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Measurement of Transit Benefits
Click HERE for graphic. . . Measurement of Transit Benefits Final Report June 1993 Prepared by Edward Beimborn and Alan Horowitz with Julie Schuetz and Gong Zejun Center for Urban Transportation Studies University of Wisconsin-Milwaukee Milwaukee, Wisconsin 53201 Prepared for University Research and Training Program Office of Technical Assistance and Safety Urban Mass Transportation Administration Washington, D.C. 20590 DOT-T-93-33 . ABSTRACT It is the objective of this report to look at benefits of public transit in a broad way to gain a better understanding of how their measurement can be used to assist in making decisions. The report provides a comprehensive view of the range of consequences of transit services and indicates various methods that can be used to assess their benefits. Benefit assessment is done to make decisions, and a general discussion is given of how to view benefits for that purpose. Consequences of transit are illustrated through the use of a benefit tree. Transit service provides an alternative means of travel, results in changes of trip making by automobile and transit, affects land-use activity and leads to direct and indirect employment. These effects lead to still further consequences. Methods are provided for measuring benefits. These methods include an enhanced consumer surplus approach to measure travel related changes and a land-use redistribution model to identify travel benefits of land-use changes. Techniques for air pollution assessment and for employment impacts are also given in detail. ii Measurement of Transit Benefits . TABLE OF CONTENTS Page Title Page i Abstract ii Table of Contents iii Acknowledgements vi Part I: INTRODUCTION 1 A. Background 1 B. Objectives 4 Part II: PRINCIPLES AND ISSUES 5 C. Basic View of Benefits 5 Economic versus noneconomic evaluation of benefits 7 Decision basis for benefit measurement 8 National versus regional viewpoints 9 Local versus areawide benefits 10 Definition of null alternative 11 Perceived versus measured benefits 13 Double counting 14 Success should be consistent with positive benefits 16 D. Technical Issues in Benefit Measurement 17 Size of the universe 17 Aggregation of benefits 17 Standardization 18 E. Interpretation of Benefits 19 Break-even analysis 19 Sensitivity analysis 19 Analysis for contingencies 20 Impact and incidence analysis 21 Implementation feasibility 21 Qualitative analysis 21 Measurement of Transit Benefits iii . TABLE OF CONTENTS (continued) Page Part III: A FRAMEWORK FOR BENEFIT ANALYSIS 22 F. Consequences of Transit 22 The benefit tree 23 Transit as an alternative -- branch 1 26 Travel related consequences -- branches 2 and 3 30 Land-use and economic consequences 36 Transit supply consequences 40 Use of benefits tree -- an example 41 G. State of the Practice 46 Benefit measurement in transit studies 46 Transit as an alternative 47 Travel related consequences 47 Land-use/economic consequences 52 Transit supply 54 Local use of benefit measures 55 Issues of debate 55 Role of political process 58 Part IV: MEASUREMENT TECHNIQUES 60 Overview 60 H. Travel Related Benefits 64 Measuring travel related benefits 64 Essential ingredients 65 Travel benefits as measured by an enhanced consumer surplus 67 Disutility measures 68 Calculation of enhanced consumer surplus 71 A numerical example 74 Relationship of enhanced consumer surplus to time savings 77 Value of time 78 Market segmentation 79 Aggregation issues 79 Enhanced consumer surplus without a travel forecasting model 80 Technical issues 83 Avoiding double counting 88 iv Measurement of Transit Benefits . TABLE OF CONTENTS (continued) Page Benefits not included in consumer surplus 88 I. Land-use Effects of Transit 90 Introduction 90 Background on residential location models 91 Elastic-demand equilibrium 95 Land-use forecasting procedure 96 Benefits assessment 97 An example - Wausau, Wisconsin 100 J. Air Pollution Reduction Benefits 107 Methods of measuring benefits 108 Technical issues 110 K. Employment Benefits and Impacts 113 Input-output analysis 114 Strengths and weaknesses 124 The direct approach 124 Productivity of transit investments 125 Part V: RECOMMENDED PRACTICE 126 Major Findings 126 Recommended Procedures 128 Bibliography 131 Appendix: Blank Benefit Tree 141 Measurement of Transit Benefits v . ACKNOWLEDGEMENTS This project was conducted under the sponsorship of a University Research and Training grant from the Federal Transit Administration of the U.S. Department of Transportation. The opinions expressed are those of the authors and not necessarily those of the project sponsor. Many organizations and people provided useful input into this report, either directly or through our review of their work. 'This includes planners and officials in a variety of cities who helped us to understand local decision making procedures. We would like to thank Norm Paulhus, Marina Drancsak, Duane Weeks, and Brian Cudahy of the U.S. Department of Transportation for their helpful suggestions and comments. We would also like to acknowledge the helpful suggestions of Richard Marshment of the University of Oklahoma and Stephen J. Andrle of the Transportation Research Board. Primary authorship of this report was by Edward Beimborn, Alan Horowitz, Julie Schuetz and Gong Zejun. Word processing and report organization was done by Linda Rupp. iv Measurement of Transit Benefits . PART I: INTRODUCTION A. Background In recent years there has been an increased interest in public transit at the local level. Many urban areas have undergone substantial reviews of their local transit services and developed ambitious plans for expanding service and for constructing new fixed guideway facilities. This increased local interest often coincides with budget shortages at all levels of government and with increased. automobile ownership and usage. Under such conditions this support for transit usually means a larger commitment of local funds. Very often such support is manifested through a referendum or through a major grass roots effort. There is a local perception that the benefits of transit are great - so great that people will accept increased local taxes to pay for them. This has occurred in many cities, but the benefits of transit are still poorly understood. Traditional methods of benefit measurement, with their roots in economic theory, offer only an incomplete understanding how local communities perceive the value of public transit. An accurate assessment of the benefits of transit service is particularly complex because beneficiaries include the community-at- large, as well as passengers. Local businesses benefit from better transit access; and the community holds certain forms of transit in high esteem, even if only small portions of the population regularly use it. Many automobile drivers feel that transit has an option value; they might need it someday. Moreover, there is the indirect benefit of transit service accruing to society from the increased mobility of the population as a whole. Conventional methods of measuring benefits, derived from economic theory, provide only partial help in understanding how local citizens value transit or why they are willing to go through considerable effort to increase the amount of service. Typical economic benefit assessments rely on the notion that benefits occur primarily to users and only secondarily to nonusers. Nonuser benefits are added when it can be argued that they result from improved service to users. Measurement of Transit Benefits 1 . "Transit has unique characteristics which do not fit well with traditional methods of benefit measurement." These techniques can lead to double counting of benefits if not carefully done. Benefits are usually expressed in monetary units; well-established methodologies are employed for such items as out-of- pocket cost savings, time savings, and accident reduction. Typically these methodologies try to directly relate benefits to these savings by using the difference between the cost of the good and the amount a person is willing to pay for it. In this case, the "good" is either the access provided by transit or one of its many indirect effects. Transit has unique characteristics that do not fit well with traditional methods of benefit measurement. First, user benefits cannot be easily found because of difficulties in determining the way willingness-to-pay varies across individuals and population segments. A simple time-savings approach, popular in benefit-cost studies of highways, can underestimate user benefits because some individuals can have a large willingness-to-pay, even when the average individual does not. Besides a possible time savings, users can benefit by being able to make trips that would otherwise be foregone, by saving other personal resources, and by being able to make trips to more desirable destinations. Second, transit has comparatively large nonuser benefits. Many people who rarely use transit are its strongest supporters. There may be an option value ("I-might-need-it-some-day"), environmental concerns, sympathy for those who cannot use automobiles, civic pride, or other similarly intangible factors. If people perceive that transit has benefits, then the benefits exist to some extent. This argument is conceptually consistent with notions of consumer surplus, but we possess few means to measure nonuser benefits. Third, transit may have effects on the location of land development activity. Recent rail transit projects have had significant impacts on the urban areas they serve. Major development projects have been positioned near stations, which lead to overall shifts in regional land-use patterns. Not only can a development project cause a desirable change in the location of activity, it can 2 Measurement of Transit Benefits . cause new activity, at least locally. In addition, the resulting concentration of activities can provide agglomeration benefits, such as a reduction in the costs of providing public services when activities are concentrated. Such benefits are seldom explicitly considered in traditional methods, although they are often cited at the local level as important reasons to construct new fixed guideway transit systems. Clearly there is a need to take a fresh and different look at benefits as they relate to transit. "The measurement of benefits must comprehensive enough to permit comparisons between alternatives for the purpose of making decisions." Besides identifying benefits and determining how they are distributed, there are problems associated with measuring them. The measurement of benefits must be comprehensive enough to permit comparisons between alternatives for the purpose of making decisions. The willingness-to-pay criterion might be used to estimate the direct user benefits of transit service. But the methodology should be sensitive to differences among different population segments. For instance, "captive" users are likely to have inelastic demands for transit service, and consequently, their aggregate benefits may be considerably higher than for people with access to other transpor- tation modes. Measurement of Transit Benefits 3 . B. OBJECTIVES The estimation of benefits from transit investments is a difficult process which can be approached with many different points of view. It is the objective of this report to look at benefits in a broad way to gain a better understanding of why local citizens positively perceive transit services. The report will attempt to provide a comprehensive view of the range of consequences of transit services and to indicate various methods that can be used to assess transit benefits. In addition, comparisons will be made among methods to assess benefits in various communities and to compare benefits from a political viewpoint to those from a technical viewpoint. Guidelines for benefits measurement are provided with examples. 4 Measurement of Transit Benefits . PART II: PRINCIPLES AND ISSUES C. BASIC VIEW OF BENEFITS Benefits exist because people believe they are important, whether or not they can be measured. . . " A fundamental understanding of the concept of benefits is important for an understanding of techniques to measure transit benefits. Transit systems have many consequences for a community, ranging from the basic (need for bus stops, purchase of fuel) to direct effects (trips made by transit, employment of workers in transit firms) to indirect effects (changes in land use, independent life styles). These consequences need to be sorted to determine how they relate to one another, whether they are positive or negative, and their relative importance. Benefits can be viewed as those consequences that are valued by some segment of the population. Benefits exist because people believe they are important, whether or not they can be measured (or even if seemingly objective measurement shows them to be nonexistent). Some communities place a high value on public transit even though it is difficult to find significant benefits by methods used for other means of transportation. These communities may be willing to support transit with high local subsidies and/or dedicated local taxes. These communities value transit highly and are collectively "willing-to-pay" a substantial amount of money to support transit. The level of monetary benefits of a transit system in such places must be viewed as being at least as high as the total local expenditures (user costs + subsidies) for transit, maybe substantially higher. Benefits can be viewed in different ways, and it is essential to distinguish between approaches. Much of the debate about benefits stems from the chosen point of view. Three common viewpoints are financial, economic, or political. A financial viewpoint includes only those benefits that can be recovered as income. Benefits are those things that contribute to the rate of return on the investment in transit. Returns (benefits of transit) should occur directly to the agency to pay the expense of providing service. External benefits have no value unless they can be "captured" by the transit agency. Measurement of Transit Benefits 5 . Click HERE for graphic. "The political process in a democratic system provides a way for a community to express its opinion of what is and what isn't important." The economic viewpoint of benefits is broader in that benefits can accrue to others and still be of value. This viewpoint uses a willingness-to-pay criteria for benefits; i.e., how much are users and nonusers of a system willing to pay for a service beyond its price? The difference between willingness-to-pay and price can be viewed as a benefit - consumer surplus. The economic view also assumes that the benefits can be measured (or converted) to monetary units. Benefits are derived from an analysis of supply/demand equilibrium and from the behavior of individuals who make choices in an open market condition. The third viewpoint of benefits is a political one. The political process in a democratic system provides a way for a community to express its opinion of what is and what isn't important. When duly elected officials make choices, ideally they are expressing the collective feelings of society about the benefits of different governmental activities. The value placed on transit by voters, primarily nonusers, is an indication of the benefits beyond those accruing to users. If a local community willingly taxes itself to spend large sums of money for transit, this implies they feel there are large benefits of transit, irrespective of any quantitative measures. Promotional materials from transit agencies, citizen groups and referenda advocates often include environmental improvements, access to jobs, economic development, better mobility for others, emergency transportation, and enhanced community image/pride as reasons to support transit. The political process involves tradeoffs and choices and can be a good indicator of community values. However, there are factors that may cause the political process to represent opinion poorly. Lack of open debate, unfair competition between ideas, over-representation of special interests, or consideration of other unrelated issues (e.g., educational policy or low income housing) can inhibit the interpretation of transit decision making as a means of measuring benefits. 