Sustainable Return on Investment Benefits and Costs of Alternative Future Land Use Development Alternatives

Transcription

1 Sustainable Return on Investment Benefits and Costs of Alternative Future Land Use Development Alternatives Case Study of Goffstown, NH Northern New England Chapter of American Planning Association (NNECAPA) September 9, 2011 Dan Hodge Principal Economist HDR Decision Economics

2 Agenda Brief overview of HDR Decision Economics Overview of Sustainable Return on Investment (SROI) Approach I-93 Community Technical Assistance Program (CTAP) and Buildout Reports Methodology Analytical framework, data, benefits and costs Preliminary findings of Goffstown analysis Potential enhancements and next steps

3 HDR, Inc. Background Leading engineering, architecture, planning and economics firm Over 7500 employees in 140 offices Infrastructure-focused assessments and strategies Transportation, energy, economic development, water, environment, health care, urban planning HDR s New England offices: 50 employees in Boston engineering, economics, architecture 40 employees in Portland, ME renewable energy HLB Decision Economics acquired 5 years ago to add internal economics and finance expertise Four (4) Boston-based economics staff

4 HDR Decision Economics Background Leading firm in economic analysis in support of: Governments (National, Provincial / State and Local) Public sector authorities and non-profits Private sector and capital markets Key service areas are: Cost-Benefit Analysis; Economic Development and Land Use Analysis; Economic Impact Analysis; Project Finance / Business Case Analysis; Cost Risk Analysis; and Decision support tool development Staff includes economists, financial analysts, and statisticians in Boston, New York, Silver Spring (MD), Ottawa, and Toronto

5 Recent Economic Analysis Projects Boston Redevelopment Authority Sustainable Return on Investment of Boston s ARRA Investments Pioneer Valley Planning Commission (MA) Knowledge Corridor Passenger Rail Study and Economic Development Assessment Maine DOT CanAm Trade and Transportation Study Rhode Island Public Transit Authority Metro Transit Study and Streetcar Alternatives Analysis Portland, ME MPO Vision for Transit and TOD Study New Hampshire DOT State Rail Plan Mass Technology Collaborative Innovation-Based Economic Development Strategy for Holyoke and Pioneer Valley

6 Making Sustainable Decisions Sustainability: Development that meets the needs of the present without compromising the ability of future generations to meet their own needs The World Commission on Environment and Development, 1987 (Brundtland Commission) As many benefits and costs of infrastructure investment are not priced, financial return on investment a poor guide to social return on investment Sustainable Return on Investment: Measure all costs and benefits over a project s life The Triple Bottom Line 6

7 What is SROI? It s best practice in Cost-Benefit Analysis and Financial Analysis over a project s entire life-cycle, augmented by: Accounting for uncertainty using state-of-the-art risk analysis techniques Engaging stakeholders directly to generate consensus and transparency 7

8 SROI = Calculating The Triple Bottom Line SROI adds to traditional financial analysis the monetized value of non-cash benefits and externalities Project s Cash Impacts Internal Non- Cash Impacts External Costs & Impacts Capital Operations & Maintenance Productivity Mobility Health & Safety Greenhouse Gases Criteria Air Contaminant Water, Waste, & Noise Financial Return Financial & Internal SROI 8

9 Decision Metrics From Both a Financial & SROI Perspective Net Present Value (NPV) Benefit to Cost Ratio (BCR) Discounted Payback Period (DPP) Internal Rate of Return (IRR) Return On Investment (ROI) 9

10 Examples of Recent SROI Projects Client Department of Defense BNSF, CSX & UP Railroads Boston Redevelopment Authority Chicago Area Waterway System Denver Metro Wastewater Reclamation District Johns Hopkins University Department of Energy 10 Project SROI on the Fort Belvoir Community Hospital, USAG Humphreys in Korea and Fort Bliss in Texas, etc. Proved the public benefit of dozens of new infrastructure projects resulting in $200M in grants from TCIF and another $500M from TIGER and TIGER II The city of Boston used SROI to analyze its portfolio of ARRA funding projects Using SROI to help determine the most sustainable form of physical barrier between the great Lakes and Mississippi river system Using SROI to make design & construction decisions on Denver s proposed new wastewater treatment facility Provided SROI analysis of JHU s Campus Sustainability Initiative project in order to secure LEED certification SROI analysis of energy and water reduction initiatives at Argonne National Laboratory Energy Sciences Building in Chicago

11 A Sustainable Future US DOT TIGER Program Selection Criteria Transportation Investment Generating Economic Recovery (TIGER) Selection criteria for major discretionary grant program for transportation: State of Good Repair Economic Competitiveness Livability Environmental Sustainability Safety Job Creation

