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Procedia Engineering 189 (2017) 854 – 859

Transportation Geotechnics and Geoecology, TGG 2017, 17-19 May 2017, Saint Petersburg,
Russia

METHOD OF TRAM TRACK STRUCTURES FEASIBILITY STUDY

E.P. Dudkinа*, E.N. Zaitsev b, S.V. Kolankov а

а
Emperor Alexander I Petersburg Railroads State University, Moscow avenue 9,
Saint-Petersburg, Russia
b
Civil Aviation Petersburg State University, Pilotov street 38,
Saint-Petersburg, Russia

Abstract

Тhe article deals with assessment of the economic efficiency of different tram track structures. The analysis of currently used
performance indicators is performed. And the use of these indicators to a simple payback period is justified It is recommended to
calculate a simple payback period on the basis of the modified methodology for assessing reduced costs, as determined by
budgetary financing of these projects. The possibility of evaluating a simple payback period of investment analytical and graph-
analytic methods is analysed
© 2017 The Authors. Published by Elsevier Ltd.
© 2017 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license
Peer-review under responsibility of the scientific committee of the International conference on Transportation Geotechnics and
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Geoecology.
Peer-review under responsibility of the scientific committee of the International conference on Transportation Geotechnics and Geoecology

Keywords: tramway track construction, economic evaluation, capital costs, current maintenance, payback period

1. Introduction

St. Petersburg is a city with a long tram network. Trams have been operated in Saint Petersburg since the middle
of 19 century. [1]. By the end of the 1980s, the length of the tram tracks in the city was 1,022 km; it was the longest
in the world and was included in the Guinness Book of Records. From the 1990s tram traffic volumes started to
decrease, in many areas tram tracks were dismantled [2]. However, in recent years in St. Petersburg as well as in
many foreign countries, tram transportation is intensively recovering as one of the most environmentally friendly
modes of transport. It should be borne in mind that there are many tram track designs. Application of the traditional
rail and sleeper design in urban streets, especially in the city centre, has some drawbacks, such as: destruction of the
adjacent road surface; increased noise; vibration spreading to buildings and facilities; frequent track repairs;
electrical corrosion of underground utility systems and bridges caused by sneak currents.
Modern tram track designs are quite varied: sleeper tracks, monolith tracks and slab tracks using railway, tram
rails and tails without necks [3–8].

1877-7058 © 2017 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of the scientific committee of the International conference on Transportation Geotechnics and Geoecology
doi:10.1016/j.proeng.2017.05.133
 E.P. Dudkin et al. / Procedia Engineering 189 (2017) 854 – 859 855

Currently, when looking for the most efficient renovation, modernization and overhaul technology one of two
options is considered – either the method of reduced costs (RC), i.e. the sum of capital investment (C) and operating
costs, or the Methodology [9] that is mainly focused on the likelihood of receiving revenue over a certain period of
time.
RC can be calculated using two approaches.
When applying the first approach which can be called the annuity version, the calculation result is presented as
"RUB/year" and the best option is deemed to provide minimal total annual costs that are assumed to be equal from
year to year and thus to form the so-called annuity (from Latin "anno" – year):

RС С u Е  Oy (1)

where E is efficiency rate (discount rate), % per annum;

Oy – annual operating costs, RUB/year.
On the one hand, this method does not require determination of the duration of the calculation period, on the other
hand, it is not clear what standard efficiency value (E) should be used in calculations.
The second approach involves making the annual operating costs and the permanent track maintenance costs
comparable with the C value; to do so the value of these costs is multiplied by the duration of the calculation period
(Tcalc):

RС С  Oy u Tcalc (2)

In this case discounted costs are measured in RUB and the best technology for reconstruction, modernization and
overhaul is chosen based on the lowest sum of non-recurrent costs and total operating costs incurred by the owner of
the facility during the calculation period.
Interestingly, when using RC, only costs are taken into account and no potential revenues are considered.
Actually, RC calculations answer the question, which is preferable: to make high capital investments and later save
on operating costs, or, vice versa, invest less in the beginning but later have higher operating costs.
In other words, the area of application of the discounted costs method is only assessment of the so-called
comparative effectiveness, i.e., selection of the best option from a number of alternatives assuming that each of these
options will brings a certain functional effect. This method is not intended for assessment of absolute economic
efficiency, i.e. it cannot say whether even the best option is cost effective (profitable), and if so, how profitable. To
answer these questions, net value (NV), net present value (NPV), internal rate of return (IRR), payback period (PP),
profitability indices (PI) and other indicators recommended in the Guidelines [9, 10] are to be used. The same
indicators can be used to determine an efficient option for state-subsidized projects, i.e. to identify the least
subsidized construction, renovation or repair option.

