Business Case for Investment in Cycling 2012
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TravelSmart
to
School
Pilot
Research
and
Development
i
May 2012
Business
Case
for
Investment
in
Cycling
Ian Ker
for
RAC WA
Contents 1 Introduction .................................................................................................................................... 1 2 About this Project........................................................................................................................... 2 3 Why Is Cycling Important?............................................................................................................. 3 4 Why a Business Case?.................................................................................................................. 5 4.1 What is a business case? 5 4.2 Multi-sectoral interests and outcomes 6 5 Evaluation in Public Sector Decision-Making ............................................................................... 8 5.1 Evaluation and Public Expenditure 9 5.2 Evaluation and Transport 10 5.3 Comprehensive Analysis 10 5.4 Triple Bottom Line and Sustainability Evaluation 12 5.5 Key Requirements for Evaluation of Cycling 16 6 Components of a Business Case ................................................................................................ 17 6.1 Benefit-cost analysis 17 6.2 Evaluation Framework 17 6.3 Conceptualising Benefits 18 6.4 Discount Rate 21 6.5 Real Values over Time 23 6.6 Financial and distributional analysis 25 6.7 Community analysis: the Appraisal Summary Table 26 6.8 Macro-Economic Analysis 26 6.9 Risk Assessment and Management 28 7 Business Case Framework for Cycling........................................................................................ 31 7.2 Impact on level of cycling activity 32 7.3 Identifying and valuing the benefits 42 8 Benefit and Costs ........................................................................................................................ 43 8.1 Benefit-Cost Analysis 43 8.2 Financial Analysis 45 9 The Business Case for Cycling.................................................................................................... 46 9.1 Benefit-cost analysis 46 9.2 Financial and distributional analysis 54 9.3 Community analysis: the appraisal summary table 57 10 How Much Investment is Required? ............................................................................................ 58 10.1 Perth and Peel 59 10.2 Outside the Perth Metropolitan Area 60 11 What Will This Investment Deliver? ............................................................................................. 61 References (includes references for Appendices A and B) ............................................................... 62 Appendix A: Derivation of Benefit Values for Benefit-Cost Analysis .................................................. 71 Appendix B: Derivation of Values for Financial Analysis ................................................................... 79
Business Case for Investment in Cycling 1
1 Introduction
Cycling is increasingly a mainstream contributor to providing access to activities and opportunities
and has been given renewed impetus by developing concerns over recent years, including:
Increasing congestion on roads and public transport;
Increasing rates of obesity and other health issues related to low levels of physical activity;
The impending peak in oil production in the face of continuing increases in demand;
The contribution of motorised transport using fossil fuels to global climate change; and
The extent of pressures on household budgets from increasing utility (electricity, gas and water)
and housing costs.
At the same time, global economic setbacks have made governments acutely aware of the need to
get value for money from investments and public expenditure.
In many places, cycling is a larger part of the transport mix than it is in Perth. There are many
reasons for this, some of which relate to the physical layout of Perth and other urban areas in WA,
which have largely developed to accommodate cars as the primary mode of transport. However, land
use planning in Western Australia (WAPC, 2010) is increasingly adopting new mechanisms to deliver
vibrant and revitalized centres. These mechanisms include increasing densities and concentrating
varied activities to give residents more opportunity to access services locally and thus lessen the
extent to which people rely on car travel.
Reducing the need to travel long distances will, in the right circumstances (amenity, safety,
convenience), make cycling a more feasible and attractive option. Increasing the rate of cycling
participation for travel will contribute to the achievement of objectives relating to:
Affordability for governments and individuals;
Health and other social impacts;
Local and global environmental concerns; and
Long term sustainability of our cities and the transport systems that support them.
This is a far wider range of impacts than has commonly been assessed in cycling programs or in
transport investment. They also extend well beyond the traditional boundaries of organisations and
sectors commonly concerned with cycling, which has important implications for both the assessment
of cycling programs and the decision-making processes for their funding and implementation.
This report describes, quantifies and values the effects of cycling programs on the economic, social
and environmental well-being of our community in the Western Australian context. Where these
effects cannot be quantified or where a monetary value cannot be placed on them (at least with the
current state of knowledge), the assessment framework will provide information to support their
consideration in decision-making.
An Executive Summary of this report has been prepared as a separate stand-alone document.
Business Case for Investment in Cycling 2 2 About this Project The RAC is an advocate for Western Australian road users and the broader community, the RAC seeks to defend their rights, pursue their causes and give voice to their concerns. One road user alone does not stand much chance of changing government policy. The RAC speaks with the authority of 720,000 members. The RAC advocates for transport by lobbying government and other organisations on key issues that affect the way Western Australians move around their community – whether it is as motorists, motorcyclists, cyclists, public transport users or pedestrians. Many motorists and their passengers are also cyclists and would benefit from improved cycling conditions when they do cycle. Motorists who do not currently cycle at all may choose to travel by bicycle for some trips if better routes and infrastructure were available. Even motorists who choose not to cycle may benefit from a reduction in the level of road traffic, especially at times of peak usage. The RAC aims to ensure that Western Australians are able to travel around this state in the safest, most sustainable and accessible way possible. Lobbying for the changes that will help meet those goals is done by the RAC’s Advocacy team, which focuses on the creation of value for members by always putting the members’ needs and interests first. The RAC is dedicated to ensuring that the right public policies are in place to ensure the mobility needs of our members are met. The RAC aligns its activities with the following three themes: Safety A safe mobility system can be defined as a system that outperforms national and international safety benchmarks. It encompasses safer drivers in safer cars on safer roads. Accessibility To have a cost efficient, convenient and reliable commuter network is an essential part of personal mobility. Sustainability Sustainable mobility is broader than the environmental aspects of mobility: it encompasses the mobility needs of current and future generations. Often there is a lack of readily-available research and information to support the development, acceptance and implementation of improvements to the sustainability of the transport system we all use every day. This project demonstrates the net benefit of investing in selected cycling programs. The RAC commissioned CATALYST to rigorously validate and, where necessary, update existing economic analysis to capture the benefits and costs arising from investment in the context of both the Perth metropolitan area and a regional centre. The key outcomes are the positive results of a thorough benefit cost analysis. A benefit-cost calculator and a report detailing the inputs to and findings of the business case are provided, including a plain-language executive summary for wide dissemination.
