manhattan east side access project second avenue subway pea team: jay horwitz bryan mullins muyiwa...
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Manhattan East Side Access ProjectSecond Avenue Subway
PEA Team:
Jay Horwitz
Bryan Mullins
Muyiwa Teriba May 3, 2004
2
Overview of Presentation
I. Introduction
II. Funding and Finance
III. Costs
IV. Benefits
V. Synthesis
3
INTRODUCTION
4
What is SAS?
• 8.5 mile subway project from 125th Street to the financial district in Lower Manhattan
• Will include 16 new stations along path under Second Avenue
• Purpose to provide faster travel for current transit riders and relieve severe overcrowding conditions on Lexington Avenue line
• Construction time estimated to start in 2004 and last 17 years
5
On the Table for Nearly a Century
• Population density of East Side increased dramatically at turn of century
• Proposals to build north-south subway line along Second Avenue date back to 1929
• During 1960s a two-track subway line from the Bronx to Lower Manhattan resulted in construction of several tunnel segments
• However, construction suspended in 1970s due to City’s financial crisis
6
Transportation Problems have Renewed Interest in SAS Proposal
• Lexington Avenue express service (4/5/6) operates with passenger loads that exceed New York City Transit guidelines
• Overcrowding expected to increase
• Access (1/4 to 1/2 mile) to subway service is lacking on farEast Side of Manhattan
• Overcrowding lengthens trip times and causes service delays
• Majority of rush hour buses are crowded and travel speeds are slow due to traffic congestion
• Severe traffic congestion on local streets and FDR Drive contribute to New York City’s inability to meet National Ambient Air Quality Standards
7
SAS Wins Favor Among Officials, Community Groups, General Public
• No-Build Alternative: Examined future impacts of inaction
• Transportation System Management (TSM) Alternative:Bus service improvements
• Build Alternative 1: New subway line under Second Avenue from 125th Street to 63rd Street with connection to Lower Manhattan via Broadway subway line
• Build Alternative 2: 125th Street to 63rd Street subway line with addition of light rail transit line linking Lower East Side to Union Square and Lower Manhattan
• Build Alternative 3: Full-length Second Avenue Subway from125th Street to financial district in Lower Manhattan
8
Map of SAS and System Interconnection
Source: MTA MESA Study, “Supplemental Draft Environmental Impact Statement,” April 2001
9
FUNDING
10
Project Funding: Preliminary Consideration and Commitment
Sources of Funding ($ in millions)
Federal Government $4,984
New York City $530
Coliseum Sale Proceeds $145
Investment Income $245
Triborough Bridge and Tunnel Authority $60
Carryover from Prior Capital Program $225
Subtotal $6,189
Debt Restructuring Initiative $3,011
Revenue Bonds $8,262
Total $17,462
Source: MTA, FTA
11
Where are we in the process?
2001 2002 2003 2004 2005
Environmental Analyses
Preliminary engineering
Final design
Construction
X X
X
X
?
X: Federal approval received Decision Pending
2021
Est. 17 years
X
12
COSTS
13
Costs Overview
• $1.05 billion for 2000-2004 Capital Program
• $728 million for 2000-2004 Capital Program personnel costs
• $16.8 billion total capital cost from 2004-2021
– $16.18 billion for project management, design, construction, right-of-way
– $624.9 million for rolling stock
• $348.6 million annual operating cost starting in 2021 over 50 years at 2004 present value of $2.8 billion
• $1.13 billion cost per mile
• $210 incremental cost per incremental rider*
* This figure is exceptionally high because of the difficulty of attracting new transit riders in a market in which the majority of commuters already use transit.Source: Annual Report on New Starts 2003 (November 2002), LowerManhattan.info
14
Elements of $16.8 bn Total Capital Cost
• Northbound and Southbound twin tunnels (8.5 miles each)
• 16 new stations
• 30-35 fan plants
• Numerous pump rooms
• Electrical power substations
• 1-2 new or expanded train storage and maintenance yards
• Connections to existing stations
Source: PEA Team Research
15
2000-2004 Capital Program Allocates $1.05 Billion for SAS
Preliminary Engineering
Final Design
Construction$625,000,000
$270,337,039
$154,662,961
Source: MTA Capital Construction, March 2004
16
2000-2004 Capital Program Also Yields Personnel Costs
$728 mn(average annual increase of 3.8%)
2000 2001 2002 2003 2004
Source: Metropolitan Transit Authority Note: The MTA did not disclose assumptions regarding changes in staffing levels
17
Cost-Per-Mile of Major Transit Projects Shows Magnitude of SAS
1970s 1990s 2004-2021
Source: Common Patterns, PEA Team Research
$81 mn
1980s
$152 mn
$197 mn
$300 mn
$1.13 bn
SAS
2001 Dollars
Bay Area Rapid Transit
MARTA(Atlanta)
D.C.Metro
Los Angeles Red Line
18
Cost Timeline
* $16.8 bn figure distributed evenly over 17 years; PV of annuity formula using 17 years, 5% interest rate** Present value discounted back 17 years to 2004 at 5% interest rateSource: PEA Team Research
2000Capital
ProgramStart
2071
$348,600,000 Annual Operating Cost Over 50 YearsPV 2004** =
$2,776,598,933
2004SAS
ConstructionStart
2021SAS
Opening
$16,804,900,000Total Capital Cost
PV 2004* = $11,144,679,758
$1,778,000,000Capital
Program(Sunk Cost)
PHASE 3PHASE 2PHASE 1
19
Baseline Cost Figure
ITEM COST*
Total Capital Cost from 2004-2021 $11,144,679,758
Annual Operating Cost from 2021-2071 $2,776,598,933
BASELINE $13,921,278,691
