appendix a benefit-cost analysis technical memo

USDOT DTOS59-21-RA-RAISE APPLICATION | NORTH CAROLINA DOT | I-26 FLYING TO THE FUTURE

APPENDIX A

Benefit-Cost Analysis Technical Memo

1USDOT DTOS59-21-RA-RAISE APPLICATION - APPENDIX A | NORTH CAROLINA DOT | I-26 FLYING TO THE FUTURE

1.0 Introduction & Summary

This memo summarizes the benefit-cost analysis (BCA) for the RAISE Grant Program application for the NCDOT I-26 Flying to the Future project. Project costs, described in the application, are those required to design and construct the new I-26 interchange plus accompanying structures, roads, utilities, and so forth.

The benefits of this project are primarily for improved access to land use, substantial regional economic impact, and new job creation. None of these are a direct part of the BCA. Because this is a new interchange that follows significant Interstate expansion to eight lanes, and because the interchange and improved connectivity itself increases vehicle trips, these benefits are limited primarily to small travel time savings, plus lesser contributions from crash reduction and residual value. The net present value (NPV, i.e., direct benefits minus costs) is estimated at about $24 million, and the benefit-cost ratio (BCR) around 1.70.

This memo is accompanied by an Excel file (BCA Excel file) containing input values, assumptions, and calculations. The analysis follows the familiar procedures and parameters in USDOT’s Benefit-Cost Analysis Guidance for Discretionary Grant Programs, February 2021 update.1 The remainder of this appended memo includes:

• Section 2, describing the baseline condition, • Section 3, outlining various assumptions used for the analysis,• Section 4, summarizing the project costs as presented in the

application and used as input for the BCA, and • Section 5, the benefits estimates.

1 https://www.transportation.gov/office-policy/transportation-policy/benefit-cost-analysis-guidance-discretionary-grant-programs-0

https://www.transportation.gov/office-policy/transportation-policy/benefit-cost-analysis-guidance-discretionary-grant-programs-0


This BCA assumes conservative estimates of benefits and provides a range of anticipated values, as explained in the remainder of this memo. The following graph shows both total costs and total benefits over time.

The BCA results are summarized in Table 1. Cost breakdowns are listed in the application and in the accompanying BCA Excel file. Nominal (generally 2021) dollars are adjusted to real 2019 dollars, then discounted to present 2019 dollars.

Figure 1: Benefits and Costs Summary

2022

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$-

2028

2034

2040

2025

2031

2037

2043

2023

2029

2035

2041

2026

2032

2038

2044

2024

2030

2036

2042

2027

2033

2039

2045

Table 1: BCA Results Summary

Nominal (2021$) Real (2019$) Present (2019$)

Total Costs $ 36.84 M $ 35.59 M $ 34.54 M

Total Benefits $ 153.26 M $ 58.68 M

Net Present Value (NPV) $ 24.14 M

Benefit-Cost Ratio (B/C or BCR) 1.70

KEYCosts: Real $ Present $

Real $ Present $Benefits:


Sensitivity TestingMost input assumptions are allowed a range of possible values, constituting the sensitivity analysis. For example, the analysis allows for most costs to vary ± 10%, and the resurfacing around 2036 to vary ± 20% given uncertainty with timing, condition, and costs of material and labor. An example for benefits is the traffic modeling showing a 92 hour per day reduction in net travel time in 2045, with BCA sensitivity allowing net travel time to be reduced an additional 0.1% ± 0.2% of the travel model. With the variety of parameters allowed to vary, the values are randomized within their given ranges, and a B/C is recalculated 10,000 times.

In the accompanying Excel file, anywhere a number or note is shown in a dark orange color means it is related to sensitivity testing, and users can see how it works by altering cell M8 on the Summary tab. The results of 10,000 iterations are summarized in Figure 2. The median B/C of the 10,000 runs is 1.715, close to the mean of 1.730 and the base estimate of 1.703.

Figure 2: B/C Sensitivity Histogram

2.0 Baseline Condition

The analysis relies on the traffic modeling completed for the project, which account for traffic growth from the development with and without the interchange. The forecasts and modeling include the rational assumption that the addition of the interchange a) changes traffic patterns, especially shifting trips from NC 191 to I-26, and b) increases total trips due to better access. The figures on the next two pages illustrate the forecast volumes between baseline and the proposed project.


