Literature Review for a Cost-Benefit Analysis of
Rapid Transit in Winnipeg
ABSTRACT
This paper conducts a literature review on background information about rapid
transit, and on previous studies that have been conducted on cost-benefit analyses of
rapid transit proposals.
When a city is looking to modernize its public infrastructure, often one of the
first things that they look at is a rapid transit system. Cities all over the world have
implemented rapid transit systems in an attempt to ease congestion on their roads
and allow faster access to different parts of the city for their residents. Winnipeg has
been looking at rapid transit systems since the Southwest Corridor Report of 1970
(Rapid Transit Task Force, 2005), and has already made concrete steps towards
achieving that goal. However, there is still considerable controversy regarding
which form of rapid transit to implement, and in fact whether the implementation of
any sort of rapid transit is worthwhile. With the eventual goal of creating a costbenefit analysis for rapid transit in Winnipeg in mind, this paper will conduct a
literature review on the intended benefits of rapid transit, the different ways that it
can be implemented, perspectives on rapid transit, and studies that have been
conducted on the implementation of rapid transit in other areas.
Why Rapid Transit?
According to the City of Winnipeg Rapid Transit Task Force (“RTTF”), rapid
transit (“RT”) is being considered in Winnipeg mostly due to the expected effect of
population increases on the existing transportation systems. They estimate that the
population of Winnipeg will grow by approximately 100 000 people in the next
twenty years, and that the existing infrastructure will be unable to accommodate
their travel needs (Rapid Transit Task Force, 2005). While proponents of RT in
Winnipeg also point to goals such as reducing carbon emissions, providing economic
benefits, and strengthening downtown, the core issue is that of easing congestion on
local streets and accommodating the travel and transit needs of an expanded
population. This is generally the primary goal for proposed RT systems. For the city
of Waterloo, for example, due to “little opportunity to add or expand the road
networks in [their] core areas, and an expected increase in population of 100,000 in
the central transit corridor” (Region of Waterloo, 2010), RT was seen as the only
viable solution to transport such an expanded population.
Types of Rapid Transit
Once a city decides to consider a RT system, they then are faced with the
question of what form of RT to implement. While there are many RT systems to
choose from, such as subways, metros, light rail transit, or bus rapid transit, many of
the heavy RT options such as subway systems are far too expensive for the levels of
demand present in mid-sized cities. The city of Toronto, while looking into the
creation of a RT system, found that an underground subway cost $300 million per
kilometer, as opposed to $100 million per kilometer for a light rail system (Doolittle,
2010). Therefore, most cities are restricted in the potential choice of RT systems.
The two most commonly considered forms of RT, and the two forms
considered by the RTTF for Winnipeg, are Light Rail Transit (“LRT”) and Bus Rapid
Transit (“BRT”). LRT is defined as “[a]n electric railway system, characterized by its
ability to operate single or multiple car trains along dedicated rights-of-way at
ground level, on aerial structures, in subways or in streets, able to board and
discharge passengers at station platforms or at street, track or car-floor level and
normally powered by overhead electrical wires” (Region of Waterloo, 2005). BRT is
defined as “a flexible rubber-tired rapid transit mode that combines stations,
vehicles, services, running ways, and Intelligent Transportation System (ITS)
elements into an integrated system with a strong positive identity that evokes a
unique image” (Savage, 2009).
BRT and LRT systems are very different in terms of their respective costs and
benefits. LRT is characterized both by higher capital costs and higher benefits than
BRT, and generally lower operational costs. The Waterloo study found that the
capital costs of creating an LRT system were $306 million, compared to $112 million
for the BRT (Region of Waterloo, 2005). A 2003 study by David McBrayer found that
BRT would cost no more than two-thirds to three-fourths what a LRT system would
cost in terms of capital expenditure, even when the BRT was “designed to adhere as
closely as possible to light rail design, short of the installation of tracks and
overhead electrification, and using vehicles of uniquely high quality” (McBrayer,
2003). These lower capital costs are generally due to less need for additional
infrastructure, such as rail systems and stations.
In terms of operational costs, for a demand level up to 1500 passengers per
hour, the BRT was found to be a cheaper system than the LRT. For all greater levels
of demand, the LRT was found to be cheaper to operate (McBrayer, 2003). However,
“despite the shorter lifespan of buses compared to light rail vehicles, and despite
having higher operating cost over most of the system capacity range assumed, BRT
would be the less expensive approach” when looking at the equivalent annual cost
(McBrayer, 2003).
