Highway And Transit Investments
Options for Improving Information on Projects' Benefits and Costs and Increasing Accountability for Results Gao ID: GAO-05-172 January 24, 2005Mobility is critical to the nation's economy. Projections of future passenger and freight travel suggest that increased levels of investment may be needed to maintain the current levels of mobility provided by the nation's highway and transit systems. However, calls for greater investment in transportation come amid growing concerns about fiscal imbalances at all levels of the government. As a result, careful decisions will need to be made to ensure that transportation investments maximize the benefits of each federal dollar invested. In this report GAO identifies (1) the categories of benefits and costs that can be attributed to new highway and transit investments and the challenges in measuring them; (2) how state, local, and regional decision makers consider the benefits and costs of new highway and transit investments when comparing alternatives; (3) the extent to which investments meet their projected outcomes; and (4) options to improve the information available to decision makers. To address these objectives, we convened an expert panel, surveyed state departments of transportation and transit agencies, and conducted site visits to five metropolitan areas that had both a capacity-adding highway project and transit project completed within the last 10 years. DOT generally agreed with the report's findings and offered technical comments, which were incorporated as appropriate.
A range of direct and indirect benefits, such as savings in travel time and positive land-use changes, and costs can result from new highway and transit investments. The extent to which any particular highway or transit investment will result in certain benefits and costs, however, depends on the nature of the project and the local economic and transportation conditions where the investment is being made. In addition, measuring project benefits and costs can be challenging and is subject to several sources of error. For example, some benefit-cost analyses may omit some benefits or double-count benefits as they filter through the economy. Officials we surveyed and visited said they considered a project's potential benefits and costs when considering project alternatives but often did not use formal economic analyses to systematically examine the potential benefits and costs. Even when economic analyses are performed, the results are not necessarily the most important factor considered in investment decision making. Rather, our survey responses indicate that a number of factors, such as public support or the availability of funding, shape transportation investment decisions. Officials we interviewed indicated that they often based their decision to select a particular alternative on indirect benefits that were often not quantified in any systematic manner, such as desirable changes in land use or increasing economic development. Available evidence indicates that highway and transit projects do not achieve all projected outcomes; in addition, our case studies and survey show that evaluations of the outcomes of completed projects are not frequently conducted. A number of outcomes and benefits are often projected for highway and transit investments, including positive changes to land use and increased economic development. These projected outcomes were often cited as reasons why the projects were pursued. However, because evaluations of the outcomes of completed highway and transit projects are not typically conducted, officials have only limited or anecdotal evidence as to whether the projects produced the intended results. Several options exist to improve the information available to decision makers about new highway and transit investments and to make analytic information more integral to decision making. These options, such as improving modeling techniques and evaluating the outcomes of completed projects, focus on improving the value this information can have to decision makers and holding agencies accountable for results. Even if steps are taken to improve the analytic information available to decision makers, however, overarching issues, such as the structure of the federal highway and transit programs, will affect the extent to which this information is used. Nevertheless, the increased use of economic analysis, such as benefit-cost analysis, could improve the information available, and ultimately, lead to better-informed transportation investment decision making.
GAO-05-172, Highway And Transit Investments: Options for Improving Information on Projects' Benefits and Costs and Increasing Accountability for Results
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Report to Congressional Committees:
January 2005:
HIGHWAY AND TRANSIT INVESTMENTS:
Options for Improving Information on Projects' Benefits and Costs and
Increasing Accountability for Results:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-05-172]:
GAO Highlights:
Highlights of GAO-05-172, a report to congressional committees
Why GAO Did This Study:
Mobility is critical to the nation‘s economy. Projections of future
passenger and freight travel suggest that increased levels of
investment may be needed to maintain the current levels of mobility
provided by the nation‘s highway and transit systems. However, calls
for greater investment in transportation come amid growing concerns
about fiscal imbalances at all levels of the government. As a result,
careful decisions will need to be made to ensure that transportation
investments maximize the benefits of each federal dollar invested.
In this report GAO identifies (1) the categories of benefits and costs
that can be attributed to new highway and transit investments and the
challenges in measuring them; (2) how state, local, and regional
decision makers consider the benefits and costs of new highway and
transit investments when comparing alternatives; (3) the extent to
which investments meet their projected outcomes; and (4) options to
improve the information available to decision makers. To address these
objectives, we convened an expert panel, surveyed state departments of
transportation and transit agencies, and conducted site visits to five
metropolitan areas that had both a capacity-adding highway project and
transit project completed within the last 10 years. DOT generally
agreed with the report‘s findings and offered technical comments, which
were incorporated as appropriate.
What GAO Found:
A range of direct and indirect benefits, such as savings in travel time
and positive land-use changes, and costs can result from new highway
and transit investments. The extent to which any particular highway or
transit investment will result in certain benefits and costs, however,
depends on the nature of the project and the local economic and
transportation conditions where the investment is being made. In
addition, measuring project benefits and costs can be challenging and
is subject to several sources of error. For example, some benefit-cost
analyses may omit some benefits or double-count benefits as they filter
through the economy.
Officials we surveyed and visited said they considered a project‘s
potential benefits and costs when considering project alternatives but
often did not use formal economic analyses to systematically examine
the potential benefits and costs. Even when economic analyses are
performed, the results are not necessarily the most important factor
considered in investment decision making. Rather, our survey responses
indicate that a number of factors, such as public support or the
availability of funding, shape transportation investment decisions.
Officials we interviewed indicated that they often based their decision
to select a particular alternative on indirect benefits that were often
not quantified in any systematic manner, such as desirable changes in
land use or increasing economic development.
Available evidence indicates that highway and transit projects do not
achieve all projected outcomes; in addition, our case studies and
survey show that evaluations of the outcomes of completed projects are
not frequently conducted. A number of outcomes and benefits are often
projected for highway and transit investments, including positive
changes to land use and increased economic development. These projected
outcomes were often cited as reasons why the projects were pursued.
However, because evaluations of the outcomes of completed highway and
transit projects are not typically conducted, officials have only
limited or anecdotal evidence as to whether the projects produced the
intended results.
Several options exist to improve the information available to decision
makers about new highway and transit investments and to make analytic
information more integral to decision making. These options, such as
improving modeling techniques and evaluating the outcomes of completed
projects, focus on improving the value this information can have to
decision makers and holding agencies accountable for results. Even if
steps are taken to improve the analytic information available to
decision makers, however, overarching issues, such as the structure of
the federal highway and transit programs, will affect the extent to
which this information is used. Nevertheless, the increased use of
economic analysis, such as benefit-cost analysis, could improve the
information available, and ultimately, lead to better-informed
transportation investment decision making.
www.gao.gov/cgi-bin/getrpt?GAO-05-172.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Katherine Siggerud, (202)
512-2834, siggerudk@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Benefits and Costs of Highway and Transit Investments Depend on Local
Circumstances, Though Measuring and Properly Counting Some Benefits and
Costs Can Prove Difficult:
Analysis of Benefits and Costs Not Usually Systematic, and Results of
Analysis Are Only One Factor Among Many Considered in Investment
Decision Making:
Costs and Usage Outcomes of Highway and Transit Investments Are Often
Different from Projected; and Other Expected Outcomes Are Not Usually
Evaluated:
Options for Increasing Use of Information on Project Benefits and Costs
to Better Inform Decisions and Instill Accountability:
Concluding Observations:
Agency Comments:
Appendixes:
Appendix I: Scope and Methodology:
Appendix II: Survey Results:
Appendix III: Panelists:
Appendix IV: Trends in Highway and Transit Expenditures, Usage, and
Capacity:
Appendix V: Information on Benefits Attributable to Highway and Transit
Investments:
Direct and Social Benefits:
Indirect Benefits:
Appendix VI: GAO Contacts and Acknowledgments:
GAO Contacts:
Acknowledgments:
Tables Tables:
Table 1: Types and Purposes of Economic Analysis:
Table 2: Types of Direct Benefits and Costs to Use in Evaluating
Proposed Highway and Transit Projects:
Table 3: Types of Indirect Benefits to Use in Evaluating Proposed
Highway and Transit Projects:
Table 4: Description of Five Highway and Five Transit Projects Selected
for Review:
Table 5: Summary of Key Projected and Observed Outcomes of Highway and
Transit Projects:
Table 6: Experts' Suggestions for Improving the Quality and Utility of
Economic Analysis:
Table 7: Description of Five Highway and Five Transit Projects Selected
for Review:
Figures:
Figure 1: Survey Responses of Frequency of Economic Analysis Completed
for Proposed Project Alternatives by State DOTs and Transit Agencies:
Figure 2: Survey Responses of Completed Economic Analyses When
Evaluating Project Alternatives:
Figure 3: State DOTs' Survey Responses of Factors of Great or Very
Great Importance in the Decision to Recommend a Highway Project:
Figure 4: Transit Agencies' Survey Responses of Factors of Great or
Very Great Importance in the Decision to Recommend a Transit Project:
Figure 5: Total Public Spending on Highways, 1982-2002:
Figure 6: Total Public Spending for Transit, 1982-2002:
Figure 7: Public Highway Capital Expenditures, 1982-2002:
Figure 8: Public Transit Capital Expenditures, 1995-2002:
Figure 9: Cost to Maintain and Improve Highways and Transit, 2001-2020:
Figure 10: Level of Usage of Public Highways by Mode, 1982-2002:
Figure 11: Level of Usage of Public Transit, Rail/NonRail 1982-2002:
Figure 12: Level of Usage of Rail Transit, 1984-2001:
Abbreviations Abbreviations:
AASHTO: American Association of State Highway and Transportation
Officials:
AMPO: Association of Metropolitan Planning Organizations:
BEA: Bureau of Economic Analysis:
DOT: Department of Transportation:
FHWA: Federal Highway Administration:
FTA: Federal Transit Administration:
ISTEA: Intermodal Surface Transportation Efficiency Act:
MPO: Metropolitan Planning Organization:
NAS: National Academy of Sciences:
NEPA: National Environmental Policy Act:
OMB: Office of Management and Budget:
TEA-21: Transportation Equity Act for the 21ST Century:
TCRP: Transit Cooperative Research Program:
TRB: Transportation Research Board:
ROW: Right-of-way:
Letter January 24, 2005:
The Honorable Thad Cochran:
Chairman:
The Honorable Robert C. Byrd:
Ranking Member:
Committee on Appropriations:
United States Senate:
The Honorable Jerry Lewis:
Chairman:
The Honorable David R. Obey:
Ranking Member:
Committee on Appropriations:
House of Representatives:
Mobility--that is, the movement of passengers and goods through the
transportation system--is critical to the nation's economic vitality
and the quality of life of its citizens. Mobility provides people with
access to goods, services, recreation, and jobs; provides businesses
with access to materials, markets, and people; and promotes the
movement of personnel and material to meet national defense needs.
However, increasing passenger and freight travel has led to growing
congestion in the nation's transportation system; and projections of
future passenger and freight travel suggest that this trend is likely
to continue. Several strategies exist for addressing this congestion,
including improving operations and system management, or managing
system use through pricing or other techniques. One of the key
strategies is to invest in new capacity in the transportation system.
In 2002, capital outlay from all levels of government for highways was
about $68.2 billion, with $26.5 billion specifically for new or
expanded capacity. For transit, 2002 capital outlay was about $12.3
billion from all levels of government, with $8.7 billion specifically
for new capacity. The Department of Transportation (DOT) estimated that
about $90 billion in capital spending on average will be required each
year to maintain the condition and performance of the nation's highway
and transit systems through 2020 and approximately $127 billion in
capital spending to improve the conditions of these systems.[Footnote
1]
Calls for increased transportation investments come amid growing
concerns about the size of federal and state budget deficits, the long-
term viability of financing the nation's highway and transit systems
through motor-fuel taxes, and the future mandatory commitments to
Social Security and Medicare that will consume a greater share of the
nation's resources. Given these fiscal challenges, careful decisions
will need to be made to ensure that transportation investments maximize
the benefits of each federal dollar invested and achieve projected
outcomes. As we have noted previously, there are no mechanisms in the
federal-aid highway program that link federal funding to project
performance.[Footnote 2]
The House Appropriations Committee report, accompanying the fiscal year
2004 Departments of Transportation and Treasury and Independent
Agencies Appropriations Bill, requires that we review the costs and
benefits of the different modes of transportation.[Footnote 3] We
limited our review to the costs and benefits of new highway and transit
investments. Accordingly, this report (1) describes the categories of
benefits and costs that can be attributed to new highway and transit
investments and the challenges in measuring these benefits and costs;
(2) identifies how state, local, and regional decision makers consider
the benefits and costs of new highway and transit investments when
comparing alternatives; (3) examines the extent to which select
capacity-adding highway and transit investments meet their projected
outcomes; and (4) describes options to improve the information
available to decision makers about new highway and transit investments.
To address these objectives, we convened, in collaboration with the
National Academy of Sciences, an expert panel of transportation
economists and practitioners, conducted an extensive literature review,
and interviewed officials from the Federal Transit Administration (FTA)
and Federal Highway Administration (FHWA) as well as representatives
from various industry associations, think tanks, and academic
institutions. We also surveyed all 50 state DOTs and the 30 largest
transit agencies about the type of economic analysis they use when
considering transportation alternatives and how such analysis is used
in decision making, and we received responses from 43 state DOTs and 20
transit agencies.[Footnote 4] In addition, we developed case studies by
conducting site visits to five metropolitan areas across the nation
that had both a capacity-adding highway project and transit project
completed within the last 10 years.[Footnote 5] During these site
visits, we reviewed project documents and interviewed officials from
the respective transit agency, metropolitan planning organization, and
state DOT. We conducted our work from February 2004 through January
2005 according to generally accepted government auditing standards.
[Footnote 6]
Results in Brief:
The categories of benefits that transit and highway projects may
produce include two types of direct benefits--those to users, such as
savings in travel time, and those to users and nonusers alike, such as
reductions in the adverse environmental impacts of transportation.
These direct benefits can in turn produce indirect benefits, such as
economic development, although indirect benefits are harder to
accurately estimate. For example, by creating changes in how nearby
land is used or developed, such projects can increase productivity or
spur economic growth, but some of this benefit may represent a transfer
of economic activity from one area to another. Although transfers can
represent real benefits for the jurisdiction making the transportation
improvement, from a national perspective, they do not represent net
benefits. The costs against which these direct and indirect benefits
must be weighed are likewise varied. They include costs to build,
operate, and maintain the project, as well as less obvious items such
as traffic delays caused by the project's construction or the effects
of unmitigated changes to the environment. These benefits and costs can
vary greatly, depending on the specifics of the project and on local
economic and transportation conditions. Experts and practitioners
identified several challenges in measuring these benefits and costs.
One set of challenges involves limitations in the methods themselves--
for example, limitations in the ability of forecasting models to
anticipate changes in traveler behavior or changes in land use. Another
set of challenges involves sources of error that can be introduced into
benefit-cost calculations, such as omitting some benefits or double-
counting benefits as they filter through the economy. These challenges
can make it difficult to comprehensively and accurately consider all
the various benefits and costs associated with a project.
The majority of local, regional, and state transportation officials we
surveyed and interviewed told us they consider various benefits and
costs of projects when evaluating transportation alternatives; but they
often do not use formal economic analytical tools, such as a formal
benefit-cost analysis, to do so. If they use formal analyses, they tend
to do so more often on transit projects than on highway projects. Local
and state officials noted that these formal analyses are done more
often for transit projects because of the New Starts requirements. For
example, the New Starts program requires that project sponsors
calculate the cost-effectiveness of their proposed transit projects. In
contrast, there are no similar federal requirements for economic
analysis of highway projects, because highway projects are funded under
a formula program, and there is no federal approval of project economic
worthiness. However, regardless of the type of project, our survey
responses indicated that such analyses were just one factor considered
and not necessarily the most important factor in deciding whether to
proceed with a project. Similarly, officials at the locations we
visited indicated that they often based their decision about whether to
proceed primarily on the project's perceived indirect benefits, such as
desirable changes in land use or economic development, which are
difficult to forecast and were generally not quantified or
systematically analyzed in the planning documents we reviewed.
The available evidence indicates that highway and transit projects
often do not meet projected outcomes such as cost and usage, while
other projected outcomes such as economic development or land-use
impacts are not regularly evaluated. Results from our case studies, as
well as analyses conducted by others, show that completed highway and
transit investments often result in higher than expected costs and
usage that are different from what was projected. For example, a study
of over 250 transportation projects found that costs were 28 percent
higher on average than projected costs.[Footnote 7] FTA has implemented
a number of measures to improve usage and cost estimates for New Starts
projects, including holding senior executives accountable for project
cost overruns and assessing the risks related to the project schedules
and budgets. In addition to projections about usage, a number of other
outcomes and benefits were projected for the 10 highway and transit
projects we reviewed, including positive changes to land use, increased
economic development, improved travel time, and reduced emissions.
According to transportation officials we interviewed, these projected
outcomes were important reasons that the projects were pursued.
However, we found that evaluations of the outcomes of completed highway
and transit projects are typically not conducted. Because these
evaluations are not regularly conducted, officials only have limited or
anecdotal evidence of whether the projects produced the intended
results. For example, in several areas we visited, transportation
officials discussed development occurring in the area around the
transportation improvement, although the benefit of such development
was not quantified; and it is unclear whether such development would
have occurred in the area or elsewhere if the project was not
constructed. Because outcome evaluations are not usually completed,
transportation agencies miss an opportunity to learn from the successes
and shortcomings of past projects to better inform future planning and
decision making and increase accountability for results. To identify
lessons learned for future projects and hold transit agencies
accountable for results, FTA recently instituted a new requirement for
before and after studies of transit projects funded under its New
Starts program.
There are several options to improve the information available to
decision makers about new highway and transit investments and to make
analytic information more integral to decision making. These options
focus on improving the value that this information has to decision
makers and holding agencies accountable for results. They range from
improving the quality of data, modeling, and analytic tools to
evaluating the results of completed transportation projects. These
options could be implemented through incentives or mandates, although
each of these approaches has its own degree of difficulty in
implementation, time required, and impacts on federal programs and
resources. Any attempt to implement these options, however, needs to be
tempered with the knowledge that overarching issues, such as the
structure of the federal programs or legislative earmarks, will affect
the extent to which this information is used. For example, the
Transportation Equity Act for the 21st Century (TEA-21) requires local,
regional, and state transportation agencies to consider a number of
factors in their planning, such as economic vitality, safety,
accessibility, and environmental issues. Consequently, these
statutorily defined factors can be more important than the results of a
benefit-cost analysis in selecting a transportation project for
funding. These overarching issues could also steer decision makers away
from the most cost-beneficial projects. Nevertheless, the increased use
of economic analytical tools, such as benefit-cost analysis, could
improve the information available to decision makers and, ultimately,
lead to better-informed transportation investment decision making.
We provided copies of the draft report to DOT, including FTA and FHWA.
Overall, DOT said that the report presented a clear and useful
assessment of the status of economic analysis in its application to
evaluating transportation projects. DOT offered a number of technical
comments, which were incorporated as appropriate.
