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BUDAPEST METRO LINE 4 FEASIBILITY STUDY Oktober 1996 |
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Economic Analysis |
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This chapter sets out the methodology and key parameters and the results of the economic evaluation of the short list alternatives examined. Overview and assumptions for the economic evaluation
The economic evaluation is concerned with comparing
alternatives in terms of their overall resource costs to society
independent of the incidence of costs (and benefits) to specific
groups or organisations.
The economic evaluation was not concerned with revenues,
which are not resource costs but represent a transfer payment
between public transport operators and users. Similarly the evaluation
excluded taxation components and inflation effects from the costs
and benefits.
The evaluation was concerned principally with the
differences between alternatives. It was therefore essential
to ensure that the inputs to the costing and evaluation are consistent
between alternatives.
The geographical area covered by the evaluation for
this study was sufficient to cover all significant changes in
transport demand and supply patterns associated with the various
alternatives as a Budapest-wide network was used for the purposes
of transport modelling and assessing user benefits, as discussed
in Chapter 6. To assess the merits of public transport in the corridor, a 'Do Minimum' option was defined against which 'Do-something' options could be compared. A description of the Do Minimum scenario is included in Chapter 9. Details of the short list of 'Do-something' alternatives and their respective passenger forecasts is included in Chapter 9. Key evaluation input parameters
Economic evaluation results are expressed in ECU.
The majority of the analysis was undertaken in Hungarian Forints
which was converted to ECU based on a currency exchange rate of
185.3 Forints to 1ECU as a representative exchange rate for first
quarter of 1996.
For stage 1 evaluations we have adopted discount
rates of 5% and 7%.
Following discussions with the Study Steering Committee
two sets of growth rates were used to reflect the high and low
growth assumptions. These are as follows:
The evaluation period adopted covered the period of project construction
plus a benefit period of 40 years from the start of operation
of the alternative.
It was assumed that all alternatives would start operation in
January 2005, i.e. the 40 year evaluation period would cover years
2005 - 2044 (inclusive). LRT and metro options are assumed to
be constructed over a 4 year period (2001 - 2004).
All prices have been related to the same base period (i.e. adjusted
for inflation). 1996 has been used for this purpose. Year 1996
was also used as the base to which costs and benefits were discounted.
Public transport passengers
Value of time for public transport passengers was calculated as
40% of gross average wage rate. Wage rates used were based on
the most recent data from the Hungarian Central Statistics Office
which was for 1995 and was rebased to 1996 to 149 Hungarian Forint.
Private vehicle driver and passenger
For private vehicle driver and passengers, public transport passenger's
value of time was increased by 20% (to 179 Forints) to allow for
the higher proportion of business travel by private vehicle occupants.
Based on the results of the analysis undertaken on data from Budapest General Transport Surveys (1992-1994) a value of 1.4 occupants per vehicle was adopted.
Based on an analysis of local accident statistics between 1990
and 1995 (inclusive) an average accident rate of 131.32 accidents
per 100 million vehicle kilometres was adopted across all severities.
Based on disaggregated accident costs data made available by local
consultants which is widely used in Hungary, a weighted average
(across all severities) accident cost of 1.573 Million Forints
per accident was adopted.
Based on disaggregated private vehicle operating and maintenance
costs data for urban private vehicle use, made available by local
consultants and which is widely used in Budapest, an average overall
maintenance, operating and capital cost of 15.28 Forints per vehicle
kilometre was adopted.
Based on the results of the analysis undertaken on data from Budapest General Transport Surveys (1992-1994) for both public transport and highway traffic and discussions with Budapest public transport operator company (BKV) a peak hour to all day conversion factor of 13 and daily to annual conversion factor of 300 was adopted. Key evaluation output criteria
Key evaluation outputs which have been used to assess the relative
merits of the various alternatives are:
Infrastructure and Rolling Stock CostsLand and Infrastructure
The derivation of these costs have been described
in detail in Chapter 7. For the purposes of economic assessments
net infrastructure costs of the scheme are considered. This is
the cost of construction of the scheme less any costs which would
incur in the Do Minimum scenario. For this study, Do Minimum
costs are only applicable for the strengthening of Szabadság
bridge to allow the continuation of operation of tram routes 47
and 49. This cost is estimated at 19 Million ECU. The cost of
the tram track rehabilitation programme is not included as its
implementation is not influenced by the schemes being considered
here.
A summary of land and infrastructure costs for the
short list alternatives being considered is as follows:
* Above costs include land costs design supervision and contingencies
All costs are in undiscounted 1996 prices, in Million
ECU
It has been assumed that the construction period
is 4 years starting in 2001 and expenditure attributed to each
year of construction will be 15%, 20%, 35% and 30% from year 1
to year 4 respectively. Residual value of both land and infrastructure at the end of evaluation period will be small and has been ignored. Public Transport Rolling Stock costs
Capital costs and related information for public
transport vehicles were derived from a number of sources including
estimates provided to the study team by BKV and study team's knowledge
of similar work in France, UK and elsewhere both in 'western'
and 'eastern' Europe. Table 10.3 summarises the vehicle costs
for replacing existing vehicle stock adopted for the study.
