Evaluation of Rail Infrastructure Investments Related to the New Rail Regulatory Environment in Some Countries
As for any transportation infrastructure project, rail investment projects are subject to appraisals, which traditionally include an economic evaluation to determine public benefits and a financial analysis to determine the purely financial returns. When the company that owns and manages the rail infrastructure, termed the “infrastructure manager,” is legally different from the company that provides the rail service, appraisals are typically carried out separately for the infrastructure manager and the train operator. The appraisal process is different from the process when the same legal entity owns and manages both infrastructure and train operations. The distinction is especially pertinent for European Union member states. This study proposed a comprehensive methodology for rail investment project appraisal for the case of rail infrastructure and train operations that were owned and managed by separate legal entities. The study defined the socioeconomic viability of a project from the infrastructure manager's perspective, which reflected social welfare, as well as the financial viability of the project from the perspectives of the infrastructure manager and the operator. It was recognized that a project would proceed only if the socioeconomic evaluation were positive. In the case of a negative financial appraisal, which was often the case for low-volume rail links, the study demonstrated how the use of subsidies could render the rail investment financially viable. The methodology was applied for a proposed investment in the western extensions of the railway network of Greece project.
New Approach to Appraisal of Rail Freight Projects in South Korea
This paper contributes to the estimation of the value of rail freight transit time savings, reliability, and service frequency for producers and transport operators by using stated preference data for short-haul rail freight shipments in South Korea. To appraise investments in freight projects in South Korea, the mixed logit model was used to determine the value of rail freight transit time savings, resulting in an estimated savings of about $2.31/h per shipment. The value of rail freight reliability (the percentage of on-time arrivals and departures) is $2.78/h of delay and $0.54/day for scheduled freight service delay. The results for freight time value for different economic agents are surprising: shippers perceived the value of transit time, transit time reliability, and service frequency to be far higher than producers did. Shippers valued rail freight transit time savings at about $2.35/metric ton h, whereas this same value for producers was $1.21/metric ton h. When the time benefit based on these values was added to the preliminary feasibility evaluation for 20 freight railroad infrastructure projects in South Korea, the number of projects for which benefits outweighed costs increased from four to 11.
Treatment of the Value of Preventing Fatalities and Injuries in Preparing Economic Analyses
Prevention of injury, illness, and loss of life is a significant factor in many private economic decisions, including job choices and consumer product purchases. When government makes direct investments or controls external market impacts by regulation, it also pursues these benefits, often while also imposing costs on society. The Office of the Secretary of Transportation and other DOT administrations are required by Executive Order 13563, Executive Order 12866, Executive Order 12893, OMB Circular A-4, and DOT Order 2100.5 to evaluate in monetary terms the costs and benefits of their regulations, investments, and administrative actions, in order to demonstrate the faithful execution of their responsibilities to the public. Since 1993, the Office of the Secretary of Transportation has periodically reviewed the published research on the value of safety and updated guidance for all administrations. The benefit of preventing a fatality is measured by what is conventionally called the Value of a Statistical Life, defined as the additional cost that individuals would be willing to bear for improvements in safety (that is, reductions in risks) that, in the aggregate, reduce the expected number of fatalities by one. This conventional terminology has often provoked misunderstanding on the part of both the public and decision-makers. What is involved is not the valuation of life as such, but the valuation of reductions in risks. While new terms have been proposed to avoid misunderstanding, we will maintain the common usage of the research literature and OMB Circular A-4 in referring to VSL.