2. Investment project efficiency indicators

The above indicators and criteria [9] are most widely used for assessment of the efficiency of commercial
projects, i.e. the projects that are aimed at profit generation.
Most of these indicators answer questions about the revenue that can be earned in case of implementation of the
assessed project, about return of investment (ROI) and how significantly the proceeds from the project will exceed
investor expenses.
However, there are projects not intended for pure profit generation. Those are primarily projects implemented by
governmental authorities, in particular, for infrastructure development or by private investors as charity projects.
In these cases it is expedient to use the payback period indicator or, when choosing the most cost-efficient way to
invest capital, i.e. when assessing comparative effectiveness of projects, to use the net present value indicator.
Since construction, overhaul and maintenance of tram tracks is subsidized from the state budget there is no reason
to consider these operations as commercial projects. The effect is mainly manifested in the increase of tram tracks
service life as well as in a certain change in annual operating costs and in loss of transportation revenue for the
duration of the construction period [10]. Thus, when substantiating tram track designs the payback period should be
856 E.P. Dudkin et al. / Procedia Engineering 189 (2017) 854 – 859

used as a key indicator, and the modified RC calculation method should be used for its calculation. It may be noted
that in accordance with the Guidance [9] the payback period can be calculated both discounted and undiscounted
(the so-called simple payback period).
In our view, the use of the simple payback period is more correct in terms of methodology due to the following
considerations.
When using the discounting procedure it is assumed that a portion of the resulting net effect would be used to
return capital investments and a portion in the amount of the discount rate would generate net income. Therefore,
when using the discounting procedure, the amount of the resulting revenue used annually to return investments will
be less compared with the simple payback period calculation. That is why the discounted payback period is always
longer than the simple payback period. This can be clarified using the following example. Let us assume that capital
investments in the amount of 1,000 monetary units were made. It is expected that the net effect (revenue) will be the
same from year to year and equal to 250 monetary units per year. The simple payback period will be as follows: PP
= 1,000/250 = 4 years.
However, if the discount rate is set at E = 19% per annum with annual calculation and 17-year calculation period
the amount of return on capital will be 50 monetary units per year. This means that 250–50 = 200 monetary
units/year will be used to return capital investments, and the discounted payback period will be equal to: PP =
1,000/250 = 5 years.
In our opinion until the investment is paid back it is groundless to assume that a portion of the effect of the project
can be considered as profit (net income), because until incurred costs are fully paid off no portion of incoming funds
can be considered as profit. What profits can you have if not all investments made for the project implementation
have paid back?

3. Method of technical and economic substantiation of tram track design

When developing the methodology the following characteristics that depend on the design features of tram tracks
were taken into account:
- construction features – installation time, reliability and simplicity of rail fixing to the foundation, industrial
methods, mechanization and automation, independence of the quality of construction and repair works of seasonality
and temperature;
- operating features – increase of service life, reduction of operating costs, mechanization and automation of
maintenance and repair;
- economic features – construction and operating costs (increased performance and reduced labour inputs).
The efficiency criteria of the new tram track design are as follows:
1. When comparing m number of options: Сст o min
2. When comparing options by pairs: Сс1  Сс2 ‘0 , in this case the 1st of the considered options is the most
efficient.
When calculating the simple payback period: PP min t 0
3.
where С сt – total costs (capex and opex) under the m option of track design;
PP min – is the earliest moment in the calculation period; after this moment the current net income [9] becomes
and remains non-negative.
Substantiation of the simple payback period is to be made with consideration of the maximum service life of the
compared structures. The maximum service life of the structures of 50 years is used based on the data of foreign
studies for the structure on solid concrete foundation (the foundation service life is 50 years, rails are replaced in 25
years). The effect of the use of the new tram track design is in increase of its service life and changes in annual
maintenance costs.
Calculation of total costs over 50 years of the track service live can be made using the following formulas:
 E.P. Dudkin et al. / Procedia Engineering 189 (2017) 854 – 859 857

- for sleeperless tram tracks:

