Meeting_Body
PLANNING AND PROGRAMMING COMMMITTEE
CONSTRUCTION COMMITTEE
JULY 16, 2025
Subject
SUBJECT: METRO COST BENEFIT ANALYSIS METHODOLOGY
Action
ACTION: APPROVE RECOMMENDATION
Heading
RECOMMENDATION
Title
ADOPT the recommended Metro Cost Benefit Analysis Methodology (Attachment A).
Issue
ISSUE
Last month, the Planning and Programming Committee and the Construction Committee received a staff report on a Cost Benefit Analysis (CBA) draft methodology. The report represents a significant milestone in Metro’s effort to establish a standardized framework for evaluating capital projects. The Committees addressed the proposed methodology and its representation of priorities, weights attributed to objectives and goals, and how Metro CBA results would be used, as one tool among many, to help inform decision-making on project development and prioritization anticipated for longer term planning efforts such as the upcoming Measure M Decennial Review. This report recommends that the Board adopt the final methodology (Attachment A).
Background
BACKGROUND
At its February 2025 meeting, the Board approved Motion 14 (Attachment B) 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.
In April 2025, as part of the Annual Program Evaluation (APE) report, staff presented an update on a general Metro CBA framework for organizing key project criteria to be evaluated. The framework distinguished criteria included in federal and state grant programs from those reflecting local and regional interests. Key to the framework was that all criteria of federal and state funding programs formed the basis of the Metro CBA, upon which local impacts (like regional economic output and equity) would be added.
The balance of this report refers to the US Department of Transportation’s (USDOT)analysis as “Benefit Cost Analysis,” consistent with the federal agency’s nomenclature and its updated guidance document, Benefit Cost Analysis Guidance for Discretionary Grant Programs, as well as the California Department of Transportation’s (Caltrans) California Benefit-Cost Analysis model (Cal-B/C). These guidance tools for conducting benefit cost analysis produce results such as Net Present Value (NPV), Benefit Cost Ratios (BCR), Return on Investment (ROI), Internal Rate of Return (IRR), and Payback Period (years). This Board Report refers to the Metro analysis as the “Metro Cost Benefit Analysis (Metro CBA),” consistent with the nomenclature used in the Board motion, and built upon the USDOT and Caltrans models.
Discussion
DISCUSSION
In June 2025, staff presented detailed criteria within the framework, including organizing themes (goals) and weights, objectives, and metrics to be used in evaluating capital projects. These goals were based on a 2015 Performance Evaluation Framework adopted by the Board, and modified to reflect updated priorities such as safety, long term operational sustainability, economic impacts to the region necessary for sustaining continued transportation sales tax revenues, and equity.
The proposed goals and weights presented in June 2025 to evaluate projects are summarized below, with equity metrics noted within each objective. Additional information can be found in Attachment A and the June 2025 Metro Cost Benefit Methodology Board Report.
• Mobility and Accessibility (40%) - Easing congestion, increasing active transportation, and improving travel times, system connectivity, throughput, and reliability. Equity contributes three percentage points (3%) to the Mobility and Access theme, and represents analyses conducted on outcomes by mode, geography and EFCs, and other socio-economic data.
• Safety and Health Benefits (15%) - Transportation projects’ benefits to health and safety are measured by reductions in exposure to risks posed by the transportation system across multiple modes, increased access to health-promoting behaviors (such as walking and bicycling), or increased access to health care for particular socio-economic groups; equity contributes one percentage point (1%) to this category.
• Environmental Sustainability (15%) - 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%) related to equitable environmental sustainability, accounting for disproportionate exposure and/or distribution of environmental benefits (i.e. air pollution, green space) by mode, geography and Equity Focus Communities (EFC), or other socioeconomic data.
• Long-Term Operational Sustainability (15%) - This goal focuses on the continuity of infrastructure delivery and sustained operations and service over the long term, including measures to evaluate the operational benefits and system productivity over time, the sufficiency of funding for operations and maintenance, improvements to system resiliency and recovery from service disruptions and/or emergencies, and the feasibility of project implementation such as delivery in phases while maintaining high benefits relative to cost.
• Economic Benefits to the Region (15%) - Transportation investments are expected to result in economic benefits to the region travel time savings allow more productive activities (for workers and their employers) that generate further economic activity in the region, jobs created (from construction and operations), and more goods carried to market. 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. Equity contributes one percentage point (1%) towards Economic Benefits to the Region.
