This chapter of the guidebook provides a practical example of how the five step economic impact analysis framework can be applied to a real-world project using a wide range of transportation and economic impact analysis tools. In order to develop this example, we have started with an actual example of an economic impact analysis of a major freight rail program in Baltimore, Maryland. The original economic impact analysis conducted for this project is fairly typical of the better economic impact studies of freight projects and it incorporates a fairly extensive evaluation of cross-modal economic impacts and provides much useful data on transportation performance benefits of the proposed project. In order to illustrate the usefulness of the five-step framework, we have taken this original economic impact analysis, re-cast it in the five-step framework, and illustrate how the range of the analysis can be extended to more comprehensively address the economic benefits and impacts of the proposed investments. This should provide users of this guidebook with a clearer picture of how they might apply the economic impact analysis framework to their own investment analyses.
The Baltimore rail project example is only able to illustrate the use of the framework for analysis of one type of freight project (rail corridor improvements) and it uses a particular set of impact analysis and modeling tools appropriate to the budget and concerns of the Maryland Department of Transportation (MDOT) at the time the analysis was conducted. In order to illustrate impact evaluation tools that cover a wider range of project types and tools that can be used with varying budgets and levels of effort, we have included a series of mini-case studies in the Appendix B of this guidebook. While none of these case studies illustrate applications of the five-step framework in its entirety, they do provide examples of how different tools and techniques can be used to conduct specific parts of the analysis covering a wide range of conditions. The mini-case studies have been “mapped” to the five steps in the process so that it will be easier for the reader to see how specific tools and techniques could be applied to the framework developed in this guidebook. There is a review of the case studies included at the end of the Appendix B that also points out the degree to which the case studies do and do not incorporate specific features of the economic impact analysis framework described in this guidebook.
In order to illustrate the application of the analysis approach developed in this guidebook, a case study of the Baltimore Freight Rail Bypass project is first presented describing how the analysis was conducted by the MDOT and its consultant. It is useful to take this original analysis and present it in terms of the five steps in the guidebook approach for illustrative purposes (although the analysis was not originally conducted with this framework in mind). This is followed by a re-working of the case study analysis to apply additional aspects of the five step framework process and to show how a more comprehensive economic impact analysis conducted in accordance with this approach would yield a different result.
The Mid-Atlantic Rail Operations Study (MAROps) report released by the I 95 Corridor Coalition in 2002 noted that significant choke points existed within the region, and that these were hurting current rail performance and limiting future rail growth.18 The report specifically stated that the “CSX Howard Street Tunnel [in Baltimore, Maryland]…[is an] antiquated, single track tunnel with limited vertical clearances that preclude double-stack trains.” When the tunnel was hit by a fire in July 2001, the dependence of the United States’ east coast corridor rail traffic on key stretches of track was effectively demonstrated. The 60-car CSX fire took the emergency services almost a week to bring under control, and severely impacted east coast rail operations for some time afterwards. Other tunnels in Baltimore include the Union Tunnels (built in the 1920s) and the B&P Tunnel (built in the 1870s), both of which are in need of rehabilitation due to deterioration and lack of vertical clearance.
A study commissioned by the MDOT was entitled, The Economic Benefits Estimates for the Baltimore Rail Framework Plan. The focus of the Baltimore Rail Framework Plan study was the congested railroads located in and around Baltimore. The railtrack is shared by freight and passenger rail, with ownership resting in the hands of several companies. Following a series of train delays and reports indicating the need for track improvements, the decision was made to study the economic benefits of the Rail Framework Plan that had been designed to reduce the pressure on the congested tracks. The plan suggested improvements that included new tunnels beneath the city of Baltimore and alternate alignments that would bypass the city.
The improved alignments represent link level capacity enhancements by upgrading track and tunnel conditions. The project might also be considered a link level operational improvement. To the extent that these improvements to rail service characteristics attract more rail users, the project might also have modal diversion impacts.
The purpose of the economic analysis of the Baltimore Rail Framework Plan for MDOT was to calculate the estimated benefits to freight rail operators, intercity rail passengers, and the public. The study quantified the benefits of the proposed new alignment from three perspectives:
The allocation of benefits were modeled for Maryland only, and covered the marginal cost reduction per train, the cost savings to the shipper, environmental and safety benefits, and reduction in highway maintenance costs. Reduced highway congestion and travel times for the remaining autos and trucks on the highway system were not estimated in this study.
