Southeast Connector Benefit-Cost Analysis Technical Document

Transcription

1 Southeast Connector Benefit-Cost Analysis Technical Document Prepared for the City of Des Moines By Wilbur Smith Associates March 2012

2 Benefit-Cost Analysis Technical Document Table of Contents 1.0 Introduction Estimating Approach Methodology Assumptions and Parameters Project Costs Basic Project Benefit Estimates Vehicle Miles Traveled Vehicle Operating Cost Savings Vehicle Hours Traveled Travel Time Savings Motor Vehicle Emissions Crash Reductions Summary of Benefits Job Creation Short-term Construction and Maintenance Job Benefits Induced Jobs and Property Taxes from Development/ Redevelopment Summary of Benefit-Cost Analysis Sensitivity and Risk Analysis Potential Benefits Not Accounted for in this Analysis Figures and Tables Figure 1: Project Area... 3 Table 1: Assumptions and Parameters... 5 Table 2: Capital Costs of Construction... 7 Table 3: Forecast Reduced Carbon Emissions... 9 Table 4: Existing Crash Rates (per 100 million vehicle-miles travelled) 2004 to Table 5: Crash Rates used to Estimate Future Crash Rates for Southeast Connector Table 6: Crash Reduction Estimates Table 7: Benefit-Cost Analysis Results Table 8: Sensitivity Analysis and Benefit-Cost Ratio Wilbur Smith Associates Southeast Connector March Page 1 of 16

3 Benefit-Cost Analysis Technical Document 1.0 INTRODUCTION This report summarizes the results of an updated benefit-cost analysis performed for the Des Moines Southeast Connector, proposed as an arterial connector road in Southeast Des Moines and Western Pleasant Hill Iowa. The project area is shown in Figure 1. The SE Connector is a proposed Complete Street four-lane roadway connecting downtown Des Moines, through the industrial southeast quadrant of the city, to the U.S. 65 Beltway. The project will provide a direct connection for residents and businesses through this area, while also providing a trail, bicycle lanes, and sidewalk along the entire length of the roadway. The segment of the SE Connector proposed for a 2011 TIGER Discretionary Grant runs from SE 14 th Street to SE 30 th Street. The portion of the project from downtown to SE 9 th Street is completed and SE 9 th Street to SE 14 th Street will be under construction in The SE Connector addresses several desperately needed improvements in the southeast quadrant of the city. These include: Enhance Road System Connectivity Provide a direct transportation route between downtown Des Moines and SE 30 th Street to improve community and business access and goods movement in the region. Improved Capacity Improve the capacity of the road system in southeast Des Moines. Economic Development Provide an east-west connector to serve current land use, promote infill development, and support planned growth and development. Safety Provide a safe and efficient road for traffic and improve emergency responses. For this study, the benefit-cost analysis for the proposed project was performed for a 30-year period extending from the opening year in 2015 to a horizon year of A right-of-way and construction acquisition phases from 2011 to 2014 was also included. This technical memorandum provides an updated benefit-cost analysis based on the most recent traffic and revenue study and environmental/carbon footprint analysis completed for the project. The following topics are addressed in this report: Methodology adopted Summary of costs Summary of benefits Project related benefit-to-cost ratio, and Sensitivity analysis of the benefit-to-cost ratio. Benefit-cost analysis was performed by applying the net present value (NPV) method. The forecast costs and economic benefits shown in this report are presented in year 2011 dollars. Wilbur Smith Associates Southeast Connector March Page 2 of 16

4 SE 17TH ST SE 6TH ST SE 7TH ST S PLEASANT HILL BLVD SE 21 ST SE 25 CT SE 26 CT 29TH E LINDEN BLVD SE SHADYVIEW DR SE 16 CT E 28TH CT SE SHADYVIEW DR GRAND AVE E KASSON ST COURT AVE E SE 5TH ST VINE ST SE 7TH ST SHAW ST Allen Park Iowa State Capitol Sam Cohen Park SE 9TH ST DEY ST RACCOON ST SE 8TH ST SE 10TH ST Stewart Square SE 12TH ST E 14TH ST SE 13 ST 69 WALNUT ST E DEAN AVE JOHNSON CT SE 14 CT SE 15 ST VINE ST E SE 15TH CT DEAN AVE ASTOR ST ASTOR ST E 16TH ST Redhead Park Fire Station 2 E 18TH ST SE 18 ST SE 19 ST SE 20TH ST SCOTT AVE E 22ND ST MAURY ST E 23RD ST MARKET ST E SHAW ST SE 23 CT E 24TH ST SE 24TH ST DEAN AVE SE 24TH ST Dean Lake SE 25 ST LOGAN AVE SE 25TH CT ELM ST E Chesterfield Park SE 27 ST SE 27TH C SE 28TH ST SE 28TH S SE 28TH CT 29TH E 29TH SE 29TH CT E Willard Elementary School RACCOON ST 29TH CT SE CARR ST E 31ST ST RACCOON ST MAURY ST Iowa State Fairgrounds CARR ST SE 32ND CT 33RD SE 33RD SE DEAN AVE 33RD CT S 34TH SE 35TH E COURT AVE E LAUREL HILL RD 35TH SE 36TH SE SCOTT AVE WILLIAMS ST DEAN AVE Gay Lea Wilson Trail E 44TH ST CHRISTIE LN FAIRVIEW DR GRANT CIRCLE LEXINGTON DR DEE DR PARKVIEW DR N PLEASANT HILL BLVD PARKRIDGE AVE ASH DR WALNUT DR HILLCREST DR OAKWOOD DR BIRCH BLVD Doane Park BEECH BLVD ORCHARD DR PARKWOOD BLVD HICKORY BLVD BECKYLYNN BLVD SE 4TH ST VALE ST John Pat Dorrian Trail SE 5TH ST JACKSON AV E E GRANGER AV RAILROAD AVE Hawthorn Park Des Moines River Chesterfield Community Center VALE ST HARRIETT ST Iowa Health s La Clinica de la Esperanza C B AND Q ST SE 30TH ST E GRANGER AV Four Mile Creek Four Mile Twp. INDIANOLA AVE HILLSIDE ST E DUNHAM AVE E EDISON AVE E SE 5TH ST SE 8TH ST SE 5TH ST BROAD ST E VIRGINIA AVE E Fire Station 6 SE 7TH ST E BROAD ST GRATIS AVE PIONEER RD E LACONA AVE SE 8TH ST CT SE 9TH ST SE 9TH ST SE 14TH ST SE 14TH ST KIRKWOOD AVE E SE 10TH ST SE 14 CT HARTFORD AVE E Pioneer Park BELL AVE E CRESTON AVE E KING AVE GLENWOOD DR E VIRGINIA AVE E E PLEASANTVIEW DR KIRKWOOD AVE E SE 17TH ST SE 18TH ST SE 18TH CT KING AVE BELL AVE E SE 19TH ST SE 20TH ST SE 22ND ST E VIRGINIA AVE RIVER RIDGE RD GLENWOOD DR RIVERWOODS AVE CARLISLE RD Proposed Agrimergent Technology Park SE 42ND ST VANDALIA RD Des Moines SE 43RD ST Pleasant Hill 65 Allen Twp. Legend TIGER Grant Project Area Community Boundaries Rail Line Designated Truck Routes SE 9th to SE 14th Construction SW2nd to SE 9th - Constructed Fire Station Police Church Community Center/School Cemetery Hospital ,500 3,000 Feet Urbandale Des Moines 235 West Des Moines Altoona 65 Figure 1

