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A business case is typically used to promote or justify a particular project, like the Canberra LRT. Unfortunately, politicians, and even the media, often use the term interchangeably with cost-benefit analysis, which creates confusion about the economic value of government policies or projects. A true cost-benefit analysis begins with the main policy question. In the case of the streetcar, it would be a question of whether public transport between Civic and the Woden Valley can be improved. The analysis should also specify the counterfactual case of what would happen if the current system continued unchanged into the future. The costs and benefits of each of the possible public transport alternatives, for example underground metro, light rail, O-Bahn or minibuses, can then be compared to the current ACT bus network. ACT Auditor General’s report number 8/2021 on Civic Streetcar Stage 2A at Commonwealth Park should be applauded for its in-depth critique of the 2019 business case. It identifies the omission of the cost of the modernization of existing light rail vehicles with wireless technology (an additional 17% of capital costs) and the omission of traffic and business disruption costs during construction. Interestingly, however, the audit did not question the presentation of positive transport benefits, which would be negative if the tram journey time was longer than the existing bus transport, an important issue for the link. Civic in Woden. Regarding the estimated benefits, the audit report noted that expected passenger footfall was modeled on data from South East Queensland, Sydney and Melbourne – but not Canberra – which likely resulted in a overestimation. He also notes that the so-called “city shaping benefits” and “wider economic benefits” account for over 60% of the estimated benefits, but the business case provides “no narrative that describes, explains or supports estimates of broader economic benefits ”. 19th-century economist Alfred Marshall argued that a denser urban population would generate greater economic benefits because people interact in cafes, learn from each other, and develop new ideas. Proximity would also mean that workers could find and specialize in jobs better suited to their talents, and employers could more easily recruit available skilled workers, thus increasing productivity. But Marshall warned that negative externalities such as “lack of light and air” would reduce the benefits of agglomeration. The concept of broader economic benefits can be extended to “effective urban density” if a large transport project (think high-speed rail in China) brings workers from regional settlements or suburban dormitories to the city center. , so that the urban density is temporarily increased during the working day. Higher metropolitan productivity, reflected in higher wage levels, can be statistically correlated with changes in worker density levels. However, many consultants rely on standard parameter estimates obtained from studies in large cities like London. READ MORE: Applying these estimates derived from studies of major cities to Stage 2A, or even a streetcar from Civic to Woden, would be unlikely to pass the ad test. Wider estimates of economic benefits are often used to support infrastructure business cases, although consideration of such estimates after project completion is rare. But a 2004 study of the Channel Tunnel found that it did not appear to have produced greater economic benefits. And a 2007 study of the French high-speed train found that traffic levels were increasing in both directions, but there was no overall impact on the cities connected by the train. The ACT government was given a providential opportunity to test the credibility of the values ​​of wider economic benefits assumed for the extension of the light rail line to the south. Capital Metro’s 2014 business case for Stage 1 (Gungahlin to Civic) included “broader economic impacts” (i.e., broader economic benefits) in its estimate of benefits. Verifying the actual extent and distribution within Canberra of these benefits supposedly produced by Phase 1 would no doubt be welcomed by punters who will experience higher housing rates in the years to come. Business cases may well be a useful way to lubricate the machinery of government, but they are a slippery slope to poor governance, if not worse.



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