Guidelines for Quantifying Benefits of Traffic Incident Management Strategies (2022)

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66 Transforming Quantified to Monetized Benefits The most common quantified outcomes from TIM include reduction in delay, fuel con- sumption, environmental emissions, secondary incidents, and operating costs. Among these, the first four will require transforming outcomes to a monetary value. To do so will require additional information specific to the region as well as the value and costs in dollars for specific data. Section E.1 provides conversion rates based on national data. To the extent feasible, agencies should apply conversion rates based on local conditions and valuations. Section E.2 applies these data and provides formulas to estimate monetary values for delay, secondary incident, environmental, and fuel consumption savings. E.1 National Resources for Conversion Rates Several useful documents focus on the BCA of transportation programs or projects. The Office of Management and Budget (OMB), Office of Secure Transportation (OST), and FHWA have all issued guidance on BCA for projects: • OMB Circular A-94: Guidelines and Discount Rates for BCA of Federal Programs. • FHWA Economic Analysis Primer (2003). • OST Benefit-Cost Analysis Guidance for Discretionary Grant Programs (updated 2021). • U.S. DOT Revised Departmental Guidance on Valuation of Travel Time in Economic Analysis (updated 2016). • Departmental Guidance on Valuation of a Statistical Life in Economic Analysis (2013). • U.S. Energy Information Administration provides fuel cost data for regular and diesel fuel by week from the year 1990 to the present at the national level as well as by national regions. Data can be found at http://www.eia.gov/petroleum/gasdiesel. • Other tables of standard values. The following paragraphs discuss national values and guidance on the discount rate, time horizon, crash cost, passenger and truck value of time, vehicle occupancy rates, air pollutant costs, and travel time reliability. Of note, guidance on valuation of travel time reliability is in development; consequently, monetized rates are unavailable for this TIM outcome. A few regional specifications for the value of time and emissions terms are also provided. Discount Rate As a default position, OMB Circular A-94 states that a real discount rate of 7% should be used as a base case for BCA of programs and projects. The 7% rate is an estimate of the average before-tax rate of return to private capital in the U.S. economy. Circular A-94 states that other discount rates should be used for sensitivity analysis but does not require or recommend a rate, or rates, for this purpose. OMB Circular A-4, which is concerned solely with BCA of regulations, A P P E N D I X E

Transforming Quantified to Monetized Benefits 67   calls for a 3% discount rate for sensitivity analysis. The 3% rate is based on average, over time, yields on U.S. bonds, adjusted for inflation. That value is considered close to the “social rate of time reference,” which represents the rate at which an average saver values future consumption relative to present consumption. The OST guidance for discretionary grants (U.S. Department of Transportation, 2021) requires the 7% rate and 3% for sensitivity analysis. This is the official U.S. DOT guidance. The FHWA primer repeats the OMB guidance for 7% but does not specify a rate for sensitivity analysis. Time Horizon There is little guidance on the choice of a time horizon in the official documents. The FHWA primer says, in effect, that the time horizon should be at least as long as the economic life of the investment with the longest life. This is a valid principle, but the FHWA primer is written in the context of major infrastructure investments (e.g., highways or bridges). ITS projects are, generally, of a different character. There is not one big investment upfront with future benefits and cost streams over decades. There may be little upfront investment. Where there is an upfront investment, it is in the nature of equipment such as cameras or devices that regulate traffic signals according to traffic flows. Such equipment could have relatively short lives—several years. Also, economic lives might be shorter than physical lives as technology becomes obsolete. This last point is especially valid regarding investment in software. Software does not “wear out” but will become obsolete, as software with better features often emerges within a few years or even more quickly. In those projects in the database that report time horizons (relatively few), a 10-year horizon has often been chosen. One cannot make a general statement about what is always right, but this makes some sense for the kind of investments being considered. It is long enough to exceed the economic lives of most of the equipment and software and, thus, to include replace- ment costs for these assets. More research in this area would be helpful. Crash Costs The U.S. DOT guidance on the economic value of a statistical life (VSL) provides a VSL of $9.1 million in 2012 dollars. This guidance also includes a table (shown as Table E1) of the relative values of preventing injuries of varying severity, which is unchanged from the 2011 version of the guidance. The resource guide for discretionary grant applications references the aforementioned VSL guidance and shows the following table, which multiplies the relative values for injury levels by the VSL of $9.1 million. This table does not provide the cost per average crash. Cost per average crash is shown in Table E2. The data on the rate of injuries and deaths per crash are from NHTSA (2011 National Statistics). The data on cost per type of crash are from AIS Level Severity Fraction of VSL Unit Value (2012 $) AIS 1 Minor 0.003 $27,300 AIS 2 Moderate 0.047 $427,700 AIS 3 Serious 0.105 $955,500 AIS 4 Severe 0.266 $2,420,600 AIS 5 Critical 0.593 $5,396,300 AIS 6 Unsurvivable 1.000 $9,100,000 Table E1. Relative disutility factors by injury severity level (AIS) and monetized value of injuries.