Background:
The scope of the nation's transportation system is vast and
increasingly congested. Two key components of the transportation
network are the nation's highways and transit system. There are
approximately 4 million miles of highway in the United States, which
serve to provide mobility to millions of passengers and millions of
tons of freight each day. In addition, over 600 transit agencies
provide a range of transit services to the public, including rail and
bus service.[Footnote 8] Each workday, about 14 million Americans use
some form of transit.
Over the last 20 years, all levels of government, including the federal
government, have spent hundreds of billions of dollars on the nations'
highways and transit systems to enhance mobility as well as meet other
needs. Despite these expenditures, increasing passenger and freight
travel has led to growing congestion. For instance, annual delays per
traveler during rush hour have almost tripled, increasing from 16 hours
in 1982 to 46 hours in 2002.[Footnote 9] According to DOT forecasts,
passenger and freight travel will continue to increase in the
future.[Footnote 10] There are a number of strategies, such as
preventive maintenance, improving operations and system management, and
managing system use through pricing or other techniques, which can be
taken to help address the nation's mobility challenges. One of the key
strategies is to invest in new physical capacity in the transportation
system. While such investment is the subject of this report, as we have
noted in the past, a targeted mix of these strategies is needed to help
control congestion and improve access.[Footnote 11] (See app. IV for
additional information about the level of usage of and investment in
the nation's highway and transit systems.)
The funding for new transit and highway projects comes from a variety
of sources, including federal, state, and local governments; special
taxing authorities and assessment districts; and user fees and tolls.
The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA)
and TEA-21 continued the use of the federal Highway Trust Fund as the
mechanism to account for federal highway user-tax receipts that fund
various highway and transit programs.[Footnote 12] Once Congress
authorizes funding, FHWA makes federal-aid highway funds available to
the states annually, at the start of each fiscal year, through
apportionments based on formulas specified in law for each of the
several formula grant programs. Ninety-two percent of the federal-aid
highway funds apportioned to the states in fiscal year 2003 were
apportioned by formula.[Footnote 13] According to DOT officials, the
majority of federal-aid highway funds are used for maintenance
purposes, not new investments. FTA also uses formulas to distribute
federal urbanized and nonurbanized funds for capital and operating
assistance to transit agencies and/or states. FTA also has
discretionary transit programs, including the New Starts program. The
New Starts program provides funds to transit providers for constructing
or extending certain types of transit systems and is the primary source
of funding for new transit capacity.
FTA generally funds New Starts projects through full-funding grant
agreements, which establish the terms and conditions for federal
participation in a project, including the maximum amount of federal
funds available for the project. To compete for a full-funding grant
agreement, a transit project must emerge from a regional planning
process. The first two phases of the New Starts process--systems
planning and alternatives analysis--address this requirement. The
systems planning phase identifies the transportation needs of a region,
while the alternatives analysis phase provides information on the
benefits, costs, and impacts of different corridor-level options, such
as rail lines or bus routes. The alternatives analysis phase results in
the selection of a locally preferred alternative--which is intended to
be the New Starts project that FTA evaluates for funding. After a
locally preferred alternative is selected, the project is eligible for
entry into the New Starts process. FTA oversees the management of
projects from the preliminary engineering phase through construction
and evaluates the projects for advancement into each phase of the
process,[Footnote 14] as well as annually for the New Starts report to
Congress. FTA's New Starts evaluation process assigns ratings on the
basis of a variety of statutorily defined criteria, such as mobility
improvements, and determines an overall rating. FTA uses the evaluation
and ratings process, along with its consideration of the state of
development of the New Starts projects, to decide which projects to
recommend to Congress for a full-funding grant agreement.[Footnote 15]
ISTEA and TEA-21 also established an overall approach for
transportation planning and decision making that state, regional, and
local transportation agencies must follow to receive federal funds.
This approach includes involving numerous stakeholders, identifying
state and regional goals, developing long-and short-range state and
regional planning documents, and ensuring that a wide range of factors
are considered in the planning and decision-making process. For
example, transportation officials must consider safety, environmental
impacts, system connectivity, and accessibility, among other things.
While the federal requirements specify a wide range of factors that
must be considered when selecting a project from alternatives,[Footnote
16] they generally do not specify what analytical tools, such as
benefit-cost analysis, transportation officials should use to evaluate
these factors. Instead, local, regional, and state agencies are largely
responsible for selecting the methods used to analyze these factors.
Federal requirements also do not mandate that local, regional, and
state agencies choose the most cost-beneficial project. Rather,
transportation officials at these agencies have the flexibility to
select projects on the basis of their communities' priorities and
needs. Even in the more structured New Starts program, state, regional,
and local agencies have discretion in selecting the preferred
alternative, although, according to FTA, these agencies are likely to
consider New Starts requirements in the decision making process.
Various analytical approaches, including benefit-cost, cost-
effectiveness, and economic impact analyses, have been refined over
time to better calculate the benefits and costs of transportation
investments and provide decision makers with tools to make better-
informed decisions. (Table 1 describes the purposes of the different
economic analyses.) The Office of Management and Budget (OMB), DOT, and
GAO have identified benefit-cost analysis as a useful tool for
integrating the social, environmental, economic, and other effects of
investment alternatives and for helping decision makers identify
projects with the greatest net benefits. In addition, the systematic
process of benefit-cost analysis helps decision makers organize and
evaluate information about, and determine trade-offs between,
alternatives.
Table 1: Types and Purposes of Economic Analysis:
Type of analysis: Benefit-cost analysis;
Purpose: To identify the alternative with the greatest net benefit to
the locality, region, or nation by comparing the monetary value of
benefits and costs of each alternative.
Type of analysis: Cost-effectiveness analysis;
Purpose: To identify the lowest cost alternative for achieving a level
of benefit by comparing the costs of each alternative.
Type of analysis: Economic impact analysis;
Purpose: To identify the impact of alternatives on the local, regional,
or national economy by measuring the effects derived from each
alternative.
Source: GAO.
[End of table]
Because the federal-aid highway program is funded under a formula
program and projects are therefore not subject to an evaluation process
at the federal level, there are no federal requirements for economic
evaluation of highway investment costs and benefits--except that FHWA
does ensure that federal highway funding is being spent on an eligible
roadway for eligible purposes.[Footnote 17] In contrast, FTA's New
Starts program is discretionary, and FTA is authorized to establish
various requirements that sponsors of transit capital investments need
to meet in estimating a project's benefits and costs, including
calculating the cost-effectiveness of a proposed project and providing
information on expected land-use effects, to obtain federal
funding.[Footnote 18] However, transit agencies are not required to
conduct a formal benefit-cost analysis, and FTA is prohibited by TEA-21
from considering the dollar value of mobility improvements in
evaluating projects, developing regulations, or carrying out any other
duties.[Footnote 19] FTA officials noted that the New Starts evaluation
process results in greater federal oversight and scrutiny for New
Starts projects, compared with the level of federal oversight for
federally funded highway projects.
Benefits and Costs of Highway and Transit Investments Depend on Local
Circumstances, Though Measuring and Properly Counting Some Benefits and
Costs Can Prove Difficult:
The types of direct benefits that transit and highway projects may
produce include user benefits, such as travel-time savings, and
benefits that accrue to users and nonusers alike, such as reductions in
the adverse environmental impacts of transportation. These direct
benefits can in turn produce indirect benefits, such as economic
development and employment that affect the regional or local economy;
however, these indirect benefits may constitute transfers of economic
activity from one area to another or are a result of the direct
benefits filtering through the economy. Although these indirect
benefits represent real benefits for the jurisdiction making the
transportation improvement, they represent transfers and not real
economic benefits, from a national perspective. Transportation
investments also produce costs, including the direct costs to
construct, operate, and maintain the project as well as other potential
social costs resulting from the construction and use of the facility,
such as unmitigated environmental effects. The potential benefits and
costs of any specific highway or transit investments will depend on the
specifics of the project being considered and the local economic and
transportation conditions. However, measuring all the potential
benefits and costs of proposed highway and transit investments can be
challenging and subject to several limitations and sources of error.
For example, in current practice, benefit-cost analysis and economic
impact analysis may not include all potential benefits. In addition,
there are many limitations in being able to accurately predict changes
in traveler behavior, land use, or the use of nearby roadways or
alternative travel options resulting from a new investment. Sources of
error can also include double counting of benefits and not comparing a
project to a viable alternative or improperly defining the "do-nothing"
case for comparison.
Highway and Transit Investments Can Result in a Range of Benefits and
Costs:
The key categories of potential direct user benefits from highway
investments include travel-time savings, reductions in accidents, and
reductions in vehicle operating costs.[Footnote 20] These user benefits
are historically included in benefit-cost analysis of such investments.
The User Benefit Analysis for Highways Manual developed by the American
Association of State Highway and Transportation Officials (the AASHTO
Manual) provides guidance on how these benefits should be
estimated.[Footnote 21] In addition to benefits that accrue solely to
users, social benefits such as reductions in environmental costs--
including reduced emissions, noise, or other impacts--are also
potential sources of direct benefits of highway projects. However,
these benefits are more difficult to quantify and value; and as a
result, they are less often included in benefit-cost analyses of
transportation investments. Guidance from FHWA's Office of Asset
Management, the Economic Analysis Primer, discusses these benefits
along with user benefits.[Footnote 22] Experts we consulted also cited
improvements in travel-time reliability as a major source of potential
direct-user benefits, particularly for freight transportation,
although officials at FHWA stated that this benefit is complex and the
best means to incorporate it into benefit-cost evaluations has not been
resolved.[Footnote 23]
For transit investments, direct benefits include improving travel times
for existing transit users, improving travel times for autos and trucks
on alternative roadways, lowering user and environmental costs of auto
use by attracting riders out of their vehicles, and providing a back-up
or future option for nonusers of transit. These types of benefits are
described in guidance on conducting benefit-cost analysis for transit
projects published by the Transit Cooperative Research Program (TCRP)
(this report is known as the Transit Manual).[Footnote 24] Another TCRP
report on transit benefits describes other types of potential benefits,
which may result from the project but may be more difficult to include
in a benefit-cost analysis, such as improved job accessibility for
individuals who are dependent on transit and those who do not or cannot
drive a car.[Footnote 25] See Table 2 for the categories of direct
benefits described in the AASHTO Manual, the Economic Analysis Primer,
and the TCRP reports.
Table 2: Types of Direct Benefits and Costs to Use in Evaluating
Proposed Highway and Transit Projects:
Type of investment: Highway investments; Source of guidance: AASHTO
User Benefit Analysis for Highways;
Direct benefits:
* Savings in travel time;
* Savings in user operating expenses;
* Reductions in injury, morbidity, and mortality;
Costs:
* Project costs;
* Costs of operating and maintaining the project;
* User travel delay incurred during project construction.
Source of guidance: FHWA Economic Analysis Primer;
Direct benefits:
* Reductions in travel time and delay;
* Reduction in costs of crashes;
* Reductions in vehicle-operating costs;
* Reduction in emissions;
* Reductions in noise and other impacts;
Costs:
* Project costs;
* Costs of operating and maintaining the project;
* Mitigation (e.g., noise barriers);
* User costs associated with work zone.
Type of investment: Transit investments; Source of guidance: TCRP
Report 78 (the Transit Manual)[A];
Direct benefits:
* Reductions in transit travel times, including waiting and transfer
time;
* Reductions in transit accident and crime costs;
* Reductions in travel times for autos and trucks;
* Reductions in vehicle operating and ownership costs (including
parking costs);
* Transit option value[B];
* Reductions in environmental impacts from improvement, such as air and
water quality;
* Reductions in roadway accidents;
Costs:
* Any changes in fare costs to users;
* Project construction costs;
* Costs of operating and maintaining the project;
* Increases in transportation support services.
Source of guidance: TCRP Report 35;
Direct benefits:
* User benefits, such as travel time reductions;
* External benefits, such as reduced environmental costs;
* Job accessibility benefits;
* Reduced parking costs;
Costs: Costs are not discussed in this report.
Source: FHWA, AASHTO, TCRP.
[A] The Transit Manual breaks down what we refer to as direct benefits
into primary and secondary benefits. The manual classifies reductions
in transit travel times, transit accident and crime costs, travel times
for autos and trucks, and vehicle operation and ownership costs as
primary benefits. The remaining three direct benefits are classified as
secondary benefits.
[B] Option value refers to the benefit that some nontransit users
receive by having transit service as an option for the future or in
certain circumstances.
[End of table]
In addition to direct benefits, a number of indirect benefits are also
attributed to highway and transit investments. Lowering transportation
costs for users and improving access to goods and services enables new
and increased economic and social activity. Over time, individuals,
households, and firms adjust to take advantage of those benefits,
leading to several indirect impacts. These indirect impacts include
changes in land use and development, changes in decisions to locate
homes and businesses in areas where housing and land are less expensive
or more desirable, and changes in warehousing and delivery procedures
for businesses in order to take advantage of improved speed and
reliability in the transportation system. These impacts then lead to
increased property values, increased productivity, employment, and
economic growth. Economic impact analysis is generally used to estimate
the extent to which direct benefits translate into indirect economic
impacts. Table 3 shows the types of indirect benefits that are included
in economic impact analysis.
Table 3: Types of Indirect Benefits to Use in Evaluating Proposed
Highway and Transit Projects:
Type of investment: Highway investments;
Source of guidance: FHWA Economic Analysis Primer;
Indirect benefits:
* Economic productivity and growth;
* Changes in property values and employment;
* Multiplier effects on the regional economy from transportation
spending.
Source of guidance: AASHTO User Benefit Analysis for Highways;
Indirect benefits: According to the manual, while these types of
effects are important to consider, they are outside the scope of the
manual.
Type of investment: Transit investments;
Source of guidance: TCRP Report 78 (the Transit Manual);
Indirect benefits:
* Increases in regional productivity and benefits of urbanization;
* Enhanced employment accessibility;
* Increases in property values;
* Employment, output, and income effects due to construction.
Source of guidance: TCRP Report 35;
Indirect benefits: Generative Impacts:
* Higher density development, resulting in agglomeration and
urbanization benefits, i.e., clustering of offices, retail shops,
hotels, entertainment centers, and other land uses around rail-transit
stops that enable higher productivity;
Indirect benefits: Redistributive Impacts:
* Land development;
* Employment and income growth;
Indirect benefits: Transfer Impacts:
* Regional employment and economic growth related to construction,
operation, and maintenance of the transit system;
* Joint development income;
* Property tax income.
Source: FHWA, AASHTO, TCRP.
[End of table]
The extent to which these indirect benefits are relevant depends to
some degree on whether the project is viewed from a local or a broader
perspective. These economic impacts may represent transfers of economic
activity from one area to another; and, while such a transfer may
represent real benefits for the jurisdiction making the transportation
improvement, it is not a real economic benefit from a national
perspective because the economic activity is simply occurring in a
different location. For example, a highway improvement in one county
may induce businesses to relocate from a neighboring county, bringing
increased tax revenue and providing jobs; but the neighboring county
then loses that tax revenue and employment.
Indirect benefits may also represent capitalization of the direct user
and social benefits, and therefore should not be added to the direct
benefits. For example, a project's transportation benefits, in terms of
improved travel times, can lead to increased demand for more remote
properties, and thus lead to increases in those property values. In
this instance, the users are transferring their travel benefits to
property owners through a higher purchase price. Including the
increased property value and the travel-time benefit in an overall
project evaluation would constitute counting the same benefit twice.
However, some experts we consulted and literature we reviewed indicated
that there could be some residual benefit from these indirect effects
that is not accounted for in travel-time benefits or other direct
impacts and argue that this portion should be incorporated into a
comprehensive estimation of project benefits and costs.[Footnote 26]
Transportation investments also produce costs--such as the costs to
construct, operate, and maintain the project; traffic delay costs
during construction of the project; and other potential social costs,
resulting from the construction and use of the facility--such as
unmitigated environmental effects or community disruption. For example,
while a project may have an indirect benefit of increasing some land
values, it may also reduce land values elsewhere due to negative
impacts from noise and emissions that may result from the improved
roadway or transit line. In addition, a transportation improvement can
entail costs for some regions if it diverts economic activity away from
a particular area.
Benefits and Costs Depend on the Local Conditions and the Type of
Improvement:
The size and type of benefits and costs that will manifest from highway
and transit investments depend critically on local conditions, such as
existing travel conditions and the extent of congestion, economic
conditions and development patterns, and the extent of the existing
road and transit networks. In addition, the type of project, its
design, and other specifics will also affect the types of benefits and
costs the project may produce. Each particular project must be
evaluated on its own merits, in comparison with any other viable
alternatives to address the transportation and other goals of the
region.
For example, research indicates that transit projects can result in
peak period, travel-time savings for users of alternative roadways when
those roadways are heavily congested, the transit project has a
separate ROW and a fixed schedule, and door-to-door travel times on the
transit line are competitive or lower than door-to-door travel times on
the roadway in peak periods for some road users.[Footnote 27] Building
a rail line alongside a road that is not frequently traveled will
clearly not result in similar benefits. Similarly, the extent to which
a highway investment will result in reductions in travel times and the
extent to which new travelers will return the highway to previous
levels of congestion and delay, depend on the level of congestion on
alternative routes, the extent of the local transit system, and local
economic conditions.
Research further indicates that to realize desired land-use changes and
higher density development, transit investments need to be coordinated
with supportive local land-use policies and that impacts need to occur
more readily in rapidly growing regions with demand for high-density
development.[Footnote 28] In a similar fashion, the extent to which
highway investments will result in improvements in freight productivity
will depend on economic conditions; the amount of freight traffic on
the local network; the presence of alternative freight modes, such as
rail or waterways; and various other locally specific factors. In
addition, specific projects will also affect different areas and groups
differently. A transportation project that is projected to produce
large benefits may cut through one neighborhood and provide excellent
access to another, thereby imposing costs on one area and creating
benefits for another or providing service to wealthy areas at the
expense of lower income areas.
The costs of highway investments and various transit alternatives can
vary significantly, based on the location and specifics of the project.
For example, according to a 2002 report from the Washington State DOT,
average construction costs for a lane mile of highway range from $1
million to over $8 million across 25 states the department
surveyed,[Footnote 29] with some projects costing far more than these
averages suggest.[Footnote 30] In a recent study on different transit
modes, we found that light rail construction costs vary from $12.4
million per mile to $118 million per mile.[Footnote 31] As with
construction costs, the costs to operate and maintain highway and
transit systems also vary significantly, based on the specific project
and area. For example, according to the National Transit Database,
operating costs per-vehicle revenue mile for heavy rail systems ranges
from about $5 to about $15, whereas for light rail, these costs range
from a little over $5 to over $20 in some locations.
Measuring and Forecasting Benefits and Costs Subject to Several
Difficulties and Sources of Error:
Experts we consulted and literature we reviewed cited several
limitations in current practice, and some major sources of error in
evaluating transportation projects that can lead to over or
underestimation of a project's benefits and costs.[Footnote 32] The
following sections discuss some of these limitations and sources of
error.
