on Nuveen Bond Fund

32

Sensitivity Analysis: Discount Rate

Focus on transportation benefits:

(in millions)

Base case: as described above w/: (1) even distribution of capital costs over 17 years, (2) zero growth in operating costs, (3) only transportation benefits (60,000 incremental riders)Conservative case: (1) front loads construction costs, (2) zero growth in operating costs, (3) conservative rider forecasts and time savings benefits (15,000 incremental riders)

(in millions)

$(40,000.00)

$(20,000.00)

$-

$20,000.00

$40,000.00

$60,000.00

$80,000.00

$100,000.00

$120,000.00

$140,000.00

Base

Conservative case

(in millions)

33

Sensitivity Analysis: Putting the Core Assumptions to the Test

• Ridership assumptions/forecast– Number of incremental riders (typically 150% overestimated)– Subway shift (tight travel corridors in New York City)

• Development assumptions– Incremental job creation: these remain a non-factor

• Capital costs– Time distribution matters– Overruns: time and cost (will focus on project creep)

34

Comparing Proponents’ Research with Our Base Case

$-

$2,000,000,000.00

$4,000,000,000.00

$6,000,000,000.00

$8,000,000,000.00

$10,000,000,000.00

$12,000,000,000.00

$14,000,000,000.00

$16,000,000,000.00

$18,000,000,000.00

Costs Benefits

$-

$10,000,000,000.00

$20,000,000,000.00

$30,000,000,000.00

$40,000,000,000.00

$50,000,000,000.00

$60,000,000,000.00

Costs Benefits

Base case: present value estimates

Optimistic case: present value estimates

Notes 50 years at 5.2 percent, dead weight loss15% of capital construction costs

Benefits represent 60 percent of costs!

35

Summary: What’s going on here?

• Applying discount rates uniformly:– Makes costs look better, however…– This is very expensive even relative to comparable transit

projects

• Standing is important; we chose to ignore economic development because:– Difficult to estimate magnitude of effect

• Studies did not employ reasonable estimation techniques– Very difficult to isolate marginal effects– Given national standing, marginal effects even less likely to

appear

36

More Detailed Analysis Should Examine

• Air quality improvements from mass transit

• Quality of life: transportation options

• Social equity: distributional weighting according to rider income distribution (Harlem, Lower East Side); access to CBDs

• Value added of increased multimodal interconnection with other regional transportation

• Real estate squeeze on low-income areas—a chronic problem in New York City

manhattan east side access project second avenue subway pea team: jay horwitz bryan mullins muyiwa...

Documents

lower manhattan slide

funding slide

introduction slide

street subway line

new subway line

synthesis slide

fta slide

subway service