In order to calculate the benefits anticipated for the existing freight rail operators, the report utilized:
Since the FAF database presents freight flow in total tons, the forecast shipments were converted to 20-car trains with car payloads estimated at 56 tons each. The crew cost per hour was based on an estimate of the cost of a train comprised of one locomotive pulling 100 FEUs over a 16-hour period. The new alignment was estimated to save 6 hours over current conditions.
The savings that result from the maintenance of freight rail mode share were also calculated using the FAF database. The existing FAF forecast predicts a growth in freight rail volumes, with an even higher growth rate for trucks. The analysis assumed that the new alignment would make rail a more attractive mode choice due to the improved efficiency and reduced costs over present conditions. As such, the existing mode share for freight rail was applied to the projected total freight shipments to estimate the increased level of rail freight (and a corresponding reduction in truck freight).
The travel time benefits for Amtrak intercity rail passengers were based on the reduction in the trip time (30 minutes) estimated from improvements to the Northeast corridor. The analysis shows that the Maryland share of origin-destination based benefits is 30 percent. Consequently, 70 percent of the benefits are allocated to non-Maryland residents traveling through the state, but benefiting from rail bottleneck improvements in Maryland. The estimate of a 30-minute travel time savings for Amtrak riders was based on assumptions rather than simulation modeling.
The impact of potential time savings for trucks and autos on those highways that experienced a decrease in traffic due to the diversion of cargo to rail was not explored.
The six hours in time savings anticipated for the existing freight rail operators who would instead use the bypass route were used to calculate a reduction in crew costs and car lease costs. Existing freight train crew and unit costs savings were based on cost data that was obtained from the U.S. DOT, CSX, NS, and a Port Authority of New York and New Jersey publication.19 The crew cost was valued at $175 per hour, based on the cost of a train comprised of one locomotive pulling 100 FEUs for 16 hours (equivalent to approximately 300 miles). The daily car lease costs were valued at $45 per car per day.
The increased level of rail freight and reduced level of truck freight projected due to the improved efficiency of freight rail was used to calculate a number of benefits. The resultant decrease in truck activity would have a variety of positive economic impacts, including reduced transport or shipper costs due to lower per ton costs for rail versus truck, and reduced environmental and highway maintenance cost savings due to fewer trucks and less truck VMT on the state’s highways. Benefits originating from the recapture of freight from truck to rail were assumed to only occur for those trips that that originated or terminated in Maryland, but did not include intrastate trips since these were deemed too short for recapture.
Pecuniary values were assigned to the truck VMT reductions consistent with the values used in the MAROps Interim Benefits Assessment study.20 Cost savings were based on 4.5 cents per ton mile transportation rate for rail in 2004 (remaining flat in future years) and 8.0 cents per ton mile transportation rate in 2004 for truck (increasing to 10.0 cents per mile by 2020). This results in a 3.5-cent shipping cost savings per affected ton mile in 2004, growing to 5.5 cents in 2020. This analysis did not take into account the differences in travel time and reliability between rail and truck (which might dampen the benefits as trucks tend to have faster travel times). Instead, the analysis focused on cost per ton mile differences and assumed that current rail shippers would prefer to stay with rail in the future, and are therefore comfortable with the time and reliability of rail.
The reductions in collision costs, air pollution, and noise pollution were derived based on steady cents per truck mile rates. Highway maintenance cost savings were calculated for reductions in pavement deterioration repair, pavement improvements, and bridge costs. The value of the total economic benefits for freight diverted from truck to rail were substantially larger than those benefits projected for existing freight rail users.
The 30 minutes in travel-time savings experienced by intercity rail passengers was valued at $30.00 per hour, which was based on other reports, including the Intercounty Connector study. Amtrak ridership data were used to determine the number of trips that originated or terminated in Maryland, and were multiplied by the $15.00 value in travel-time savings. While the number of passengers who traveled through the state was extracted from the ridership data, the benefits that these passengers would receive were not calculated.
This analysis did not include a formal benefit/cost analysis, and given the focus on statewide benefits (excluding regional and national benefits), that may be appropriate. The benefits to Maryland over the 20-year period were valued at $253 million from existing rail freight, $1,340 million from the recapture of mode share from truck to rail, and $293 million from the current intercity rail passengers. The total benefits projected to be seen by the state were estimated at $1.89 billion.