6 Measurement of Transit Benefits . Economic Versus Noneconomic Evaluation of Benefits Benefit-cost analysis is a method of evaluation that, if applied completely and accurately, will select the best projects and best alternatives within projects. Economists have developed benefit-cost analysis to a high degree of sophistication. Nonetheless, there are many aspects of the transit project decision process that cannot be adequately represented in a benefit-cost study. Issues of fairness, health, aesthetics, social interaction, and prestige are difficult to convincingly quantify in monetary terms. Furthermore benefit-cost analysis can mask the tradeoffs between alternatives, their performance and impacts that often become the focus of real world decision making. Difficulties of valuation of benefits, lack of independence of measures, and different viewpoints and goals of decision makers further complicate the process. Finally, other issues (such as land-use impacts and safety) could be quantified in monetary terms, but we often lack the time and resources to do it properly. This report adopts economic theory where it is of demonstrated value; then broadens that theory to incorporate factors of particular importance to transit projects. Where economic theory does not apply or where it is difficult to implement, other methods are suggested. This report recognizes that transit decision making is a highly complex process that cannot be replaced by a set of rules or a formula. Techniques are proposed that can be useful to identify the range of transit consequences and their interrelations, to highlight significant tradeoffs between alternatives and to better quantify the effects of transit. Measurement of Transit Benefits 7 . "Understanding the nature of decisions is the key to benefit measurement." Decision Basis for Benefit Measurement Benefit analysis is done so decisions can be made. A decision could be for a specific purpose, such as the selection of the best alternative, or for more general reasons, such as to generate support for all transit services. Understanding the nature of decisions is the key to benefit measurement. Specific decisions involve the comparison of proposed alternatives against a base system. The comparison process is a useful way of dealing with many of the philosophical, conceptual, and mathematical difficulties with benefits measurement. Biases caused by assumptions tend to cancel each other out, since they either have the same effect on all alternatives or have very little differential effect (i.e., it only makes a difference if there is a difference). For example, there may be concern over the choice of an appropriate interest rate, but if all alternatives have roughly the same portion of capital costs and roughly the same time stream of maintenance costs, then interest rates may not make much of a difference in the final decision. Similarly, air quality impacts on health may be very difficult to assess, but all alternatives may have similar effects. The importance of many of the subjective benefits of transit will be directly related to the type of decision being made. A decision to select a particular technology (i.e., rail versus bus) should include a broader range of benefits than a study of alternative locations of a particular technology. Rail transit is perceived by many civic leaders and elected officials as positively affecting economic development, jobs and civic prestige, while bus transit does not. Rail versus bus decisions may be made at the local level by elected officials considering these factors, but these factors might be ignored at a federal level. Locational decisions, in particular, need not consider quite as many factors, since there may be no differential impact. For example, community prestige may be the same regardless of the chosen location, so it need not be a component of a benefits assessment for that tier of a decision. 8 Measurement of Transit Benefits . "Benefits of transit from a national point of view may be quite different from those perceived at a regional or local level." National Versus Regional Viewpoints Benefits of transit from a national point of view may be quite different from those perceived at a regional or local level. As the geographic scope of analysis is increased, shifts from one area to another become internalized and may no longer be viewed as benefits. A benefit at a regional level that involves a taking of activity from another region would be interpreted as a "transfer payment" at a state or national level. Economists, as a rule, prefer to ignore transfer payments in benefit-cost studies. Many important impacts of transit (such as effects of transit on land use, some environmental consequences, employment gains or community prestige) may be of little importance at the national level, since they involve transfers between regions rather than overall national gains. Allocation of money between urban areas is quite a different decision than the local selection of an alternative within a region., Alternative selection would likely emphasize different criteria, including interregional transfers. It is important to consider the goals of the investment, especially at higher levels of government. A goal at a high governmental level to maximize return on investment would lead to different choices than a goal to help distressed areas. Different goals may require different alternatives, as well as different decision criteria. It is crucial that everybody involved understand that the selection of benefits and how they are measured depends upon the viewpoint of those who make decisions. For example, an analysis of interregional transfers can be complicated by fairness issues. Often, a city can successfully argue for more transit funds because it has not received a proportionate share of some other federal program. To be perfectly fair, transfer payments should be considered at the national level, too. Measurement of Transit Benefits 9 . Click HERE for graphic. Local Versus Areawide Benefits The geographic scope of analysis will also affect magnitude or even the existence of benefits at the regional level. For example, it may be important to local officials that employment gains occur in a particular neighborhood or political jurisdiction. From a regional point of view, employment may only shift between subareas for no net gain. Similarly, there could be a gain in employment for one metropolitan region because of transit investment, but this could be offset by losses in other regions. The concept of a "zero sum game" is relevant in national or regional analysis, but for small areas there can be substantial gains in employment. Another example relates to land value and tax base. Transit investment may result in a shift of values from suburban to centralized locations with no change in the overall tax base. From a regional perspective there is no gain in overall value; whereas, from a more local perspective there could be important benefits. Of course, there can be other benefits representing overall gains, regardless of geographic scope. For example, some experts may argue that a more centralized land-use pattern may lead to a more efficient use of infrastructure and an increase in the efficiency of interaction between people. The geographic scope will also affect the relative impact of transit services. A large geographic area with a moderate sized transit change will result in a measured benefit that. appears small. However, if the geographic area were made smaller, the impact of transit would appear to be more significant. Consequently, care should be exercised when using relative measurements (percentage change in some overall indicator) to avoid misleading results. The change is the same but the percentage is larger or smaller depending on the size of the area that is used for comparison. 10 Measurement of Transit Benefits . Benefits . . . are found by comparing the world with a transit change against the world without it." Definition of Null Alternative Benefits are a relative measurement. They are envisioned as savings that occur as a result of an investment. They are found by comparing the world with a transit change against the world without it. Accordingly, the definition of the base or null alternative is important to the measurement of transit benefits. The definition will depend on the type of analysis. For example, the base alternative for a major fixed guideway proposal may represent the current transit system with minor changes over an extended period, including fleet replacements and minor service improvements. An occasional study has been performed.1.2 of the impact of having no transit service in a particular community. These studies start with the assumption that transit service has been eliminated, and then they calculate the costs that are incurred (additional travel costs, social services, etc.) as a result. Attempts are made to develop a total cost that includes all impacts of removing the system. Such studies are used to establish a baseline for transit benefits. Similar approaches are widely used, topic by topic, to demonstrate the benefits of an existing transit service. For example, air pollution and energy savings could be calculated by looking at the air pollution reduction per transit trip versus the same trip by automobile. Unfortunately, this approach is not very realistic in that seldom does a community seriously consider the elimination of all transit service. Assessing benefits in this manner would be acceptable only if service might be eliminated in entire areas of a city or parts of a state. In all cases there is considerable judgement in definition of the base system. Assumptions about the base system could substantially affect on ____________________ .1Dockendorf, J., October, 1972. .2Urban Institute, June, 1991. Measurement of Transit Benefits 11 . calculated benefits, while other assumptions might have only a minor effect. All assumptions should be made explicit and well documented. Good documentation will enable discussion and lead to more defensible conclusions. Furthermore, sensitivity analysis should be conducted to determine the relative impact of various assumptions on the results of a benefit calculation. A sensitivity analysis is relatively easy to do, compared to the effort of the original benefits calculation. A base case is defined with a set of assumed values of parameters. Then each parameter is varied independently by a fixed percentage above and below its assumed value. The relative change in benefits per change in parameters (a type of elasticity measure) can be calculated. This process is completed for all parameters having some uncertainty as to their value. The result is an indication of the importance of each assumption. A good sensitivity analysis creates considerable insight into the nature of the system being analyzed and frequently helps generate additional options that might be more efficient or have more benefits. 