Renewal of Northbourne Avenue - Assignment Example

Executive Summary This renewal is estimated that will pass the Australian University campus and this is the area where Dickson as well as s taking in the entire Haig Park. Mr Barr stressed when he tabled legislation to set up two new agencies on Thursday that Haig Park would not have residential development, units or houses, in the park. Increase in the transport capability and capacity along the corridors. Currently there isn’t many options of increasing the road carriage capacity. The road is particularly messy during peak periods and the construction and the renewal of the Northbourne Avenue Corridor will increase the overall capacity of the road. It should be noted that currently the Northbourne Avenue has the capability of carrying more passengers compared to all other cars combined. Investment in a rapid transit along the existing corridor will greatly increases its capacity therefore, the renewal of the Northbourne Avenue Corridor should be carried out. Table of Contents Executive Summary 1 Table of Contents 2 1.0 Introduction 3 2.0 Project description 3 3.0 The potential benefits of the project 4 4.0 Impact Chart Analysis 7 5.0 Financial vs. economic impacts of Northbourne Avenue’s renewal 10 6.0 Cost benefit Analysis 12 7.0 Cost benefit analysis of the options 15 Reference 20 1.0 Introduction Renewal of Northbourne Avenue started by the Chief minister Andrew Barr stating that this work needs to begin very soon. This renewal is estimated that will pass the Australian University campus and this is the area where Dickson as well as s taking in the entire Haig Park. Mr Barr stressed when he tabled legislation to set up two new agencies on Thursday that Haig Park would not have residential development, units or houses, in the park. He made no comment about the rationale behind the boundaries of the rest of the precinct (Ray 2016). 2.0 Project description The proposed Renewal of the Northbourne Avenue Corridor is one of the national proposed roads with great significant and value. This project will approach route into Canberra and will have the ability to improve the transport along the corridor between the CBD and the Gungahlin which is one of the Canberra’s most Greenfield areas of development. This road is approximately 13 kilometers long. This road is part of the government to help in the reduction in the congestion of transport sector by transforming the sector to be efficient and effective. This project aims and objectives of the Australia transport and development programs. Cost benefit analysis are decisions which are based on the available project options and they help in producing a clear understanding of the economic cost and benefits in a given project. It further analyses the benefits of the project to society and give room to compare the benefits of one project to another. The figure below shows the general framework for cost benefit analysis. In estimating the net and gross benefit approach to project valuations to the Renewal of the Northbourne Avenue Corridor. The pros and cons of this project will be investigated to help understand the need for this project. The gross project evaluation involves:- Total additional economic costs that the roads, airports, railway line and users of these services would get under every alternative option. This implies the real value of the national resource that would be received under each alternative option (Boadway, 2016). Secondly, the total additional economic benefits which can be derived from the various road and other means of transport services and other sections of the community would derive under each option. The real value of the project should be calculated and the input verses output of the project of each alternative should be evaluated. Additional economic costs that are added and subtracted from the total additional economic benefits will be estimated against the proposed benefit of the runway extension. The incremental cost of the project will be considered and all other cost like feasibility study, research and development among other costs. 