A reader writes: “If you live in Whangaparaoa instead of, say, Takapuna, you will spend around 30 minutes extra each way in your car at rush hour. Since in each eight-hour work day most people spend at least a couple of hours doing pretty much nothing (coffee, gossip etc), commuters work an extra day a week, equal to 20 per cent of their salary in lost time/money.”

To me it sounds like the reader might work at the NZTA economics department, as what they describe is the fundamental flaw in how benefit cost ratios are calculated. Anyhow, I responded:

A commuter in Whangaparaoa might spend a lot of time commuting by car, but this isn’t “equal” to 20% of their salary. People choose to commute in their own time, not their employer’s, and the value of this time is up to the individual.

A recent NZTA survey found that 40% of people actually enjoyed their commute – and only 3% specified zero minutes as the ideal commute. Few respondents said they would use the time saved to do work or study. Common responses identified any time savings would be spent on non-work/non-study activities such as sleeping, more time getting ready for work, eating breakfast, family time, household chores and reading.

For additional benefits they could also try the 0897x bus service – tweet and text as much as you like! (phone not included).

In opening a fourth motorway lane between Newmarket and Greenlane, the New Zealand Transport Agency claims benefits of over a million dollars week to the Auckland economy, brought about by peak hour journey time savings of up to five minutes.

It is difficult to understand how this claimed economic benefit is calculated. No commuter using this section of motorway at peak times is likely to arrive at work any earlier or leave work any later – workers travel on their own time, not their employers. For a while they may enjoy an extra five minutes in bed or an extra bowl of cornflakes, but this is unlikely to add up to a million a week for Auckland’s economy.

Courier and freight companies that utilise this section of road more frequently at peak times may enjoy some cost savings, but these would hardly add up to $1m a week either.

The NZTA’s reasoning appears seriously flawed, which is a concern given the billions currently being allocated by central Government to motorway projects, while petrol prices soar to record levels.

On the otherhand, if NZTA want to use this type of economic evaluation, then the CBD rail tunnel must be worth tens of millions a week, since a single railway line can carry 10x more than a single motorway lane in an hour at peak. The CBD rail tunnel will also save more than 5 minutes at peak for Western Line passengers, who can also be productive on their mobile phones at the same time, checking emails and texts.

I haven’t had a chance to read through all 156 pages of the document yet (full title “The Implications of Discount Rate Reductions on Transport Investments and Sustainable Transport Futures”) but will do so when I have time.

It will be interesting to see how independent the research is, given the funders are Roading New Zealand, Downer EDI Works and the NZTA.  Have a look for yourself, here:

BCR study by NZTA

Take the proposed Waterview motorway extension, for example. Treasury and Ministry of Transport officials have worked out that for every dollar spent on the $2.8bn motorway connection between Mt Roskill and Waterview, the economy will receive $1.15 worth of benefits.

In the business case document now being considered by Cabinet, officials point out that “full tunnel” option means that the benefits are only a little in excess of their costs. Some above ground options might save up to $200m from the construction cost, but these have higher social and environmental costs, and also involve the loss of park land and a significant number of houses.

Considering the billions of dollars at stake, one would hope that the economic benefits and costs of the various options are as accurate and as realistic as possible. So are they? Well, no, actually.

Since the 1960s it has been standard practice for the majority of roading economic benefits to be derived from travel time savings that road users can expect to enjoy. For the Waterview extension, maximum travel time savings of 15 minutes are expected. By placing a dollar value on each road user’s time, this equates to $2.6bn worth of claimed benefits.

The reality, however, is quite different. In the long run, an individual’s travel time savings are replaced by longer trips as travel patterns change. Commuters utilise the increased roading capacity by travelling further distances to work and leisure destinations. Eventually, the average amount of time individuals spend in traffic remains unchanged.

This is backed up by recent research from the UK based Centre for Transport Studies. By analysing the outcomes of nationwide travel surveys, their study found that average travel times in the UK have held constant at around an hour a day since the 1970s, despite expenditure of £100bn on roads over the last 20 years in the UK.

Of course it could be argued that had it not been for this massive investment, then average travel times would be much higher than they are currently. However, the study points out that there were marked swings in expenditure over the 20 year period, and hence new capacity becoming available. Throughout all of this, average travel times remained steady.

Here in New Zealand there are no comparable studies, but similar results have been documented in the Netherlands and the United States.

It would seem that promised travel time savings never eventuate in the long term, yet the myth of travel time savings also permeates into other areas. For Waterview, $690m of benefits are attributed to “reductions in frustration due to traffic congestion over and above the benefits gained from travel time savings.” How mental health benefits like this are quantified is not fully explained.

Vehicle operating cost savings of $40m are also claimed, the logic being that faster cars consume less petrol per kilometre. However, there is no evidence at all that households are spending any less on transport as a result of the completion of roading projects in recent years. The most recent Household Economic Survey in 2007 suggests transport constitutes 14% of expenditure for the average household, but no data is available to cover the subsequent period of high petrol prices.

It would seem that the long term benefits of increased road capacity come not from travel time savings, but rather from the increased choice of destinations for road users. Businesses also benefit from a greater catchment area of potential employees. For the Waterview extension, these “agglomeration” benefits could be as much as $607m, but this is still well short of the almost $3bn cost of the project.

An alternative method of estimating economic benefits is based on the user-pays principle. Transport officials have calculated that if the Waterview motorway extension was tolled at $2, then just 50% of motorists, or about 75,000 vehicles a day would consider it economically worthwhile to use the route instead of the existing alternative local roading network. It also follows that if Waterview were to operate as a private toll road, hapless investors would stand to lose about a billion dollars over a 30 year time frame.

A substantial economic risk also exists due to volatile oil prices. Petrol and diesel prices could well return to the record levels seen last year, yet the probability of this occurring does not feature in any economic assessment for Waterview or any other roading project currently on the drawing board.

Right now Cabinet Ministers must decide which one of twelve different options for the Waterview motorway extension makes economic sense. The only honest answer is that none of them do.