12 Measurement of Transit Benefits . Click HERE for graphic. "Benefits occur because people believe them to be important." Perceived Versus Measured Benefits Benefits occur because people believe them to be important. People are willing to pay a certain price for something because they believe it to have positive effects. The perceptions of people as well as the actual characteristics of the good must be considered. Benefits that are perceived may be much different from ones that can be measured, and there could be important perceived benefits that are impossible to measure. For example, there may be a strong perception on the part of the community that transit substantially reduces lung disease from air pollution. Calculations of air quality impacts may show very little actual change in community health. Nonetheless, the perceived substantial benefit for health will be an important factor in the debate that leads to decisions. In this case, the real benefit is what is believed to exist, not the measurement. A similar example relates to the community image of transit. Residents of an urban area and their elected officials may feel that their community needs a certain form of transit to enhance the status and image of the community. As a result they decide to increase their taxes to support the system. The actual level of benefit from community image is nearly impossible to measure; nonetheless, it is a determining factor in the decision. The level of the overall perceived benefit could be interpreted to be as at least as large as the amount of local money spent on the system. Over time, the real benefits of a system will prevail over perceived benefits, if there are major differences. As people gain experience with a system, they see the actual benefits. Sometimes there is disappointment in the system; in other cases people might be pleasantly surprised. Measurement of Transit Benefits 13 . Double Counting There are four basic steps in benefit assessment. First, benefits must be identified, then measured, then valued and then combined. As one proceeds through these steps, possibilities of misrepresentation increase. Questions of double counting arise in the processes of valuation and combination. Double counting of benefits is a serious and complex issue. As a rule one does not want to count the same thing twice when calculating benefits. Double counting should be avoided, especially when benefits are compared to costs for the purpose of making build or no build decisions. Double counting tends to inflate benefits, resulting in unnecessary investments. For example, benefits calculations may include savings from reductions in accident costs and changes in vehicle operating cost. If vehicle operating costs include an insurance component, there would be a double counting because accident costs and insurance measure the same thing. Similar problems can occur between energy savings, fuel taxes and vehicle operating costs, because fuel use is counted several times. Similarly, it is generally agreed among economists that travel time savings and land value increases can involve a double counting of benefits. Land may change its value as a result of greater accessibility as time savings are capitalized, Including both items in a benefit total, without careful consideration, could lead to an inflated view of benefits. The issue becomes complicated, however, because land may change in value because of other effects of transit not related to user time and cost savings. Land values may increase because of better visibility, better pedestrian access to retail at stations or economies of scale. Thus, a portion of land value increments could be legitimately added to time savings benefits, while the remainder should not. 14 Measurement of Transit Benefits . Double counting cannot be totally avoided. The simplest way to overcome many of the problems with double counting is not to add benefits together. Consequences of transit can be displayed for each alternative, and these consequences need not be combined. The information can then be interpreted and compared by decision makers who are making tradeoffs in their minds to reach a conclusion. Some factors will be ignored while others are given high value as these decisions are reached. It is essential not to over-represent a given benefit by providing several redundant measures. Venn diagrams, or similar graphical techniques, can be used to show double counting where it exists. "Double counting cannot be totally avoided. The simplest way to overcome many of the problems with double counting is to not add benefits together." Click HERE for graphic. Measurement of Transit Benefits 15 . "Benefit measurement must be intuitively correct." Success Should be Consistent with Positive Benefits Benefit measurement must be intuitively correct. Intuitively correct answers may not always come from some measurement techniques. For example, shifts of trips from automobile to transit could lead to counter-intuitive results when only time-savings are used as the benefit indicator. More travel by transit may show up as a negative benefit, because transit trips generally take more time than automobile trips. Thus a transit alternative that attracts large numbers of automobile trips could do poorly in a benefits evaluation if total travel time is used as a measure of success. A negative time savings benefit is counter to the goal of increasing transit use and misrepresents what will happen. Other effects, such as changed automobile ownership costs and reduced parking difficulties, may have been ignored and should be identified, as well. Better and more intuitively correct measurement techniques are available. Later, this report will discuss an enhanced consumer surplus measure that more realistically expresses user benefits and accounts for behavior factors in travel choice. 16 Measurement of Transit Benefits . D. TECHNICAL ISSUES IN BENEFIT MEASUREMENT Beyond the issues raised earlier in this chapter there are technical issues that affect how the benefits are interpreted and affect the underlying validity of their measurement. Three of the more general technical issues relate to the size of the universe, aggregation of benefits and standardization. Size of the Universe The universe is defined by the limits of the system, usually delineated by geographical boundaries. The size of the universe can make a big difference to the perceived magnitude of benefits. The definition of the universe is especially important when relative measures are used, such as percentage reduction in air pollution or energy use or the percentage change in trips to a locale. If the size of the universe is large, the relative magnitude of transit induced change will appear to be small. Measures of this sort can be misleading since there would be larger impacts in smaller areas or different time periods. It is better to simply report the magnitude of the effects and allow comparison between alternatives rather than putting them on a relative scale. Different individuals can then interpret whether or not they are significant, based on their magnitude rather than on the choice of the size of the universe. Aggregation of Benefits If nonmonetary benefits are to be combined, the choice of the mathematical formulation will affect results. Generally, benefits are combined using a linear function, by adding individual benefits put in some common set of units such as dollars or time. The use of a linear function assumes that each benefit is independent (unrelated) of all other benefits. Since some benefits are invariably related to others a simple linear sum could seriously misrepresent the Measurement of Transit Benefits 17 . "A . . . better approach is to avoid aggregation. . . ." overall effect of an alternative. Other mathematical forms can be used. For example, weights can be used as exponents with the combination of benefits being the product of each benefit raised to its power. This formulation has a different effect on the combination, since it tends to emphasize differences - magnifying high scores and diminishing low scores..3 The resulting nonlinear preference function may be more consistent with intuitive preferences than a linear form. Reasonable arguments can be made for either approach (linear or multiplicative), and it is sometimes difficult to make a choice. Sensitivity analysis should be used to determine the differences. A second, and perhaps better, approach is to avoid aggregation except in cases where the decision to combine factors is obvious. Tradeoff analysis can be used to provide a basis for decision without the need for aggregation. Standardization Benefits are measured on different scales and need to be placed on a standard scale if they are to be combined. Several standardization methods exist. Examples are standardization by range, standardization by mean, and standardization by mean and standard deviation. Standardization by range sets the upper and lower limits of all indicators on the same scale, say 0 to 100. Standardization by mean sets the mean values at the same point, say 50, while use of standard deviation also standardizes the dispersion of data. Since the nature of data may differ for each indicator, choice of a method may affect the outcome. Sensitivity analysis can help reduce the effect of a given standardization method on the aggregate benefit measure. ____________________ .3Alexander, E., and E. Beimborn, June, 1987, p. 37. 18 Measurement of Transit Benefits . E. INTERPRETATION OF BENEFITS Once a set of benefits has been identified and measured, they should be interpreted to build confidence in the analysis. The process of benefit measurement always involves a series of simplifications, omissions and assumptions that must be examined to determine their effects on the results. The interpretive phase could involve several activities..4 Break-even Analysis Break-even analysis tells how much better the best alternative is over the second-best. Such an analysis is often easy to perform. An important question is addressed: Are the differences between the best and second-best alternatives significantly large so that they are not within the range of differences that might be expected from the data and procedures used? Such an analysis would be conducted by comparing marginal costs versus gains. The marginal gain of the best plan over the second-best plan should be examined in relation to the process used to delineate the differences in the plans. If the differences are beyond the range of variance due to the forecasting techniques, there should be a greater degree of confidence in the best plan. Sensitivity Analysis As mentioned earlier, the purpose of sensitivity analysis is to identify the effects of the various parameters and assumptions used in the forecasts and in the evaluation. The results of the forecasting procedures may be very sensitive to some parameters and insensitive to others. The sensitivity analysis can be ____________________ .4Beimborn, E., Oct., 1977, p. 25. Measurement of Transit Benefits 19 . directed at the alternatives themselves or at the data processing effort. In the first case, the sensitivity of the choice of the best alternative to the procedure used to define a benefit measure is examined. In the second case, the sensitivities of the forecast to the data used and parameters of the forecasting techniques are examined. Obviously, the latter case would involve considerably more effort that the former. Data and parameter sensitivity would usually involve the following steps: (a) identify the parameters used in the forecasts; (b) examine the range of values used; (c) review the process used to set parameter values for the forecasts; (d) estimate the possible range of values the parameter could have as the result of statistical, conceptual, or assumption errors; and (e) determine how these errors would be carried through the process and how they might have a differential effect on the various alternatives. Analysis for Contingencies A contingency is an event whose occurrence is possible but not probable. For example, the effects of severe long-term shortages in petroleum-based fuels, the effects of major changes in population growth, or the effects of major shifts in land-use patterns might be viewed as contingencies. Because of the uncertainty of the future, it is desirable to examine how well the best alternative performs under contingent situations. Such an analysis would usually involve the following steps: (a) identify the contingent situations, (b) develop scenarios as to how they would occur, (c) forecast the performance of the best alternative under the contingent situations, and (d) compare the performance of the best alternative under normal and contingent situations. 20 Measurement of Transit Benefits . Impact and Incidence Analysis The impact (upon whom) and the incidence (at what period in time) of the costs and gains associated with the best alternatives should be examined. The costs and gains for two plans may be very similar in the aggregate but very dissimilar in their effects on those who receive them or the times in which they occur. Implementation Feasibility The relative ease with which a plan can be implemented should be examined. A superior plan with a low probability of successful implementation might be rejected in favor of a lesser plan with a higher probability of successful implementation. In addition, plans might be combined to increase implementation probabilities, or efforts might be made to reduce barriers to implementation (when barriers can effectively be identified). Qualitative Analysis Qualitative analysis is a catchall that would include a careful examination of the best choice considering factors omitted in the analysis, assumptions made, factors that could not be quantified, uncertainties, and the results of the other phases of interpretation. Measurement of Transit Benefits 21 . A FRAMEWORK FOR ANALYSIS PART III: A FRAMEWORK FOR BENEFIT ANALYSIS F. CONSEQUENCES OF TRANSIT The topic of transit benefits is widely discussed in technical literature, trade journals and the popular press. Advocates for transit offer transit benefits as a basis for expanded service and/or increased public expenditures for transit. Benefits frequently cited include air pollution reduction, congestion relief, energy savings, strengthened central cities, land value gains, and reduced automobile dependency. In many cases, these benefits are calculated and, sometimes, combined to present a strong case for transit expansion. There is little consistency in how benefits are combined. Methods for doing calculations vary widely, and the results can often be misleading. Despite the large amount of prior work on transit benefits, there have been few systematic efforts to deal with the interrelationships between different benefits nor have there been many attempts to provide a comprehensive picture of transit benefits. This section of the report provides a framework for understanding the interrelationship of benefits of transit service. The framework takes the form of a tree diagram. 