Cost Benefit Analysis of Washington-Richmond High-Speed Rail

Cost Benefit Analysis of Washington-Richmond High-Speed Rail Spring 2010
investor. Because these investments are a cost as well as a benefit, they are not a net benefit as in a
cost-benefit analysis.
There is often an element of benefit in these impacts. A worker who gets a higher paying job as a result
of a transportation investment project benefits if he or she works just as hard as he or she did at his or
her previous job but is paid more. Such projects produce benefits by increasing the productivity of
labor. A transportation investment project that increases the value and productivity of land and thus
induces real estate investment can also provide a benefit, but the benefit must be measured net of the
cost of making the real estate investment. Measuring these labor productivity effects requires a careful
analysis of the local labor market and how that market is changed by the transportation investment.
Similarly, measuring the effects of transportation projects on the productivity of land requires careful
netting out of increases in land values that are compensated by costs of real estate investment and
increases in land values that in effect capitalize other types of benefits that have already been counted,
such as time savings.
The benefits that should be reported for transportation projects include:
26
• Improved condition of existing transportation facilities and systems;
• Long-term growth in employment, production, or other high-value economic activity;
• Improved energy efficiency, reduced dependence on oil and reduced greenhouse gas emissions;
• Reduced adverse impacts of transportation on the natural environment;
• Reduced number, rate and consequences of surface transportation-related crashes, injuries and
fatalities;
• Any other benefits claimed in the project’s cost-benefit analysis.
4.2 Affected Population
Because these improvements are associated with improvements along a passenger rail line, the costbenefit
analysis should clearly identify the population that the project will affect and measure the
number of passengers affected by the project. Although the improvements being considered are
directly related to passenger rail movements, the rail line being impacted has both passenger and
freight movements that need to be addressed as part of the analysis. If possible, passenger and freight
traffic should be measured in passenger-miles and freight ton-miles (and possibly value of freight).
4.3 Discounting
When preparing the cost-benefit analysis, the analysis should discount future benefits and costs to
present values using a real discount rate of seven percent, following guidance provided by the Office of
Management and Budget (OMB) in Circulars A–4 and A–94 1819 .
18 Circular A-4 (Washington, DC: Office of Management and Budget, September 17, 2003).
19 Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs (Washington, DC: Office of
Management and Budget).