However, in terms of benefits, on aggregate LRT systems tend to outperform
BRT. Although BRT can often operate at a higher frequency than LRT systems, LRT
systems generally have a much higher carrying capacity than BRT systems
(McBrayer, 2003). A further benefit of LRT systems is that “rail transit has had a
demonstrable influence on land values and locational decisions” and has been
“recognized as a planning tool that can support and encourage the development of
more sustainable land-use patterns” (Region of Waterloo, 2005). It has been shown
to influence land development in part because “being tied to tracks, it is both
distinct and perceived to be permanent” (Region of Waterloo, 2005). On the other
hand, “the land use effects of North American BRT lines are unclear” (Region of
Waterloo, 2005). Furthermore, LRT offers a greater level of comfort and service
features than does BRT (Region of Waterloo, 2005), and although bus technology is
making strides to address these deficiencies through developments such as
automated vehicle guidance and better sound suppression (McBrayer, 2003), these
are still expensive propositions. However, the BRT does surpass the LRT in terms of
shorter wait times, due to its higher frequency of operation.
Ideologies behind Rapid Transit Proposals
While in many ways a RT proposal is a fairly straightforward analysis of costs
and benefits, there is one key area where ideology affects a RT proposal. This lies in
the expectations placed on the effect of a RT system on economic growth. Certain
proposals measure the benefits of RT as primarily in terms of reduced traffic
congestion and faster, more efficient transportation for transit users. However,
other proposals base their recommendation in large part on the expected economic
effect of a RT system on the local economy.
In a cost-benefit analysis (“CBA”) study done on the implementation of BRT
in Milwaukee, they examine purely the traffic and transportational benefits
(Sawicki, 1974). Other studies count varying levels of secondary effects as economic
benefits. A CBA done in Myanmar on a BRT system also counted the benefits for bus
operators, as bus driving was contracted out to private enterprises (Kato, Inagi,
Saito, & Htun, 2010). A study on RT in Waterloo included the effect on influencing
land values and locational decisions as a benefit in their analysis (Region of
Waterloo, 2005). However, including economic benefits in secondary markets can
sometimes lead to trouble. In a CBA conducted on the implementation of RT in the
Los Angeles Area, the researchers included improved business productivity,
construction employment reductions, and structural and functional unemployment
reductions as benefits of the project (Peterson, 1975). A critical examination by
Thomas Peterson at the University of Wisconsin on this CBA found that there was no
demonstrable evidence that the project would reduce structural employment
(Peterson, 1975). Furthermore, the CBA done in Los Angeles counted a reduction in
the required provision and maintenance of parking spaces as a benefit, and the
increase in construction jobs as another benefit. Peterson raises the question of how
an increase in jobs in one sector would be considered a benefit, but the decrease in
jobs in another sector was not considered to be a cost (Peterson, 1975). This shows
that one must be very careful in how one analyzes the potential economic benefits of
a RT proposal.
Prior Studies on Rapid Transit Proposals
Due to the fact that different cities face different issues and conditions, most
studies on RT proposals come to different conclusions. However, in analyzing
previous research, we can gain insight into the different ways to set up a CBA for a
RT proposal. One of the first issues to consider is who is to have standing in the
analysis. This can be restricted to the people who ride the transit system and those
whose travel would be affected by the proposed project, which is seen in the
Milwaukee study (Sawicki, 1974), or can be as wide as the entire community in
which the transit system is placed, such as in the Los Angeles study (Peterson,
1975). In the Myanmar study, bus drivers are also considered to have standing as
suppliers, since the system relies on independent operators, and their welfare
would be affected by the RT system (Kato, Inagi, Saito, & Htun, 2010).
A second issue is the discount rate used to calculate the present values of the
costs and benefits in the analysis. The study conducted in Waterloo made use of a
discount rate of 10%, which “represents a federal and provincial guideline for
judging the investment worthiness of public capital expenditures” (Region of
Waterloo, 2005). However, this discount rate is certainly not set in stone, and “both
the Federal Treasury Board and Provincial Management Board encourage
sensitivity analysis at alternative discount rates” (Region of Waterloo, 2005). The
study done in Myanmar utilized a discount rate of 20% (Kato, Inagi, Saito, & Htun,
2010), placing a much lower value on future benefits.
