National Academies Press: OpenBook

A Guide to Computation and Use of System-Level Valuation of Transportation Assets (2022)

Chapter: Appendix A Details on Economic Valuations

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Suggested Citation:"Appendix A Details on Economic Valuations." National Academies of Sciences, Engineering, and Medicine. 2022. A Guide to Computation and Use of System-Level Valuation of Transportation Assets. Washington, DC: The National Academies Press. doi: 10.17226/26667.
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Suggested Citation:"Appendix A Details on Economic Valuations." National Academies of Sciences, Engineering, and Medicine. 2022. A Guide to Computation and Use of System-Level Valuation of Transportation Assets. Washington, DC: The National Academies Press. doi: 10.17226/26667.
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Suggested Citation:"Appendix A Details on Economic Valuations." National Academies of Sciences, Engineering, and Medicine. 2022. A Guide to Computation and Use of System-Level Valuation of Transportation Assets. Washington, DC: The National Academies Press. doi: 10.17226/26667.
×
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Suggested Citation:"Appendix A Details on Economic Valuations." National Academies of Sciences, Engineering, and Medicine. 2022. A Guide to Computation and Use of System-Level Valuation of Transportation Assets. Washington, DC: The National Academies Press. doi: 10.17226/26667.
×
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Suggested Citation:"Appendix A Details on Economic Valuations." National Academies of Sciences, Engineering, and Medicine. 2022. A Guide to Computation and Use of System-Level Valuation of Transportation Assets. Washington, DC: The National Academies Press. doi: 10.17226/26667.
×
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Suggested Citation:"Appendix A Details on Economic Valuations." National Academies of Sciences, Engineering, and Medicine. 2022. A Guide to Computation and Use of System-Level Valuation of Transportation Assets. Washington, DC: The National Academies Press. doi: 10.17226/26667.
×
Page 181
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Suggested Citation:"Appendix A Details on Economic Valuations." National Academies of Sciences, Engineering, and Medicine. 2022. A Guide to Computation and Use of System-Level Valuation of Transportation Assets. Washington, DC: The National Academies Press. doi: 10.17226/26667.
×
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Page 183
Suggested Citation:"Appendix A Details on Economic Valuations." National Academies of Sciences, Engineering, and Medicine. 2022. A Guide to Computation and Use of System-Level Valuation of Transportation Assets. Washington, DC: The National Academies Press. doi: 10.17226/26667.
×
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Suggested Citation:"Appendix A Details on Economic Valuations." National Academies of Sciences, Engineering, and Medicine. 2022. A Guide to Computation and Use of System-Level Valuation of Transportation Assets. Washington, DC: The National Academies Press. doi: 10.17226/26667.
×
Page 184
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Suggested Citation:"Appendix A Details on Economic Valuations." National Academies of Sciences, Engineering, and Medicine. 2022. A Guide to Computation and Use of System-Level Valuation of Transportation Assets. Washington, DC: The National Academies Press. doi: 10.17226/26667.
×
Page 185

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A-1 A Guide to Computation and Use of System-Level Valuation of Transportation Assets Introduction With the economic perspective, historic data on the use and economic value of an asset serve to mark trends for the current economic value. With this perspec- tive, the current asset is presented as the baseline, and changes to the asset are - paring the total future opportunities an asset generates with the opportunities - lower-cost retailers and increasing their competition. value of each use must be inferred from observations about travel behavior. - cant, observable aspect of travel is the travel time. The value of reaching a destination faster (i.e., travel time savings) is handled in conventional practice as a single value of time regardless of user income, time saved, trip this approach is that a single value of time users, trip purposes, timing, distances, and same regardless of income or other factors. - Appendix A Details on Economic Valuations With- and Without- Project Contexts The basic formula for the economic ap- proach to valuation is the comparison of a baseline scenario to another proposed scenario. With-project contexts and impacts refer to the scenario where the proposed action occurs. Similarly, the without-project contexts and impacts relate to the case where the proposed action does not take place.

