Meeting_Body
PLANNING AND PROGRAMMING COMMITTEE
CONSTRUCTION COMMITTEE
JUNE 18, 2025
Subject
SUBJECT: METRO COST BENEFIT ANALYSIS AND METHODOLOGY
Action
ACTION: RECEIVE AND FILE
Heading
RECOMMENDATION
Title
RECEIVE AND FILE the status report on Metro’s Draft Cost Benefit Analysis and Methodology.
Issue
ISSUE
At its February 2025 meeting, the Board approved Motion 14 by Directors Dutra, Najarian, Barger, Butts and Solis, and amended by Director Horvath, that directed staff to develop a framework for a Metro Cost Benefit Analysis (CBA) that could be used as one tool among others to support investment and funding decisions for Metro’s capital projects. The consistent application of a Metro CBA is intended to inform a more data-driven and transparent decision-making process that also includes economic data and evaluation criteria approved by the Board in October 2023 as part of the Measure M 5-Year Comprehensive Assessment and Equity Report.
Staff have developed a draft framework that includes a methodology that is consistent with United States Department of Transportation (USDOT) and California Department of Transportation (Caltrans) guidance and incorporates benefits criteria aligned with Board adopted objectives and goals. These objectives are operationalized into performance metrics used to evaluate projects, especially in assessing their contributions to the economic output and vitality of the region, equity, and sustainability. This report provides an update on the progress of developing the methodology. Staff anticipate returning to the Board next month to seek the Board’s approval of a final Metro CBA methodology that integrates comments received this month.
Background
BACKGROUND
Metro currently is planning for and delivering the largest portfolio of transportation capital projects in the nation, due in large part to the revenue streams provided by Measure R, Measure M, Senate Bill 1 - the Transit and Intercity Rail Capital Program, the Bipartisan Infrastructure Law, and other funding sources, all of which have been instrumental in providing local and state funds to leverage federal participation. With the magnitude of the capital program and increasing operating costs, coupled with recent years’ rising construction costs and inflation as well as federal funding uncertainty, Metro and other transit agencies across the country are grappling with project delivery and financial sustainability.
In February 2025, the Board passed Motion 14 (Attachment A), which directed staff to develop a CBA framework for Metro Capital Projects that could strategically position projects for funding opportunities and could evaluate contributions to the economic vitality of Los Angeles County and the United States. As amended, the motion also directed CBA evaluations to include project viability, competitiveness in funding programs, systemwide connectivity benefits, service to Equity Focus Communities and transit dependent riders, ridership, and connectivity with economic centers to increase sales tax growth. Additionally, the CBA methodology would be consistent with USDOT, California and Metro policy objectives and guidelines.
In April 2025, Program Management staff presented the Metro Annual Program Evaluation (APE) report and discussed the multifaceted strategies to mitigate cost and schedule risks and to support continuous improvement in capital program delivery. As part of the report, Planning staff presented an initial CBA framework that included criteria consistent with USDOT guidelines (e.g., travel time savings, safety, emissions reductions, operating cost savings, and health benefits), State criteria (e.g., accessibility, journey quality), and Metro criteria (e.g., community benefits, system and network benefits, economic benefits, and equity). Collectively, these form the Metro Cost Benefit Analysis (Metro CBA) criteria.
Current Metro Practices in Employing CBA
Metro currently uses various forms of cost and benefit analyses in project development and implementation. In selecting a Locally Preferred Alternative (LPA), Metro conducts robust analyses on proposed alternatives to identify capital costs and environmental and other benefits to the region; however, methodologies can differ from project to project, making it difficult to compare projects’ benefits and costs. Additionally, capital cost analyses have been limited in that most estimates do not incorporate operations, maintenance, or asset replacement costs in early planning decisions, thus missing a full life-cycle assessment. Analyses also have been limited in addressing equity and economic impacts, as discussed below:
Equity Impacts: Equity evaluations currently are conducted on most projects, primarily centered on the geographic relationship of transportation infrastructure to Equity Focus Communities (EFC). The Office of Equity and Race (OER) is developing new tools to measure accessibility, as well as health, environmental, and economic equity and to answer the question of how proximity translates to access to opportunities and quality of life. These tools are anticipated to be developed over the next year and will inform the Metro CBA in terms of distributional and absolute contributions to mobility, health and safety, and other goals for disadvantaged communities. In the meantime, evaluations will continue to use existing tools (e.g., maps, geographic analyses, qualitative information).
