Social welfare analysis of investment public–private partnership approaches for transportation projects

This paper has two objectives: (i) to introduce a new approach in order to gain widespread support for road pricing; and (ii) to develop a detailed social welfare analysis for road pricing schemes. We first describe our novel approach that stimulates public support for road pricing, which we refer to as an investment public–private partnership, or IP3. This approach returns a significant portion of the economic value created by road pricing back to the citizens who own the newly priced facility. We then present a social welfare framework that estimates the benefits and costs of using the IP3 approach on an urban transportation network. A P3 project’s impact on overall social welfare provides a more comprehensive evaluation criterion than the often-used Value for Money (VfM) analysis. Apart from several theoretical studies, a detailed social welfare analysis that includes all major P3 project stakeholders is absent from the literature. We use Fresno, California as our case study in order to conduct a welfare analysis on IP3s. Our results show that system-optimal tolling favors average users, but that government—and consequently taxpayers—should pay for costly tolling systems (negative profits). In contrast, unlimited profit-maximizing tolls raise substantial profits for government, for the infrastructure’s citizen-owners, and for the private sector, but the average user is worse off. From a social-welfare perspective, one should search for a Pareto improvement under which all major stakeholders are better off. Our estimates indicate that a mixed public and private tolling scheme offers such an improvement.     

Bus routing strategies in a transit market: A case study of Hong Kong

Conventionally, the objective of transit routing is often set either to minimize the total operational cost, subject to a given level of service quality, or to maximize the service quality at a given acceptable cost. In a deregulated, commercial‐based environment however, such as bus and railway operations in cities of the UK and Hong Kong where several private firms compete in route‐based or area‐based market, routing becomes one of the means for higher returns rather than just for cost saving. In such a case, how do the transit providers set up their routes for profit‐maximization? Will the routing based on the provider's objective meet the user's objective? How do government regulations and policies affect the choice of transit provider's routing strategy? To answer these questions, we first examine the relationship between the objectives of users and transit providers, set up criteria for transit routing quality, and then investigate the possible routing configurations/patterns for a hypothetical case. These criteria include (1) the load factor of transit, (2) the level of route directness, (3) the level of route overlapping, and (4) the total number of routes and (5) the average of route length. These measures are finally applied to a real case in Hong Kong to examine the route changes of Kowloon Motor Bus from 1975 to 1995. The result of the empirical case reveais how key measures such as load factor are controlled by the bus operator and affected by government policies and how the bus routing pattern was adjusted to meet users' need. Facing the dilemma as evident in Hong Kong between the route directness and the efficiency of road use, we suggest that a rational multi‐modal routing structure be put in place if an institutional solution is introduced so that bus and other transit modes can form a sharing program or an alliance.     

Relationship between service quality and demand for inter-urban buses

This article proposes a model for analysing the modal choice of travellers making inter-urban journeys. Discrete choice models with systematic and random tastes variation were applied to find the most relevant variables for encouraging the use of public transport by bus rather than private car. This research follows on from the results of previous user satisfaction studies on inter-urban bus services in the province of Burgos (Spain). Willingness to pay is also estimated for time savings or other improvements in the bus service.The results indicate that, in general, improvements in the journey time or the number of daily journeys are valued less by inter-urban bus users than they are by car or railway users. The type of bus and its characteristics are evaluated as a function of the distance travelled and result in very small values for this variable. Contrary to what is often reported in satisfaction surveys, the journey cost is found to be relevant when choosing which mode of transport to use, but the most important variable is journey time. Little value is placed on the features of the bus, except on long distance journeys.Finally, a methodology differentiating four hierarchical groups is presented for comparing the results of the relevant variables in demand and satisfaction models. Some only improve perception rather than encourage new users, while others increase take-up but do not improve the image of the service.     