12 SROI Flow Diagram Example of Benefits Costs Cash Reduced Electricity Costs Reduced Heating/Cooling Costs Reduced Water Usage Costs Reduced Sewage Costs Reduced Waste Disposal Costs Reduced Chemical Usage Other Reduced Operational Costs Non-Cash Reduced Green House Gas Emissions Reduced Air Contaminant Emissions Fresh Water Conserved Improved Health Improved Productivity Improved Resiliency Improved Safety Capital Costs ($) Operating Cost Increases ($) Associated Maintenance Costs ($) Disposal Costs ($) Total Benefits ($) Discounting (%) Total Costs ($) Output Metrics ($) Reveals a project s Full Value (SROI) 12

13 SROI of Boston s ARRA Investments Annual Energy and Environmental Benefits and Cost Savings in 2015 Air Pollutants Savings, $2,972,980, 25% Greenhouse Gases $890,209 7% Economic Value of Water Saved, $178,315, 1% Sewer Bill Savings, $1,337,029, 11% Water Bill Savings, $1,075,355, 9% Energy Bill Savings, $5,687,755, 47% 13

14 BRA Sustainable Return on Investment Results Department Net Present Value Discounted Payback Period (Years) Internal Rate of Return Benefit-Cost Ratio EE $ 52,394, % 3.0 BTD & PW $ 111,398, % 6.8 DND $ 1,114, % 1.6 BHA $ 43,746, % 9.2 TOTAL $ 208,654, % 4.5 The aggregate Net Present Value (NPV) is over $208 million with a 4.5 discounted payback period of about 5 years Benefit-cost ratios are estimated to be greater than 1.0 for all departments evaluated, ranging from 1.6 to 9.2 The total Internal Rate of Return (IRR) is estimated to be 38% 14

15 Risk Analysis of Boston s ARRA Investments and Sustainability Benefits 15

16 Key Elements of SROI It s a proven Cost-Benefit Analysis based approach to making planning & budgeting decisions It fully incorporates non-cash benefits and externalities into the decision making process It provides a full range of possible outcomes using state-ofthe-art risk analysis techniques It helps generate consensus by being both interactive and transparent It is an invaluable tool to help organizations secure funding, generate public support, generate internal approval, etc. 16

17 CTAP SNHPC Buildout Reports Five-year initiative to assist communities in development planning with widening of I-93 State, regional, local, non-profit partnership Promote beneficial growth patterns and development to minimize negative effects on community, open space, traffic, environment, etc.

18 Existing Gofftstown Land Use and Zoning

19 Three Buildout Scenarios (2030) Base Buildout Maximum development buildout under current land use regulations Accounts for wetlands, 100-year floodplain, conservation lands Standard Alternative Buildout Community center clustering and additional ecological constraints Increase allowable density based on distance from community centers Community Scenario Buildout Community specified land use changes based on meetings with local officials and volunteers Based on 2006 Master Plan Update additional community centers and increased zoning density within ½ mile Note: First two scenarios are standardized methods to analyze alternative growth scenarios not a specific policy proposal

20 Base and Standard Alternative Buildouts 23 square miles of buildable land area in Base Buildout 16.9 square miles in Standard Alternative

21 Indicators from SNHPC Analysis

22 Objective of Benefit-Cost Analysis of Land Use Development Alternatives Estimate the benefits and costs, in dollar terms, of alternative development plans and buildout For example, infrastructure costs to achieve buildout, environmental impacts Social welfare effects on the community Productivity, efficiency and reduced future costs to individuals, community or broader environment Not a fiscal impact analysis Fiscal impact analysis refers only to public revenue and expenditures impacts of development or investments Potential next step complementary analysis Comparative analysis benefits and costs compared to Base Buildout Not a standard benefit-cost analysis as we assess development plans not individual investments

23 Benefit-Cost Analysis Framework

24 Potential Categories of Benefits (or Cost Savings) Environmental Air, water or noise pollution, storm-water run-off, vegetation/wildlife Transportation / Travel Vehicle miles of travel (VMT), vehicle hours of travel (VHT), delay, accidents Use of Resources Energy consumption (kwh, therms of gas), water use, solid waste Effects on the Economy Employment to previously unemployed, increases in land value Social & Distributional Crime, poverty, homelessness, affordable housing

25 Potential Categories of Costs Infrastructure & Utilities Roadway and transit infrastructure, water/sewer, solid waste, telecommunications Public Service & Facilities Emergency services (fire, police, EMS/hospital), education, libraries, legal system Land & Building Costs of land (acreage) and buildings developed can be difficult to value

26 Driving Factors for Costs and Benefits Land devoted to residential, commercial, civic, green space uses Directly impacts population and commercial activity (jobs) Single-family, multi-family and mixed use development Impacts energy consumption, spatial spread of growth Population Many public expenditures on per capita basis, transportation use, energy consumption Distance (sprawl) and density of use Infrastructure to serve growth, average length of trips

27 Key Data Indicators, Buildout Year Base Scenario Standard Alternative Community Scenario Total Population 38,472 37,953 37,769 School Age Population 8,598 8,402 8,441 Households 14,002 13,698 13,771 Commercial Jobs 6,659 6,818 7,011 Commercial Floor Area (million sq. ft.) Land for Development (sq. mi.)

