UMTA evaluates the cost-effectiveness of competing rail transit projects by using an index proposing to measure the average cost per new rider of shifting from all-bus service to rail transit. The unusual manner in which costs and benefits are measured and included in the UMTA cost-effectiveness formula prompts this investigation of the ability of the index to identify desirable projects when the selection criterion is an excess of benefits over costs. The methodology uses 10 economic assumptions and an investment model for evaluating rail projects. Using the model, the UMTA cost-effectiveness index and an alternative index incorporating nonuser benefits are computed for three projects. By ranking the projects according to the net benefits they generate, the UMTA index is shown to be an unreliable indicator of economic efficiency. (Author/publisher)
Abstract