A new approach to evaluating on-road public transport priority projects: balancing the demand for limited road-space

Despite widespread growth in on-road public transport priority schemes, road management authorities have few tools to evaluate the impacts of these schemes on all road users. This paper describes a methodology developed in Melbourne, Australia to assist the road management authority, VicRoads, evaluate trade-offs in the use of its limited road-space for new bus and tram priority projects. The approach employs traffic micro-simulation modelling to assess road-space re-allocation impacts, travel behaviour modelling to assess changes in travel patterns and a social cost benefit framework to evaluate impacts. The evaluation considers a comprehensive range of impacts including the environmental benefits of improved public transport services. Impacts on public transport reliability improvements are also considered. Although improved bus and tram reliability is a major rationale for traffic priority its use in previous evaluations is rare. The paper critiques previous approaches, describes the proposed method and explores some of the results found in its application. A major finding is that despite a more comprehensive approach to measuring the benefits of bus and tram priority, road-space reallocation is difficult to economically justify in road networks where public transport usage is low and car usage high. Strategies involving the balanced deployment of bus and tram priority measures where the allocation of time and space to PT minimises negative traffic impacts is shown to improve the overall management of road-space. A discussion of the approach is also provided including suggestions for further methodology development.

Optimal bus fleet management strategy for emissions reduction

Transportation is a major cause for environmental degradation via exhaust emissions. For many transit-oriented metropolitan areas, bus trips often constitute a sizeable mode share. Managing the bus fleet, in particular updating buses to comply with the newer emissions standards, therefore, can have a substantial impact on transportation-induced air quality. This paper presents the approach of remaining life additional benefit–cost (RLABC) analysis for maximising the total net benefit by either early-retiring or retrofitting the current bus fleet within their lifespans. By referring to the net benefits for different bus types estimated by RLABC analysis, the most beneficial management scheme for the current bus fleet can be identified. Optimal bus fleet management (BFM) models based on the RLABC analysis for the operator and the government are developed. Then a government subsidy plan is produced to achieve win–win solutions, which will offer efficient and flexible management schemes. To illustrate the approach, the largest bus company in Hong Kong, which carries more than 23% of the total trips in Hong Kong, is taken as a case study example. Instead of adopting a fixed retirement plan, such as replacing buses at the age of 17 as is currently practised, the proposed method develops an optimal BFM scheme that progressively phases out buses or retrofits them. This study produces promising results to demonstrate the large benefit of this approach for optimal bus fleet management.     

Tradable credits scheme and transit investment optimization for a two‐mode traffic network

This paper proposes an optimization model to minimize the “system costs” and guide travelers' behavior by exploring the optimal bus investment and tradable credits scheme design in a bimodal transportation system. Travelers' transport mode choice behavior (car or bus) and the modal equilibrium conditions between these two forms of transport are studied in the tradable credits scheme. Public transport priority is highlighted by charging car travelers credits only. The economies of scale presented by the transit system under the tradable credit scheme are analyzed by comparing the marginal cost and average cost. Numerical examples are presented to demonstrate the model. Furthermore, the effects of tradable credits schemes on bus investment and travelers' modal choice behavior are explored based on scenario discussions. Copyright © 2016 John Wiley & Sons, Ltd.     

The estimation of transport cost functions: a methodological review

Abstract

The ex‐post facto cost of using private finance in roads is examined using a case study approach. The paper focuses on the first eight design, build, finance and operate (DBFO) roads commissioned by the UK Government’s Highways Agency and paid for through a system of shadow tolls. It carries out a financial analysis of the publicly available accounting information from the Highways Agency and its private sector partners for the first 6 years since the start of the 30‐year schemes in 1997. Publicly available financial information about the schemes was found to be limited and opaque. In 3 years, the Highways Agency had paid more than the construction cost. It was unclear whether the payments were higher than expected at financial close. Its private sector partners reported a post‐tax return on capital of 29% and an effective cost of capital of 11% in 2002, twice the cost of public finance. However, operating through a complex web of subcontracting creates additional, undisclosed sources of profit for their parent companies that make it difficult to establish the total cost of using private finance. The paper questions the wisdom of using private finance by providing evidence about the cost, including the cost of risk transfer.     

“This train is without a destination”: a cost benefit analysis of the retention of railway services — the Penistone line

The paper undertakes a cost‐benefit analysis of a disinvestment using readily available data and demonstrates that a relatively straightforward yet systematic approach can provide useful input to the decision‐making process. Despite various assumptions necessitated by the analysis, it is argued that the net benefits of the railway line retention are unlikely to be significantly sensitive to their variation within feasible limits. The most significant component in the analysis is seen to be the operative costing system and it is argued that this should be revised.     