22 Measurement of Transit Benefits . Click HERE for graphic. The Benefit Tree The benefit tree provides a display of what might happen as the result of transit service. Because transit exists, there are certain consequences. These consequences may not necessarily be benefits but merely impacts resulting from the improvement of a transit system. Impacts can be significant or insignificant depending on the chosen viewpoint, the scope of analysis and the nature of the base alternative. First, transit provides an alternative means of travel that may or may not actually be used by any given individual. Because transit exists, people have options available for travel for unusual occurrences, for the future when a person may not be able to use an automobile, or for the transit dependent. Second, trip making occurs which can result in a shift between automobile and transit travel or trips by persons who could not otherwise travel. Trip making, in turn, results in changes in user resources (time, cost, etc.), changes in facility needs, environmental effects and so forth. Third, transit accessibility makes land more or less valuable, causes shifts in life styles, preserves open space, affects interaction among people, and affects the efficiency of certain public services. Fourth, transit exists as an enterprise that employs people in its operation and construction. It too uses resources. The benefit tree shows how consequences are related. The tree is divided into five branches. Verticallly, the tree grows in specificity from top to bottom. Double counting occurs when benefits are included at multiple levels on the tree. Some benefits can be quantified, others cannot. Measurement of Transit Benefits 23 . Click HERE for graphic. 24 Measurement of Transit Benefits . Click HERE for graphic. Measurement of Transit Benefits 25 . "Transit provides a form of mobility insurance." Transit as an Alternative - Branch I Transit provides alternatives to those who regularly use automobiles or for those who have no other option but public transportation, as shown in Branch 1 of the tree. When good transit service exists people need not be solely dependent upon their automobiles. A benefit accrues to the entire population, even those who never use transit, because transit provides an option for travel. Transit as a Long Term Option. Transit provides a form of mobility insurance. It is available whenever other forms of transport are not. People will see value in having a transit system, even though they may not need to use it right now, feeling they may need it at some time in the future when they are no longer able to drive an automobile. Unusual Occurrences. Unusual occurrences, such as severe weather, fuel shortages, family emergencies, vehicle breakdowns, community emergencies, and evacuations, temporarily increase society's dependence on transit. In these cases, benefits of transit are large even though the probability of the occurrence is small. In the event of a major, disaster (such as floods, earthquakes, and hurricanes), transit has provided mobility for large numbers of people and enabled communities to resume normal operations sooner. Independent Living. Transit provides the elderly and disabled, as well as those unable to drive for other reasons, freedom to travel without relying on others. This permits them to live independently, to have good access to discretionary activities (such as social events and recreation), as well as essential activities (such as employment, health care, education and shopping). The benefits to them and to others can be far greater than the consumer surplus of the trip itself. If transit service were not available, the costs of providing alternative services might be very high. Access to various activities, including 26 Measurement of Transit Benefits . health care and employment, not only allows for an individual's independence, but reduces public cost. Recreational Riding. Transit can be a form of recreation in many cities, such as San Francisco, where tourists enjoy riding the cable cars or historic vehicles. People may be attracted to the city for other activities (conventions, shopping, fairs, exhibitions, sporting events, etc.) because of the novelty of the transit system. Click HERE for graphic. Measurement of Transit Benefits 27 . Click HERE for graphic. 28 Measurement of Transit Benefits . Click HERE for graphic. Measurement of Transit Benefits 29 . Click HERE for graphic. Travel Related Consequences - Branches 2 and 3 Transit directly benefits both transit and automobile users as a result of trip making and associated saving in user time and cost. Furthermore, it can lead to savings in the cost of providing transportation facilities and in negative environmental consequences of travel. Transit User Effects. The most obvious benefits of a transit improvement are reductions in the time, cost and inconvenience of transit trips as shown in Branch 3 of the tree. The magnitude of the benefits can be estimated by analyzing choice behavior; if people make a choice to use transit it is because they feel that they will personally benefit from the transit trip. Such benefits can be measured by looking at the attributes of alternative choices and the choices behavior and by observing the differences between them. These effects relate to savings in personal resources, such as time and cost. Some savings may be Ion run and others may relate to an individual trip. For example, if one member of a household regularly uses transit to travel to work, the household may avoid the purchase of an automobile. Avoiding a car purchase can have substantial benefit over that of a single trip. So-called captive users can have a high benefit since their alternative would be not to travel. Change in Well Being and Security. Shifts of trips to or from transit car with them changes in user safety, security and feelings about self. Automobile travel and transit travel differ in accident and security experiences. Assessment of these benefits are further complicated by differences between perceived an actual conditions. Users of transit may feel they are helping the environment and society through their transit use and have positive feelings about their person choice. Change in Lifestyle. Transit riders come in closer physical contact wit other riders, allowing for more interaction within the same community. Levels 30 Measurement of Transit Benefits . of privacy, frequency of contact with strangers, and equity are all affected. Some of these consequences can be viewed as benefits, others as disbenefits, depending on the point of view. Interaction increases familiarity with others, and it presents opportunities for networking, better communications, and understanding. Transit use can encourage a different life style. Travel by transit also affects users' freedom and their confidence in the ability to get places, to travel independently, and to travel punctually. For some this change is negative, while many people view it positively. Automobile Related Benefits. Transit travel also provides benefits to both users and nonusers by decreasing the number of automobiles on highways as shown in Branch 2. Fewer automobile trips may mean less need for expanded highways, less parking facilities and less traffic control needs. Fewer automobile trips mean less energy use, less land consumption, and less accidents. Reduced automobile trip making affects the time and cost of meeting travel needs for remaining automobile users. Environmental Effects. Shifts of travel between automobile and transit lead to a healthier environment. Reductions in overall travel lead to lower air pollutant emissions, reduced noise levels and other effects. Measurement of Transit Benefits 31 . Click HERE for graphic. 32 Measurement of Transit Benefits . Click HERE for graphic. Measurement of Transit Benefits 33 . Click HERE for graphic. 34 Measurement of Transit Benefits . Click HERE for graphic. Measurement of Transit Benefits 35 . Click HERE for graphic. Land-Use and Economic Consequences Transit affects land-use and economic activity in different ways than highway systems. Generally, transit can sustain more concentrated land-use patterns. An evaluation of land-use and economic activity is complex. Some of the land value and economic changes occur because of savings in user travel time and cost, while other land-use changes are shifts of activity from one location to another. Care should be taken in the interpretation of these effects, especially if they are combined with others. Increases in economic activity can lead to increases in land values. Land-Use Consequences. With concentrations of activities, public services become more efficient. There is a reduced need for sewer, water, and other utilities with higher densities. Services such as police and fire protection may become more efficient with less land area to cover. Furthermore, operating costs of these services may become smaller per unit of delivered service because of the concentration of activity. A concentrated land-use pattern also can lead to more interpersonal contacts, increased networking, productivity and community interaction. Communities with high levels of transit service and concentrated land use ("Eurocity") have very different levels of interaction than places that are automobile dominated, and lower densities ("horizontal city"). These effects could be positive or negative depending on how they occur. Increased interactions could have a synergistic effect on the destructive effect (say, from more crime) depending on many factors. Concentrations of activity also lead to more preservation of open space for agriculture and natural areas. Concentration has effects on the value of land at a specific location. While the net change in land value for all land in an urban 36 Measurement of Transit Benefits . region may not change, it could increase substantially in areas of activity concentration. It is important to separate those effects on land use that are related to better accessibility from effects due to concentration. Travel time and cost savings and better accessibility can be the cause of land value changes. Thus, double counting can occur if both are added to a benefit measure. Economic Consequences. Economic activity and employment levels at a location may be impacted through job creation or job shifts. Increased economic activity often results in an increased tax base. A concentration of economic activities could produce higher employment levels at a locale and, thus, a more equitable tax base. Measurement of Transit Benefits 37 . Click HERE for graphic. 38 Measurement of Transit Benefits . Click HERE for graphic. Measurement of Transit Benefits 39 . Click HERE for graphic. Transit Supply Consequences Finally, the existence of transit, by itself, has benefits and impacts as shown in Branch 5 of the tree. Community Support and Prestige. At the local level many people feel that a transit system (particularly a fixed guideway system) adds to the prestige of the city, perhaps qualifying their city for "world class" status. Prestige cannot be quantified, but it can be of critical importance when decisions are made at the local level. People may support transit because they have a general belief that it makes a positive contribution to the environment and to society. Facilities. Facilities and their construction cause temporary or permanent impacts that may constitute either benefits or disbenefits. Jobs are created through construction and materials consumption if the construction is a new activity for an area. Construction can be temporarily disruptive, including loss of customers for some businesses, spot congestion, and general inconvenience. Facilities consume vacant land or productive land. Land near stations can become good sites for secondary developments. Operations. Transit agencies employ people, consume resources and make purchases as a result of their operations. These activities are multiplied as their impact is felt through the local economy. 40 Measurement of Transit Benefits . Use of Benefits Tree - An Example The benefits tree can be used to identify and display the potential benefits of a transit alternative. This would be done by first identifying those boxes on the diagram where it appears that a transit alternative will be significantly different from the null alternative. Only those consequences generate benefits or disbenefits. Each remaining box would then be filled out with numerical or descriptive information to describe the effect. It is important to understand that measures at one level could include measures at lower levels. Thus, benefits should not be combined across levels since double counting can occur. Rather, the tree is a way of displaying how the pieces fit together, and as a way of comparing alternatives. The example shows Branch 5 of the tree, transit supply, as filled out for a rail transit alternative as compared to the null alternative, an all bus system. Plan design and travel demand analysis lead to the determination that the rail alternative requires 30 light rail vehicles to operate on 20 miles of track. Operations and construction, require the resources shown in the tree. A fully filled out tree could illustrate all consequences and help focus decision making on key, tradeoffs between alternatives and aid in the selection of a locally preferred alternative. This example uses the viewpoint of a local decision rather than a national decision. As such consequences that have differential effects at the local level are included. Decisions at other levels of government may use different factors. To facilitate use of the tree, a blank version of the tree is included as an appendix to this report. A soft-copy version is also available (as Excel spreadsheet files) upon request from the Center for Urban Studies at the University of Wisconsin-Milwaukee (414-229- 5787). Measurement of Transit Benefits 41 . Click HERE for graphic. 42 Measurement of Transit Benefits . Click HERE for graphic. Measurement of Transit Benefits 43 . Click HERE for graphic. 