Economic Impacts: Some federal grant programs require Benefit Cost Ratios (BCR) and USDOT prescribes a standardized accounting framework that includes parameters to be included (e.g., mobility, safety) and specific metrics for those parameters (e.g., travel time savings, fatalities avoided, etc.), monetized unit values, and calculations to be used. Other federal grant programs require cost effectiveness measures (or the cost per additional unit of change, such as cost per new rider). Notably, USDOT grant guidance for competitive programs specifically prohibits the inclusion of local economic benefits in BCRs. From a federal/national perspective, economic benefits generated from federal funding to a project do not consider “the extent to which positive impacts in one region or industry may be accompanied by offsetting losses in another” (2024, USDOT).
Despite the exclusion from federal funding decisions, however, economic impacts to the region are important factors for local audiences (e.g., Metro Board, local elected officials, communities, advocates, etc.). Accordingly, staff are developing a regional economic modeling tool to assess and quantify economic output generated by project investment. As Metro projects reach critical milestone decisions, staff will conduct economic impact analysis on a project-by-project basis until a systematic methodology is incorporated into the Metro CBA.
Discussion
DISCUSSION
The draft Metro CBA framework reflects Board-defined goals and objectives adopted since a 2015 Performance Framework was used to support the Measure M Ordinance Expenditure Plan and the 2020 Long Range Transportation Plan (see Attachment B for more background). Based on Board direction over the past 10 years, staff recommend a Metro CBA framed by the thematic areas described below. Each thematic area includes a percentage weight that is based on the 2015 Performance Framework but adjusted to reflect emerging priorities since.
Note that equity has been and continues to be a prominent theme in Metro Board priorities as reflected in the Measure M 5-Year Comprehensive Assessment and Equity Report (October 2023). Mobility can advance equity by increasing access to high-quality mobility options, reducing air pollution, and enhancing economic opportunity in underserved areas. As a result, equity evaluations are embedded within the thematic areas, to ensure that this direction is integrated into transportation outcomes. Equity constitutes three percent (3%) in Mobility/Accessibility because this is the primary benefit area from transportation investments. It constitutes one percent (1%) within each of the areas of Safety and Health Benefits, Environmental Sustainability and Economic Benefits to the Region. Long Term Operational Sustainability does not include equity performance because its benefits directly accrue to the service provider. In total and across all thematic areas, Equity represents 6% of the total Metro CBA as described below.
Proposed Metro CBA Objectives and Weighting
• Mobility and Accessibility (40%) - This is the primary benefit for most transportation modes, aligned with FTA and Caltrans methodologies. Easing congestion, increasing active transportation, and improving travel times, system connectivity, throughput, and reliability, are all key Metro objectives addressed by mobility improvement. The key metric in evaluating projects is travel time savings for different user groups and modes (transit riders, drivers and bicyclists). Travel time savings are critical for estimating travel demand and mode share, which influence regional congestion management goals. Other policy objectives reflected in mobility and accessibility metrics include improvements in reliability, reductions in travel delay (for goods and people), and improved connectivity to jobs, housing, resources, and opportunities. Equity is also a consideration in mobility and access evaluations, contributing three percentage points (3%) to the Mobility and Access theme, and representing analyses conducted on outcomes by mode, geography and EFCs, and other socio-economic data.
The weighting factor for this category has been reduced from 45% since the 2015 Performance Framework because operating and life cycle costs, as well as extended life of equipment and long-term fiscal sustainability of operations - which had been considered as Mobility goals - are now proposed to constitute a new category, “Operational and Long-Term Sustainability,” reflecting the new financial criteria adopted by the Board in October 2023.
