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An Investigation of the utility of benefit-cost analysis in waterfront allocation Hankin, Richard Alfred 1968

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AN" INVESTIGATION OF THE UTILITY OF BENEFIT-COST ANALYSIS IN WATERFRONT ALLOCATION by RICHARD ALFRED HANKIN A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS i n the Department of COMMUNITY AND REGIONAL PLANNING We accept t h i s thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA April,1 9 6 8 In p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l m e n t o f t h e r e q u i r e m e n t s f o r an a d v a n c e d d e g r e e a t t h e U n i v e r s i t y o f B r i t i s h C o l u m b i a , I a g r e e t h a t t h e L i b r a r y s h a l l m a k e i t f r e e l y a v a i l a b l e f o r r e f e r e n c e a n d s t u d y . I f u r t h e r a g r e e t h a t p e r m i s s i o n f o r e x t e n s i v e c o p y i n g o f t h i s t h e s i s f o r s c h o l a r l y p u r p o s e s may be g r a n t e d by t h e H e a d o f my D e p a r t m e n t o r by h i s r e p r e s e n -t a t i v e s . I t i s u n d e r s t o o d t h a t c o p y i n g o r p u b l i c a t i o n o f t h i s t h e s i s f o r f i n a n c i a l g a i n s h a l l n o t be a l l o w e d w i t h o u t my. w r i t t e n p e r m i s s i o n . i i ABSTRACT The purpose of t h i s thesis was to investigate the following hypothesis: "that Benefit-Cost analysis i s a suitable and s u f f i c i e n t technique fo r the all o c a t i o n of waterfront to competing uses." The greatest stress i s placed on the technique by l i m i t i n g the meaning of "allocation" to problems involving mutually exclusive uses which compete f o r the same waterfront s i t e . In t h i s context choice of the best from a number of suitable s i t e s f o r a use or of the most e f f i c i e n t scale of a project on a si t e are not considered to be all o c a t i o n problems. Chapter I defines the waterfront and i t s elements— the shoreline, foreshore, and adjacent water areas—and discusses i t s major uses, extent, interrelationships, and multiple-use potential. Also discussed i s the h i s t o r i c a l importance of the waterfront and some public attitudes which have fostered careless waterfront a l l o c a t i o n and use. Thus, the need for comprehensive waterfront allo c a t i o n procedures i s established. The second Chapter b r i e f l y reviews Benefit-Cost theory and methods and discusses some problems of applica-t i o n . While acknowledging the extensive theoretical debate i i i concerning the technique, i t i s outlined as i t i s currently-used i n water-resource development programmes. Chapter III applies Benefit-Cost analysis to a s p e c i f i c waterfront a l l o c a t i o n problem involving p a r t l y r e a l - p a r t l y hypothetical port and recreation development • proposals f o r the same s i t e . Benefits, costs, and benefit-cost r a t i o s are estimated f o r each of the two alternatives. Then basic assumptions with respect to the a v a i l a b i l i t y of other s i t e s , the evaluation context, and timing are varied to examine the effects on the r e l a t i v e benefit-cost ratings of the two proposals. Problems of intangibles and of providing the necessary background f o r analysis are also discussed. The f i n a l Chapter summarizes the major conclusions regarding the u t i l i t y of Benefit-Cost analysis i n water-front use decisions. It was concluded that the r a t i o s f o r alternatives may s h i f t substantially with changes i n the context or viewpoint, with important implications f o r the d i s t r i b u t i o n of benefits and costs amongst individuals, groups, and regions. Changes i n timing also seriously affect r e l a t i v e ratings; i t was found that the technique was not well-suited to long-range planning problems because of i t s orientation to s p e c i f i c projects. F i n a l l y , i t was observed that the d i f f i c u l t type of a l l o c a t i o n problem i v posed i n t h i s paper could create numerous intangible benefits and costs which, though considered to be of substantial importance, could not be integrated into the benefit-cost r a t i o i n a useful way. Thus fundamental problems not encompassed by Benefit-Cost analysis must be solved before the r a t i o s become useful f o r all o c a t i o n purposes. It was concluded that the hypothesis was i n v a l i d . Instead, a comprehensive waterfront planning framework i s suggested i n which the role of Benefit-Cost analysis i s seen to l i e i n investigating the welfare d i s t r i b u t i o n consequences of alternative development proposals, i n the e f f i c i e n c y of various scales of development of a f a c i l i t y or s i t e , or i n determining the best of the suitable a l t e r -native s i t e s f o r a p a r t i c u l a r waterfront use. In t h i s view Benefit-Cost analysis i s thus accorded a more limited but s t i l l useful r o l e . TABLE OP CONTENTS v CHAPTER PAGE I. INTRODUCTION 1 D e f i n i t i o n of Waterfront 2 The shoreline 2 The foreshore 4 The adjacent water area 5 The Waterfront and Its Uses 6 Transportation 7 U t i l i t y 11 Recreation 13 Conservation 14 Extent of the Waterfront Land Resources .... 15 Interrelationship of waterfront elements . 18 Multiple use potential 19 History of Waterfront Development i n North America 21 Early settlement 21 Benefits of the early waterways 23 Public attitudes 25 Purpose and Scope of the Thesis 26 . I I . BENEFIT-COST ANALYSIS—AN OUTLINE 34 Introduction 34 The Theory i n B r i e f 36 v i CHAPTER PAGE Methodology 38 Basic p r i n c i p l e s 39 Benefits 42 Costs 46 The evaluation context 48 Choice of alternatives 49 Time streams, the discount rate, and uncertainty 51 The Benefit-Cost c r i t e r i o n 53 III . BENEFIT-COST ANALYSIS APPLIED TO THE ROBERTS BANK WATERFRONT 57 Introduction 57 The General Setting 61 The Waterfront Site 68 The Port Proposal 69 Benefit-Cost Analysis of the Port Proposal . 71 Forecasts of shipments 72 Costs of the port proposal 76 Benefits of the port scheme 85 The Recreation Development Proposal 91 Benefit-Cost Analysis of the Recreation Proposal 94 Forecasts of recreation demands 94 v i i CHAPTER PAGE Costs of the recreation proposal 100 Recreation scheme benefits 103 Findings of the Analysis 110 Port proposal Benefit-Cost r a t i o I l l Recreation proposal Benefit-Cost r a t i o ... 114 Alternative Assumptions 119 Alternative provision of port f a c i l i t i e s . 119 Alt e r i n g the viewpoint 122 Timing d i f f i c u l t i e s 126 Problem of Intangibles 129 Background f o r Benefit-Cost Analysis 131 IV. CONCLUSIONS: BENEFIT-COST ANALYSIS AND WATERFRONT ALLOCATION 137 Strengths and Weaknesses i n Benefit-Cost Analysis 138 The Planning Framework 142 An Alternative Approach to Waterfront Allocation 146 The Role of Benefit-Cost Analysis 149 v i i i LIST OP TABLES TABLE PAGE 1. Port Development Scheme: Forecast of Shipments and Transportation Savings 73 2. Port Development Scheme: D i r e c t Costs 77 3. I n t a n g i b l e Costs of the Port Proposal 83 4. P a r t i c i p a t i o n Forecasts f o r Selected Lower Mainland Recreation A c t i v i t i e s 98 5. Recreation Development Scheme: D i r e c t Costs .. 102 6. Port Development Scheme: Schedule of Costs ... 112 7. Port Development Scheme: Schedule of B e n e f i t s 113 8. Recreation Development Scheme: Schedule of Costs S t a r t i n g 1981 and 1971 115 9. Recreation Development Scheme: Schedule of B e n e f i t s - 116 > i x LIST OP FIGURES FIGURE PAGE 1. The Waterfront Element 3 2. The General Setting 62 3. The Regional Setting 63 4. Roberts Bank-Port Development Scheme 78 5. Roberts Bank-Recreation Development Scheme ... 92 ACKNOWLEDGEMENTS The writer wishes to express his sincere appreciation to the Department of Community and Regional Planning at the University of B r i t i s h Columbia, and p a r t i c u l a r l y to Dr. Robert C o l l i e r and to Mr. Brahm Wiesman fo r t h e i r extra patience and consideration. Above a l l the writer thanks Mr. Norman Pearson and Mrs. Connie Isaak for th e i r indispensable aid at a l l times, but especially when needed most. I . INTRODUCTION 1 The waterfront and i t s many potential uses have been receiving increasing attention throughout North America. Municipal, p r o v i n c i a l , state, and federal decision-makers are faced with proposals f o r development of waterfront f o r port and i n d u s t r i a l uses; private developers increasingly f i n d that development of luxury waterfront r e s i d e n t i a l areas i s a lucra t i v e investment; increasing l e i s u r e time and growing personal incomes generate growing demands on existing parks and beaches with costly shoreline purchases advocated to meet our water-based recreation needs; i n the 'new towns' of Reston, V i r g i n i a and Columbia, Maryland, man-made