Incentive subsidy scheme design with elastic transport demand

Huge public transport subsidies caused by deficits have become a heavy financial burden on some local governments due to the decline of bus passenger numbers. It is essential to apply the performance‐based contract to bus services considering maximization of social welfare. This paper constructs an incentive subsidy contract considering the decision‐making powers of the service level and calculating the proper frequency elasticity aiming at two problems of performance‐based contracts. Meanwhile, we consider a role of bus operators ignored by most researchers. Under the scheme, the decision‐making power of the service level is discussed based on five assumptions, and meanwhile, bus operators are motivated to reduce cost and improve service level in the scheme. The case of the bus service of Arao city indicates that the optimal frequency equals to zero when bus operators decide frequency. If bus operators determine efforts, the optimal effort also equals to zero with the goal of maximizing the profit. Also, bus operators can play their roles in lessening cost and improving service level to help bus operators and the local government achieve a win‐win situation, which maximizes the social benefit in this subsidy scheme when all factors are decided by the government. Copyright © 2013 John Wiley & Sons, Ltd.     

The analysis of regulation on private highway investment under a build-operate-transfer scheme

The build-operate-transfer (BOT) approach has become an attractive instrument for public facility provision, especially for a project that faces difficulty with public finance. This study analyzes the regulation alternatives on private highway investment under a BOT scheme and their impacts on traffic flows, travel costs, toll, capacity, and social welfare (total user-benefit in the traffic system including congestion). For comparison, five cases are analyzed: (1) No BOT with maximizing welfare, (2) No BOT with breaking even on finance, (3) BOT without regulation, (4) BOT with a minimum flow constraint (the total users will not be less than those in Case 1), and (5) BOT with a maximum travel cost constraint (the travel cost for users on a non-tolled road will not exceed the maximum tolerance). After each case is modeled and simulated on some functional forms, we find that the case of BOT with regulations performs between the cases of maximizing welfare and that of maximizing profit. From the perspective of the government, regulation has less power in a project with low elastic demand. Furthermore, even when the regulation is strict, a high cost-efficient firm with BOT could result in a higher level of social welfare than that without a BOT scheme.     

The acceptability of road pricing in Vienna: the preference patterns of car drivers

The acceptability of road pricing has attracted considerable attention among researchers over the last decade, as is evident in the amount of literature about transport and environmental economics. The general conclusion from these studies has been that there is low acceptability for road pricing among car users. In this paper, we add more knowledge to the existing literature by conducting an acceptability study of road pricing in Vienna, where such a study has never been conducted before. We used a replication study approach where a previous approach used in the EU research project AFFORD (acceptability of fiscal and financial measures and organisational requirements for demand management) was replicated for Vienna and further supplemented with a conjoint analysis. In order to examining whether the Vienna study confirms previous findings. We investigated the acceptability of two concrete policy packages factors influencing this acceptability, and preference patterns that can be used in designing a road pricing policy for Vienna. The survey reveals a higher acceptability if road pricing schemes lead to perceived personal benefits. According to the multivariate analyses, the “personal outcome expectations”, “social norm” and “perceived effectiveness” variables account for more than 50 % of the criterion variance and therefore these are the most influential factors. Road pricing schemes can be an effective transport management instrument for a city particularly if they are associated with direct investment in public transport and public infrastructure. Thus, personal benefits can be perceived more easily and direct effects can be expected.     