Ссns Сп  Еm u Т1  Сch  Еm u Т 2 , (3)

- for sleeper tram tracks:

Ссs Сп  Еm u Т1  Сп/  Еm u Т 2  Сп/  Еm 50  Т1  Т 2 , (4)

where Cn – specific capital investments during construction, RUB/km:

ʠ୬ ൌ ʠୣୡ ൅ ʠ୪ (5)

where Cec – estimated cost of construction of 1 km of track, RUB;

Cl – losses of the operator during construction (renovation), RUB;

ʠ୪ ൌ ʠୢ ή ‫ݐ‬௜ (6)

ti – period of construction (repair) of the ith tram track structure (days);

ʠୢ – daily loss of transportation revenue by the operator, RUB/day;
Em – maintenance costs of 1 km of structure per year, RUB/km-year;
T1 – time before first repair or change of rails, years;
T2 – time between the first and the second repair (or from rail changing to the expiry of service life), years;
Cch – unit cost when changing the rails, RUB/km:

ʠୡ୦ ൌ ʠୣୡ୦ ൅ ʠ୪ െ ୰ ή ߙ௧ (7)

Ce ch – estimated cost of rail change, RUB/km;

Cl – losses of the operating organization arising during replacement of rails (calculated using formula (6)),
RUB/km;
Cr – recurrent cost of 1 km of track superstructure materials, RUB/km.
Recurrent cost of superstructure materials is calculated as follows:

୰ ൌ ʹǡͲͲͲ ‫ כ‬ʟ୰ ‫Ͳ כ‬Ǥͺ ‫ כ‬୫ ሺͳ െ ʟୱ ሻ (8)

Pr – rail mass per unit length, kg/m;

2,000 – coefficient taking into account the length of two lines of 1 km track;
0.8 – coefficient taking into account 20% rails wear at the time of their scrapping
Pm – the price of one kilogram of scrap metal (excl. VAT), RUB/kg;
Рs – operating organization costs upon scrapping rails (with VAT), RUB/km;
ଵ
ߙ௧ ൌ ሺଵାʔሻ೟ – discount factor for different-time costs. In this case ߙ௧ can be taken equal to 1 since the simple
payback period is calculated.
ʠᇱ୬ – repair unit costs, RUB/km, calculated as follows

ʠᇱ୬ ൌ ʠ୰ୣ୮ ൅ ʠ୪ െ ୰ (9)

where Crep – estimated repair cost, RUB/km.

Example of summation (accumulation) of the current net revenue is presented in Figure 1, where PP is the
payback period for additional capital investments in the structure of monolithic tram track.
Assessment of the simple payback period can be performed using both analytical [9] and grapho-analytical
method.
858 E.P. Dudkin et al. / Procedia Engineering 189 (2017) 854 – 859

Figure. 1 Tram track structure payback period

When calculating the simple payback period using the analytic method, it is necessary to calculate the net cash
flow at each calculation step and use the formula:

S m
PP m  (10)
S m  S m

where m_ – is the number of calculation step when the balance of accumulated cash flow is negative for the last
time;
Sm_ – is the balance of the accumulated cash flow at step m_ taken in absolute value, RUB;
Sm+ – is balance of accumulated cash flow at step m + 1, i.e. at the next step, when the balance becomes positive
for the first time, RUB.
When using formula (10) it is assumed that within one step the balance of the accumulated flow changes linearly.
The second summand of (10) shows the fractional part of the year, which can also be determined using the
grapho-analytical method. For example, let us assume that at step 4 the balance of accumulated cash flow is equal to
"-2.5" mln RUB, and at step 5 – to "+0.8" mln RUB. In this case the following graph can be built (Fig. 2).
 E.P. Dudkin et al. / Procedia Engineering 189 (2017) 854 – 859 859

Figure 2 Grapho-analytical method for determining the fractional part of the payback period

4. Conclusion

The developed methodology for technical and economic substantiation of tram track design makes it possible to
identify the most efficient tram track design depending on the tram line planned service life and to take into account
the peculiarities of operation and financing of the track section.
The methodology uses elements of the calculation of reduced costs indicators and the simple payback period
which makes it possible to apply this methodology to capital investment projects that are not intended to generate net
profit.

* Tel.: +7(921)575-42-76; +7(812)407-43-40; fax: +7(812)315-26-21.

E-mail address: kpgt@pgups.edu

References

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