lakes and ponds are being created as f o c i f o r t h e i r town centres and t h e i r high density r e s i d e n t i a l areas. The public has become more aware of both the wide spectrum of a c t i v i t i e s and values that waterfront offers, and of the inherent c o n f l i c t s that often arise between these a c t i v i t i e s and values. The North American population con-tinues to grow rapidly, but the supply of waterfront land i s v i r t u a l l y fixed, especially within urban regions. The competition between r e s i d e n t i a l , commercial, i n d u s t r i a l , and recreation development for the available waterfront, such as i s charged to have occurred on the eastern seaboard of the United States, 1 w i l l increase. Thus, while there may be 2 d i f f i c u l t i e s , a r a t i o n a l process f o r the a l l o c a t i o n of the waterfront resource to the various competitors f o r i t i s essential i f the waterfront i s to he used to best advantage. To t h i s end t h i s thesis examines the u t i l i t y of Benefit-Cost Analysis as an approach to a l l o c a t i o n . D e f i n i t i o n of Waterfront At f i r s t glance the meaning of 'waterfront' might seem straightforward, hut a l i t t l e investigation uncovers complications not at f i r s t foreseen. Por example, people tend to interpret words i n r e l a t i o n to t h e i r own experience; to- a Brooklynite l i v i n g near New York's piers, 'waterfront' means something t o t a l l y different from i t s meaning to a resident of a small community on the Oregon coast. 'Water-front' therefore, f o r the purposes of this paper, i s broken down into three immensely variable but closely inter-related p components, as shown i n Figure 1. The shoreline. This i s the s t r i p of land adjoining the water l i n e — u s u a l l y the high water l i n e — t h a t can be said to d i r e c t l y benefit from the r i p a r i a n rights pertaining to the waterfront location. The extent of t h i s area usually would be determined by the depth of the l e g a l subdivision parcels fronting on the water area although where the land remains i n large acreage l o t s i t i s probably more useful to FIGURE 1 THE WATERFRONT ELEMENTS 4 describe i t s extent by some arbitrary measure—say a depth of f i v e hundred feet. Of course, the shoreline can be much less than t h i s where roads, railway l i n e s , or a sudden change i n topography intervenes. In some cases, such as a steep c l i f f having a rapid drop-off into deep water, the shoreline may be v i r t u a l l y non-existent, or that which does exist may be inaccessible. The values of waterfront may spread even further inland, however. For example, upland areas adjacent to the shoreline may provide 'view l o t s ' f o r attractive r e s i d e n t i a l development though without physical access to the water, or careful design plus provision of group f a c i l i t i e s may impart waterfront values to clusters of cottages, rather than to a single row strung along the water. This potential f o r d i f -fusion of waterfront values i s , of course, highly dependent on l o c a l conditions. The foreshore. This refers to the i n t e r t i d a l area i n saltwater areas and to lands underlying freshwater that are exposed by seasonal changes i n water l e v e l , by periods of dry weather, or by the operation of dams and reservoirs. If foreshore gradients are r e l a t i v e l y f l a t , then these exposed areas can be very large. The foreshore i s often r i c h i n aquatic l i f e , p a r t i c u l a r l y i n saltwater areas, because of the regularity and short duration of the t i d a l 5 cycle as compared to the intermittent and lengthy cycle of immersion and exposure that frequently occurs' on freshwater foreshore. It can serve as sources of sand and gravel for construction projects, provide fine beaches, or support shorebirds and waterfowl. Marine and freshwater 'agricul-ture' , such as the production of algae, s h e l l f i s h , and other marine animals, has also become a s i g n i f i c a n t foreshore use. On steeply sloping waterfront, the foreshore area may be i n s i g n i f i c a n t , or because of geological conditions i t can be treacherous, presenting an obstacle to many water-front uses. In t h i s state i t may have l i t t l e alternative use potential beyond that of w i l d l i f e habitat. Under better geological conditions, however, the foreshore i s the