We are very good at calculating costs, but bad at tabulating benefits.Green Line: Let’s talk about money
If you are a semi-occasional reader of Spur, you might have noticed that I tend to avoid talking about costs when discussing projects like the Green Line. I very rarely talk about specific dollar values, and when I speak on the radio I tend to avoid them as well.
Part of the reason is that I often don’t have access to meaningful numbers. Sure, reports come out here and there about how much the project is going to cost, but these numbers are usually wild estimates. For example: some of the more recent numbers I’ve heard are Class 5 estimates, meaning that the cost can vary as much as 100% of its original number.
Another reason I avoid talking about project capital costs specifically is that I find it becomes a distraction argument. We, as a society, are very good at calculating how much money we will have to spend on something, but we are generally very bad at measuring the benefits, especially when it comes to public transit infrastructure. On top of that, most of the benefits come over time, while the costs that make the news are one-time expenditures. These are extremely hard to compare, and it makes “cost-benefit” analyses a bit of a crapshoot.
Instead, I try to rely on arguments rooted in geometry, planning, and a body of evidence on how similar projects have helped cities around the world. Usually, over an extended period of time, it is easier to demonstrate if a project has provided significant benefit to the city.
Plan then fund, not the reverse
There are a number of city councillors, and I would include the Mayor in this as well, who are looking at the planning exercise of the Green Line from the wrong direction. They are treating the project like someone walking into a hardware store with a fixed wad of cash and seeing what kind of shed they can build. Projects like the Green Line aren’t one-time, one-size things. When councillors complain that they can’t plan something if they don’t know how much money they have, they are not thinking about it the right way.
Instead, we need to follow a series of linear steps:
- Envision the project. Decide what the Green Line means for the future of Calgary and what we want it to do for our city. This requires thinking about people 100 years in the future as much as ourselves.
- Plan the project. Figure out how to make the Green Line accomplish our vision for it. The outcome of this is a decision of where the Green Line will go. This is the stage we are currently in.
- Fund the project. Gather as much money as possible, from the province, the feds, and from the city. Figure out how much you can build with that project. If the vision form step 1 is ambitious, as the Green Line vision is (and the Red and Blue lines were), then it may take a few phases of funding.
- Build the project. Turn all that good good planning into reality.
Getting into the numbers
Danielle Smith asked me whether 6, 8, or 10 billion dollars was too much for a project like this. That’s always a tough question to address, because $8 Billion is an unfathomably large number for most people to wrap their heads around. It seems like an astronomical amount of money to spend on something that an individual might never use.
It’s also, as I said, hard to compare that with the daily benefits people see from the Green Line, but let’s try it anyway:
I’ll use the $8 Billion number. We shouldn’t just divide 8 billion by, say, a lifetime of 80 years because that wouldn’t account for the fact that a loonie in 2097 is likely going to be worth less than a loonie today, but I’m going to do it anyways call it an overestimate just to prove the point. If we have the Green Line in our city for 80 years, that works out to $100,000,000 a year or $273,972.60 a day in spread out capital costs. Of course, this doesn’t count operational costs, but that discussion has hardly entered into any of the conversation surrounding the cost of the Green Line so I’ll ignore it for now.
Now let’s turn to benefit: Suppose we have an average of 80,000 daily riders on the line over those 80 years (the projected ridership is 90,000/day not accounting for the growth of the city over time). If they save, on average, 15 minutes of travel time (higher frequency of LRT means less transfer time, shorter access times, etc.), and we value their time at (a measly) $15/hour that works out to a daily benefit due to reduced travel time of $300,000 a day.
We’ve already recovered the capital cost, but let’s move on.
Taking the LRT is safer than driving, since you are much less likely to get in an accident. Costs to society due to car accidents are tricky to find data for in Canada, but working from this website (and lowballing the numbers continuously) the cost of traffic accidents works out to about $1100 CAD per person per year (from a combination of personal damages and medical costs to society). With 1 million Calgarians, even a reduction in accidents of one tenth of one percent (0.1%) works out to a savings of $301,369.86
Now we’ve doubled our return. What next?
Oh, yeah – tax revenue due to increased density/better city planning around the Green Line. This one is beyond my ability to calculate, though I’m sure the city has included this in their estimates.
There are other benefits that are even harder to measure – the value of improved freedom of mobility, health benefits from a more active transportation mode, the reduction in car dependence, the benefits to the environment. All of these have value on similar scales to the numbers I provided above, but they are hard to calculate. I’m not going to pretend to be an economist and find these values – Let’s just weight those benefits against the operational costs and call it a wash.
Here’s my point: Talking about costs is important, from a funding logistics point of view. It should never interfere with a planning exercise or with visioning what a project will do with the city. The costs will easily be recovered over time, I think I have demonstrated that.
Hopefully the people making decisions at City Hall understand that too.