* 'Vehicle' refers to a full train-set. † Based on 5 passengers per m2 ** Costs assumed pro rata to capacity based on 200 place trams
¤¤ Costs assumed pro rata to capacity
based on BKV estimates (mid-point)
Key points of note include:
All vehicle capacities have been based on the loading
standard of 5 persons/m2 (i.e. all seats occupied and
5 standees per m2 of standing area). However, following
discussions with BKV it was agreed that for this stage of the
study, for service planning purposes 80% of the above capacity
would be adopted (i.e. 4 persons per m2). Therefore
all capacities are based on 4 persons/m2.
BKV provided costs for metro cars ranging from 96
Million HuF (0.52 Million ECU) per car representing vehicles
generally similar to those currently operated to 200 Million HuF
(1.08 Million ECU) per car which in BKV's view reflects modern
Metro specifications similar to those used in Western Europe.
For the Stage 1 evaluation, the mid-point of this range, 148
Million HuF (0.8 Million ECU) per car has been used for replacing
existing rolling stock where necessary on the existing metro lines.
An average capacity of 190 passengers has been adopted
for each existing metro car based on 5 passengers/m2.
Spares required for metro trains are assumed at 15% of the operational
rolling stock and lives are assumed at 40 years.
Based on data provided by BKV existing tram vehicle
(train-set) costs range from 180 Million HuF (0.97 Million ECU)
for the smallest vehicle with a capacity of 200 passengers to
360 Million HuF (1.94 Million ECU) with a capacity of 400 passengers.
These values were adopted for the assessment based on the type
of tram which needed replacement. Spares required for existing
tram trains are assumed at 25% and lives are assumed at 30 years.
Data for two types of buses was analysed and used
for the assessment. These were articulated buses with a capacity
of 120 passengers costing 29 Million HuF (0.16 Million ECU) and
standard buses with a capacity of 68 passengers for 20 Million
HuF (0.11 Million ECU). Spares required for existing diesel buses
are assumed at 25% and lives are assumed at 15 years.
Data for two types of trolley buses was analysed and used for the assessment. These were articulated and standard trolleys with capacity of 114 and 68 passengers costing 54 Million HuF (0.29 Million ECU) and 45 Million HuF (0.24 Million ECU) respectively. Spares required for existing trolley buses are assumed at 25% and lives are assumed at 15 years.
Chapter 7 provided a set of realistic ranges of costs
for new metro LRT and tram vehicles. Based on figures in Table
7.1 we have adopted rolling stock cost values to use with this
assessment. Adopted figures are generally mid-point of figures
in Table 7.1. Table 10.4 presents a summary of the cost values
adopted for new vehicles. New metro and LRT vehicles are assumed
to have a life of 40 years with spares assumed at 15%. Lives
for new trams is assumed as 30 years with a proportion of spares
of 15%.
* Based on 5 passengers per m2 Vehicle residual values have been estimated consistent with the lives assumed. (The assumptions on residual values will have only slight effects on the evaluation results). Unit Operating and Maintenance CostsUnit operating and maintenance costs for each mode (bus trolley tram metro LRT) were derived and averaged per capacity kilometre based primarily on BKV actual cost data with certain adjustments. Costs in this case related to "working expenses" only i.e. excluding any capital charges (amortisation etc) associated with vehicles and infrastructure which is discussed in the next section of this chapter.
The steps in the process of deriving these costs
were detailed in Stage 1 Report and the results are summarised
in Tables 10.5 & 6..