68 Guidelines for Quantifying Benefits of Traffic Incident Management Strategies U.S. DOT guidance. Property damage only cost is from the OST guidance for discretionary grants—$3,285, adjusted to 2012 dollars with U.S. Bureau of Economic Analysis deflator for consumption. The OST guidance does not directly provide the cost per average injury (because it does not supply weights for the injury levels). The weighted average cost per injury of $165,000 was provided by Jack Wells, Chief Economist of U.S. DOT, in an e-mail response to an inquiry. Atlanta, Georgia, reported a 69% reduction in secondary crashes (from 676 to 210) in 1 year, which translates to an annual cost savings of $1,611,054 (2003 dollars). This is an average of $3457 savings per secondary crash (Guin et al., 2007). The Motorist Assist programs in Missouri reduced 1,082 secondary crashes per year for an annual net social benefit of $78,264,017 (Sun et al., 2010). Time Value for Passenger Vehicle Occupants and Long-Haul Trucks The U.S. DOT guidance on the valuation of travel time cited above provides the following recommended values for travel time savings: The U.S. DOT guidance on the valuation of travel time and the resource guide for discretionary grant applications (both cited above) provide the following values for travel time savings for drivers of commercial vehicles (Tables E3, E4, and E5): Crash Type Incidence Rate per Crash $/Type $/Crash Property Damage Only 1 $3,424 $3,424 Injury 0.415 $165,000 $68,532 Death 0.006 $9,100,000 $55,180 All $127,136 Table E2. Average monetary values for different types of vehicle crashes. Type of Travel Hourly Value Local Travel Personal $12.00 Business $22.90 All Purposes $12.50 Intercity Personal $16.70 Business $22.90 All Purposes $18.00 Table E3. Recommended hourly values of travel time savings (2009 $ per person-hour). Type of Travel Hourly Value Truck Drivers $24.70 Bus Drivers $24.50 Table E4. Recommended hourly values of travel time savings (2009 $ per person-hour).