* Figures in 2004 PV dollarsSource: Annual Report on New Starts 2003 (November 2002), LowerManhattan.info, PEA Team Research
20
BENEFITS
21
Benefits (Qualitative Overview)
• New York City’s Economic Priorities:– Retain/Expand diversified workforce– Improve competitiveness in economic cycles– Improve growth in outer boroughs
• Improved commute to Manhattan, which generates more than one-third of wages and one-quarter of jobs in tri-state region
• 70,000 full-time jobs created during SAS construction
• 600,000 riders will experience shorter commutes/time savings
• Auto trips reduced by 30,000 per day
• Improved security of transit networkSource: The Economic Benefits of the Second Avenue Subway, December 2003, Regional Plan Association; Transportation Choices and the Future of the New York City Economy 2003/2004, Partnership for New York City
22
Benefits (Quantitative Overview)
• $7 billion gain in wages
• $7.4 billion gross increase in city’s productivity
• $1.26 billion in benefits from time savings
• $319.1 million in ridership
Source: The Economic Benefits of the Second Avenue Subway, December 2003, Regional Plan Association; Transportation Choices and the Future of the New York City Economy 2003/2004, Partnership for New York City
23
Methodology for Estimating Benefits
+
+
Source: The Economic Benefits of the Second Avenue Subway, December 2003, Regional Plan Association; Transportation Choices and the Future of the New York City Economy 2003/2004, Partnership for New York City
Category of Benefits # trips Time saved Days $/hr Hours saved Total ValueTime Savings Those who Switch to SAS 591,000 10 300 30 98,500.00 $886,500,000
Those who remain on Lex 214,000 5 250 30 17,833.33 $133,750,000Overcrowding Avoidance Those who Switch to SAS 110,000 2 250 30 3,666.67 $27,500,000
Those who remain on Lex 214,000 2 250 30 7,133.33 $53,500,000Reliability gained Both SAS and LEX users 81,000 5 250 30 6,750.00 $50,625,000Transfers Avoided Users travelling West 142,000 5 300 30 11,833.33 $106,500,000
Totals 1,352,000 $1,258,375,000
Traveller Benefits
includes job growth, commercial development and residential developmentEstimates low $11,130,000,000
Medium $12,620,000,000High $14,120,000,000Mean $12,623,333,333 over 50 years
Economic Development Benefits
Annual Fare Box Revenues $319,100,000Fares
24
Total Benefits• $21.02 billion comprising:
– $12.62 billion in economic development benefits including job growth, commercial development and residential development
– $8.4 billion in transportation benefits including time savings and ridership
**Figures cover a 50-year period
Source: The Economic Benefits of the Second Avenue Subway, December 2003, Regional Plan Association; Transportation Choices and the Future of the New York City Economy 2003/2004, Partnership for New York City
40%
60%
Economic Development Transportation Benefits
25
Benefits CritiqueJobs
• 70,000 jobs from SAS over 17 years worth $1,000,000 per job
– No explanation of where these jobs will come from• New jobs, or job movement/reallocation?• What kind of jobs? Value?
– 22,500 direct construction jobs estimated, majority of which will be short term in nature
– No reference to jobs lost resulting from construction• No analysis of net jobs created (some jobs will be
permanently lost due to subway, e.g. taxi drivers)
Source: The Economic Benefits of the Second Avenue Subway, December 2003, Regional Plan Association; Transportation Choices and the Future of the New York City Economy 2003/2004, Partnership for New York City
26
Benefits Critique
Time Savings
• Estimated $1.26 billion in time savings
– No discussion or analysis of how much of this time savings value will be translated into dollars
– No estimation of “net” time savings taking into account time wasted as a result of delays caused by construction
– Time savings valued at today’s estimation to time value
Source: The Economic Benefits of the Second Avenue Subway, December 2003, Regional Plan Association; Transportation Choices and the Future of the New York City Economy 2003/2004, Partnership for New York City
27
Benefits Critique
Changes to “Time Savings” Benefits
Source: The Economic Benefits of the Second Avenue Subway, December 2003, Regional Plan Association; Transportation Choices and the Future of the New York City Economy 2003/2004, Partnership for New York City
Category of Benefits # trips Time saved Days $/hr Hours saved Total ValueTime Savings Those who Switch to SAS 591,000 10 300 30 98,500.00 $886,500,000
Those who remain on Lex 214,000 5 250 30 17,833.33 $133,750,000Overcrowding Avoidance Those who Switch to SAS 110,000 2 250 30 3,666.67 $27,500,000
Those who remain on Lex 214,000 2 250 30 7,133.33 $53,500,000Reliability gained Both SAS and LEX users 81,000 5 250 30 6,750.00 $50,625,000Transfers Avoided Users travelling West 142,000 5 300 30 11,833.33 $106,500,000
Totals 1,352,000 $1,258,375,000
Traveller Benefits
Category of Benefits # trips Time saved Days $/hr Hours saved Total ValueTime Savings Those who Switch to SAS 591,000 10 300 20 98,500.00 $591,000,000
Those who remain on Lex 214,000 5 250 20 17,833.33 $89,166,667Overcrowding Avoidance Those who Switch to SAS 110,000 2 250 20 3,666.67 $18,333,333
Those who remain on Lex 214,000 2 250 20 7,133.33 $35,666,667Reliability gained Both SAS and LEX users 81,000 5 250 20 6,750.00 $33,750,000Transfers Avoided Users travelling West 142,000 5 300 20 11,833.33 $71,000,000
Totals 1,352,000 $838,916,667
Traveller Benefits
vs.