Business Case for Investment in Cycling 3
3 Why Is Cycling Important?
States, territories and local government should continue to invest in and develop new on-road and off-road cycle
routes, appropriate end-of trip facilities and routes specifically for cycling tourism, as well as maintaining existing
routes and facilities.
All jurisdictions will continue to invest in developing local on-road and off-road cycling networks to key
destinations in both urban and rural areas that are consistent with national standards, and should commit
to the identification of required funds in the relevant budget processes.
States, territories and local government will continue to develop end-of-trip facilities that make it possible
for people to cycle, including considering the introduction of regulations, such as planning policies and
building standards, to mandate the provision of facilities.
Austroads will ensure that its guides recognise and promote best practice in the design and provision of
cycling infrastructure and facilities.
Australian National Cycling Strategy 2011-2016
In a modern city like Perth, the private car is essential for much of the travel we need to undertake as
st
part of our 21 century lifestyle. However, as Perth continues to grow, supported by the economic
successes of the mineral and agricultural sectors in regional areas of Western Australia, and the cost
of fuel continues to rise:
Travel times are increasing as road traffic congestion deteriorates; and
Driving our cars costs us all more.
For longer journeys, especially at peak times when services are most frequent, public transport can
often provide an effective alternative to the car.
For shorter journeys, the bicycle can be a convenient way of travelling, but too often we feel
uncomfortable or unsafe because much of the journey must be made on roads with no specific
provision for cyclists.
Why Invest in Cycling?
Cycling is a low-cost, low-impact means of independent local transport that is available to most people,
including those too young to hold a driver’s licence for a motor vehicle.
Western Australians own almost as many bicycles as cars, with an average of 1.58 bicycles per household,
higher than the Australian average of 1.46 (Australian Bicycle Council, 2011).
Nearly half (45%) Western Australians ride a bike at least once a year, indicating a willingness to use the
bicycles they own, but only half the annual users actually used their bikes in a typical week. (Australian
Bicycle Council, 2011).
Despite their high rate of bicycle ownership, Perth people make only 2% of trips by bicycle (PARTS,
undated).
The main reason for non-cyclists not riding a bicycle relate to safety/traffic and the physical environment
(tns social research, 2008). This can be addressed by provision of suitable cycle infrastructure.
The Perth Bicycle Network, planned in 1996, is incomplete and planning has not kept pace with the growth
of the Perth Metropolitan Region. Bicycle routes are often not continuous and substantial areas of Perth do
not have effective regional bicycle networks.
Regional towns and cities similarly suffer from incomplete cycle networks.
Business Case for Investment in Cycling 4 Outside Perth, congestion is less of an issue and public transport is often not available, but the cost of petrol affects everyone. Cycling is a feasible option for many trips in regional towns and cities, where we don’t have to travel as far as we do in Perth, but there might not be suitable cycling facilities to ride on. The Australian National Cycling Strategy 2011-2016 (Australian Bicycle Council, 2010) identifies cycling promotion as the first and infrastructure as the second of six key strategies to increase participation in cycling: 1. Cycling Promotion. Promote cycling as both a viable and safe mode of transport and an enjoyable recreational activity. 2. Infrastructure and Facilities. Create a comprehensive and continuous network of safe and attractive routes to cycle and end-of-trip facilities. 3. Integrated Planning. Consider and address cycling needs in all relevant transport and land use planning activities. 4. Safety. Enable people to cycle safely. 5. Monitoring and Evaluation. Improve monitoring and evaluation of cycling programs and develop a national decision-making process for investment in cycling. 6. Guidance and Best Practice. Support the development of nationally consistent guidance for stakeholders to use and share best practice across jurisdictions. This business case deals with the first two of these key strategies, as these are the ones that require substantial pubic investment. The remaining key strategies are largely about achieving better outcomes through improved process. These key strategies reflect the approach of the 1996 Bike Ahead strategy for Western Australia (Transport WA, 1996), and continue to underpin the draft Western Australian Bicycle Network Plan, 2012-2021 (Transport WA, 2012). This business case demonstrates the value of investing in increasing cycling by identifying and quantifying these outcomes in a coherent framework that supports decision-making by government and other stakeholders.
Business Case for Investment in Cycling 5
4 Why a Business Case?
4.1 What is a business case?
A business case addresses, at a high level, the business need or, in the case of cycling, the public
policy objectives that the project seeks to meet. It includes the reasons for the project, the expected
business or community benefits, the options considered (with reasons for rejecting or carrying
forward each option), the expected costs of the project and the expected risks. (Project Brief).
The aim of a business case is to facilitate a full-informed decision and should contain information that
reflects the full range of impacts, addresses government objectives and priorities and is appropriately
rigorous (ATC, 2006, p22).
