1. Using Spreadsheet Models for Toll Revenue Forecasting Don Hubbard, PE, AICP Senior Supervising Planner PB

2. Topics Covered Why Are New Methodologies Needed? Why Are New Methodologies Needed? Description of Spreadsheet Models Description of Spreadsheet Models Advantages & Disadvantages Advantages & Disadvantages A Sample Application A Sample Application Conclusions Conclusions

3. Why Are New Methodologies Needed? Travel is a derived demand … so is travel demand forecasting

4. The trouble with traffic models … Post-project studies have found that traditional 4-step models have a poor record for accuracy for toll roads Post-project studies have found that traditional 4-step models have a poor record for accuracy for toll roads … and accuracy has not improved over the last thirty years … and accuracy has not improved over the last thirty years Models are slow, noisy, cumbersome, opaque Models are slow, noisy, cumbersome, opaque Output not focused on issues of highest concern to clients (terms of the agreement) Output not focused on issues of highest concern to clients (terms of the agreement) Private investors are used to a different kind of analysis tool and are less tolerant of 4-Step models than DOTs have been

5. What Do Investors Want? Ability to test variations of the things that they have some influence over (toll structure, number of lanes, duration of contract, exempt classes of vehicles) Ability to test variations of the things that they have some influence over (toll structure, number of lanes, duration of contract, exempt classes of vehicles) Ability to perform sensitivity tests of the things they cannot control Ability to perform sensitivity tests of the things they cannot control Transparent & easy to check Transparent & easy to check Fast (able to test options during negotiations) Fast (able to test options during negotiations) Seamless connection to financial post-processors Seamless connection to financial post-processors This describes a spreadsheet, not a traditional 4-step model

6. Description of Spreadsheet Models

7. Structure Mimics a traditional model Mimics a traditional model But with simplified trips generation & distribution But with simplified trips generation & distribution Primary focus is on traffic assignment and post-processing Primary focus is on traffic assignment and post-processing

8. Trip Generation & Distribution Traffic counts are done for different periods of different types of days Traffic counts are done for different periods of different types of days User groups split out to extent data allows User groups split out to extent data allows Growth factors based on population & employment forecasts by catchment area Growth factors based on population & employment forecasts by catchment area

9. Peak Spreading Excess peak period traffic results in longer peak Excess peak period traffic results in longer peak Revised traffic then goes to diversion model Revised traffic then goes to diversion model

10. Traffic Diversion Split between tollway & non-tolled alternative based on ratio of costs Split between tollway & non-tolled alternative based on ratio of costs Starts with a seed value for the split, then iterates assignment to produce a stable result Starts with a seed value for the split, then iterates assignment to produce a stable result

11. Post-Processing Outputs from the diversion model are traffic volumes and revenues for each period Outputs from the diversion model are traffic volumes and revenues for each period The volumes can be fed into LOS analysis and used to forecast when capacity improvements will be needed The volumes can be fed into LOS analysis and used to forecast when capacity improvements will be needed Revenues can be aggregated to annual levels for use in financial analyses Revenues can be aggregated to annual levels for use in financial analyses

12. Sample Sheet for Single Period

13. Sample Volume & LOS Output Schematic Southbound Northbound

14. Managing the Process All scenario inputs are entered into a single page All scenario inputs are entered into a single page Macros then open other workbooks, process data, and close Macros then open other workbooks, process data, and close Summary results then copied into master file Summary results then copied into master file Fast, compact results Fast, compact results

15. Advantages & Disadvantages

16. Advantages Often quicker & easier to create Often quicker & easier to create They force you to examine your assumptions, so may be more rigorous They force you to examine your assumptions, so may be more rigorous Less noise than traditional models, so more accurate for small changes Less noise than traditional models, so more accurate for small changes Can feed directly to/from other models (land use, financial models) Can feed directly to/from other models (land use, financial models) Better control over the process (for the same reasons that airplanes are more maneuverable when not using auto-pilot) Better control over the process (for the same reasons that airplanes are more maneuverable when not using auto-pilot)

