Like all things in life, when it comes to transport there are always more projects being dreamed up than there is money available. So to determine just what should be built and when there needs to be some sort of prioritisation process. On the blog we try to sit between the two different aspects that make up this prioritisation process: the technical side and the political side.

The technical prioritisation process is typically done through a ‘cost benefit analysis‘, which I’m sure anyone who has read this blog for a while will have heard mentioned on many many occasions. There are clearly two sides of any such analysis: firstly the cost, which is the ‘easy’ part of the equation: what will it cost, what negative impact might it have? The benefit side is much trickier – clearly some transport projects, policies, services or whatever generate a benefit, but how to measure that benefit, put a dollar value on it and then be certain that dollar value benefit is greater than the amount we’re spending?

At this point transport experts make a number of subjective decisions, which are often passed off as objective facts. How much value to put on a minute of saved time? How much to put on a saved life? How to even work out how much time (or lives) will be saved? Will time even be saved in the longer run?

Typically most transport projects generate the vast majority of their measured “benefits” from travel time savings – the difference in some future year between the time it would have taken everyone to travel in a hypothetical “without the project” scenario and another hypothetical “with the project” scenario. Each saved minute by every person using the route adds up to saved hours, then a value is put on each hour and a whopping big number gets generated over the many decades long measured lifespan of the project.

This process has been the stock-standard approach for many decades in New Zealand and in many countries overseas – a supposedly objective way of making transport prioritisation decisions. Yet it is becoming questioned on an increasingly frequent basis. The latest critique is by transport expert Todd Littman, whose specific critique is of something called the “Urban Mobility Report” – a report prepared by the Texas Transport Institute which attempts to quantify the cost of congestion across all different parts of America.

Todd Littman’s critique is based around the idea that current cost-benefit analyses value of time ‘lost’ to congestion (and therefore the benefit of projects that may reduce congestion) far too high:

My analysis indicates that the UMR tends to exaggerate congestion costs and roadway expansion benefits, and undervalues alternative congestion reduction strategies. It uses higher baseline travel speeds and travel time values than most experts recommend (in fact, its baseline speeds often exceed legal speed limits on the roads evaluated), ignores the increased fuel consumption, pollution emissions and crash severity caused by high traffic speeds, ignores the increased external costs of induced vehicle travel, and ignores many co-benefits provided by alternative mode improvements, pricing reforms and smart growth policies. As a result, the UMR’s congestion cost estimates should be considered upper-bound values – when using such estimates analysts should apply sensitivity analysis that also include middle and lower-bound estimates.

These might be familiar critiques for blog readers. For example, we’ve noted that the supposed time savings from the Puhoi-Warkworth road would require someone to travel in excess of the speed limit to achieve. It was only earlier this year actually that NZTA released a report which highlighted that if you measure congestion costs properly, they might actually be ‘only’ around $145 million per year for travel time delay and a further $105 million for something called “schedule delay cost” (people travelling at times other than what would be ideal for them). This compared to an estimated cost of $1.25 billion using an unrealistic comparison with ‘free flow’ traffic.

Obviously the key next question is “well so what?” As explained below, the implications of over-valuing the cost of congestion are pretty vast in terms of how it skews the way we assess and prioritise transport projects:

Why does this matter? What problems will result if urban transport planning incorporates exaggerated congestion cost values?

Comprehensive and accurate valuation of congestion costs is important because urban planning often involves trade-offs between conflicting objectives such as between traffic speed and safety, and between automobiles and other forms of access. For example, expanding urban roadways may reduce congestion but tends to create barriers to active modes (walking and cycling), and since most public transit trips involve walking links, it also reduces public transit access. Exaggerating congestion costs undervalues other impacts and modes, leading to economically excessive roadway expansion and under investment in alternatives, resulting in a transport system which is less efficient, diverse, affordable, safe, healthy and equitable than optimal…

…Exaggerating congestion costs and undervaluing other congestion reduction strategies tends to result in economically excessive roadway expansion, and under investment in alternative modes, such as grade-separated public transit, and demand management strategies, such as more efficient road and parking pricing. This mattered less during the twentieth century when VMT was growing rapidly, so there was little risk of overbuilding roadways – any excess capacity would eventually be used, it was simply a question of when. However, now that automobile travel has peaked in most developed countries, and society is increasingly concerned about the external costs of excessive automobile dependency, overbuilding has become as economically harmful as under building roadway capacity.

