Tuesday, November 3, 2015

Some Initial Observations on the New Cost / Benefit Analysis for the Maley Drive Extension

A new report was tabled at Greater Sudbury Council tonight - an economic cost/benefit analysis for the Maley Drive Extension, prepared by AECOM.  The report looks at the costs (capital & maintenance) of the project, and compares them to the economic value of certain benefits.  On first glance, the report appears to be incredibly selective in what it identifies as a "cost" and as a "benefit".  I'm sure I'll undertake a more thorough analysis at some point in the near future, but I wanted to jot down my initial thoughts about this report.

First, let me say this about the scope of the project - it looks like the Phase 1 Maley Drive Extension is shrinking again!  According to this report, for $80 million, the new road project will run between Lasalle Blvd. near College Boreal in the west to just east of Lansing - and not all the way over to Falconbridge Road.  Likely the project has shrunk again in order to avoid the rail line / electrical transmission issue east of the Lansing intersection.  Greater Sudburians should know what it is that we're going to get for our money - and it seems to me that with ever new bit of information, the project just keeps getting smaller (see: "Taking a Closer Look at Maley Drive, Part 1: Costs", Sudbury Steve May, April 21, 2015).


For AECOM, there are only two costs associated with this project: the $80 million capital cost to build Phase 1, which is to be completed in 2019, and the $170,000 annual winter road maintenance costs.  The lifetime of the project is identified as 30 years (which seems very low, given the length of time that other roads have been around).  There is a one-time cost of $75,000 for crack sealing, which will be expensed in 2025.

There is no mention of risks that the costs for Phase 1 might actually be higher, thanks to inflation or whatever it is that seems to drive up the price of road projects over time.  Further, the assumption that the project will be completed in 2019 seems incredibly optimistic, given that the City won't have its 1/3 share of the capital costs available until 2021 at current rates (with $10.5 million in the bank in 2014, and just $2.3 million being added each year through development charges, unless the City chooses to raid the reserves to finance this project, our $26.7 million won't be available until 2021, two years after the AECOM estimates the project will be completed).

There is no mention of lost opportunity costs for other transportation projects, and I think this is a huge hole in the report.  Even if only the City's 1/3 share was to be made available for other projects, such as transit or the Notre Dame road widening, what sorts of benefits might the City achieve, and how do those benefits compare to those identified here for Maley?  Looking at Maley in isolation just isn't acceptable - a real cost/benefit analysis has to consider alternatives.  Certainly a Ministry of Environment and Climate Change mandated environmental assessment process requires an assessment of project alternatives - why hasn't this cost/benefit analysis considered them as well?

AECOM is clear in the preface to the report that its scope was dependent on direction given to it from the City.  So if the opportunity costs from viable alternatives haven't been figured into the equation, it's likely because AECOM was never asked to look at them.  Again, that's just not acceptable when we're talking about a major piece of infrastructure with $80 million worth of capital costs.

About Those Benefits

AECOM looked at a number of benefits, 3 of which it was able to monetize.  The first has to do with a savings in Vehicle Hours Travelled (VHT); the second has to do with the operating costs which vehicles can expect to save as a result of fewer hours spent in travel; the third has to do with the amount of greenhouse gas emissions which can be saved by vehicles spending less time on the road.  Let's look at each of these quickly.

AECOM used traffic modelling based on growth assumptions, likely from the Transportation Master Plan which is still under review.  Let's assume that these models are fine - I'm certainly not in a position to question them, not being a traffic engineer.  The draft TMP is at least based on a realistic growth projection of around 10,000 people over 20 years, so there's that.

Time is Money

AECOM estimates that at peak hours, 457 vehicle hours of travel will be saved.  What, exactly, does that mean?  It looks like that if there were 457 vehicles on the road during the peak hour, they'd each save 1 hour's worth of travel time thanks to Maley.  914 vehicles would save a half hour.  1,828 vehicles would save 15 minutes.

Now, I'm not sure exactly how many vehicles are actually on the City's roads during peak hours, but let's assume it's 15,000 (which is likely low for a City with a total population of over 165,000).  How much would each vehicle save in terms of travel time thanks to Maley?  That's about 1 minute and 40 seconds during peak hours.  Less than two minutes, anyway.