Figure 3: No-Build Scenario Volumes

DRAFT

### No. of Vehicles Per Day (VPD) in 100s

1- Less than 50 VPD X Movement Prohibited ------- Roadway K Design Hour Factor (%)AM AM Peak PeriodPM PM Peak PeriodD Peak Hour Directional Split→ Indicates Direction of D(d,t) Duals, TT-STs (%)

2045 AVERAGE ANNUAL DAILY TRAFFIC

NO-BUILD SCENARIO 1:FULL BUILDOUT

SHEET 1 OF 1

TIP: HE-0001

COUNTY: Buncombe DIVISION: 13

DATE: 06-28-2021PREPARED BY: Patriot Transportation Engineering, PLLC

LOCATION: I-26/NC 191 Connector

PROJECT: I-26 Future Interchange at NC 191 Connector (Exit 35)

L E G E N D( d, t )

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Note: Based on a review of the count data and coordination with the Congestion Management Section the peak hour truck percentages for the peak periods are very similar to the daily percentages; therefore, the unadjusted truck percentages included in this forecast should be used for the traffic analysis.

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DRAFT

### No. of Vehicles Per Day (VPD) in 100s

1- Less than 50 VPD X Movement Prohibited ------- Roadway K Design Hour Factor (%)AM AM Peak PeriodPM PM Peak PeriodD Peak Hour Directional Split→ Indicates Direction of D(d,t) Duals, TT-STs (%)

2045 AVERAGE ANNUAL DAILY TRAFFIC

BUILD SCENARIOSHEET 1 OF 1

TIP: HE-0001

COUNTY: Buncombe DIVISION: 13

DATE: 06-28-2021PREPARED BY: Patriot Transportation Engineering, PLLC

LOCATION: I-26/NC 191 Connector

PROJECT: I-26 Future Interchange at NC 191 Connector (Exit 35)

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Ledbetter Rd(SR 3498) 26

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Note: Based on a review of the count data and coordination with the Congestion Management Section the peak hour truck percentages for the peak periods are very similar to the daily percentages; therefore, the unadjusted truck percentages included in this forecast should be used for the traffic analysis.

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(2,1

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Figure 4: Build Scenario Volumes


CrashesNCDOT has completed crash analysis for segments and intersections in the project area including the following: • I-26 from Bridges #100235 & 100238 (Over Pond Rd) to 2000 feet South of NC 146

(Long Shoals Rd)• NC 191 (Brevard Road) from Hampton / Petco Driveway (Wedgefield Blvd) to Pine

Lane / I-26• NC 146 (Long Shoals Rd) from SR 3501 (Clayton Rd) to Skyland Inn Dr/Schenck

Pkwy• NC 191 (Brevard Rd) at Blue Ridge Parkway Access• NC 191 (Brevard Rd) at SR 3501 (Clayton Rd)

Each crash analysis includes a summary rate expressed as equivalent property damage only (EPDO) crashes per 100 million vehicle miles traveled (MVMT). The USDOT BCA guidance provides a 2019 dollar value of $4,500 per EPDO. An example summary for the NC 191 segment is shown in Figure 5, and estimates for all five locations are on the Assumptions tab of the BCA Excel file.

Figure 5: Example Crash Analysis Summary (NC 191)

Vehicle Exposure Statistics

Annual ADT = 19200

Total Length = 0.449 (Miles) 0.723 (Kilometers)

Total Vehicle Exposure = 15.74 (MVMT) 25.33 (MVKT)

Crash Rate Crashes Per 100 Million Vehicle Miles

Crashes Per 100 Million Vehicle Kilometers

Total Crash Rate 755.96 469.73

Fatal Crash Rate 0.00 0.00

Non-Fatal Crash Rate 190.58 118.42

Night Crash Rate 120.70 75.00

Wet Crash Rate 88.94 55.26

EPDO Rate 2166.24 1346.04


3.0 Analysis Assumptions

InflationAll dollar values are expressed in 2019 dollars. Nominal dollar values from different years are adjusted to real (2019) dollar values using the gross domestic product (GDP) implicit price deflator.2 The US Bureau of Economic Analysis and the Congressional Budget Office3 provide historical and forecast values for this purpose, and adjustment factors are included in the USDOT’s BCA guidance for many years. The proposed project costs are estimated in current 2021 dollars, so for the BCA these are adjusted to 2019 dollars by a factor of about 0.97. No estimates for this project are beyond 2021 dollars, so no other inflation adjustments are needed for future nominal costs.

DiscountingDiscount rates in economic analyses account for the time value of money, which is sep-arate from inflation. Per USDOT guidance, the real discount rate to apply is 7% per year for future costs and benefits. Intermediate calculations are shown in nominal dollars (typically 2021), real 2019 dollars, and then discounted dollars. The Excel file includes a table of adjustment factors in the Assumptions tab and graphs illustrating these.

