Practices for Evaluating the Economic Impacts and Benefits of Transit (2017)

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3 chapter one IntroductIon: overvIew and Key Issues MotIvatIon: ProbleMs and challenges Many transit agencies face the challenges of funding, planning, and prioritization decisions with increasingly constrained budgets, aging infrastructure, shifting demands, and needs to ensure sustain- able futures. This makes economic analysis increasingly important as a way to inform transit invest- ment decision making, particularly as transit agencies seek to be more accountable to their funders and constituents. Economic analysis tools can be applied to show the consequences of transit investment in terms of impacts on the economy and the value of broader social and environmental benefits. The role of economic impact and benefit analysis for transit services has often been an overlooked aspect of transportation performance. In the past, many transit agencies avoided traditional economic methods out of concern that the economic returns from transit investment would not appear competi- tive with other modes owing to the limited size of many transit markets, the costs of operating and maintaining transit services, and the qualitative aspect of public service needs remedied by transit. By contrast, highway and bridge projects have often presented compelling studies showing societal benefits and significant effects on jobs, Gross Domestic Product (GDP), and other indicators based on the sheer number of users and the well-defined costs of deficiencies remedied by such projects. Airports commonly conduct economic impact studies. In contrast, far fewer transit agencies have sponsored such studies. The problem has been exacerbated by the existence of mode-specific transportation investment evaluation practices that differ in their recognition and treatment of non-user (economic and com- munity) benefits. It is generally understood that the assumptions underlying road impact and benefit calculations are not fully applicable for transit. However, there has also been growing recognition that when the economic role of transit is appropriately framed it can be shown that transit plays a vital role in workforce participation, consumer markets, transportation efficiency, workforce pro- ductivity, and urban development. As multi-modal grant applications are increasingly requiring economic analysis, the challenge for transit agencies will be to better articulate and more rigorously demonstrate the business and economic case for transit investment. Two primary forms of economic analysis are discussed in this report: • Impacts on the economy—most often referred to as “economic impacts” or “economic develop- ment impacts,” which encompass effects on jobs and income; and • The economic valuation of broader societal benefits—sometimes referred to as “social welfare benefits,” which encompass the valuation of “non-user benefits” (affecting quality of life, envi- ronment, and productivity) in addition to user benefits. The former is commonly addressed by economic impact analysis (EIA), whereas the latter is com- monly addressed by benefit–cost analysis (BCA). A hybrid approach, called multiple account evalu- ation, catalogues various economic impact and benefit effects without adding them up to calculate any overall metric. Regardless of the technique used, it should be clear that each of these forms of economic analysis go beyond the traditional calculation of user benefits (traveler time, cost, and safety), which is already well-developed and not further addressed in this report. More complete definitions of the various forms of impact and benefit measurement and applicable economic analy- sis methods are provided in the next chapter.

4 A problem that has faced transit agencies to date is that it is often not a simple task to communi- cate either the economic impacts or benefits of transit investments and operations. The reason being that there are different ways to view the issue of what constitutes an economic impact or a benefit of transportation. There are also different methodologies that can be applied to address them. Therefore, it can be both confusing and challenging for a transportation agency to select and apply the appro- priate analysis methods and communicate its findings. The challenges are particularly problematic for the transit mode, as it has unique properties that make it even more complex to measure transit impacts and benefits, and to generalize them across geographies and system sizes. Transit planning and operating agencies also vary in their ability to conduct or sponsor economic studies. Despite these challenges, economic analysis is becoming even more important as transit agencies seek to be more accountable to their funders and constituents, and to more rigorously demonstrate their value. Although many transit planning and operating agencies do not currently tackle these types of impacts or benefits because of a lack of economic knowledge, this situation has been changing as systematic planning and analysis methods are becoming widely available. A source of further optimism is the continuing progress of new research studies and methods that are improving the state of knowledge and practice concerning transit impacts on economic devel- opment, as well as social and environmental benefits. This becomes apparent when comparing the current state of practice with that of 16 years ago (when an NCHRP synthesis examined economic impact analysis across all modes). As discussed later in this report, significant progress has occurred in the documentation and analysis of cross-modal benefits, access and productivity benefits, and effects on land values and public-sector costs. This synthesis study was conducted to assemble up-to-date information about the state of research and practice concerning transit economic impacts and benefits. It is intended to help transit operating and planning agencies to better identify ways that they can most effectively incorporate economic benefits and impacts into public information discussion and decision making and appropriately convey the business case for transit. organIzatIon of the rePort This report examines methods used for assessing transit economic benefits and impacts, the types of benefits covered by these methods, and the ways that agencies are using the information obtained for planning, prioritizing, funding, and stakeholder support. It discusses: (1) why it can be useful to conduct or sponsor economic impact and benefit studies, (2) how agencies are defining and conduct- ing these types of studies, (3) the issues that transit agencies have addressed and the challenges they have faced with these studies, and (4) how the state of practice is changing regarding both economic analysis methods and use of findings. The report is organized into chapters. • The remainder of chapter one sets the stage for defining the dimensions and uses of economic impact and benefit analysis for transportation planning, identifying the unique aspects of eco- nomic analysis pertaining to transit, and defining the challenges that transit agencies must overcome to effectively apply economic analysis. • Chapter two provides a basic framework for defining impacts and benefits, using a literature review of key national research studies and guidance documents to classify: (1) types of economic measurements, (2) perspectives that can be taken for measuring those effects, and (3) types of applications for use of their results. • Chapter three examines the state of practice, summarizing five major ways of viewing and measuring transit economic effects, and then showing how local studies have been conducted to implement them. It also shows the analysis tools and methods that are currently in use to carry out these studies. • Chapter four reports on the results of a survey of transit agencies and other transportation agen- cies that have conducted or sponsored economic impact or economic benefit studies to examine the issues they have faced.