5 1.1 Estimation Approach Benefit-Cost Analysis Technical Document Economic estimation of user benefits and its relationship to project costs is customarily performed for major investments and contracts let by sponsoring agencies such as the City of Des Moines. A multitude of estimation tools are available to determine the value of a proposed improvement or group of improvements. Under most scenarios, the proposed project is evaluated over a period of 20 or more years to prepare an accounting of project costs and economic benefits or impacts, typically on an annual basis. The results of this exercise, when appropriately discounted, aids and informs decision-makers whether to pursue an investment, generally involving public monies. For this updated benefit-cost analysis, Wilbur Smith Associates used a series of spreadsheets to analyze the benefits and costs. Data used in the benefit-cost analysis came from the following sources: The regional travel demand model as adapted for use in the Southeast Connector Traffic Analysis Study. Iowa Department of Transportation Crash Data. Iowa Workforce Information Network Employment and Wage Data. FHWA Guidance on Preparing Benefit-Cost Analyses and Grant Applications for TIGER Grants including the 2011 TIGER Discretionary Grants Notice of Funding Availability. DOT Memorandum on Treatment of the Economic Value of a Statistical Life in Department Analyses 2009 Update. The general benefits calculated for the project are the same as the prior analysis and include: Changes in Vehicle Miles Traveled (VMT) Travel time savings Vehicle operation cost savings Tax benefits from job creation Accident reductions, and Vehicle emission reductions. This analysis introduces the additional consideration of job creation and taxation benefits due to job creation as a factor in the analysis. Other types of benefits may be estimated under special circumstances and where supporting data is available. This includes such categories as benefits derived from mode change, or improvements to habitat or conservation. No special or uncommon benefits were calculated as part of this analysis. Wilbur Smith Associates Southeast Connector March Page 4 of 16

6 1.2 Methodology Benefit-Cost Analysis Technical Document This analysis considered the benefits and costs through calculation of the project s net present value (NPV) in 2010 dollars. This approach includes a summation of initial construction costs along with ongoing operations and maintenance expenses expressed in present value (2010 dollars). These project costs are then compared to the monetized user benefits likely to accrue from the proposed construction. The resulting difference, itemized annually, accounts for the net present worth of the project. The ratio of user benefits to construction costs when expressed in terms of present value yields the benefit-cost (B/C) ratio. In addition, the net present value of a project should reflect a positive economic return within an acceptably long analysis horizon or payback period. In both cases, a higher value is more desirable. The approach estimates the benefits based of traffic and other estimates for 2030 (build and no-build) and interpolated or extrapolated for an analysis period of 2015 to 2045, consistent with the prior analysis. Traffic forecasts under No-Build and Build Scenarios were obtained from the Regional Travel Demand Model for the Des Moines Area Metropolitan Planning Organization as used in the 2009 Southeast Connector Traffic Analysis. The analysis had a 2005 base year and 2030 horizon year for build and no-build scenarios. 1.3 Assumptions and Parameters The benefit-cost analysis used the key assumptions and parameters listed in Table 1. All of these were in the range of similar assumptions used for benefit-cost analysis on other projects. Table 1: Assumptions and Parameters for Benefit-Cost Analysis Assumption/Parameter Value Source/Notes Value of Time $15 per hour for cars $25 per hours for trucks Average values based on a survey of various reports on travel time values for Midwest States. Vehicle Operating Costs $0.23 per mile AAA and NADA average cost per mile of vehicle operations data. Value of Crash Reductions Fatal: $5.8 million Injury: $214,000 Property: $8,582 DOT Memorandum on Treatment of the Economic Value of a Statistical Life in Department Analyses 2009 Wilbur Smith Associates Southeast Connector March Page 5 of 16

7 Benefit-Cost Analysis Technical Document Update and National Safety Council Data (2000) Value of Carbon Emission Reductions $2.75 per metric ton Recent Values for Chicago Climate Exchange Data Value of Jobs $45,160; $34,319; $42, Iowa Wage Survey Data Adjusted to 2010 for compilations of classifications including Construction, Engineering, and General (Average) Labor; Average Wage for the IWIN Survey Area that includes Des Moines; Average wage compilation for several wage categories representative of industries in the study area Tax Rate Applied 19.40% Based on IRS Data on Average Federal Percentage Paid plus Iowa State Tax Rate Data Discount Rates 3%/7% 2011 TIGER Discretionary Grants Notice of Funding Availability Inflation Not Applied All values in 2010 Dollars 2.0 PROJECT COSTS Project costs considered in this analysis include the up-front construction related expenditures, followed by annual estimates for ongoing operations and maintenance. Cost estimates were developed as part of the EIS and incorporated in this analysis. No changes to the cost estimates were made compared to the prior analysis other than to assume the previous construction costs allocated to 2011 would now occur across the entire construction period. The total capital and operating costs involved with the proposed project until year 2045 are provided in Table 2. All costs are presented in 2010 dollars. The total capital cost of the proposed project would be approximately $64.9 million and total annual maintenance costs would be about $87,000. Wilbur Smith Associates Southeast Connector March Page 6 of 16

