Traffic and revenue (T&R) forecasts are based on travel demand models and inputs with associated uncertainties and imperfections. Forecasters must guard against overstating a proposed project’s T&R potential while avoiding being too conservative. Performing sophisticated risk assessment and sensitivity tests on key input parameters is a prudent solution to this forecasting dichotomy and thus reducing the risk in planning, designing, and financing the toll facilities.
It has been a standard practice in T&R studies to include point estimates of the various input variables to come up with point estimates of the long-range T&R forecasts. Sensitivity tests (either discrete or combined) are typically performed to determine the impacts of changes to key input variables. These results are eventually used by the rating agencies or investors to do their own risk assessments. It is not typical for the T&R consultants to provide probability margins in public debt offerings. Probability analysis is more common in studies for Public Private Partnership (PPP) financings or used by public sponsors in establishing “revenue sharing” formulae, “negotiated value”, etc. With the expected increase in involvement of multiple public partners or public/private partners in toll road financings, it is imperative that standardized processes are established for doing risk analysis.
Risk analysis involves quantification of uncertainties in the input parameters, determination of impacts of changes to key inputs on the T&R forecasts and estimation of the probabilities associated with the T&R forecasts. In conjunction with risk analysis, it is recommended to also test impacts of extreme events such as severe population and employment stagnation/decrease, income stagnation/decrease, hyper-inflation, etc. in long-term T&R forecasts.
As part of this work, we will present a risk analysis procedure and present case studies showing comparative analysis of the T&R risks associated with managed lanes vs. traditional toll roads, congested vs. uncongested networks, mature vs. startup toll facilities, rural vs. urban corridors, etc. In addition, impacts of select extreme events will be estimated and presented.