A business case for a primarily-public-funded initiative, such as bicycle programs, must address
more than simply the financial bottom line and include the full range of outcomes that are of concern
to the community. The principal means of doing this is socio-economic benefit-cost analysis, but this
has limitations where:
Effects cannot be quantified;
Effects can be quantified but not expressed in the monetary terms required by benefit-cost
analysis;
There is uncertainty about effects and values;
There are risks that may affect the achievement of the potential outcomes;
There are substantial effects on a range of government (decision-maker) stakeholders beyond
the specific agency/portfolio with direct responsibility for the program;
The impacts on different groups of stakeholders are likely to vary.
It is important that the Business Case for Investment in Cycling provide clear information on all
aspects that are important to key stakeholders in the decision-making process. These stakeholders
include:
State government, as the principal policy-setter and funder of bicycle programs. State
government can also be a substantial beneficiary, for example, through reduced health system
costs (resulting from improved health and fitness) and improved educational outcomes.
Local government, both as a partner with State government and in their own right, for example
through the benefits to local businesses and communities.
Federal government, for example through reduced health system costs and improved economic
outcomes resulting from a fitter, healthier and more-productive workforce.
Individuals and the community, for example through lower-cost transport, improved health and
well-being (including lower financial costs) and reduced intrusion of motor vehicle traffic into
residential areas.
Commercial businesses and employers generally, for example through fitter and healthier
employees and reduced need to provide employee car-parking.Business Case for Investment in Cycling 6 4.2 Multi-sectoral interests and outcomes Many public sector initiatives involve cross-sectoral interests and outcomes. Figure 1, over the page, illustrates some of the principal relationships between cycling and other areas of public policy. Figure 1 Illustrative influences and outcomes of increased cycling activity Based on Ker et al (2010). Applied Research Project to Assess the Cost and Health Benefit of Active Transport in Queensland. CATALYST FOR Health Promotion Queensland, Queensland Health: Brisbane, Queensland. For the benefit of all stakeholders, whether they be investors or beneficiaries, it is important that a business case ensures that all significant costs and benefits are identified—even if they cannot all be measured and valued – lest they be otherwise overlooked. A robust framework is required that is able to quantify the benefits of active cycling, to provide a comprehensive evaluation to assist public policy decisions across government. Giles-Corti et al (2010, p. 125) concluded that: As societies confront the economic, social and environmental effects of climate change, population growth, traffic congestion and the burden of chronic disease, there is a unique opportunity to view the benefits of active transportation through a multi-sector lens. …Studying the co-benefits of policy options however is at the nascent stage. …The language of co-benefits is useful as it helps break down policy silos and presents additive (rather than discrete) benefits that could be incorporated in economic analyses to assess cost-effective strategies. The co-benefits of active transport have begun to receive recognition in government strategies, with walking and cycling explicitly and implicitly recognised as helping to support national and/or state targets in a range of public policy sectors. The following national and Western Australian strategies have included encouragement of cycling as part of their aims:
Business Case for Investment in Cycling 7
Transport and Planning
- National Cycling Strategy 2011 – 2016
(https://www.onlinepublications.austroads.com.au/items/AP-C85-10)
- WA Bike Ahead Strategy
(http://www.transport.wa.gov.au/mediaFiles/AT_CYC_P_bike_ahead.pdf)
- Perth Bicycle Network Plan, 2012-2021
(http://www.transport.wa.gov.au/mediaFiles/AT_CYC_P_WABN_Plan.pdf) and its
predecessor, the Perth Bicycle Network Plan of 1996
(http://www.transport.wa.gov.au/mediaFiles/AT_CYC_P_PBNP.pdf)
- Perth Directions 2031 and Beyond (http://www.planning.wa.gov.au/publications/826.asp).
Economic Policy
- Energy2031: Strategic Energy Initiative Directions Paper – A smarter energy future for
Western Australians (http://www.energy.wa.gov.au/1/3321/3312/about_energy.pm)
Health and Social Policy
- Blueprint for an Active Australia
(http://www.heartfoundation.org.au/SiteCollectionDocuments/Blueprint-for-an-active-
Australia.pdf)
- Active, Healthy Communities (http://www.activehealthycommunities.com.au)
- An Australian Vision for Active Transport (http://www.heartfoundation.org.au/driving-
change/current-campaigns/Pages/australian-vision-active-transport.aspx)
- Healthy Spaces and Places (http://www.healthyplaces.org.au)
Education
- AuSSI – the Australian Sustainable Schools Initiative, Western Australia
(http://det.wa.edu.au/curriculumsupport/sustainableschools/detcms/portal)Business Case for Investment in Cycling 8
5 Evaluation in Public Sector Decision-Making
Good public policy and associated programs require comprehensive evaluation of all impacts
(benefits and costs) to allow decision-makers to understand the full effects of the alternatives they
must choose from. Comprehensive evaluation helps identify the options that are optimal overall, and
helps avoid solutions to one problem that unintentionally exacerbate other problems facing society or
have unintended consequences.
There is an important distinction in public policy and public sector decision-making between policy
objectives, which may be enunciated in legislation or in high-level decisions of government, and the
strategies and programs to give effect to these objectives. The main emphasis of evaluation
(including development of methodology) has usually been on programs and projects rather than
policy, except in the specific case of the use of economy-wide models of budgetary and fiscal policy.
In some cases, policy or legislation aimed at problem solving can be broken down into components
that may be commensurate with programs and can be evaluated in the same ways as programs.
