Patrick Tsai, University of Sydney Business School: Balancing the cost of light rail installation with its long term benefits

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Information about Patrick Tsai, University of Sydney Business School: Balancing the cost...
Business & Mgmt

Published on March 4, 2014

Author: informaoz



Dr Patrick Tsai, Senior Research Analyst, PhD – Institute of Transport & Logistics Studies, University of Sydney Business Schooldelivered this presentation at the 2014 Light Rail conference in Melbourne. Across the globe the conception and delivery of light rail projects has been growing at an incredible rate. Seen as an efficient and sustainable way to alleviate the congestion that cripples the expansion of many key urban zones, light rail is fast becoming a central solution in the evolution of Australia's major urban areas. In order to work towards a congestion free future, it is imperative that federal and state governments support light rail projects.

Light Rail 2014 explored all the possible funding options for light rail projects, while also looking at international case studies, the latest rolling stock, braking technology, among many more. For more information about the event, please visit the conference website:

Dr Patrick Tsai Senior Research Analyst- The University of Sydney Rail Service Analyst- Transport for NSW Presented at Informa Light Rail Future 2014 1

!  Introduction !  Costs of Light Rail !  Benefits of Light Rail !  What’s Next for Cost Benefit Analysis !  Case Study !  Conclusions 2

!  Light rail is usually expensive !  Low cost-recovery rate from box revenue !  Evaluation of economic benefits !  Current practice of Cost Benefits Analysis (CBA) !  Future direction of CBA !  How to get the Benefit Cost Ratio (BCR) sensible? Source: Patrick Tsai (2010) 3

!  Capital cost ◦  Construction cost: $15-$120 million per km in the US ◦  Alignment- grade, elevated, or underground ◦  Project management and delivery costs ◦  Property acquisition ◦  Traffic impact and business disruption during construction !  Operating cost ◦  Operating cost per km: $9.7-$90.5 million ◦  Avg cost-recovery rate at 13.4% in the US (Higgis and Ferguson, 2012) ◦  Over-estimated demand; under-estimated cost 4

!  Customer/transport benefits ◦  Travel time savings for public transport users ◦  Travel time savings for car users ◦  Usually the largest component of economic benefits ◦  Determined by value of time; vary with: !  Travel time !  Trip purpose !  Travel mode !  Socio-demographics !  etc ◦  Implication of fixed travel time budget 5

!  Operating benefits ◦  Increased revenue from mode shift ◦  Reduced costs for current systems ◦  Improved operating efficiency ◦  Avoided infrastructure costs !  Environmental/social benefits ◦  Reduced emissions ◦  Reduced accident (from safety improvement) 6

!  Health benefits ◦  Health benefits from active travel ◦  $1.68 per km walking and $1.12 per km cycling (Mulley et al., 2013) !  Social inclusion benefits ◦  Willingness to pay for an increased trip ◦  Mean valuation of an extra trip estimated at $19.3 ◦  Lower income people have higher value of an additional trip (Stanley et al., 2011) 7

!  Wider economic benefits ◦  Agglomeration economies !  The advantages derived through the spatial concentration of economic activities !  New transport infrastructure provide better accessibility and hence improve business productivity !  Take account of 10%-21% of economic benefits for transport investment appraisals in the UK (Graham, D., 2007) !  Already included in the UK WebTAG !  Currently not in the Australian national guidelines but will be included in the guidelines 8

!  Wider economic benefits ◦  Land value uplift !  New public transport infrastructure! better accessibility! higher real estate value !  Price premium ranged from insignificant to 20% !  Larger scale network connecting to business centres usually provides higher price premium !  Sydney Inner West LRT: price higher by 0.58% on average for every 100m closer to LRT stations (preliminary research finding by Tsai and Mulley, 2014) 9

Tsai and Mulley (2014) 10

!  Sydney CBD and South East Light Rail ◦  12km; 20 stations ◦  Construction to start in 2014; ◦  Expected to open in 2019-20 ◦  Total costs 1.6 billion ◦  Total benefits 4 billion ◦  BCR: 2.5 Source: CBD AND SOUTH EAST LIGHT RAIL BUSINESS CASE SUMMARY (2013) 11

Economic benefits of Sydney CSELR 0.31 billion 8% 0.22 billion 5% PT user benefits Road user benefits 0.71 billion 18% 0.33 billion 8% 0.26 billion 6% Pedestrian benefits 2.2 billion 55% Operating benefits Social benefits WEB Source: CBD AND SOUTH EAST LIGHT RAIL BUSINESS CASE SUMMARY (2013) 12

!  23km Light Rail at grade (preferred route) !  Capital cost: 2.1 billion !  Operating cost: 390 million p.a. !  Total cost at 2012 value: 1.1 billion !  Total benefits: 3.6 billion !  BCR:3.3 Source: Pre-feasibility and Rapid Economic Appraisal Report (2012) 13

Economic benefits of Sunshine Coast LRT 0.8 23% 0.05 1% 0.6 17% Transport benefits Avoided infrastructure costs 0.7 20% 1.4 39% WEB Social benefits Residual value Source: Pre-feasibility and Rapid Economic Appraisal Report (2012) 14

!  Generally, economic benefits of Light Rail could outweigh the cost !  Economic benefits vary substantially with project types, locations, current transport options…etc !  Travel time savings may not be the largest component of economic benefits !  Health benefits have not yet been considered !  More guidelines are required for WEB to ensure consistency 15

Thanks for your attention Q&A Dr. Patrick Tsai 16

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