8 Benefit-Cost Analysis Technical Document Table 2: Capital Costs of Construction (2010 Dollars) Element 2010 Dollars Engineering Design $11,460,000 Right-of-Way $6,558,000 Bridges $11,090,000 Roadway $35,764,000 Total Capital Cost $64,872,000 Average Annual Maintenance Cost $87,000 Source: Southeast Connector EIS Engineering Report Cost Estimates and City of Des Moines Maintenance Estimates 3.0 BASIC PROJECT BENEFIT ESTIMATES The proposed project will have several key benefits for the traveling public and the regional economy based most heavily on the reductions of travel times and distance traveled by motorists. The following sections provide an analysis of each of the key benefits in more detail. 3.1 Vehicle Miles Traveled Savings Vehicle Operating Cost Savings The analysis of the reduction in vehicle miles traveled was based on data provided from the 2009 Southeast Connector Traffic Analysis. In assessing the change in vehicle miles traveled, both the diverted and induced trips need to be considered. Diverted trips from existing roads will result in a decrease in overall vehicle miles traveled while induced new trips to the study area will increase overall vehicle miles traveled. The analysis of the reduction in vehicle miles traveled took both of these types of trips into account and examined the change in total network vehicle miles traveled in 2030 for both Build and No-Build scenarios. The Build Scenario showed a total reduction in network vehicle miles traveled of approximately 3.98 million miles per year in 2030 compared to the No-Build Scenario. This analysis was completed for the SE 14 th to Southeast 30 th section of the Southeast Connector assuming the ongoing construction of sections west of SE 14 th Street. Using the 2030 vehicle miles traveled data, estimates were determined for all of the years in the study period using interpolation/extrapolation, assuming that 75% of the savings occur on Wilbur Smith Associates Southeast Connector March Page 7 of 16

9 Benefit-Cost Analysis Technical Document opening of the new roadway in The savings in VMT used was approximately 3.0 million miles in 2015, rising to approximately 5.0 million miles in The reduction in net vehicle miles traveled results in several economic benefits including potential motor vehicle emission reduction benefits discussed in Task 3.3 below and potential crash reduction benefits discussed in Section 3.4. One of the largest potential savings is reduced cost of operating vehicles through less fuel use and less wear on vehicles. Using an average cost per mile of 23 cents (AAA and NADA data), this translates to approximately $687,000 in savings in 2015 and $1.1 million in annual savings by The results of this analysis were integrated into the overall benefit-cost analysis tables discussed in Section Vehicle Hours Traveled Savings - Travel Time Savings The new bridge would also save travel time for diverted travelers. These saved hours also translate into economic benefits based on the value of motorist s time. The traffic model data along with field traffic signal data was used to form estimates of the time saved by users of the Southeast Connector. This analysis identified that approximately 109 hours a day would be saved in 2015 and 180 hours per day in This translates into approximately 40,000 hours saved in 2015 and approximately 67,000 hours saved in Estimates were determined for all of the years of the study period using interpolation/ extrapolation of the model data. The study team researched several values of time used on similar projects in the Midwest and used values of $15 per hour for passenger vehicles and $25 per hour for trucks. Approximately 15% of future users of the Southeast Connector are anticipated to be trucks. These figures are within the range of estimates that is typically used for benefit-cost analyses. Using this value of time, the time saved in 2015 is worth approximately $600,000 dollars while the time saved in 2035 would be worth approximately $1.1 million dollars. The results of this analysis were integrated into the overall benefit-cost analysis tables discussed in Section Motor Vehicle Emissions Benefits The reduction in vehicles miles traveled and vehicles hours traveled, as discussed in the sections above, will have a beneficial effect on air quality through reduced motor vehicle emissions. Of particular interest is the potential reduction of carbon dioxide emissions. A separate emissions analysis was conducted based on the same model traffic data used for this benefit-cost analysis. This was based on the same net decrease in vehicle miles traveled discussed in Section 3.1. The emissions analysis resulted in the identification of reduced carbon emissions as a result of the project as shown in Table 3. This reduced emissions forecast was extrapolated for the remainder of the forecast period of the benefit-cost analysis. Wilbur Smith Associates Southeast Connector March Page 8 of 16

10 Benefit-Cost Analysis Technical Document Table 3: Forecast Reduced Carbon Emissions Year Net Annual Reduction in Fuel Use (gal) Net Annual Reduction Carbon Emissions (metric tons) ,372 2,626 The reduced carbon emissions have economic value due to the improved health and environmental conditions resulting from reduced emissions. The market value of carbon emissions is best estimated based on carbon markets and value of carbon off-set credits. With current economic conditions, the value of carbon reductions has decreased substantially compared with the timing of the previous benefit-cost analysis based on values shown by exchanges such as the Chicago Climate Exchange. While once a value of $15 per ton would have been a logical estimate, more recent conditions have placed the value of reduced carbon emissions at $2.75 or less per ton and this is the value used in this analysis. The reduced carbon emissions have a value of approximately $5,500 in 2015 and $8,900 annually in The results of this analysis were integrated into the overall benefit-cost analysis tables discussed in Section Crash Reduction Benefits Another economic benefit of the Southeast Connector is a likely reduction in fatal crashes as a result of reduced travel. Crashes are often extremely costly in terms of loss of life, productivity due to injury, and vehicle or other property damage. To compute crash benefits associated with the proposed project, the accident history for existing routes in the project area was examined. Data and crash maps from the Iowa Department of Transportation were obtained for the latest five year period available ( ) for the study area roads. These were used to calculate an average crash rate for study area roads based on existing traffic volumes and miles traveled. The existing study area crash rates used for this analysis are shown in Table 4. Table 4: Existing Crash Rates (per 100 million vehicle-miles travelled) 2004 to 2008 Study Area Five Year Average Crash Rates PDO Injury Fatal Total Existing Study Area East-West Roads Source: Iowa Department of Transportation Crash Data and Existing Study Area Traffic Volumes The total costs associated with each type of accident were obtained from guidelines/studies published by the DOT (Treatment of the Economic Value of a Statistical Life in Department Analyses 2009 Update) and National Safety Council (NSC) and the Urban Institute (2000). This included $5.8 million for a fatal crash, $214,000 for an injury crash, and $8,582 for a property damage only crash. Wilbur Smith Associates Southeast Connector March Page 9 of 16