So if we are over-valuing congestion costs, then what are better ways of measuring the impact of transport investment and prioritising projects? Well a good place to start would be by analysing the different factors which contribute to the “cost” that transport imposes on our lives – which interestingly highlights even the upper end of congestion costs as being fairly minimal in the scheme of things:


And here’s where we get to the key point:

…a congestion reduction strategy may be worth far less overall if it increases other costs, and worth far more if it provides other benefits. For example, a roadway expansion may seem cost effective considering congestion impacts alone, but not if it induces additional vehicle travel which increases parking congestion, accidents and pollution emissions. Conversely, alternative mode improvements may not seem inefficient considering congestion reductions alone, but are cost effective overall when co-benefits (parking cost savings, traffic safety, and improved mobility for non-drivers, etc.) are also considered. 

Until we fix the way we prioritise projects we’re going to keep making really stupid transport prioritisation decisions.

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  1. And the obvious solution is to prioritise transport decisions that target the largest bar in the graph above- ‘vehicle ownership’. A real “cost”.

  2. And I’d agree.
    But I should point out that the bar graph above omits “Public transport costs”

    If you are going to cost in ownership of a vehicle (which I assume includes insurance, etc), then you should also cost in spending money on public transport.

    Assuming I spent nothing on car ownership, which would currently cost me ~$7,000pa in fuel, insurance, WOF, +$3,000pa in depreciation (for a nice round 10Kpa)

    I should then cost in ~$10/day 220 days per year $2,200
    for getting to work

    Plus probably another ~$15/day on the other days (I go a wider range of places when I’m not at work) for another $2,400

    Plus I’d probably need to spend ~$60/week on a taxi to transport grocery shopping for another $3,000, or possibly do all my shopping online and get it delivered, which would be $10-$15/week, but I’d miss out on in store specials, etc that would probably increase my grocery bill further.

    Plus what price do I put on loss of time?
    20 minutes/per day 365 days a year is ~120 hours.
    At minimum wage that’s another $1,800pa

    1. It seems fair to consider the cost of PT. Not sure it’s $10 a day (I pay $6 a day when I’m not riding my bike)
      I think most people don’t have a problem picking up groceries while out and about. Hopefully people have a grocery store that is a little closer than a $30 taxi ride away. We are talking about a city context right?

      I can read my emails on the bus making it a time-saver, unlike driving.

        1. While on my bike I often check my phone while waiting at intersections. Unfortunately I see a lot of drivers doing the same thing.

        2. Cycling IS a time saver. If you ride to work and back you will never need to go to the gym, or actively seek exercise.

        3. I don’t know about that, the amount of exercise you get out of cycling depends entirely on how you ride. I know quite a few overweight folks who have been cycling for years due to them just coasting along.

          Add to that most folk who go to the gym don’t just go their and ride a bike but they go there and work all sorts of different muscle groups depending on the type of results they want.

          In terms of commuting cycling is faster in some cases but other modes are faster in other cases.

        4. Well then you are going to the gym by choice, I was more talking about in a preserving your life context, though you are of course right.

          I’d say it is pretty rare in Auckland for cycling to be the fastest mode unless you are pretty nifty on the bike, there are some good examples obviously, but not many.

      1. @Kent Depends on the super market.

        I use Pak’n’Save about 5 km away as it’s significantly cheaper than the New World 1.4km away.
        That’s about $15 each way if I can do it in one trip. Since we’re feeding oh, 6 – 6.5 people on average, that’s not always possible.

        I could use the Countdown 4km away, but it’s more expensive.

        Plus the New World owns SouthMall in Manurewa, does sweet FA maintenance on it, and used its ownership to force out the Woolworths to reduce competition. So I’d prefer not to support it overall.

        Of course the New World owner also owns the Pak’n’Save, can’t win really.

        Then I also go to the fruit shop and butchers near the Pak’n’Save as they are cheaper and better quality for many things.

        So like I said, you’re trading travel costs for food costs.

    2. Right now in Sydney it is costing me $25 a week to travel between 2 station for work each day. Add to that another $15 a week for PT trips to other destinations and another $100 in taxi fares and currently it is costing me $7k a year.

