Why build, and not expand?

By Lynsey Mengchen He

I have always imagined a city being an organic entity that is shared and nourished by people initially sharing the same culture and way of living. A city is a consequence of society development, not a cause. Many “new city” projects had high hopes to share urbanization burdens on existing economic centers, but later turned out to be empty infrastructures that wasted huge investments from both public and private sectors.

I agree with some of the previous posts and bullet points discussed in class regarding the importance of people and culture for a city’s development. Therefore, I think that instead of building a city out of nothing, it could be a better idea to expand a city and relocate a portion of its central business district to the newly expanded area. The new area, which exists in the name of the city, would allow for easy commute, culture extension, and at the same time be include in the city’s overall future planning. Since it contributes to the city’s GDP, the new extension would grow with the expansion of existing infrastructure and later transit into a new central economic zone that releases the population and resource tension within the old central areas, to a good extent.

Individual Behavior and Collective Sustainability

By Rami Sarafa

How individuals respond to large-scale projects is a core consideration for developers. Real estate, infrastructure and transit projects aimed at creating greater efficiency and savings can seem ideal as blueprints, but necessarily in practice.  It’s essential for the curators of a given project to incent and educate constituents in order to shape behaviors or a new style of living; this approach is especially essential in pursuing large-scale projects that strive to provision for future generations. The Dharavi case study is an example of how developers must consider particular needs/desires, while hopefully incenting individuals to live differently than how they’re accustomed.

A particularly salient example is the potential development (or redevelopment) of a country’s transit system. Such projects are only as successful as its potential beneficiaries allow it to be. One case example I’ve personally witnessed is the construction of the metro in the emirate of Dubai. In theory, the project’s massive cost should be offset by time, environmental and financial savings given the state’s busy highways and streets. However, the system has primarily attracted tourists and joyriders rather than actually serving as a transit alternative for Dubai’s motorists. Individuals still prefer to expend resources (i.e. petrol money, time) fo  the convenience of driving. Individuals have also smirked at the prospect of being in crowded trains with strangers (especially cross-gender) given the state’s Arab-Islamic identity.

Dubai has pursued some policies that have been effective and others that are unsuccessful. One retroactive measure the government has pursued is installing automated tolls on the city’s major highways to disincentive drivers and promote public transport. However, this measure has had little impact on motorists who live in one of the wealthiest states in the world. The project designer’s integration of different cabins by class (premium vs. economy) and gender-segregation has been more successful. For instance, work commuters can use Wi-Fi in the premium class, which takes into account their specific needs/wants. Since the metro line is still limited in terms of breadth, shuttles connect metro stations to other parts of the cities. But because these shuttles were the same design as public-city buses (which traditionally only blue collar workers utilized), wealthier individuals did not want to take them. Distinctly designed, metro shuttles now connect the stations, which has helped encourage use. Such lessons are now being applied to the second and third phases of the project, which are aimed at provisioning for future decades.

Dubai metro is an example of how understanding and alignment (or lack thereof) can be a principal determinant of whether a project is successful or not. It is not enough to simply rely on factors of convenience or cost to encourage behavior. Policymakers should seek to understand the unique needs of individuals before committing to major projects. Allowing stakeholders to be part of the decision-making process can be a potential solution. Also,  continuous learning and a flexible approach to a project help provision for unanticipated requirements.

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Somerville’s Green Line Extension

By Matt Bornstein

Last December, Boston’s public transit authority began construction on an extension of the Green Line light rail system.  Today, the Green Line runs from the near western suburbs, through downtown Boston, into East Cambridge.  The planned expansion would add seven stations serving Somerville and Medford, Cambridge’s neighbors to the north.  (See map; the extension is marked as a dashed green line.) 

If you are an average HBS student, your response to this news is probably, “what is the Green Line?”  For a typical Boston resident, the reaction is probably more like, “why extend the slowest, most cramped, least reliable public transit line in the country?”  In Somerville, though, this project has people buzzing and emotions flowing.

