Engineering Economics and Finance for Transportation Infrastructure

223 Pages·2013·6.793 MB·English

by  Elena S. Prassas, Roger P. Roess (auth.)

Springer Tracts on Transportation and Traffic STTT
Elena S. Prassas
Roger P. Roess
Engineering
Economics
and Finance
for Transportation
Infrastructure
123
Springer Tracts on Transportation and Traffic
Volume 3
SeriesEditor
R.P.Roess,NewYork,USA
Forfurthervolumes:
http://www.springer.com/series/11059
·
Elena S. Prassas Roger P. Roess
Engineering Economics
and Finance for
Transportation Infrastructure
ABC
ElenaS.Prassas
AssociateProfessorofTransportationEngineering
PolytechnicInstituteofNewYorkUniversity
NewYork
USA
RogerP.Roess
ProfessorofTransportationEngineering
PolytechnicInstituteofNewYorkUniveristy
NewYork
USA
ISSN2194-8119 ISSN2194-8127 (electronic)
ISBN978-3-642-38579-7 ISBN978-3-642-38580-3 (eBook)
DOI10.1007/978-3-642-38580-3
SpringerHeidelbergNewYorkDordrechtLondon
LibraryofCongressControlNumber:2013939180
(cid:2)c Springer-VerlagBerlinHeidelberg2013
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Contents
1 Introduction ............................................................................................ 1
1.1 Funding Needs for Transportation Infrastructure ............................ 1
1.2 Revenues for Transportation Infrastructure..................................... 1
1.3 Tools for Analysis ........................................................................... 2
References ................................................................................................ 3

Part I: Engineering Economics with Transportation Applications
2 Banking Formulae .................................................................................. 7
2.1 Single Payment Transactions .......................................................... 7
2.1.1 Compound Amount .............................................................. 7
2.1.2 Present Value or Present Worth ........................................... 11
2.2 Uniform Series Transactions ........................................................... 14
2.2.1 Sinking Fund Transactions .................................................. 14
2.2.2 Capital Recovery and Annuities .......................................... 18
2.3 Using Banking Formulae in Engineering Applications ................... 22
2.4 Closing Comments .......................................................................... 25
Problems ................................................................................................... 25
References ................................................................................................ 27
3 Use of Banking Formulae in Engineering Economics ......................... 29
3.1 Simple Engineering Applications .................................................... 30
3.2 Applications Involving “Infinite” Service Periods .......................... 35
3.3 Methodologies for Engineering Economic Comparisons ................ 40
3.3.1 The Treatment of Transportation Demand .......................... 41
3.3.2 Defining the Scope of Alternatives in an Economic
Analysis ............................................................................... 41
3.3.3 Direct Techniques for Alternative Economic Analysis ....... 43
3.3.3.1 The Present Worth Method .................................. 43
3.3.3.2 The Annual Cost Method ..................................... 45
3.3.3.3 Examples Using Direct Methods .......................... 46
3.3.4 Incremental Methods for Alternative Economic
Analysis ............................................................................... 50
3.3.4.1 Incremental User Benefits (IUB) ......................... 51
VI Contents