Transforming Quantified to Monetized Benefits 69   Although these values reflect the value of the driver’s time, they do not reflect the total time value of the freight-hauling truck. In the passenger vehicle, the passengers are the valuable things being carried, and so their earning power is used to establish time value for the passenger vehicle. In the freight-hauling truck, the valuable thing being carried is the freight, not the driver. In this case, the earning power of the truck is chosen as the correct measure of its time value. This reflects the value the shipper and truck owner place on an hour of a truck’s time. The current estimate of average hourly revenue is $65, based on industry practices and current truck rates. Most regions tend to apply their location-specific value of time unit rates. For example, the Maryland CHART program applied a driver cost of $14.34 per hour and a truck cost (driver and cargo) of $64.99 based on 2005 data. The more recent Road Ranger CBA applies a value of auto driver time at $16.10 per hour and a truck time at $105.67 per hour (Lin et al., 2012). Table E5 highlights other passenger and truck value of time. Occupancy Ratios As shown in Table E6, the 2009 National Household Travel Survey (NHTS) (FHWA, 2009a) provides values for average vehicle occupancy by trip purpose. These values can be used when estimating travel time savings. The NHTS does not directly report the all-non-work category. The all-non-work ratio is useful as it provides some sense of the difference between occupancy in peak and off-peak periods. The all-non-work ratio from NHTS staff was provided in response to a request. Air Pollution Costs The Benefit-Cost Analysis Guidance for Discretionary Grant Programs (U.S. Department of Transportation, 2021) provides the following values for emissions of air pollutants. The guidance, in turn, cites the regulatory impact analysis conducted for the rulemaking setting Corporate Average Fuel Economy for MY2017-MY2025 Passenger Cars and Light Trucks (NHTSA, 2012). NHTSA used EPA values. 2007 2005 2004 2004 2007 2001 2006 1998 13.45 13.75 10.00 10.04 19.14 12.40 15 8.03 71.05 72.65 - 18.61 32.15 - 15 30.38 Khattak and Rouphail Nee and Hallenbeck Guin et al. Hagen et al. Dougald Latoski et al. Haghani et al. MnDOT Table E5. Passenger value of time from previous TIM studies. Type of Trip Occupancy Ratio Work trips 1.13 Shopping/errands 1.78 Social/recreation 2.20 All non-work trips 1.88 All trips 1.67 Table E6. Average vehicle occupancy by trip purpose (person-miles per vehicle-mile).

70 Guidelines for Quantifying Benefits of Traffic Incident Management Strategies The value of avoided emissions of CO2 and other greenhouse gases (GHGs) is not included in Table E7; assigning values for avoided GHG emissions is more complicated. Guidance from the federal Interagency Working Group on Social Cost of Carbon (2013) states that the value of CO2 emissions changes over time and should be discounted at the lower discount rates of 2.5%, 3%, or 5%. The working group has produced a technical support document with a detailed discussion of the methodology for monetizing a change in future carbon emissions. In Atlanta, Georgia, harmful emissions of 2,457 tons, 186 tons, and 186 tons of CO, HC, and NOx, respectively, translate to annual cost savings of $1,247,985, $15,626,587, and $3,368,436 based on 2003 dollars (Guin et al., 2007). Fuel Consumption Fuel consumption costs are typically defined and projected at the state or local levels and can be differentiated by auto and truck market share. Travel Time Reliability Value of reliability—the cost of unexpected delay—is an important element of time cost, but there is no official guidance on this point. U.S. DOT is conducting research with the goal of achieving a valuation method. For freight, one possible approach is examining the rates for premium truck service. A possibility for passenger travel is to find a way to estimate the buffer time that people build into their schedules to avert the cost of an unexpected late arrival. One example is the buffer time built into airport trips where a missed flight is the cost of an unexpected delay. E.2 Application of Conversion Rates This section presents simple formulas for transforming TIM quantified savings to a monetary value. Organizations may modify these formulas to reflect more detailed categorizations and costs as feasible based on localized data. Other TIM outcomes may be monetized using similar techniques. There are two key factors in a successful monetization: realistic quantification of the outcome of interest and realistic monetary values for the outcome at the individual unit level. Delay Savings When assessing delay savings, it is important to consider traffic composition (the percentage of trucks, percentage of local travel), vehicle occupancy, and time valuations for the different categories of traffic in the traffic composition. The most straightforward equation for monetizing delay savings is divided into sections based on the categories of traffic composition. Common categories are local traffic, intercity traffic, and truck traffic. However, additional categories may be added to the modular equation. Pollutant Cost per short ton Cost per metric ton VOCs $1,700 $1,874 NOx $6,700 $7,385 PM $306,500 $337,858 SOx $39,600 $43,651 Table E7. Values for avoided air emissions (year 2010).