44 Measurement of Transit Benefits . Click HERE for graphic. Measurement of Transit Benefits 45 . G. STATE OF THE PRACTICE Benefit Measurement in Transit Studies This section describes the benefits typically identified in various planning and other technical documents for new transit systems. The description only reflects what is felt to be important by local agencies as they analyze alternative systems and propose systems for implementation. A list of benefits and impacts was compiled from Alternatives Analysis/Environmental Impact Statements for major transit investments. Within the AA/EIS's, the government requires certain impacts to be quantified including air and noise pollution, travel times, land value, employment, etc. Local agencies can add other factors to this list and elaborate on required items in order to make their case more convincing. AA/EIS's provide evidence of which benefits are of greatest importance to each community. One city may emphasize quality of life while another may emphasize travel time savings. Fifteen alternative analyses, environmental impact statements and economic impact assessments were reviewed. Results from this analysis are given in a table on the following pages. Cited benefits are indicated, as well as whether an effort was made to quantify the benefits. The categories for the benefits were developed from the benefit tree as discussed previously. A reading of the AA/EIS's reveals that communities cite a wide variety of benefits. There are a few differences between cities. None of the cities considered the option value of transit, while most considered the reduction in automobile trips, land preservation and transit operations as benefits. The cited benefits can be discussed in terms of the four major branches of the benefits tree: transit as an alternative, travel related changes (Branches 2 and 3), land-use/economic effects, and transit supply. 46 Measurement of Transit Benefits . Transit as an Alternative That transit provides an alternative means of travel to the automobile was seldom mentioned in the EIS's. This consequence provides options, greater flexibility, and travel insurance for short term emergencies or long term changes in life style. Better accessibility for the elderly and disabled was discussed in only three statements. The Southeastern Pennsylvania Transportation Authority (SEPTA) commented on the importance of transit to the elderly and handicapped. "For the handicapped, SEPTA services, including paratransit, provide a vital link to jobs, health care, recreation, church, shopping and visiting.".5 SEPTA believes the elderly and disabled use mass transit more frequently than any other cross-section of the population. It addressed the option value of transit by discussing whether proposed routes consider the needs of elderly and handicapped. Travel Related Consequences These two branches involve what AA/EIS's refer to as "Transit Oriented" benefits. They include accessibility, comfort, congestion, parking, safety/security, travel times, value of time, and VMT charges. These effects result from changes in trip making and are dealt with extensively in the AA/EIS's. Nearly all the reports reviewed provide estimates of facility needs, environmental effects, and user savings. Of these factors, accessibility, congestion, safety and security were rarely quantified. However, travel times, changes in vehicle miles of travel (VMT), parking effects, and value of time were nearly universally quantified. Fourteen of the ____________________ .5 U. S. Department of Transportation, June 1991, P. 4-12. Measurement of Transit Benefits 47 . Click HERE for graphic. 48 Measurement of Transit Benefits . Click HERE for graphic. Measurement of Transit Benefits 49 . fifteen EIS's quantitatively analyzed VMT, travel time, value of time, and parking. Air quality, energy and noise pollution are quantified in every document, as these are required items for an AA/EIS. Issues of transit travel (such as change in well-being and in lifestyle) were superficially mentioned in only one EIS as possible spin-off effects of an efficient transit system. The methods for measuring these benefits were as follows. Facility Needs. Parking losses are calculated by the number of parking spaces destroyed so that the land can be used for track or other transit facilities. Parking losses may also occur from coordinated planning efforts to reduce the amount of traffic in downtown corridors and to promote transit ridership. The documents reviewed did not discuss reductions in highway facility needs that might result from an increased transit ridership. Environmental Effects. Environmental effects are the primary subject of an EIS. Air Quality indexes are derived from standard formulas, measured in units of carbon monoxide emission levels by transit line and (in some cases) regionally. This method of quantification is consistent throughout the various environmental impact statements. Noise impacts are compared between alternatives and are measured in units of decibels. Energy consumption is calculated across alternatives and is measured in units of British Thermal Units (BTU) for each alternative. User Effects. User effects occur to both automobile users and to transit riders. They are frequently combined in two overall measures: travel time and vehicle-miles-traveled. Travel time savings are estimated in person-minutes of in-vehicle travel for alternative transit system(s) as compared to a base system. These methods treat all components of travel time (waiting, transfer, travel, etc.) with equal weight. Travel time savings are sometimes converted into monetary units to obtain a dollar value of time savings. Changes in traveler cost (e.g., automobile operating costs parking and transit fares are seldom included. 50 Measurement of Transit Benefits . Congestion is measured in vehicle miles traveled (VMT). The reports reason that more vehicle miles traveled has greater potential for congested highways and arterials. There is a prevailing view that a reduction in VMT is a principal benefit of transit. Accessibility as it relates to transit dependent riders (such as the poor, elderly, and handicapped) is measured in the travel time it takes to reach a work based and/or a nonwork based destination. Change in Well Being. The effects of the transit system on the general well being of its users, their safety and their security are seldom mentioned in the documents. One report discussed this topic, saying, Better transit service within the downtown would enhance the convenience of region-serving transit service. This could reduce the use of automobiles for commuting to the Central Area and could encourage people to make longer trips by unifying the C.A. into a unified whole . . . ..6 The Central Ohio Transit Agency generated accident statistics to determine the relative safety of each alternative to the null alternative..7 Social Interaction is generally not considered, but some EIS's discuss how neighborhoods will be affected by transit systems. Interaction effects are evaluated by how much a neighborhood will be divided by transit facilities. Quality of Life may be quantified in ways important to a specific community, but differs from place to place. For example, COTA quantified the "quality of life" issue as the need to provide better ____________________ .6 Alternatives Analysis and Draft Environmental Impact Statement Central Area Circulator, Chicago, Illinois, August 1991, p. 5-2. .7 Economic Impacts of COTA on Central Ohio, January, 1988, p. 27, table 17. Measurement of Transit Benefits 51 . access for the poor, elderly and handicapped to reach job destinations, leading to fewer welfare recipients..8 Change in Lifestyle. Similarly, the effects of transit on the lifestyle of users were seldom discussed. Transit users have different levels of privacy, contact with others, freedom of movement and confidence in being able to get places than automobile users. Only a limited discussion of these consequences appeared in one of the documents reviewed, where it was stated, Better transit service within the downtown will encourage people to make longer trips by unifying the Central Area into a more coherent whole, allowing them [people] access to jobs that were not convenient to them before, and encouraging people to venture farther within the downtown during lunch and in the evening..9 Land-Use/Economic Consequences Concentration of Activity. Concentrating activities causes greater efficiency of public services, increased interpersonal contacts and preservation of land. Of these items, only land preservation and employment impacts were discussed by all reports. Efficiency of Public Services was mentioned in 13 reports with comments such as "The LRT alternatives generally reduce these times [transit travel times] by at least 10 minutes....".10 Interpersonal contacts are not mentioned in any of ____________________ .8 Economic Impacts of COTA on Central Ohio, January, 1988, p. 32. .9 Alternatives Analysis and Draft Environmental Impact Statement Central Area Circulator, Chicago, Illinois, August, 1991, p. 1-9. .10 Tasman Corridor, Santa Clara County, California, May, 1991, pp. 4-7. 52 Measurement of Transit Benefits . the reports. Land preservation and open space, however, were discussed in fourteen of the fifteen reports reviewed. Preservation of parklands and wetlands were most often mentioned, calculating the amount of potentially endangered wetlands or flood plains. Preservation was rarely quantified, but the Honolulu EIS quantified the preservation of a potentially endangered butterfly population. Economic Effects. Transit is often advocated as a way to persuade developers to build commercial, industrial, and residential sites within certain corridors. AA/EIS's attempt to measure the amount of economic activity that will occur and the potential impacts new developments will have on the region's economy. Several different methods of employment analysis were implemented depending upon the preference of the city or region. Variations of the input-output analysis for employment impacts are commonly used. Also, multipliers calculated by the Bureau of Labor Statistics are frequently used to determine potential employment. For example, the Colma BART station FEIS/FEIR calculated employment impacts by using the 1982 I-O Model and Economics Multipliers for the San Francisco Bay Region. The reports are unclear whether the employment impacts represent real gains or simple shifts from within or outside the region. Land Value is directly related to economic development; attempts were made to determine the cost of land once a transit system is implemented or expanded. Land close to the transit centers may increase in value. Both negative and positive impacts could occur from this kind of development. Land value effects are rarely quantified. Only the St. Louis EIS made a minimal effort to quantify such benefits based on tax revenues: "EWGCC estimates that LRT will potentially attract $532.1 million in development. . .".11 The amount of potential development was usually discussed but there are too many unknowns to permit quantification. ____________________ .11 5-29, St. Louis. Measurement of Transit Benefits 53 . Transit Supply Consequences of an expanded transit system are discussed but not necessarily quantified. Community support (added prestige or "world class" city) is sometimes mentioned. For example, according to the Metropolitan Atlanta Rapid Transportation Authority, Rapid rail transit represents a major public investment which has and will continue to greatly influence Atlanta's future development pattern. The region will continue as one of the nation's pivotal distribution points linking the United States and the world with the rapidly growing Southeastern market..12 Employment Impacts of facility construction are cited in every AA/EIS. Very often this is done by estimating the employment activity per year during construction. Effects on employment for operations are also given. Generally it is felt by the community that such jobs are a local gain since they are new to the area. Whether such jobs are shifts from other areas and whether more jobs would be created by investing funds in other activities are seldom mentioned. ____________________ .12 MARTA, Transit Station Areas Update, August, 1986, p. 15. 54 Measurement of Transit Benefits . Local Use of Benefit Measures Visits were made to different cities around the country to gain a better understanding of transportation decision making and the role of benefits analysis. Cities were selected where expansion of the transit system has been a significant local issue and where extensive analysis has been or is being made of the benefits of transit. The purpose of these visits was to examine how analytical estimates of benefits were used in decision making and to identify critical factors that lead to the choice of particular courses of action. This effort also looked into the role of referenda as a way to gain a community expression of transit benefits, to determine whether one could estimate overall perceived benefits by looking at how much a community was willing to tax itself voluntarily to support transit. In each community, interviews were conducted to understand better the technical and political arguments for and against the transit expansion. In-depth interviews were held with staff members of transit agencies, local government, and metropolitan planning agencies, and with citizens and the academic community. A large number of documents were also obtained, including planning documents and promotional information that helped to understand the social, political and philosophical history of transportation decision making. There was good agreement among those interviewed about the key political issues and the areas of dispute. Issues of Debate In the communities we visited we found diverse opinions on the general value of transit and even more disagreement on specific projects. This disagreement is especially evident where the issue of building a rail system is a point of local controversy. In these places transit, in general, may have widespread support but particular parts of rail system proposals can be seriously questioned. Measurement of Transit Benefits 55 . "Debates over courses of action tend to center on benefit issues. Advocates believe there are substantial benefits of transit investment, while those people opposed doubt that such benefits exist." Debates over courses of action tend to center on benefit issues. Advocates believe there are substantial benefits