3.3.4.2 Incremental System Costs (ISC) .......................... 51
3.3.4.3 Benefit-Cost Ratio Method for Comparing
Incremental Costs ................................................. 52
3.3.4.4 Rate of Return Method for Comparing
Incremental Costs ................................................. 59
3.4 Defining Inputs to Economic Alternative Analyses ........................ 62
3.4.1 Selection of an Analysis Period ........................................... 62
3.4.2 Selecting an Interest Rate .................................................... 64
3.5 Closing Comments .......................................................................... 65
References ................................................................................................ 65
Problems ................................................................................................... 66
4 The Costs of Transportation for Alternative Economic Analysis ...... 73
4.1 User Costs ....................................................................................... 73
4.2 System Costs ................................................................................... 75
4.3 Indirect Costs .................................................................................. 77
4.4 The Costs of Transportation ............................................................ 79
4.5 The Cost of Travel Time ................................................................. 80
4.5.1 Issues Affecting How Travel Time Is Viewed .................... 81
4.5.2 Estimating the Value of Travel Time .................................. 82
4.5.3 An Illustrative Application in the Value of Travel Time .... 85
4.5.4 Closing Comments on Travel Time .................................... 89
4.6 Vehicle Operating and Maintenance Costs ..................................... 90
4.6.1 Typical Operating and Maintenance Costs .......................... 90
4.6.2 An Example in Vehicle Operating and Maintenance
Costs .................................................................................... 92
4.7 The Cost of Highway Crashes ......................................................... 93
4.8 Highway System Costs ................................................................... 97
4.9 Public Transportation Costs ............................................................ 102
4.9.1 Construction Costs .............................................................. 103
4.9.2 Rolling Stock ....................................................................... 104
4.9.3 Operating and Maintenance Costs ....................................... 104
4.10 Closing Comments .......................................................................... 108
Problems ................................................................................................... 108
References ................................................................................................ 110
5 Illustrations of Complex Economic Analyses ....................................... 113
Sample Problem 5.1: Comparing Pavement Types .................................. 113
Sample Problem 5.2: Reducing the Severity of a Rural Grade ................ 117
Sample Problem 5.3: Upgrading a Commuter Rail Line for
High-Speed Trains ............................................................................... 125
Sample Problem 5.4: Considering a By-Pass .......................................... 130
Sample Problem 5.5: Considering Regional Public Transportation
Options ................................................................................................. 136
Contents VII

Sample Problem 5.6: Priority Selction ..................................................... 145
Closing comments .................................................................................... 147
Problems ................................................................................................... 148

Part II: Financing of Transportation Infrastructure
6 History of Transportation Finance in the U.S. .................................... 153
6.1 The Early Toll Roads ...................................................................... 153
6.2 The National Road .......................................................................... 154
6.3 The Good Roads Movement ........................................................... 156
6.4 The Lincoln Highway ..................................................................... 156
6.5 The Federal-Aid Highway Program, 1916 to 1955 ......................... 156
6.5.1 Federal-Aid Highway Act of 1916 ..................................... 157
6.5.2 Federal-Aid Highway Act of 1921 ...................................... 158
6.5.3 Federal-Aid Highway Acts from 1921 to 1955 ................... 158
6.6 Federal-Aid Highway Act of 1956 .................................................. 160
6.7 Federal-Aid Highway Acts from 1957 – 1991 ................................ 162
6.8 Federal Funding for Railroads ......................................................... 163
6.8.1 The Pacific Railway Acts, 1862-1866 ................................. 163
6.8.2 AMTRAK ........................................................................... 165
6.8.3 High-Speed Rail Program ................................................... 166
6.9 Federal Funding for Aviation .......................................................... 168
6.10 Federal Funding for Urban Mass Transportation ............................ 168
6.11 The Era of Multimodal Funding ...................................................... 169
6.11.1 The Intermodal Surface Transportation Efficiency Act of
1991 (ISTEA) ...................................................................... 169
6.11.2 The Transportation Equity Act for the 21st Century
(1998, TEA-21) ................................................................... 170
6.11.3 The Safe, Accountable, Flexible and Efficient
Transportation Equity Act – A Legacy for Users
(SAFETEA-LU, 2005) ........................................................ 170
6.11.4 The Moving Ahead for Progress in the 21st Century Act
(MAP-21) ............................................................................ 171
6.12 Closing Comments .......................................................................... 172
References ................................................................................................ 172
7 Bond Financing ....................................................................................... 175
7.1 What Is a Bond? .............................................................................. 175
7.2 Types of Bonds ............................................................................... 176
7.2.1 Classification by Type of Security ...................................... 176
7.2.2 Classification by Method of Repayment ............................. 177
7.3 Establishing a Selling Price for Bonds ............................................ 181
7.4 Call Privileges ................................................................................. 184
VIII Contents