      In Auckland PT costs me $13 a week, taxi’s $60 a week, parking for two cars $80 a week, insurance $40 a week, fuel about $40 a week. That’s $12k for owning 2 cars and using PT and having much more freedom.

      1. 40 a week for 2 cars is 10 litres per car per week that is 100 km per week in city driving that is less than 20 km per day or 10 km one way. You’re not going very far.

        1. Have you heard of public transport, walking or cycling? Just because someone owns a car it doesn’t mean they drive here there and everywhere.

          Someone who doesn’t own a car can still live a rather full life driving zero km per week.

        2. Have you not heard of public transport, walking or cycling? Just because someone owns a car it doesn’t mean they are required drive here there and everywhere.

          Someone who doesn’t own a car can still live a rather full life driving zero km per week.

        3. I saw a bus once, but I was little. Jokes aside, I think people underestimates how much money they spend on fuel and on cars in general.

    3. Actually, the maximum cost of PT in Auckland will be $1080 a year from November, but, if we decide to run our PT in house then the cost of PT fares would be zero as the council costs would reduce by the same quantity as the passenger is charged.

  3. In other words, how you frame the problem completely determines what answer you get. In particular, not including public transport and other means of transport into this equation seems like a glaring mistake. Also, the benefit in reduced transport times coming from a densification of central Auckland, shifting people from cars into PT, walking or cycling to work… At the moment, the problem is framed with only the car solution in mind.

  4. An AT HOP pass covering all of metropolitan Auckland from Papakura to Waiwera (but excluding the islands, Pukekohe and other satellite towns) for unlimited trips on all services is $190 a month, so $2,280 a year. That covers weekdays, weekends, everything. So even at $60 a week extra for taxis or other transport you are still saving a heap. Not that you really need it just for shopping, my local New World has free delivery for purchases over $100. You go in to the store as usual, fill the trolley in the aisles, get all the regular specials and discounts, pay at the checkout and then leave it with them, they deliver it to your home within the next two hours for free.

    What price to put on lost time? Same price they already put on time lost to traffic congestion I suppose, if we are monetising time. But if we are moentising time the best time saving project would be to buy everyone in Auckland a dishwasher, or pay people to take a day off work. Those would have a far greater return on time savings than shaving 87 seconds off a commute (yes I’m being facetious here, but for the most part nobody gets paid more if they get to and from work faster, nor are they more economically productive).

  5. I’ve always thought that evaluating the benefit of transport and land use projects in terms of travel times for road traffic is a bit like evaluating a weight loss program in terms of the waist size of the participants that are still obese afterwards, and ignoring those that are no longer overweight. You miss all the positives for those that have benefited the most, and only measure those that are still part of the problem.

    The Northern Busway is the best example, it is derided by some because it has only marginally reduced traffic even though there are now an extra 15,000 people a day getting around free of traffic entirely.

  6. Reducing the notional cost of congestion is also going to reduce the benefits of public transport projects. The $17 notional benefit to motorists created by every public transport trip is based on reduced congestion. If congestion isn’t valued as highly then the $17 is going to need to be reduced, and that’ll push the cost-benefit ratio for projects like the CBD rail tunnel well down.

    So we may end up saving money by not building either motorways or rail tunnels. That would have the perverse outcome of allowing the government to reduce fuel taxes.

    (I still maintain that the business cases we do for transport projects focus on the trivia. Is there any transport infrastructure in the country that hasn’t been a long term success? I can think of few examples, and I’m thinking about white elephants such as the wharf in Tolaga Bay. There is some infrastructure that isn’t economically viable now, such as the Napier-Gisbourne rail line, but that paid its way in the early days by opening up the East Coast. However in the main our historic construction of railways, roads, airports, and ports has supported a huge increase in population since 1840 and a vast increase in GDP.)

    1. Where does the $17 figure come from? Isn’t it accessed for each project as part of the alternatives and would therefore change project by project? Minimum chance that say Puhoi to Warkworth would see any major benefit or relief from PT projects but AWHC would have huge potential notional benefits, especially if PT project investment meant we didn’t need to build a $5b tunnel.

      “Is there any transport infrastructure in the country that hasn’t been a long term success?”

      I think it would be fair to say that in the past more care was taken with the money available. I recall a time when projects without a BCR or 4 or more wouldn’t get built. The long term success of some of the projects being built right now and planned for the near future will be interesting to monitor.