This can be difficult, however, where:
Different parts interact with each other (in which case the effects of individual programs may not
be separable); and
The policies (or legislation) may interact with other policies, creating problems of unclear
boundaries (Bussmann, 2010).
Nevertheless, wherever choices have to be made, some form of assessment or evaluation must be
undertaken, unless the choice is purely random or based on personal opinion. Sometimes, however,
the evaluation is implicit, rather than explicit, in which case the real basis of it may be known only to
the person making the decision.
Often evaluation is only partial, on the basis of one or a small number of criteria rather than on the
basis of the full range of issues the community would wish to be considered. This may be the case
where public commitments are made without full knowledge of the implications or where a particular
objective is, at the time, seen as paramount. It is also the case where a decision is made on the
basis of a single form of assessment, such as benefit-cost analysis, without consideration of the
limitations and exclusions of such a methodology. This raises questions about the extent to which
evaluation should be technically or professionally driven and to what extent there should be a role for
stakeholders and the community.
In the case of cycling initiatives:
The focus of evaluation has been on the transport and environmental (especially climate
change) consequences, with less attention being paid to health and other social outcomes; and
The health focus has often been on the short-term imperatives of providing health care for
current health problems (as, for example, measured by hospital waiting lists) to the detriment of
the less tangible longer-term reduction of disease achievable through active transport.
Attempts to establish budget processes in which new proposals are considered on equal terms with
existing programs (such as ‘zero-based budgeting’, in which all expenditures have to be justified, not
just changes from the previous year) have not been widely successful, largely because of the
1
resources required simply to undertake this form of budgeting on an annual basis.
1
See, eg, http://www.accountingformanagement.com/zero_based_budgeting.htmBusiness Case for Investment in Cycling 9
5.1 Evaluation and Public Expenditure
Public sector expenditure proposals are usually subject to well-defined budgetary requirements,
including a clear process distinction between capital and recurrent initiatives. Governments generally
define capital investments as those expenditures that create durable physical assets and generate
benefits over an extended period of time. Such assets also generate recurrent costs over time for
operation and maintenance.
Capital investments may or may not generate a direct need for borrowing, but in a pragmatic sense
2
all create a net borrowing requirement (an opportunity cost ) where the funds could otherwise have
been used for another purpose which itself is funded from loans. Even where there is no borrowing,
as might be the case with a ‘zero-debt’ local government, the funds could be returned to their source
– there is an opportunity cost for those who provided the funds in the first place.
Cycle infrastructure programs are commonly accompanied by behavioural and educational programs
to encourage people to cycle and to enable them to do so safely and with confidence. This is a form
of ‘human capital’ (enhancing the capabilities of individuals and the community), but such programs
and initiatives are typically funded from recurrent budgets rather than capital funds.
Rarely do governments regard the creation of social or human capital in the same terms as the
creation of physical capital, yet it also produces benefits over a period of time. It may also require
expenditures over a period of time, for example to cover the whole population with part being done
each year, but this is conceptually no different from a road program or a school-building program,
each of which will consist of a number of individual projects. Most important, social capital creates
benefits across the triple bottom line, including health.
Adam Smith, often called the ‘father of modern economics’, regarded human capital as one of the
four types of fixed capital – the others being: useful machines and instruments of the trade; buildings
as the means of procuring revenue; and improvements of land. Initiatives that create the ability in
individuals to achieve desired outcomes (e.g. access to employment, education, recreation or better
health) with fewer resources (e.g. cost of driving a car or use of medical services) should properly be
regarded as capital.
Recurrent expenditures are defined as those necessary for the operation and maintenance (or
consumption, where maintenance does not restore the asset to original condition) of capital assets.
Recurrent expenditure does not result in the creation or acquisition of assets.
All this creates a ‘no man’s land’ for initiatives where expenditure creates a continuing stream of
benefits but without creating a physical asset and without creating the need for asset maintenance
expenditure. The most effective approach for gaining support and funding is likely to be to evaluate
the proposed program as an investment, in terms comparable to those used or required for existing
projects and programs, to demonstrate its value to the community, irrespective of the likely source of
funding. This is what most evaluations of voluntary travel behaviour change, whether ex-ante (before
the event – during the planning stage) or ex-post (after the event – based on the outcomes actually
achieved by implementation), have attempted to do. This establishes the business case for public
expenditure, usually in the form of a community-wide benefit-cost analysis, but sometimes from a
more specific perspective such as public transport (see, eg, Ker, 2003a).
2
An opportunity cost is the cost related to the next-best choice available to someone who has picked between several
mutually exclusive choices. Simply, opportunity cost is the value of the something we forego to get something else.Business Case for Investment in Cycling 10
5.2 Evaluation and Transport
In assessing “reforms and investments which are vital to ensure Australia’s economic [includes
transport] infrastructure continues to support and drive the nation’s economic, social and
environmental success”, Infrastructure Australia (2010) requires a combination of benefit-cost
analysis and other methods, demonstrating:
Robust and objective Cost Benefit Analysis which is supported by strong evidence.
Consideration of as many monetised economic benefits and costs as possible.
All benefits and costs are economic impacts and not simply transfers, second round effects, or
financial in nature; all impacts are incremental; and all are directly associated with the initiative.
Consideration of non-monetised benefits and costs. Where impacts cannot be robustly
expressed in money units (‘non-monetised’), Infrastructure Australia will nevertheless
incorporate them into the appraisal process and requests proponents to provide supporting
information on the scale of these impacts.