11 Benefit-Cost Analysis Technical Document The difference in number of crashes under Build and No-Build Scenarios were calculated based on the change in vehicle miles traveled and the change in crash rates based on roadway type. The new roadway is projected to be a municipal arterial and the Iowa DOT crash rates for a similar facility for 2004 to 2009 (the most comparable time period to the study area crash data available) were used to estimate future crash rates on the Southeast Connector. These rates are shown in Table 5. Table 5: Crash Rates used to Estimate Future Crash Rates for Southeast Connector 2004 to 2009 Average Crash Rates PDO Injury Fatal Total Iowa Municipal Routes ( ) Source: Iowa Department of Transportation Crash Data The existing study area routes have substantially lower injury crash rates and slightly lower property damage only crash rates than the average for a route like the Southeast Connector. However, the fatal crash rate is substantially higher on the existing route than state averages. As a result, there are potential crash savings due to reduced fatalities and also due to reduced overall vehicle miles traveled. These savings would be partly off-set by slightly higher crash estimates for injury crashes on the Southeast Connector. Table 6 shows the crash reduction estimates. Table 6: Crash Reduction Estimates Factor Estimate 2015 Fatal Crashes Saved Injury Crashes Saved Property Damage Only Crashes Saved Fatal Crashes Saved Injury Crashes Saved Property Damage Only Crashes Saved Fatal Crash Rate Used for No-Build Condition 4.05 Fatal Crash Rate Used for Build Condition 1.05 Injury Crash Rate Used for No-Build Condition Injury Crash Rate Used for Build Condition PDO Crash Rate Used for No-Build Condition PDO Crash Rate Used for Build Condition Source: WSA Calculated Using Iowa DOT Crash Data and Vehicle Miles Traveled from Travel Demand Model Based on these estimates, the value of reduced crashes in 2015 would be approximately $1.5 million and the value of reduced crashes in 2045 would be approximately $2.6 million. The results of this analysis were integrated into the overall benefit-cost analysis tables discussed in Section 5. Wilbur Smith Associates Southeast Connector March Page 10 of 16

12 Benefit-Cost Analysis Technical Document 3.5 Summary of Benefits Sections 3.1 to 3.4 discuss the basic benefits of the Southeast Connector that were used in the benefit-cost analysis. These included vehicle operating cost savings, travel time savings, reduced emissions, and crash savings. As mentioned in Section 1.2, benefit values for other years between 2015 (opening year) and 2045 (travel demand model horizon year) were either interpolated or extrapolated. An additional benefit that needs to be considered in the analysis is the residual/left over value of the project after the analysis period is over (2046 and beyond). Some of the infrastructure will still have value beyond the end date of this analysis. The residual (salvage) value of the proposed project was estimated based on the following assumptions: The value of the bridges would slower than road improvements and would retain approximately 50 percent of their service value. Right-of-way would retain its salvage value. Road improvements would retain approximately 25 percent of their service value. Based on the construction cost estimates (removing engineering and contingencies) for the bridge project and the assumptions above, the project would retain a residual value of approximately $12.1 million in This was incorporated into the benefit-cost analysis as discussed in Section 5. The benefits discussed in Section 3 are those typically used as part of a benefit-cost analysis. An increased focus on job creation has resulted in the inclusion of job creation consideration in benefit-cost analyses, particularly those that are part of grant applications. The potential job creation benefits are discussed in Section 4 below. 4.0 JOB CREATION BENEFITS The Southeast Connector would have three different potential types of job creation benefits that should be considered: Direct jobs in engineering and construction related to designing and constructing the actual improvements. There would also be direct jobs resulting from on-going maintenance. Induced jobs from the reinvestment of earnings from engineering and construction jobs as they reverberate in the regional economy. Induced jobs from the value that the project provides in terms of enhanced access, leading to increased development and business activity. The first two types of jobs listed above can be calculated and economic benefits attributed to Wilbur Smith Associates Southeast Connector March Page 11 of 16

13 Benefit-Cost Analysis Technical Document them based on ratios provided by the President s Council of Economic Advisors for evaluating job impacts of investments funded by TIGER and other grants. The induced jobs from enhanced access involve a greater degree of uncertainty based on the land use, development and growth forecasts prepared for the project. 4.1 Short-term Construction and Maintenance Job Benefits The investment of close to $65 million in engineering and construction costs will create jobs (in terms of years of employment) during the construction phase of the project. Using the federally guided ratio for job creation, the investment will directly create approximately 485 jobs spread over the construction period (2012 to 2015). In turn, the earnings from these jobs would be forecast to induce an additional approximate 273 jobs in the region during the same time periods. The ongoing maintenance and operations of the bridge would also support approximately one job each year. The best measure of the overall societal economic benefit of these jobs would be the return in taxes paid on these earnings. To estimate these benefits, the relevant average wage data was collected for the Des Moines area for engineering, construction, and general wage earners and applied to the created jobs. Federal IRS Tax data on the total taxes paid by individual Iowans (federal, state, and local) was used to estimate the taxes that would be paid as a result of the jobs created. The total average tax rate paid by Iowa residents is 19.4 percent. This analysis identified that the tax benefit of the jobs created/induced through the investment of funds in the construction of this segment of the Southeast Connector was approximately $6.1 million between 2012 and This was incorporated into the benefit-cost analysis as discussed in Section Induced Jobs and Property Taxes from Development/ Redevelopment The tax benefits from the new development/redevelopment supported by the proposed project would come in the form of income taxes from new jobs created at developed sites and property tax increases due to redevelopment. The Southeast Connector Land Use Analysis was used to estimate the development/redevelopment potential specifically tied to the Southeast Connector from SE 14 th Street to SE 30 th Street. Input from existing area industries also assisted with the estimates. The analysis identified 72 acres of probable development and 274 permanent jobs tied to this redevelopment. These were assumed to be phased in at 10 percent per year following completion of construction. Average wage data for a mix of industries similar to those that exist in the study area was used to estimate the earnings from the jobs and the same total average tax rate of 19.4 percent as discussed above was applied. Between 2015 and 2045, these induced jobs would result in a total of $60 million in tax benefits. Wilbur Smith Associates Southeast Connector March Page 12 of 16