This section of the report details the application of the analytical framework set forth in this document to measure the economic benefits of freight transportation investments. As discussed, preliminary work has been conducted by Maryland DOT and their consultant (PB Consult) to estimate the future benefits of this project. The analytical framework uses results from the technical memorandums generated by PB Consult (dated March 31, 2005 and August 19, 2005), and by applying the analytical framework, it expands on this initial work by:
Consequently, this application of the framework quantified the benefits of the proposed new alignment from five perspectives:
These adjustments to the analysis primarily affect Step 3 (by extending the analysis of shipper benefits from maintaining rail mode share to include shippers outside of Maryland; including highway user benefits for all highway users; and including travel time savings to all Amtrak users not just those in Maryland), Step 4 (by including the direct cost savings of maintaining rail mode share for rail users outside of Maryland, by calculating the direct economic benefits to all highway users based on an application of the Highway Economic Requirements System (HERS), and by incorporating potential second and higher-order supply chain benefits), and Step 5 (by incorporating a full benefit/cost analysis as part of the decision methods). These adjustments to the original economic analysis involve relatively modest changes in terms of overall level of effort applied. Had more resource been available, several other modifications to the analysis approach could have been incorporated and these might be considered by Maryland DOT if it proceeds with the project and seeks other government funding partners:
The adjustments to the original analysis and source for deriving these benefits are explained below.
One component of the original analysis focused on the effect that the proposed investment would have on CSX and Norfolk Southern (NS) operations in the Maryland region. It was estimated that the improvements would lead to a combined travel cost savings of $22 million in 2010, growing to nearly $30 million by 2039. A brief summary of the analysis for CSX and NS is presented below. This aspect of the analysis was not adjusted in the re-work of the case study but the details of how the travel savings and cost benefits were calculated are presented here in order to provide users of the framework with a clearer picture of how the analysis was conducted.
CSX. The current CSX alignment through the Baltimore region runs parallel to Amtrak’s Northeast Corridor (NEC) through downtown Baltimore, but it is redirected south at the Howard Street Tunnel to Camden Yards and then continues southwesterly towards Washington. A mid-harbor tunnel would provide a more direct route through the downtown area, resulting in shorter travel times for the 22 trains that would use it on a daily basis.
It was estimated that 20 of those daily trains would experience a ten-minute reduction in travel time while the remaining ones (given a difference in route) would save six hours on average. These numbers would result in an average savings of 42 minutes per train (Step 3).
PB Consult worked in collaboration with the U.S. DOT, FRA, CSX, and NS to produce an estimated cost per car-hour that would allow them to quantify the time savings into dollars. For this route, they estimated cost per car-hour of $17.00. Given the average savings of 42 minutes and the nearly 1.1 million cars projected to be moving along the route in 2010, the improvements are expected to generate approximately $10.0 million in benefits during that year. The traffic volume is expected to increase to 1.5 million cars by 2039, producing a cost reduction of $13.2 million.
Norfolk Southern (NS). While NS does not currently use the NEC for freight rail shipments from the South to the New York metro area, they hold trackage rights to the Corridor and could resume use of it whenever they see a favorable opportunity. If NS were able to use the mid-harbor tunnel routes, it would be necessary to build connections to and from the Corridor at either end, and grant them trackage rights over the tunnel approaches, which are owned by CSX. The mid-harbor alignment would be a more direct route on this corridor through downtown Baltimore. PB Consult estimated that this would save NS approximately 15 minutes per train based on pure running time, but considering actual operations it would be closer to two hours (based on waiting time to get an opening through the B&P Tunnel, their present route). In addition, NS sends about 10 trains per day through the Shenandoah Valley route in Pennsylvania and western Maryland. This circuitous route adds another 6 to 8 hours in travel time for these trains, but avoids the delays on the NEC.
Assuming a 120-minute time savings for NS trains and an estimated total of 486,000 cars passing along the route during one year, NS will realize a cost savings of $12.4 million due to the improvements in 2010. This figure will grow to $16.5 million by 2039 from 674,000 cars.
The analysis for Maryland DOT assumed that freight rail would experience higher volumes of future freight rail tonnage if the project is built (essentially consistent with today’s mode share applied to higher future total freight volumes). This assumption was consistent with the methodology assumed in the Mid-Atlantic Rail Operations (MAROps) “Interim Benefits Assessment” from March 2004. This results in more rail freight and less truck freight, which lowers overall shipping costs for businesses. The benefits of this scenario are derived from the cost savings associated with transporting by rail versus truck and are independent from the benefits to existing rail users who would use rail even without the improvement project.