5 • Chapter five provides case examples where economic studies were used to improve information dissemination and decision making for transit funding and planning. • Chapter six presents a concluding discussion of findings on the application of economic analy- sis, including issues faced in conducting studies and reporting findings, remaining challenges, and ways of addressing them. • Appendices include more detailed summaries of individual reports, the survey questionnaire, and a list of survey participants. dIMensIons and uses of econoMIc analysIs The word “transit” as used in this report (and by FTA) refers to all forms of public transportation, including various urban and rural bus, bus rapid transit (BRT), light and heavy rail transit, and com- muter rail service. It is synonymous with the term “public transportation” (as used by APTA), and the term “public transport” (as used in the United Kingdom). This study found examples of economic impact and benefit analysis equally applicable for each of these different transit services. The motivation for a transit planning or operating agency to conduct either economic impact and/or economic benefit analysis is basically to help provide accountability and a rational structure for deci- sion making. Such analysis can serve to define and convey the decision-making case for transit projects and activities. The decision making can be for any stage in the transportation funding and planning process, including: • Policy making—by better informing the public so that they can better understand the value of local transit services to the community and economy. • Funding for projects and programs—by informing legislators and voters about the public return on investment from funding transit projects and services. • Long-range planning—by better informing stakeholders about economic opportunities and risks associated with alternative transit system scenarios. • Mandated studies—improving environmental impact studies and public hearings by providing more information about local neighborhood versus region-scale effects. • Short-range prioritization—enabling better ranking and selection of projects by enabling more complete measurement of impacts and benefits for stakeholders. • Operations and service features—by better informing transit agency staff about the implications of shifting access, service, or pricing features. The stage of decision making matters, for it affects the type of economic analysis that is required. Specifically, funding decisions require some consideration of benefits relative to costs. In contrast, planning and prioritization decisions require further consideration of the relative impacts and trade- offs involved in selecting among alternatives. The target use of the economic analysis may also vary—including public information dissemi- nation or briefings for planners, government leaders, and officials, or making the funding case for legislators. The actual target audience matters, for it can affect the scale of analysis and the range of impacts and tradeoffs to be considered. For example, if a transit agency is concerned about revenues (or operating savings) from an internal management perspective, it may only consider in its private return on investment “benefits” accruing to the agency relative to agency outlays (does the agency break even in its own books on reducing headways or purchasing a new bus). By contrast, if a state or metropolitan planning organization (MPO) reviewing the same investment from the standpoint of efficient use of public funds they would count a wider societal benefit by including options such as the safety and environmental value of enhanced ridership, as well as potential savings associated with passengers diverting from less efficient modes of transporta- tion. However, because all of the previous decisions ultimately do involve the commitment or the use of public money, there is widespread interest among these audiences in considering the con- sequences in monetary terms—whether it be impacts on the transit agency, the overall economy, or the value of broader societal benefits.

