Action for Public Transport (N.S.W.) Inc.

Action for Public Transport (NSW) is a transport advocacy group, which has been active in Sydney since 1974. We promote the interests of beneficiaries of public transport; both passengers, and the wider community. We make the following submission on the documents released for public consultation in June 2017:

• Economic Analysis Overview
• Measuring Wider Economic Benefits in Australian Cities

The gist of Economic Analysis Overview appears to be that Cost Benefit Analysis ("CBA") will continue to be given primacy in the assessment of transport proposals. The document recommends that some "wider economic benefits" ("WEB") be incorporated into CBA, in the manner set out in Measuring Wider Economic Benefits in Australian Cities. The Economic Analysis Overview also outlines some other methods of assessment and suggests that some of these can supplement CBA.

APTNSW contends that CBA has proven to be deeply flawed as a tool for making sound decisions about transport. This is partly due to its inherent failure to pay attention to where and on whom costs fall and benefits accrue. An uncritical acceptance of benefits stated by project proponents, notably the stated ability of road projects to reduce traffic congestion, exacerbates this inherent weakness of CBA.

Notwithstanding our view that CBA is not fit for purpose in this context, APTNSW is pleased to see attention being given to wider economic benefits. We expect some good can come of the inclusion of agglomeration benefits and employment benefits, which high levels of public transport accessibility offer. We suggest however that these benefits go well beyond the increased tax receipts the document Wider Economic Benefits acknowledges.

Limitations of CBA

The document Wider Economic Benefits (p.10) confirms that CBA "adds together costs and benefits regardless of to whom they accrue", to produce the single ratio known as the cost benefit ratio. If the situation were to reverse, and all the "winners" were to become "losers" and vice versa, the CBA would not change one iota, and yet the outcomes for real people in the real world would be completely different.

Where and on whom costs fall and benefits accrue is not irrelevant to responsible decision makers, and nor should it be.

Economic Analysis Overview suggests other forms of assessment can complement CBA analyses, and document F3 suggests that decision makers should be made aware of other impacts such as of equity impacts (document F3 p.12). All the same, there is a tendency for decision makers, commentators and political opponents alike to focus on the single ratio.

Given the limitations of CBA, it is not safe to leap to the conclusion that a proposal with a ratio of less than 1:1 is a "waste of money" whereas anything with a ratio of more than 1:1 is the responsible choice to make. Nor is it safe to conclude that a project with a higher cost benefit ratio is necessarily the best choice. In the case of public transport, projects in areas where services are poor can fare worse in CBA than areas where service levels are comparatively high, and hence better patronised.

Serious policy choices are embedded in the guidelines, but it is unlikely that decision-makers and commentators have any real understanding that this is so.

Failure to consider alternative ways to address identified problems

It is of great concern to APTNSW that NSW transport planners have been instructed not to consider rail alternatives to the F6 extension, regardless of whether prioritising rail might do more to reduce travel times than "the initiative" actually being assessed. See http://www.smh.com.au/nsw/f6-planners-told-to-ignore-public-transport-build-roads-documents-show-20170407-gvgbon.htm.

We appreciate that CBA is seen by ATAP as part of step 3 in the ATAP framework (T2 Cost benefit analysis p.4). Step 3 is Options generation assessment (document F3). There seems however to be a problem in practice in the way options are generated (or discarded). It is concerning that the document Cost benefit analysis suggests that a "rapid appraisal" can ignore anything that is "hard to measure" (CBA p.7). This is likely to impede proper consideration of public transport projects.

Garbage in, garbage out

The Westconnex New M5 Project Overview contains empirical evidence that it is unlikely to achieve its stated objective of reducing travel times, at least not for long. It notes (p.9) that the "old" M5 East was congested within just six months of its opening in 2001, and now experiences the slowest typical travel speeds of any of Sydney's main motorways (WestConnex: the New M5 Project Overview, p.9).

And yet, the claim that expanding road space in highly developed urban areas will improve travel speeds continues to be made, and built in to the assessment of projects like Westconnex as a benefit of the project. Cost benefit analysis then busies itself attributing a value to illusory time savings. Something very peculiar is going on here.

It appears from p.15 of the discussion paper Measuring Wider Economic Benefits in Australian Cities (3.1.2) that the problem may lie in the inputs to the CBA exercise, the "strategic transport model".

We note that Document T1 Travel Demand Modelling does deal with the phenomenon of induced traffic and note with alarm the observation that a modal shift from public transport can account for up to half of the estimated induced traffic on a road corridor (p.29).