Consideration of both the overall efficiency of an initiative (the combined scale of benefits and
costs), as well as its equity and distributional impacts.
Consideration of issues of risk and uncertainty. Infrastructure Australia is fully aware that the
future cannot be predicted with certainty, and that economic growth, individuals’ behaviour, oil
prices, carbon prices and so on may vary over time. To ensure that the appraisal process is
robust to potential changes, Infrastructure Australia requests a series of sensitivity tests of the
demand modelling and Cost Benefit Analysis results.
It is a fundamental principle of transport economics that the demand for transport is a derived
demand. In other words, transport and travel are not valued for their own sakes but for what they
enable us to achieve (e.g. travelling to work, visiting friends etc). That being so, there are
circumstances in which we seek to minimise the amount of transport (to achieve given outcomes) as
well as occasions when ‘more is better’ (if the range of outcomes is increased).
5.3 Comprehensive Analysis
Conventional planning tends to assign problems to individual agencies that have narrowly-defined
responsibilities. One result of this has been that much transport planning is limited in scope and does
not assess all outcomes equally and comprehensively (Dora & Racioppi, 2003). For example,
transport agencies are responsible for reducing traffic congestion and road crashes, environmental
agencies are responsible for reducing emissions and protecting wildlife habitat and public health
agencies are responsible for encouraging physical activity and improving mental health. This can
result in these agencies implementing solutions to their problems that might exacerbate other
problems and to undervalue strategies that provide modest but multiple benefits. For example,
transport agencies can rationally expand roads to reduce congestion, even if this degrades walking
and cycling conditions (and therefore physical activity); environmental agencies can implement fuel
efficiency standards that, by reducing the per-kilometre cost of driving, stimulate more vehicle travel
and therefore add to congestion and crashes; and both are likely to undervalue strategies such as
walking and cycling improvements, because health and fitness issues have not featured in
evaluation and they may provide only modest congestion and emission reduction benefits.
More comprehensive analysis can help identify ‘win-win’ strategies – a solution to one problem that
help reduce other problems facing society, such as congestion reduction strategies that also help
reduce parking costs, improve mobility options for non-drivers, increase physical activity and improve
individual and community healthBusiness Case for Investment in Cycling 11
Equally, health sector evaluations may fail to consider transport or environmental benefits. For
example, Cobiac et al (2009) only consider health benefits when evaluating the cost-effectiveness of
programs for encouraging active transport. Of the programs evaluated, some only increase active
transport while others (such as the TravelSmart program) also reduce automobile travel and so
provide additional benefits, such as congestion reduction, lower vehicle operating costs, road and
parking facility cost savings, road trauma and emission reductions. More comprehensive analysis
can lead to very different conclusions about what strategies are most cost effective, and create
opportunities for cooperation among interest groups. For example, transport agencies have little
reason to support programs that only encourage recreational walking and cycling, but should support
programs that encourage walking and cycling that substitutes for driving or in other ways help
achieve their objectives such as congestion reduction and facility cost savings.
Mobility Versus Accessibility - Implications for Cycling
Mobility refers to physical movement. Accessibility refers to people’s ability to reach desired services and
activities, such as work, school, shops and friends. Accessibility is the ultimate goal of most transport activity,
excepting the small portion of travel without destination, such as recreational walking or cycling and automobile
cruising; even holiday travel generally has a destination such as a resort or campground.
Factors that affect accessibility include vehicle and personal mobility (the ease of travel), transport system
diversity (the variety of modes available, including walking, cycling, car and public transport), transport system
connectivity (the connections between roads, public transport services, paths and modes), land use accessibility
(density and mix), and the availability and feasibility of mobility substitutes such as telecommunications and
delivery services.
Urban planning often tends to be mobility-based: it evaluates transport system performance based primarily on
motor vehicle travel conditions using indicators such as vehicle traffic speeds, congestion delay, crash rates,
parking availability and fuel price. This tends to justify planning decisions that favour car travel even if that
degrades other forms of access. For example, a destination (such as a worksite, school or shopping centre)
designed for convenient car access will be located on a major highway, often at the urban fringe, with generous
parking supply, although that often results in poor access by other modes.
Accessibility-based planning expands the range of solutions that can be applied to transport problems. For
example, with mobility-based planning, the only logical solution to traffic congestion is to expand roadways.
Accessibility-based planning also considers improvements to alternative modes, pricing reforms, more
accessible land use development and increased use of mobility substitutes such as telecommunications and
delivery services.
Put simply, mobility-based planning ignores the benefits provided by mode-change or travel reduction strategies
because it perceives physical travel as an end in itself, rather than recognising that the ultimate goal of most
mobility is accessibility. Accessibility-based planning recognises that reducing motorised travel (or travel itself)
can be the most efficient solution to transport problems.
Mobility-based planning tends to place little value on active transport modes, since they represent a relatively
3
small portion of current travel, and because they are slow. Mobility-based planning tends to give little
consideration to the needs of non-drivers, because they are often undercounted in conventional travel surveys
(see, eg, Ker, 2011) and there is little information on their unmet travel needs.