6 There is not really a choice of selecting between economic impact and benefit analyses, as they are not substitutes; both serve a purpose. EIA can have broad use for policy, planning, and priori- tization as a measure of strategic goal achievement. However, EIA is clearly not intended to be a replacement for establishing the efficiency of a proposed investment through BCA. This relationship between economic impacts and benefits is further explored in chapter two. However, at this juncture, it is clear that there is public interest in understanding both impacts on the economy and the societal value of broader benefits, which is why (as will be shown in chapter three) some transit agencies are choosing to conduct both forms of analysis. unIque asPects of econoMIc analysIs for transIt There are several features that distinguish transit from other transportation modes. These features affect both the definition and measurement of transit impacts and benefits. • Infrastructure and service: Unlike other modes, transit is a service and not just infrastructure. It is important to consider that transportation funding decisions concerning road, air, and marine modes are largely focused on publicly owned infrastructure (e.g., pavement, bridges, airports, and marine ports—all of which are then used by private operators). However, transit is a public service that uses publicly funded vehicles that most often rely on the right-of-way or corridors of other modes (e.g., roads, rail lines, or land along their corridors). This public service feature is widely recognized, which helps explain why cities throughout the world feature some form of publicly operated, subsidized, and/or regulated transit services. Many rural regions do too, and in each of these cases, transit—similar to public education and parks and recreation—serves a public or social service that is particularly critical for some dependent populations. • Intermodal and reliever roles: Transit benefits often cross over to other modes. In major cities, transit often serves as a connector to airports, rail stations, convention centers, and business centers, where it plays a particularly critical role for enhanced intermodal access and as a road congestion reliever. These multi-modal roles are often not well captured by traditional user- benefit calculations. • Long-term, strategic planning roles: Transit investments are sometimes seen as important tools that can be targeted to facilitate private investment in economically depressed areas, to help attract high-growth technology industries to a region, and/or to facilitate forms of urban spatial growth that will lessen the effects of pollution growth in the future. These are strategic planning roles that involve distributional consequences—effects on spatial development patterns, eco- nomic development patterns, and environmental change over time. These longer-term effects are most often not captured in the evaluation of traditional transportation network benefits. These various types of transit roles and their associated impact or benefit categories are summa- rized in Table 1, which was assembled from the national studies and guidance documents reviewed in chapter two. Although not all aspects of this table apply for all agencies in all cases, the table does show that transit can play three very different roles: 1. As an element of multi-modal transportation networks and services, contributing to overall system efficiency; 2. As a means of access to opportunities that enable wider societal benefits; and 3. As a strategic planning tool, which enables progress toward the evolution of long-range eco- nomic development, social, and environmental goals. Below each of these roles, Table 1 lists a series of specific impacts or benefits that can potentially be measured, forming the basis for classifying and interpreting the different perspectives taken by the reports and guides that are reviewed in chapters two and three, and the state of practice that is discussed in chapters four and five. Not all of these transit impact or benefit categories apply in all areas; therefore, rigorous analysis is required to document when they apply and the magnitude of their effect. Consequently, this table

7 has four important implications relating to how economic analysis is applied to assess transit impacts and benefits. They pertain to: (1) measurability, (2) applicability, (3) scale, and (4) observer view- point for measuring effects, and are discussed next. challenges for transIt econoMIc analysIs The following are four challenges for transit economic impact and benefit analysis discussed throughout this report. Measurability—It is important to note that although transit investments can be used to address the various types of outcomes identified in Table 1, it is often not easy to document or measure them. After all, not all of these effects can be easily quantified, not all quantified effects can be monetized into dollar benefit valuations, and not all monetized effects can be reflected in current BCA mea- sures. Many of the social service and strategic planning motivations for transit have distributional aspects—over time, space (areas), or elements of society—that are important for public policy, but are either not captured or are discounted by the aggregate form of BCA that is now widely practiced. Even many of the multi-modal connectivity, cross-modal tradeoff, and intercity transfer benefits are difficult to capture with today’s urban travel models. Applicability—It is not necessary to exhaustively consider all of the effects itemized in Table 1 within a single economic study. Some projects address regional multi-modal transportation efficiency Source: Review of national reports and guidance documents discussed in chapter two. Transit investment as a multi-modal source of transportation efficiency improvement For transit users: reduce travel time, wait time, and travel-related expenses (compared with do nothing or other modal alternatives). For road users: reduce road congestion growth (and related traveler time, reliability, safety, and cost effects) by providing non-road travel options that reduce car traffic growth. For government and the public: reduce investment costs of expanding existing and building new highways (and sometimes also public parking facilities) by reducing the growth in number of vehicles on roads. For intercity air and rail travelers: enhance local ground access and intermodal connectivity for airports and high-speed intercity trains. Transit as access to opportunities Access to basic needs: provide mobility for those who cannot drive, should not drive, cannot afford to drive, or live in neighborhoods where there is currently limited access to outside areas for medical, education, recreation, shopping, and work opportunities. Affordability: provide more affordable mobility options that require less household spending on transportation, thus enabling more expenditures on housing, health care, etc. Transit as a strategic planning and development tool Regional economic development: Access broader labor markets with more specialized worker skills, support technology cluster development, and provide faster and more reliable goods movement by reducing road congestion on truck routes—all expanding economic growth to reduce long-term unemployment and increase income and wealth for residents. Poverty and community development: Encourage investment in urban neighborhoods, local communities, and rural areas that are economically depressed and suffer from insufficient private investment as a result of poor accessibility, thus reducing crime, blight, and poverty. Environment and livable communities: support public policy goals for “quality of life,” livable neighborhoods, and land development patterns that can reduce air, noise, and water pollution; energy resource use; carbon emissions; and needs for further highway investment. TABLE 1 ROLES AND GOALS OF TRANSIT INvESTMENT