Analysis PeriodThe analysis time period is 23 years from 2022 to 2045 (24 years with 2022 as year zero). The BCA guidance suggests 20-25 years for projects like this one, and the time frame works very well since the project begins in earnest in 2022, and the future traffic forecast is set in 2045.

Benefits do not begin to accrue until 2024, the year of opening. The core Pratt & Whitney economic expansion and jobs build out is targeted for 2029.

Other AssumptionsInduced DemandThis project supports the land development in the region, so new trips are implicit in the traffic modeling results that are used as inputs. Diversion between I-26, NC 191, and other connection segments are all included in the model results, so no new additional benefits are drawn from outside the analysis area.

Independent UtilityThis analysis captures the full costs required to attain the benefits included in the analysis. In addition to the proposed costs outlined in the proposal, the BCA includes additional costs for early design work, and a full resurfacing around 2036.

2 https://www.bea.gov/data/prices-inflation/gdp-price-deflator3 https://www.cbo.gov/about/products/budget-economic-data

https://www.bea.gov/data/prices-inflation/gdp-price-deflator

https://www.cbo.gov/about/products/budget-economic-data


4.0 Project Costs

Project costs are described in the proposal and assigned to years of expenditure commensurate with the project schedule. Costs are estimated in nominal 2021 dollars, deflated to real 2019 dollars, and discounted to present values. A summary of costs over time is shown in the following graph.

80% of the project design and right-of-way (ROW) costs are in 2022, and the other 20% are in 2023. Construction costs are placed 10% in 2022, 50% in 2023, and 40% in 2024.

Costs in the BCA include: • $400 thousand for effort already spent on this project (per USDOT BCA guidance

to include this sunk cost as an exception to the rule) for preliminary engineering and environmental work.

• An estimated $500 thousand for a full resurfacing around 2036. • Annual operations and maintenance (O&M), which is accounted for as a disbenefit

per BCA guidance.

Ongoing operations and maintenance costs are accounted for as disbenefits rather than costs.

O&M Cost and Residual ValueThe USDOT BCA guidance is clear that operations and maintenance (O&M) cost changes are to be accounted for in the numerator of the B/C. Because this project adds new infrastructure where there was none before, net O&M increases and is thus a disbenefit. These costs include electrical and communications, roadside vegetation management, and surface maintenance. The first five years are estimated to add $10 thousand per year, increasing to $25 thousand per year through 2033, then $50 thousand per year thereafter.

Residual value – also accounted for as a benefit – at the end of the analysis period (2045) assumes a 60-year service life for the roadway and a 65-year service life for structures. NCDOT typically assumes 60 to 75 years for service life of new infrastructure as included in this project.

Figure 6: Project Cost Summary


5.0ProjectBenefits

Quantifiable and monetized direct project benefits for BCA include travel time savings, crash reduction (safety improvement), and residual value. Operating cost savings are negligible and assumed to be zero in the base case. Increased ongoing O&M is deducted as a disbenefit and combined with residual value in Figure 7 for illustration (O&M disbenefit is much smaller than residual value).

All benefits in 2024, the year of opening, are reduced to one-quarter because the facility is scheduled to be fully open later in the year.

Vehicle Miles, Operating Costs, and EmissionsThe traffic modeling shows negligible change in net vehicle miles traveled (VMT), either positive or negative. Therefore the base case assumes no net benefit nor disbenefit for operating costs and emissions. Operating costs are still included in the BCA model (see Excel attachment) for purposes of sensitivity testing.

Travel Time SavingsAs seen in the forecast volumes (Figure 3 and Figure 4 above), traffic patterns change with the new I-26 interchange, particularly a shift from NC 191 to I-26. I-26 being expanded to eight lanes just prior to this project means no assumption of Interstate congestion reduction. Values of time and occupancy ranges are drawn right from the USDOT BCA guidance. These are shown in the accompanying Excel file along with the heavy truck percentage in the area. The traffic modeling shows that savings in travel time are offset by longer and/or additional trips. The initial basis for travel time savings is a 92 vehicle-hour per day net reduction in the 2045 traffic model. This is out of a total 400-500 thousand hours per day in the model (i.e., a negligible small fraction of a percent).