14 Benefit-Cost Analysis Technical Document The 72 acres of land expected to redevelop due to the presence of the Southeast Connector and the access it provides to these specific underdeveloped brownfield sites will result in improved land/property values. Based on the Southeast Connector land use analysis, the study team identified properties in the southeast quadrant of the City of Des Moines with land uses similar to those forecast for the properties expected to redevelop. These comparison properties were used to derive expected future property values for the redevelopment sites. Based on this information, an average increase in property value was calculated. The average increase in property values due to redevelopment was approximately $633,000 per acre for land and site improvements. Based on this value increase and the average millage rate for this quadrant in Des Moines, property tax collections are forecast to increase by approximately $2 million per year upon full build-out of the land use changes/redevelopment. The land use/redevelopment changes and associated property value and tax increases were assumed to be phased in at 10 percent per year over a ten year period from the opening of the Southeast Connector. 5.0 SUMMARY OF BENEFIT-COST ANALYSIS To complete the benefit-cost analysis a summary comparison of the benefits and costs is required. The total benefits and costs in 2010 dollars for the analysis period are shown in Table 7. This table reflects a summation of the annualized benefits and costs for each year between 2011 and Consistent with the USDOT guidance for economic analysis, the annualized benefits and costs were discounted to reflect the time value of money. Two different discount rates were use: three percent and seven percent to provide a comparison of the benefits and costs under different assumptions. These are the same discount rates that were used in the previous benefit-cost analysis. The higher the discount rate, the less influential/valued future long-range costs and benefits are when compared to near-term costs and benefits. Seven percent is more of a classic discount rated while three percent is much closer to the Federal Office of Management and Budget 30 year rate and more reflective of the low interest environment we are currently in. Wilbur Smith Associates Southeast Connector March Page 13 of 16

15 Item Benefit-Cost Analysis Technical Document Table 7: Benefit-Cost Analysis Results Total 2011 to 2045 Nominal Value Total 2011 to % Discounted Value (2010 Dollars) Total 2011 to % Discounted Value (2010 Dollars) Benefits: Travel Time Savings $27,240,548 $15,008,127 $7,693,543 Vehicle Operating Cost Savings $28,377,400 $15,634,473 $8,014,624 Carbon Emission Savings $223,867 $123,651 $63,590 Crash Reduction Savings $63,426,447 $34,944,676 $17,913,520 Additional Income Tax Revenues $66,148,679 $37,776,260 $20,673,989 from Job Creation Including Redevelopment Property Tax Increases $55,577,840 $30,155,682 $14,907,600 Residual Value of Improvements $21,044,000 $7,478,688 $1,971,043 after 2045 Total Benefits $262,038,781 $141,121,557 $71,237,908 Costs: Capital Construction, Engineering $64,872,000 $59,661,689 $53,620,888 and Right-of-Way Operations and Maintenance $2,697,000 $1,546,001 $831,760 Total Costs $67,569,000 $61,207,690 $54,452,648 Net Benefit N/A $79,913,868 $16,785,260 Benefit-Cost Ratio N/A The proposed project shows substantial net benefits under both scenarios. The benefit-cost ratio with a three percent discount rate is 2.31 indicating the project returns $2.31 in benefits for every dollar of costs. With the higher seven percent discount rate the benefit-cost ratio is The most influential benefits are clearly travel time savings, vehicle operating cost savings, and cost reductions. The detailed annualized flow of benefits and costs is contained in the tables in Appendix A. 5.1 Sensitivity and Risk Analysis A sensitivity analysis was conducted to explore the change in the results if the parameters used in the analysis were reduced or increased. Ordinarily, under this procedure the input parameter values are assumed to vary by 30 percent of their value, i.e. the parameter values Wilbur Smith Associates Southeast Connector March Page 14 of 16

16 Benefit-Cost Analysis Technical Document are assumed to vary between 0.3 to 1.3 times their nominal values. Summarized risk analysis results are shown in Table 8. Table 8: Sensitivity Analysis and Benefit-Cost Ratio Benefit-Cost Ratio with Standard Parameters Benefit-Cost Ratio with 30% Parameter Reductions Benefit-Cost Ratio with 30% Parameter Increase With 3% Discount Rate With 7% Discount Rate As Table 8 indicates, a 30 percent reduction of all of the benefit value inputs would result in a benefit-cost ratio of slightly less than one under the seven percent discount rate scenario. All other scenarios show substantial positive benefits. There is low risk that all of the parameters used were off by 100 percent or more, thus on balance it is safe to assume that the project shows overall net benefits in this analysis given the parameters used and the assumptions made. The use of two different discount rates is also a form of sensitivity analysis, with positive net benefits shown regardless of the discount rate used in the base scenario. The key risks involved in the benefit-cost analysis are related directly to the key traffic and cost inputs. These would include: The risk that forecast traffic usage of the Southeast Connector are substantially different than anticipated in the travel demand model and from the traffic study process. All of the key benefits, except for job creation tied to construction and maintenance, are dependent of bridge traffic forecasts. Incorrect cost estimating would be a risk. If costs of construction increase, net benefits would be reduced. Given the benefit-cost ratios are substantially greater than one; costs would have to increase approximately 30 percent with the more conservative discount rate scenario to reduce the net benefit of the project to zero. 5.2 Potential Benefits Not Accounted for in this Analysis In addition to the benefits and costs monetized above, there are several other benefits and costs from the project that are more difficult to quantify. They include: Safety and Emergency Access Benefits: The rail grade separation along with a properly designed route for truck traffic would definitely benefit safety in the Project Area and emergency access. Health and Recreation Benefits: The proposed trail along the entire length of the project Wilbur Smith Associates Southeast Connector March Page 15 of 16