area most subject to direct physical change—by dredging, f i l l i n g , dyking, or draining f o r a variety of purposes. The adjacent water area. This refers to that part of the adjacent water body that i s functionally t i e d to foreshore and shoreline uses and a c t i v i t i e s . Important though i t i s , i t s extent i s somewhat arbitrary and depends upon the a c t i v i t y involved. In a port, for example, one might use the harbour headline, the l i m i t set by the harbour administration f o r the building of structures, as the outer-most boundary. But, the movement of ships between piers must be through water areas outside t h i s boundary—areas to 6 which non-port-oriented waterfront users may have equal access. In the case of pleasure c r a f t marinas adjacent t o good s p o r t s f i s h i n g waters, i t becomes e q u a l l y d i f f i c u l t t o e s t a b l i s h a boundary, but i t i s probably unnecessary anyway. Perhaps more important than d e f i n i n g such a boundary i s acknowledgement of the v a r i a b l e f u n c t i o n s that t h i s segment of the waterfront may serve, and the fundamental importance of these f u n c t i o n s t o the waterfront uses. As with the other waterfront elements, t h i s adjacent water area i s a l s o v a r i a b l e i n p h y s i c a l q u a l i t y , b i o l o g i c a l s t r u c t u r e , and p o t e n t i a l f o r human a c t i v i t i e s . The Waterfront and I t s Uses I t i s d i f f i c u l t t o name a North American C i t y that i s not l o c a t e d beside a l a k e , r i v e r , bay, or harbour. C e r t a i n l y there are good reasons f o r t h i s — t h e need f o r domestic and i n d u s t r i a l water, e a r l y dependence on waterway t r a n s p o r t a t i o n , mechanical power based on water, the occurrence of f i s h and w i l d l i f e p o p u l a t i o n s , d e p o s i t i o n s of r i c h s o i l s i n r i v e r f l o o d p l a i n s , and the s c e n i c and r e c r e a t i o n p o s s i b i l i t i e s o f f e r e d . But i n a d d i t i o n t o these p h y s i c a l and economic values there appears t o be a psycho-l o g i c a l a t t r a c t i o n of people t o water. Perhaps as one of the f o u r b a s i c 'elements' named i n more p r i m i t i v e t i m e s — e a r t h , a i r , and f i r e . w e r e the o t h e r s — f o r some i t may s t i l l 7 r e t a i n a mystical quality and evoke an i n s t i n c t i v e f e e l i n g of security. However that may be, i t i s appropriate at t h i s point to outline the range of uses to which 'waterfront' i n a l l i t s forms can be put. Some areas, because of severely l i m i t i n g physical q u a l i t i e s , have only a narrow range of potential uses. In other cases, human a c t i v i t i e s and developments may have limited the potential range of a c t i -v i t i e s , or through p o l l u t i o n may have destroyed some of the opportunities that once existed. Almost the f u l l range of uses of waterfront land can be c l a s s i f i e d within the following four functional groups—transportation, u t i l i t y , recreation, and conservation—however, t h i s l i s t i n g i s not exhaustive. Por example, even re l i g i o u s purposes may be served, as i n India where the Ganges River i s "used" as a Holy r i v e r . Nevertheless, most purposes of interest to us i n North America can be f i t t e d into these categories. Transportation. Most people are f a m i l i a r with the great ocean ports of the world, such as New York, London, Rotterdam, and Hamburg. The largest of these are 'break of bulk' points for water-borne commerce to be distributed over half a continent—New York^ and Rotterdam f o r example. These ports are fundamental to world trade, exporting and importing to meet the demands of domestic surpluses and 8 shortages. But t h i s transportation function i s not limited to the oceans. The inland waterways of North America—the St. Lawrence and M i s s i s s i p p i River systems—and the r i v e r s and canals of Europe provide the means for movement of many millions of tons of bulk goods annually. Water-borne commerce often moves between what can be termed true port f a c i l i t i e s — t h e piers and wharves, grain elevators, o i l docks and numerous specialized water-front i n s t a l l a t i o n s . These add l i t t l e or nothing to the processing of the goods and there i s no change i n t h e i r values. The f a c i l i t i e s serve