3
Speed of travel is conventionally measured as the distance travelled divided by the time taken for the journey. It often
ignores trip-end activities, such as searching for and accessing car parking and walking to/from final destination. In areas
with traffic congestion, the bicycle can be as fast as the car. If ‘time’ is taken to include the time needed to earn the money
to pay for travel, the effective speed of cycling is higher than all but the smallest, most fuel-efficient cars and the
comparative performance of the bicycle improves as the price of petrol increases (Tranter and Ker, 2007).Business Case for Investment in Cycling 12
Ultimately, decision-making based on conventional evaluation has not always delivered
unambiguous benefits in terms of what the community really values (Eckersley, 1997). The social,
environmental and health impacts of over-reliance on the private motor vehicle for access and
mobility in cities are becoming more and more evident, and increasing fuel prices and road traffic
congestion are eroding the economic benefits as well.
The broader scope of evaluation required to address triple-bottom-line sustainability issues, has
resulted in correspondingly more far-ranging guidance for evaluators in many jurisdictions. These
place benefit-cost analysis into a more complex decision-making context that includes:
Strategic fit of proposals with:
- the strategic direction set out in the agency’s investment and revenue strategy, and
- addressing significant national or regional issues.
Effectiveness – how well do proposals contribute to a particular strategic objective? Proposals
achieving long-term, integrated and enduring solutions rate highest.
Economic efficiency – do proposals:
- use resources efficiently
- offer long-lasting benefits.
Economic efficiency is assessed according to:
- the benefit-cost ratio (BCR) for proposals that add new or improved infrastructure or services
- cost effectiveness - for ongoing maintenance, operations and public transport services (New
Zealand Transport Agency, 2010)
Similar guidance, with varying degrees of detail, can be found for Australia (Australian Transport
Council, 2006), the UK (Department for Transport, 2010a), which incorporates UK Treasury
requirements (Department for Transport 2010c) on matters such as discount rates for benefit-cost
analysis) and the USA (US Office of Management and Budget, 2003).
5.4 Triple Bottom Line and Sustainability Evaluation
Increasingly, government and community are concerned with the long-term sustainability of our cities
and transport systems into the future. Sustainability is most simply represented in terms of the ‘triple-
bottom-line’: economic, environmental and social. Benefit-cost analysis (BCA) incorporates the
economic and, to some extent, the environmental impacts, but is largely unable to adequately reflect
social impacts or those that cannot be quantified. Other assessment methods, such as multi-criteria
analysis (MCA) or other (quantitative and qualitative) methods are necessary to fully reflect the value
to the present and future community.
Benefit-cost analysis involves discounting the future, which potentially conflicts with protecting the
interests of future generations (see, Pezzey and Toman, 2002, for a review of this topic). Certainly,
the rate of any such discounting must be very carefully scrutinised. Initiatives concerned with the
long-term future and sustainability are severely disadvantaged by the common Australian practice of
requiring the future to be discounted at a rate comparable to the market rate of interest. Only
Queensland does not specify a rate but makes it clear that calculation of the rate for evaluations
should be based on values excluding inflation (Department of Infrastructure & Planning, 2010).
Improved opportunities for cycling and other active transport will deliver measurable outcomes of
three kinds:Business Case for Investment in Cycling 13
Enhancing and sustaining economic prosperity;
Sustaining and protecting the natural and built urban environments; and
Enhancing social outcomes, including the access opportunities for people who are currently
mobility-poor. Health benefits from cycling and other active transport can be accounted under
both the economic and social categories.
5.4.1 Multiple Bottom Lines
There is nothing new in multiple economic, social and environmental objectives for transport
projects. For example, major road projects will often state objectives in respect of:
Transport - such as reducing traffic congestion, improving access by other means, reducing
traffic on local streets and reducing road trauma;
Land use planning - such as minimising planning blight, providing a catalyst for redevelopment
and maintaining economic activity; and
Social, environmental and economic - such as encouraging inner city living, heritage retention,
enhancing amenity, improving equity of access and minimising air and noise pollution.
The evaluation response, however, has often been poor in terms of measuring those impacts that
are not direct transport consequences such as travel time, travel costs and, more recently, the
physical externalities of transport (e.g. air pollution, greenhouse gas emissions) and the social
externalities (including health and fitness). Moreover, even where broader impacts are quantified, the
evaluator usually attempts to reduce these to a single cardinal or ordinal measure, either in:
Benefit-cost analysis, in which all things are reduced to a monetary equivalent; or
Multi-criteria analysis, in which a range of criteria are weighted to produce a ranking of projects
for decision-making purposes.
The real problem with both approaches, in the age of the triple bottom line, sustainability and whole-
of-government performance measurement, is that a large amount of information is lost in the process
of measurement and aggregation. The alternative of some form of Goals Achievement Matrix is
rarely considered on the grounds that it is too difficult to interpret and does not give unique and clear
results. In the United Kingdom, the development of a 'New Approach to Appraisal' (Department of
Environment, Transport and Regions, 1998) has now been incorporated into formal guidance on
evaluation in transport (Department for Transport, 2010a). This includes the development of an
Assessment Summary Table (AST) as the core of the integrated assessment process - this is
effectively a goals achievement matrix. What is more, this form of disaggregated presentation of
impacts has been demonstrated to have a systematic and transparent influence on decision-making
(Nellthorp & Mackie, 2000) and has been incorporated into transport evaluation guidelines in
Australia (ATC, 2006).
The national taskforce on Measure 5.3 of the National Greenhouse Strategy, ‘Promoting Best
Practice in Transport and Land Use Planning’, posed the question of what an integrated assessment
framework (Figure 2) for urban transport investment, taking into account greenhouse issues, would
look like and how it might be implemented. The outcome challenged some of the key assumptions of
traditional transport evaluations and highlighted some key areas of improvement necessary if
evaluation were to play an effective role in transport decision-making. The most significant of these
related to:
The identification of relevant options to evaluate;
Understanding and estimating the cause-effect relationship of interventions;Business Case for Investment in Cycling 14
Allowing for feedback;
Including all significant outcomes in the evaluation; and
Exposing rather than hiding component information on costs and benefits (Allen Consulting,
2000).