Well, whatever it is, the amount isn't negligible, and according to AECOM, it can be monetized over a year.  AECOM estimates that one hour of travel time is worth $16 for each personal vehicle and $75 for cars.  They've got a methodology to justify this, so again, let's take AECOM's numbers as given.

AECOM estimates a total annual benefit of $11.1 million per year in terms of time saved.  But time saved for whom?  Well, some of that will be time saved for the trucking industry (almost $4 million annually).  The rest will be those few minutes a day saved by the travelling public - or at least, that portion of the travelling public which uses personal automobiles (remember: the draft TMP doesn't look at modal splits for transit/alternative transportation, such as cycling, walking.  It just counts cars).

A couple of minutes a day for car users works out to over $7 million a year at $16 an hour.  But how much of that will individuals really save?

AECOM acknowledges that their report doesn't build in any assumptions with regards to changes in modal split (likely because the TMP doesn't either) between now and 2048 - and again, that's just not realistic, given what we know about the downward trend of car ownership.  Modal split for transit in this community has nearly doubled since data for the first TMP was collected in 2003 - there's no good reason to presume that there won't be additional changes over the next 30+ years.

Vehicle Operating Savings

Next, the report looks at how much vehicle operators can save based on reduced time on the road.  Wear and tear is minimized when cars are parked safely in driveways rather than when they're idling in traffic - so clearly there can be real savings from those 457 less hours on the road at peak times.  AECOM estimates the operating savings for motorists to be $1.15 million for cars and an additional $360,000 for trucks - not huge, but not negligible.  Divided by the total number of drivers (let's again use 15,000 for the sake or argument), that's almost $77 a year, or about 32 cents a business day.

Greenhouse Gas Emissions

This one is of personal interest to me. AECOM estimates a savings of $218,000 per year.  It arrives at that figure by estimating fuel savings, and identifying how much carbon pollution would be saved as a result of fewer kilometers being traveled.

Finally, it put a price on carbon pollution.  This is where it gets really interesting.  AECOM estimates a price on carbon of $88.5 per metric tonne.  If  you're not familiar with carbon pricing, let me put that figure into perspective.  Right now in British Columbia, after 7 years of a rising carbon tax, the per tonne price of carbon pollution is just $30 per tonne.  In the recent federal election, the Green Party of Canada had the most aggressive carbon pricing scheme of any federal party - it wanted to see a per tonne price of $30 per tonne.

It is true that most economists believe that the price of carbon should rise to around $200 per tonne by 2030 if we are going to hold global warming at 2 degrees Celsius.  That's considerably higher than the per tonne price AECOM uses for a period much shorter than the 30-year life of Maley Drive.  But is it realistic?  As somebody concerned about the climate crisis, I certainly hope that it may be, but here's the kicker; if carbon is priced at $88.5 per tonne or $200 per tonne, when does that price start to have an impact on lifestyle choices - like driving personal vehicles?

Let's do some quick math here.  Wikipedia tells me that B.C.'s $30 per tonne carbon tax adds 7.2 cents per litre at the pumps (see: "British Columbia carbon tax," Wikipedia), so a carbon price of $88.5 per tonne represents about an additional per Litre charge on gasoline of about 20.5 cents.  Would that additional cost be enough to incent some drivers to leave their cars at home in favour of other modes of transportation?

Not according to the AECOM study, anyway - it assumes a constant number of drivers over time.

Economic Activity and Safety

AECOM indicates that the intent of the Maley Drive Extension is to "alleviate traffic congestion and promote economic activity while improving safety."  And yet AECOM's own cost/benefit analysis looked only at one of these factors: traffic congestion.  The costs and benefits of economic activity and safety are unknown, unassessed.  A lot of those potential costs would be opportunity costs for unimplemented projects which might generate more economic activity (think here how bike lanes and walkability increase economic activity along cycling/pedestrian routes) and safety (slowing traffic with congestion rather than increasing its rate of flow - there is a direct correlation between a higher incidence of dangerous collisions and speed - if safety is the issue, Maley isn't going to help, according to AECOM's analysis).

