It was determined that Blackstone Avenue would be the best initial alignment for such a monorail project in Fresno, California due to it having the most annual boarding annually as published by Fresno Area Express. Bus 30 is the city bus that travels along Blackstone Avenue and it starts from downtown Fresno to Woodward Park; the exact same route of the monorail.
The annual ridership of the city bus that runs along the Monorail's alignment was used as the ridership for the monorail. Using the bus ridership is the best estimate for the actual monorail ridership. Although the goal is to get people to stop using their cars, it is hard to estimate how many will actually stop and use the monorail instead. However, people who normally take the bus or don't have cars are very likely to use the monorail if the monorail is traveling the same route that their everyday bus takes. Therefore the annual ridership for the monorail is very accurate and it provides the minimum ridership that still makes the project profitable over its service life.
The projected ridership for the monorail for the year 2010, the estimated year that all construction will be completed, along Blackstone was determined to be 2.5 million and these are the number of single tickets sold for a one-way ride. The 2.5 million boarding was to increase by 100,000 boardings every year as indicated by the trend published by Fresno Area Express. The price for a one-way ticket ride used was $6.00 (this is not that bad since the current bus one-way ride is already $2 and the Las Vegas monorail charges around $10.00) and it was to increase $0.25 for every 10 years. The annual operating and maintenance cost used was $10 million. The only sources of revenue used for the monorail was from the boardings and the advertisements. Assuming a total of 2 trains with 8 cars capable of operating simultaneously and each car charges a fee of $100,000 per month for businesses to put an advertisement on the train, the annual income from the advertisements is
Annual Advertisement Income = 8 ($100,000)12 months = $9,600,000 per year (Actual value used was $10,000,000)
The revenue from the boarding was calculated by simply multiplying the one-way fare ticket price by the annual boarding. Using a 40 year service life for the monorail a benefit-cost analysis was performed on the project. The following chart tracks the net present value of the project as it starts to repay itself after the first year.
Figure 1 - NPV of Monorail Project
(The dollar values on the left in the graph are in millions)
From the graph, the project breaks even at year 38 and after which it has repaid its debt for construction and begins generating revenue. The benefit to cost ratio calculated was 1.032. The internal rate of return calculated was 4.24 % which is greater than the miminum acceptable rate of return used of 4%. The net present value at year 40 was $25.1 million.
Therefore, the monorail project has just been shown to be profitable. Its benefits exceed its costs. Federal grant funding consideration requires that a project's benefits exceed its costs. The monorail project qualifies for federal funding consideration.
Any comments, questions, feedback, or suggestions on how the economic analysis was approached can be sent to the author using the Contact link on this website. A response will be provided within 1-3 days.