of transit investment, while those people opposed doubt that such benefits exist. In most cases, these opinions existed independently of any attempts to quantify benefits. Studies that measured benefits were ignored or discredited or cited as authoritative depending on one's position on the proposed project. In most places we visited benefits were a matter of belief rather than an agreed fact. Furthermore, many benefits cited were intangible and difficult or impossible to measure. The strongest criticisms come from those who believe that rail development cannot possibly be cost effective. In a role reversal, some critics are accusing political leaders of being too visionary, of not appreciating the obstacles to a successful system, and of placing too much faith in travelers' willingness to adapt to the changing transportation system. Technical analysis used to justify rail programs have been challenged by opponents, saying that the positive results were predetermined by the chosen methods. The critics have taken a conservative position relative, to the potential benefits of a rail program, suggesting that most of the benefits are small and that overall non-quantified benefits do not exist. They say that it would be better to spend the money on bus services that can blend with the automobile-oriented life style of the community. Advocates, on the other hand, place high weight on nonquantified consequences and. are optimistic on other effects. In the cities visited those interviewed felt that the community supported transit principally because of the promise of congestion relief. Concerns about air pollution and energy consumption were also expressed in some locations. Supporters of transit included downtown interests, who believed that the center of the city could not experience any future growth without an increase in transportation system capacity. Comparisons to other "world class" cities were made in several of the cities we visited. Transit was seen as an important factor in civil pride and prestige. However, it was also mentioned in several cities that 56 Measurement of Transit Benefits . transit was supported by people who feel that they would not personally use it. In other words, their view was that people want transit so that other people can ride it. These reasons for transit support in some cities appear to be based on frustration with the highway system. Transit was presented as a palatable way of solving seemingly intractable problem of traffic congestion. It was mentioned in several places that the city once had a fine streetcar system and things were better then. Lacking tangible evidence that a rail system would actually mitigate today's traffic problems, decision makers accepted this contention as an act of faith. In some places the issue of socioeconomic status of riders was mentioned. There was a general agreement that trains have more status than buses. They can attract a better class of rider because of the promise of personal safety, comfortable seats, smoother ride, and attractive surroundings. Asked why these same attributes couldn't be given to buses, it was stated by one person that a better bus environment could not be maintained, given the type of people taking the bus. A decision has been made to create trains for affluent travelers, leaving buses as they were for poor people. Socioeconomic status is also affecting route alignments. There is a discernible tendency to locate rail lines away from richer areas and near poorer areas, somewhat undercutting the objective of increasing the proportion of affluent riders. The desire to serve poorer areas is understandable; poorer areas already have a demonstrated need for transit. The desire to avoid rich areas is perplexing. Interviewees suggested that the rich do not envision taking transit themselves, but fear an increase in crime in their neighborhoods by "those" people who do take transit. Another impediment to providing rail transit in rich neighborhoods is a perception by some individuals that it is visually unattractive and noisy. Measurement of Transit Benefits 57 . "Transit planning, especially for new rail systems, is fundamentally a political process, assisted by technical analysis." Role of Political Process Transit planning, especially for new rail systems, is fundamentally a political process, assisted by technical analysis. Our experience was that most local planners do not feel it necessary to evaluate the benefits of its rail program because they have received a mandate for the program in the form of a clear political mandate and/or successful referenda. The decision makers are all actors in the political process, and they decide which parts of the transit program receive funding. Transit is seen by some elected officials as a means of revitalizing the community, containing sprawl, and encouraging growth in high density corridors. There exists a strong belief in the cities visited that they have a dynamic community, rapidly changing in both its urban form and its demographics. The vision of rail transit development is that it can help reshape the community into a more efficient one and that it can overcome the almost complete dependence on highway transportation. Transit relies on key elected officials for its support. If these key officials lose elections or leave office, there can be significant changes in direction. Projects are dropped or scaled back as other issues gain emphasis. The level of benefits may remain the same, but different people pursue other political objectives. In some cases support for transit occurs because of a compromise between highway goals, environmental interests and other factors. Some level of transit investment is needed to gain support for overall transportation programs that include substantial investment in other modes of transportation. Furthermore support of advocates for environmental protection is obtained by supporting transit in exchange for compromises in development policy. Transit is another issue that mixes into an overall package of programs assembled by elected 58 Measurement of Transit Benefits . officials. When the overall picture is explained, the level of effort for transit can make more sense than if transit is looked at by itself. Transit decision making is part of local politics, and it cannot be replaced by objective technical analysis. The political process is sensitive to good technical analysis and systems can be modified or designed differently as a result of objective measures. However, technical analysis that conflicts with strongly held beliefs will tend to be discredited and ignored. Transit decision making is dominated by intangibles that do not lend themselves to quantification and is done as part of a process of compromise and tradeoffs with other needs. "The political process is sensitive to good technical analysis and systems can be modified or designed differently as a result of objective measures. However, technical analysis that conflicts with strongly held beliefs will tend to be discredited and ignored." Measurement of Transit Benefits 59 . "Since a decision involves a comparison of alternatives, only those consequences that are likely to be significantly different between alternatives need to be looked at extensively." MEASUREMENT TECHNIQUES PART IV: MEASUREMENT TECHNIQUES Overview The benefits tree shows that transit can have a wide variety of consequences. These consequences occur because transit provides an alternative means of travel, because transit provides a means of making trips, because land use can vary and because transit is an enterprise. Each of these categories of consequences leads to other effects, which in turn lead to still more effects. While measurement of all effects at all levels of the tree may appear to be a difficult (if not an impossible) task, there are factors that may make the problem less difficult. The purpose of a given benefits analysis and the nature of the decisions to be made are two important factors in making the process easier. An understanding of the decision process will help to identify those consequences that should be looked at in detail. Since a decision involves a comparison of alternatives, only those consequences that are likely to be significantly different between alternatives need to be looked at extensively. If a consequence is likely to be the same for all alternatives, it will not make any difference in the decision. The scope of analysis can therefore be reduced. A second way of simplification is to avoid combining consequences to produce aggregate estimates of benefits. Valuation is often difficult, and it can easily lead to double counting. There is also an "apples and oranges" problem. For example, it is impossible to add prestige to emissions reduction in any meaningful way. If a difference exists and if it is significant, then it should be expressed in the most understandable terms. The most understandable terms for emissions reduction might be tons of pollutants reduced; the most understandable terms for prestige might be a summary of results of an attitudinal survey. A final way of simplifying the analysis is to use the branching of the tree to get more general indicators. Transit trip making affects lifestyle in a number 60 Measurement of Transit Benefits . of ways, but these effects are very difficult to measure at the lower levels of the tree. In such a case, it may suffice to indicate the number of people affected (i.e., the number of new users) as a general indicator, rather than to measure all lower level effects. The method depends on the decision. With this background, methods for measuring benefits are suggested in the remainder of the report. The table on the next page provides suggestions on how to measure benefits at the first two levels identified in the benefit tree. Transit as an Alternative. The value of having transit available as a possible alternative (option value) is difficult to estimate. These effects could be simply described in words or else measured in a general sense; i.e., overall size of service area or the population of zero automobile households served. More detailed estimates could be found from looking at the costs (or consumer surplus) of providing such advantages by means other than transit; i.e., use of taxicab service in the event of an automobile breakdown. Travel by Transit. Travel related benefits for both automobile users and transit users can be estimated through an enhanced consumer surplus technique. This technique can be used to estimate the user effects from savings in travel time, operating and parking costs, and destination choice that result if the transit system is changed. The technique is described in greater detail in the Section H of this report. Consumer surplus also can be used to determine the land redistribution effects of transit (also explained later in Section I). Environmental effects of travel occur in several areas of the tree and could be measured by trip related multipliers. If the number of trips is known along with some of their characteristics (i.e., length, speed, delay, and vehicle type). Measurement of Transit Benefits 61 . MEASUREMENT TECHNIQUES FOR TRANSIT CONSEQUENCES Ease of Measurement Technique I. Provides Alternatives A. Long Term Option difficult written comment service area size B. Unusual Occurrence easy difference in C.S. of next best alternative C. Independent Living difficult written comment D. Recreational Riding moderate value/trip II. Travel by Transit A. Fewer Automobile Trips 1. Facility Needs easy comparison of plan alternative 2. Environmental Effects easy trip related multipliers 3. User Effects easy consumer surplus B. Transit Trips 1. User Effects easy consumer surplus 2. Change In Well Being very difficult written comments 3. Change In Life Style very difficult written comments 4. Security difficult written comments III. Land-Use/Economic Activity A. Concentration of Activity 1. Efficiency of Public Services moderate written comment land-use model 2. Interpersonal Contacts very difficult written comment 3. Land Preservation difficult comparison of plan alternatives moderate Included with consumer surplus moderate Included with consumer surplus IV. Transit Supply A. Community Support very difficult referenda, budget allocations B. Facilities 1. Construction moderate Input/output 2. Land-use easy plan results C. Operations 1. Employment moderate input/output 2. Environmental easy transit veh. mi. multipliers 3. Purchases easy Input/output 62 Measurement of Transit Benefits . then estimates can be made of energy, air pollution, and noise consequences. Methods for doing this for air pollution are discussed in Section J. Facility needs related to less automobile travel can be found from comparisons of plan elements. Transit trip making has many complex consequences; i.e., change in well being, change in lifestyle, and security. It can be argued that these effects will be reflected in net consumer surplus, if the measurement of consumer surplus is calculated so that it incorporates the behavioral nature of travel choice. The calibration of mode choice models and other steps of the travel forecast must be done to represent how travelers consider all aspects of their travel decisions. Traveler behavior would account for the values placed on many of the effects shown in the transit trip making part of the tree. Land-Use Consequences. Effects on land use of transit can be partially measured through a consumer surplus approach, if the modeling structure permits land-use distribution to change. Techniques are given in Section I. Other landuse consequences that result from concentration are more difficult to measure. Efficiency of public services and interaction may need to be described in words. Land preservation could be found from the results of a travel demand/land-use model, as described later. Transit Supply Consequences. The presence of transit has a variety of effects. Transit facility construction and operation employ people and consume resources. In addition, the presence of a transit system can generate local community pride and prestige. Such intangibles are difficult to measure but may be quite significant to a community. Employment