Challenges in Predicting Changes in Travel Behavior and Land Use with
Current Models and Data:
One of the key challenges in measuring and forecasting benefits and
costs is the inability to accurately predict changes in traveler
behavior, land use, or the usage of nearby roadways or alternative
travel options resulting from a highway or transit project using
current travel models.[Footnote 33] For example, according to FHWA
guidance, travel models do not generally anticipate the impact of a
transportation improvement on travelers who change their time of travel
or make entirely new trips in response to the relatively lower trip
cost resulting from the improvements. Current transportation demand
models are also unable to predict the effect of a transportation
investment on land-use patterns and development, since these models
take land-use forecasts as inputs into the model. Nonetheless, expected
land use and development impacts are often the major drivers of
transportation investment choices.[Footnote 34] In addition, the effect
of a highway or transit investment on alternative roadways or on other
modes is rarely taken into account and is difficult to forecast. In
fact, according to the DOT Inspector General, transit's effect on
alternative roadways is not reliably estimated by local travel
models,[Footnote 35] although this effect can be a major source of
benefits in some cases.[Footnote 36] These same models are also used in
making highway investment decisions.
Compounding these shortcomings is the considerable variation in models
used by local transportation planning agencies. The federal government
gives local transportation planning agencies the flexibility to choose
their own transportation models without being subject to minimum
standards or guidelines. This flexibility reflected varying local
conditions and expertise in applying these models. However, one expert
pointed out that this strategy has had the unintended consequence of
making local planning agencies very dependent on outside expertise
because they usually contract with independent consultants who have
their own software packages. This strategy also has produced
significant variation in forecast quality and limited the ability to
assess quality against the general state of practice.
Data quality is a pivotal concern to the challenges in modeling, as the
available data provide critical input for travel models. For example,
data about traffic flow throughout the day, rather than at a single
time, are crucial to produce valid representations of travel needs and
problems. However, reliable and complete data are not always available-
-which can result in forecasting errors. Collecting the data needed for
modeling is growing more expensive and difficult. For instance, a home
survey of travel habits, which identified basic transportation needs
and travel patterns of a region and is the foundation of transportation
modeling, is now beyond most local transportation agencies' annual
budgets, according to experts. Moreover, obtaining data through
telephone surveys is difficult and willingness to participate is
declining.
Omitting Certain Benefits and Ignoring Impacts on Different Groups:
Experts we consulted and literature we reviewed also indicated that
benefit-cost analysis and economic impact analysis often do not include
all potential benefits, some of which are very difficult to quantify.
For example, according to one expert we consulted, transit projects are
often put at a disadvantage in terms of estimating benefits and costs
relative to highway projects because several types of benefits specific
to transit are not typically evaluated and are difficult to quantify. A
review of economic analyses conducted for over 30 transit projects
found that these analyses routinely omitted benefits to noncar owners,
often did not include environmental benefits, and often did not
evaluate the economic development benefits related to the
project.[Footnote 37] Experts we consulted also highlighted the
importance of taking account of which groups benefit from a project and
which bear the costs, although these distributional impacts are
commonly ignored in evaluation of a project's benefits and costs. In
theory, a benefit-cost analysis could take such considerations into
account, but the outcome of a benefit-cost analysis is a net value,
which under standard assumptions eliminates any distinction between
groups who benefit and groups who do not.[Footnote 38]
Double Counting and Counting Costs as Benefits:
Project appraisals often double count benefits and count certain
project expenditures as benefits. As previously discussed, for the most
part, indirect benefits are more correctly considered capitalization of
direct user benefits or transfers of economic activity from one area to
another.[Footnote 39] Therefore, estimating and adding such benefits to
direct benefits would constitute double counting and lead to an
overestimation of a project's benefits. Some evaluations of particular
transportation projects also cite jobs created, or the economic
activity resulting from the construction of the project, as benefits of
the project. Experts we spoke with indicated that job creation from
transportation spending would only be a true benefit if the person
getting the job would otherwise be unemployed, and thus the reduction
in unemployment benefits could be considered a benefit of the project.
Nonetheless, local decision makers generally view such expenditures as
producing benefits for their jurisdiction.[Footnote 40] In some
evaluations decision makers also count the avoided cost of some other
alternative project as a benefit of the project under consideration.
For example, in some evaluations, decision makers have considered the
foregone expense of improving the highway as a benefit of a transit
project, or the foregone expense of adding general-purpose lanes as a
benefit of adding high-occupancy vehicle lanes. Instead, those costs
should be included in the benefit-cost analysis of the alternative and
then compared with the benefits and costs of all other alternatives. In
some appraisals, such cost savings have been the largest source of
project benefits.[Footnote 41]
Not Discounting Future Benefits and Costs Properly:
Another expert we interviewed stated that state departments of
transportation often do not discount future benefits into present
values. Benefits and costs incurred in the future have lower values
than those incurred in the present because, in the case of benefits,
the benefits cannot be enjoyed now; and in the case of costs, the
resources do not need to be expended now. Benefits and costs are worth
more if they are experienced sooner because of the time value of money.
Failure to discount future benefits or using an inappropriate discount
rate can severely affect the results of a benefit-cost analysis. Not
discounting at all will greatly overestimate a project's benefits. An
unreasonably high discount rate will underestimate a project's
benefits. OMB provides guidance on choosing appropriate discount rates
for different types of investments.[Footnote 42]
Unreasonably Bad Conditions Expected Without the Project:
Another source of error when calculating transportation projects'
potential benefits and costs occurs because current travel demand
models tend to predict unreasonably bad conditions in the absence of a
proposed highway or transit investment.[Footnote 43] Travel
forecasting, as previously discussed, does not contend well with land-
use changes or effects on nearby roads or other transportation
alternatives that result from transportation improvements or growing
congestion. Before conditions get as bad as they are forecasted, people
make other changes, such as residence or employment changes to avoid
the excessive travel costs. In one area we visited, local officials
told us that the "do-nothing" scenario for a particular project
evaluation predicted that travel delays would grow to almost 80 minutes
for a typical commute after 20 years, and impacts on travel-time
reductions were then calculated for the proposed investment. However,
officials noted that traffic did not degrade as they had predicted in
the years leading up to construction--with delays of 13 minutes by
1999, although they had predicted delays of 40 minutes or more by that
time. The officials noted that generally, commuters only stand for a
certain amount of delay before they shift their own behavior to avoid
the delay.
Lack of Comparison to Viable or Modal Alternatives:
In addition, experts indicated that projects are often not compared to
viable alternatives, or to projects in other modes, to enable adequate
comparisons of investment alternatives. We found in our case studies of
five New Starts projects and five highway projects that the transit
projects we reviewed were compared with other transit modes, such as
increased bus service, but not to new highway investment alternatives;
and none of the highway projects we reviewed were compared with a
transit alternative. However, in some cases, differently designed
alternatives can prove to be a superior option. For example, one study
of transportation decision making in Houston found that, if the bus
alternatives to the preferred light rail system were designed to cost
as much as the light rail option, the resulting bus system would carry
more passengers and be more cost-effective than the rail option;
however, local planners and decision makers did not consider such an
alternative.[Footnote 44] Another recent evaluation compared a transit
and a highway project with common economic yardsticks--such as a
benefit-cost ratio and a rate of return--and found that under certain
circumstances, transit can perform favorably compared with a highway
alternative.[Footnote 45]
Analysis of Benefits and Costs Not Usually Systematic, and Results of
Analysis Are Only One Factor Among Many Considered in Investment
Decision Making:
According to our survey results and case studies, although the costs
and benefits of projects were almost always considered in some way,
formal analyses such as benefit-cost analysis were not usually
conducted when considering project alternatives, and they were
completed less frequently for proposed highway projects than transit
projects. Additionally, officials reported that the results of formal
economic analyses were just one factor among many considered in project
selection, and it was not necessarily the most important factor. Other
important factors included qualitative assessments of the potential
land use or economic development benefits of the project, public
opinion and political support, and funding availability.
Costs and Benefits of Highway and Transit Investments Are Considered
but Not Always Systematically:
Most state DOT and transit agency officials that responded to our
survey said that when alternatives are considered for a proposed
project, they complete some analysis of either costs or benefits of the
various alternatives, but they complete a formal benefit-cost analysis,
economic impact analysis, or cost-effectiveness analysis less
frequently (see fig. 1). These results indicate that many state and
local transportation agencies are not consistently using formal
economic analysis as part of their investment decision-making process
to evaluate project alternatives. In addition, in the locations that we
visited, we did not find any examples of completed benefit-cost
analysis for the 10 projects that we examined.
Figure 1: Survey Responses of Frequency of Economic Analysis Completed
for Proposed Project Alternatives by State DOTs and Transit Agencies:
[See PDF for image]
[End of figure]
More Analysis Is Completed for Proposed Transit Projects:
According to our survey results, when comparing alternatives for
proposed projects, economic analyses were more likely to be conducted
for transit projects than highway projects (see fig. 2). We saw a
similar pattern in our case studies. For instance, a cost-effectiveness
analysis was completed for all five transit projects that we examined
in our case studies.[Footnote 46] We also found additional studies for
the transit projects that included qualitative examination of such
potential project impacts as regional economic development
opportunities, distribution across social groups, increased transit
reliability, and increased transit ridership. For the highway projects
we studied, we found that project documents contained little, if any,
economic analyses on the various alternatives. We did find that for
some highway projects, safety and environmental impacts were
quantified, but not put into dollar terms.
Figure 2: Survey Responses of Completed Economic Analyses When
Evaluating Project Alternatives:
[See PDF for image]
[A] Economic analyses include cost-effectiveness, benefit-cost, or
economic impact analysis.
[End of figure]
Local and state officials noted that these economic analyses are done
more often for transit projects because of the New Starts requirements.
For example, FTA requires project sponsors to calculate a project's
cost-effectiveness in order to be eligible to receive New Starts
project funding--and the results of this analysis are used in FTA's
evaluation of the project.[Footnote 47] In contrast, there are no
similar federal requirements for economic analysis of highway projects
because highway projects are funded under a formula program, and there
is no federal analysis of project economic worthiness. In addition,
because New Starts projects may require a higher local funding share
compared with federally funded highway projects,[Footnote 48] officials
suggested that more economic analysis is generally completed for
transit projects, especially if a special taxing authority is required
or the project becomes controversial and subject to public scrutiny.
Many Factors Are Considered in Selecting Transportation Projects:
In our past work, we found that numerous factors shape transportation
investment choices and that factors other than those considered in
analyses of projects' benefits and costs can play a greater role in
shaping investment choices.[Footnote 49] Some of the factors considered
reflect local or regional priorities and needs; others are required to
be considered in the decision-making process by federal legislation.
For example, as a result of the National Environmental Policy Act
(NEPA) of 1969, transportation officials must make project decisions
that balance engineering and transportation demands with the
consideration of social, economic, and environmental factors, such as
air quality and impacts on communities. Some of these factors may not
be easily considered in traditional benefit-cost analysis.[Footnote 50]
Similarly, TEA-21 requires local, regional, and state transportation
agencies to consider a range of factors in their planning, including
environmental compliance, safety, land use, and public input.
Our case studies also demonstrated that officials often place value on
a variety of indirect impacts that may be difficult to estimate and are
often not quantified in project analyses. For example, we found that
many of the projects we examined were expected to result in desirable
changes in land use and economic development in the region, although
these types of impacts were not quantified or systematically analyzed
in the planning documents we reviewed for both highway and transit
investments. For example, one proposal discussed the light rail transit
project's potential for attracting new businesses and developers to the
surrounding low-income community, but it did not present projections of
the potential impact or estimates of the types of benefits these
impacts might produce. Transportation officials indicated that these
factors were just as important, if not more important than the results
of their cost-effectiveness analysis in the decision to pursue the
project.
Similarly, our survey of transit agencies and state DOTs also showed
that the results of economic analysis of a project are not necessarily
the most important factor considered in highway and transit investment
decision making. For highways, political support and public opinion,
the availability of state funds, and the availability of federal
matching funds were ranked most often as important factors in highway
project decision making within state DOTs (see fig. 3). Thirty-four
state DOTs said that political support and public opinion are factors
of great or very great importance in the decision to recommend a
highway project, whereas only eight said that the ratio of benefits to
costs was a factor of great or very great importance.[Footnote 51]
Figure 3: State DOTs' Survey Responses of Factors of Great or Very
Great Importance in the Decision to Recommend a Highway Project:
[See PDF for image]
Note: Forty state DOTs responded to each survey question that asked
about the relative importance of different factors. See appendix II for
the survey instrument and complete results.
[End of figure]
For transit, results from our survey showed that the factors ranked
with "great or very great importance" most often included political
support/public opinion, the availability of local funds, and the
availability of federal matching funds. Specifically, of the 19 transit
agencies that responded to these survey questions, 17 said that
political support/public opinion and the availability of local funds
were factors of great or very great importance in project decision
making (see fig. 4).
Figure 4: Transit Agencies' Survey Responses of Factors of Great or
Very Great Importance in the Decision to Recommend a Transit Project:
[See PDF for image]
Note: Twenty transit agencies responded to each survey question that
asked about the relative importance of different factors, except for
the question that asked about the relative importance of the
availability of federal matching funds. Nineteen transit agencies
responded to this question. See appendix II for the survey instrument
and complete results.
[End of figure]
Survey respondents also provided a number of examples of other factors
that figure into the decision-making process. For example, one state
DOT highway survey respondent mentioned that in the respondent's state,
projects are often built as a basic public good, regardless of the
relative benefits and costs. Another state DOT highway survey
respondent said that the geographic distribution of funds plays a large
role in determining the priority of highway projects. One transit
agency survey respondent commented that comprehensive, long-range
planning is a major component in evaluating and selecting projects, and
the criteria are not solely based on economic factors; other typical
considerations include population growth, land-use projections,
environmental factors, and housing.
To further analyze the relationship between the results of economic
analyses of transportation projects and decisions made in selecting the
project, we conducted a regression analysis of the relationship between
the results of benefit-cost analyses completed for state transportation
projects in California and the subsequent decisions to program
construction funds for projects in the Statewide Transportation
Improvement Plan. The benefit-cost analyses used by California
considered travel-time savings, vehicle operating cost reductions, and
safety benefits. In our analysis, we found that projects with higher
benefit-cost ratios had a higher probability of receiving funding for
construction. However, the analysis explained little of the overall
variation--for example, some projects with high benefit-cost ratios
received funding while others with relatively lower ratios also
received funding, indicating that other factors were likely considered
in the decision.
Costs and Usage Outcomes of Highway and Transit Investments Are Often
Different from Projected; and Other Expected Outcomes Are Not Usually
Evaluated:
Results from our literature review and case studies indicate that both
completed highway and transit investments result in higher than
expected costs and in usage that is different from what was projected.
Transportation officials we interviewed generally contend that
completed projects have achieved other outcomes that were projected to
flow from the highway and transit investments, such as positive changes
in land use and economic development. In most cases, however, these
outcomes of highway and transit projects are not regularly quantified
or evaluated after the projects are completed. Rather, transportation
officials relied on limited and anecdotal evidence to support their
statements about the impacts of the projects. Officials we met with
cited several reasons that evaluations of completed projects are not
regularly conducted, including lack of funding and technical
challenges.
Highway and Transit Projects Are Subject to Inaccurate Forecasts of
Costs and Usage:
A number of studies have shown that both completed highway and transit
investments often result in outcomes that are different from what was
projected. The following examples highlight such problems for both
highway and transit projects.
* A study of over 250 transportation projects in Europe, North America,
and elsewhere found that costs for all projects were 28 percent higher
than projected costs at the alternatives analysis stage, on average.
Rail projects showed the highest cost escalation, averaging at least
44.7 percent, while road projects averaged escalations of 20.4
percent.[Footnote 52] This study further found that cost
underestimation has not improved over time, indicating systematic
downward bias on costs.
* Initial results from an ongoing study of New Starts projects by FTA
show that nearly half of the 19 projects, for which ridership was
reviewed, will achieve less than two-thirds of forecast ridership by
the forecast year. In addition, costs escalated on 16 of the 21
projects reviewed from the alternatives analysis stage, where decisions
are made to go forward with a preferred alternative, to the completion
of the project--with 4 of those projects experiencing increases of
between 10 and 20 percent and 9 projects with increases over 20
percent.[Footnote 53]
* In a 1997 report, we collected and analyzed data for 30 highway
projects costing $100 million or more. We found that cost growth
occurred on 23 of 30 projects when comparing actual costs to costs
estimated at the alternatives analysis stage, with about half of the
projects experiencing increases of more than 25 percent.[Footnote 54]
* A 1996 study that compared actual toll-road revenues to forecasted
revenue streams, found that 10 out of the 14 projects studied fell
short of projections by 20 to 75 percent, while a majority of the
projects missed or are likely to miss revenue forecasts in the second
year by 40 percent or more.[Footnote 55]
We found similar patterns for our case studies of 10 transit and
highway projects in 5 metropolitan areas.[Footnote 56] Table 4 provides
descriptions of the projects we reviewed in each metropolitan area.
Table 4: Description of Five Highway and Five Transit Projects Selected
for Review:
Location: Baltimore;
Highway project: Construction of a new segment of road;
Transit project: Extensions to existing light rail system.
Location: Dallas;
Highway project: Widening a segment of an existing road;
Transit project: Construction of an original segment of light rail
system.
Location: Denver;
Highway project: Widening and modifying a segment of an existing road;
Transit project: Extension to existing light rail system.
Location: Miami;
Highway project: Adding travel lanes and grade separation to a segment
of road;
Transit project: Extension to elevated people-mover system.
Location: San Jose;
Highway project: Modifying major interchange;
Transit project: Construction of an original segment of light rail
system.
Source: GAO summary of project documents.
Note: According to FTA, the Miami People Mover is not typical of most
New Starts projects. In particular, FTA officials noted that there are
only three other people-mover projects in the United States.
[End of table]
In summary, we found the following:
* Comprehensive data on the projected and actual costs and usage of all
the highway projects we examined were not readily available. In
particular, we were not able to obtain estimates of the projects' costs
at a consistent point in the project development cycle (e.g.,
alternatives analysis). As a result, it is difficult to draw overall
conclusions on how the projected costs compared with the actual costs
for the five projects. However, the limited cost data we were able to
obtain suggest that at least two of the five highway projects
experienced cost escalation. In one case, the capital costs were
originally budgeted in the state's capital funding program at
approximately $62.7 million (in inflation-adjusted 1999 dollars); but
the actual expenditures for the project, in 1999, approached about
$94.4 million, 50 percent higher than the estimate. In another case,
construction costs for the preferred alternative, at the alternatives
analysis phase, were estimated at $16.6 million (in inflation-adjusted
2001 dollars), while actual construction costs in 2001, according to
officials, approached $25.4 million, a 53 percent increase. In
addition, in at least two locations, traffic after the improvement was
greater than had been expected after project completion, leading to
less congestion relief than had been expected. FHWA is working to
improve the cost estimates of federal-aid highway projects. For
example, in June 2004, FHWA issued guidance for developing cost
estimates, including steps for producing more realistic early
estimates. FHWA also established help teams that travel to states that
ask for assistance in developing better estimates.