17 Benefit-Cost Analysis Technical Document would enhance the minimal safe recreation, walking, and biking opportunities for residents and workers in the Project Area. This would have potential health benefits. Redevelopment Opportunities: The monetized benefit-cost analysis only included the potential redevelopment of sites immediately adjacent to the proposed project. However, this project coupled with several other infrastructure improvements in the southeast quadrant of Des Moines are expected to have a dramatic effect on economic development opportunities and job creation. The Agrimergent Technology Park development with its up to 6,500 potential long-term jobs is one example of this. Land Use and Reduction of Sprawl: The project represents a needed opportunity to reinvest in an area of Des Moines that is part of the existing urbanized core. By providing infrastructure to assist in the redevelopment of this area, local residents will have greater opportunity to find employment and businesses will have access to suitable sites without encouraging further sprawl on the edges of the metropolitan area. This will have environmental benefits in terms of reduced commuting and use of green space and farmland for development. Direct Environmental Impacts and Costs: As discussed in the Environmental Impact Statement prepared for the SE Connector, the proposed project will have minor impacts on low quality wetlands (less than five acres) and would require 15 homes and seven businesses to relocate. There would also be potential noise impacts on adjacent land. While the costs for addressing, compensating, and mitigating for these impacts are fully included in the cost estimates listed above, they also represent a short-term inconvenience cost for some members of the community. Wilbur Smith Associates Southeast Connector March Page 16 of 16

18 Benefit-Cost Analysis Technical Document Appendix A This appendix contains workbook sheets that were used to complete the benefit-cost analysis. Appendix A.1 provides the key inputs into the analysis which were used on the subsequent benefit-cost calculations in Appendix A.2 (3% discount rate) and Appendix A.3 (7% discount rate). In Appendix A.1 values were calculated based on the Travel Demand Model/Traffic Analysis output. Assumptions and parameters used for the calculations are discussed in the third column of Appendix A.1. In Appendix A.1 base data values are shown 2015 (opening year) and 2045 (out year) based on the traffic analysis for 2030 (traffic design year). These base data values were interpolated/extrapolated for the remaining years of the benefit-cost analysis time period of 2015 to 2045, as appropriate. These annualized values for each cost and benefit category are shown in the columns of the benefit-cost spreadsheets (A.2 and A.3). Appendices A.2 and A.3 then contain a summary of both the nominal values and the discounted net present values of the benefits and costs. A benefit-cost ratio is calculated for each discount rate scenario. Appendices A.4 to A.7 contain the sensitivity analysis sheets for the benefit-cost analysis. In Appendices A.4 and A.5, the key parameter for each of the benefit categories (travel time savings, vehicle operating cost savings, crash reduction benefits, carbon reduction benefits, property taxes, and taxes from direct construction/maintenance job creation) have been reduced by 30%. In Appendices A.6 and A.7, the key parameter for each of the benefit categories has been increased by 30%. Wilbur Smith Associates Southeast Connector March 2012 Appendix A

19 Appendix A. 1 - Southeast Connector Benefit-Cost Inputs - Benefits and Costs Apply to SE 14th to SE 30th Only (These inputs were used in the Benefit-Cost Worksheet Tab) Benefit-Cost Inputs DATA SEC 14th to 30th Notes Miles 2.1 Build/Capital Costs (2010 Values) $64,872,000 Based on Cost Estimates in Engineering Report. Total project value estimated at $65 million. Annual Maintenance $87,000 Based on Des Moines Average Maintenance Costs including snow maintenance. Travel Time Savings Calculations Travel Time References Vehicle Distribution Time Savings 2015 Time Savings 2045 Travel Time Savings Values Per Hour Auto 85% Truck 15% Total 100% Auto 33,951 Calculated based on savings per day inputted below Truck 5,991 Total 39,942 Auto 56,585 Calculated based on savings per day inputted below Truck 9,986 Total 66,570 Auto $15 Average values are based on a survey of various reports on travel time values for Midwest States. Truck $25 Year 2015 VHT Savings (Hours/Day) 109 Based on 20 seconds per vehicle and 0.75 x 2030 Average Daily Traffic VHT Savings (Hours/Year) 39,942 Auto $509,262 Truck $149,783 Total Vehicle Time Savings $659,046 Year 2045 VHT Savings (Hours/Day) 182 Based on 20 seconds per vehicle and 1.25 x 2030 Average Daily Traffic VHT Savings (Hours/Year) 66,570 Auto $848,771 Truck $249,638 Total Vehicle Time Savings $1,098, DMSEC TIGER Benefit Cost Spreadsheet/Input 3/9/2012