The Maryland DOT analysis included the shipping cost benefit of maintaining the freight rail share for freight originating or terminating in Maryland, but did not include intra-Maryland trips, which were deemed too short for rail. The benefits were estimated using the per ton-mile costs presented in the MAROps study. In this report, a ton-mile by rail would cost a shipper 4.5 cents versus 8.0 cents by truck in 2004; the cost of shipping by truck was expected to increase to 9.0 cents by 2010, and 10.0 cents by 2020 due to congestion, while the cost for rail was assumed to remain constant.
In order to extend the original analysis, the FAF data were consulted to determine the number of trips using the MD rail system that were through trips. These data were analyzed to determine the amount of truck tonnage in the future FAF forecast would need to be maintained on rail in future years to preserve rail mode share. The cost savings to these shippers from using rail versus trucking would add to the benefits previously calculated in the original MD DOT analysis for those trips with origins or destinations in MD that would be maintained on rail as a result of the rail improvements.
The average trip distance for freight rail trips in MD was obtained from the State’s shipment characteristics published on the 2002 Commodity Flow Survey (CFS). The average distance for trips originating or terminating in MD is approximately 300 miles, while through trips were assumed to be traveling on average 500 miles.21 These data could then be applied to the inter-MD and through-MD tonnage numbers calculated as described in the previous paragraph in order to estimate ton-miles that could be retained by rail in the future.
Using the numbers provided by PB Consult (regarding modal shift), along with the assumptions about ton-mile costs and trip distance, the shipper cost savings for the entire nation (all trips traveling on the rail system in MD) were estimated at $64.3 million in 2010, increasing to more than $300 million by 2039.22 Estimating the total shipper cost savings for all trips (including trips passing through Maryland) increases the national benefit significantly as the Maryland-only shipper cost benefit in 2010 is $39.5 million (see Table 8.1).
Table 8.1 Transportation and Economic Benefits in 2010
Shipper |
Reworked National |
Maryland-Only |
Difference |
|---|---|---|---|
Freight Rail Operators |
$22,400,000 |
$22,400,000 |
0 |
Shipper Costs |
$64,261,665 |
$39,465,442 |
$24,796,223 |
Highway Costs |
$72,691,635 |
$25,725,621 |
$46,966,014 |
Amtrak |
$57,303,336 |
$16,137,797 |
$41,165,539 |
Subtotal |
$216,656,635 |
$103,728,860 |
$112,927,775 |
Supply Chain |
$61,900,522 |
Not applicable |
Not applicable |
Total |
$278,557,157 |
$103,728,860 |
$174,828,297 |
Source: Baltimore Rail Studies by PB Consult for Maryland DOT and Cambridge Systematics.
Notes: The highway benefits for Maryland were estimated by PB Consult based on a reduction in pavement deterioration repair, pavement improvements, and bridge costs – a different approach than the national level. The Amtrak benefits for Maryland were estimated using the trip purpose split and adjusted travel time values estimated by Cambridge Systematics (resulting in slightly more conservative results).
Highway travel benefits extend from the assumption that the improvement in the rail infrastructure will create a decrease in truck traffic throughout the highway system. This will result in a number of benefits including:
In the original analysis, PB Consult only considered the highway maintenance cost benefits.
PB Consult estimated that this project would take nearly 426,000 trucks off Maryland’s roads in 2010, growing to approximately 866,000 by 2020. Out of this total, approximately 16 percent was associated with through trips (with origin and destination outside of the State), while the remaining share had either an origin or a destination in the State.
As mentioned in the previous section, freight rail trips originating or terminating in Maryland were assumed to be traveling 300 miles on average, while through trips would travel 500 miles. Using these numbers, the total truck VMT reduction for 2010 would be nearly 143 million miles, and would surpass 560 million miles by 2039. These numbers were used to estimate the reduction in travel time and costs for the cars and trucks remaining on the highway system.