* The five New Starts transit projects we reviewed had more extensive
information on the projected costs of the projects and had estimates
from several different points in the project development process. When
comparing as-built costs to cost estimates at the alternatives analysis
stage--where decisions are made on the preferred alternative but the
project is likely not at final design--three out of five New Starts
transit projects we reviewed had actual costs in excess of projected
costs by more than 10 percent. When comparing costs from the Full-
Funding Grant Agreement stage--where the preferred alternative has been
selected and the project is at its final design--only two projects had
costs escalate, one by 6 percent and one by over 40 percent.[Footnote
57] At the time ridership figures were reviewed, the forecast years--
that is, the years for which the ridership projections were made in the
project's planning documents--for four of the five New Starts projects
remained in the future; therefore, final conclusions about whether the
projects exceeded or fell short of ridership projections are premature.
Currently, only one of the projects achieved the ridership levels
projected; however, four of these five projects have surpassed 50
percent of the projected level of ridership for the forecast year.
According to FTA, the agency has introduced a number of measures since
these projects were planned and developed to improve ridership and cost
estimates. For example, FTA is more rigorously examining ridership
forecasts of projects, requiring before and after studies for all new
projects, and conducting risk assessments of select projects to
identify all significant risks related to the project's schedule and
budget and to ensure that mitigation measures or contingencies are in
place, among other things. In addition, FTA is currently examining the
projected and actual ridership of New Starts projects that opened in
the last 10 years to assess whether these projects achieved their
estimated ridership levels and to improve the reliability of
forecasting procedures. FTA also instituted a pilot program in 2003 to
hold FTA senior executives accountable for project outcomes.
Specifically, FTA's senior executive service team bonuses are tied, in
part, to project cost control--that is, New Starts projects with full
funding grant agreements must not exceed their current baseline cost
estimate by more than 5 percent.[Footnote 58]
Transportation officials offered several reasons that the actual costs
and levels of usage differ from those projected. For example,
transportation officials from one metropolitan area we visited
attributed lower than expected transit ridership to a severe economic
downturn and slower than anticipated development around transit
stations. The economic downturn also affected the highway project in
this area, resulting in less traffic than expected. This had the effect
of reducing congestion, although the transit project was credited with
contributing to congestion reduction as well. In addition, inflation,
changes in the project's scope, and changes in costs of building
materials could also explain differences between the projected and
actual costs of the project. For example, officials commented that
estimated costs of a project always change as the project moves through
the planning, design, and construction processes--becoming more
accurate as more specifics about the project are known. When the cost
of the project is initially estimated, sponsors do not know exactly how
the scope/design of the project may change or what environmental
problems may arise. However, by the time the New Starts project has
reached the Full Funding Grant Agreement stage, or the highway project
has had construction funds programmed, much more about these costs are
known. Comparing costs from this stage to actual costs will reveal less
variance than comparing costs with estimates from earlier stages in the
process, such as the alternatives analysis stage. However, it is
important to note that estimates from these earlier stages are
generally used by project sponsors to select the preferred
alternative.[Footnote 59]
Evaluations of Highway and Transit Projects Are Not Usually Conducted:
Outcome evaluations of completed projects are not usually conducted to
determine whether proposed outcomes were achieved. For most of the
highway and transit projects we reviewed, several of the proposed
outcomes were not defined in any measurable terms in the project
planning documents we reviewed. Moreover, officials stated that many of
the projected outcomes were not usually quantified, tracked, or
evaluated after the projects were complete. Of the 10 projects we
reviewed, 6 did not have any type of outcome evaluation completed.
Before and after studies for four projects had been completed or were
being conducted--three for transit projects, and one for a highway
project. Although these studies provide a description of corridor
conditions before and after the project, they do not compare or
evaluate actual outcomes with projected goals. Results from our survey
also indicate that outcomes are not typically evaluated, although
evaluations for transit projects tend to be conducted more so than for
highway projects. In particular, 16 of 43 state DOTs reported that they
have analyzed completed highway projects to determine whether proposed
outcomes were achieved, while 13 out of the 20 transit agencies
reported that they have conducted such evaluations.
Although evaluations were not often conducted, officials we interviewed
provided some limited evidence as to the outcomes resulting from the
projects we reviewed. Table 5 shows the types of outcomes that project
officials and planning documents cited for each project and the extent
to which these outcomes were measured.[Footnote 60] As table 5
indicates, the projects were often expected to result in indirect
impacts that are difficult to forecast and measure, such as positive
changes to land use, and economic development, among other things.
According to project officials, these outcomes, while not forecasted in
measurable terms, were important reasons that the projects were
pursued.
Table 5: Summary of Key Projected and Observed Outcomes of Highway and
Transit Projects:
Project: Baltimore light rail extensions;
Projected outcome: Expand ridership--average weekday boardings and
alightings on the extensions were predicted to be about 11,800 by 2005;
Measured outcomes: Boardings and alightings on the extensions in 2001
were 8,272.
Project: Baltimore light rail extensions;
Projected outcome: Attract growing reverse commuter population--two of
the extensions combined were expected to carry over 4,000 reverse
commuters;
Measured outcomes: No measurement of reverse commuters.
Project: Baltimore light rail extensions;
Projected outcome: Reduce travel-time--savings of 10 to 12 minutes for
one extension were expected, and 11 to 24 minutes for another;
Measured outcomes: No measurement of changes in travel times.
Project: Baltimore light rail extensions;
Projected outcome: Support future development;
Measured outcomes: No measurement of benefits of development, but local
officials showed increases in employment and households around transit
extensions.
Project: Baltimore highway addition;
Projected outcome: Reduce congestion on nearby roads;
Measured outcomes: Before and after study showed that congestion was
reduced in some areas and traffic increased in others.
Project: Baltimore highway addition;
Projected outcome: Attract new industry;
Measured outcomes: No measurement of the extent to which new industry
was attracted, but local officials showed increases in employment in
the area.
Project: Baltimore highway addition;
Projected outcome: Increase tax revenues from increased property values
and additional employment;
Measured outcomes: No measurement of increases in tax revenues, but
officials provided data on increases in employment in the area.
Project: Baltimore highway addition;
Projected outcome: Accommodate planned regional and local industrial
and residential growth;
Measured outcomes: Local officials showed that number of households
grew around new highway.
Project: Dallas light rail segment;
Projected outcome: Expand ridership--average weekday boardings on the
segment were predicted to be 34,800 by 2005;
Measured outcomes: 26,884 average weekday boardings in 2002.
Project: Dallas light rail segment;
Projected outcome: Maximize transit potential in the city and improve
overall transit travel;
Measured outcomes: Before and after study for the entire system showed
overall annual transit ridership increased by 7 percent and annual
passenger miles of travel increased by 8 percent 2 years after opening.
Project: Dallas light rail segment;
Projected outcome: Improve travel times from various points within the
corridor to the central business district;
Measured outcomes: Before and after study for the entire system showed
that overall, the light rail offered better travel time, as compared
with local bus routes, but limited bus express routes offered a better
travel time.
Project: Dallas light rail segment;
Projected outcome: Create land-use changes throughout the corridor;
Measured outcomes: Before and after study for the entire system showed
that mixed results have been observed throughout corridor, but areas in
the southern sector of Dallas, where there are high levels of poverty
and unemployment, have seen less development despite city incentives to
develop the area.
Project: Dallas lane widening;
Projected outcome: Improve existing and future congestion;
Measured outcomes: Traffic counts are taken, but no measurement of
changes in traffic levels and congestion, although officials noted
fewer complaints of congestion.
Project: Dallas lane widening;
Projected outcome: Enhance safety;
Measured outcomes: No measurement of safety improvement.
Project: Denver light rail expansion;
Projected outcome: Expand ridership--average weekday boardings on the
expansion were predicted to be 22,000 by 2015;
Measured outcomes: 19,083 average weekday boardings in 2002.
Project: Denver light rail expansion;
Projected outcome: Relieve mounting congestion on alternative roadways
with less traffic expected versus the no-build alternative;
Measured outcomes: Before and after study showed that daily traffic on
one road in the corridor declined between 2000 and 2001--a survey on
the light rail line also indicated that 38 percent of the weekday
riders were likely former drivers.
Project: Denver light rail expansion;
Projected outcome: Contribute to the attainment of regional air
quality objectives;
Measured outcomes: No measurement of air quality impacts.
Project: Denver light rail expansion;
Projected outcome: Influence land use and economic opportunity within
the corridor;
Measured outcomes: No measurement of benefits of land-use changes or
development, but local officials cited changes to zoning and increases
in development around stations.
Project: Denver light rail expansion;
Projected outcome: By 2015, potential savings in bus operational costs;
Measured outcomes: No measurement of changes in bus operating costs.
Project: Denver lane widening;
Projected outcome: Reduce increasing congestion and improve level of
service;
Measured outcomes: No measurement of congestion reduction, but
officials noted that improvements are self-evident.
Project: Denver lane widening;
Projected outcome: Decrease the rate and number of accidents by
eliminating signalized intersections and numerous turning movements;
Measured outcomes: No measurement of accident reduction, although
project did result in elimination of signalized intersections.
Project: Denver lane widening;
Projected outcome: Business conditions may improve with improved
accessibility;
Measured outcomes: No measurement of changes in business conditions.
Project: Denver lane widening;
Projected outcome: Regional emissions would be reduced;
Measured outcomes: No measurement of changes in emissions.
Project: Miami Metromover extensions;
Projected outcome: Expand ridership--average weekday boardings on the
extensions were predicted to be 20,404 by 2000;
Measured outcomes: 4,158 average weekday boardings in 2002.
Project: Miami Metromover extensions;
Projected outcome: Promote land use and economic development;
Measured outcomes: No measurement of benefits of land use changes or
development, but officials noted some development occurring around
stations.
Project: Miami Metromover extensions;
Projected outcome: Minimize duplication of public transportation
services;
Measured outcomes: No measurement of benefits resulting from less
duplication, but officials noted that bus service within downtown had
been replaced by the Metromover.
Project: Miami highway expansion and interchange;
Projected outcome: Improve overall levels of service, solve congestion
at particular bottlenecks;
Measured outcomes: Traffic counts were taken, but were not comparable
with projections due to different data collection methods-- officials
indicated that congestion has returned to levels similar to before the
improvement was made because of greater than expected development in
the area.
Project: Miami highway expansion and interchange;
Projected outcome: Reduce accident rates;
Measured outcomes: No measurement of accident reductions.
Project: Miami highway expansion and interchange;
Projected outcome: Accommodate existing development and planned future
development;
Measured outcomes: No measurement of benefits of changes in
development, but officials noted that development has increased at a
greater rate than was expected.
Project: San Jose light rail extension;
Projected outcome: Expand ridership--average weekday boardings on the
extensions were predicted to be between 5,800 and 7,400 by 2005;
Measured outcomes: 6,366 average weekday boardings in July 2000--
although ridership fell to 3,800 in July 2004.
Project: San Jose light rail extension;
Projected outcome: Reduce congestion on area roadways;
Measured outcomes: No measurement of congestion reduction, but a 2000
survey of riders found that 46 percent of riders would drive if light
rail were not available and 55 percent of riders were new to transit
(in other words, riders were taken off the highway network, thereby
lowering congestion levels).
Project: San Jose light rail extension;
Projected outcome: Improve travel time;
Measured outcomes: No measurement of changes in travel times, but
officials noted that transit travel times are competitive with auto
travel times.
Project: San Jose light rail extension;
Projected outcome: Support the development plans of local cities, such
as higher density development;
Measured outcomes: No measurement of benefits of land use changes or
development, but officials noted that many local businesses had
located around transit stations, and one business had financed a
station.
Project: San Jose interchange;
Projected outcome: Improve congestion at interchange;
Measured outcomes: Eastbound afternoon delay decreased from 13 minutes
to 4 minutes, and westbound morning delay decreased from 6 to 3
minutes.
Project: San Jose interchange;
Projected outcome: Promote land use and economic development;
Measured outcomes: No measurement of benefits of land-use changes or
development, but officials noted that many local businesses had
located in the area around the interchange.
Source: GAO summary of information collected through case studies of
each project.
[End of table]
For some outcomes, as table 5 indicates, transportation officials only
had anecdotal or qualitative pieces of evidence about whether the
projects achieved their proposed outcomes. For example, in one area,
transportation officials cited personal experiences and public comments
about reduced congestion on nearby roadways. In other areas, officials
showed us developments that had been constructed around stations, or
areas near the improvements where development was expected to occur as
evidence of the projects' impacts.
Transportation Officials Cite Several Reasons for Not Conducting
Outcome Evaluations:
Transportation officials we spoke with offered several reasons why they
do not typically conduct evaluations of the outcomes of highway and
transit projects. In particular, transportation officials and experts
agreed that there is little incentive to direct available funding
toward doing outcome evaluations. Because state and local funding is
limited and these studies can be costly and difficult, local officials
indicated that studies of completed projects were not as high a
priority as pursuing and conducting studies on future projects. Several
transportation officials stated that once a project is completed, it is
considered successful; and planners then turn their attention to other
projects. Some officials also noted that these projects inherently
improve safety, mobility, and economic development and that evaluation
of these outcomes is not needed. Thus, project evaluations for
completed projects do not fare well in competition for limited planning
funds. The Senate-proposed bill (S. 1072) to reauthorize federal
surface transportation programs, which was considered by the 108TH
Congress in 2004, would increase funds available to support local
transportation planning. The funds provided under such a provision
could potentially be used to fund outcome evaluations.
Experts and transportation officials we spoke with also stated there
were many technical challenges to designing and completing outcome
evaluations. For example, experts stated that it is very difficult to
determine the economic impacts that can be attributed to a
transportation project, given the multitude of other factors that can
influence development. According to experts and transportation
officials, once transportation investments are completed, they become a
part of an entire transportation system; and, therefore, the effects of
the individual project become difficult to isolate, evaluate, and
attribute to the individual project.
Finally, experts and transportation officials contend that a major
disincentive to doing outcome evaluations is that the benefits of doing
the analysis may be smaller than the potential risks. Transportation
projects are concrete and cannot be easily redesigned or adjusted once
completed, so some officials believe there is little incentive to find
out that a project is not providing the intended benefits. Therefore,
agencies tend to declare success once the project begins operating.
Options for Increasing Use of Information on Project Benefits and Costs
to Better Inform Decisions and Instill Accountability:
There are options for providing state, regional, and local decision
makers with more and better analytic information for making investment
choices. These options focus on improving the value of this information
for decision makers to make more fully informed choices and in helping
ensure that projects can be evaluated on the results they produce. At
the federal level, these options could be implemented either through
incentives or mandates. However, each of these implementation
approaches has a degree of difficulty in such matters as the time
required and the impacts on federal programs and resources. In
addition, any attempts to increase the use of such information should
be tempered with the knowledge that other factors, such as the
structure of federal programs and the requirements of legislative
earmarks, will affect the extent to which such information can be used.
These other factors often have a strong effect on decisions about which
projects are funded.
Options Exist to Improve Analytic Information and Its Use in
Transportation Investments:
The experts who served on our panel provided a variety of options for
improving information available to decision makers and potentially
giving such information a greater role in highway and transit
investment decisions. The options are of three main types: (1)
improving the quality of data and transportation modeling, (2)
improving the quality and utility of benefit-cost analysis methods and
tools, and (3) evaluating the results of completed transportation
projects. These options focus on making the analytic information more
useful and relevant to investment decisions, according to experts.
Experts noted two important caveats in considering these options,
however. First, no single analytic tool can answer all questions about
the impacts of transportation investment choices. Second, even when
benefit and cost information is available, it may play a relatively
limited role in investment decisions. As a result, the best information
and analysis may not result in the most beneficial highway and transit
investments.
Improve the Quality of Data and Transportation Modeling:
Local and state transportation agencies require valid, reliable data
and transportation models in order to conduct analyses, including
benefit-cost analysis. Yet, experts have expressed concerns about the
quality of local data and transportation models and have proposed
improvements in both areas.
Several options have been proposed to improve data and modeling
quality. For example, TRB, with DOT sponsorship, is undertaking a study
to gather information and prepare a synthesis of local planning
agencies' current modeling state of practice so that this baseline can
be used to identify data that these models require. In addition, an
expert proposed adopting an approach used outside the transportation
sector--that is, accept existing data but specify the degree of
uncertainty associated with the data. This approach is based on the
idea that consistent data and measures are more important than perfect
data and measures.
To improve the accuracy of local travel models used to support New
Starts projects, FTA introduced new reporting and analysis software--
"Summit"--in the fiscal year 2004 rating process. Summit is intended to
produce a computation of user benefits from locally developed
forecasts, as well as standardized analytical summaries of both the
forecasts and user benefits. According to FTA, these reports and
summaries have provided both FTA and transit agencies a means to (1)
identify and diagnose travel forecasting problems related to
assumptions regarding fare and service policies, regional
transportation networks, land use, and economic conditions as well as
(2) help ensure that the local forecast is utilizing comprehensive and
up-to-date data on travel behavior and local transportation systems. As
evidence of the impact of Summit, FTA officials noted that they
required 22 of 29 projects rated in the fiscal years 2004 and 2005
rating cycles to correct flaws in their underlying local forecasting
models. Despite these improvements, however, forecasting of transit
user benefits currently has a critical shortcoming. FTA has discovered
that current models used to estimate future travel demand for New
Starts are incapable of estimating reliable travel time savings as a
result of a New Start project. According to DOT's Inspector General,
this limitation is due to unreliable local data on highway speeds. FTA
is studying ways to remedy this problem.
Improving the Quality and Utility of Benefit-Cost Analysis Methods and
Tools:
Experts said local, regional, and state transportation officials could
have more reason to use benefit-cost analysis if it produced
information more relevant to the investment choices that they face. In
this regard, they cited various steps that could be taken to make
benefit-cost analysis more accessible to these officials without making
it more complex. Table 6 describes the improvements they identified.
Table 6: Experts' Suggestions for Improving the Quality and Utility of
Economic Analysis:
Improve land-use measures and incorporate more fully into analysis; The
impacts of transportation investments on land use are an important
factor in decision making. As a result, analyses that predict the
impacts of transportation investments on land use, or the impact of
changes in land use and employment on travel behavior and
transportation choices, are critical to local transportation decision
makers, according to experts and local officials we interviewed.
Nevertheless, benefit-cost analysis and other types of economic
analysis usually pay limited attention to land-use issues, according to
experts. Moreover, land-use impacts--as well as other indirect
benefits--are difficult to estimate, and the inclusion of such impacts
must be done in a manner that captures the complexity of other factors
that work in conjunction with access issues.[A] Noting that
transportation planners generally find it difficult to adapt economic
analysis to debates about population density and sprawl and lack
economic analytic tools to forecast land-use impacts, experts described
this as a situation that discredits economic analysis.