Appendix A. Details on Economic Valuation proach. For people who value their free time more than their wages, the cost of notice a reduction in travel time if the savings are a small fraction of their over- asset, resulting in worse travel conditions than before. While theoretical re- search continues to explore these issues related to income and the impact of small travel time savings, standard practice remains in place. The value of time follow. The remainder of this appendix focuses on the major elements of economic with- and without-project impacts, the determination of a present value com- Comparison with Other Perspectives - With each perspective one sets a baseline value, but with the economic per- spective the baseline is not a starting point for future valuation via treatments - thermore, unlike the case of the other perspectives, the economic perspective incorporates both user and non-user impacts, positive and negative. The standard economic approach considers six main categories of user and - Table A-1 compares how the economic, cost, and market approaches to valuation account for these user and non-user elements. economic perspective will often value parallel road corridors higher than the A-2 A Guide to Computation and Use of System-Level Valuation of Transportation Assets

Table A-1. Comparison of the Value Categories Used in Each Valuation Perspective Categories of Asset Value Economic Perspective Cost Perspective Market Perspective Travel Time User Value Implicit in Condition Perceived User Value Vehicle Operating Cost User Value Implicit in Condition Perceived User Value Safety User Value Implicit in Condition Unlikely User Value Asset Maintenance Externality Cost to Maintain Condition Cost to Retain Users Emissions and Pollutants Externality Not Included Not Included Wider Community Impacts Externality Not Included Not Included Appendix A. Details on Economic Valuation - nalities across a greater population. Asset maintenance in the economic approach considers the damage and wear 1, which impact the - - - - 1 Criteria air pollutants are a set of common pollutants found across the US and US Clean Air Act are ground-level ozone, particulate matter, carbon monoxide, lead, sulfur dioxide, and nitrogen dioxide. A-3 A Guide to Computation and Use of System-Level Valuation of Transportation Assets

Appendix A. Details on Economic Valuation - below. Principles of Economic Valuation Several important principles are applied in all economic valuations. First, it is - common basis of understanding. The discount rate, which brings future values projects, depending on the timing and magnitudes of the project impacts. As a Comparative Contexts in Economic Valuation - entail a comparison between the current, or baseline, conditions and the fore- casted future conditions of the asset and other connected assets. Oftentimes, the baseline is a counterfactual with-project conditions to determine the change in value. This constructed valu- ation approach is then applied to assess if a project should be pursued. - baseline are compared to an alternative forecast that shows the impacts of the project implementation. The demand for a new asset (or changes to an existing asset) are estimated from a travel demand model that account for route and modal shifts as well as - tion of the changes attributed to the project so that the costs can be compared - A-4 A Guide to Computation and Use of System-Level Valuation of Transportation Assets

Appendix A. Details on Economic Valuation Comparative Contexts for Economic Valuations of Asset Management - Maintenance activities for one or more assets Maintenance Activities. - - level of maintenance against the current conditions. Principal measures of user value are travel speeds and vehicle operating and maintenance costs, which (51) - to the value measured via the cost approach. Physical Changes. This second case is the most common form of economic - ening, overpasses, and truck lanes), operational improvements (e.g., interchange - - over the life of the projects. System-Wide Assessments. The value of an asset can be evaluated from a aggregated asset perspective, the next best option would be the minor arterials. travel speeds per mile, intersection crossings and signals, and potential levels of - minor arterials. Since major arterials permit faster speeds, their value is expect- ed to be higher, provided that the value of this reduced travel is not overcome A-5 A Guide to Computation and Use of System-Level Valuation of Transportation Assets

Appendix A. Details on Economic Valuation a car can be compared with an option to ride a bike or walk to a destination. - - of perspectives from which a value can be considered. The remainder of this a similar approach can be taken with respect to the other two contexts. Measurement of Value - that such use places upon others. Since transportation assets are a public good, - operating, ownership, crash, and emissions costs are all common elements of - assessments. - crashes while using this asset. The full public welfare impact also accounts for the user-caused pollution externalities and marginal damage to the asset (e.g., be estimated as: User Value = Personal travel time savings and reliability (by type of vehicle, occupancy) Less Personal out-of-pocket vehicle use and ownership costs Less Personal crash risk (including the probability of being in a crash by type) Less Public air and noise pollution costs (including GHG) Less User damage cost on public infrastructure (roadway deteriora- tion) A-6 A Guide to Computation and Use of System-Level Valuation of Transportation Assets