28
SYNTHESIS
29
Context: This Project Must Inevitably Compete for Scarce Resources
• Total New York City budget FY2005: $46.9 billion– SAS equals a non-trivial fraction
• Financial pressure on City anticipated– Budget deficits expected to range from $3.7 billion to $4.2 billion
annually from 2006-2008– Debt service increases from $2.4 billion in 2004 to $4.3 billion in
2008
• However, New York City pays $11.4 billion more in federal taxes and $2.6 billion more in state taxes than it receives in funding*
* 1999 FY analysis
30
What should we count?
• Depending on how you look at who has standing, things change:– Do federal dollars mean national standing?– Or, is it New York City’s turn at the federal transit pot?
• New real estate development?– Where is the marginal benefit?
• Jobs?– Construction? Business relocation?– Looks like redistribution of federal funds
• Nearly $2 billion in sunk costs?– Planning, design and assessment are all expensive; these costs
cannot be recouped if project is a “no go”
31
What is an appropriate discount rate?
• OMB Guidelines (public investment) = 7%– “approximates marginal pre-tax rate of return on an average
private investment”
• U.S. Treasury bond rate (30 year) = 5.2%
• New York City municipal bond rate = 6.5%
• This is a long-lived project with high up-front costs—it matters
Source: Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs, OMB 1992, US Treasury Bond Rate for April 2004; NYC Municipal Bond rate based on Nuveen Bond Fund
32
Sensitivity Analysis: Discount Rate
Focus on transportation benefits:
(in millions)
Base case: as described above w/: (1) even distribution of capital costs over 17 years, (2) zero growth in operating costs, (3) only transportation benefits (60,000 incremental riders)Conservative case: (1) front loads construction costs, (2) zero growth in operating costs, (3) conservative rider forecasts and time savings benefits (15,000 incremental riders)
(in millions)
$(40,000.00)
$(20,000.00)
$-
$20,000.00
$40,000.00
$60,000.00
$80,000.00
$100,000.00
$120,000.00
$140,000.00
Base
Conservative case
(in millions)
33
Sensitivity Analysis: Putting the Core Assumptions to the Test
• Ridership assumptions/forecast– Number of incremental riders (typically 150% overestimated)– Subway shift (tight travel corridors in New York City)
• Development assumptions– Incremental job creation: these remain a non-factor
• Capital costs– Time distribution matters– Overruns: time and cost (will focus on project creep)
34
Comparing Proponents’ Research with Our Base Case
$-
$2,000,000,000.00
$4,000,000,000.00
$6,000,000,000.00
$8,000,000,000.00
$10,000,000,000.00
$12,000,000,000.00
$14,000,000,000.00
$16,000,000,000.00
$18,000,000,000.00
Costs Benefits
$-
$10,000,000,000.00
$20,000,000,000.00
$30,000,000,000.00
$40,000,000,000.00
$50,000,000,000.00
$60,000,000,000.00
Costs Benefits
Base case: present value estimates
Optimistic case: present value estimates
Notes 50 years at 5.2 percent, dead weight loss15% of capital construction costs
Benefits represent 60 percent of costs!
35
Summary: What’s going on here?
• Applying discount rates uniformly:– Makes costs look better, however…– This is very expensive even relative to comparable transit
projects
• Standing is important; we chose to ignore economic development because:– Difficult to estimate magnitude of effect
• Studies did not employ reasonable estimation techniques– Very difficult to isolate marginal effects– Given national standing, marginal effects even less likely to
appear
36
More Detailed Analysis Should Examine
• Air quality improvements from mass transit
• Quality of life: transportation options
• Social equity: distributional weighting according to rider income distribution (Harlem, Lower East Side); access to CBDs
• Value added of increased multimodal interconnection with other regional transportation
• Real estate squeeze on low-income areas—a chronic problem in New York City