Consider distribution of projects in analysis; Distribution of
transportation investments' benefits and costs is a critical, local
concern that frequently is not considered adequately in economic
analysis. Improving analytical tools and attention to how
transportation benefits and costs are distributed across social and
income groups and geographic areas could be important to local
officials and the public, experts emphasized. At the same time, these
issues often are treated as having secondary importance in economic
analysis. By not fully addressing these issues, local transportation
planning agencies can be open to charges--both from the public and
judges in courts of law--of conducting a less than a comprehensive
project assessment. One expert stated that these distributional issues
are a key reason for conducting economic analysis--that is, the
analysis can help referee situations where investments produce real
differences in outcomes for various groups.
Improve understanding of travel patterns; Travel patterns are changing
as the number of people using the transportation system increases and
the demographics of the traveling public changes. The travel market is
growing and diversifying and travelers' demands are changing. For
example, experts point to significant differences between men's and
women's travel patterns in use of different transport modes, and
journey purpose and destinations, among other things. Understanding the
implications of these passenger and freight travel patterns is
important in meeting local, regional, and state needs, and supporting
reasonable and accurate economic analysis, since travel demand models
produce the information that is then used to estimate economic
benefits.[B]; ; Transportation financing and service delivery also is
changing--and some changes are generating the need for analytic tools
to help predict travel patterns. For example, to the extent that more
private firms build toll highways, their need for analyses to support
required revenue bonds and insurance becomes greater. Highway expansion
projects that are done with toll financing rather than highway trust
funds will not advance without good models of travel patterns. This
need for analysis to help predict how people will react to the project
and respond to various prices is far more important, according to an
expert.
Explore innovative approaches in using and communicating analysis;
State, regional, and local officials who might be comparing a transit
project with a highway widening project need information that is useful
and better documented. Several paths could lead toward this result,
according to one expert. Economic analysis could be reinvented to
facilitate decision by discussion because it can be a powerful tool to
discuss values--increasing jobs, reducing emissions, etc.--that are
associated with certain investment choices. The use of risk assessment
and probability analysis in conjunction with economic analysis could
also be expanded. For example, weather forecasters talk about the
probability of rain rather than suggesting that they can accurately
predict what will happen. This approach could illustrate that projects
with similar rates of return have very different risk profiles and
different probabilities of failure.[C].
Source: GAO analysis of expert panel discussion.
[A] FTA's New Starts program requires project sponsors to assess the
extent to which a New Starts project may affect land use.
[B] FTA requires that project sponsors describe the travel patterns of
forecast project users as part of the submittal of information to
support project ratings in the New Starts evaluation process.
[C] FTA currently requires risk analysis on the capital costs of all
projects as a prerequisite for approving the project into final design
in the New Starts program.
[End of table]
Evaluating the Outcomes of Completed Projects:
A third set of options suggested by the experts dealt with conducting
more analyses of completed projects. Information about the outcomes of
completed highway and transit projects can be used not only to better
determine what a particular project accomplished, but also to improve
decisions on other projects. For example, a study of how federal
agencies use outcome information indicates that this information can
help decision makers maximize project effectiveness by identifying
"best practices" and better allocate limited resources.[Footnote 61]
However, as noted previously, the outcomes of completed projects are
not typically evaluated. Experts noted that such studies are more
regularly conducted in other sectors, such as health and education
programs. Such evaluations provide an opportunity to increase
accountability in the planning process by documenting and measuring the
results of projects. Outcome evaluations also offer the opportunity for
officials to learn from successes as well as the shortcomings of past
projects.
FTA has recently adopted a requirement for project sponsors to complete
before and after studies for New Starts projects.[Footnote 62] In
particular, sponsors seeking federal funding for their New Starts
project must submit to FTA a plan for the collection and analysis of
information that addresses how the project's estimated costs, scope,
ridership and operating plans prepared during planning and project
development compared with what actually occurred. According to FTA
officials, this requirement is intended to hold transit agencies
accountable for results and identify lessons learned for future
projects. The Senate-proposed bill to reauthorize federal surface
transportation programs, which was considered by the 108TH Congress in
2004, would codify this requirement.[Footnote 63] Neither the House nor
Senate reauthorization bills that were considered in 2004, or FHWA
regulations, would require similar studies for most highway projects,
although the Senate bill provides for evaluating projects funded by the
Congestion Mitigation and Air-Quality program.[Footnote 64]
Incentives or Mandates Could Be Used to Increase Use of Analytic
Information:
Incentives, mandates, or a combination of both, could be used to
increase decision makers' use of analytic information and improve
accountability for investment choices. Each strategy has factors that
affect its feasibility--the difficulty of implementation, time
required, and impacts on federal programs and resources. Each strategy
also has its unique advantages and disadvantages, according to experts.
Several experts also emphasized that the question of strategy is
important because, although many ingredients for benefit-cost analysis
already are in place as a result of local agencies' compliance with
extensive environmental and clean air analytic requirements, they have
not taken the extra step toward this analysis.
Incentives could be used to increase state, regional, and local
agencies' utilization of analytical information and tools. For example,
funding could support additional analysis; training for state,
regional, and local agency personnel in using the analytical tools; and
performance incentives. Using incentives would also be consistent with
what one expert described as the appropriate federal role--supplying
funds to improve data and modeling practices, providing guidance
regarding best practices, and evaluating completed transportation
projects. State, regional, and local transportation agencies also may
view the use of incentives--as opposed to a new federal mandate--as
giving them more flexibility to respond to their stakeholders' interest
in how modal and distributional trade-offs are made. However, using
incentives to increase the use of economic analytical tools, such as
benefit-cost analysis, would be reasonably labor intensive for the
respective federal agencies and require strong program management;
clear strategies for setting goals and practices; and a workable method
to ensure that state, regional, and local transportation agencies have
good analytical tools, according to experts. FTA and FHWA are working
to provide incentives that encourage greater use of analytical tools.
For example, FTA and FHWA have collaborated to establish the
Transportation Planning Capacity Building program, which provides
training and technical assistance to state, regional, and local
transportation officials on using analytical tools in the decision-
making process.
Federal mandates could also be used to increase state, regional, and
local transportation agencies' use of analytical tools, such as
benefit-cost analysis. However, in some cases, mandates would require
legislative change. For example, benefit-cost analysis cannot currently
be required as a condition of receiving highway funds because the
federal government does not have exclusive approval power over the
worthiness of these projects, and states maintain the sovereign rights
to determine which projects shall be federally funded.[Footnote 65] In
addition, it would also be necessary to change TEA-21's prohibition on
placing dollar values on transit mobility improvements in order to
require a benefit-cost analysis as part of the New Starts process.
[Footnote 66] As a strategy based on compliance with rules, mandates
are comparatively simple to implement. However, detecting mistakes and
enforcing mandates as well as creating mechanisms for sanctioning
noncompliance would require considerable attention for effective
oversight.
Factors that Work Against Greater Use of Analysis in Investment
Decisions:
As our survey responses showed, decisions about transportation
investments are based on many things besides the results of economic
analyses of a project's benefits and costs, such as the availability of
funding or public perception about a project. Improving the quality of
information about projects does not make these other matters disappear.
Experts, other transportation researchers, and our past work have
identified several overarching factors that can affect the extent to
which additional analytical information may be used in making decisions
about projects. Four such factors, each discussed below, would likely
continue to affect the extent to which analytic information, even
significantly improved, would be used as the dominant factor in making
investment decisions.
* Structure and Funding of Federal Programs: According to several
experts, the highly compartmentalized structure and funding of federal
highway and transit programs work against an advantage of benefit-cost
analysis--the ability to evaluate how well alternative investments meet
transportation problems. Separations between federal programs and funds
give state, regional, and local agencies little incentive to
systematically compare the trade-offs between investing in different
transportation alternatives to meet passenger and freight travel needs
because funding can be tied to certain programs or types of projects,
according to several experts.[Footnote 67] For example, only fixed
guideway transit projects, such as rail projects, are currently
eligible for New Starts funds.[Footnote 68] As a result, certain bus
rapid transit projects, which have compared favorably with the per-
mile costs of light rail projects, are not eligible for New Starts
funds.[Footnote 69] Both the Senate-and House-proposed bills (S. 1072
and H.R. 3550) to reauthorize federal surface transportation programs,
which were considered by the 108TH Congress in 2004, would allow
certain nonfixed guideway transit projects (e.g., bus rapid transit
operating in nonexclusive lanes) to be eligible for New Starts funding.
The Transportation Research Board reported that most local agency
staff continues to be in a single transportation sector "silo."
[Footnote 70]
Federal funding of highway and transit projects is also not linked to
performance or the accomplishment of goals or outcomes. As a result,
the federal government misses an opportunity to use financial
incentives to improve performance and to hold agencies accountable for
results. In a previous report, we identified possible options for how
the federal highway program could be restructured to increase
flexibility and accountability, including linking funding with
performance and outcomes.[Footnote 71]
* Legislative earmarks: Legislative earmarks target transportation
funds to specific local uses. As a result, these designated projects do
not compete for funding against other alternatives, which removes the
reason and incentive for transportation agencies to conduct benefit-
cost analyses.
* Multiple federal requirements: Federal legislation and regulations
place many demands on state, regional, and local transportation
agencies' analytic resources and--in some cases--give them compelling
reasons to dedicate their analytic resources to areas other than
benefit-cost analysis or to choose an alternative that is not the most
cost beneficial. For example, one expert emphasized that local
transportation agencies have especially strong incentives to focus
their modeling and analytic resources on achieving air-quality goals,
as mandated by federal statute. Demonstrating that these goals are met
is a high priority because failing to do so creates the very tangible
risk that transportation project funding could be blocked. In addition,
TEA-21 requires local, regional, and state transportation agencies to
consider a number of factors in their planning that are not easily
quantified.[Footnote 72] As a result, these statutorily defined
factors, which are considered in a more qualitative manner, can be more
important than the results of a benefit-cost analysis in selecting a
transportation project for funding.
* Expense of analysis: Experts told us that analysis can be quite
expensive. For example, a formal benefit-cost analysis can typically
cost over $100,000 for a multimodal urban corridor that is several
miles long. The high cost of such analyses puts pressure on local
agency budgets that are already stretched to meet other competing
demands and poses a significant disincentive to using benefit-cost
analysis or conducting outcome evaluation. As noted earlier, the Senate
proposed bill (S. 1072) to reauthorize federal surface transportation
programs that was considered by the 108TH Congress in 2004 would
increase funds to support local transportation planning, and those
additional funds could presumably be used to support economic analyses.
Concluding Observations:
With growing concerns about the size of federal and state budget
deficits, combined with the future mandatory commitments to Social
Security and Medicare set to consume a greater share of the nation's
resources, the prospects of future fiscal imbalances are a certainty.
Given the current and long-term fiscal challenges, careful decisions
need to be made to ensure that transportation investments
systematically consider the benefits of each federal dollar invested.
Through federal regulations, laws, and guidance, a framework has been
established for transportation planning that state, local, and other
decision makers must follow to receive federal transportation dollars.
Although the framework identifies factors for consideration during
transportation investment decision making, it does not specify
analytical tools to be applied for evaluating project merits--nor does
it require that the most cost-beneficial project be chosen.
Furthermore, many of the factors that are required to be considered are
not easily incorporated in economic analysis, and methods for
estimating dollar values associated with those factors may not be
readily accepted. This results in some factors being considered more
qualitatively and thus weighted differently than those factors that can
be more easily incorporated in an economic analysis. Academic
institutions, research organizations, and experts in the field continue
to seek new methods and tools for estimating transportation project
benefits and costs. Such advancements could help federal funding
recipients improve their project analyses and thus improve the
information available to decision makers, although these methods should
be appropriately tested and vetted within the transportation community.
Throughout this report, we have acknowledged the very tangible
difficulty of comprehensively and accurately estimating the benefits
and costs of transportation projects, which, in part, leads to the
relatively infrequent use of benefit-cost analysis in determining which
projects to pursue. Further, we have recognized that transportation
investment decision making does not occur in a vacuum. State, regional,
and local officials consider a variety of factors in making
transportation investment decisions, including the community's needs
and priorities as well as federal requirements--and these factors can
play a greater role in shaping investment choices than the analysis of
a project's benefits and costs. In addition, overarching factors, such
as the funding compartmentalization of federal transportation programs
and legislative earmarks that target transportation funds to specific
uses, inhibit more widespread use of benefit-cost analysis.
Nevertheless, the increased use of systematic analytical tools such as
benefit-cost analysis, and the continued improvement of such tools
through dissemination of new methods and advancement of existing
techniques, can provide important additional information that can be
used to inform discussions about community needs and values, which
could then lead to better-informed transportation investment decision
making.
Agency Comments:
We obtained comments from DOT, including FTA and FHWA. Overall, DOT
said that the report presented a clear and useful assessment of the
status of economic analysis in its application to evaluating
transportation projects. While recognizing the utility of economic
analysis for maximizing benefits associated with public investment in
transportation capacity, DOT agreed with the limitations associated
with the use of these techniques that we described in our report. DOT
indicated that a combination of factors, including difficulties in
measuring and forecasting benefits, along with local political, land
use, and public support factors can limit the practical utility of
formal economic analysis in making local transportation decisions.
Nonetheless, at the federal level, representatives from FTA said that
it had made significant strides incorporating state-of-the-art
analytical tools into its New Starts Program. For example, as described
in our report, FTA developed software capable of calculating
transportation user benefits, based on locally originated data, and
grantees are required to use it in making statutorily required New
Starts submissions. Representatives from FTA also said that FTA is more
rigorously reviewing ridership forecasts, requiring before and after
studies for all new projects, and is conducting risk assessments to
identify significant risks to project budgets and schedules, as
described in our report. Finally, both FTA and FHWA offered a number of
technical comments, which have been incorporated in this report, as
appropriate.
We are sending copies of this report to the Secretary of
Transportation, Administrators of the Federal Highway Administration
and Federal Transit Administration, and interested congressional
committees. We will also make copies available to others upon request.
In addition, the report will be available at no charge on the GAO Web
site at [Hyperlink, http://www.gao.gov].
If you have any questions about this report, please contact me at
[Hyperlink, siggerudk@gao.gov], or (202) 512-2834. Key contributors to
this report are listed in appendix VI.
Signed by:
Katherine Siggerud:
Director, Physical Infrastructure:
[End of section]
Appendixes:
Appendix I: Scope and Methodology:
To identify the categories of benefits and costs that can be attributed
to highway and transit investments and the challenges in measuring
these benefits and costs as well as options to improve the information
available to decision makers, we reviewed the economics literature,
academic research, and transportation planning studies containing
evaluations of various economic analytical tools, with an emphasis on
benefit-cost analysis. A GAO economist reviewed these studies, which
were identified by searching economics literature databases and
consulting with researchers in the field, and found their methodology
and economic reasoning to be sound and sufficiently reliable for our
purposes. We also reviewed federal laws, regulations, and guidance on
the transportation planning process in order to determine the extent to
which considerations of project benefits and costs are required or
encouraged. In addition, we interviewed federal transportation
officials in the Department of Transportation's (DOT) Office of the
Inspector General, Federal Highway Administration (FHWA), Federal
Transit Administration (FTA) and the Volpe Transportation Center, as
well as representatives from think tanks, consulting firms, academic
institutions, and the Transportation Research Board's Transit
Cooperative Research Program and National Cooperative Highway Research
Program.
We also contracted with the National Academy of Sciences (NAS) to
convene a balanced, diverse panel of experts to discuss the use of
benefit-cost analysis in highway and transit project decision making
and gather views about options to improve the information available to
decision makers. The NAS Transportation Research Board (TRB) identified
potential panelists who were knowledgeable about benefit-cost analysis,
transportation policy and planning, highway and transit use, and
transportation decision making. We worked closely with TRB to select
panelists who could adequately respond to our general and specific
questions about conceptualizing, measuring, improving, and using
benefit and cost information in investment decisions (see app. III for
more information about the panelists). In keeping with NAS policy, the
panelists were invited to provide their individual views, and the panel
was not designed to build consensus on any of the issues discussed.
After the expert panel was conducted on June 28, 2004, in Washington,
D.C., we used a content analysis to systematically analyze a transcript
of the panel's discussion in order to identify each expert's views on
key questions.
To determine how state, local, and regional decision makers consider
the benefits and costs of new highway and transit investments and the
extent to which select capacity-adding highway and transit investments
met their projected outcomes, we conducted a survey and a series of
case studies. Specifically, we conducted a self-administered e-mail
survey of all state DOTs (excluding the District of Columbia and Puerto
Rico) and the 30 largest transit agencies in the United States. We sent
the survey to state DOT planning officials and transit agency general
managers and asked them to coordinate responses with agency officials
most knowledgeable about particular issues raised in the survey.
Although we did not independently verify the accuracy of the self-
reported information provided by these agencies, we took a series of
steps, from survey design through data analysis and interpretation, to
minimize potential errors and problems. To identify potential
questions, we spoke with numerous transportation experts, agency
officials, and officials at organizations relevant to transportation
planning and decision making, including, the American Association of
State Highway and Transportation Officials (AASHTO), the American
Public Transportation Association, and the Association of Metropolitan
Planning Organizations (AMPO). To verify the clarity, length of time of
administration, and understandability of the questions, we pretested
the questionnaire with 12 transit agencies, state DOTs, and
metropolitan planning organizations (MPO). We also had the
questionnaire reviewed by a survey expert and AMPO staff. In addition,
we examined survey responses for missing data and irregularities. We
analyzed the survey data by calculating descriptive statistics of state
DOT and transit agency responses.[Footnote 73] A copy of the Survey of
State Department's of Transportation and Transit Agencies--The Costs
and Benefits of Transportation Projects can be found in appendix II.
We used AASHTO's standing committee on planning to identify state
highway officials in each state. We also used the National Transit
Database to identify the top 30 transit agencies nationwide as well as
obtain contact information for the general managers of the agencies.
[Footnote 74] We also interviewed officials from several MPOs on the
types of analysis they used in planning, but we did not include them in
the survey population because MPO officials told us that state DOTs and
transit agencies are typically project sponsors and are responsible for
identifying and evaluating specific project alternatives. While MPOs
are involved in the project planning process, we decided to limit our
survey to those agencies that most likely had completed project
specific analyses.
We conducted the survey from August through October 2004. We initially
contacted state DOT and transit agency officials via telephone, and we
then sent the survey via e-mail to each official. To maximize response
rates, we sent periodic e-mail reminders with copies of the survey to
nonrespondents in September 2004. Each of these messages contained
instructions for completing the survey and contact information to
submit questions. We extended the initial deadline from September 15,
2004 to October 8, 2004, to allow additional agencies to submit
completed questionnaires. Finally, we telephoned officials that had not
yet responded between September 22, 2004, and September 28, 2004, to
remind them to complete the questionnaire. Overall, 43 of the 50 state
DOTs responded to our survey and 20 of the 28 transit agencies.