Analysis of regulation and policy of private toll roads in a build-operate-transfer scheme under demand uncertainty

The build-operate-transfer (BOT) approach is one of the privatization mechanisms for promoting transportation infrastructure developments by using private funds to construct new infrastructure facilities. In a BOT scheme, it often involves three parties: the government, whose objective is to maximize the benefit defined in terms of social welfare added to the society; the private investors, whose objective is to maximize the profit generated from the investment; and the road users, whose objective is to minimize the inequality of benefit distribution among the road users traveling from different origin–destination pairs. Each of these parties has different objectives that often conflict with each other. In this paper, we develop various optimal road pricing models under demand uncertainty for analyzing the tradeoffs among the three objectives. In addition, a project evaluation framework is developed for assessing the effects of government policy and regulation on the BOT project. Seven cases of the BOT road pricing problem are analyzed: (1) BOT without regulation, (2) BOT with price control regulation, (3) BOT with equity regulation, (4) BOT with construction cost subsidy, (5) BOT with concession period extension, (6) BOT with construction cost subsidy and concession period extension, and (7) BOT with multiple objectives. Numerical results using a real case study of the Ban Pong–Kanchananburi Motorway (BMK) in Thailand are provided to examine the above seven cases.     

Role of transport in rural development in Africa

Rural Africa is starved of transport services. The transport routes run towards the export enclaves and the coast.

The political, social and developmental rural transport benefits are discussed. Rural transport will help (i) integrate the country and ease its governance; (ii) widen markets; (iii) induce increased agricultural output, through new technologies, reduced transport costs, etc. The transport cost savings should be passed on to rural firms and producers. The paper warns against their accruing only to middlemen — agricultural parastatals inclusive, thereby stifling the benefits to production. This could happen under some forms of pan‐territorial pricing. Negative aspects of road development, e.g. the substitution of local goods by imports, increased migration and noise, are noted.

The place and role of project appraisal in rural road planning is acknowledged. The broad‐based development packages approach associated with Integrated Rural Development Projects has, despite its attractions, some pitfalls. It favours well established villages and ignores distribution benefits within villages.

Project appraisal can be used to justify socially uneconomic transport developments. However, rural road investment projects with immediate negative returns are unlikely to be funded. Given clear priorities, short of elaborate cost/benefit analysis, obvious road investments choices can be made by the local community. Greater public accountability of transport planners and peoples’ participation in determining rural transport needs and priorities is emphasized. Increased rural road maintenance especially through self‐help schemes and increased use of traditional modes of transport, e.g. walking, animal and water transport, is recommended.     

Evaluating the public investment mix in US freight transportation infrastructure

This research empirically evaluates the public sector investment in the US freight transportation infrastructure. In particular, the infrastructures to support the two most comparable modes of freight transportation – highway and intermodal rail – are examined as alternatives for public fund allocation. Indicators for public sector transportation infrastructure investment mix are established based on financial analysis of both private and social costs and benefits, as well as the propensity of freight shippers to utilize such infrastructures. The research results in recommendations for the aggregate allocation of public funds in the US based on these indicators. We find that approximately a quarter of truck freight could be handled at a 25% lower cost if rail infrastructure to support it existed. Because an additional 80% reduction in social costs could be achieved through this modal conversion, the public sector is a critical participant in creating a more efficient transportation infrastructure.     

Modeling intermodal equilibrium for bimodal transportation system design problems in a linear monocentric city

This paper investigates the intermodal equilibrium, road toll pricing, and bus system design issues in a congested highway corridor with two alternative modes - auto and bus - which share the same roadway along this corridor. On the basis of an in-depth analysis of the demand and supply sides of the bimodal transportation system, the mode choice equilibrium of travelers along the continuum corridor is first presented and formulated as an equivalent variational inequality problem. The solution properties of the bimodal continuum equilibrium formulation are analytically explored. Two models, which account for different infrastructure/system regulatory regimes (public and private), are then proposed. In the public regulatory model, the road toll location and charge level are simultaneously optimized together with the bus service fare and frequency. In the private regulatory model, the fare and frequency of bus services, which are operated by a profit-driven private operator, are optimized for exogenously given toll pricing schemes. Finally, an illustrative example is given to demonstrate the application of the proposed models. Sensitivity analysis of residential/household distribution along the corridor is carried out together with a comparison of four different toll pricing schemes (no toll, first best, distance based, and location based). Insightful findings are reported on the interrelationships among modal competition, market regulatory regimes, toll pricing schemes, and urban configurations as well as their implications in practice.     