3.0 The potential benefits of the project There are a number of potential economic development opportunities which may come in handy with the investment of this road along the corridor. Some of the economic potentials include:- Increase in the transport capability and capacity along the corridors. Currently there isn’t many options of increasing the road carriage capacity. The road is particularly messy during peak periods and the construction and the renewal of the Northbourne Avenue Corridor will increase the overall capacity of the road. It should be noted that currently the Northbourne Avenue has the capability of carrying more passengers compared to all other cars combined. Investment in a rapid transit along the existing corridor will greatly increases its capacity therefore, the renewal of the Northbourne Avenue Corridor should be carried out. The second economic potentiality of Northbourne Avenue Corridor is promoting the economic productivity along the corridor. There would be a number of business activities coming up along this corridor. Providing additional transport capacity is important enabler of further development and investments due to easy access of the area and the strategic location of this corridor will connect other major towns. Thirdly, promoting greater sustainability. The government will continue to support increase in density and a strong mix of activities along the project corridor which will have the ability to encourage the localized travel and trips which would be supported by the rapid transport system. In circumstances where the inter-town travel is needed to help connect with the employment destinations, a quicker and a more reliable public transport services would be necessary and this is the alternative offered by the renewal of the Northbourne Avenue Corridor (Andrew Barr, 2017). Fourth, this corridor is part of the broader network for the government vision 2031 on its strategic road transport system. It will help in encouraging the future public transport network within the Canberra city. The designer and future developers will be having easy time in terms of enhancing frequencies of services in this area. Lastly the renewal of the Northbourne Avenue Corridor will support cross-government city buildings initiatives. It will help in supporting other government initiative project to expand road network which worth millions of shillings. Therefore, direct importance of this project cannot be underrated but will come with other benefits beyond the road itself. All these benefits will benefits people directly to help in enhancing means of communication from one point to another within the city. Impact Chart Analysis The impact chart analysis identifies major areas which needs to be addressed the various aspect of the project. Impact chart analysis help to point out risk and potentiality in the business. The management of the project will be to know how to allocate resources to ensure the success of the business. Essential, impact chart assessment for this project is shown above. 4.0 Impact Chart Analysis Impact chart analysis summary Narrative Summary Measurable Means of Verification Important Indicators Assumptions Goal： 1: Positive average net present value 1: Cost Benefit Analysis 1: Goal to super goal 1: improve Canberra city image 2: Increasing Canberra’s average income 2: welfare Analysis 2: Increase Canberra GDP and welfare   3: Income Analysis Purpose： 1: More tourist come from all around the world 1: Annual local government report 1: Government’s support from budget, human resource 1: Build a better city entre 2: More Government assets 2: Economic outlook 2: Well layout for the whole area 2: Improve tourism number   3: Budget outlook 3:00 3: Create more government income       Outputs: 1: Increase land value 1: The project Complete report 1: Finish on time 1: Series of new building and facilities at 2: more tourist 2: Independent audit report 2: good economic in ACT Northbourne 3: Decrease air quality in city area   3: good compensation program Avenue       2: Construction       pollution       Activates： 1: Construction Raw materials 1: ACT development report 1: Plan for residents compensation pal 1: Resettlement of the old building 2: Labor 2: environment analysis report 2: Land acquisition 3: Time of Construction   3: Construction of the new building     4: Generate Noise     Incidence of costs and benefits of the Northbourne Avenue’s renewal Participant group COSTS BENEFITS l   