COST BENEFIT ANALYSIS
A cost benefit analysis of the 710 Gap Closure was undertaken by Patrick DeCorla-Souza, an expert in cost benefit analysis at the Federal Highway Administration (FHWA). In accordance with the best practices in the industry, the costs and benefits to the region of building the freeway over not building the freeway are summarized in this chart:
|
Annualized
Costs and Benefits of Building the 710 Freeway
(in Millions of Dollars) |
|
|
Agency Costs: |
|
|
Annualized capital cost |
$70.40 |
|
Annual Operation/Maintenance costs |
$2.05 |
|
Total Agency Annual Costs |
$72.45 |
|
Benefits to Region: |
|
|
Emissions cost change |
$1.16 |
|
Accident cost change |
$26.43 |
|
Vehicle operation/noise cost change |
($5.58) |
|
Delay cost change |
$92.84 |
|
Fuel cost change |
$4.45 |
|
Parking cost change |
($1.75) |
|
Consumer surplus change |
$.02 |
|
Total Annual Benefits |
$117.57 |
|
Net Annual Worth |
$45.12 |
|
Benefit-Cost Ratio |
1.62 to 1 |
Thus, based upon the analysis performed in 1995-96, the 710 Freeway will benefit the region $1.62 for each $1.00 of investment. In 1998, the Federal Government committed to increasing the cost of the project in order to provide extensive mitigation of the project impacts upon the affected communities. However, even with a 15% to 20% increase in mitigation costs, the 710 Freeway will likely have a benefit-cost ratio of between 1.35 to 1 and 1.30 to 1. Thus, even though 710 mitigation costs have been driven higher by community mitigation demands, completion of the 710 Gap Closure is still a substantial benefit to the region.