A simple way to estimate the full highway user benefits of the Baltimore Rail project was developed by using results of HERS runs prepared for the MAROps study (the Baltimore project involves highway users and highway networks that are a portions of that included in the MAROps analysis and is, therefore, considered similar enough to use for this purpose). The VMT reduction numbers derived above for the Baltimore project were compared to those used in the MAROps study to obtain the travel benefits. The total VMT reduction expected as part of the Baltimore Rail project is expected to account for approximately 23 percent of all of the proposed MAROps improvements; hence it was assumed that the project would produce the same proportion of travel benefits and thus the 23 percent figure was applied to the total MAROps highway user benefits calculated with HERS. Using this approach, auto travelers (for work or pleasure) would save a combined $61.5 million in 2010 and $82.2 million in 2039, while truck travelers would experience savings of $11.2 million in 2010 and $15.0 million in 2039 as a result of the Baltimore project. This includes consideration of all highway users and all categories of highway user benefits as distinct from the way the analysis was done originally, including only the pavement and bridge maintenance benefits. In total, the benefits would amount to $72.7 million in 2010, growing to $97.2 million in 2039.
This benefit share (23 percent) is consistent with the costs associated with the project in relation to the additional MAROps projects. The original MAROps plan included two projects with significant improvements to the Howard Street and B&P Tunnels. These improvements were comprised of additional (new) track, better clearance, and improved alignments. The two projects were expected to cost $1.26 billion, or approximately 20 percent of all proposed MAROps projects ($6.17 billion).
PB Consult estimated that the infrastructure improvements from the project in question would provide Amtrak riders with a 30-minute improvement in travel time through the region. Amtrak ridership data was obtained from the PB Consult report and reveal that currently 5.2 million riders would be affected by this project (30 percent of them traveling to or from Maryland while the rest are through passengers, providing the basis for extending the analysis to include benefits to all Amtrak users that would benefit from the improvements). For purposes of this analysis, it was assumed that the average value of travel time for Northeast corridor riders is $30.00 per hour for business travelers and $15.00 per hour for the remaining riders.23 Different trip purpose splits were assigned to all the routes, which combined for a total 46 percent24 business travelers, or 2.4 million people per year.
Using the assumptions stated above, the 30-minute reduction in travel time would result in savings of $36.2 million for work-related trips and $21.1 million for the remaining ones, adding up to a total of $57.3 million in savings in 2010. Lacking ridership forecasts for this section of Amtrak passenger rail, it was assumed that this figure would remain constant through 2039.
In addition to addressing the monetary benefit of transportation impacts to the users of the transportation system, the re-worked case study also examined the supply chain effects created by this freight investment. In particular, the analysis uses the results presented thus far in terms of reductions in the costs of shipping goods, and estimates an additional “second order” supply chain/logistics benefit to the industries most affected by an improvement to the rail system. The methodology for deriving these benefits was obtained from the Boston Logistics Group (BLG) “Framework for Assessing the Supply Chain Benefits of Large-Scale Transportation Infrastructure Projects,” which is included as Appendix A of this guidebook. The basic approach developed by BLG is to estimate a percentage increase added to direct freight system user benefits that are associated with supply chain improvements (benefits). These percentage increases vary depending on the type of supply chains that are dominant in the industries that are affected by the project. This recognizes that different supply chain types are able to take greater or lesser advantage of transportation cost saving.
The types of impacts included in the supply chain analysis include:
In general, shippers use lower transportation costs to source from less expensive suppliers, which increase their profit margins. They are also able to deliver at lower costs per shipment. Because of transportation improvements that reduce travel time and increase reliability, they can operate fewer plants since they can achieve greater market reach from each one, thereby reducing costs and increasing return on assets. Finally, shippers also opt for smaller shipments, which had been prohibitively expensive, and thereby decrease the needed level of inventory.
To quantify each of these impacts, the full-range of industries was divided into the six “Supply Chain Types” defined by BLG: Extraction, Continuous Flow Manufacturing, Make-to-Stock Manufacturing, Design-to-Order Manufacturing, Distribution, and Retailing. As shown in Appendix A, BLG has associated industry sectors (identified by industry classification codes) with the supply chain type that is found most predominantly in that industry. In some cases, industries are allocated among multiple supply chain types. For this portion of the study, the number of jobs in each industry sector was obtained from the Bureau of Labor Statistics for the greater Mid-Atlantic Region, consisting of Delaware, Maryland, North Carolina, New Jersey, New York, Pennsylvania, Virginia, and West Virginia. Once these were obtained, the share of jobs in each Supply Chain Type™ was calculated as shown in Table 8.2.