Driver on the road Loss of convenient from road close, increasing ravel time and traffic jam. Time savings from light rail completed, lees people will drive on road. l   Local community Loss of amenity from old community service removal. Reduce in travel time from City to Gungahlin town centre. Increased construction noise to the apartment alongside the road . Increased road congestion. l   Construction industry Raw materials & labour used Income from Construction l   Local business Removal of the old building, cause time and capital loss. Compensate from government l   Government Resources for reconstruct the local community as well as the business side Dividends from FAC. Extra taxes l   Finance industry Finance services provided Interest and services fees l   Tourism industry   Profits from extra international & domestic visitors 5.0 Financial vs. economic impacts of Northbourne Avenue’s renewal Impact Financial (money) Economic (real) Costs Labour Wages Time lost Materials Market price more factory pollution Air pollution Pay for tree removal Lost green tree (Recreate public goods) Benefits Time (passengers) extra productive for work more contribute to society Fuel savings money savings less use of fossil fuel (Reduced fuel payments) More tourism more income Bigger reputation for city Cost-Benefit Analysis of the Northbourne Avenue’s renewal (2016)   Definition Valuation Benefits     Driver time saving Less car on road do to the light rail complete: minutes per driver time’s driver per year. Value of time: valued at $35/hr. More income for government New commercial apartment developing plan, create new government income thought selling permit for land. Using market prices       Economic impacts Increasing spend in the city thru more tourist in the city. Government Tax report show the increasing sales around tourist area.       Costs     Land   sunk cost market price New building Development       Increased contraction activates Market price Operations   Lost fisheries Historical building disappear Culture lost Pollution Air pollution will harm human health and damage building. Loss of productive Preventive budget Replacement cost   Road congestion Extra local traffic travel cost: valued at $20/hr 6.0 Cost benefit Analysis The theory and concept of cost benefit analysis is widely used in evaluating the benefits and disadvantages of projects. The main aim of cost benefit analysis is to provide a consistent procedure for evaluating cost benefit of projects. It is widely used in evaluating competing projects and choosing the best alternative between the competing projects. The process of evaluating projects and choosing the best alternative is called cost benefit analysis. It involves examination of decisions in terms of project consequences or the costs involves and benefits the project can bring (Reniers & Van Erp, 2016). The project shadow prices shows the measure of its consequences or it benefits to the public. Largely, project are accepted if the overall benefits of that project to the public is more than the cost involves while at the same time we reject projects with high cost than the benefits it comes with (Reniers & Van Erp, 2016). In order to evaluate a project from one point to another, it is important to have a model which will help us predict the total effect on the state of the economy in case that particular project is undertaken. In the cost benefit analysis we will be able to evaluate the total effect which is involve and comparing it with other alternatives in the economy. Therefore, the quality of any good cost benefit analysis should have the ability to predict the consequences using the model and the willingness to evaluate the models or the objective functions. The cost benefit analysis allow for the decision to be made in light of the public sector benefit as well as for the organization level. The main objectives of any cost benefit analysis is to help create an analysis procedure which can be consistent for evaluating the decisions being made in organization in terms of consequences of those decisions. This looks simple and easy but in most cases it involves a lot of evaluation in order to come up with the best alternatives. Gives general guidelines on how decisions are being made in organizations and how to choose best