impacts can be determined through an input-output analysis or through a direct approach, as described in Section K of this report. Other effects (such as land consumption, environmental effects and purchases) can be found from plan designs. Measurement of Transit Benefits 63 . H. TRAVEL RELATED BENEFITS Measuring Travel Related Benefits Travel related benefits are those that result from increased accessibility when a transit system is improved. Benefits can accrue to a transit patron, because a trip can be made with less time, cost or inconvenience by transit than by some other alternative. Benefits can also accrue to an automobile driver or a passenger, because there might be less congestion on some streets due to increased transit usage. Benefits can also accrue a traveler who might choose to make an additional trip by either mode or might choose to switch modes. Many past benefits studies have determined that the largest single user benefit from a transportation system improvement is travel time savings. Additional user benefits include savings in costs of fuel, tolls, fares, vehicle ownership, and vehicle maintenance. Intangible user benefits can include the comfort of travel, the ability to make entirely new trips, or to satisfy trip purposes by traveling to better but more distant destinations. In our largest cities, there has been an increasing interest in transit's impact on traffic congestion. There are two aspects to this impact: (1) the degradation of traffic flow associated with buses mixed with automobiles; and (2) the improvements in traffic flow that might occur if some drivers can be persuaded to take transit. Both of these effects should be components of user benefits. When dealing exclusively with highway travel, it is sometimes possible to estimate user benefits by adding individual components. For example, by ignoring changes in mode or destination it is possible to compute time saving from a highway improvement by subtracting the "after" total travel time from the "before" total travel time. Transit benefits are far more complicated, so it is easiest to estimate them directly from the net consumer surplus of the system change. If 64 Measurement of Transit Benefits . calculated properly, net consumer surplus will include all the cited benefits - both tangible and intangible. Essential Ingredients User benefits in the form of net consumer surplus can be easily estimated, provided that a good travel forecast has been prepared for the transit alternative and the null alternative. Ideally, the travel forecast should have these features. a. It must have determined mode split for every possible trip in the transportation system. Planners familiar with travel forecasting will call this a "post distribution!' mode split for all origin and destination pairs. The mechanism for computing mode split should be properly sensitive to travel time, travel cost and convenience including weighted out-of-vehicle time). b. The spatial distribution of trips should have been sensitive to the amount of transit service, enabling shifts in origin- destination patterns because of transit improvements. Most travel forecasting models do not provide this sensitivity; however, it can often be added with little difficulty. Methods for distributing trips in this way are described in the section, "Technical Issues". c. The spatial distribution of trips should be sensitive to the level of congestion on highways. Some travel forecasting models can do this automatically, others cannot. Planners sometimes refer to a forecast with this property as having "elastic- demands". d. Trip generation, the choice to travel or not to travel, should be sensitive to the quality of transit service. This could be done in a Measurement of Transit Benefits 65 . "The essence of this approach is to use behavioral travel choice models as the indicator of willingness-to-pay and the basis for benefit measurement." number of ways, including using automobile ownership forecasts that relate to the extent of transit service. e. The amount of traffic estimated for each segment of road must be properly sensitive to the amount of congestion on that segment. Furthermore, the amount of estimated delay on each road segment must accurately reflect the amount of traffic. If both these conditions are satisfied, the forecast is described as having an "equilibrium traffic assignment". f. The estimate of mode split for each possible trip should be properly sensitive to the amount of congestion on the road network. g. The procedure should be capable of market segmentation; that is, to incorporate data from user groups with different circumstances. Procedures for creating such a forecast have been developed over the past several years, and are already available in off-the-shelf travel forecasting packages. The essence of this approach is to use behavioral travel choice models as the indicator of willingness-to-pay and the basis for benefit measurement. Additional elements may be needed, depending upon the nature of the transit system modification and upon its long-term effects on urban development. A ballpark estimate of user benefits can sometimes be made with a less-than-ideal travel forecasting model. Such a rough estimate is not always desirable as some benefits may be underestimated; the method will be explained later in this chapter. 66 Measurement of Transit Benefits . Travel Benefits as Measured by an Enhanced Consumer Surplus Economists tell us that benefits of any public project can be ascertained by calculating net consumer surplus. Consumer surplus is the difference between the amount an individual is willing to pay for a good and the amount the individual actually pays. For example, consider a commuter line that now carries 500 riders. One particular commuter might be willing to pay $5 for travel from his suburban home to his work place, but the rail operator only charges $4. The $1 difference is the commuter's current consumer surplus. Any decrease in fare would further increase this commuter's consumer surplus. Net consumer surplus can be estimated very easily when there aren't any changes in travel behavior. A reduction in fare to $3 would increase this commuter's surplus by another $1 to a total of $2. The net increase in consumer surplus for all current riders is exactly $500. Net consumer surplus is more difficult to estimate when there are behavioral changes. Continuing with the previous example, assume that after the fare decrease there was an increase in ridership on the commuter line of 100 new riders. It is reasonable to assume that each new rider had a willingness-to-pay of somewhere between $3 and $4. A rider with a willingness-to-pay of less than $3 wouldn't choose to ride; a rider with a willingness-to-pay of greater than $4 would already be riding. Without any further knowledge of the new riders we can only split the difference and assume the average willingness-to- pay of the new riders is $3.50. The average net consumer surplus for a new rider is $0.50, or $50 for all 100 new riders. The total net consumer surplus of the fare reduction is $550 ($500 for the old riders and $50 for the new riders). A person's decision to switch to transit normally consists of more than cost issues. The potential rider also considers in-vehicle time, out-of-vehicle time, comfort, and convenience. The forecast of travel must include all of these elements of the choice process, properly weighted. Measurement of Transit Benefits 67 . When doing a complete benefits calculation, it is also essential to consider losses in consumer surplus elsewhere in the system - on other transit routes or on highways. The above example would be totally correct only if the new riders had not been already making the same trip by some other means. Clearly, benefits still can accrue when there aren't any changes in fare, such as with improved headways, elimination of transfers, faster speeds, or line extensions. Some service improvements can decrease the duration of the trips; other service changes improve the convenience of trips. It is important to include these nonmonetary changes in any estimate of consumer surplus. Disutility Measures For any given transit trip it is possible to calculate a comprehensive measure of its costs and inconveniences, called the trip's "disutility". Disutility is most easily interpreted when it is expressed in units of automobile riding time. A typical disutility function would look like: Disutility = automobile riding time + (transit riding time)(transit riding weight) + (walking time)(walking weight) + (waiting time)(waiting weight) + (transfer time)(transfer weight) + initial wait penalty + first transfer penalty + second transfer penalty + fare /(value of time) + (tolls + parking costs + vehicle operating costs)/(value of time) + (vehicle ownership costs)/(value of time). (H.1) 68 Measurement of Transit Benefits . In this equation, the value of time is the rate at which travelers would be willing to trade money for time savings. Typical values of weights and penalties are shown in Table H.1. These values could also differ by trip purpose and by market segment to represent different levels of importance for different types of trips. Equation H.1 deals exclusively with time, cost and convenience issues. Additional terms could be provided for other significant elements of comfort, such as protection from inclement weather and privacy, if they were factors in traveler choices. Table H.1. TYPICAL WEIGHTS AND PENALTIES FOR TRAVEL DISUTILITY Transit Riding Weight 1 + 2.0 X (fraction of person time standing) Walking Weight (good weather) 1.3 Waiting Weight 1.9 Transfer Weight 1.6 Initial Weight Penalty 8.4 minutes Transfer Penalty (first or second) 23 minutes Value of Time 0.167 to 0.333 of the average wage of choice riders The only vehicle ownership costs that should be included in Equation H. 1 are those that can be attributed to a single trip. It has been found that travelers do not correctly perceive the fall value of their vehicle ownership costs while making mode choice decisions, so this term is sometimes omitted. However, it may be that a user regularly chooses transit to avoid ownership of a second car. Measurement of Transit Benefits 69 . In that case the ownership cost of an automobile should be included in the automobile disutility equation for those who consider this a factor. Travelers have a willingness-to-pay in units of travel time..13 They will choose to ride only if the disutility of travel (in time units) is less than their willingness-to-pay (in time units). Consequently, travelers possess a consumer surplus of disutility in time units. This disutility may be mathematically expressed as a time savings or converted to monetary units by multiplying by the value of time. ____________________ .13 Horowitz, Alan J., 1980, pp. 175-182. 70 Measurement of Transit Benefits . Click HERE for graphic. Calculation of Enhanced Consumer Surplus This enhanced measure of consumer surplus is illustrated in Figure H. 1 for a single trip. A demand curve shows the relationship between numbers of trips and trip disutility, expressed in time units. Point 1 represents the original disutility and number of riders taking the trip. Point 2 shows a new disutility and the number of riders after a service change, such as shortening the headway. Because of the service improvement, more people have chosen to take this trip. Some new riders switched from the automobile, some new riders have changed their choice of destination, and some new riders are making an entirely new trip. T.1 is the original disutility and T.2 is the new disutility. All the old riders receive a windfall consumer surplus of T.1 - T.2. This windfall is illustrated as the shaded area A. New riders have a net consumer surplus shown in the shaded area B. The new riders' net consumer surplus is an almost triangular area. Consequently, the total consumer surplus can be found from the roughly trapezoidal, combined area: Net Consumer surplus = (T.1 - T.2) * (Q.1 + Q.2)/2 . (H.2) More precisely, net consumer surplus may be found by subdividing the shaded area into several flat and wide trapezoids and adding their areas, as shown in Figure H.2. This process of finding the area of several smaller trapezoids can be expressed mathematically as, Click HERE for graphic. (H.3) Measurement of Transit Benefits 71 . Click HERE for graphic. Figure H.2. Approximating the net consumer surplus integral with flat trapezoids. Click HERE for graphic. Figure H.3. Effect of a transit system improvement on net consumer surplus for automobile users. 72 Measurement of Transit Benefits . where Q(T) is ridership as a function of disutility. Because of the integral sign, Equation 3 looks more complicated than it really is. Integral calculus is never actually used to perform such a computation. Instead, we would simply divide the service change into several small increments and compute the net consumer surplus with Equation H.2 as each increment is applied. In a multimodal transportation system it is necessary to sum the net consumer surplus over all possible modes. For example, it is likely that highway traffic would decline slightly as the result of the service improvement illustrated in Figure H. 1. The demand curve for the highway is shown in Figure H.3. It is seen that the disutility of travel declines slightly, due to congestion relief, but the number of automobile passengers also declines. Consequently, there is a small net consumer surplus to highway travelers (shaded area). Total net consumer surplus for the whole system can be found from this relationship, Click HERE for graphic. (H.4) for all modes (m), all origins (i) and all destinations (j). As before, the integral is performed by summing the areas of flat, wide trapezoids. Measurement of Transit Benefits 73 . Click HERE for graphic. Figure H.4. A Numerical Example Consider the network of Figure H.4 and the accompanying data. There is one origin, one destination, and two modes - bus and automobile. There are 1400 person trips made between the origin and destination during the peak hour, of which 50 trips are captive to transit. The remaining 1350 travelers have a choice of modes. Transit disutility will be reduced, on average, from 50 minutes to 40 minutes by a variety of service improvements. The practical capacity of the road is 650 vehicles per hour and the average number of passengers per automobile is 1.2. The trip takes, on average, 20 minutes under uncongested conditions by automobile. The disutility by automobile, T.a, can be estimated from the BPR travel time/volume formula:.14 T.a = (uncongested travel time) x [ 1 + 0. 