Conceptual Model for Evaluation the Impact of Transit-Oriented Development Initiatives ...staff.ui.ac.id › system › files › users › akhmad.hidayatno › ... · development

Conceptual Model for Evaluation the Impact of Transit-Oriented Development Initiatives to the Income Growth of MRT Operating

Company

Akhmad Hidayatno, Tyonardo Cahayadi, Irvanu Rahman

Systems Engineering Modeling and Simulation Laboratory Industrial Engineering Department, Faculty of Engineering, University of Indonesia, Depok 16424

E-mail : [email protected], [email protected]

ABSTRACT

The planned mass rapid transit development in Jakarta as a huge public infrastructure project must balance between massive cost investments with every possible sources of income opportunity. In order to do this, early on in the design, the MRT Jakarta Company with the Government of Jakarta must exploit the presence of each MRT station. This is because each station will bring a significant impact to the surrounding area, especially at walking distance radius. This Transit Oriented Development (TOD) perspective must be able to capture the value added to the area around the station and provide opportunities for additional revenue, especially the non fare box (NFB) revenue for the company. However, it is not clear how the causal relationships between MRT station development and NFB revenue generation. This paper offers a conceptual model of this relationship that would help the shareholders and stakeholders understand these important relationships and devise an appropriate strategy.

Keywords

Mass Rapid Transit, Urban Planning, Transit Oriented Development, Conceptual Model.

1. INTRODUCTION

Public Infrastructure with massive investment would require income opportunities from different sources possible. Revenue from public infrastructure comes from usually three sources: income from ticket fare, income from subsidies, and non fare-box (NFB) revenue. NFB revenues are advertisements, property rent, kiosks and other income not linked directly with ticket sales (fare-box or FB). Finding factors that could affect the income dynamics between these three sources of income would provide more understanding on how all three are actually related.

All public infrastructures in general may affect the development and the value of property in an area, which open up the opportunities of NFB. Grass (1992) indicates that public infrastructure has a profound influence on the pattern of urban development and spatial distribution of urban property values [1]. The existence of a station in general would provide benefit to the surrounding environment within walking distance radius, which is known as part of the Transit Oriented Development. PT MRT Jakarta (MRTJ) must capture this predicted growth of NFB income opportunities. MRTJ is the state owned company who has the responsibility of developing, operating and maintaining this first urban rail-based mass rapid transit (MRT) line in Indonesia.

Understanding this relationship between station and NFB growth is important for determining the long term corporate financial strategy of MRTJ. In order to attract more passengers, the ticket price must be affordable. This would require subsidy from the city government. There is not yet clear contract agreement regarding this between Jakarta Government and MRTJ. This agreement could greatly affect the cost structure managed by both parties. For MRTJ this could significantly alter their corporate strategy.

Conceptual modeling, which would be based on system dynamics methodology, could show qualitatively the complexity of variables on this issue. This paper offers a conceptual model of this relationship that would help the shareholders and stakeholders understand these important relationships, and have a common understanding as the background on developing an agreement for MRTJ and Jakarta’s City Government.

Proceeding of the 13th International Conference on QIR (Quality in Research) Yogyakarta, Indonesia, 25-28 June 2013

ISSN 1411-1284

Page 804

2. LITERATURE REVIEW

The impact of railway station proximity on property value has received wide attention in the economic literature. Several empirical studies tried to quantify this effect. However, the Conclusions are not uniform (Debrezion, 2004) [2]. The presence of a station in an area, will give a great impact of surroundings environment. Naturally, railway stations have an effect on both land value and land use patterns (Ferguson et al, 1988) [3]. The pattern of the effect can be seen as volcano shaped, shown in Figure 1.

Figure 1: Volcano Shaped Value Pattern of Land Value and Station Location

Source: (Steer Davies Glee, 2011) [4]

All public transportation infrastructures in general may affect the development and the value of property in an area. Public infrastructures produce pattern of urban development and spatial distribution of urban property values. This happens because the infrastructure is providing accessibility to an area so that residents from other areas far away can have access to reach the site.

Public transportation infrastructure that provides accessibility definitely impacts an area such as sewer, highway, bus station, train station. Damm then capitalized these services into urban property values [5]. With the accessibility, a place said to be interesting. As a location becomes more attractive, as a result of certain characteristics, demand increases. This results in increase of price

Another effect of the station is also influenced by any of the facilities provided by the station, as said by Bowes, The number of parking lots in or near the station and the proximity of the railway station to the Central Business District also increase of the impact of the station on property value [6].

