MEMORANDUM 100 Webster Street, Suite 300 Oakland, CA 94607 (510) 540-5008 www.altaplanning.com
To: (Fehr & Peers) From: (Alta Planning + Design) Date: May 9, 2017 Re: SBCTA Points of Interest Pedestrian Plan - Task 1.5 Cost-Effectiveness Model
Summary This cost-benefit analysis (CBA) weighs the costs (capital and maintenance) and benefits (environmental sustainability, quality of life, economic competitiveness, safety, and state of good repair) that would accrue during construction and over a 20-year evaluation period after completion of the proposed projects within the SBCTA Points of Interest Pedestrian Plan. While construction of the proposed projects will benefit residents and visitors to the region, this analysis considers only residents of the study communities. Table 1 shows a summary of the discounted findings of the CBA (all values presented in 2017 constant dollars). The estimated benefits of constructing the proposed projects is compared to the estimated costs of implementation over a 20-year, post-construction period. The balance of these benefits and costs are summarized using three common economic terms: net present value, internal rate of return, and benefit-cost ratio. The net present value of a project shows whether the estimated benefits generated by a project (in present dollars) exceeds the anticipated costs (also in present dollars). Generally, any project with a positive net present value is likely to be profitable and one with a negative net present value may lead to a net loss. The estimated net present value for each of the jurisdictions ranged between approximately -$3 million and $383 million depending on the number of people in the study area and the estimated change mode share. Internal rate of return is another common alternative to net present value, and it shows projected rate of growth of a project by representing the discount rate of an investment when the net present value is zero. This allows projects of different scales (i.e., a $1.8 million investment in Rancho Cucamonga and a $15.9 million investment in Highland) and different timelines (i.e., a project that would complete construction in 2018 and one that would complete construction in 2025) to be more readily compared. The estimated internal rate of return for each of the jurisdictions ranged between approximately -5 percent and 181 percent depending the relationship between the estimated costs and the magnitude of the estimated benefits.
1 | Cost-Effectiveness Model