Document F3 p. 19 states that a CBA should be "supported by strong evidence" (p.19), and p. 20 speaks of "benefit management" which asks (after the event) whether an initiative achieved its outcomes. It is not clear however that if the answer is "no", as in the case of the "old" M5, that empirical evidence has any effect on subsequent proposals to do much the same thing. A lack of proven efficacy seems to be no barrier to prescribing the same remedy, over and over.

APTNSW regards this as a profoundly unsatisfactory way to proceed. We are concerned that too much reliance is placed on theoretical models, and too little attention is paid to empirical evidence.

Land use impacts

APTNSW strongly agrees with the recognition of the "city-shaping" effects of major transport interventions (Measuring WEB in Australian Cities p.11 at 2.2.1). We welcome ATAP's recognition that the assumption that land use is fixed is the source of serious error.

We hope ATAP is on its way to killing off the "invisible worm" identified by Dr David Adams, in his evidence to the recent House of Representatives Inquiry into the role of transport connectivity in stimulating development and economic activity. Dr Adams argued:

So the invisible worm in Australia is that the national guidelines used for evaluating transport projects instruct the person doing the evaluation to ignore land value impacts. So all of the appraisers in Australia have been instructed to ignore land value impacts

Dr Adams' criticism related to a reference to Volume 4, chapter 2 which says (or said at the time):

... increases in land value that may result from urban public transport initiatives are generally a capitalisation of other benefits. Accordingly, they should not be included in economic appraisal of initiatives because this would double-count benefits.

Dr Adams suggested that this is nonsense, and we agree:

What I am suggesting to you is that the high-speed rail phase 2 report was derailed because the worm in the national guidelines ate away at it. The terms of reference for the high-speed rail phase 2 study is 17½ pages long. … Ninety-five per cent of those terms of reference instructed the study to assume that land use was fixed. Ninety-five per cent said, 'Assume that nobody changes where they live as a result of high-speed rail', because that is what the national guidelines say. That is a nonsense, and, by implication, the findings of the study are therefore a nonsense. You ask the wrong question, you get the wrong answer (p.13)

Land take

In addition, we suggest that ATAP needs to recognise that transport systems (especially rail) do more than shape land uses – they are land uses in their own right; they utilise space which can be very valuable and for which there are other potential uses. Public transport alternatives use valuable land much more efficiently.

Dr Adams told the House of Representatives Committee that he had calculated that roads constituted 17.5 per cent of the land area of Melbourne (Official Committee Hansard, Standing Committee on Infrastructure, Transport and Cities, Monday 7 March 2016, p.13; http://www.strategex.com.au/wp-content/uploads/2015/04/More-productive-space-and-time-Exec-Summary.pdf. The associated parking is not included in this estimate. Since additional road space in urban areas is designed to accommodate peak demand, it is inevitably fully utilised only in peak periods.

Even if major new roads are built partly in tunnels, the associated portals and ramps inevitably consume large quantities of land, as the image below shows.
Source: M5 EIS Figure 5-10

At present, the paper on Wider Economic Benefits does not appear to capture this crucial land use impact. We hope that this will shortly be rectified.

Social benefits

APTNSW welcomes the recognition of labour market impacts as a wider economic benefit that should be captured in CBA (Measuring WEBs in Australian Cities). We believe that the calculation proposed at p.20 is however much too narrow:

"The welfare benefit then is the additional tax revenue receive by the government, which is a combination of taxes on labour (income and payroll tax) as well as tax on the additional output created by businesses" (p.21)

Encouraging the under-engaged and disengaged workforce into active employment (p.9, 2.1.2.1) does more for society in general than creating additional taxpayers. When a welfare recipient is able to become self-supporting this is a benefit to whole society, not simply a “personal” dollar benefit. The high health costs, instability of housing and education, and pattern of intergenerational disengagement associated with unemployment and underemployment are well documented. The cost to Federal and State budgets is considerable, and any form of analysis that is blind to these factors is in our view not fit for purpose.

We hope the next revision will approach the wider economic benefits of connecting people to employment opportunities (and educational opportunities) in a more realistic, less blinkered way. Whether or not they should be categorised as "workplace impacts" or as "social benefits" is open to debate (see http://www.aptnsw.org.au/documents/ipart_ext_benefits_2.html). Either way, it is deeply unsatisfactory to persist with appraisal methods that render such impacts invisible to decision makers.

Conclusion

APTNSW thanks ATAP for the opportunity to comment on these documents. We hope that they are made more accessible to a wider audience. We see a role for transport users, transport specialists, land use planners and behavioural economists, as well as transport modellers and classical economists.

We appreciate the progress that has been made towards less blinkered and biased appraisal techniques, and hope to see progress continue.