      1. The $17 per journey figure doesn’t apply to road cost benefit studies, but to public transport projects. I don’t know how it was calculated, by who (NZTA?), or if it only applies to Auckland. Supposedly a bus with 50 people on board provides 50×17=$850 worth of benefits to motorists by reducing congestion. These congestion reduction benefits are a key part of the business case for the CBD rail tunnel and all other public transport projects.

        The figure has always felt too high to me. If congestion in general is overpriced, as Matt L argues, then the $17 per journey figure must reduce to reflect that overpricing. The CBD rail tunnel BCR is already somewhere between less-than-one and marginal. A reduction in congestion pricing would likely blow the business case out of the water.

        I’m not big on business cases. I think the published BCR misses the big issues and building the tunnel would still make sense to me. However it would be fun watching everyone who argues that we shouldn’t build infrastructure with a BCR less than one and that transport funding should be scientific rather than based on politics jump through hoops to justify their continued support for the tunnel.

        1. Given that I completely disagree with the science I find it tough to support the CRL based on science already, lowering the cost of congestion wouldn’t change that because I believe the other benefits are massively understated in this case….

          Though I agree with you. They would look like Nick Smith, comical and embarassing.

    2. Yes I hindsight it infrastructure can often look like a no brainer. In part due to the fact that NZ has a weak history of assessing the effectiveness of past investments. What measures exist that show how well our historic investment has been in the past at delivering the safety and economic benefits we have touted? Despite the multi billion dollar investment over time, Auckland is considerably MORE congested than it was sixty years ago. Does this mean the investment is a failure? Conventional wisdom is that we haven’t spent ENOUGH and that if we hadn’t done anything things would be so much worse! But wait…. Isn’t that the argument that is currently being used to justify why spending $60 billion still won’t resolve congestion?

  7. One thing I found from some research I was doing was that the closer a road gets to carrying its theoretical capacity the lower the number of injury crashes.

    For instance if you look at our motorway network the CMJ has almost zero injury crashes yet parts of the motorway network that only get up to about 70% of total capacity have quite high crash and injury rates.

    There is a simple reason for this being that the more congested a road is the slower people are going and therefore any crashes are of low severity.

    1. That is absolutely true. That is one reason higher density cities have much better crash stats than ours- everyone is going much slower on the roads and streets. As well as, of course, that so many more are not driving at all in those cities.

        1. Well as one little interesting test I looked at what the added travel time costs were for a certain section of motorway if the average speed reduced by 20km/h. Given this section was quite busy based on the travel time costs from going from 6mins to 7.5mins you would need one less person to die each month to offset the cost. Given only one person had died over the past 5 years on this 10km section there was no way to safety benefit could offset the time delay based on the travel time savings formula.

          For another test I looked at the travel time cost of one minor crash that delayed 1 hours worth of traffic for 15mins, it ended up the cost was about 5 times more than what the crash was values at costing under normal BCR measures. If I had the numbers on hand I could quote them but I’m out of the country right now.

        2. That is quite an interesting analysis.

          Would be good to look at a total time actually lost, as traffic is presumably not often travelling at the speed limit, and compare it to all of the safety costs together; cost of death, cost of injury and cost of time delay from crashes. It is obviously beyond the scope of a personal project, but would be good to see for say Dominion Road type projects where we are redoing the entire road at significant cost whether the speed limit should be lowered.

        3. I was looking at average speed and not the speed limit. Another thing I found was that if you reduce the speed limit on a road that is characterized as high speed people will only reduce their speed by 25% to 50% of what you post.

        4. Slightly off topic, but I’ve read in a few places that the visual width (whether done by actual lane width, keeping opposing lanes close which creates ‘drag’, or by the use of visuals like trees or parked cars) of the lane determines speed more than limits as such..

        5. Bryce P, that’s an interesting comment – I try to avoid the single lanes on the Harbour Bridge because they feel narrower, even though they probably aren’t, and so probably drive more slowly than usual as I feel less comfortable (totally subjective). Of course a minor lane digression could have major consequences so maybe it’s not so silly after all! Similarly on some suburban streets with cars parked randomly on both sides and effectively a single lane between.

        6. Absolutely agree that road speed is based much more on design than the speed limit. Good example is East Coast Road from constellation the Greville, traffic speed varies by 20 km/h on a road with the same limit along it’s length due to this.

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