20 DATA SEC 14th to 30th Notes Vehicle Operating Cost Savings Reference VMT Savings 2015 VMT Savings 2045 VMT Savings (Miles/Day) VMT Savings (Miles/Year) VMT Savings (Miles/Day) VMT Savings (Miles/Year) 2,985,000 Based on 0.75 x 2030 Modeled Savings of 3,980,000 Miles per year - Southeast Connector Traffic Report 4,975,000 Based on 1.25 x 2030 Modeled Savings of 3,980,000 Miles per year - Southeast Connector Traffic Report Cost Savings per Mile Average Cost Per Mile $0.230 Based on AAA and NADA average cost per mile of vehicle operations data. VOC Savings 2015 $686,550 VOC Savings 2045 $1,144,250 Crash Savings Benefits Value of Fatal Crash $5,800,000 DOT Memorandum on Treatment of Economic Value of a Statistical Life in Departmental Analyses Value of Injury Crash $214,000 National Safety Council Data Value of Property Damage Only Crash $8,582 National Safety Council Data 2015 Fatal Crashes Saved 0.47 Based on Annual VMT Savings for 2016 multiplied by Fatal Crash Rate for Build Condition and the Crash Rate Differential for Build and No-Build Conditions as shown below 2015 Injury Crashes Saved Based on Annual VMT Savings for 2016 multiplied by Injury Crash Rate for Build Condition and the Crash Rate Differential for Build and No-Build Conditions as shown below 2015 Property Damage Only Crashes Saved Based on Annual VMT Savings for 2016 multiplied by PDO Crash Rate for Build Condition and the Crash Rate Differential for Build and No-Build Conditions as shown below 2045 Fatal Crashes Saved 0.78 Based on Annual VMT Savings for 2035 multiplied by Fatal Crash Rate for Build Condition and the Crash Rate Differential for Build and No-Build Conditions as shown below 2045 Injury Crashes Saved Based on Annual VMT Savings for 2035 multiplied by Injury Crash Rate for Build Condition and the Crash Rate Differential for Build and No-Build Conditions as shown below 2045 Property Damage Only Crashes Saved Based on Annual VMT Savings for 2035 multiplied by PDO Crash Rate for Build Condition and the Crash Rate Differential for Build and No-Build Conditions as shown below Total Annual VMT Miles on Southeast Connector Segment ,640,945 Based on 0.75 x 2030 Modeled Annual Estimated Volume of 15,521,000 - Southeast Connector Traffic Report Data Total Annual VMT Miles on Southeast Connector Segment ,401,575 Based on 1.25 x 2030 Modeled Annual Estimated Volume of 15,521,000 - Southeast Connector Traffic Report Data Fatal Crash Rate Used for No-Build Condition 4.05 Based on Average Crash Rate for current Study Area East-West Routes using Crash Data for 2004 to 2008 (Iowa DOT Office of Traffic and Safety Data). Fatal Crash Rate Used for Build Condition 1.05 Based on Average Crash Rates for City Streets of this type in Iowa for 2004 to 2009 (Iowa DOT Office of Traffic and Safety Data) Injury Crash Rate Used for No-Build Condition Based on Average Crash Rate for current Study Area East-West Routes using Crash Data for 2004 to 2008 (Iowa DOT Office of Traffic and Safety Data). Injury Crash Rate Used for Build Condition Based on Average Crash Rates for City Streets of this type in Iowa for 2004 to 2009 (Iowa DOT Office of Traffic and Safety Data) PDO Crash Rate Used for No-Build Condition Based on Average Crash Rate for current Study Area East-West Routes using Crash Data for 2004 to 2008 (Iowa DOT Office of Traffic and Safety Data). PDO Crash Rate Used for Build Condition Based on Average Crash Rates for City Streets of this type in Iowa for 2004 to 2009 (Iowa DOT Office of Traffic and Safety Data) Total Value of Crashes Saved 2015 $1,534,511 Value of crashes by crash type multiplied by crashes saved as shown above. Total Value of Crashes Saved 2045 $2,557, Value of crashes by crash type multiplied li by crashes saved as shown above. Job Creation Tax Benefits Construction jobs shown during construction phase. Long-term jobs shown phased in 10% per year starting Estimate of Construction Based Jobs Created 485 Based on Council of Economic Advisors Guidance January 2012 of 1 Employment Year per $76,923 spent and 64% of jobs created as direct jobs. (Years of Employment Staggered during Construction Period) Average Wages per Job (2010) $45, Based on 2010 IWIN Wage Data for Construction and Engineering (80% Highway Construction and Maintenance and 20% Civil Engineering) Tax Percentage per Job 19.40% Based on IRS Data on Average Federal Percentage Paid Estimate of Induced Jobs due to Construction 273 Based on Council of Economic Advisors Guidance January 2012 of 1 Employment Year per $76,923 spent and 36% of jobs created as induced jobs. Average Wages per Job (2010) $34, Based on 2010 IWIN Wage Data for Average Wage in Des Moines Tax Percentage per Job 19.40% Based on IRS Data on Average Federal Percentage Paid Estimate Tax Value of Jobs Created per Year for 4-Year Construction Period $1,516, Above cells for construction and induced jobs with number of jobs multiplied by average wage per job multiplied by tax rate and divided by 4 for four years of construction. Net Long-Term Economic Development Jobs Created (Shown from 2020 on) Average Value per Job (2010) Tax Percentage per Job 274 Based on Redevelopment/Land Use Analysis completed for Southeast Connector plus one maintenance Job per Year $42, Based on 2010 IWIN Wage Data for Several Industrial/Commercial Wage Categories for Common Industries in Project Area % Based on IRS Data on Average Federal Percentage Paid plus Iowa State Tax Rate Data Property Tax Benefits Through Development Phased in at 10% per year starting Total Acres of Redevelopment 72 Net Gain in Value per Acre $623, From Southeast Connector Land Use Study - Shows an increase in land values from $118,000 per acre to $741,000 per acre for light industrial uses with redevelopment. Property Tax Rate that Applies Typical Millage Rate for Parcels in that part of the City of Des Moines DMSEC TIGER Benefit Cost Spreadsheet/Input 3/9/2012

21 DATA SEC 14th to 30th Notes Values of Carbon Saved Total Tons of Carbon Saved Per Year on Average 2626 Based on Change in 2030 Vehicle Miles Traveled (in tons not metric tonnes) Value per Ton of Carbon 2.75 Highest value of recent Chicago Climate Exchange estimates. Residual Values Reference Value of Right-of-Way $6,558, From Cost Estimate in Engineering Report Value of Bridges $11,090, From Cost Estimate in Engineering Report Value of Roadway $35,764, From Cost Estimate in Engineering Report Value of Engineering/Mitigation $11,460, From Cost Estimate in Engineering Report Total Value $64,872, Cross Check Capital Cost - Total Value Right-of-Way Residual 100% Bridge Residual 50% Roadway Residual 25% Engineering/Mitigation Residual 0% Residual Values $21,044, DMSEC TIGER Benefit Cost Spreadsheet/Input 3/9/2012