We supplemented our survey data with in-depth information from state
and local transportation officials about 10 highway and transit
projects in five major metropolitan areas: Baltimore, MD; Dallas, TX;
Denver, CO; Miami, FL; and San Jose, CA. We chose these five
metropolitan areas because they each had both a New Starts project and
a capacity-adding highway project completed within the last 10 years
and were identified by the Texas Transportation Institute as among the
top 25 most congested areas in the United States. (Table 7 provides a
description of each project.) In these locations, we interviewed
officials from transit agencies, MPOs, and state DOTs in order to
understand the type of analysis that was completed for the highway and
transit projects, the factors that drove project decision making,
[Footnote 75] and the types of project outcomes that were achieved and
tracked. We also analyzed available planning and project documents,
such as Environmental Impact Statements and Project Study Reports. We
also collected available cost and usage information from the planning
and project documents or from project officials.
Table 7: Description of Five Highway and Five Transit Projects Selected
for Review:
Location: Baltimore;
Highway project description: This project completed a 5-mile section of
Maryland Route 100, located between U.S. Route 29 and Interstate Route
95 in eastern Howard County Maryland. This project was opened to
traffic in 1999;
Transit project description: This project included three distinct
extensions to the Baltimore Central Light Rail Line. The Hunt Valley
extension was to be 4.6 miles with five stations, the Penn Station
extension was to be 0.3 miles, and the BWI extension was to be 2.4
miles with two stations. The extensions were opened to service in
1997.
Location: Dallas;
Highway project description: This project widened a 4-mile stretch of
State Highway 66, between the cities of Rockwall and Rowlett, from two
lanes to four lanes, and replaced an existing bridge with twin bridges.
The project was completed in 2003;
Transit project description: This project is a 9.6 mile segment of a
20-mile light rail starter system. Traffic conditions within the South
Oak Cliff Corridor were not severely congested, so this project was
intended to provide dependable, fast, and convenient transit access to
employment opportunities for residents. Initial revenue service began
in June 1996. The final segment opened for service in May 1997.
Location: Denver;
Highway project description: This project included widening Parker
Road (State Highway 83) by one through lane in each direction,
modifying the I-225 interchange ramps, completing a grade separation
and access roads at Vaughn Way and a half-urban interchange at Hampden
Avenue, eliminating three signalized intersections, and constructing a
flyover ramp from northwest bound Parker Road to southwest bound I-225.
The project was completed in 2001;
Transit project description: This project was an 8.7 mile light rail
line extending from I-25 and Broadway just south of downtown Denver to
Mineral Avenue in Littleton, Co. The project is grade separated and
generally follows the South Santa Fe freight rail corridor. Revenue
operation began in 2000.
Location: Miami;
Highway project description: This project was one of several expansion
projects planned for Biscayne Blvd., from downtown Miami to the Broward
County line. It included adding travel lanes in both directions and a
grade separation at the intersection of NE 203[RD] St. and Biscayne
Blvd. This project was completed in 2001;
Transit project description: This project was an extension to the
existing Miami Metromover system--an elevated downtown people-mover
system. It was designed to provide downtown distribution for the
Metrorail system and for general circulation around downtown Miami.
The extensions added 2.5 miles of additional guideway north and south
of the initial 1.9-mile loop. The extensions began service in 1994.
Location: San Jose;
Highway project description: This project consisted of modifications to
the existing Route 237 and I-880 interchange, including providing a
direct freeway-to-freeway connector between Route 237 and I-880,
separating freeway traffic from eastbound and westbound local street
traffic on Calaveras Blvd., providing for the expansion of I-880 to
accommodate a 10-lane freeway, and converting the existing full
cloverleaf interchange to a partial cloverleaf interchange.
Construction of the interchange was completed in 2002;
Transit project description: This project was the first 7.6 mile phase
of a 12-mile light rail line running across the Tasman Corridor--a
major travel corridor that covers the City of San Jose in the east and
the City of Mountain View in the west in northern Santa Clara County.
The Tasman West light rail line was constructed to connect to the
existing Guadalupe light rail line for connections to downtown San
Jose. Operations began in 1999.
Source: GAO summary of project documents.
[End of table]
To examine the relationship between benefit-cost ratios computed for
state transportation projects in California and the subsequent
decisions to program construction funds for those projects in the
Statewide Transportation Improvement Plan, we used a logit model. This
model is one of the most commonly used statistical techniques for
estimating problems involving outcome variables that take discrete
values---in this case, the outcome variable is that the projects either
received funding or they did not. The data for this analysis were
provided to us by the California DOT. In the statistical analysis, we
also included population density and total employment to both account
for plausible effects from these demographic factors and to check for
the sensitivity of the estimated relationship. These county-level
demographic variables, obtained from Census Bureau's 2000 census, were
matched to counties in which the projects were to be constructed.
Finally, to determine trends in public expenditure, capacity, and usage
for highway and transit systems over a 20-year period (1982 to 2002),
we analyzed information from FHWA's Highway Statistics, FTA's National
Transit Database, and DOT's Conditions and Performance Report. We
adjusted expenditures to 2002 dollars using the price index for state
and local government gross fixed investment in highways and streets
estimated by the Bureau of Economic Analysis (BEA) of the Department of
Commerce. The adjusted expenditures using the BEA index will be
slightly different from expenditures calculated by FHWA using its bid-
price index because BEA adjusts the FHWA bid-price index. We used BEA's
index because it uses a 12-quarter phasing pattern that more
consistently captures expenditure patterns for capital highway
projects. To determine the reliability of the data, we (1) reviewed
available documentation about these databases and the systems that
produced them and (2) interviewed knowledgeable agency officials. We
determined that the data were sufficiently reliable for the purposes of
this report.
[End of section]
Appendix II: Survey Results:
[See PDF for image]
[End of figure]
[End of section]
Appendix III: Panelists:
The names and backgrounds of the panelists are as follows. Brian Taylor
of the University of California, Los Angeles, served as moderator for
the sessions.
* David J. Forkenbrock is Director of the Public Policy Center,
Director of the Transportation Research Program, Professor in Urban and
Regional Planning, and Professor in Civil and Environmental Engineering
at the University of Iowa. His research and teaching interests include
analytic methods in planning, and transportation policy and planning.
From 1995 through 1998, Dr. Forkenbrock chaired a National Research
Council-appointed committee to review the FHWA's Cost Allocation Study
process. He is a member of the College of Fellows, American Institute
of Certified Planners and a lifetime National Associate of the National
Academies. He is chairman of the TRB Committee for Review of Travel
Demand Modeling by the Metropolitan Washington Council of Governments
and a member of the TRB Committee for the Study of the Long-Term
Viability of Fuel Taxes for Transportation Finance. In 2004, he
received the first ever TRB William S. Vickrey Award for Best Paper in
Transportation Economics and Finance for his work on mileage-based road
user charges. He received the Michael J. Brody Award for Excellence in
Faculty Service to the University and the State, from the University of
Iowa in 1996. He earned a Ph.D., from the University of Michigan; a
Master of Urban Planning from Wayne State University; and a B.A., from
the University of Minnesota.
* José A. Gómez-Ibáñez is Derek C. Bok Professor of Urban Planning and
Public Policy at Harvard University's John F. Kennedy School of
Government and Graduate School of Design. His research interests are
primarily in the area of transportation policy and urban development
and in privatization and regulation of infrastructure. He has served as
a consultant for a variety of public agencies. His recent books include
Regulating Infrastructure: Monopoly, Contracts, and Discretion;
Regulation for Revenue: The Political Economy of Land Use Exactions
(with Alan Altshuler); Going Private: The International Experience with
Transport Privatization (with John R. Meyer); and Essays on Transport
Policy and Economics (ed.).
* Ronald F. Kirby is Director of Transportation Planning for the
Metropolitan Washington Area Council of Governments. He began his
career in the United States as a Senior Research Associate with
Planning Research Corporation. He joined the Urban Institute as a
Senior Research Associate and became a Principal Research Associate and
Director of Transportation Studies. He has served on several TRB
committees and is currently a member of the TRB Executive Committee. He
has a B.S. and a Ph.D., in applied mathematics, from the University of
Adelaide, South Australia.
* David L. Lewis is President and CEO of HLB Decision Economics. His
credits include a range of widely adopted applications in cost-benefit
analysis, productivity measurement, risk analysis, and approaches to
establishing public-private investment partnerships. He has authored
three books, including Policy and Planning as Public Choice: Mass
Transit in the United States (Ashgate Press), 1999. His past positions
include Partner-in-Charge, Division of Economics and U.S. Operations,
Hickling Corporation; Chief Economist, Office of the Auditor General of
Canada; Executive Interchange Program and Principal Analyst, U.S.
Congressional Budget Office, Congress of the United States; and Senior
Economist and Director of the Office of Domestic Forecasting,
Electricity Council. He has a Ph.D., and an M.S., in economics from the
London School of Economics and a B.A., in economics from the University
of Maryland.
* Michael D. Meyer is Professor of Civil and Environmental Engineering
at the Georgia Institute of Technology. Prior to coming to Georgia Tech
in 1988, he was the Director of the Bureau of Transportation Planning
and Development at the Massachusetts Department of Public Works for 5
years. Prior to his employment at the Massachusetts Department of
Public Works, he was a professor in the civil engineering department of
the Massachusetts Institute of Technology. His research interests
include transportation planning and policy analysis, environmental
impact assessment, analysis of transportation control measures, and
intermodal and transit planning. He is a Professional Engineer in the
State of Georgia, and a member of the American Society of Civil
Engineers and the Institute of Transportation Engineers. He has chaired
TRB's Task Force on Transportation Demand Management, the Public Policy
Committee, the Committee on Education and Training, and the Statewide
Multimodal Transportation Planning Committee. He is a former member of
the National Research Council policy study Panel on Statistical
Programs and Practices of the Bureau of Transportation Statistics.
Currently, he is a member of TRB's Executive Committee and Standing
Committee on Statewide Multimodal Transportation Planning.
* Donald Pickrell is DOT's Volpe Center's Chief Economist. Prior to
joining DOT, he taught economics, transportation planning, and
government regulation at Harvard University. While at the Volpe Center,
he also was a lecturer in the Department of Civil Engineering at
Massachusetts Institute of Technology. He has authored over 100
published papers and research reports on various topics in
transportation policy and planning, including transportation pricing,
transit planning and finance, airline marketing and competition, travel
demand forecasting, infrastructure investment and finance, and the
relationships of travel behavior to land use, urban air quality, and
potential climate change. He received his undergraduate degree in
economics and mathematics from the University of California at San
Diego, and Master's and Ph.D. degrees in urban planning from the
University of California at Los Angeles.
* Kenneth A. Small is Professor of Economics at the University of
California at Irvine, where he served 3 years as chair of the
Department of Economics and 6 years as Associate Dean of Social
Sciences. He previously taught at Princeton University and was a
Research Associate at The Brookings Institution. He has written
numerous books and articles on urban economics, transportation, public
finance, and environmental economics. He serves on the editorial boards
of several professional journals in the fields of urban and
transportation studies and has served as coeditor or guest editor for
four of those boards. In 1999, he received the Distinguished Member
award of the Transport and Public Utilities Group of the American
Economic Association. During 1999 to 2000, he held a Gilbert White
Fellowship at Resources for the Future. He has served on two TRB policy
study committees--the Committee for a Review of the Highway Cost
Allocation Study and the Committee for a Study on Urban Transportation
Congestion Pricing.
* Brian D. Taylor (Moderator) is Associate Professor of Urban Planning
and Director of the Institute of Transportation Studies at University
of California at Los Angeles as well as Vice-Chair of the Urban
Planning Department. His research centers on transportation finance and
travel demographics. He has examined the politics of transportation
finance, including the influence of finance on the development of
metropolitan freeway systems and the effect of public transit subsidy
programs on system performance and social equity. His research on the
demographics of travel behavior has emphasized access-deprived
populations including women, racial-ethnic minorities, the disabled,
and the poor. He also has explored relationships between transportation
and urban form, with a focus on commuting and employment access for
low-wage workers. Prior to coming to University of California at Los
Angeles in 1994, he was Assistant Professor in the Department of City
and Regional Planning at the University of North Carolina at Chapel
Hill. Prior to that, he was a Transportation Analyst with the
Metropolitan Transportation Commission in Oakland, California.
* Martin Wachs is Professor of Civil and Environmental Engineering and
City and Regional Planning, and Director of the Institute of
Transportation Studies at the University of California at Berkeley. He
was formerly Professor of Urban Planning and Director of the Institute
of Transportation Studies at the University of California at Los
Angeles where he served three terms as Head of the Urban Planning
Program. His research interests include methods for evaluating
alternative transportation projects; relationships among land use,
transportation, and air quality; and fare and subsidy policies in urban
transportation. Most recently, he chaired the Transportation Research
Board policy study Committee for the Study on Urban Transportation
Congestion Pricing. He is the former Chairman of the TRB Executive
Committee. He holds a Ph.D., in transportation planning from
Northwestern University.
[End of section]
Appendix IV: Trends in Highway and Transit Expenditures, Usage, and
Capacity:
Public Expenditures:
Expenditures by all levels of government for both highways and transit
have grown substantially from fiscal year 1982 through 2002, at an
average annual rate of about 3.4 percent for both highway and transit
spending. Figures 5 and 6 show trends in federal, and state and local
spending for highways and transit in inflation-adjusted 2002 dollars.
In 2002, total highway expenditures reached almost $136 billion while
over $26 billion was spent on transit, with the bulk of funding coming
from state and local governments for both highways and transit systems.
For highways, total federal expenditures have risen at a faster rate
since the enactment of TEA-21 in 1998 than have state and local
expenditures, with federal expenditures rising at about 8.4 percent per
year, on average, from 1998 through 2002, and state and local
expenditures rising at about 0.5 percent per year, on average, over the
same period. For transit, the converse is true, as state and local
expenditures have increased at a faster rate than federal spending
since 1998, with state and local expenditures rising at an average
annual rate of about 7.5 percent per year, as opposed to 5.8 percent
per year for federal expenditures.[Footnote 76]
Figure 5: Total Public Spending on Highways, 1982-2002:
[See PDF for image]
Note: Amounts are presented in 2002 dollars.
[End of figure]
Figure 6: Total Public Spending for Transit, 1982-2002:
[See PDF for image]
Note: Amounts are presented in 2002 dollars.
[End of figure]
Investment in highway and transit capital, which represents investment
in new capacity as well as rehabilitation of existing assets,[Footnote
77] has also increased. Figure 7 shows trends in federal, and state and
local capital spending from 1982 through 2002 in inflation-adjusted
2002 dollars. The bulk of federal funding for highways goes toward
capital outlays, with about 96 percent of all federal funding going to
capital outlays in 2002, as compared with 36 percent of state and local
funds. In addition, since the passage of TEA-21, federal capital
spending has increased at a faster rate than state and local capital
spending for highways. From 1998 through 2002, federal capital spending
on highways increased an average of about 8.8 percent per year in
inflation-adjusted dollars, while state and local capital spending
decreased at about 0.8 percent per year, on average, in inflation-
adjusted dollars.[Footnote 78]
Figure 7: Public Highway Capital Expenditures, 1982-2002:
[See PDF for image]
Note: Amounts are presented in 2002 dollars.
[End of figure]
Figure 8 shows trends in federal, and state and local capital spending
for transit from 1995 through 2002 in inflation-adjusted 2002
dollars.[Footnote 79] Data prior to 1995 are not reported because
comparable data with those available in the National Transit Database
are not available. In contrast to highway capital spending, since the
passage of TEA-21, state and local capital spending has increased at a
faster rate than federal capital spending for transit. From 1998
through 2002, federal capital spending on transit increased an average
of about 4.9 percent per year in inflation-adjusted dollars, while
state and local capital spending increased almost 15 percent per year
on average in inflation-adjusted dollars.
Figure 8: Public Transit Capital Expenditures, 1995-2002:
[See PDF for image]
Note: Amounts are presented in 2002 dollars.
[End of figure]
According to DOT's 2002 Conditions and Performance report, capital
investment by all levels of government remains well below DOT's
estimate of the amount needed to maintain the condition of the highway
and transit systems.[Footnote 80] As a result, according to DOT, the
overall performance of the system declined, thus increasing the number
of highway and transit investments needed to address existing
performance problems. Figure 9 shows DOT's estimates of capital
investment needed from all levels of government to maintain and to
improve the highway and transit systems, compared with actual capital
spending in 2002.
Figure 9: Cost to Maintain and Improve Highways and Transit, 2001-
2020A:
[See PDF for image]
Note: Amounts are presented in 2002 dollars.
[A] Investment requirements for highways and bridges are drawn from the
Highway Economic Requirements System (HERS), which estimates highway
preservation and highway and bridge capacity expansion investment.
Transit investment requirements, except those for rural and special
service transit, are estimated by the Transit Economic Requirements
Model (TERM). All projections are based on 2000 data.
[End of figure]
Usage of Public Highways and Transit:
Travel on highways and transit has increased steadily from 1982 through
2002. For highways, the level of usage has increased at an average
annual rate of about 3 percent per year. By 2002, Americans traveled on
highways more than 2.8 trillion vehicle miles annually. Figure 10 shows
trends in usage of public highways from 1982 through 2002. Although
most highway lane miles are rural, the majority of highway travel
occurs in urban areas. For example, in 2002, 61 percent of highway
travel occurred in urban areas. Passenger vehicles account for the bulk
of vehicle miles traveled on public highways, although usage by trucks
has increased more over the period. Highway usage by trucks increased
by 92.5 percent, as opposed to 78.3 percent by passenger
vehicles.[Footnote 81] Conversely, the level of usage of public
highways by buses only increased 17.6 percent from 1982 through 2002.
Figure 10: Level of Usage of Public Highways by Mode, 1982-2002:
[See PDF for image]
[End of figure]
The level of usage of public transit, measured in passenger miles
traveled, has increased an average of 1.5 percent annually from 1982
through 2002, although usage has increased more rapidly since passage
of TEA-21.[Footnote 82] Figure 11 shows trends in rail and nonrail
transit usage over this period. Since 1998, rail transit has seen an
11.2 percent increase in usage,[Footnote 83] while nonrail forms of
transit, including demand response, ferry-boat, jitney, motor bus,
monorail, publico, trolley bus, and van pools, experienced a smaller
increase, approximately 9.5 percent, over the same time period.
[Footnote 84] In 2002, passenger miles traveled on rail were 24.6
billion and accounted for about 54 percent of total usage; however,
according to the 2002 C&P report, rail accounts for only 5 percent of
urban transit route miles.
Figure 11: Level of Usage of Public Transit, Rail/NonRail 1982-2002:
[See PDF for image]
[End of figure]
Disaggregating rail usage by commuter rail, heavy rail, and light rail,
shows that usage of heavy rail and commuter rail greatly exceeds that
of light rail.[Footnote 85] Figure 12 shows trends in usage by rail
mode from 1984 through 2001, the years for which the data are
available. In 2001, light rail accounted for only 6 percent of the
total passenger miles traveled on rail, whereas commuter rail and
heavy rail were 38 percent and 56 percent, respectively, of the total
passenger miles traveled on rail transit in 2001.