While this model equilibrium has merit, the new interchange and connection between I-26 and NC 191 is estimated to have greater net reduction in travel time because of the dramatically improved network connectivity. This is a known and acknowledged point of uncertainty. The net reduction in travel time savings could be on the order of

Figure 7: Share of Estimated Project Benefits

Travel Time 80%

Maint/Residual10%

Safety10%

Operating0%


1% in the network modeled. Though 1% may seem small, the benefits accumulate very rapidly when multiplied across total vehicle-hours of travel in a year. As a baseline, a conservative estimate is set at just 1/10 of 1% reduction in travel time, in addition to the directly quantifiable shifts identified from the model equilibrium. Further, given the uncertainty with this assumption, the 0.1% travel time reduction is allowed to vary ±0.2%, meaning travel time could also increase, and the disbenefit generates a negative net present value.

SafetySafety benefits for this project accrue from a reduction in risk exposure resulting from trips diverted from higher crash locations (e.g., NC 191) to lower crash locations (e.g., I-26). The EPDO approach was introduced above in the baseline section, and the rates are summarized on the Assumptions tab of the accompanying Excel file.

There are no targeted crash reduction tactics included in this project, so the baseline crash rates are taken as fixed. The net change in EPDO estimated at 2021 and 2045 are interpolated through the analysis period, but reductions are fixed at zero in the first three years until the new facility is fully opened.

In addition, because a) not all locations in the affected network have a crash analysis included, and b) the crash rates are based on existing data prior to the expansion of I-26, the overall crash reduction is assumed to be 10%. With uncertainty this assumption is set to vary from 0% (no change in crashes) up to 20%.

BenefitsSummaryandOtherQualitativeBenefitsThe following figures show a summary of quantified benefits over the analysis period. The summary values are shown at the front of this appendix and in the accompanying Excel file.

Figure 8: Benefits Summary Over Time


BCA strives to quantify only first order (direct) impacts, not other economic impacts such as those known to emerge in the area from jobs, property values, and so forth. Nonetheless, there exist other potential benefits that are not necessarily quantified:

Infrastructure ResiliencyNorth Carolina’s 2020 Climate Risk Assessment and Resilience Plan4 includes improving transportation infrastructure resilience, particularly for major storms and flooding. This project and its improved connectivity and alternate route options are part of NCDOT’s targeted efforts to improve resilience and maintain essential travel on the State’s highway network.

Travel Time ReliabilityUnpredictable travel time can be monetized in utility functions along with delay, safety, and other costs. However, because this project follows on the expansion of I-26, claims of improved travel time reliability are less about general congestion. Travel reliability will improve during instances of full closures just up or downstream of the new interchange where the improved connectivity and alternate routes will reduce long queues, secondary crashes, and uncertain travel time.

Emergency ResponsePolice, fire, emergency medical services, and other first responders will gain new route options with this project. The map inset at right illustrates the proximity of fire/EMS stations to the project area. The team assessed travel times from nearby stations to the project area in accordance with the USDOT and FEMA guidance.5 In part because of data limitations, and because the project area has multiple stations of roughly equal travel distances – both in the no-build and build scenarios – quantified economic benefit is not included here. Nonetheless, the project area is currently primarily served by the Asheville / Skyland Fire-Rescue Biltmore Forest Valley Springs Station (shown as Station 4 on the map inset), and response time for that station may be reduced up to three minutes depending on location.

4 https://files.nc.gov/ncdeq/climate-change/resilience-plan/2020-Climate-Risk-Assessment-and-Resilience-Plan.pdf5 Federal Emergency Management Agency Benefit-Cost Analysis Re-engineering (BCAR) Development of Standard Economic Values, Version 6.0, December 2011

Asheville City Limits

10 Mile Radius from Project

Station 5

Station 4

Station 21-2

Station 9

Station 2

Station 11

Station 10

Station 3

Station 6

Station 1

Station 8

Station 12

Station 7

26

240

40

40

Station 5

Station 4

Station 21-2

Station 9

Station 2

Station 11

Station 10

Station 3

Station 6

Station 1

Station 8

Station 12

Station 7

Biltmore Estate

Asheville RegionalAirport

NC Arboretum

Project AreaProject Area

https://files.nc.gov/ncdeq/climate-change/resilience-plan/2020-Climate-Risk-Assessment-and-Resilience-Plan.pdf


Public Health This project not only connects people and jobs, but also improves access to outdoor recreational resources, many of which encourage exercise and healthy living.

State of Good Repair This project improves the state of good repair not of the new infrastructure itself but of the highway system and freight network. The project also lessens additional burden, wear, and tear on the existing roads in the area, offsetting maintenance and resurfacing. Also see Section IV.E of the application.

Agglomeration Economies This is a welcome addition to the USDOT’s BCA guidance. While not quantified for this project, the project benefits the regional economy given its new connections among communities, jobs, and other economic activities. The application narrative lays out the benefits related to this category.

appendix a benefit-cost analysis technical memo

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