as terminal points at which goods can be stored, sorted, aggregated, or broken down f o r movement onto the various water c a r r i e r s , or onto land-bound transport systems f o r d i s t r i b u t i o n to inland areas. However, many water-oriented industries are located on shore-l i n e s i t e s to f a c i l i t a t e direct water access to raw materials and f o r outward shipment of finished products. Waterway transportation of domestic goods i s heavily concentrated i n bulk, low value items which do not require speed or care-f u l handling. Thus primary industries using raw materials including mineral ores, petroleum, some chemicals, construc-t i o n materials, timber, and wood pulp are most l i k e l y to be found on the waterfront.^ 9 M i l i t a r y i n s t a l l a t i o n s may also be considered as a use belonging to t h i s group. Waterfront s i t e s provide f o r naval docks and depots. (They also provide defensive s i t e s against attack from the water, and may provide added security for m i l i t a r y a c t i v i t i e s being pursued within i n s t a l l a t i o n s . The defensive role may probably be con-sidered minimal now, given the changes i n the technology of warfare.) A number of industries that are found along water-ways cannot be said to 'use' i n a l i t e r a l sense the values of waterfront land for transportation. They may occupy si t e s simply because s i t e s were available at suitable prices and met the other location requirements of p a r t i c u l a r firms, or waterfront locations may serve as a protective feature, y i e l d prestige values, or be held as a speculative investment to be sold to genuine waterfront users when shortages of appropriate s i t e s have brought about a price increase. Sometimes shoreline s i t e s are obtained by firms as a 'threat' or lever, to hold down the rates charged by competing transport systems—the railways and trucking firms—because of the implied c a p a b i l i t y of s h i f t i n g to water transport i n the event of 'unreasonable' transporta-5 t i o n costs. Though coastal and inland domestic waterway t r a f f i c has continued to grow i n volume, most new industry i s found 10 at the secondary and t e r t i a r y l e v e l s , the manufacturing and service industries. These are not as dependent on waterway locations as the primary industries which must move large quantities of cheap, bulk materials, and there-fore one might expect, judging from the viewpoint of demonstrable need, that there w i l l be reduced i n d u s t r i a l pressure on the waterfront from those i n d u s t r i a l groups most l i k e l y to require i t fo r transportation purposes. To achieve t h i s purpose, costly public works projects may be required to create harbours and shipping channels of adequate width and depth. Annual dredging to maintain channels i s often required. Dams, locks, and other control works are b u i l t to maintain water l e v e l s . At the same time 's p o i l ' materials gleaned from dredging may be used to create new land i n shallow water areas, or gravel and sand may be removed for construction purposes. The combined effects may have repercussions f o r other uses and fo r the ecology of the whole water body when carried out on an extensive scale. Various public transportation f a c i l i t i e s are located along the shoreline from time to time. The most important of these are roads and railways, f o r they can f a c i l i t a t e or hinder effective use of shoreline, foreshore and water. Railways are t i g h t l y r e s t r i c t e d by the gradients which 11 they can mount. They frequently follow watercourses, especially where the t e r r a i n i s rough, because the least r i s e and f a l l i s then encountered over the length of track. In early days they followed waterways to be i n a position to capture as much of the existing and future trade (since economic a c t i v i t y was at f i r s t centered on the waterways) 7 as possible. In i n d u s t r i a l and port areas railways backing up the shoreline a c t i v i t i e s are c r i t i c a l l y important, but i n other instances r a i l l i n e s may occupy v i r t u a l l y a l l the usable shoreline, sometimes even where they need not do so. When roads and r a i l l i n e s are b u i l t after s e t t l e -ment has taken place they are often located on the water-front i f i t i s easier or cheaper f o r the constructing agency to obtain the