alternatives among varied options It also help in predicting whether the project benefits outweigh the cost involves and what is the overall benefits or cost involves in a given project. Therefore, this theory is very important in making decisions and only professionals are able to use it. There are several methods involves in carrying out cost benefit analysis of a project. The first one is the net present value (NPV) which involve in discounting the future cash flow of a project and comparing it with the cash outflow. This method always recommend that an investor should chose an alternative with positive NPV or project with the highest NPV. The second approach to cost benefit analysis involve calculating the internal rate of return (IRR). This involve the rate of return and cost of capital. Always take a project when the IRR is higher than Cost of capital. These two methods take into account the time value of money when doing evaluation (Boadway, 2016). The third method is by calculating the payback period or accounting rate of return. These are very useful in terms of analyzing how long a project will take to recoup initial investment. The two methods that is payback period and accounting rate of return (ARR) does not consider time value of money in its analysis. The fourth method involves using sensitivity analysis where project is evaluated in terms of surrounding risk involve. Impact to environment. This analysis involve environmental scanning both internal and external and how these risk can be mitigated. For project managers, cost benefit analysis is one area which must be taken seriously in that the investor or project managers will be in a position to manage risk, process of risk management and can easily communicate project potentials. The project manager should reject project with higher risk and low return but embrace investments with lower risk and higher returns (Boadway, 2016). Three option available in this case and we can chose from the best alternative among the three options. First option is the bus priority and median cycle path and this involve relocating the cycle lane from the present Northbourne Avenue kerb to the median area. If this is selected, the first priority will be to build bust station intersection on the Northbourne Avenue. Second option is to build the bus and emergency vehicle lane in the median area, the cycling lane will be still remain in the kerb area. The last option was bus emergency vehicle lane in the Northbourne avenue median and constructing cycle paths on each side of the median lane should have it. 7.0 Cost benefit analysis of the options From the options using the NPV, the third option gives the best alternative which the government should implement. This shows the five year payback period of the road is constructed. It shows that the benefits outweigh cost hence it should be undertaken. Cost benefit analysis of the project 1 Cost Benefit Analysis using Present Value YEAR OF PROJECT >>> 0 1 2 3 4 5 6 7 8 9 10 Net economic benefit $ - $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 Discount rate (12%) 1 0.892857143 0.797193878 0.711780248 0.635518078 0.567426856 0.506631121 0.452349215 0.403883228 0.360610025 0.321973237 PV of Benefits $ - $ 44,643 $ 39,860 $ 35,589 $ 31,776 $ 28,371 $ 25,332 $ 22,617 $ 20,194 $ 18,031 $ 16,099 NPV of all BENEFITS $ - $ 44,643 $ 84,503 $ 120,092 $ 151,867 $ 180,239 $ 205,570 $ 228,188 $ 248,382 $ 266,412 $ 282,511 One-time COSTS $(42,000.00) Recurring Costs $ - $(28,500.00) $(28,500.00) $ (28,500.00) $ (28,500.00) $ (28,500.00) $ (28,500.00) $ (28,500.00) $ (28,500.00) $ (28,500.00) $ (28,500.00) Discount rate (12%) 1 0.892857143 0.797193878 0.711780248 0.635518078 0.567426856 0.506631121 0.452349215 0.403883228 0.360610025 0.321973237 PV of Benefits $(42,000.00) $(25,446.43) $(22,720.03) $ (20,285.74) $ (18,112.27) $ (16,171.67) $ (14,438.99) $ (12,891.95) $ (11,510.67) $ (10,277.39) $ (9,176.24) NPV of all COSTS $(42,000.00) $(67,446.43) $(90,166.45) $ (110,452.19) $ (128,564.46) $ (144,736.12) $ (159,175.11) $ (172,067.06) $ (183,577.73) $ (193,855.12) $ (203,031.36) Cumulative Difference (42,000.00) (22,803.57) (5,663.90) 9,639.37 23,303.01 35,502.69 46,395.26 56,120.77 64,804.25 72,557.37 79,479.80 Cost benefit analysis of the project 2 Cost Benefit