15 x (volume/practical capacity).4] so T.a = 20 x [1 + 0.15 x (volume/650).4] (H.5) The number of travelers choosing the bus can be estimated by adding the captive riders to those choice riders who chose transit: Q.b = (Captive Riders) + (Choice Travelers) x P.b (H.6) Where P.b is the fraction of choice travelers who chose transit. The remaining travelers go by automobile. The fraction of choice travelers choosing the bus may be found from the logit model: ____________________ .14Federal Highway Administration Report HHP-24 R8-83, August 1973. 74 Measurement of Transit Benefits . P.b = exp(-à T.b) / {exp(-à T.b) + exp(-à T.a)} (H.7) where exp() is the exponential function and a is a constant that is individually calibrated for each transit system. From earlier work, it has been determined that a good value of a for this example is 0.06. These relationships permit a simultaneous solution of transit ridership and automobile disutility. Because the equations are rather complicated, it is easiest to find the solution iteratively with a spreadsheet. The before and after solutions are shown in Table H.2. Table H.2. CHANGES IN TRAVELER DISUTILITY AND BEHAVIOR Bus Automobile Disutility Passengers Disutility Passengers Before 50.0 357 29.6 1043 After 40.0 462 26.3 938 Change -10 +105 -3.3 -105 Measurement of Transit Benefits 75 . The results of Table H.2 can be easily confirmed by substituting these results directly into Equations H.5, H.6 and H.7. In general, results such as those in Table H.2 would be outputs of rather complex simulation that incorporates the necessary feedback loops. Using Equation H.1, the consumer surplus for the system can be computed: Net Consumer Surplus Transit = (50 - 40)(357+462)/2 = 4095 person minutes and Net Consumer Surplus Automobile = (29.6 - 26.3)(1043+938)/2 = 3269 person minutes for a total of 7364 person minutes. This example assumed that the only effect of a transit improvement is to shift people from automobile to bus. New trips, had they existed, could have been easily handled within this framework. For example, if the service change generated 40 new transit trips, their consumer surplus would be 40 times their average improvement in disutility: = 40 x (50 - 40)/2 = 200 person minutes. The net consumer surplus would then be 7564 person minutes. 76 Measurement of Transit Benefits . Relationship of Enhanced Consumer Surplus to Time Savings A popular method of evaluating improvements in highways is the computation of time savings. This method assumes that demand is inelastic; i.e., the pattern of trip making will be unchanged and the only effect will be a savings in time for certain travelers. This assumption assures that net consumer surplus can be computed by subtracting the total automobile time after the change from the total automobile time before the change. However, when there are important changes in demand due to choice of mode or of destination, time savings fails to measure properly net consumer surplus. In the previous example, a disutility savings in time units can be computed as Time savings = (29.6 x 1043) + (50 x 357) - (26.3 x 938) - (40 x 462) = 5573 person minutes of savings. In this case, time savings underestimates the benefit of the transit service improvement. A conventional time savings calculation underestimates the benefits of the service change because it simply penalizes travelers who switch to transit. These travelers appear to be making an irrational decision in choosing a mode with a higher disutility. However, a close inspection of each travelers' decision process would undoubtedly reveal a strong predisposition toward transit of those that switched. The traveler's origin or destination may have been particularly well located for a transit trip; or the traveler may be able to avoid the purchase of an automobile; or the traveler may have some personal circumstance that makes automobile driving unattractive. A time savings calculation would, only make sense if we possessed highly detailed personal information about every traveler. Such information is impossible to get. Measurement of Transit Benefits 77 . "If a person chooses a different travel behavior, there must be a net positive benefit." Unlike time savings, net consumer surplus takes the mode choice decision at face value as a description of choice behavior. Since mode choice models are developed to represent consumer behavior, it should logically follow that they also can be used to determine how much the traveler benefits when that behavior takes place. If a person chooses a different travel behavior, there must be a net positive benefit (or a smaller loss). Value of Time Values of time have been tabulated for many different travel situations. A majority of studies establishing a value of time have done so by statistical analysis of mode split data. Statistical procedures have varied, yielding varied results. However, the bulk of values of time fall between 12.5% and 50% of the prevailing wage rate. Many transit studies have adopted standard values of time - one third of the wage rate for work trips and one-sixth of the wage rate for non-work trips. A value of time would permit conversion of disutility (in time units) back to dollar units. For example, assume all the travelers in the previous example are going to work and they all make $12 per hour. The value of time is then $4 per hour (one-third of the wage rate) and there are 245.45 hours of consumer surplus for a total of $981.80 worth of benefits. Economists have confirmed that different people have different values of time while traveling; for example, high wage earners benefit more from a time savings than low wage earners. This line of reasoning can produce the controversial conclusion that the best transit systems are those that serve high income people. Systems that serve low income individuals (often minorities) achieve less monetary benefits because of their lower values of time. A strict measure of monetary benefits must include this income variation. For this 78 Measurement of Transit Benefits . reason, it is suggested that planners resist converting disutility benefits to dollar benefits when comparing alternatives or when choosing an alignment. Otherwise, the evaluation methodology could lead to discriminatory results. Market Segmentation A traveler's response to a transit system change would normally vary by the traveler's life circumstances. For example, a large family with only a single automobile would be unlikely to sell it, even if transit service is made very convenient. A small family with many automobiles might be more inclined to cast off a redundant vehicle. Such life circumstances could affect the net consumer surplus of a transit system improvement. These persons would have a larger disutility function with components for vehicle operation costs and ownership costs. The best way of accounting for life style is to segment the market for transit service within the travel forecast. At the very least, a distinction should be made between "captive" and "choice" riders. Other variables in a segmentation scheme could include income, automobile availability, and family size. It is best if the segmentation scheme be kept consistent throughout all forecasting model steps - trip generation to mode split. Aggregation Issues Economists have argued about the practice of aggregating a small amount of time savings for each traveler across a large number of travelers to get a large net benefit. Some economists feel that the saving of a very small amount of time (e.g., a fraction of a minute) is of no practical value, so it must have a very low Measurement of Transit Benefits 79 . benefit. Other economists state that small time savings should be counted anyway. The practice of discounting small, individual time savings assumes that travelers are instantly granted these savings and have no means of adjusting their lifestyles to them. It further assumes that the travel patterns are identical across alternatives. Neither of these assumptions are valid. A time savings, regardless of its size, is beneficial. Enhanced Consumer Surplus without a Travel Forecasting Model The effect of many service changes can be roughly estimated in numerous ways; for example, the similar route method, elasticity method, and the pivot point method. The elasticity method is particularly popular for small, short-term service changes to individual bus routes. Elasticity may be defined as the percentage change in output divided by the percentage change in input, so long as the changes are small. For example, assume a bus route had a reduction in headways from 25 minutes to 20 minutes and this resulted in a route ridership increase from 3000 to 3300. Thus, there was a 10 percent increase in ridership associated with this 20 percent reduction in headway. The elasticity, in this case, was -0.5. Some typically found values of elasticity are reproduced in Table H.3. Although elasticity values can be adopted from other cities, local knowledge is strongly preferred. The benefits of a small, short-term service change can be easily estimated from Equation H.2. We should use Equation H.3 for a large service change, because the typical assumption of constant elasticity implies a nonlinear demand curve. In other words, larger service changes should be arbitrarily broken into a series of smaller service changes for the purposes of benefits calculation. 80 Measurement of Transit Benefits . Consider an example of another route. The current ridership is 2400 with a headway of 30 minutes. The headway is to be reduced in half. Assume that each I minute reduction in headway results in a 0.5 minute reduction in average waiting time and further assume that each reduction of 1 minute of waiting time results in a 1.9 minute reduction in disutility (see Table H.1). Furthermore assume that the headway elasticity is constant across the whole reduction. The calculations are illustrated on Table H.4. Again, the result has units of person minutes. This, calculation did not assume a value for disutility for any given rider; only differences in disutility were used. The disadvantages of an elasticity model relate to its simplicity. It is only approximate, ignoring local circumstances and peculiarities of existing service. It cannot be used to determine the impact on other parts of the transportation system (for example, reductions in congestion on the highway as a result of service change), so consumer surplus from elasticity models excludes some possible benefits. Measurement of Transit Benefits 81 . Table H.3. TYPICAL VALUES OF ELASTICITY FOR TRANSIT SERVICE CHANGES Bus Fare -0.4 Rapid Rail Fare -0.2 Headway -0.5 Bus Mile 0.9 Households within Service Area 1.0 Source: "Travel Response to Transportation System Changes," FHWA, 1981. Table H.4. CONSUMER SURPLUS WITH ELASTICITIES Headway Change in Before After Net Consumer Reduction Disutility Ridership Ridership Surplus 30 to 25 min 4.75 min 2400 2600 9975 25 to 20 min 4.75 min 2600 2817 12865 20 to 15 min 4.75 min 2817 3052 13939 Total 36779 82 Measurement of Transit Benefits . Technical Issues A travel forecast that can properly measure enhanced consumer surplus is no more difficult to run than a conventional forecast, provided care is taken to compute the necessary values of disutility and demand for all modes. The types and amount of data, calibration requirements, and necessary expertise are essentially unchanged. However, there are certain technical and procedural questions that must be dealt with. Equilibrium Assignment Issues. When computing consumer surplus, it is important that automobile disutility be consistent with the amount of traffic along the path from origin to destination. In addition, the amount of traffic should be sensitive to possible variations in mode split and the distribution of trips, both of which depend upon automobile disutility. This consistency is sometimes referred to as an elastic demand-equilibrium assignment. Planners have developed different methods for obtaining such equilibrium solution, but one particular method has been demonstrated to be the most practical with travel forecasting models currently in use by the majority of transportation planning agencies. This method of obtaining an equilibrium assignment is illustrated in Figure H.5. Figure H.5 contains the same steps as a traditional travel forecast. However, Figure H.5 differs from traditional travel forecasting by including a feedback loop, so that the trip distribution and mode split steps can be based upon the highway disutilities that are appropriate for the amount of traffic congestion. (If there is an effect that goes back to trip generation, then the feedback loop should extend to that step as well.) Critical to the feedback loop is an averaging step. At this step the traffic volumes from all previous all-or-nothing traffic assignments are averaged together. Then new disutilities on each link are obtained. An unweighted average typically works well. Measurement of Transit Benefits 83 . Click HERE for graphic. Figure H.5. Combined-Steps Methods of Travel Forecasting 84 Measurement of Transit Benefits . Variations in the order of steps in Figure H.5 are sometimes justifiable to handle special planning situations. A. Transit disutilities are usually assumed to be unrelated to the amount of congestion on the highway network. It might be useful to include traffic congestion in transit disutilities if congestion relief is the principal reason for implementing the service change. However, the service change must be quite large to affect significantly the total level of benefits. B. Land-use is usually assumed to be independent of the amount of congestion on the highway network or the quality of service on the transit system. If either of these assumptions are in