Figure 12: Level of Usage of Rail Transit, 1984-2001:
[See PDF for image]
[End of figure]
Capacity of Highways and Transit:
The capacity of the public highway system and the nation's transit
system has increased at a slower rate than usage of these systems. For
highways, total estimated lane miles have increased an average of 0.17
percent annually from 1982 through 2002, compared with an annual
increase of 3 percent for vehicle miles traveled.[Footnote 86] In 2002,
there were approximately 8.3 million lane miles in the United States,
with 76 percent of the total capacity existing in rural areas.
[Footnote 87]
From 1993 through 2002, years for which data are available, total
transit system capacity increased 24 percent, while usage increased 27
percent over the same period.[Footnote 88]The capacity of all rail
modes increased 26 percent from 1993 through 2002, while nonrail mode
capacity increased 22 percent. Light rail capacity experienced the
greatest percentage change of the rail modes over the period,
increasing 122 percent. Vanpools experienced the largest percentage
change in nonrail capacity, 225 percent.
[End of section]
Appendix V: Information on Benefits Attributable to Highway and Transit
Investments:
Measuring benefits that can potentially result from highway and transit
investments can be quite contentious and spur vigorous debates among
experts in the field and in literature, although there tends to be more
agreement about the nature of the direct user benefits associated with
highway and transit investments, as opposed to the wider social
benefits or the indirect benefits.
Direct and Social Benefits:
Generally, the largest direct benefit from transportation investments,
both highway and transit, is the reduction in travel time that results
from the investment. When travel time is reduced, additional time
becomes available to spend on some other activity and, therefore,
people are willing to pay to reduce their travel time. The value of
travel-time savings is an estimate of how much people would be willing
to pay for reductions in travel time. There is a substantial body of
literature consisting of both conceptual analyses of how best to
estimate the value of travel-time savings and empirical analyses that
estimate values in specific circumstances.[Footnote 89] Travel-time
savings are often divided between work-time savings and nonwork-time
savings. Work-time savings--for example, reductions in the time for a
repairperson to get from one work site to another during the workday--
would allow someone to accomplish more in a day's work. Accordingly,
the work travel time that someone saves is generally valued at that
person's hourly wage rate because the wage rate represents the value to
the employer of having an additional hour of that person's time
available for work activities.
The values that travelers place on nonwork travel-time savings depend
upon both the benefit that they would receive by spending additional
time in some other way and the benefit they receive from reductions in
individuals' perceived costs of travel. For example, it is generally
accepted that reductions in time spent waiting for a bus to arrive are
more highly valued than reductions in riding time because travelers
dislike waiting more than riding and, therefore, would receive a
greater benefit from waiting time reductions. As a result, the
conceptual link between nonwork travel-time savings and the wage rates
of the travelers is less direct. Different travelers along the same
route with equal wage rates might value a given reduction in travel
time differently, and any one traveler might value travel-time savings
differently in different circumstances. In addition, a large change in
travel time may be valued differently per minute than a relatively
small change in travel time. Nonetheless, because some empirical
studies have identified a relationship between willingness to pay for
travel-time reductions and wage rates, DOT guidance for valuing
benefits recommends estimating the value of travel-time savings for
nonwork travel for both highways and transit as certain fractions of
travelers' wage rates.[Footnote 90] For transit, the recommended value
is different for different types of time savings, such as waiting,
transfer, and in-vehicle time. It may be possible to obtain more
accurate estimates of travel-time savings for a specific investment.
This additional precision could be obtained by considering the degree
to which the travelers who are affected by this investment are likely
to have different values in this circumstance, as compared with
previously estimated average values for all travel-time savings.
However, obtaining this additional precision entails a cost, which
would have to be considered in deciding whether to seek more precise
estimates.
In addition to reductions in travel time for people, investment in
transportation can reduce the time for freight products to move from
one location to another, which is also a benefit from this investment.
For highway investment, this effect is more direct; adding a new lane,
for example, can increase the speed of highway travel, enabling trucks
to reach their destinations more quickly. Although most freight
typically does not travel by bus or subway, transit investment can
indirectly allow freight to move more quickly to the extent that such
investment removes cars from highways and allows trucks to travel at
faster speeds.
Measurement and forecasting of travel-time impacts can be complicated
by changes in demand resulting from shifts in travel behavior brought
about by the highway or transit improvement. Reducing travel times
leads to what has been referred to as triple convergence, where traffic
on an improved road increases due to (1) travelers switching from less
convenient alternative routes to the improved road (although travelers
remaining on the alternative routes will benefit from reduced traffic),
(2) travelers switching from less convenient times to the peak period,
and (3) travelers switching from transit to driving because of the
higher speeds and lower travel times.[Footnote 91] Estimates of this
effect vary. One study showed that, over time, a 10 percent increase in
road capacity led to a 9 percent increase in travel, while other
research finds that these changes in demand may have a smaller
effect.[Footnote 92] This change in demand does not mean travel-time
benefits are not realized--only that forecasting future travel-time
reductions should take account of increased traffic flows resulting
from such shifts in demand, or else travel-time benefits are likely to
be overestimated.
For transit investments, the impact of the investment on travel times
for highway users can be complicated by what is known as travel-time
convergence, whereby travel times on a roadway alternative to a transit
line tend to converge to the transit travel time. The convergence of
travel times occurs because some drivers are drawn off of the
alternative roads to the transit line in search of lower door-to-door
travel times. As these drivers leave the road, traffic conditions on
the roadway improve, leading to some additional demand on the road and
resulting in additional traffic. This process continues until door-to-
door travel times on the two modes converge. Several studies bear out
the existence of this phenomenon in highly congested urban corridors
and suggest that improving the transit travel time will lead to
improvements in travel times on the alternative roadways.[Footnote 93]
Another user benefit from transportation investment in both highways
and transit related to travel time, concerns reliability, which is
generally defined to mean the variability in travel time. Empirical
studies suggest that travelers often place a high value on increased
certainty of arrival by a specific time, such that they would be
willing to pay to reduce their travel time variability even if there
was no change in mean travel time. Some investments might accomplish
both and would be valued accordingly. For example, improving a
bottleneck might not only reduce time on average, but it also might
reduce variability by reducing the likelihood of an exceptionally long
delay. One study estimates that the value of increased travel time
reliability may be as large as the value of travel-time savings on a
per minute basis.[Footnote 94] Not all projects that affect travel-time
savings will affect reliability and vice versa.
In addition to benefits related to making travel times shorter and less
variable, transportation investment can provide travelers other
benefits, such as lower vehicle operating costs and safer and more
comfortable travel. Lower vehicle costs can arise from highway
investments that improve road quality, thereby reducing wear and tear
on vehicles, and from investments that reduce congestion, which can
reduce fuel consumption. Estimates exist in the literature of the
extent to which highway investment reduces vehicle operating costs.
Transit investment can also reduce vehicle operating costs to the
extent that such investment reduces congestion by inducing some drivers
to switch to transit. Improved safety has often been found to be a
major benefit from transportation investment. Improving roadway designs
generally contributes to fewer accidents, which implies fewer deaths
and injuries and less property damage. As for the value of safety
improvements, there is substantial literature--both conceptual and
empirical--on how to value lives saved, often referred to as the value
of a statistical life. Although different people might be willing to
pay different amounts to reduce their likelihood of death, and the same
person might be willing to pay different amounts in different
circumstances, an average value based on various research studies is
generally recommended.[Footnote 95] Improved comfort is another benefit
from some forms of transportation investment. Transit investment that,
for example, improves the comfort of a seat or increases the likelihood
that a rider will get a seat, creates benefits for which some travelers
would be willing to pay.
Transportation investment benefits also include benefits that accrue to
the general public, not just to the travelers directly taking advantage
of the investment. For example, transportation investment can lead to a
reduction in environmental damage, which can be a benefit to an entire
metropolitan area. Research has indicated that increased roadway
congestion increases air pollution. Thus, investments that reduce
congestion--including highway investments that directly speed up
traffic and transit investments that indirectly speed up traffic by
inducing people to switch from driving to using transit--can provide
environmental benefits. However, to the extent that transportation
investment induces additional travel by reducing expected travel time,
the pollution resulting from these additional trips might offset the
initial pollution-reducing effects of the investment. As another
example, transportation investment that increases mobility for those
who currently have limited access to the transportation network for
access to jobs, schools, etc., might provide social benefits that go
beyond the benefits to the users themselves. Such investment could
include both additional transit service and highways that connect
residents of lower income areas with job sites to which service and
roads do not currently exist.
Another form of public benefit that may result from transportation
investment, particularly for transit, is sometimes called option value:
nontransit users, for example, might be willing to pay to provide
transit service to retain the option to use it in the future. That is,
for some people, having the option of transit service available in case
circumstances--such as the weather or the price of gasoline--change
could have some value, even if they do not currently plan to use it.
The Transit Manual provides a methodology for estimating the value of
this benefit.
Indirect Benefits:
The direct user benefits of highway and transit improvements result in
individuals, households, and firms acting to take advantage of those
benefits. These actions can then lead to several types of indirect
benefits, such as increased property values and new development,
reduction in the costs associated with other public infrastructure
(e.g., water, electricity, etc.) due to more compact development,
reduction of production and logistics costs from improved freight
efficiency, and overall increases in productivity and economic growth.
As was discussed earlier in the report, these benefits largely
represent capitalization of direct user benefits or transfers of
economic activity from one area or group to another and, therefore,
should not entirely be added to direct benefits.
As transportation costs fall and access is improved, incentives are
created for households and firms to relocate to areas where housing and
land is less expensive or more desirable. This can result in new
development and increases in land values of the areas made more
accessible, although improvements can also result in land values
falling in other locations, due to changes in relative access, and
negative impacts from noise and emissions that may result from the
improvement. Most studies show a positive effect on land values from
highway improvements, although the effects of improvements to highways,
as opposed to new roads, are more localized and tend to be
smaller.[Footnote 96] For transit, several studies have documented that
increases in land values and higher-density development can occur
around rail transit stations, although these impacts depend highly on
local conditions, such as the condition of the local economy, and the
extent to which complimentary land-use policies exist.[Footnote 97]
Residents of areas where new transit lines are constructed, or where
transit is improved may also value the type of urban development, i.e.,
high density or mixed use, which typically occurs around transit
stations.[Footnote 98] However, increasing property values around
transit stations can also displace low-income households, who may rely
on transit.
Transportation investments can also have an impact on how land is used
in an urban area. How such changes are valued can depend in large part
on individual preferences for more or less compact and dense
development. Highways are generally thought to encourage development on
the outskirts of urban areas, although transit investments that provide
access to those areas can also encourage such development. However,
some research indicates that transit-served sites require less public
capital than sites on the edges of urban areas.[Footnote 99]
Nonetheless, while investments in transportation infrastructure have
had major effects on development and land use in the past, research
indicates that future effects are likely to be much weaker due to the
already extensive amount of connectivity that exists and shifts in the
nature of the U.S. economy from manufacturing to service orientation.
[Footnote 100]
Transportation investments can also reduce freight transportation costs
and increase freight reliability, which allows firms not only to move
to more desirable locations, but also to reorganize their warehousing
and production processes to take advantage of those benefits. This
reorganization can result in lower production and inventory costs for
firms. Research on this relationship has estimated the benefits on a
national level and found that, while the relationship is positive, the
returns have been diminishing over time. While diminishing returns are
to be expected as the highway and road network becomes more
interconnected, the authors of one study also postulate that returns
may also be diminishing because highways are inefficiently priced, and
highway investment policies do not target the most efficient
investments.[Footnote 101] While investment in highways has a more
direct relationship to this benefit, transit investment can also result
in such benefits to the extent that it improves conditions on nearby
roadways.
Transportation improvements also lead to increased productivity and
economic growth, through improving access to goods and services for
businesses and individuals and increasing the geographic size of
potential labor pools for employers and potential jobs for individuals.
Recent research into the relationship between productivity, economic
growth, and highway investment shows average annual returns on
investment of 13.6 percent between 1990 and 2000, slightly greater than
the return on private capital investment.[Footnote 102] However, this
research also supports the notion that returns on highway investment
have been declining over time. Transit can also lead to economic growth
through encouraging the concentration of economic activity and the
clustering of offices, shops, entertainment centers, and other land
uses around transit stops, particularly rail transit stops. This
concentration of activity leads to more efficient economic
interactions, which results in higher productivity and can stimulate
economic growth. One study has estimated that a 10 percent increase in
transit presence would raise economic growth by about 0.2
percent.[Footnote 103] Another study on the rate of return of several
investments in new transit capacity suggests that these returns can be
substantial, depending on the project, with projects ranging from 11.8
percent returns to 92 percent returns.[Footnote 104]
[End of section]
Appendix VI: GAO Contacts and Acknowledgments:
GAO Contacts:
Katherine Siggerud (202) 512-2834:
Nikki Clowers (202) 512-4010:
Acknowledgments:
In addition to those named above, Mark Braza, Jay Cherlow, Steve Cohen,
Sharon Dyer, Sarah Eckenrod, Scott Farrow, Libby Halperin, Jessica
Kaczmarek, Terence Lam, Heather MacLeod, Sara Ann Moessbauer, Stan
Stenersen, Stacey Thompson, Andrew Von Ah, and Susan Zimmerman made key
contributions to this report.
(542031):
FOOTNOTES
[1] U.S. Department of Transportation, 2002 Status of the Nation's
Highways, Bridges, and Transit: Conditions and Performance, Report to
Congress (Washington, D.C.: 2002). Estimates are in 2000 dollars.
[2] GAO, Federal-Aid Highways: Trends, Effect on State Spending, and
Options for Future Program Design, GAO-04-802 (Washington, D.C.: Aug.
31, 2004).
[3] H.R. 108-243.
[4] We surveyed state DOTs about capacity-adding highway projects and
transit agencies about New Starts transit projects because these
agencies are typically project sponsors and responsible for identifying
and evaluating specific project alternatives.
[5] Specifically, we visited the Baltimore, Dallas, Miami, Denver, and
San Jose metropolitan areas. All of these metropolitan areas are among
the top 25 most congested areas, as measured by the Texas
Transportation Institute. These projects should not be considered
representative of all transportation projects but are rather
illustrations of experiences with specific types of projects.
[6] See appendix I for a complete description of our scope and
methodology, appendix II for our survey instrument and results, and
appendix III for profiles of the panelists from our expert panel.
[7] Bent Flyvbjerg, Mette Skamris Holm, and Soren Buhl,
"Underestimating Costs in Public Works Projects: Error or Lie?,"Journal
of the American Planning Association, Vol. 68, No. 3 (2002).
[8] There are several types of rail transit, including commuter, heavy
and light rail. The National Transit Database defines commuter rail as
a transit mode that is an electric or diesel propelled railway for
urban passenger train service consisting of local short-distance travel
operating between a central city and adjacent suburbs. Heavy rail is
defined as a transit mode that is an electric railway with the capacity
for a heavy volume of traffic. It is characterized by high speed and
rapid acceleration passenger rail cars operating singly or in multicar
trains on fixed rails, separate rights-of-way (ROW) from which all
other vehicular and foot traffic are excluded, sophisticated signaling,
and high-platform loading. Light rail is defined as a transit mode that
typically is an electric railway with a light volume traffic capacity,
compared with heavy rail. It is characterized by passenger rail cars
operating singly (or in short, usually two-car trains) on fixed rails
in shared or exclusive ROW, low-or high-platform loading, and vehicle
power drawn from an overhead electric line via a trolley or a
pantograph.
[9] David Schrank and Tim Lomax, The 2004 Urban Mobility Report
(College Station, TX: Texas Transportation Institute, September 2004).
[10] U.S. Department of Transportation, Conditions and Performance
Report.
[11] GAO, Surface and Maritime Transportation: Developing Strategies
for Enhancing Mobility: A National Challenge, GAO-02-775 (Washington,
D.C.: Aug. 30, 2002).
[12] P.L. 102-240 and P.L. 105-178, respectively. In 1983, the Highway
Trust Fund was divided into two accounts: a Highway Account and a Mass
Transit Account. The Highway Account mainly funds federal highway
programs, and the Mass Transit Account funds federal transit programs.
[13] The remaining highway program funds were distributed through
allocations to states with qualifying projects. For more information
about the structure of the federal-aid highway grant program and
formulas, see GAO-04-802.
[14] The phases of the New Starts process are preliminary engineering,
final design, and full-funding grant agreement.
[15] For more information about FTA's New Starts program, see GAO, Mass
Transit: FTA Needs to Better Define and Assess Impact of Certain
Policies on New Starts Program, GAO-04-748 (Washington, D.C.: June 25,
2004).
[16] Although the law requires that these factors be considered,
failure to consider all of these factors in the long-range planning
process is not reviewable in court.
[17] Some federal regulations encourage states to conduct life-cycle
cost analysis or benefit-cost analysis for highway projects, although
TEA-21 prohibits the Secretary of Transportation from requiring a state
to conduct a formal life-cycle cost analysis. See 23 C.F.R. 627, and
section 5204(j)(1) of TEA-21.
[18] Guidance for evaluating land-use effects can be found in FTA's
Office of Planning "Guidelines and Standards for Assessing Transit-
Supportive Land Use" (May 2004).
[19] Section 3010 of P.L. 105-178.
[20] This section is limited to a brief overview of the major
categories of benefits and costs. Additional discussion of benefits can
be found in appendix V.
[21] American Association of State Highway and Transportation
Officials, User Benefit Analysis for Highways Manual (August 2003).
[22] U.S. Department of Transportation, Federal Highway Administration,
Office of Asset Management, Economic Analysis Primer (Washington, D.C.:
August 2003).
[23] As part of our review, we convened an expert panel in
collaboration with the National Academy of Sciences. See appendix I for
information about the design of the expert panel and appendix III for
profiles of the panelists. We refer to the panelists as "experts" in
this report.
[24] ECONorthwest and Parsons Brinckerhoff Quade & Douglas, Inc.,
Estimating the Benefits and Costs of Public Transit Projects: A
Guidebook for Practitioners, TCRP Report 78 (Washington, D.C.: National
Academy Press, 2002). TCRP is a cooperative effort of FTA; the National
Academies, acting through the Transportation Research Board; and the
Transit Development Corporation, a nonprofit, educational, and research
organization established by the American Public Transportation
Association. TCRP provides free research tools for the transportation
industry and identifies real-life solutions to address the technical
and operations challenges facing the industry's service providers,
consultants, and suppliers.
[25] Cambridge Systematics, with Robert Cervero and David Aschauer,
Economic Impact Analysis of Transit Investments: Guidebook for
Practitioners, TCRP Report 35 (Washington, D.C.: National Academy
Press, 1998).
[26] For more discussion, see Kenneth A. Small, "Project Evaluation,"
In Essays in Transportation Economics and Policy--A Handbook in Honor
of John R. Meyer, J. Gomez-Ibanez, W.B. Tye, and C. Winston, eds.
(Washington, D.C.: Brookings Institution Press, 1999).
[27] See David Lewis and Fred Laurence Williams, Policy and Planning as
Public Choice: Mass Transit in the United States (Brookfield, VT:
Ashgate, 1999). See also, Martin J.H. Mogridge, Travel in Towns: Jam
Yesterday, Jam Today, and Jam Tomorrow? (London, England: The Macmillan
Press, Ltd., 1990).
