Presented By: Jeff Bagdade Traffic Engineer AAA Michigan Road Improvement Demonstration Program Economic Analyses Presented By: Jeff Bagdade Traffic Engineer AAA Michigan

Economic tool for comparing the benefits accrued to the costs incurred based on the number of crashes prevented Benefit Cost Analysis

When do you conduct benefit cost analyses? 1.To choose potential project locations 2. To determine which engineering countermeasures can be economically justified 3. During Post Improvement Evaluation

What are the BENEFITS?  Crashes Prevented Reductions in Congestion and Travel Time Reductions in Maintenance Costs

What are the COSTS? Societal Costs (National Safety Council) –Wage and Productivity Losses –Medical Expenses  Insurance Costs –Motor Vehicle Damage –Employer Costs –Loss of Quality of Life Operations & Maintenance Costs

What are the Current Published Societal Costs? Fatal Collision = $3.1 million A-Level Injury = $153,500 B-Level Injury = $39,500 C-Level Injury = $18,800 Typical Average Value used for Injuries = $34,000 Property Damage Only (PDO) = $1,800 Source: National Safety Council NSC on the web:

How do you Calculate the Benefit Cost Ratio?  Benefits B/C Ratio =  Costs

Choosing Potential Project Locations Source: Michigan State Police Which location should you choose?

Which Location to Choose? Step #1 – Determine the average annual costs currently being accrued at each intersection. Forest & Van Dyke 11 PDO 11 Injuries Annual Cost=(11*$1800)+(11*$34,000)=$393,800 BENEFIT TERM

Step #2 – Assuming that crashes and injuries will decrease by 15% each how much will your costs decrease? PDO Savings = Annual # of PDO * Crash Reduction Factor * PDO Societal Cost PDO Savings = 11*0.15*$1800 = $2970 Injury Savings = Annual # of Injuries * Crash Reduction Factor * Injury Societal Cost Injury Savings = (11*0.15*$34,000) = $56,100 BENEFIT TERM

 Benefits = PDO Savings + Injury Savings  Benefits = $59,070 BENEFIT TERM

Step #3a – Estimate the cost to implement the improvements –Estimated Improvement Cost (EIC) = $100,000 Step #3b – Assign a discount rate & find the corresponding capital recovery factor (CRF) Discount Rate = 8% Project Life Span = 10 years CRF =  Costs = EIC * CRF = $100,000 * = $14,900 COST TERM

Determine Your B/C Ratio for Forest & Van Dyke  Benefits $59,070 B/C Ratio ==  Costs $14,900 B/C Ratio = 4:1 * I used the EUAB/EUAC method

Now calculate the B/C Ratio for the following intersections Plymouth & Hubbell Greenfield & McNichols Seven Mile & Dequindre

Which Intersection To Choose? IntersectionB/C Ratio Forest & Van Dyke4.0 : 1 Plymouth & Hubbell5.2 : 1 Greenfield & McNichols4.9 : 1 Seven Mile & Dequindre3.3 : 1

Which Engineering Countermeasures are Economically Justified at Plymouth & Hubbell? Westbound Approach of Plymouth

Southbound Approach of Hubbell

Plymouth & Hubbell Condition Diagram Grocery Store Gas Station Auto GarageRestaurant

Hubbell Plymouth Crash Data from 1998 & 1999 Source: UD-10’s from Detroit Police Dept. ISSUES Lots of red light running Left-turns Driveways Signal visibility Sight Distance Plymouth & Hubbell Collision Diagram

Traffic Counts Plymouth Road = 15,000 vehicles/day Hubbell Avenue = 8,000 vehicles/day

What type of improvements would you make to this intersection?

Level of Service ApproachCurrent Conditions With LT Phase on Plymouth EastboundCA WestboundCA NorthboundBB SouthboundBB

Economic Analysis of Improvements Use the same process as was used for choosing intersections to determine whether the countermeasures are justified. Each group will calculate the B/C ratio for their set of countermeasures. Be able to justify why you chose your specific countermeasures

Economic Analysis of Improvements (cont.) Signal, Pavement Markings & Signs Only Signal, Pavement Markings, Signs & Geometric Group ## of Countermeasures Crash Reduction Factor Project Cost 1115%$70, %$80, %$90, %$100, %$100, %$125, %$150, %$175,000

B/C Analysis to Meet Specific Criteria AAA must meet a minimum criteria a B/C ratio of 2:1 over two years for any investment at an intersection. How do you calculate a maximum investment using a specific B/C criteria?

Step #1: Set the B/C equation equal to the criteria you are tying to meet. Use a B/C of 2:1 over 2 years and assume a crash reduction of 20%, a discount rate of 8% and a project life of 5 years. Assume the intersection has 20 PDO and 7 Injury Crashes.  Benefits 2 = =  CostsMax Inv * CRF

Calculate the  Benefits  Benefits=(20*$1800*0.20)+(7*$34,000*0.20)  Benefits = $54,800

Using Algebra Calculate the Maximum Investment  Benefits$54,800 Max Inv = = 2*CRF2* Max Inv = $107,784