17. Disadvantages Limited to well-defined corridors with only a few realistic alternative routes Limited to well-defined corridors with only a few realistic alternative routes Single-purpose models; cannot replace 4-step models for general modeling use Single-purpose models; cannot replace 4-step models for general modeling use Agencies may be reluctant to accept alternatives to a regional model if one exists Agencies may be reluctant to accept alternatives to a regional model if one exists

18. Sample Application: North Luzon Expressway

19. Project Background Old tollway extending northwards from Metro Manila Leased to private company under an upgrade-operate- transfer agreement Varies from 8-lane freeway in south to 4-lane expressway in north Alternate route is 2-to-4 lane undivided highway Source: PB Asia Manila (12 Million) San Fernando (500,000) Angeles City (500,000)

20. Key Features 50 miles of freeway 16 interchanges $377 million cost Need to keep costs down; toll increase politically sensitive Needed detailed volume forecasts for each ramp to do “just enough” and “just in time” upgrading Urban Section Rural Section

21. Model Requirements Also needed detailed cost and revenue projections to arrange for various loan packages Banks required that all assumptions be open to scrutiny Model must be able to predict, on the spot, the effect of changes in assumptions CostsRevenue $

22. Background for the NLE Model Existing regional lacked detail in study corridor Ramp volumes varied erratically for different study years Investors unwilling to take risks on unreliable forecasts

23. New Approach - Spreadsheet 9 months spent trying to fix regional model, only 3 months remained before firm forecasts were needed 9 months spent trying to fix regional model, only 3 months remained before firm forecasts were needed Determined that the regional model was unlikely to produce the needed accuracy within the time available Determined that the regional model was unlikely to produce the needed accuracy within the time available Decided to replace the regional model with a spreadsheet model Decided to replace the regional model with a spreadsheet model

24. Trip Generation O-D table taken from toll receipts from previous 5 years Growth rates for each O-D pair were based on the expected population and employment growth at each end

25. Growth of O-D Table The existing volumes at each ramp were then factored up, based on future volumes of the O-D pairs served, to make “Base Demand” Existing 2010 2020 2030

26. Other Input Assumptions Next added: - Assumed tolls - Toll sensitivity - Income assumptions Income Growth Diversion Curve

27. Capacity Constraints Explicit capacity constraints were made for: - Receiving capacity of local roads - Toll plaza capacity - Mainline capacity

28. Peak Spreading Separate sheets were done for each peak period and for the off-peak period, with spillover (peak spreading) based on conditions during the peak hour Peak Off-Peak Spill- Over

29. Schedule for Upgrading Ramp volumes were automatically compared to service thresholds Produced an upgrading schedule for each of 40+ ramps Ramp Volumes Year Upgrade Needed LOS Threshold

30. Financial Results The resulting volumes for each ramp-to-ramp pair, for each vehicle class, were converted into annual revenues These were automatically fed into the financial spreadsheets Volume Revenue Annuali- zation Factor

31. Application During Negotiations The model was able to quickly answer questions like, “What happens if the government refuses to approve toll increases after the first 5 years?” ? - Traffic increases - Upgrading needed sooner - Revenue/veh decreases - Rate of return declines

32. Results of the NLE Model The methodology was robust and defendable The resulting forecasts were reasonable The client was able to get financing; upgrading now underway “Asia-Pacific Transport Project of the Year” Project Finance Magazine (London) PastFuture

33. Conclusions

34. Conclusions Model types should be considered tools in a toolbox; different types are needed for different tasks Model types should be considered tools in a toolbox; different types are needed for different tasks There are circumstances where spreadsheet models are likely to produce better results than traditional models There are circumstances where spreadsheet models are likely to produce better results than traditional models –Well-defined corridor with limited routes –Uncertainties about input assumptions more likely source of error than computational mechanics

35. Don Hubbard Senior Supervising Planner PB Tel. (916) 567-2555 hubbardd@pbworld.com