[28] See Kaveh V. Vessali, "Land Use Impacts of Rapid Transit: A Review
of the Empirical Literature," Berkeley Planning Journal 11 (1996).
[29] Washington State DOT, "Highway Construction Cost Comparison
Survey: Final Report," (April 2002).
[30] For example, the 7.5 mile Central Artery/Tunnel project may cost
as much as $14.6 billion, or over $90 million per lane mile, as of
2002. See Alan Altshuler and David Luberoff, Mega-Projects: The
Changing Politics of Urban Public Investment (Washington, D.C.:
Brookings Institution Press, 2003).
[31] GAO, Mass Transit: Bus Rapid Transit Offers Communities a Flexible
Mass Transit Option, GAO-03-729T (Washington, D.C.: June 24, 2003).
[32] For more discussion of these sources of error, see Peter Mackie
and John Preston, "Twenty-One Sources of Error and Bias in Transport
Project Appraisal," Transport Policy 5 (1998).
[33] DOT has not issued standards on the development of forecasting
models, which generate the data to calculate potential project
benefits. Thus, localities generally have the latitude to develop their
own traffic forecasting models, which may lead to varying quality of
the estimates of future traffic demand. However, DOT officials noted
that, while the state of modeling is inadequate, the agency does review
models used to produce measures for the New Starts criteria to ensure
that the model reflects good practice.
[34] FTA's New Starts program requires project sponsors to evaluate the
land-use impacts of their project. However, FTA guidelines suggest
measurements of the extent of land use that is supportive of the
transit project, such as new developments occurring near potential
station locations, but do not suggest methods for valuing the benefits
that arise from land-use changes. FTA is currently considering changes
in the New Starts land-use criteria, although there is no time frame
established for when new criteria may be developed.
[35] "The Rating and Evaluation of New Starts Transit Systems,"
Statement of the Honorable Kenneth M. Mead, Inspector General, U.S.
Department of Transportation before the Committee on Appropriations,
Subcommittee on Transportation, Treasury and Independent Agencies, U.S.
House of Representatives, April 28, 2004.
[36] One study, using recently developed modeling tools, showed that
congestion-related benefits of building a light rail line in Cincinnati
constituted 63 percent of the project's total projected benefits. For
more detailed information see HLB Decision Economics, Inc., "Moving
Forward: The Economic and Community Benefits and Investment Value of
Transportation Options for Greater Cincinnati," prepared for the
Metropolitan Mobility Alliance (April 2001).
[37] HLB Decision Economics, Inc., in association with ICF Consulting
and PB Consult, "Economic Study to Establish a Cost-Benefit Framework
for the Evaluation of Various Types of Transit Investments" (January
2002).
[38] For more information on the practical challenges of conducting
benefit-cost analysis, see GAO, Surface Transportation: Many Factors
Affect Investment Decisions, GAO-04-744 (Washington, D.C.: June 30,
2004).
[39] For a more detailed discussion of transfers and double counting,
see Herbert Mohring, "Maximizing, Measuring, and Not Double Counting
Transportation-Improvement Benefits: A Primer on Closed-and Open-
Economy Cost-Benefit Analysis," Transportation Research Part B:
Methodological, Vol. 27 (1993).
[40] Anthony Boardman, Aidan Vining, and W.G. Waters, II, "Costs and
Benefits through Bureaucratic Lenses: Examples of a Highway Project,"
Journal of Policy Analysis and Management, Vol. 12, No. 3 (1993).
[41] See Robert J. Harmon & Associates, Inc., Westside LRT MAX
Extension: User Benefit-Cost Analysis (Portland, OR: 1988). See also,
Russell H. Henk, Daniel E. Morris, and Dennis L. Christiansen, An
Evaluation of High-Occupancy Vehicle Lanes in Texas, 1994, sponsored by
the Texas Department of Transportation (College Station, TX: November
1995).
[42] OMB, Circular A-94 Guidelines and Discount Rates for Benefit-Cost
Analysis of Federal Programs (Washington, D.C.: 2002). For a more
detailed discussion of discount rates see Mark A. Moore, et al, "'Just
Give Me a Number!' Practical Values for the Social Discount Rate,"
Journal of Policy Analysis and Management, Vol. 23, No. 4 (2004).
[43] See Patrick DeCorla-Souza, Jerry Everett, Brian Gardner, and
Michael Culp, "Total cost analysis: An alternative to benefit-cost
analysis in evaluating transportation alternatives," Transportation 24
(1997).
[44] John F. Kain, "The Use of Straw Men in the Economic Evaluation of
Rail Transport Projects," American Economic Review, Vol. 82, No. 2 (May
1992).
[45] HLB Decision Economics, Inc., "Moving Forward."
[46] For each transit project, these analyses included a cost-
effectiveness ratio for at least one alternative, but the project
sponsors were not required to choose an alternative based on the most
favorable cost-effectiveness ratio. However, according to FTA, once
selected as a locally preferred alternative, a New Starts project must
go through a rigorous national competition before it is funded.
[47] This requirement has changed over time. The current cost-
effectiveness measure used by FTA to evaluate candidate New Starts
projects is defined as incremental cost divided by transportation
system user benefits.
[48] In general, the federal share for most highway projects is 80
percent. By statute, the federal share of a New Starts project cannot
exceed 80 percent of the project's net cost; however, in fiscal year
2004, FTA instituted a preference policy favoring projects that seek a
federal New Starts share of no more than 60 percent of the total
project cost in its recommendations for full-funding grant agreements.
As a result, the nonfederal share of a New Starts project must be at
least 40 percent of the total cost for the project to be competitive
for New Starts funding.
[49] GAO-04-744.
[50] The NEPA process is designed to ensure that possible adverse
economic, social, and environmental effects related to any proposed
project have been fully considered in developing such a project. To
comply with NEPA, agencies are required to prepare an Environmental
Impact Statement for large transportation projects, among other things.
An EIS is a full disclosure document that details the process through
which a transportation project was developed, includes consideration of
a range of reasonable alternatives, analyzes the potential impacts
resulting from the alternatives, and demonstrates compliance with other
applicable environmental laws and executive orders. The Senate-proposed
reauthorization bill that was considered by the 108th Congress in 2004
would require that all project alternatives considered as part of the
environmental review process meet the stated purpose and need of the
investment--that is, the transportation objectives or other objectives
intended to be achieved by the project--and that the alternatives be
made available for public comment. See S. 1072, 108th Cong. Sec.
1511(g) (2004).
[51] This relationship holds true, although to a lesser extent, when
combining responses for the three types of economic analysis. Twenty-
two state departments of transportation ranked at least one of the
three types of economic analysis as being of very great importance or
great importance in the decision to recommend a project from among its
various alternatives.
[52] Flyvbjerg, Holm, and Buhl, "Underestimating Costs in Public Works
Projects."
[53] Other evaluations of New Starts projects show similar results,
although the FTA study shows improvements have been made in projections
of ridership. See Don Pickrell, "Urban Rail Transit Projects: Forecast
Versus Actual Ridership and Costs," prepared for Office of Grants
Management, Urban Mass Transportation Administration (October 1990);
and Jonathan Richmond, "A Whole System Approach to Evaluating Urban
Transit Investments," Transport Reviews, Vol. 21, No. 2 (2001).
[54] GAO, Transportation Infrastructure: Managing the Costs of Large-
Dollar Highway Projects, GAO/RCED-97-47 (Washington, D.C.: Feb. 27,
1997). To calculate the cost growth for these 30 projects, we examined
the initial cost estimates contained in the project's draft
environmental impact statements.
[55] Robert H. Muller, "Examining Toll Road Feasibility Studies" PW
Financing (1996).
[56] These projects should not be considered representative of all
transportation projects but are rather illustrations of experiences
with specific types of projects. In particular, FTA noted the people-
mover is a unique project; there are only three other people-mover
projects in the United States. For more information about the projects,
and the selection methodology we used for our case studies, see
appendix I.
[57] According to FTA, the full-funding grant agreement is a fixed
public record of the project sponsor's and FTA's specific objectives
against which to measure project performance and outcomes.
[58] For more information about FTA's efforts to improve ridership and
cost estimates, see FTA Administrator Jennifer L. Dorn's testimony
statement before the U.S. House of Representatives, Committee on
Appropriations, Subcommittee on Transportation and Treasury, and
Independent Agencies, Hearing on the Rating and Evaluation of New Fixed
Guideway Systems (Apr. 28, 2004).
[59] See Pickrell, xiiii; see also, Flyvbjerg, Holm, and Buhl, 279-291.
[60] One official commented that it may be possible to measure several
of the outcomes included in table 5 although it is not typically done
for specific projects.
[61] Harry P. Hatry, Elaine Morley, Shelli B. Rossman, and Joseph S.
Wholey, "The Managing for Results Series of the IBM Endowment for the
Business of Government and National Academy of Public Administration,"
How Federal Programs Use Outcome Information: Opportunities for Federal
Managers (Washington, D.C.: May 2003).
[62] 49 C.F.R., Part 611 (2003).
[63] Section 3011(g) of the Safe, Accountable, Flexible, and Efficient
Transportation Equity Act of 2004 (S. 1072), 108TH Congress.
[64] S. 1072 and the Transportation Equity Act: A Legacy for Users
(H.R. 3550), 108TH Congress.
[65] 23 U.S.C. 145 (2003).
[66] FTA officials noted that this prohibition does not preclude local,
regional, or state agencies from conducting benefit-cost analysis of
their New Starts projects. However, FTA officials acknowledged that the
New Starts evaluation criteria usually set the bar for the type and
amount of analysis that is performed for New Starts projects. Rather
than a benefit-cost analysis, the New Starts evaluation process
requires a project's cost-effectiveness, as defined by FTA, to be
measured.
[67] See also, Jianling Li and Martin Wachs, "The Effects of Federal
Transit Subsidy Policy on Investment Decisions: The Case of San
Francisco's Geary Corridor," Transportation 31 (2004).
[68] Fixed-guideway systems use and occupy a separate ROW for the
exclusive use of public transportation services. They included fixed
rail, exclusive lanes for buses and other high-occupancy vehicles, and
other systems.
[69] Bus rapid transit projects are designed to provide major
improvements in the speed, reliability, and quality of bus service
through barrier-separated busways, high-occupancy vehicle lanes, or
reserved lanes or other enhancements on arterial streets. For more
information about the potential costs and benefits of bus rapid transit
projects, see GAO-03-729T.
[70] Transportation Research Board, Transportation Agencies Meet Fiscal
Challenges: The Transportation Research Board's 2003 Field Visit
Program (Washington, D.C.: Feb. 2004).
[71] GAO-04-802.
[72] TEA-21 requires that metropolitan and state projects that are
proposed for federal funding address seven criteria including economic
vitality, safety, accessibility, environment, transportation system
integration, efficiency, and system preservation.
[73] We also surveyed state DOTs about the analysis of benefits and
costs of transit projects, and the importance of different factors in
decision making, for capacity-adding transit projects in their states.
However, based on the inconsistencies and irregularities of the survey
responses, low response rate, and telephone conversations with survey
respondents, we concluded that the information from this survey was not
sufficiently reliable for our purposes. Therefore, we did not use the
information from this survey in our analysis or include it in the
report.
[74] The largest 30 transit agencies were identified based on total
passenger miles traveled. We later eliminated 2 transit agencies from
the study population because 1 reported that it was privately owned and
operated, and the other received no federal funds, making the survey
population 28 rather than 30 agencies.
[75] Several of the factors we identified during our in-depth
interviews with state and local transportation officials, such as land-
use changes, were not specifically included in our survey. See appendix
II for a copy of our survey instrument.
[76] Average annual increases since 1998 reported throughout this
appendix were calculated using 1998 as a base year. Therefore, the
figures represent an average of four annual increases. We report annual
increases since 1998 to show recent trends under current law. We do not
mean to imply that there is a direct causal link between the enactment
of TEA-21 and the resulting trends, as many factors have affected the
level of investment in both highways and transit.
[77] Also included in highway capital expenditures are highway
improvements, such as land acquisition and other right-of-way costs,
and installation of traffic service facilities such as guardrails,
fencing, signs and signals.
[78] We previously reported that state and local capital outlays had
decreased by 4 percent from 1998 to 2002 (see GAO-04-802). Since GAO-
04-802 was released, FHWA has provided us with adjusted data for 2002.
In addition, the Bureau of Economic Analysis revised their price
indexes on March 12, 2004, and August 5, 2004. Using the adjusted data,
the overall percentage decrease in spending from 1998 to 2002 is 3.5
percent.
[79] Capital expenditures include funds for design and construction of
New Starts projects, the modernization of fixed assets--including fixed
guideway systems (e.g., rail tracks), terminals and stations, as well
as maintenance and administrative facilities--and the acquisition,
renovation and repair of rolling stock--which includes buses, rail,
cars, locomotives, and service vehicles.
[80] U.S. Department of Transportation, 2002 Status of the Nation's
Highways, Bridges, and Transit: Conditions and Performance, Report to
Congress (Washington, D.C.: 2002).
[81] Trucks include single unit 2-axle, 6-tire or more and combination
trucks. Passenger vehicles include passenger cars and other 2-axle, 4-
tire vehicles.
[82] Passenger miles traveled are the total number of miles traveled by
passengers in transit vehicles.
[83] Rail includes automated guideway, Alaska rail, cable car, commuter
rail, heavy rail, inclined plane, and light rail.
[84] According to the National Transit Database, a jitney is a transit
mode comprised of passenger cars or vans operating on fixed routes
(sometimes with minor deviations) as demand warrants without fixed
schedules or fixed stops. A publico is a transit mode comprised of
passenger vans or small buses operating with fixed routes but no fixed
schedules.
[85] The National Transit Database defines commuter rail as a transit
mode that is an electric or diesel propelled railway for urban
passenger train service consisting of local short distance travel
operating between a central city and adjacent suburbs. Heavy rail is
defined as a transit mode that is an electric railway with the capacity
for a heavy volume of traffic. It is characterized by high speed and
rapid acceleration passenger rail cars operating singly or in multicar
trains on fixed rails, separate rights-of-way (ROW) from which all
other vehicular and foot traffic are excluded, sophisticated signaling,
and high platform loading. Light rail is defined as a transit mode that
typically is an electric railway with a light volume traffic capacity
compared with heavy rail. It is characterized by passenger rail cars
operating singly (or in short, usually two-car trains) on fixed rails
in shared or exclusive ROW, low or high platform loading, and vehicle
power drawn from an overhead electric line via a trolley or a
pantograph.
[86] Highway capacity can be measured by estimating the number of
highway lane miles that exist across the functional classification
system. The functional classification of roadways is determined
according to their primary function: arterials, collectors, and local
streets.
[87] Urban lane miles increased from 1982 through 2002, while rural
lane miles decreased. However, a significant percentage of the increase
in urban lane mileage is the result of functional reclassification.
FHWA's functional classification system defines areas under 5,000 in
population as rural; 5,000 to 49,999 in population as small urban; and
50,000 and over in population as urban. Many previously rural
communities have grown above 5,000 in population, and thus, their
existing roads have been reclassified as small urban mileage. Likewise,
as communities classified as small urban areas have grown above 50,000
in population, their mileage has been reclassified as urban.
[88] Transit system capacity is measured in capacity-equivalent vehicle
revenue miles, the distance traveled by a transit vehicle in passenger-
carrying revenue service, adjusted by the carrying capacity of the type
of transit vehicle. The capacity of a motor bus is used to represent
the baseline.
[89] For more detailed discussion of travel-time savings, see P.J.
Mackie, S. Jara-Diaz, A.S. Fowkes, "The value of travel time savings in
evaluation," Transportation Research Part E 37 (2001); and Jay R.
Cherlow, "Measuring Values of Travel Time Savings," Journal of Consumer
Research, Vol. 7 (March 1981).
[90] For monetizing travel time, DOT recommends that analysts use "50
percent of the wage for all local personal travel regardless of the
mode employed, 70 percent of the wage for all intercity personal
travel, and 100 percent of the wage (plus fringe benefits) for all
local and intercity business travel, including travel by truck drivers—
In special cases where out-of-vehicle time (access, waiting, and
transfer time) on transit trips is isolated as an object of analysis,
the value of 100 percent of the wage is adopted." See "Valuation of
Travel Time in Economic Analysis," Guidance of U.S. DOT, Office of the
Secretary, April 9, 1997, and revised February 11, 2003.
[91] Anthony Downs, Stuck in Traffic - Coping with Peak-Hour Traffic
Congestion (Washington, D.C.: The Brookings Institution, 1992).
[92] Robert Cervero. "Road Expansion, Urban Growth, and Induced Travel:
A Path Analysis," Journal of the American Planning Association, Vol.
69, No. 2 (2003).
[93] See Lewis and Williams, Policy and Planning as Public Choice and
Mogridge, Travel in Towns.
[94] David Brownstone and Kenneth A. Small, "Valuing Time and
Reliability: Assessing the Evidence from Road Pricing Demonstrations,"
Working Paper (October 2003).
[95] For benefits resulting from safety improvements, DOT recommends
that analysts use a threshold value of $3 million per life saved to
determine if a project is worthwhile. See "Treatment of Value of Life
and Injuries in Preparing Economic Evaluations," Guidance of U.S. DOT,
Office of the Secretary, January 8, 1993, and revised January 29, 2002.
[96] Brian ten Siethoff and Kara M. Kockelman, "Property Values and
Highway Expansions: An Investigation of Timing, Size, Location, and Use
Effects," Recommended for Publication in the Transportation Research
Record.
[97] Vessali, "Land Use Impacts of Rapid Transit."
[98] See Lewis and Williams, Policy and Planning as Public Choice, for
more discussion of transit's value to neighborhoods.
[99] ECONorthwest and Parsons Brinckerhoff Quade & Douglas, Inc.,
Estimating the Benefits and Costs of Public Transit Projects.
[100] Don Pickrell, "Transportation and Land Use," in Essays in
Transportation Economics and Policy--A Handbook in Honor of John R.
Meyer, J. Gomez-Ibanez, W.B. Tye, and C. Winston, eds. (Washington,
D.C.: The Brookings Institution Press, 1999).
[101] See Chad Shirley and Clifford Winston, "Firm Inventory Behavior
and the Returns from Highway Infrastructure Investments," Journal of
Urban Economics 55 (2004).
[102] Theofanis P. Mamuneas and M. Ishaq Nadiri, "Production,
Consumption and the Rates of Return to Highway Infrastructure Capital,"
preliminary draft (September 2003).
[103] Office of Policy Development, Federal Transit Administration,
U.S. Department of Transportation, Transit Benefits 2000 Working
Papers: A Public Choice Policy Analysis (Washington, D.C.: 2000).
[104] U.S. Department of Transportation, Federal Transit
Administration, Resource Allocation in Rail Transit: Evaluating the
Balance Between New Capacity and Modernization Investments, final
report, October 2004.
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