Home to about 80,000 people, Somerville is the most densely populated neighborhood in Boston and among the densest areas in the country.  Historically, its residents were working class and diverse (for Boston) at “only” 70% white.  In the mid-1990s, however, gentrification hit.  Condos, restaurants, and shopping areas began to move in.  Property values quadrupled from 1991-2003.  Long-time Somerville residents came into contact with new yuppie entrants and, worse, a massive wave of young hipsters.  The causes?  Many, including urban expansion, the repeal of rent control, and thriving businesses in nearby Cambridge and along I-95.  The trigger?  The Red Line subway added one stop in Somerville.[1]

You can see, then, why seven new stations are a cause for controversy.  Most residents – or at least the most vocal – support the project and have berated the state for delays.  Lawmakers, including the governor and local congressman, are touting the recent groundbreaking as a major success.  Long-time Somerville residents, however, are on the fence.  And looking below the surface reveals the usual brewing disaster of a Boston public works project.

The Green Line extension is currently slated to be completed in 2019 at a cost of roughly $1.3Bn.[2]  Sounds reasonable for a project of this scale.  But there are a few problems:

1. No one knows who will pay for it.  The state is seeking ~$550M in financing from the federal government, money which is by no means guaranteed.  The balance (~$750M) is expected to come from state bond funds which have not yet been approved.  Meanwhile, the MBTA is facing revenue shortfalls and the Mass. Department of Transportation is fighting an uphill battle for moderate increases to its operating budget.  Public-private partnerships are being put to good use (e.g., real estate developments near stations in exchange for needed right-of-way) but will not meaningfully reduce the $1.3Bn figure.  (More financing details here.)
2. Construction started two months ago, and it’s already five years behind schedule.  The state is legally obligated to complete this project by 2014, a deadline imposed by a Big Dig lawsuit.  Right now, though, 2019 looks optimistic.  As a result of the delay, the state must simultaneously pursue other, near-term environmental improvement projects.  This has the potential to dramatically increase costs and create a vicious cycle of further delays caused by distraction and diversion of resources.
3. Political cover is shaky.  Massachusetts Governor Deval Patrick has championed this project as a tangible part of his legacy.  Rumors are circulating that Patrick may leave his post in 2013, though, to fill a spot in the US Senate or another federal position.  If he departs, the project could face even steeper delays.  At the December groundbreaking, Congressman Michael Capuano was quoted as saying, “We need to get as much of this project done and committed in an irrevocable way before [Patrick] leaves office.”

The ingredients are there for this to become an albatross around the neck of the next governor.  It’s hard to argue against increased mobility and reduced pollution in Boston’s most densely populated neighborhood.  But whether the project will become another public works sinkhole – and drive out the last of old Somerville – remains to be seen.

Bonus: Boston’s own “MRT vs. BRT” evaluation process ( light rail vs. BRT vs. commuter train)

Table: Tier 1 Green Line Extension Alternatives Analysis (Source: GLX project)

Table: Tier 2 Green Line Extension Alternatives Analysis (Source: GLX project)

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[1] Wikipedia & local knowledge

[2] “Preliminary Engineering Approval for the Green Line Extension (GLX) Light Rail Transit Project,” 6/11/2012

Urban Transportation — Lessons learned from Colombia’s TransMilenio success vs. Germany’s Stuttgart 21 disaster

By Valerie Scheer

In 2012, Colombia’s infrastructure ranked #64 on World Bank’s Logistics Performance Index vs. #1 Germany [1]. However, this nation who prides itself on being highly disciplined and organized, failed miserably compared to the developing country. Columbia’s new BRT system (TransMilenio) and Germany’s Stuttgart 21 (remodeling of Stuttgart’s train station into an underground station) yielded different results.

Phase 1 of TransMilenio has been a huge success and became one of the most acclaimed and imitated transportation systems.

In contrast, Stuttgart 21 (construction period 2010 – 2021), is still highly controversial, sparking several large protests [2] and exploding budgets (from estimated €3 billion in 2009to €7 billion in 2012[3,4]) that might even lead to project cancellation [5].

So what are the key factors leading to success or failure?

 

1) Government Support

TransMilenio was built on the goodwill of politicians and strong leadership from the mayor, allowing for collaborative efforts and fast elimination of roadblocks.