When considering the costs of a RT proposal, there is much more consensus.
Generally, the capital, operating, and maintenance costs are taken into
consideration. The Milwaukee study included in their operating and maintenance
costs the cost of passenger time, the operating costs of the busses, costs of accidents
of the busses, and maintenance costs of equipment and infrastructure (Sawicki,
1974). Beyond general accounting expenses, the cost of a lane-conversion can also
be taken into account when analyzing certain systems, especially with BRT. Taking a
mixed-flow traffic lane and converting it into an exclusive transit lane can cause
congestion problems in the adjacent mixed-flow lanes, and cause degradation of the
level of service for vehicles (Savage, 2009). The proposal for Winnipeg put forward
by the RTTF considers operational, maintenance, and capital costs in their analysis.
While they do mention non-accounting costs such as the effect on regular traffic of
implementing RT systems, they do not factor these costs into their analysis (Rapid
Transit Task Force, 2005).
As discussed earlier, the consideration of benefits in RT proposals is the most
controversial area of a CBA. Benefits can be seen as reduced travel time, increased
transit ridership, less degradation of public infrastructure, lower carbon emissions,
and even economic growth for the region. The RTTF proposal considers mainly the
benefits of reduced travel time and enhanced system reliability, but also considers
community-wide benefits such as expanding opportunities for development along
the major lines, and strengthening the local economy through “bus purchases,
generation of employment opportunities through construction and other potential
spin-off benefits” (Rapid Transit Task Force, 2005). In this case bus purchases could
potentially stimulate Winnipeg’s economy, since there is a significant bus
manufacturing industry present in the city. However, the claim that employment
would be generated in construction and produce economic benefits is much more
unclear, as that would depend on there being distortions in the market for
construction labour.
Recommendations
Since every city faces different issues, there is no particular pattern to the
recommendations made by CBA studies on RT. However, there were certain
common factors that had significant impacts on the results. First of all, the analysis
of benefits depended in large part on estimated usage rates. The Milwaukee study
found BRT to be worthwhile at a split of 10% of the population using transit and
90% using autos, an increase from the original 5%/95% split (Sawicki, 1974).
However, they found the proposal to not be worthwhile at the original split, so the
recommendation was dependent on the estimated increased transit usage (Sawicki,
1974).
Another major factor in the analysis of benefits was whether or not the
analyst included the stimulation of economic growth as a benefit of a RT system. The
greater the predicted effect on growth, the more likely the RT proposal was to be
accepted. The city of Los Angeles, in their study, recommended that the city go
ahead with their RT system. However, the University of Wisconsin review of this
CBA found that the recommendation was based on passenger estimates that were
overly optimistic, and on estimates of economic growth that were not empirically
demonstrable (Peterson, 1975).
A further issue is how well suited existing infrastructure is for RT systems.
The Waterloo study was much more favorable to LRT than to BRT, in part because
they had the ability to use an abandoned rail corridor through the city that had
already been acquired by the region. However, the Waterloo study found that the
costs outweighed the benefits for both BRT and LRT options at a 10% discount rate;
it recommended both when using a 5% discount rate, showing the importance of the
discount rate in CBA calculations (Region of Waterloo, 2005).
The study conducted by the RTTF recommended that Winnipeg implement a
BRT system, and that this would be preferable to the status quo (Rapid Transit Task
Force, 2005). Part of this decision was based on the fact that the existing rail
infrastructure in Winnipeg would require a considerable amount of cost to be made
usable for LRT systems. Winnipeg also had levels of passenger demand that made
the BRT system cheaper than the LRT system in terms of operating costs (Rapid
Transit Task Force, 2005). However, the RTTF did not undertake a true CBA of their
RT proposal for Winnipeg, as the costs and benefits were not fully monetized, nor
were they transformed into present values and compared.
Conclusion
In conclusion, conducting a CBA on a rapid transit proposal can be a murky
proposition. There are many different ways of evaluating the costs and benefits, and
how one goes about this can directly impact the recommendations that are made.
Examination of these studies shows how a CBA of a rapid transit proposal can be
properly constructed as well as potential errors that can be committed, and
provides perspective and information on the construction of an accurate CBA for the
implementation of rapid transit in the City of Winnipeg.
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