Appendix A. Details on Economic Valuation without- and with-project changes are estimated to determine a net value per period and then discounting, the net present value of with- and without-project contexts can be compared. (48). The - includes: Travel time is one of the most common and important considerations peo- - sured and monetized. Asset improvements can increase vehicle speeds and reduce travel times. Travel time reliability also impacts how users experience and value an Vehicle use and ownership relates to changes in fuel consumption, wear Safety - Asset Maintenance is the damage and general wear-and-tear that a vehicle - with (roads and bridges). Air and Noise Pollution Externalities include criteria air contaminants, greenhouse gas emissions, and noise from vehicles. While criteria air contam- with safety improvement types. A-7 A Guide to Computation and Use of System-Level Valuation of Transportation Assets

Table A-2. . Elements of Economic Value, by Category of Value Value Category Scale of Impact Impact Factors Impact Value per Unit Travel Time Numbers of travelers by mode, and time period Travel times, by mode and time period Value of time Vehicle Operating Cost Numbers of vehicles, by type Travel distance Vehicle speed, by facility Fuel and non-fuel operating costs for autos and trucks Safety Numbers of vehicles, by type Travel distance Crash Rates, by severity Crash costs, by severity Asset Maintenance Numbers of vehicles, by type Travel distance Cost of asset damage per mile for autos and trucks Emissions and Pollutants Numbers of vehicles, by type Travel distance Vehicle speed Pollutant emissions rates per vehicle type Valuation per unit of emis- sions, by pollutant type Noise pollution in $ per mile for autos and trucks Wider Community Impacts Number of vehicles, by type Size of asset Asset proximity Geographic conditions Other factors Cost of impact per unit of asset (e.g. mile of roadway) Appendix A. Details on Economic Valuation - house gas emissions contribute to the widespread threat of climate change. unit basis and are combined with emissions rates to estimate the cost of a with-project context. Noise pollution is estimated as a function of the impact is outlined in Table A-2 - The most common scale is per vehicle, as vehicles are the easiest unit to mea- sure, but conversion factors for the average number of passengers per vehicle - A-8 A Guide to Computation and Use of System-Level Valuation of Transportation Assets

Appendix A. Details on Economic Valuation Estimation of Present Value period of time. Often, it is the length of time that an asset is improved above a given baseline or the expected lifespan of the asset, and it varies depending on value over the time between potential resurfacings or other treatments. The - - of operation, except in the case of transportation facilities (e.g., bridges and structures) that have a much longer lifespan (48) to occur sooner rather than later. A discount rate equal to zero implies that a - a bequest of value for future generations, than to gaining the value for his or (52), though this is - tude of the rate. - occur in the future and have no discernible worth in the present. Think about - time-traveled physically A-9 A Guide to Computation and Use of System-Level Valuation of Transportation Assets

Appendix A. Details on Economic Valuation waiting. To overcome such incongruities in future transportation valuation, it is helpful - because of general preferences for the present over the future and the higher risks in realizing the future value. - - ation, positive discount rates will lower the present value of the future stream future. - ing the appropriate value (53) (54) Circular A-94, the rationale is established for using a 7% real discount rate (which approximates the marginal pretax rate of return on an average invest- - A-10 A Guide to Computation and Use of System-Level Valuation of Transportation Assets

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Determining the value of a transportation organization's physical assets is important for both financial reporting and transportation asset management (TAM).

The TRB National Cooperative Highway Research Program's NCHRP Web-Only Document 335: A Guide to Computation and Use of System-Level Valuation of Transportation Assets details how to calculate asset value and use it to support application in TAM.

Supplemental to the document are summary of the research project activities and recommendations for implementation.

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