necessary lands. It then may become a matter of design whether these aid access or whether they remove the waterfront from public view, access and use. In some notable cases, rough topography has produced outstanding scenic t r a v e l routes through areas that other-wise would be of limited economic and public value. U t i l i t y . This group of waterfront occupiers includes those industries, commercial establishments or public u t i l i t i e s which use the water i t s e l f f o r one or more of a number of purposes or f o r waste disposal. These 12 purposes include domestic water supply, water used i n i n d u s t r i a l processes, cooling water, and water used i n d i l u t i n g and discharging l i q u i d and suspended wastes back into the parent water body. Domestic sewage i s frequently disposed of i n th i s fashion, with the receiving water body Q becoming the 'treatment plant'. Diversion of water f o r i r r i g a t i o n may also affect the waterfront and i t s potential, though agriculture normally wouldn't be calle d a waterfront use. I f the volume taken i s large r e l a t i v e to the supply, or i f some of the water i s returned carrying high loads of s i l t and/or dissolved solids and pesticides, high treatment costs f o r the other water users are created. We now have the example of Lake Erie to demonstrate most c l e a r l y how the combination of these uses as popula-ti o n concentrations increase can completely change the character of even a huge lake. Thus i t i s easy to under-stand the changes wrought on smaller water bodies and streams with r e l a t i v e l y more dense development along the 'waterfront 1. Some s c i e n t i s t s now question whether the process of eutrophication of Lake Erie can be reversed, whatever the resources put into sewage treatment plants and the lim i t a t i o n s placed on water diversions f o r domestic, i n d u s t r i a l and water transport purposes.^ 13 Recreation. Many public and private waterfront users are attracted to the waterfront by the recreational or the aesthetic values i t provides. Owners of commercial operations f i n d that the waterfront and the a c t i v i t i e s associated with i t provide a firm basis on which to build businesses dependent on both t o u r i s t s and residents. Hotels, marinas, and restaurants are some of the f a c i l i t i e s that f a l l into t h i s category. Then, too, public i n s t i t u -tions may seek attractive waterfront s i t e s simply f o r the variety i n landscape offered even though physical use of the water area may be non-existent. Over the years many miles of shoreline have been occupied by people for private residences and summer cottages. Beach clubs and yacht clubs have sought such s i t e s . Increasingly, as per capita income and leisure time have expanded, luxury r e s i d e n t i a l areas are being created, with each l o t fronting on a waterway that opens on adjacent boating and f i s h i n g waters. Most of these developments have been developed i n marine bays i n F l o r i d a and C a l i f o r n i a , however, there have also been a number of 'aquatic communi-t i e s ' developed on fresh water. Public parks, of course, come to mind with respect to t h i s group. It i s clear that outdoor recreation f o r adults i s heavily concentrated i n water-based a c t i v i t i e s ; 14 parks which include some ki n d of water area or waterfront w i t h i n t h e i r boundaries are the most valued and g e n e r a l l y o f f e r the widest v a r i e t y i n a c t i v i t i e s . The Outdoor Recreation Resources Review Commission (ORRRC) studies c l e a r l y showed the r e l a t i v e dominance of swimming, boating and f i s h i n g amongst the most popular outdoor a c t i v i t i e s . D r i v i n g and walking f o r pleasure, the two most popular but poorly defined outdoor r e c r e a t i o n s , c l e a r l y i nvolve the 'use' of waterfront to a great extent."