8 and economic productivity, others address the current social needs for specific population groups, and yet others are intended to help shape urban growth in order to achieve long-term growth goals. The economic analysis can focus on the specific outcome metrics deemed to be relevant, with analysis covering a time frame and level of detail that matches the project size and its goals. Scale of analysis—The various transit roles (and associated goals) itemized in Table 1 occur at very different spatial scales. An economic analysis defined for a small-scale study area will likely fail to capture the full magnitude of broader impacts. Conversely, an economic analysis defined at a broad scale will likely fail to capture some of the effects on particular socio economic groups and neighborhoods. Observer viewpoint—The notion of what constitutes a benefit depends on who is doing the obser- vation or measurement. College textbooks on BCA emphasize the need for clarity about “who has standing” to consider what is beneficial. Indeed, it is clear that the items listed in the table are defined from a variety of different viewpoints. These four topics constitute challenges for transit economic analysis. They exist to some extent for other modes, but they are particularly problematic for transit because of its properties as a pub- lic service—intended to meet the needs of specific groups and address long-term social equity and strategic economic development needs. These issues make economic analysis tools such as BCA par- ticularly challenging for documenting the benefits of transit investment, which may help to explain why BCA has not been used more widely for transit decision making. Furthermore, confusion over differences between BCA and economic impact modeling add to the reasons why staff at some transit agencies has not committed to conducting any such studies. However, there is a path to clarify the appropriate role and use of EIA and BCA. The various transit roles that were previously shown in Table 1 are recognized by the U.K.’s Transport Appraisal Guide (DFT 2013) and also reflected in Canadian and U.K. guidance. That guidance directs that proposed transportation projects be considered in terms of their overall “business case”—that is, the extent to which the proposal addressed strategic public goals are economically efficient and implementable in terms of financial, legal, and institutional factors. Strategic public goals can encompass the inter- modal, social service, and strategic planning factors noted in Table 1. They can also be viewed as spanning social, economic, and environmental issues, which together are sometimes referenced in the United States as “triple bottom line” factors, and which are all recognized in U.S. requirements for environmental impact studies. These issues are often also recognized in the multi-criteria project prioritization rating systems used by many state departments of transportation (DOTs). In the context of considering the business case, BCA can be viewed as a tool for assessing the rela- tive economic efficiency of spending, whereas EIA can be viewed as a scenario analysis tool used to assess the achievement of strategically desired impacts for specific areas and various elements of the economy in specific future years. In some cases, the value of social benefits can also be applied in narrower terms—focusing on effects for specific areas, subgroups, or points in time. Indeed, the literature review covered in chapter two reveals that there has been a continuing progression over time of new research and analysis efforts aimed at better measuring the effects of transit systems from different perspectives. These perspectives may include effects on specific: • Areas—neighborhoods, cities, regions, states, nation. • Usage groups—transit users, highway users, non-users (rest of society). • Population groups—people with disabilities, low income, older age, or lack of automobile access. • Industry groups—high tech, target growth industries, etc. • Time periods—current year, future year, net present value over a period of time. The appropriate form of analysis and the appropriate perspective for analysis will both depend on the applicable transit service or investment objective—identified from the list shown earlier in

9 Table 1. For instance, if a project or program is intended to address long-term resource use and cli- mate change, then a national benefit perspective may be appropriate to fully capture all benefits. On the other hand, if a project or program is intended to help revitalize a neighborhood, then it makes sense for impacts to be viewed at a highly localized neighborhood level in order to capture local benefits. This broad range of potentially applicable perspectives for viewing impacts and benefits can be seen in the range of documents that are summarized in chapter two. The different perspectives can also be seen in the various forms of EIA reported by transit operating and planning agencies in the chapter three survey results. They are also evident from the range of case studies described in chapter four. Taken together, these results provide a strong basis for transit operating and planning agencies to move forward with even more informative and useful economic impact and benefit studies in the future.