• Safety and Health Benefits (15%) - Transportation’s influence on safety and public health are objectives for Metro’s Vision 2028. Transportation projects’ benefits to health and safety are typically measured by reductions in exposure to risks posed by the transportation system across multiple modes. Safety and health benefits similarly result from improved access to safe active transportation infrastructure that promotes active transportation as a primary mode or connection to transit, health care facilities, and recreational opportunities, such as parks and open space.
Since transportation is a social determinant of health, from an equity perspective, safety and health benefits may be analyzed through the lens of sensitive receptors (e.g., children younger than 5 and older adults above 65 years of age) or increased access to health care for particular socio-economic groups; equity contributes one percentage point (1%) to this category.
In the Metro CBA, safety and health are proposed in one category, since in both policy areas, the transportation investments are intended to reduce exposure to (safety and health) risks posed by the transportation system across multiple modes and minimize safety and health risks introduced by the project. In 2015, safety was a separate category and health related performance was included as a goal for “Sustainability/Quality of Life” with 12.5% weight; the Metro CBA would instead include health and safety together (15%) and environmental sustainability (15%) as separate categories.
• Environmental Sustainability (15%) - Projects demonstrating the following improvements support Metro’s climate and sustainability goals as aligned with SB 375 targets. Policy criteria include reductions in greenhouse gas (GHG) emissions and criteria pollutants, reductions in urban heat island effects, reduced stormwater runoff impacts, and reduced biological and habitat impact. Equity in this category contributes one percentage point (1%) to this category. Objectives related to equitable environmental sustainability include accounting for disproportionate exposure and/or distribution of environmental benefits (i.e. air pollution, green space) by mode, geography and EFCs, or other socioeconomic data.
• Long-Term Operational Sustainability (15%) - The provision of timely, reliable, and efficient transportation services is critical for Metro riders as well as for goods movement in and through our region. Just as environmental sustainability focuses on ensuring long-term viability of natural resources for future generations by exercising responsible resource management, operational sustainability focuses on fiscal decisions that ensure the continuity of infrastructure delivery and operational service over the long term. Identifying and measuring operational sustainability at the outset of project planning helps ensure that capital investments can be operated and maintained effectively throughout their lifecycle, reducing the risk of underutilized or deteriorating infrastructure. Doing so in turn is critical for providing continuity in service and thus maintaining public trust and for securing continued investment and support from state and federal funding partners. To this effect, the Metro CBA will include measures to evaluate the operational benefits and system productivity over time, the sufficiency of funding for operations and maintenance, system resiliency and recovery from service disruptions and/or emergencies, and the feasibility of project such as delivery in phases while maintaining high benefits relative to cost.
Aligned with the October 2023 Board-adopted motion and given the Board’s attention to the transit “fiscal cliff,” this new category of objectives evaluates Metro’s investments today against fiscal and operational sustainability in the future.
Economic Benefits to the Region (15%) - While economic benefits are explicitly excluded from federal funding evaluations, infrastructure improvements for enhanced mobility of both goods and people can have significant positive effects on regional economic output. Reductions in travel times make it easier for workers to access jobs and for employers to reach a wider employment pool. Additionally, businesses benefit from more reliable and timely delivery of goods and services, and workers benefit from more time for work and leisure. Finally, travel time reductions can improve access to tourist destinations to increase visitation and spending, generating additional economic activity in the region, including sales tax revenue and growth. The direct benefits of travel time reductions are accounted for as mobility and accessibility, but the economic benefits to the region are indirect benefits including reallocation of time savings to productive activities that generate further economic activity in the region.
The economic impact analysis to estimate jobs created (from construction and operations), and countywide output associated with project investment. In addition to identifying productivity and consumption resulting from travel time savings to all users of the transportation system, staff also will estimate the socio-economic composition of those obtaining economic benefits to help with equity assessment of the project. For this reason, equity contributes one percentage point (1%) towards Economic Benefits to the Region.
Implementation of Metro CBA
Staff will return to the Board next month for approval of finalized weighted objectives and operationalized metrics to be used in evaluating projects. As mentioned in previous sections, metrics for equity and the regional economic impact models are still under development. However, following Board’s approval of objectives, staff will continue to refine technical calculations and modeling work and begin conducting Metro CBA evaluations on projects that are nearing milestone decisions.
