4.4. SR 03-17-2003 - Laserfiche WebLink

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Introduction In January, 2003, Anton, Lubov & Associates was hired by the Northstar Corridor Development Authority to assess and comment on the future benefits and costs of the Northstar Commuter Rail project and to undertake economic and financial analyses pertaining to the cost-effectiveness of commuter rail as a solution to the traffic congestion within the Northstar Corridor. This preliminary document provides information on the benefit/cost analysis assessment. A more detailed report is being prepared and will be made available at a later date. Background on Benefit/Cost Analysis Benefit/cost analysis is a method for comparing altemative policy or investment options by attempting to quantify and compare the various public and private impacts of those policies. The different benefits (many of them in the future) are listed, valued in monetary terms, and then reduced to a present value. In like manner, the different costs associated with the policy or project, both current and future are enumerated, valued in dollars, and converted to a present value. Then the present value of the total benefits can be compared to the present value of the total costs. The difference of the two quantities is referred to as the net present value of the project; the ratio of the two quantities is referred to as the project's benefit/cost ratio. Benefit/cost analysis is used to compare alternative projects being considered for public investment. Roughly speaking, the higher the net present value and the benefit cost ratio the better the project. Of course, there are other policy considerations involved in any decision, but this method allows policymakers to make a more complete and objective analysis than when they only have cost figures and must rely on their own qualitative assessment of the relative benefits of two projects. Benefits and Costs of Northstar Commuter Rail The benefits and costs of the Northstar Commuter Rail were calculated using the most current information available on ridership forecasts, technical specifications, operating plans and capital costs as set forth in the Northstar Corridor Final Environmental Impact Statement (March 2002) and the Northstar Corridor Rail Project New Starts Criteria (August 2002), documents prepared by the Minnesota Department of Transportation for the Federal Transit Administration. Based on that information and other data provided by MnDOT, the U. S. Office of Management and the Budget and other sources, the estimates in Table 1 below were calculated. Total benefits were estimated to have present value of $578.9 million in 20075 while total costs were estimated to have a present value of $501.4. The benefits were divided into several categories as shown in the Table 1. The two largest items, vehicle operating cost savings and time savings to commuters accounted for roughly half of the expected benefits. The time savings to commuters include time