22 Appendix A.2 Benefit-Cost Output in Real 2010 Dollars - 3% Discount Rate Southeast Connector 14th to 30th Discounted to 2010 Capital Maintenance Total Costs Time VOC Accident Reduction Benefits Taxes from Job Growth Property Tax Increase Carbon Reductions Residual Value Costs Benefits Net Benefits 2011 $5,000,000 $0 $5,000,000 $0 $0 $0 $1,516,906 $0 $0 $0 $4,854,369 $1,472,724 ($3,381,645) 2012 $19,957,333 $0 $19,957,333 $0 $0 $0 $1,516,906 $0 $0 $0 $18,811,701 $1,429,829 ($17,381,872) 2013 $19,957,333 $0 $19,957,333 $0 $0 $0 $1,516,906 $0 $0 $0 $18,263,787 $1,388,183 ($16,875,604) 2014 $19,957,333 $0 $19,957,333 $0 $0 $0 $1,516,906 $0 $0 $0 $17,731,832 $1,347,751 ($16,384,081) 2015 $0 $87,000 $87,000 $659,046 $686,550 $1,534,511 $226,721 $405,678 $5,529 $0 $75,047 $3,034,687 $2,959, $0 $87,000 $87,000 $673,691 $701,807 $1,568,611 $453,442 $608,516 $5,642 $0 $72,861 $3,359,743 $3,286, $0 $87,000 $87,000 $688,336 $717,063 $1,602,711 $680,163 $811,355 $5,755 $0 $70,739 $3,663,289 $3,592, $0 $87,000 $87,000 $702,982 $732,320 $1,636,812 $906,884 $1,014,194 $5,867 $0 $68,679 $3,946,303 $3,877, $0 $87,000 $87,000 $717,627 $747,577 $1,670,912 $1,133,605 $1,217,033 $5,980 $0 $66,678 $4,209,723 $4,143, $0 $87,000 $87,000 $732,273 $762,833 $1,705,012 $1,360,326 $1,419,872 $6,093 $0 $64,736 $4,454,450 $4,389, $0 $87,000 $87,000 $746,918 $778,090 $1,739,112 $1,587,047 $1,622,711 $6,206 $0 $62,851 $4,681,351 $4,618, $0 $87,000 $87,000 $761,564 $793,347 $1,773,212 $1,813,768 $1,825,549 $6,319 $0 $61,020 $4,891,254 $4,830, $0 $87,000 $87,000 $776,209 $808,603 $1,807,313 $2,040,489 $2,028,388 $6,432 $0 $59,243 $5,084,959 $5,025, $0 $87,000 $87,000 $790,855 $823,860 $1,841,413 $2,267,210 $2,028,388 $6,544 $0 $57,517 $5,129,131 $5,071, $0 $87,000 $87,000 $805,500 $839,117 $1,875,513 $2,267,210 $2,028,388 $6,657 $0 $55,842 $5,020,891 $4,965, $0 $87,000 $87,000 $820,146 $854,373 $1,909,613 $2,267,210 $2,028,388 $6,770 $0 $54,216 $4,914,606 $4,860, $0 $87,000 $87,000 $834,791 $869,630 $1,943,714 $2,267,210 $2,028,388 $6,883 $0 $52,636 $4,810,253 $4,757, $0 $87,000 $87,000 $849,436 $884,887 $1,977,814 $2,267,210 $2,028,388 $6,996 $0 $51,103 $4,707,810 $4,656, $0 $87,000 $87,000 $864,082 $900,143 $2,011,914 $2,267,210 $2,028,388 $7,109 $0 $49,615 $4,607,253 $4,557, $0 $87,000 $87,000 $878,727 $915,400 $2,046,014 $2,267,210 $2,028,388 $7,222 $0 $48,170 $4,508,560 $4,460, $0 $87,000 $87,000 $893,373 $930,657 $2,080,115 $2,267,210 $2,028,388 $7,334 $0 $46,767 $4,411,708 $4,364, $0 $87,000 $87,000 $908,018 $945,913 $2,114,215 $2,267,210 $2,028,388 $7,447 $0 $45,405 $4,316,673 $4,271, $0 $87,000 $87,000 $922,664 $961,170 $2,148,315 $2,267,210 $2,028,388 $7,560 $0 $44,082 $4,223,431 $4,179, $0 $87,000 $87,000 $937,309 $976,427 $2,182,415 $2,267,210 $2,028,388 $7,673 $0 $42,798 $4,131,959 $4,089, $0 $87,000 $87,000 $951,955 $991,683 $2,216,516 $2,267,210 $2,028,388 $7,786 $0 $41,552 $4,042,233 $4,000, $0 $87,000 $87,000 $966,600 $1,006,940 $2,250,616 $2,267,210 $2,028,388 $7,899 $0 $40,341 $3,954,228 $3,913, $0 $87,000 $87,000 $981,246 $1,022,197 $2,284,716 $2,267,210 $2,028,388 $8,011 $0 $39,166 $3,867,920 $3,828, $0 $87,000 $87,000 $995,891 $1,037,453 $2,318,816 $2,267,210 $2,028,388 $8,124 $0 $38,026 $3,783,285 $3,745, $0 $87,000 $87,000 $1,010,536 $1,052,710 $2,352,917 $2,267,210 $2,028,388 $8,237 $0 $36,918 $3,700,299 $3,663, $0 $87,000 $87,000 $1,025,182 $1,067,967 $2,387,017 $2,267,210 $2,028,388 $8,350 $0 $35,843 $3,618,938 $3,583, $0 $87,000 $87,000 $1,039,827 $1,083,223 $2,421,117 $2,267,210 $2,028,388 $8,463 $0 $34,799 $3,539,178 $3,504, $0 $87,000 $87,000 $1,054,473 $1,098,480 $2,455,217 $2,267,210 $2,028,388 $8,576 $0 $33,785 $3,460,993 $3,427, $0 $87,000 $87,000 $1,069,118 $1,113,737 $2,489,318 $2,267,210 $2,028,388 $8,688 $0 $32,801 $3,384,361 $3,351, $0 $87,000 $87,000 $1,083,764 $1,128,993 $2,523,418 $2,267,210 $2,028,388 $8,801 $0 $31,846 $3,309,256 $3,277, $0 $87,000 $87,000 $1,098,409 $1,144,250 $2,557,518 $2,267,210 $2,028,388 $8,914 $21,044,000 $30,918 $10,714,344 $10,683,425 Total $64,872,000 $2,697,000 $67,569,000 $27,240,548 $28,377,400 $63,426,447 $66,148,679 $55,577,840 $223,867 $21,044,000 $61,207,690 $141,121,557 $79,913,868 NPV $59,661, $1,546, $61,207, $15,008, $15,634, $34,944, $37,776, $30,155, $123, $7,478, Discount Rate 3.00% NPV = $79,913,868 B/C = DMSEC TIGER Benefit Cost Spreadsheet/BenefitCost Worksheet 3% 3/8/2012