Analysis using Present Value YEAR OF PROJECT >>> 0 1 2 3 4 5 6 7 8 9 10 Net economic benefit $ - $ 150,000 $ 150,000 $ 150,000 $ 150,000 $ 150,000 $ 150,000 $ 150,000 $ 150,000 $ 150,000 $ 150,000 Discount rate (12%) 1 0.892857143 0.797193878 0.711780248 0.635518078 0.567426856 0.506631121 0.452349215 0.403883228 0.360610025 0.321973237 PV of Benefits $ - $ 133,929 $ 119,579 $ 106,767 $ 95,328 $ 85,114 $ 75,995 $ 67,852 $ 60,582 $ 54,092 $ 48,296 NPV of all BENEFITS $ - $ 133,929 $ 253,508 $ 360,275 $ 455,602 $ 540,716 $ 616,711 $ 684,563 $ 745,146 $ 799,237 $ 847,533 One-time COSTS $(42,000.00) Recurring Costs $ - $(28,500.00) $(28,500.00) $ (28,500.00) $ (28,500.00) $ (28,500.00) $ (28,500.00) $ (28,500.00) $ (28,500.00) $ (28,500.00) $ (28,500.00) Discount rate (12%) 1 0.892857143 0.797193878 0.711780248 0.635518078 0.567426856 0.506631121 0.452349215 0.403883228 0.360610025 0.321973237 PV of Benefits $(42,000.00) $(25,446.43) $(22,720.03) $ (20,285.74) $ (18,112.27) $ (16,171.67) $ (14,438.99) $ (12,891.95) $ (11,510.67) $ (10,277.39) $ (9,176.24) NPV of all COSTS $(42,000.00) $(67,446.43) $(90,166.45) $ (110,452.19) $ (128,564.46) $ (144,736.12) $ (159,175.11) $ (172,067.06) $ (183,577.73) $ (193,855.12) $ (203,031.36) Cumulative Difference (42,000.00) 66,482.14 163,341.20 249,822.50 327,037.95 395,980.31 457,535.99 512,496.42 561,568.23 605,382.35 644,502.10 Cost benefit analysis of the project 3 Cost Benefit Analysis using Present Value YEAR OF PROJECT >>> 0 1 2 3 4 5 6 7 8 9 10 Net economic benefit $ - $ 80,000 $ 80,000 $ 80,000 $ 80,000 $ 80,000 $ 80,000 $ 80,000 $ 80,000 $ 80,000 $ 80,000 Discount rate (12%) 1 0.892857143 0.797193878 0.711780248 0.635518078 0.567426856 0.506631121 0.452349215 0.403883228 0.360610025 0.321973237 PV of Benefits $ - $ 71,429 $ 63,776 $ 56,942 $ 50,841 $ 45,394 $ 40,530 $ 36,188 $ 32,311 $ 28,849 $ 25,758 NPV of all BENEFITS $ - $ 71,429 $ 135,204 $ 192,147 $ 242,988 $ 288,382 $ 328,913 $ 365,101 $ 397,411 $ 426,260 $ 452,018 One-time COSTS $(42,000.00) Recurring Costs $ - $(28,500.00) $(28,500.00) $ (28,500.00) $ (28,500.00) $ (28,500.00) $ (28,500.00) $ (28,500.00) $ (28,500.00) $ (28,500.00) $ (28,500.00) Discount rate (12%) 1 0.892857143 0.797193878 0.711780248 0.635518078 0.567426856 0.506631121 0.452349215 0.403883228 0.360610025 0.321973237 PV of Benefits $(42,000.00) $(25,446.43) $(22,720.03) $ (20,285.74) $ (18,112.27) $ (16,171.67) $ (14,438.99) $ (12,891.95) $ (11,510.67) $ (10,277.39) $ (9,176.24) NPV of all COSTS $(42,000.00) $(67,446.43) $(90,166.45) $ (110,452.19) $ (128,564.46) $ (144,736.12) $ (159,175.11) $ (172,067.06) $ (183,577.73) $(193,855.12) $(203,031.36) Cumulative Difference (42,000.00) 3,982.14 45,037.63 81,694.31 114,423.49 143,645.97 169,737.48 193,033.46 213,833.45 232,404.86 248,986.49 Reference ACT Land Development. Northbourne Overview. Retrieved 12 March 2017. from http://www.lda.act.gov.au/urbanrenewal/sites/northbourne-overview Andrew Barr. Urban renewal in CBR. Retrieved 16 March 2017. from http://www.andrewbarr.com.au/urban_renewal_in_cbr Andrew Barr.(2016, February 24).Renewal of Northbourne Avenue begins. Retrieved 16 March 2017, from http://www.cmd.act.gov.au/open_government/inform/act_government_media_releases/barr/2016/renewal-of-northbourne-avenue-begins Boadway, R. (2016). Cost-benefit analysis. In The Oxford Handbook of Well-Being and Public Policy (p. 1569). Oxford University Press. D.C.Haas.(2016, August 29), Northbourne Avenue trees and light rail-facts not fiction. Retrieved 16 March 2017. from http://www.actlightrail.info/2016/08/northbourne-avenue-trees-and-light-rail.html David Ellery.(2016, January 18). Northbourne Avenue redevelopment plan released for comment. Retrieved 12 March 2017. from http://www.canberratimes.com.au/act-news/northbourne-avenue-redevelopment-plan-released-for-comment-20160115-gm6yek.html Ray Sparvell.(2016,Novenber 25),Northbourne Avenue transformation continue with new land for sale at lyneham. Retrieved 16 March 2017. from http://www.allhomes.com.au/news/northbourne-avenue-transformation-continues-with-new-land-for-sale-at-lyneham-20161124-gswcqq/ Reniers, G. L., & Van Erp, H. R. (2016). Cost‐Benefit Analysis. Operational Safety Economics: A practical approach focused on the chemical and process industries, 149-218. Read More