^ I f and as the megalopolis becomes the dominant urban form the concentration of people r e l a t i v e to a l l l i m i t e d resources, i n c l u d i n g waterfront, w i l l r e s u l t i n greater s t r e s s on and concern f o r e f f i c i e n t , s u i t a b l e use of resources so that as much as p o s s i b l e i s reserved f o r necessary p u b l i c a c t i v i t i e s . Purchase of shoreline by i n d i v i d u a l s has l e d t o i n c r e a s i n g concern that a l l choice 12 shoreline w i l l be pre-empted. Por t h i s reason, the Province of B r i t i s h Columbia reserved a l l remaining Crown-owned s a l t and freshwater s h o r e l i n e and w i l l now only permit 21 year leases of sho r e l i n e judged as not needed f o r p u b l i c use. Conservation. Perhaps b e l a t e d l y , i t i s being recog-nized that marshes and t i d a l f l a t s are not simply wastelands t o be dredged, dyked, drained, and developed at the f i r s t 15 opportunity. Many of these areas have l i t t l e access and may even be quite unattractive i n t h e i r natural state. Yet t h e i r annual production of plants and animals can be 13 equal to the productivity of the most f e r t i l e farmland. In fact, some such areas may be uninhabitable by humans, but they are not wastelands. Many species of f i s h , s h e l l -f i s h , birds and mammals l i v e as residents i n these areas. But many more species are seasonally dependent on the plants and animal l i f e tidelands produce. Huge stocks of migratory f i s h and birds are dependent on them according to the season, and without them would p e r i s h . 1 ^ The conclusion that these waterfront areas are use-less i s wrong. D i r e c t l y and i n d i r e c t l y they support commercial f i s h e r i e s and s h e l l f i s h industries, they provide outdoor recreation a c t i v i t i e s such as nature study and hunting and play an important role i n international conservation e f f o r t s . Thus, there i s a case f o r retaining large foreshore areas i n a natural, or c a r e f u l l y improved condition, that w i l l preserve and enhance s p e c i f i c ecolo-g i c a l systems that alone are capable of supporting a wide range of f l o r a and fauna. Extent of the Waterfront Land Resources Crude estimates of the t o t a l waterfront supply, measured i n miles of shoreline, are available. The. United 16 States Coast and Geodetic Survey computes a t o t a l of 12,000 miles of 'general shoreline 1 around the sea coast of the United States, including Alaska and Hawaii. 'General shoreline' i s defined as the generalized outline of the coast, including indentations to a point where they narrow IS to 34.8 miles. Obviously, many important waterfront areas are not measured i n such a t a l l y ; San Francisco Bay, Puget Sound, Chesapeake Bay and many other areas are passed by. The Canadian sea coast i s given as approximately 59,670 miles i n t o t a l length; 14,790 miles on the Atl a n t i c , 39,320 miles i n the Arctic Archipelago, and 5,560 miles on the P a c i f i c Coast. The number of miles of freshwater waterfrontage must be enormous though apparently not calcu-lated. As must be evident already these figures are r e a l l y meaningless. Clearly, Antarctica has thousands of miles of waterfront but what are i t s q u a l i t i e s and i s i t accessible? The many miles of American shoreline l y i n g undeveloped on the Gulf of Mexico does not help the millions of people who surge to overcrowded beach and cottage areas along the New York and New Jersey Coasts. In B r i t i s h Columbia i t i s estimated that there are about 15,000 miles of actual saltwater shoreline i f a l l 17 17 the bays and i n l e t s are included, but greatest pressure and competition f o r waterfront centres on l e s s than 200 miles of t h i s s h o r e l i n e surrounding M e t r o p o l i t a n Vancouver. This one area houses over f i f t y per cent of the province's population and, as w i l l be seen l a t e r , has warm, sheltered waterfront that i s v i r t u a l l y u n a vailable elsewhere along the remaining p r o v i n c i a l c o a s t l i n e . The remaining s a l t s h o r e l i n e i s mostly i n a c c e s s i b l e except by plane or boat; i t i s often steep, f o r e s t e d , and rocky. I t has been and . w i l l remain f o r the most part the preserve of the logger, commercial fisherman, sports fisherman and pleasure boater. Thus concern must focus on the a v a i l a b i l i t y and s u i t a b i l i t y of the waterfront having economic and s o c i a l values because of i t s a c c e s s i b i l i t y t o population, and p a r t i c u l a r l y to the growing urban concentrations. The q u a l i t y of waterfront as noted e a r l i e r i s tremendously v a r i a b l e and no u s e f u l purpose i s served by attempts at c l a s s i f i c a t i o n here, beyond perhaps no t i n g the great d i f f e r e n c e s between s a l t and f r e s h waterfront and the v a r i