Staff heard a number of questions and comments from the Board related to the proposed methodology, including:
• Adequacy of weights for priority goals such as safety and economic output, relative to the other goals;
• Inclusion of other goals and objectives such as Metro’s commitment to addressing homelessness and housing, and to improving the security and personal safety of our customers;
• How and when the Metro CBA would be conducted and presented on projects as they are being developed;
• How a Metro CBA will be used to support the upcoming Measure M Decennial Review, which will evaluate the past ten years of Measure M performance and update the next ten years’ schedule of expenditures; and
• Potential liability in developing a Metro CBA that may be used to challenge a project’s environmental assessment as required by the California Environmental Quality Act (CEQA) and/or National Environmental Protection Act (NEPA).
Staff have considered these comments and recommend that the weights listed above be adopted as a starting point for continuous development of the Metro CBA methodology. These weights and the results they produce for each category will be subject to sensitivity testing to determine how changes in the weights affect the project’s total outcomes.
While the methodology presented in June has not changed, the committee discussions reflected interest in continuing to pursue Metro’s commitments to address homelessness and housing, and to improve security and personal safety for our customers. Because the Metro CBA is designed to evaluate transportation capital projects, these objectives are not directly included in the Metro CBA, but a qualitative narrative about these goals will be presented alongside the Metro CBA.
Staff reported during discussions that the Metro CBA would be used as one of a several tools for at least two purposes: (1) evaluating project performance at critical decision milestones, such as alternatives analyses, selection of a Locally Preferred Alternative, project approval, establishment of a Life of Project budget, and evaluating value engineering efforts, etc.; and (2) evaluating projects that will be considered during the upcoming Measure M Decennial Review. As a point of clarification, the Metro CBA will not be used to compare projects of different modes against each other, but will be conducted on different types of projects to provide transparent, data-driven evaluations of expected performance relative to a project’s estimated cost.
Finally, staff reported that conducting a CBA on projects does not conflict with nor increase liability with regard to our CEQA and/or NEPA analyses. CBAs are used in other agencies and across industry in addition to the environmental analysis to support decision-making.
Determination_Of_Safety_Impact
DETERMINATION OF SAFETY IMPACT
The recommended Board action to approve and adopt the Metro CBA methodology itself will have no impact on safety standards for Metro. The approval and implementation of the Metro CBA methodology will evaluate the safety impacts of capital projects.
Financial_Impact
FINANCIAL IMPACT
Impact to Budget
At this time, there is no impact to budget should the Metro Board approve the methodology and implementation of the Metro CBA. Conducting analyses for project milestones and for the Decennial Review will require technical and professional services which are in Countywide Planning and Development’s FY2026 adopted budget. The Chief Planning Officer will ensure sufficiency within the annual budget and staff will return to the Board should there be a need for additional resources.
Equity_Platform
EQUITY PLATFORM
This report provides an overview of the proposed Metro CBA methodology and proposes potential applications of the Metro 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 the Metro CBAs provides a more data-driven and transparent decision-making process to support delivery of the capital program including transit, highways, and major 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 a Metro CBA provides a tool for evaluating projects against strategic goals and supports Metro’s capital investment decisions with transparent, trustworthy, data-based analysis.
Alternatives_Considered
ALTERNATIVES CONSIDERED
The Board could choose not to approve the Metro CBA methodology, direct staff to make changes to the methodology before implementation, and/or not approve its implementation at all. Not approving the Metro CBA methodology or its implementation would limit staff’s ability to provide data-driven, transparent analysis of costs and benefits intended to inform the Board’s milestone decisions on projects and on the upcoming programmatic Measure M Decennial Review. Directing staff to change the methodology before implementation - depending on the magnitude of change - may delay the availability of Metro CBA findings to inform these imminent project decisions.
Next_Steps
NEXT STEPS
With Board approval of the Metro CBA methodology, staff will conduct analyses and produce project profiles to support milestone planning decisions. As part of our desire to begin evaluations of major projects and to continuously improve our process, staff will validate the models, conduct sensitivity testing, and adjust the methodology to comprehensively reflect projects’ costs, benefits, and returns on investment.
Attachments
ATTACHMENTS
Attachment A - Goals, Objectives and Sample Metrics in Metro CBA
Attachment B - Motion 14: Cost-Benefit Analysis for Metro Capital Projects
Prepared_by
Prepared by: Allison Yoh, Executive Officer, Countywide Planning and Development, (213) 922-4812
Nicole Ferrara, Deputy Chief Planning Officer, (213) 547-4322
Arnold Hackett, Senior Advisor to the CEO, (213) 922-5409
Reviewed_By
Reviewed by: Ray Sosa, Chief Planning Officer, (213) 547-4274