Transforming Quantified to Monetized Benefits 71   Delay Cost Savings = DHS × [(FLT × HRLT × ORAT) + (FIT × HRIT × ORAT) + (FT × HRT)] where DHS = Delay savings in hours FLT = Fraction of local traffic (decimal percentage) FIT = Fraction of intercity traffic (decimal percentage) FT = Fraction of truck traffic (decimal percentage) HRLT = Hourly value of time for all local trips (dollars) HRIT = Hourly value of time for all intercity trips (dollars) HRT = Hourly value of time for trucks (driver and cargo) (dollars) ORAT = Occupancy ratio for all trips (people per vehicle) The first section of the equation calculates the monetary savings for local traffic, the second section calculates the monetary savings for intercity traffic, and the third section accounts for the monetary savings of truck traffic. The hourly value for trucks is a unit cost, so a vehicle occu- pancy ratio is not necessary for this component of the equation. Secondary Incident Reduction Secondary incidents range from 1.5% to 20% of the total number of incidents. Most analyses assumed that the severity distribution of secondary crashes reflects the distribu- tion of crashes overall. Table E2 defines general values for property damage only, injury crashes, and fatal crashes and describes the percentage of all crashes in each category based on national statistics. Similar to the technique for calculating delay savings, the value assigned to a secondary crash may be constructed by using the ratio, or probability, that a given crash is either PDO, injury, or fatal. This may be accomplished by using the values in Table E1 but may also be accomplished by applying locally estimated figures. The value for injury crashes in Table E1 is a composite of the costs of any injury crashes, ranging from MAIS 1 to MAIS 5. Average Crash Cost = (FPDO × CPDO) + (FInj × CInj) + (FF × CF) Secondary Crash Savings = Number of Secondary Crashes Prevented × Average Crash Cost where FPDO = Fraction of PDO crashes FInj = Fraction of injury crashes FF = Fraction of fatal crashes CPDO = Average cost of a PDO crash CInj = Average cost of an injury crash CF = Average cost of a fatal crash Emissions Reductions Monetizing emissions is simple when the output of an analysis technique is expressed in a unit of volume, such as kilogram or ton. Costs of some types and quantities of emissions are included in this chapter; others may need to be looked up from the Environmental Protection Agency or state-level environmental organizations. Table E7 and Chapter 2 present values to estimate the value from emissions savings.

72 Guidelines for Quantifying Benefits of Traffic Incident Management Strategies Reduction in Fuel Consumption Many factors affect the rate of fuel consumption. These factors can be broadly categorized into four groups: vehicle, environment, driver, and traffic conditions, among which speed accounts for over 70% of the variability in fuel consumption (Ardenkani et al., 1975). Fuel consumption savings may be determined independently or as a component of delay, depending on the analysis method. Output measured in volume or fluid units is ideal when determining a reduction in fuel consumption due to TIM. When the outcome is in volume or fluid units, the only information necessary is the price of fuel (typically gasoline and diesel) and the composition of traffic using each of those fuels. The following equation is a simple way to calculate monetary savings from fuel consumption reductions. Fuel Consumption Savings = (FGas × FS × CGas) + (FDsl × FS × CDsl) where FS = Fuel savings in volumetric unit (typically gallons or liters) FGas = Fraction of savings from gasoline FDsl = Fraction of savings from diesel CGas = Cost per volumetric unit of gasoline CDsl = Cost per volumetric unit of diesel Lifecycle Estimation of TIM Benefits Typically, state-specific processes and rates are defined in transforming benefits to a net present value. These processes involve two steps. The first step is to estimate future-year monetary values. To convert monetized benefits to future estimates of benefit, a number of approxima- tions must define annual changes over the lifecycle of the project. Four such factors are: • Demand and respective increase in the number of incidents. • Increase in delay from incidents at higher demand levels based on future-year capacity. • Proportion of commercial traffic. • Fuel efficiency of vehicles. Applying these estimates from year to year will yield the projected benefits from TIM in future years. Typically, sensitivity analyses should center on these factors and other potential considerations that change the nature of traffic demand, roadway capacity, incident severity, value of time, the proportion of commercial mix, and potentially TIM operations changes. For example, in a future with driverless vehicles, the cost associated with travel may be less if travelers can use this time for other tasks. Conversely, with the greater presence of collision avoidance systems, the rates of incidents, and particularly secondary incidents, may be significantly curbed. These projections will affect the overall lifecycle value of the TIM program.