In addition to the increase in terms of value, the presence of a station also provides other effects. When some of the development of property often focused on area besides highway road, or when on the sides there are fancy and dense commercial buildings, but behind on the second layer would be found lots of underprivileged housing on a way different scale from the first layer from the roadside. The theory on land prices and settlement that indicates a higher accessibility of a location leads to a dense settlement [2]. Area on station’s walking distance provide place that has great accessibility for both commercial commuter use and residential use. Naturally, railway stations have an effect on both land value and land use patterns [7].

Station that gives access to a particular area would give movement of passengers in large numbers, especially when the particular area provides great money flow activities. High population movement would create a development of retail activities but at the same time may attract criminality [6]. This indicates that definitely a station would provide a growing retail area.

[8] The center for Transit Oriented Development (TOD) in Berkeley identified several ways that station location, transit accessibility can benefit land owners, improve marketability of new residential units, office and retail space, open up valuable new sites for development, prompt up zoning and higher density development, command higher sales prices and rents, making higher density construction more financially feasible, encourage cities to support new infrastructure and public facility. The development of station area can grow naturally with a possible threat of unstructured sprawling areas. The other better alternative is by orientating the development along the transit stations through regulation, rights allocation, and incentives by the government. This concept of development is known as Transit Oriented Development TOD [9]. The keywords from TOD definitions are mixed-use development, pedestrian walking, multimode interchange access, high density, and transit stations [10]. The TOD initiatives must be adopted by the MRTJ early in the development of the project to make sure that they could capture the business opportunity created by future growth of the surrounding MRT stations.


ISSN 1411-1284

Page 805

3. METHODS

Model conceptualization is the first step in the System Dynamics (SD) methodology. Conceptual model is primarily used in SD to help the modeler know and understand the subject system. Sterman (2000) defines that in order to help the modeling process, conceptual model must consist of problem articulation (boundaries selection) and dynamic hypothesis [11]. The best representation for a conceptual model for SD is in the form of system diagram that has a causal loop diagram (CLD).

This research began with a hypothesis that station development would influence the surrounding environment in many ways that would in turn increase the NFB revenue. Interviews and held Focus Group Discussions were held with experts from the two major and important shareholders, MRTJ and Jakarta City Government, to identify key variables that affects and be affected by the station existence. These variables are represented in a CLD, which showed variables increase or decrease the other, by relationship arrow. We then present this CLD to gain feedback and confirmation with the mental model of the shareholders. The result is a consensus regarding the causal loop diagram of aspects that affected by station and affecting station. The causal loop diagram is then transferred into the systems diagram as the complete representation of the conceptual model.

4. RESULTS AND ANALYSIS

This research develops a conceptual model represented in a system diagram

(

Figure 2).


ISSN 1411-1284

Page 806

Figure 2: System Diagram

Using MRTJ Company is the primary actor in this analysis, this research identifies the purpose of the conceptual model is to gain insights on how to maximize MRT Jakarta’s profitability, especially from NFB business development. Based on shareholders' interviews, there are three outputs needed to accomplish this goal: passenger flows, property area development and property growth. The actor represents the interest of major stakeholder that could influence the MRTJ policies. Some of the possible policies are represented in the policy options box on top of the diagram. Figure 3 shows a more detailed explanation of variables interaction.

Figure 3 shows that the presence of the MRT station would affect development of two major area types: commercial area and residential area. Commercial area includes office, retail shopping, dining or leisure. In this conceptual model, the primary focus for area development is the passenger flows. The bigger the passenger flow, the area surrounding the station would be more attractive for development. At the same time, more developed area would attract more people to visit hence increasing the passenger flow, creating a positive feedback loop. The commercial area and retail area loops are R1-Commercial Business Attractiveness reinforcing loop. R2-Residential Area Attractiveness represents the reinforcing loop feedback for the development of residential area.


ISSN 1411-1284

Page 807

Figure 3: Causal Loop Diagram of TOD Impacts to NFB Income

However, all shareholders agree that with current state of building development in Jakarta and land availability, they would choose an integrated multi use area Therefore, finding the right tenant-mix-ratio in the surrounding area of the station between commercial (including retail) and residential area would be the key for developing the NFB business. Each area types would have different dynamic effects on increasing passenger flow.