Oh, and a quick word about congestion - traffic models throughout North America continue to under compensate for congestion.  When new roads get built, they generally lead to higher levels of congestion.  I'm not a traffic engineer, but there is a great deal of work which looks at this activity - whether Greater Sudbury might be unique among North American cities which buck this trend, I just can't say - but we do have a lot of roads here already, and people seem to complain about congestion.  Does that mean that we don't have enough roads, or that we've made it so that if you want to get around, you've got little choice but to drive?  With that in mind, how will Maley really help ease congestion?


The most significant problem with AECOM's Cost/Benefit analysis of a shrunken Maley Drive Extension is the lack of assessment related to alternatives.  Using AECOM's approach, I suspect that the addition of any new road infrastructure would likely reveal a net benefit due to lower vehicle hours traveled versus capital costs (unless those capital costs were incredibly high due to site-related issues, that is - things like rail lines or electrical transmission lines being in the way - but I digress).

For a similar investment in, say, the Barrydowne Extension, would there be a larger net benefit identified?  Barrydowne's costs might be a little higher than Maley (but then again, maybe not, as Maley's costs/scope keeps changing) - but if we're going to blow $80 to $100 million on a new road, let's make sure we can get the biggest bang for our bucks.  Maybe that's Barrydowne.  Maybe it's widening MR 35, or MR 80.  Both of those are identified in the draft Transportation Master Plan as municipal priorities - where is the cost/benefit analysis for these (and other) road projects which we can compare this one to?

Further, what about investing in transit or cycling and pedestrian infrastructure?  Seems to me that this sort of cost/benefit analysis would almost be impossible to undertake if one was interested in evaluating those alternatives, mainly because data for these types of trips haven't been entered into Greater Sudbury's transportation models, which only look at cars.

Oh, and about those cars; let's be clear here - besides the benefits from a reduction to greenhouse gas emissions, the net benefits to Greater Sudbury are primarily accrued by motorized vehicle owners/operators - cars & trucks.  The Sustainability Master Plan identified that 1/3 of Greater Sudburians don't have access to personal vehicles when it comes to making travel choices.  That means 1/3 of the traveling population won't receive any benefit from Maley at all - or at least none that was assessed by AECOM.  So only a certain segment of the population will receive these direct benefits.

The costs, however, will be borne by taxpayers, who receive no benefit whatsoever.  Unless they own vehicles, of course.  Vehicles which travel at peak hours.  As an example, my family owns one vehicle, but it's not usually traveling during rush hour.  We're a family of 5 - we'll get no benefit from Maley, but our property taxes will nevertheless be used to maintain this new road.

The study didn't look at other ways of maximizing benefits, either - such as the imposition of road pricing through tolls or HOT lanes (which might be difficult to implement given that Maley is intended to be a two-lane road).  Sure, right now, municipalities don't have the ability to levy tolls.  But there may be other ways to leverage funds - certainly the 2005 Master Transportation Plan indicated that the City should explore financing options for Maley from those who will benefit most, presumably the trucking industry.  Looks to me like none of those options were explored - or if they were, they've been left out of the benefits column because they've all failed.

When the Benefits Outweigh the Costs...

AECOM concludes that since their analysis shows that the benefits of Maley outweigh the costs, there's no good reason not to pay the price and build the road.  But AECOM failed to look at the costs/benefits of building this road versus legitimate transportation infrastructure alternatives, some of which are roads projects which have been prioritized for the City almost as long as Maley.  An assessment which fails to look at alternatives is, frankly, not very useful.  It provides a single snapshot, rather than looking at the big picture - something which I thought transportation engineers were supposed to do.

Further, since the primary beneficiaries will be vehicle owners/operators, and the costs borne by property taxpayers, developers and federal & provincial taxpayers, it seems that it's quite premature to conclude that the net benefits will accrue to "Greater Sudburians" - which AECOM does.  Again, the opportunity costs of assessing alternatives would have been valuable in looking at whether Maley makes sense.

If this were the only piece of infrastructure that Greater Sudbury could build, AECOM makes a decent, if somewhat flawed case, of the economic value of costs vs. benefits.  But we have options in our community - and those options might prove to be better alternatives than Maley.  Our problem is that we've not looked at the costs and benefits of those other options, so we really have no idea whether Maley makes any sense at all in comparison.

AECOM paints a nice picture, but it's hardly a reflection of reality.

(opinions expressed in this blog are my own and should not be interpreted as being consistent with the views and/or policies of the Green Parties of Ontario and Canada)

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