Stuttgart 21 is challenged by financing from the EU, federal government, state government and German Railway — several parties with differing views and priorities. Unlike the former government, neither Stuttgart’s newly elected mayor (2012) nor the newly elected government of Baden-Württemberg (2011) is a big supporter of Stuttgart 21. Also recently, a report from the federal government leaked, calling continuation of the project into question [6].

2) Concept

TransMilenio has aspirations to expand substantially, yet has a sound economic business model (no operating subsidies, “modest” CAPEX of $240 million).

Stuttgart 21, in contrast, appears to be less about logistic or economic needs but more about building a legacy for key leaders. Several experts have argued for cheaper and equally efficient alternatives to Stuttgart 21.

A feasible, economic concept is not only important to ensuring project realization, but critical to creating public acceptance and reducing financial burden to the developer.

3) Stakeholders

TransMilenio involved key stakeholders (e.g., bus operators) early on in the planning and implemented large marketing campaigns.

Stuttgart 21 put the focus on obvious stakeholders (such as politicians and people living near the train station), completely neglecting the German population as a whole. The billions of tax Euros spent on this project in an era of high state debt gave way to strong opposition and public dissatisfaction was one strong reason why Baden-Württemberg’s former governing party of nearly 60 years has been deselected, leading to further decreased support of Stuttgart 21.

4) Project Structure/People

TransMilenio was realized within 36-month thanks to an appropriate project structure. Experts provided input and contractors were selected through a competitive bidding process [7].

While Stuttgart 21 also implemented competitive bidding and German Railway had extensive experience developing train stations, several issues prevented a more efficient project.

Given the number of financiers involved, the project took many years from idea (1994) to realization, resulting in compromises and increased costs. Also, as a state-owned company, German Railway’s board of directors comprises predominantly of politicians with lack of infrastructure expertise and potential conflict of interest (Baden-Württemberg’s Minister of Transport is also on the council of a RE-developer building a new mall on the old train station land [8]).

 

Summarizing these differences one could question whether Stuttgart 21 would have been more successful with a PPP (as for TransMilenio)?

 

 

[1] The World Bank, Logistics Performance Index 2012   http://lpisurvey.worldbank.org/international/global?sort=asc&order=Infrastructure#datatable

[2] Stuttgarter Zeitung, So viel Protest wie noch nie                                  http://www.stuttgarter-zeitung.de/inhalt.demonstration-gegen-s-21-so-viel-protest-wie-noch-nie.dedd248a-36a7-49ca-8a31-2b1cd57b0399.html

[3] State parliament of Baden-Württemberg, Finanzierungsverträge zum Bahnprojekt Stuttgart–Ulm                                                                                            http://www9.landtag-bw.de/WP14/Drucksachen/4000/14_4382_d.pdf

[4] Der Spiegel, Bahn-Prestigeprojekt: Ramsauer spielt Kritik an Stuttgart 21 herunter http://www.spiegel.de/politik/deutschland/regierung-spielt-zweifel-an-stuttgart-21-herunter-a-881593.html

[5] Der Spiegel, Prognosen der Bahn: Regierung bezweifelt Ausstiegskosten für Stuttgart 21                                                    http://www.spiegel.de/wirtschaft/soziales/stuttgart-21-aufsichtsraete-zweifeln-an-kosten-fuer-den-ausstieg-a-882243.html

[6] Stuttgarter Zeitung, Beim Bund mehren sich die Zweifel an Stuttgart 21 http://www.stuttgarter-zeitung.de/inhalt.vertrauliches-dossier-beim-bund-mehren-sich-die-zweifel-an-stuttgart-21.4b46aa2c-3c0a-47fc-9a97-e54480e542f4.html

[7] The National Council for Public-Private Partnerships , TransMilenio Case Study http://www.ncppp.org/undp/bogota.html

[8] Die Zeit, Ministerin Gönner sieht sich mit Filz-Vorwurf konfrontiert    http://www.zeit.de/wirtschaft/unternehmen/2010-10/stuttgart-goenner-einkaufszentrum

Picture: Der Mobilitäts Manger, Stuttgart 21 vermutlich bis zu 1 Mrd. Euro teurer                                     http://dmm.travel/news/artikel/lesen/2012/12/stuttgart-21-bis-zu-1-mrd-euro-teurer-47051/

 

Congestion Pricing – An asset-light BRT?