With the increase of passenger flow and influence by tenant mix, MRTJ can capitalize by developing the NFB business and increase their NFB income, shown as R3-NFB income growth. The increase of passenger flow would also increase the operating cost and could reduce MRTJ profitability.

The existence of MRTJ stations would benefit the government of Jakarta from an increasing state various tax, which includes land building tax and service tax. These increase tax along the MRT corridor will support the city government on providing affordable transportation cost to public by giving subsidy to passenger (R4-Subsidy & Commercial Development). The city government will be pressured by the public to make the ticket price as low as possible for the public, usually well below the normal price to cover the operational and investment expense. In addition, the amount of NFB income could never cover the lack of fare-box (FB) income required for breakeven, without government subsidy. This relationship provided the means for MRTJ on negotiating the amount of ticket price subsidy from the city government.

Using the conceptual model, the source of subsidy is shown clearly with the increase annual tax revenue from the development of areas surrounding all the future 15 MRT stations. This would make easy for MRTJ to negotiate the subsidy and create a more complete corporate strategy.

5. CONCLUSION

Public transportation development is always in constant pressure to provide affordable price to increase the accessibility of the general public. Greater mobility would be good for the city economy in the long run. However, the feasibility of this development will be questionable if there is a limited income available to cover the expenses. Using the transit development oriented perspective; the conceptual model developed in this paper could show the interrelationships of variables that open up the possibilities of NFB income growth. This growth came from the increasing economic value effects of MRTJ stations.


ISSN 1411-1284

Page 808

As part of an ongoing research, this conceptual model is the basis of a system dynamic model. The future final model combine with a financial model, would analyze the most influential variables in maximizing the profitability of the MRTJ. However, the current conceptual model could easily be use as a tool for explaining the positive impact loop of MRT stations development, passenger flow, government subsidy and the growth of NFB business. This would help MRTJ to prepare its corporate strategy in the long run.

REFERENCES

[1] Grass, R. G., 1992 The estimation of residential property values around transit station sites in Washington, D.C., Journal of Economics and Finance, 16, 139-146.

[2] Debrezion, G., Pels, E., & Rietveld, P. (2004). The Impact of Railway Stations on Residential and Commercial Property Value. Tinbergen Institute Paper.

[3] Ferguson, G. B., & Mark, J. (1988). The Pre-Service Impacts of the Vancouver Light Rail Transit System on Single Family Property Values, in J.M. Clapp and S. D. Editors. Elsevier.

[4] Steer Davies Glee. (2011). The Value of Station Investment: Research on Regenerative Impacts. London: Steer Davies Glee. [5] Damm, D., S. R. Lerman, E. Lerner-Lam, and J. Young, 1980. Response of urban real estate values in anticipation of the Washington

Metro, Journal of Transport Economics and Policy, 14, pp. 315-355. [6] Bowes, David R., and Keith R. Ihlanfeldt, 2001. Identifying the Impacts of Rail Transit Stations on residential property values. Elsevier. [7] Ferguson, B., M. Goldberg and J. Mark, 1988. The Pre-Service Impacts of the Vancouver Light Rail Transit System on Single Family

property values, in: J.M. Clapp and S. D. Messner (Eds) Real Estate Market Analysis: Methods and Applications, pp. 78-110. New York: Praeger

[8] Gihring, Thomas. 2009. The Value Capture Approach To Stimulating Transit Oriented Development and Financing Transit Station Area Improvements. Victoria Transport Policy Institute. Washington.

[9] Dittmark, Hank and Gloria Ohland. The New Transit Town: Best Practices in Transit-Oriented Development. 2003. Island Press. [10] Transit Cooperative Research Program (TCRP). Transit-Oriented Development and Joint Development in the United States: A

Literature Review (TCRP Research Results Digest 52). 2002. Federal Transit Administration US. [11] Sterman, John D. 2000. Business Dynamics: System Thinking and Modeling for A Complex World. Boston: The McGraw Hill

Companies, Inc.


ISSN 1411-1284

Page 809

Conceptual Model for Evaluation the Impact of Transit-Oriented Development Initiatives ...staff.ui.ac.id › system › files › users › akhmad.hidayatno › ... · development

Documents