Staff will explore international and national cases in which CBA implementation has been successful not only in informing project development decisions but in yielding improvements to the development process itself. For example, The Green Book, issued by the United Kingdom’s finance ministry, offers a standardized development process that varies the evaluation criteria based on a project’s developmental stage and incorporates “design to budget” or “design to BCR” in early planning phases. These may provide insight into strategies for systematically incorporating the Metro CBA at project milestones across stages of planning, design, construction, and operations.
Equity_Platform
EQUITY PLATFORM
This report provides an overview of the proposed Metro Cost Benefit Analysis methodology and proposes potential applications of CBA in project evaluations. A Metro CBA methodology would apply to multimodal transportation investments, and at various milestones of project development. The methodology presented includes equity as embedded within thematic areas of performance, receiving a six percent (6%) total weighting factor.
While traditional CBAs demonstrate aggregated net benefits, Metro’s CBA process will examine equity through a quantitative analysis, spatial analysis (maps), qualitative narratives (cultural and/or historical description, etc.) or some combination. Additionally, as the technical methodology continues to be refined and as additional equity tools are developed (e.g., Access to Opportunities, Equity Toolkit, Equity Performance Measurement, etc.) the Metro CBA framework will continue to evolve and incorporate equity as an assessment factor.
Vehicle_Miles_Traveled _Outcome
VEHICLE MILES TRAVELED OUTCOME
VMT and VMT per capita in Los Angeles County are lower than national averages, the lowest in the SCAG region, and on the lower end of VMT per capita statewide, with these declining VMT trends due in part to Metro’s significant investment in rail and bus transit.* Metro’s Board-adopted VMT reduction targets align with California’s statewide climate goals, including achieving carbon neutrality by 2045. To ensure continued progress, all Board items are assessed for their potential impact on VMT.
While this item does not directly encourage taking transit, sharing a ride, or using active transportation, it is a vital part of Metro operations, as the development and implementation of CBAs provides a more data-driven and transparent decision-making process to support delivery of the capital program including transit, highways, ride sharing, and active transportation investments. Because the Metro Board has adopted an agency-wide VMT Reduction Target, and this item supports the overall function of the agency, this item is consistent with the goals of reducing VMT.
*Based on population estimates from the United States Census and VMT estimates from Caltrans’ Highway Performance Monitoring System (HPMS) data between 2001-2019.
Implementation_of_Strategic_Plan_Goals
IMPLEMENTATION OF STRATEGIC PLAN GOALS
The recommendation to implement Cost Benefit Analysis in project development decisions supports the following strategic plan goals:
o Goal 1 - Provide high-quality mobility options that enable people to spend less time traveling
o Goal 2 - Deliver outstanding trip experiences for all users of the transportation system
o Goal 3 - Enhance communities and lives through mobility and access to opportunity
o Goal 4 - Provide responsive, accountable and trustworthy governance within the Metro organization.
The implementation of CBA provides a tool for evaluating projects against strategic goals and supports Metro’s capital investment decisions with transparent, trustworthy, data-based analysis.
Next_Steps
NEXT STEPS
• Refine the proposed scoring (weighting) framework based on any feedback from the Board
• Return to the Board in July with finalized evaluation criteria
Attachments
ATTACHMENTS
Attachment A - Board Motion 14: Cost-Benefit Analysis for Metro Capital Projects
Attachment B - Existing Plans and Policies
Attachment B1 - Long Range Transportation Plan - Potential Ballot Measure Framework, Assumptions and Input
Attachment B2 - Board Motion 17.1
Prepared_by
Prepared by: Allison Yoh, Executive Officer, Countywide Planning & Development, (213) 922-4812
Edward-Michael Muña, Senior Manager, Office of Equity and Race,
(213) 317-1411
Michael Cano, Senior Executive Officer (Interim), Countywide Planning & Development, (213) 418-3010
Nicole Ferrara, Deputy Chief Planning Officer, Countywide Planning & Development, (213) 547-4322
Arnold Hackett, Senior Advisor to the CEO, Office of the Chief Executive Officer, (213) 922-5409
Reviewed_By
Reviewed by: Ray Sosa, Chief Planning Officer, (213) 547-4274