Figure 2 Integrated Sustainability Assessment Framework for Transport
Source: Developed from Allen Consulting (2000)
5.4.2 Sustainability Assessment
Sustainability assessment, however, is more than simply accounting to each of three separate
bottom lines (Western Australian Government, 2003, p. 39):
Sustainability assessment is designed to work through the social and economic issues in a
transparent way (similar to that for environmental considerations) and then to find integrated
solutions where trade-offs are minimised or non-existent wherever possible.
This means that the way a project is defined might need to be revisited as more information is
obtained on its likely effects and on alternative ways of achieving the objectives. Evaluation ceases
to be linear and confined; instead, it must be open to influences normally considered beyond its
scope in order to facilitate change and improvement in programs, projects and delivery.
5.4.3 Sustaining the Economic Bottom Line
Transport is vital to the prosperity and well-being of individuals and the community. A measure of its
importance is the large part of household incomes spent on mobility. On average some 15% of our
household expenditure is spent on transport, slightly less than for housing or food (Australian BureauBusiness Case for Investment in Cycling 15
of Statistics, 2011a). Some 94% of the transport expenditure is for the ownership (40.2%) or
operation (54.2%) of private motor vehicles. Add to this public expenditure on roads, other transport
infrastructure and services and its significance becomes even greater. Much of the public expense is
‘externalised’, meaning they are not covered by users: congestion, road traffic injuries and pollution
are examples of external costs.
The benefits from mobility are also very significant, including access to opportunities for education,
recreation, employment, as well as individual, social, community and economic development. But if
the cost to households of obtaining these benefits increases, then income available to spend on
other items and services, such as housing, food, clothing, health and recreation, will be reduced
correspondingly. The petrol price rises beginning in 2004 illustrates this point, where higher fuel
costs dampened the public’s ability to spend in other areas of the economy (Blythe, 2006).
Improving the feasibility of walking and cycling helps provide effective choice for users and helps
avoid at least the costs of operating a car. In some cases, households may even be able to dispense
with one or more cars, thus saving the costs of ownership (registration, insurance and depreciation)
as well. The Royal Automobile Club of WA found the cost of owning and operating a typical medium
sized car to be between $10.700 and $12,300 annually, over $200 per week (Royal Automobile Club
of WA, 2011). Whilst this should be qualified as it refers to a new car, for which the capital
(depreciation and interest) costs are highest, even a 5-year-old car would cost around $120 a week
4
to own and run.
5.4.4 Sustaining the Environmental Bottom Line
Public policy should also be aimed at contributing to environmental sustainability by providing
alternatives to car-based travel. There is little argument about the lower levels of environmental
impact – including carbon emissions – produced by cycling compared with those created by car
travel performing the same task. The debate, where it occurs, is about whether cycling and other
active transport can provide an acceptable alternative for enough journeys to make a worthwhile
difference.
Motorised transport using fossil fuels as the energy source contributes to deterioration of air quality,
global climate change (increasing greenhouse gas emissions), pollution of water run-off and adding
to urban noise. These impacts can be limited by restraining the growth of car travel, but only if
infrastructure and services for alternatives are available to provide acceptable levels of service to
attract potential users and users are encouraged to use them. Alternatives to the car, including
cycling, walking and public transport, where they can serve the need for access effectively, require
less land to carry the same number of people, use less fossil fuel and produce lower levels of CO2
and other pollution.
5.4.5 Sustaining the Social Bottom Line
Transport can have a major impact on the social health of communities (Leyden, 2003; Lund, 2002
cited in Giles-Corti et al, 2010). Public policy should also seek to enhance sustainable social
outcomes by maximising opportunities of access for those without a car.
Social exclusion issues can arise when transport opportunities to employment centres and other key
destinations are primarily limited to one mode of transport - private motor vehicle. A substantial
4
RACWA figures allowing for reduced depreciation and interest on older car.Business Case for Investment in Cycling 16
proportion of the population either does not have a driver’s licence (for reasons of age - young or old
- disability or choice) or has no guaranteed access to a car for a range of trip purposes (because
they do not own a car or there are more drivers than cars in the household). This includes children,
at least some of whom have reasonable expectations of a degree of independent mobility. Add to
that the fact that those with access to a car will need to act as chauffeur for those who do not have
access to one with increasing frequency and the inconvenience starts to affect the majority.
Moreover, as the 'Third Intergenerational Report' illustrates, some 14% of Australians are currently
over 65. In 2050, almost one in four will be over 65 (Department of Treasury, 2010). Research on the
ageing population shows a significant proportion cease driving; this will affect a much larger
proportion of the population in the future (Morris, 2007).
Poor access to transport, public and private, motorised and non-motorised, can contribute to long-
term unemployment, poor educational outcomes, ill-health and/or poor social integration. Lack of
transport to attend job interviews can be an impediment to taking the first step towards gaining
employment in some cases (Mason & Lake, 2000). The more people are both willing and able to use
active transport, the less they will constrained by lack of access to a car or by poor public transport
(Social Exclusion Unit, 2003).