Table 8.2 Share of Jobs by Supply Chain Type™
Shipper Type |
Percent of Jobs |
|---|---|
Make-to-Stock Manufacturing |
29% |
Retailing |
27% |
Design-to-Order |
18% |
Distribution |
15% |
Continuous Flow Manufacturing |
7% |
Extraction |
4% |
Source: Baltimore Rail Studies by PB Consult for Maryland DOT and Cambridge Systematics.
The next step was to extract the direct freight-related benefits from the previously analyzed total transportation impact categories. Freight-related benefits were defined as the benefits accrued by existing railroad operators, shipper costs savings, and the benefits associated with truck travel on the highways. The sum of the freight benefits for several selected years is shown in Table 8.3.
Table 8.3 Freight and Supply Chain Benefits
Shipper Type |
2010 |
2015 |
2025 |
2039 |
|---|---|---|---|---|
Freight-Related |
$97,869,010 |
$146,483,597 |
$243,802,873 |
$379,986,788 |
Supply Chain |
$61,900,522 |
$92,648,440 |
$154,201,265 |
$240,335,327 |
Source: Baltimore Rail Studies by PB Consult for Maryland DOT and Cambridge Systematics.
These freight-related transportation benefits were then assigned to each Supply Chain Type™ using the percentages from the previous table.25 Finally, the analysis made use of the parameters estimated by BLG to calculate potential second order industry logistics effects. For each of the three types of freight-related direct impacts, BLG estimated the Supply Chain benefits as a percent of the reduction in transportation cost, and they also provide index values for the relative amount of externally purchased materials, fixed asset intensity, and value of inventory, by each Supply Chain Type™ to better capture how these benefits will vary by industry. These values allow for the quantification of all three impacts for each Shipper Type. As shown in the Table 8.4, the sum of the supply chain benefits for 2010 is expected to be $62 million, growing to $240 million in 2039, indicating that the logistics effects can exceed 60 percent of the direct freight-related transportation benefits.
To help understand the value of the Baltimore rail improvements, the project team conducted a benefit/cost analysis. As described in the analytical framework, benefit/cost (B/C) analysis is one potential method of placing the expected benefits of a transportation project in context and enabling comparisons across proposed investment projects. Consistent with standard practice, the benefits and costs were examined over the first 25 years of operation of the new rail bypass route (in addition to the upfront capital expenditures needed to complete the project). This section provides a summary of the assumptions and methodology used in the analysis.
It was assumed that the capital costs would be incurred during a three year construction period (2007 to 2009) and that the project would be in operation starting in 2010. While the actual alignment of the project is still being evaluated, the preliminary cost estimates documented in the PB Consult work for Maryland DOT were for $2.5 billion in construction/capital costs, assumed to be spent equally throughout the construction period.26 Furthermore, it was assumed that the operating and maintenance costs would be 3 percent of the capital costs annually ($75 million).
This analysis captured the projected benefits for the 25-year period between 2010 and 2035. The total benefits are composed of those to existing freight rail operators, shippers, highway users, Amtrak travelers, and the supply chain benefits to industries and the economy as explained earlier in the report. This figure amounts to approximately $279 million in the year 2010, increasing to $693 million by 2035.
The costs and the benefits were discounted to the year 2006 using a 6 percent discount rate. As shown in Table 8.4, the analysis indicates that the national benefits of the proposed system outweigh the costs by a factor of 1.6 to 1. With a total discounted cost of approximately $3 billion for the system, and total discounted benefits of $4.7 billion, the net present value is $1.68 billion. These values reflect all of the benefit concepts used in this test case study of the analytical framework, shown in the last column of the table.
Benefit |
Maryland Benefits Only |
National Benefits |
National Benefits |
Total National Benefits |
|---|---|---|---|---|
Freight Rail Operators |
$270,229,331 |
$270,229,331 |
$270,229,331 |
$270,229,331 |
Shipper Costs |
$1,052,304,268 |
$1,655,796,822 |
$1,655,796,822 |
$1,655,796,822 |
Amtrak |
$176,187,771 |
$625,621,147 |
$625,621,147 |
$625,621,147 |
Highway Benefits |
$564,591,640 |
No value |
$873,653,722 |
$873,653,722 |
Supply Chain Benefits |
No value |
No value |
No value |
$1,303,373,082 |
Total Benefits |
$2,063,313,010 |
$2,551,647,300 |
$3,425,301,022 |
$4,728,674,104 |
Total Costs |
$3,046,338,138 |
$3,046,338,138 |
$3,046,338,138 |
$3,046,338,138 |
Benefit/Cost Ratio |
0.7 |
0.8 |
1.1 |
1.6 |
Source: Baltimore Rail Studies by PB Consult for Maryland DOT and Cambridge Systematics.
