The Failures of Cost Effectiveness


In my last two posts, I have discussed large-scale modifications of Los Angeles’ Light Rail System, namely large subway segments replacing existing surface tracks for the purpose of increasing capacity by removing two critical bottlenecks on the system: the connection between the Gold Line and the Regional Connector and the divergence at the intersection of Washington Blvd and Flower St. This post will further reveal my position on capital funding of transit projects, and why heavy investment in rail infrastructure expensive and politically difficult, yet far more beneficial in the long term.

Cost effectiveness is a hot term in transit funding these days. The Federal Transit Administration makes an objective review of all projects vying for New Starts funding based on cost effectiveness. This evaluation broadly looks at three things: cost of the project, ridership projections and solvency of the agency sponsoring the project. Ridership is looked at in terms of gross riders, new transit riders and passengers who switch transit modes. Sponsoring agencies get high scores if they lack budget deficits, and have operations money to pay for the New Starts project if built. In this formula, riders who switch from driving to transit are disproportionately valuable for the cost effectiveness score.

This cost effectiveness rating is helpful in weeding out some really awful projects from New Starts money, like the Orange Line Metrorail in Miami, but critically doesn’t account for land use changes and long-term economic impact of large-scale transit projects.

The most modern examples of high cost transit projects in the United States are, of course, the three large heavy rail systems build in the early 1970’s in San Francisco, Washington D.C. and Atlanta. The Washington Metro, widely considered the best of the three, has made an incredible impact on the DC Area in the last 40 years. Downtown Washington has remained a center, and inner suburbs like Bethesda, Silver Spring and the Rosslyn-Ballston Corridor have vastly grown in density and livability. Many of the practices followed by the planners of the Washington Metro contributed to this success. These included expensive subways in areas of limited density, like Rosslyn-Ballston, an entire network planned, with construction in phases, and a general vision for the future. A newer extension to Dulles Airport abandons many of these principles, especially the lack of a subway through the Tyson’s Corner area. The reason a tunnel through Tyson’s will not be a part of the extension is the FTA New Starts cost effectiveness requirement, which would have classified the project as “medium” instead of “medium-high”, potentially eliminating 900 million dollars of Federal funding.

In 40 years, Tyson’s Corner could be an entirely different place, with far more density, due to a large investment in rail transit now. Paying a little bit more now could facilitate a huge amount of future economic growth. Situations like the original Washington Metro System and BART in Northern California show the massive growth high-investment rail transit can attract after 40+ years of existence. These situations encourage the high-cost subway alternatives for light rail capacity growth in Los Angeles, which will massively increase total network capacity, permitting the very high frequency rail transit that attracts development. In 40 years, Los Angeles could be an entirely different place, with dense corridors surrounding high capacity rail transit lines. If we concentrate on the upfront costs of projects and neglect the long term benefit of higher investment in infrastructure, we will miss out on a whole new generation of transportation systems in the United States. A dollar now, invested in high-quality infrastructure, will be 10 or more dollars in the future in economic benefit. We just have to overcome political squabbling and funding gaps. An easy solution is to redirect Federal highway subsidies, but that is a story for another time.

Please, chime in. This article is just the beginning of my thoughts and I would like to hear those of my readers.

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About Karl Tingwald

Civil engineering student at the University of Southern California with a severe transportation compulsion.

Posted on September 3, 2010, in BART, Los Angeles, Measure R, Metro Rail, Policy and Politics, Westside Subway Extension and tagged , , , , , , , . Bookmark the permalink. 2 Comments.

  1. Three options and I’d be interested in hearing your preference:
    1) De-emphasize cost-effectiveness in favor of “soft” benefits such as livability
    2) Increase the present value of long-term benefits by changing the discount rate used in cost-benefit calculations
    3) Find alternative funding sources for the marginal cost of tunneling, such as bonds, tax-increment financing, or property assessment districts

    The Obama administration recognizes the problems associated with cost-effectiveness as the end-all of transit decisions, which is why they are promoting livability and mode choice for their discretionary actions. The problem is this option (1) is still short-term focused and ends up in places like “wouldn’t it be nice to have a street car?” rather than focusing on transporting people. This is all well and good, but there needs to be a policy choice to intentionally use transportation for economic development. One could argue that highway projects have been doing this for years.

    Option 2 is less transparent, but can make a real difference in the results of policy analysis. This requires little change in cost-effectiveness criteria, but will make expensive systems with real benefits more palatable to funders.

    Option 3 is closer to what BART did in Berkeley and there’s talk of building HSR on the Peninsula in this way. Essentially, the transportation agency is responsible for funding a line’s capacity, with the marginal cost of below grade vs. above grade paid for by the people that will benefit aesthetically. The approach essentially tells the NIMBYs to “put up or shut up.”

    Obviously advantages and disadvantages to all approaches. Cost-effectiveness in it’s current form is not all bad. As you mention, it’s good as a filter on bad projects. Perhaps it should be used as a floor, with other criteria used to select among cost-effective projects.

  2. “These situations encourage the high-cost subway alternatives for light rail capacity growth in Los Angeles, which will massively increase total network capacity, permitting the very high frequency rail transit that attracts development.”

    I think a key factor in actually hurts your argument rather than help it is the fact that a stronger emphasis on FREQUENCY compared to just investing in Subways/Heavy Rail. If I built a light rail alignment and get service frequency of every 3 minutes I would have loads of demand and investment into the system so that the local land uses will reflect that. Calgary C-Train is an example of that effect.

    Subways/heavy rail require the heavy land-use demand to match it, and if the local areas want their big grade separated subways but are not willing to maximize it’s land uses to reflect that then those subways should not be built.

    A key example in LA locally is the Crenshaw Corridor through Leimert Park and Park Mesa. The local community wants a subway under a very wide street median and wide street right of way while they don’t want any increases in density in the area that can maximize the land-uses to benefit of building such a high-benefit corridor. In DC more so than NoCal, they had their acts together to use their local authority to shape the future of the area without NIMBY’s by using Eninment Domain in the 70’s.

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