Many studies have highlighted the close relationship between social networks and morbidity and
mortality rates and that the mortality risk for people without social support is two to three times higher
than for people who had better social networks (van Kemenade et al, 2003, citing four sources). The
positive effects of social integration and support counter the risks associated with tobacco, obesity,
high blood pressure and physical inactivity. There is substantial evidence that streets supportive of
active transport enhances social interaction and improves social networks (Hart, 2008).
5.5 Key Requirements for Evaluation of Cycling
The key requirements for evaluating cycling initiatives are:
Estimating the cost of the appropriate initiatives.
Quantifying the change in travel activity (increased cycling; reduced car driving; impacts on use
of other modes) that is likely to come about as a result of the initiative. This level of evaluation is
dealt with in Section 7.2 below)
Translating the travel behaviour change into estimates of those things that are of value to the
community, such as improved health, lower cost of transport and better environmental
outcomes. This level of evaluation is outlined in Section 8 and the results set out in Sections 9.1
and 9.2).
Describing and taking account of outcomes of value to the community that cannot be quantified
or converted into monetary values (see Section 9.3 below)
In some respects, measurement of these parameters will be a valid evaluation outcome in their own
right, where there is a related strategic policy objective – for example, reduction in disease related to
low levels of physical activity or reduction in greenhouse gas emissions. To derive a comprehensive
assessment of increased cycling in a benefit-cost framework, however, requires that, wherever
possible, these outcomes be monetised (valued in dollars) as well as quantified. This aspect of
evaluation is dealt with in Section 0.Business Case for Investment in Cycling 17
6 Components of a Business Case
6.1 Benefit-cost analysis
Benefit-cost analysis (BCA) is the principal method used for evaluation of transport projects and of
public sector projects more generally. The requirements for BCA vary, to some extent, between
jurisdictions in Australia, but generally follow the guidelines set out in the National Guidelines for
Transport System Management in Australia published by the Australian Transport Council of
Ministers in 2006.
Using BCA to evaluate investment in cycling infrastructure and encouragement programs requires, in
addition to the cost of the initiative(s):
Estimates of the changes in travel behaviour, including reductions in car use and increases in
cycling. Both are needed because some of the benefits relate to reduction of the negative
impacts of car use while others relate to increases in the (largely) beneficial outcomes of cycling.
Estimates of how these effects may change over time. For example, some may take time to be
fully realised (eg health effects of cycling) and there are durability and lifestyle change factors
that may affect the longevity of travel outcomes.
Unit values to apply to the changes in car use and cycling. Some elements of benefit values,
such as traffic congestion reduction and air pollution reduction will vary between situations
(including within the Perth Metropolitan Area).
Benefit-cost analysis (BCA) is a well-accepted means of demonstrating the value to the community
of changes in public policy or transport systems. However, it is only relatively recently that BCA has
been applied to non-motorised transport and the emerging area of voluntary travel behaviour change
(Litman, 2010), not because of issues with the methodology but because of inadequate information
on the travel behaviour impacts of cycling, active transport and travel behaviour change initiatives.
6.2 Evaluation Framework
Socio-economic evaluation, whether of policies, programs or projects, is designed to operate with
what are essentially marginal changes to an existing situation. At the project level, for example,
evaluation of transport infrastructure is much more straightforward and robust where there is an
existing network and the project either adds to the opportunities for movement or makes some
journeys cheaper, faster or more convenient.
In the case of cycling and active transport generally, the key changes which result in benefits are:
Increase in cycling and other active transport; and
5
Decrease in car use.
Benefits are usually modally-specific (for example, cycling and walking have positive, but different,
health benefits and less car use results in reductions in car operating costs and environmental
costs), so we need to estimate the effects of cycling programs by mode, which will vary by location,
according to the availability and convenience of alternatives to car driving and such factors as how
far people have to travel.
5
Much of the discussion of cycling/active transport and other travel behaviour change initiatives relates to the twin
outcomes of reducing car use and increasing the use of cycling/active transport. In this report, the term ‘car’ has been
used to cover all private motor vehicle modes of transport, including utilities, panel vans, SUVs and other light vehicles
used for personal travel.Business Case for Investment in Cycling 18
Figure 3 outlines the framework for estimating benefits. The basis for estimating benefits is outlined
in this section. The appropriate values are outlined in section 8.1 and Appendix A.
Figure 3: Framework for estimating the benefits of cycling
Cycling Strategy and
Location
Effectiveness
Change in cycling
Change in car use
activity
Benefit values for Benefit values for
cycling car use
Net benefit of change
in cycling activity
Changing real values
over time
Accrual period for Time series of Durability of transport
outcomes benefits activity change
Based on Ker et al (2010). Applied Research Project to Assess the Cost and Health Benefit of Active Transport
in Queensland. CATALYST FOR Health Promotion Queensland, Queensland Health: Brisbane, Queensland.
The same framework is appropriate for transfer of travel between other modes and cycling which are
included in the business case evaluations, but analytically these are less important:
Reduction in car passenger travel produces no benefits unless the car driver was only travelling
for the sake of the passenger, as is sometimes the case when parents drive their children to or
from school. Transfer from car passenger to cycling does, of course, produce the benefits
relating the cycling activity itself (eg health and fitness).
Trips undertaken by public transport represents only a small proportion of the likely additional
cycling activity.
6.3 Conceptualising Benefits
In cases where an initiative has an effect on the level of demand (usage), there is a rule of thumb
(called the ‘rule-of-half’) that new users will personally derive, on average, half the benefit that
existing users do (Figure 3). This is on the basis that the new users will range from those that
required only a small reduction in cost to change their behaviour to those for whom the change in
cost is only just sufficient to make them do so.You can also read