7.5 The Process of Bond Issuance ......................................................... 185
7.6 Comparing Bond Financing to Pay-As-You-Go Financing ............ 186
7.7 Closing Comments .......................................................................... 188
References ................................................................................................ 188
Problems ................................................................................................... 188
8 Financing Transportation Projects ....................................................... 191
8.1 The Gas Tax and the Highway Trust Fund ..................................... 191
8.2 The Problem of Revenue Shortfalls ................................................ 193
8.3 Additional Funding Sources for Transportation Projects ................ 193
8.3.1 Joint Development Funds .................................................... 193
8.3.2 Less Traditional Financing Approaches .............................. 195
8.3.3 Road Pricing ........................................................................ 196
8.3.4 Public-Private Partnerships ................................................. 197
8.3.5 Conclusion........................................................................... 198
8.4 The Vehicle-Mile Tax and Other Tax Options for the Future ......... 199
8.5 Closing Comments .......................................................................... 200
References ................................................................................................ 200
Appendix: Interest Tables ............................................................................ 203
Subject Index................................................................................................. 217
List of Figures
Figure 2.1: An Illustration for Single-Payment Transactions 15
Figure 2.2: Illustration of Sinking Fund Transactions 18
Figure 2.3: Illustration of Capital Recovery Transactions 22
Figure 2.4: Illustration for Example Problem 1 25
Figure 3.1: Time-Line for Untreated Sign Posts 38
Figure 3.2: Time-Line for Treated Sign Posts 39
Figure 3.3: Time-Line for Example Problem 7 44
Figure 3.4: Illustration of Residual Value 50
Figure 3.5: Alternatives Plotted vs. Null Alternative for Example 64
Analysis 3
Figure 3.6: Alternatives with Respect to Alternative 4, Example 64
Analysis 3
Figure 3.7: Alternatives with Respect to Alternative 3, Example 65
Analysis 3
Figure 4.1: Speed-Flow Curve for 65-mi/h Freeways from the 98
2010 Highway Capacity Manual
Figure 4.2: Speed Determined for Illustration 99
Figure 5.1: Costs Considered in Sample Problem 5.1 132
Figure 5.2: Grade Reduction Options for Sample Problem 5.2 135
Figure 5.3: By-Pass Options for Sample Problem 5.4 148
Figure 6.1: Map of the National Road in 1839 175
Figure 6.2: Map of the Completed National System of Interstate 182
and Defense Highways
Figure 6.3: Route of the First Transcontinental Railroad 186
Figure 8.1: Annual Receipts and Outlays in the Highway Trust 220
Fund, 2004-2021
List of Tables
Table 2.1: Compound Amount Factors (F/P ) 9
n.i
Table 2.2: Present Worth Factors (P/F ) 12
n.i
Table 2.3: Series Compound Amount Factors (F/A ) 17
n,i
Table 2.4: Sinking Fund Factors (A/F ) 18
n,i
Table 2.5: Capital Recovery Factors (A/P ) 23
n,i
Table 2.6: Series Present Worth Factors (P/A ) 23
n,i
Table 3.1: Definition of Alternatives for Corridor 48
Table 3.2: Data for Example Analysis 1 53
Table 3.3: Data for Example Analysis 2 55
Table 3.4: Seven Alternatives with Costs, Benefits, and BCR versus 61
the Null Case
Table 3.5: Comparing Alternatives to Each Other for Example 62
Analysis 3
Table 3.6: Alternatives for Example Analysis 4 66
Table 3.7: An Illustration of the Rate of Return Method 68
Table 3.8: Data for Example Analysis 5 69
Table 4.1: Average National Urban CPI, 1980 – 2012 91
Table 4.2: Travel Time Values Related to Percent of Prevailing 94
Wage Rates and Level of Service
Table 4.3: U.S. Department of Transportation Recommendations on 95
the Value of Travel Time
Table 4.4: National Average Statistics on Wage and Total 96
Compensation Rates by Industry Group (for June 2012)
Table 4.5: Value of Travel Time vs. Incremental Time Saved 97
Table 4.6: Information for the Illustrative Case 98
Table 4.7: Demand Volumes Per Lane w/ and w/o an Additional 99
Lane
Table 4.8: Travel Time Cost Per Vehicle for Illustrative Case 101
Table 4.9: Annual Cost of Travel Time for Illustrative Case 102
Table 4.10: Vehicle Operating and Maintenance Costs 103
Table 4.11: Fuel Consumption Rates for Autos and Trucks vs. Speed 105
Table 4.12: Data Relevant to Example Problem 106
Table 4.13: Annual Operating and Maintenance Costs for Example 106
Table 4.14: Monetary Value of Crashes by Severity ($2012) 110
Table 4.15: General National Crash Data from FARS/GES 111
Table 4.16: Average Cost Per Crash for New York State (2011) 112