Dr Patrick Tsai

Senior Research Analyst- The University of Sydney

Rail Service Analyst- Transport for NSW

Presented at Informa Light Rail Future 2014

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!  Introduction !  Costs of Light Rail !  Benefits of Light Rail !  What’s Next for Cost Benefit Analysis !  Case Study !  Conclusions

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!  Light rail is usually expensive !  Low cost-recovery rate from box revenue !  Evaluation of economic benefits !  Current practice of Cost Benefits Analysis (CBA) !  Future direction of CBA !  How to get the Benefit Cost Ratio (BCR)

sensible?

3 Source: Patrick Tsai (2010)

!  Capital cost ◦  Construction cost: $15-$120 million per km in the US ◦  Alignment- grade, elevated, or underground ◦  Project management and delivery costs ◦  Property acquisition ◦  Traffic impact and business disruption during construction

!  Operating cost ◦ Operating cost per km: $9.7-$90.5 million ◦  Avg cost-recovery rate at 13.4% in the US (Higgis and

Ferguson, 2012) ◦ Over-estimated demand; under-estimated cost

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!  Customer/transport benefits ◦ Travel time savings for public transport users ◦ Travel time savings for car users ◦ Usually the largest component of economic benefits ◦ Determined by value of time; vary with: !  Travel time !  Trip purpose !  Travel mode !  Socio-demographics !  etc ◦  Implication of fixed travel time budget

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!  Operating benefits ◦  Increased revenue from mode shift ◦ Reduced costs for current systems ◦  Improved operating efficiency ◦ Avoided infrastructure costs

!  Environmental/social benefits ◦ Reduced emissions ◦ Reduced accident (from safety improvement)

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!  Health benefits ◦ Health benefits from active travel ◦ $1.68 per km walking and $1.12 per km cycling

(Mulley et al., 2013)

!  Social inclusion benefits ◦ Willingness to pay for an increased trip ◦ Mean valuation of an extra trip estimated at $19.3 ◦ Lower income people have higher value of an

additional trip (Stanley et al., 2011)

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!  Wider economic benefits ◦ Agglomeration economies !  The advantages derived through the spatial

concentration of economic activities ! New transport infrastructure provide better

accessibility and hence improve business productivity !  Take account of 10%-21% of economic benefits for

transport investment appraisals in the UK (Graham, D., 2007)

!  Already included in the UK WebTAG !  Currently not in the Australian national guidelines but

will be included in the guidelines

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!  Wider economic benefits ◦ Land value uplift ! New public transport infrastructure! better

accessibility! higher real estate value !  Price premium ranged from insignificant to 20% !  Larger scale network connecting to business centres

usually provides higher price premium !  Sydney Inner West LRT: price higher by 0.58% on

average for every 100m closer to LRT stations (preliminary research finding by Tsai and Mulley, 2014)

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Tsai and Mulley (2014) 10

!  Sydney CBD and South East Light Rail ◦ 12km; 20 stations ◦ Construction to start in 2014; ◦ Expected to open in 2019-20 ◦ Total costs 1.6 billion ◦ Total benefits 4 billion ◦ BCR: 2.5

Source: CBD AND SOUTH EAST LIGHT RAIL BUSINESS CASE SUMMARY (2013) 11

2.2 billion 55%

0.26 billion 6%

0.33 billion

8%

0.71 billion 18%

0.31 billion 8%

0.22 billion 5%

Economic benefits of Sydney CSELR

PT user benefits

Road user benefits

Pedestrian benefits

Operating benefits

Social benefits

WEB

Source: CBD AND SOUTH EAST LIGHT RAIL BUSINESS CASE SUMMARY (2013)

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!  23km Light Rail at grade (preferred route) !  Capital cost: 2.1 billion !  Operating cost: 390 million p.a. !  Total cost at 2012 value: 1.1 billion !  Total benefits: 3.6 billion !  BCR:3.3

Source: Pre-feasibility and Rapid Economic Appraisal Report (2012) 13

Source: Pre-feasibility and Rapid Economic Appraisal Report (2012)

0.6 17%

0.7 20%

1.4 39%

0.05 1%

0.8 23%

Economic benefits of Sunshine Coast LRT

Transport benefits

Avoided infrastructure costs

WEB

Social benefits

Residual value

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!  Generally, economic benefits of Light Rail could outweigh the cost

!  Economic benefits vary substantially with project types, locations, current transport options…etc

!  Travel time savings may not be the largest component of economic benefits

!  Health benefits have not yet been considered !  More guidelines are required for WEB to ensure

consistency

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Thanks for your attention

Q&A

Dr. Patrick Tsai patrick.tsai@transport.nsw.gov.au

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