28 Data Sources SNHPC Buildout Scenarios and GIS files Goffstown Budget (2008) New Hampshire and US DOT data Cost per new mile of roadway, vehicle operating costs, pavement maintenance, accidents, emissions US EPA and Energy Information Agency Emissions by fuel consumption, energy consumption by building type Third Party Research Costs of Sprawl Transit Cooperative Research Project (TCRP), 2000 Cost-Benefit Analysis of Local Land Use Allocation Decisions, John McDonald, Journal of Regional Science, 2001

29 New Residential Dwelling Units by Scenario and Type Base Buildout New Dwelling Units Share Standard Alternative New Dwelling Units Share New Dwelling Units Community Alternative Share Single Family 6,171 91% 5,360 82% 5,579 85% Multi-family 304 4% % % Mixed Use 307 5% 358 5% 222 3% Total 6,782 6,511 6,576

30 Annual Cost Savings Compared to Base Millions of 2008 $ Roadway Infrastructure (Construction & Maintenance) Base Scenario Standard Alternative to Base Community Scenario to Base $36.0 $7.3 $0.8 Water/Sewer/Solid Waste $6.6 $0.2 $0.1 Infrastructure & Utilities $42.6 $7.4 $0.9 Emergency Services $12.9 $0.3 $0.2 Education $71.6 $1.6 $1.3 Public Services $2.1 $0.05 $0.04 Public Services & Facilities $86.5 $2.0 $1.6 Transportation Emissions $5.8 $0.6 $0.2 Energy Based Emissions $10.5 $0.4 $0.2 Environmental $16.2 $1.0 $0.4 Transportation/Travel Impacts (costs, safety) $66.9 $6.3 $0.9 Single Family Residential Energy Costs $58.3 $6.7 $4.8 Multi-Family Residential Energy Costs $4.1 ($3.7) ($2.7) Commercial Energy Costs $19.7 ($0.5) ($1.0) Energy Costs $82.1 $2.5 $1.1 Effects on Economy $2.6 $0.2 $0.4 SUM OF COST DIFFERENCES COMPARED TO BASE SCENARIO $19.4 $5.3

31 Summary of Annual Costs and Benefits By Scenario (millions of dollars) Millions of 2008 $ Standard Alternative to Base Community Scenario to Base Costs $9.4 $2.5 Infrastructure & Utilities $7.4 $0.9 Public Service & Facilities $1.9 $1.6 Benefits $10.0 $2.8 Environmental $1.0 $0.4 Transportation $6.4 $0.9 Energy Use $2.5 $1.1 Effects on Economy $0.2 $0.4 Cost Savings and Benefits $19.4 $5.3

32 Sensitivity Test As a sensitivity test, the analysis was conducted with the population held constant across all three scenarios Results are presented in the following two tables

33 Summary of Annual Costs and Benefits By Scenario with Population Held Constant (millions of dollars) Millions of 2008 $ Standard Alternative to Base Community Scenario to Base Costs $7.3 $0.8 Infrastructure & Utilities $7.3 $0.8 Public Service & Facilities $0.0 $0.0 Benefits $7.9 $1.2 Environmental $0.7 $0.1 Transportation $6.0 $0.6 Energy Use $1.1 $0.1 Effects on Economy $0.2 $0.4 Cost Savings and Benefits $15.2 $2.0

34 Potential Analytical Enhancements Refine estimates and assumptions with SNHPC and Goffstown Infrastructure needs for undeveloped areas Apply the SNHPC travel demand model to community development alternatives by incorporating land use (pop and emp) assumptions More accurate estimates of VMT and VHT impacts based on amount and pattern of development Conduct a fiscal impact analysis to consider revenue impacts of commercial and residential development Add market demand assessments and risk analysis to account for future uncertainties Incorporate additional impact categories Solid waste, water/sewer expansion, property value differences based on proximity to community centers, social factors (low-income housing, poverty)

35 Next Steps Work with SNHPC and Goffstown to refine analysis (community vision) and fiscal impact analysis Review results with recent national research on cost savings of smart growth initiatives Work with SNHPC, state agencies and communities to apply benefitcost methodology for other CTAP communities

36 Questions and Discussion Contact Information: Dan Hodge (617) Final Report available upon request