Note: The three definitions of national benefit differ in the breadth of coverage as shown in the table.
Table 8.4 also presents how the results vary depending on the perspective in viewing the project’s benefits from a regional versus national standpoint, as well as accounting for added benefits such as highway travel time and supply chain benefits to industries. While combining all of the benefits at the national level results in a favorable 1.6 B/C ratio, analyzing only the statewide benefit results (and without supply chain benefits) produces $2.1 billion of benefits, a figure outweighed by costs (B/C ratio of 0.7).
Evaluating the three rail-related criteria (existing rail, shipper costs, and Amtrak benefits) at the national level provides a slight increase in total benefits, increasing from $2.1 billion to $2.6 billion. As a result, the B/C ratio increases to 0.8. Furthermore, adding the highway benefits at the national level ($874 million) results in benefits outweighing costs by a factor of 1.1. Finally, the last column reveals the importance of including the expected benefits to industries of reduced transportation costs. Evaluating the supply chain benefits results in a significant increase in total benefits (38 percent), and a larger B/C ratio with $1.7 billion in net benefits.
The progression of including a more complete accounting of benefits to both transportation users and the industries that benefit from more efficient goods movement reveals the importance of this analytical framework. In addition, taking a national perspective on freight investment projects is especially important considering the dispersed origin-destination pattern of goods movement. In this example, a rail bottleneck in Baltimore has larger implications for industries and shippers outside of Maryland than within the State.
It is also important to understand the effect that methodological assumptions have on the outcome of the analysis. In particular, the mileage assumptions for average length of rail trip (and the corresponding implication to truck VMT) have a very large effect on the magnitude of benefits. Average distances for through-trips and trips with Maryland origins or destinations have an especially significant effect on the final results since it directly affects the benefits for both rail shippers and remaining highway travelers, and it indirectly alters the supply chain benefits.
The analysis made by PB Consult assumed that freight rail moving through the state would travel on average 750 miles, while freight rail originating or terminating in the state would travel 500 miles. These numbers are higher than the average trip lengths estimated from 2002 Commodity Flow Survey data for Maryland freight trips (500 miles for trips through the state and 300 miles for trips with origins or destinations within the State). For trips originated/terminating in Maryland, the CFS’ shipment characteristics for the State reveal an average trip distance of approximately 300 miles. The original analysis assumption of 500 miles represents a significantly longer trip with corresponding impacts on the cost per ton mile of shipping and truck VMT impact.
Table 8.5 shows how the benefit/cost results vary when using the 500/750 and 300/500 average trip length assumptions. Using the scenario with 500 and 750 miles increases the expected benefits for the shippers and the highway users by approximately 63 percent (a net increase of nearly $1.6 billion), and by consequence, boosts the supply chain benefits by 55 percent ($710 million). The combined result is an increase in total benefits of 49 percent, representing nearly $2.3 billion, and a more favorable benefit/cost ratio of 2.3, compared to 1.6 for the 300/500 scenario. This comparison demonstrates the importance of testing and reporting the robustness of key assumptions and parameters. In this case, the basic story holds – benefits do not exceed costs from a Maryland state-level perspective, but when viewed from a national perspective with a full accounting of likely benefits, benefits are estimated to exceed cost by two to three times.
Table 8.5 Sensitivity Analysis
Benefit |
Scenario 1: |
Scenario 2: |
Percent |
|---|---|---|---|
Freight Rail Operators |
$270,229,331 |
$270,229,331 |
0.00% |
Shipper Costs |
$2,694,157,018 |
$1,655,796,822 |
62.70% |
Highway Travelers |
$625,621,147 |
$625,621,147 |
0.00% |
Amtrak Users |
$1,422,398,587 |
$873,653,722 |
62.80% |
Supply Chain |
$2,013,629,007 |
$1,303,373,082 |
54.50% |
Total Benefits |
$7,026,035,090 |
$4,728,674,104 |
48.60% |
Total Costs |
$3,046,338,138 |
$3,046,338,138 |
No value |
Benefit/Cost |
2.31 |
1.55 |
48.60% |
Source: Baltimore Rail Studies by PB Consult for Maryland DOT and Cambridge Systematics.