This section examines the sensitivity of projected transit investment requirements by the Transit Economic Requirements Model (TERM) to variations in the values of the following exogenously determined model inputs:

• Passenger miles traveled (PMT).
• Capital costs.
• Value of time.

Sensitivity to Changes in PMT

TERM relies heavily on forecasts of PMTs in large urbanized areas. In fact, these forecasts are the primary driver behind TERM’s estimates of the extent to which the Nation’s transit system will need to be expanded in order to maintain performance. Transit PMT forecasts are generally made by metropolitan planning organizations (MPOs) in conjunction with projections of vehicle miles traveled (VMT) as a part of the regional transportation planning process. They implicitly incorporate assumptions about the relative growth of travel by transit and automobile. The average annual growth rate in PMT of 1.6 percent used in this report is a weighted average of the most recent, primarily 2001, MPO forecasts available from 33 of the Nation’s largest metropolitan areas.

Future transit investment requirements have been estimated by TERM on the basis of three alternative projected PMT scenarios to examine the effect of variations in PMT growth on projected investment needs. [See Exhibit 10-4]. These scenarios are:

1. PMT growth is 50 percent greater than the forecast levels.
2. PMT growth is 50 percent less than the forecast levels.
3. There is no growth in transit PMT.

Varying the assumed rate of growth in PMT significantly affects estimated transit investment requirements. This effect is more pronounced under the Maintain Conditions and Performance scenario as PMT growth rates influence asset expansion costs, which comprise a larger portion of total estimated Maintain Conditions and Performance needs. A 50 percent increase/decrease in growth will increase/decrease the cost to Maintain Conditions by 18 to 19 percent and the cost to Improve Conditions and Performance by 13 to14 percent. Investment requirements decrease by over 25 percent if PMT remains constant, although this is not a likely scenario.

Sensitivity to a 25 Percent Increase in Capital Costs

As shown in Exhibit 10-5, a 25 percent increase in capital costs increases both the costs to Maintain Conditions and Performance and to Improve Conditions and Performance by close to the full 25 percent increase. These results indicate that total benefits continue to exceed total costs for most investments, even with a 25 percent increase in costs.

Impact of Change in the Value of Time

The value of time is a key input to TERM’s benefit-cost test for all proposed capital investments. Specifically, the value of time is used to determine the total benefits accruing to transit users from transit investments that reduce passenger travel time. Hence, increases in the value of time should further multiply the estimated user benefits of such projects.

Exhibit 10-6 shows the effect of varying the value of time, assumed to be $9.85 per hour in the baseline projections. Overall, variations in the value of time have a very limited effect on investment needs. While increases in the value of time increase the benefits of transit projects that reduce travel times, it decreases the benefits of investment in transit modes that are slower than alternative non-transit modes of travel, such as the automobile. Therefore, an increase in the value of time reduces projected investment in agencies/modes with relatively slower transit service (as travel shifts from transit to automobiles) and increases projected investment requirements in agencies/modes with relatively faster transit services (as travel shifts from automobiles to transit). The opposite occurs in response to a decrease in the value of time.