By Anonymous

The two transportation schemes we discussed in class, BRT and MRT, both have very similar goals in mind: reduce congestion and pollution and increase safety while getting more people to their destination faster. The major constraints for both systems are the huge up-front capital costs and the lack of flexibility once the system’s major lines are in place. One interesting aspect, however, is that neither system deals with the other major source of congestion, pollution and accidents: cars. On the contrary, during our discussion the need to eliminate car lanes on behalf of BRT as the system expands to new areas was a major drawback.

If we take a step away from this car-centric perspective and examine ways to manage all transit options on existing roads, there is a transportation scheme that accomplishes the stated goals in a much more flexible and dynamic way with lower capital requirements upfront: congestion pricing.

In the case of Bogota, the system would charge cars and buses for accessing certain avenues and major traffic arteries according to the time of day and the level of congestion. The fees would keep cars off the road during rush-hour and encourage the use of buses, assuming the system establishes appropriate pricing tiers across time and between cars, buses and taxis. The increased fixed cost would discourage empty buses from running and encourage industry consolidation. In order to encourage the use of newer and greener busses, the pricing could be structured to give low-emission vehicles an edge. A less congested system with fewer competing bus lines would also make transit safer and decrease travel times for commuters.

Initial capital cost to establish the system would also be much lower because traffic control systems could be installed above the street at lower costs than digging tunnels or adding separate bus lanes and platforms. From an infrastructure standpoint the congestion pricing system is much more flexible to expansion as new routes can be added or eliminated in a matter of days not years. On the revenue side, this system starts collecting revenue very soon after installation and provides a safer return on investment to the city.

Of course, this system also has trade-offs. For example, the enforcement of violations is crucial to as successful launch. If the political system is unlikely to punish those who drive without paying, congestion pricing will not improve the current situation. In addition, the implementation of this system hurts a much bigger political constituency (not just bus drivers, but all drivers) which makes this implementation much harder from a political standpoint. Furthermore, it is uncertain whether such a system can support the anticipated growth in travelers and residents over time.

Compared to BRT and MRT, the congestion pricing system would be a much less capital intensive and dynamic solution to the traffic congestion problem. However, this alternative likely has a much higher political price.

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BRT vs Metro

By Neil Padukone

When Bogota, the cradle of the world’s Bus-Rapid Transit (BRT) thinking, explored a metro system, debates over preferability raged.

Transit demand depends not only on population and demography, but also on spatial distribution. If people live far away from a metro station, that “last mile” might make traveling so difficult and time-costly that taking the metro is not worth it at all.

Of course, an argument for a metro is that, over the long-term, big infrastructure like metros would induce demand for high-density (potentially mixed-use) living and business investment. In the 1920s, New York’s subway system extended to a barren and unsettled Queens, NY (see Figure 1). That changed tremendously when Manhattan boomed and its residents needed new housing; the area has become one of the highest density areas in the country (see Figure 2).

Fig 1. Queens in 1920s

But the potential for induced demand depends on migration & growth patterns: it won’t happen if there isn’t enough growth to underwrite it. The “People Mover” in Detroit was supposed to induce demand in a contracting Detroit economy. But that wasn’t sufficient; it wound up being a glossy project that wasted money — designed for 15m people, it only served about 2m, and the cost per passenger mile was $4, compared with the New York subway’s $0.30 per passenger-mile.

Fig 2 Queens Today

The thinking in Detroit — and elsewhere — evokes another perennial consideration for the development of metro systems: aesthetics. Metros give off an appearance of legitimacy, sexiness, investment, and stability that buses may not. This sexy infrastructure may well attract other investment, but it often comes at the huge expense of massive state subsidies and deficits: Metros are almost never financially solvent. The only two subway systems in the world whose operating costs are covered by the system are in Hong Kong, which covers operating costs through real estate, and Singapore, which has long had an aggressive car-restriction policy that drove the metro’s farebox ratio up to 126% of operating costs. (Capital costs everywhere require subsidies).