Bus congestion, optimal infrastructure investment and the choice of a fare collection system in dedicated bus corridors

Microeconomic optimisation of scheduled public transport operations has traditionally focused on finding optimal values for the frequency of service, capacity of vehicles, number of lines and distance between stops. In addition, however, there exist other elements in the system that present a trade-off between the interests of users and operators that have not received attention in the literature, such as the optimal selection of a fare payment system and a designed running speed (i.e., the cruising speed that buses maintain in between two consecutive stops). Alternative fare payment methods (e.g., on-board and off-board, payment by cash, magnetic strip or smart card) have different boarding times and capital costs, with the more efficient systems such as a contactless smart card imposing higher amounts of capital investment. Based on empirical data from several Bus Rapid Transit systems around the world, we also find that there is a positive relationship between infrastructure cost per kilometre and commercial speed (including stops), achieved by the buses, which we further postulate as a linear relationship between infrastructure investment and running speed. Given this context, we develop a microeconomic model for the operation of a bus corridor that minimises total cost (users and operator) and has five decision variables: frequency, capacity of vehicles, station spacing, fare payment system and running speed, thus extending the traditional framework. Congestion, induced by bus frequency, plays an important role in the design of the system, as queues develop behind high demand bus stops when the frequency is high. We show that (i) an off-board fare payment system is the most cost effective in the majority of circumstances; (ii) bus congestion results in decreased frequency while fare and bus capacity increase, and (iii) the optimal running speed grows with the logarithm of demand.     

Evaluation of Rail Freight Facilities Grant Funding in Britain

Abstract

Rail freight has been generally in decline in many European Union countries in recent years, contrary to European transport policy. State support for railway operations is commonplace in most countries, and this paper establishes the background to targeted rail freight grant funding in Britain. Through desk‐based analysis of Freight Facilities Grant (FFG) awards, together with a survey of recipient companies, the paper assesses the extent to which the planned flows expected from these awards have materialized and it evaluates the role of the grants in influencing rail freight volumes. The evidence suggests that FFG funding has been largely successful, attracting considerable private sector investment. Overall, FFGs have played an important role in developing or retaining rail freight flows, although the processes could be made more transparent and consistent. As other European countries liberalize their rail freight markets as a result of European Union legislation, such targeted funding may be an appropriate alternative to more general government subsidy of freight operations.     

Direct versus indirect models for the effects of unreliability

Two distinguishable modelling approaches exist for modelling the attitudes of travellers to the unexpected day-to-day variability of travel times. The direct approach sees the extent of travel time variability (TTV) as the variable that travellers react to, whereas the indirect approach claims that TTV effects are fully explained by trip scheduling considerations. Past research has not yet overcome the issue of which of these concepts is preferable, especially for public transport users. In the current paper, factors affecting bus users’ scheduling behaviour and attitudes to TTV are investigated, based on a survey among bus users in the city of York, England. The survey methodology and its Internet-based design are described. The results confirm that the influence of TTV on bus users is best explained indirectly through scheduling considerations. The penalty placed on early arrival to the destination is found similar to the penalty on travel time itself; late arrivals are much more heavily penalised. Since the common treatment of TTV in practice is through models that ignore the effect of lateness and earliness, we also examine how using the simple approach rather than the correct one affects the economic interpretation of TTV; the results reveal a massive bias.     

Traffic integration and environmental traffic management in Denmark

This paper assesses Danish experience in attempting to integrate traffic with its surroundings in existing areas. Rest and play areas, quiet roads with a 30 km/h speed limit, and major road schemes on urban shopping streets and through villages are all discussed; so too are policies seeking to create safe routes to school, the problems arising from the introduction of speed reduction measures on bus routes, and the merits of area‐wide as opposed to incremental approaches. Evaluations indicate that speed reductions to a maximum of 30 km/h are achievable on local roads, and that the quiet street approach represents a cost‐effective and popular means of achieving environmental improvements and safer, more liveable streets for residents. It is recommended as an appropriate model for Britain to follow. Incremental implementation risks being sub‐optimal in design terms but has distinct advantages in minimizing conflicts and enabling rapid implementation. Evaluations of shopping street and village schemes are incomplete but speed reductions and environmental gains have undoubtedly been achieved.