* Figures exclude amortisation
* All costs are in HuF per 1000 Capacity kilometre (Excluding vehicle and infrastructure amortisation
** Assumes modern vehicles with
some operating/maintenance efficiency improvements
Application of unit operating and vehicle capital costsFor each alternative (relative to the Do Minimum), the incremental vehicle requirements and operating statistics were estimated and hence, by applying the unit costs, the incremental vehicle capital and annual operating costs were calculated. The methods covered all the services whose patronage might be significantly affected by any alternatives. Different methods, detailed within Stage 1 Report, were used for bus and Tram services than those used for Metro/LRT services. Benefits
Total benefit to travellers is calculated based on
four main categories as follows:
Methodology for calculating each of the above categories is explained as follows: Public transport user benefitsUser benefits have been calculated directly from the demand modelling work as the difference in generalised costs (excluding fare) between the Do Minimum and each alternative. This is the same data that is used to calculate the public transport sub-mode split and assignment. Total difference in generalised costs (excluding fare) is extracted from the public transport model and the value of time is applied to these time savings. Furthermore, there are benefits which are attributed to the generated traffic based on the 'rule-of-the-half' which are included in the overall public transport user benefits. These benefits are applied to the generated public transport passengers, regardless of whether they arise from mode transfers, trip redistribution or increases in trip-making. Decongestion benefits to private vehicle usersTo assess the benefit to private vehicle drivers and passengers a capacity restrained urban highway model of Budapest was used. Generated trips were estimated based on the 'elasticised matrix' methodology (described in Chapter 9). Some 30% of the generated demand was assumed to be the result of mode switch from the private vehicles. This incorporated the traffic growth rates discussed in Chapter 9. Based on this calculation the private vehicle matrix was adjusted and the highway model was re-run to establish the time savings incurred to the remaining traffic on the highway. These time savings were incorporated in the total benefits as savings attributed to the private vehicle users due to decongestion resulting from the alternative being considered. Vehicle operating and capital cost savings to private vehicle usersEstimation of vehicle operating and capital cost savings were based on the reduction in private vehicle kilometres obtained from highway model runs as described above. A unit operating and capital cost per vehicle kilometre (described earlier in this chapter) was applied to the reduction in total vehicle kilometres and incorporated in the overall savings/benefits of the alternatives. Accident benefits to private vehicle and other highway usersUsing the output from the highway model runs giving the total savings in vehicle kilometres the unit average accident cost (across all severities) was applied to estimate the accident benefits. Results of the economic analysisInfrastructure
Infrastructure costs input to the economic analysis
are the net cost of the alternative being considered, i.e. the
full cost of construction, land, design supervision and contingencies
less the cost of the Do Minimum scenario which is the cost of
strengthening Szabadság bridge estimated at 19 Million
ECU. Table 10.7 presents a summary of infrastructure costs at
1996 prices and discounted to 1996.
* Above costs include land costs design supervision
and contingencies The lowest cost alternative is the improvement of the surface modes and the most expensive alternative is the Metro via Fehérvári út due to its longer length. Rolling stock operating and maintenance costs
For the purposes of the economic assessment, vehicle
capital and operating costs for each alternative is calculated
against the savings which arise due to the relief given to existing
services. The results of the estimation of net vehicle capital
and operating costs of the alternatives in 2020 is presented in
Table 10.8. The operating costs show are appropriate for the
one year whilst the capital costs would be spread over the project
life.
* All values are based on 2020 forecast passenger levels All values are undiscounted 1996 values in Million ECU
Negative values denote savings on operation / vehicle
capital Table 10.8 shows that in general overall savings can be expected in operating costs for all the alternatives with the exception of the improvement of existing surface modes. Benefits
Total benefits resulting from any of the evaluated
alternatives are made up of 4 sources as discussed in section
10.4 above.
Table 10.9 presents a summary of the benefits over
the assessment period in undiscounted 1996 values and Tables 10.10
and 10.1. present a summary of discounted benefits based for high
and low growth scenarios respectively.
* All figures are undiscounted 1996 values in 1000 ECU
Percentages shown are proportions of total benefits
* All figures are in discounted 1996 values, Million ECU
Percentages shown are proportions
of total benefits
* All figures are in discounted 1996 values, in Million ECU
Percentages shown are proportions of total benefits
Metro alternatives in general result in the highest benefits, particularly for the public transport passenger benefits. The incremental increase of benefits of metro alternatives over the LRT alternatives is due to the larger catchment area of metro alternatives on the Pest side (metro alternatives terminate at Keleti station whereas LRT alternatives terminate at Astoria). Overall economic performance
Tables 10.12 and 10.13 present a summary of the economic
evaluation results for the two test discount rates and the high
and low growth scenarios.
LRT alignment via Fehérvári út
produces the best Internal Rate of Return for both high and low
growth scenario (10.3% and 8.3% respectively). All metro alternatives
produce similar IRR values ranging from 8.3% (for alignment via
Tétényi) and 8.8% (for alignment via Bartók
Béla út) in the high growth scenario and 6.5% to
6.9% in the low growth scenario. Ranking of metro alignments
based on the IRR is consistent across low and high growth scenarios
with only marginal differences between alternatives. Given the
accuracy of the travel model the conclusion would therefore be
that on the basis of Internal Rate of Return criteria all metro
alternatives perform equally as well.
In Net Present Value terms, again the performances
of the metro alignments are very close with the alignment via
Bartók Béla consistently performing better (albeit
marginally) than the other two alignments. Taking the best economic
scenario (high growth with the lowest test discount rate of 5%)
the alignment via Bartók Béla út returns
a NPV of 301 Million ECU, Fehérvári út returns
a NPV of 299 Million ECU, and Tétényi returns a
NPV of 272 Million ECU. Again these differences should generally
be considered.
Benefit to Cost Ratios provide a similar picture
with Bartók Béla alignment producing a ratio of
1.98, Fehérvári alignment, 1.86 and Tétényi
alignment producing a benefit to cost ratio of 1.83, with the
high growth assumption and the lowest test discount rate of 5%.
It is therefore concluded that:
* All figures are in discounted 1996 values, in Million ECU Negative operating and maintenance cost values denote savings
Value of Internal Rate of Return is independent
of the test discount rate
* All figures are in discounted 1996 values, in Million ECU Negative operating and maintenance cost values denote savings Value of Internal Rate of Return is independent of the test discount rate |
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