For a long time, metro systems were the only technologies capable of providing the sort of scale for longer-distance urban mobility. But with the improvement of bus technology — segregated lanes, GPS-based sensoring, and tinier capital costs — BRT generates comparable (though admittedly unequal) scale with the long-term ancillary benefit of lowering traffic congestion by taking up space and dis-incentivizing car usage.

The respective capital (costs) of metros and BRTs are another consideration. During its construction and development, the problems that afflict any burgeoning BRT would also afflict the Metro: the time for implementation would bring little short-term respite, and in fact cause greater delays in the interim. And in the long-term, BRT corridors are far more flexible and mutable: If demand for a corridor increases or diminishes, it can simply be deconstructed and redirected for an extremely low cost — relative to subway systems, which are fixed and can’t be redirected quite as easily.

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MRT vs. BRT. Which System makes sense for developing cities?

By Saad Islam

Given that up to 60% of the world’s output comes from just 600 cities, and this concentration of wealth will increasingly shift to emerging cities[1], the question of implementing effective urban mass transit systems is extremely important. Karachi is one of those emerging megacities and I would therefore, like to tackle this question in Karachi’s context. To give people some perspective, Karachi’s population is estimated to be around 21 million[2], making it the seventh largest urban area in the world and the third densest[3]. The current public transportation closely resembles the one in Bogota pre-BRT  – mainly private transporters with rickety, although beautifully adorned buses.

I believe that four major issues in particular need to be addressed in implementing a mass-transit system and I will try to address each one below:

1. Capital costs and financing issues: As we saw in the Bogota case, MRT solutions are significantly more expensive than BRT. It is estimated that for Karachi an MRT system would cost around $2billion for 2 lines of 41km total length, while the BRT system’s cost is about $292 million for 6 lines totalling around 90km[4]. Hence, purely on capital cost basis a BRT system makes more sense. It should also be noted that the opportunity cost for cities like Karachi of spending $1.7 billon extra on mass-transit are not insignificant. Finally, the ability to raise such a large amount of capital should also be taken into account. An MRT system costing billions would require significant external financing from multiple sources, not necessarily achievable for most emerging cities.
2. Operating costs and affordability: A mass transit system would be useless if fares are not priced correctly. GDP per capita in Karachi is around $3,500, hence ticket prices cannot be high. Rail-based systems generally need to be subsidized and this is not sustainable for cities that have budgetary strains. Hence, in such a scenario a less costly system such as BRT makes greater sense.
3. Integration with the existing transportation infrastructure: Any new mass-transit system needs to complement the existing infrastructure. Large cities like Karachi already have a widespread network of roads. A BRT system can be built around the existing system as long as roads are large enough to accommodate extra lanes. On the other hand, an MRT system could be significantly disruptive while tunnels are being dug and tracks laid etc.
4. Bringing various stakeholders on board: The bus operators in Karachi have a very strong trade union and do not hesitate to go on strike, grinding the city to a stop. As we have seen in the Bogota case, a BRT system can be structured so as to provide existing operators with a stake in the system. This can substantially mitigate any risk associated with existing operators trying to sabotage the new mass-transit system.

In summary, I believe that while an MRT system might be more scalable and work for wealthier cities, other cities need to be more realistic about the systems that can be put in place. For a city like Karachi, a BRT system provides a cost-effective mass transit solution that is also quicker and easier to implement.

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[1] McKinsey & Co. website http://www.mckinsey.com/insights/mgi/research/urbanization/urban_world

[2] The News 02 April 2012, http://www.thenews.com.pk/Todays-News-13-13637-Sindh-population-surges-by-81.5-pc,-households-by-83.9-pc

[3] New Geography website, http://www.newgeography.com/content/002940-pakistan-where-population-bomb-exploding

[4] Karachi Transportation Improvement Study Project 2010 – 2012, Japan International Cooperation Agency (JICA) and Karachi Mass Transit Cell, Karachi Metropolitan Corporation