a b i l i t y ^ of the three waterfront elements i n d i f f e r e n t s i t u a t i o n s . What should be noted however i s that i n almost every case w i t h i n an urban region, a l l waterfront has or p o t e n t i a l l y has a number of uses, some complementary, some c o n f l i c t i n g . As our population and t a s t e s continue 18 to grow and change, the emphasis i n water-oriented uses may change. A long range view i s needed. Interrelationship of waterfront elements. It i s clear that changes to one part of the waterfront often induce changes elsewhere. Por example, dredging of shallow areas can cause shoreline to recede as the shore bottom again seeks i t s natural angle of repose. Land f i l l schemes may create obstacles to normal s h i f t i n g of s i l t and sand so that a once usable bay f i l l s i n and requires 1 o annual dredging. The water generally undergoes some form of movement whether induced by currents, tides, or wind. Thus debris and p o l l u t i n g materials are carried throughout the adjacent waters and shoreline u n t i l f i n a l l y dispersed; unless, of course, the materials are so abundant that dispersal and d i l u t i o n i s not s u f f i c i e n t to remove them from notice. Intensive shoreline development severely l i m i t s access to and use of the other waterfront elements. At the same time, while b i o l o g i c a l changes are usually less noticeable than the intensity of shore development, a l t e r a -tions i n water temperature, chemical q u a l i t i e s , or t u r b i d i t y , or the destruction of productive shallows or shoreline cover can wipe out the habitat for a species very suddenly, with i t s replacement only at best a long term 19 e v e n t u a l i t y . The e f f e c t s of such changes may then spread as other b i o l o g i c a l resources dependent on the changed or l o s t elements or species have v a r y i n g a b i l i t y t o adapt and may be l o s t . The San F r a n c i s c o Bay Area P r e l i m i n a r y  Regional P l a n notes that "intense u r b a n i z a t i o n imposes complicated and interdependent demands on an exceedingly complex resource system f u l l of c r i t i c a l r e l a t i o n s h i p s . Often r e s u l t s are u n a n t i c i p a t e d and u s u a l l y undesirable"." 1"^ These close p h y s i c a l , b i o l o g i c a l , and therefore economic, i n t e r r e l a t i o n s h i p s are one reason why s p e c i a l care must be taken i n the use of the waterfront and the development p a t t e r n created. M u l t i p l e use p o t e n t i a l . The waterfront resource as seen i n the previous d i s c u s s i o n can serve many purposes. I t i s t r u l y three dimensional, p r o v i d i n g room f o r uses that may or may not involve s t r u c t u r e s on s h o r e l i n e , space f o r t e r r e s t r i a l and aquatic l i f e and space f o r man's a c t i v i t i e s i n , on, and above the surfaces of the water and foreshore areas. Waterfront i s an important element i n the supply of water f o r domestic and i n d u s t r i a l purposes and, with care, i t can serve as an o u t l e t f o r waste m a t e r i a l s , support t r a n s p o r t a t i o n of goods and people, and provide r e c r e a t i o n i n and on the water, t i d a l f l a t s , and s h o r e l i n e . Many of these a c t i v i t i e s can be c a r r i e d on j o i n t l y . 20 The extent of joint use that can be supported obviously depends on the q u a l i t i e s of a p a r t i c u l a r water-front area and the nature of the uses to be accommodated. Some a c t i v i t y i s so intensive or imposes such severe l i m i t a t i o n s on other a c t i v i t i e s that exclusive use of i t s p a r t i c u l a r portion becomes necessary. A large, busy port would be an example. On the other hand joint use may be possible, simul-taneously within the same space, on adjacent s i t e s within the larger waterfront area, or at diff e r e n t periods of the year at the same or adjacent locations. The fact that the waterfront elements are clos e l y interrelated and susceptible to physical and chemical changes means that interactions between one use and another occur, unseen perhaps, even though they are separated i n time. This imposes l i m i t s and r e s p o n s i b i l i t i e s on participants i n each a c t i v i t y i f a l l the waterfront needs of the community are to be met e f f i c i e n t l y and completely so f a r as possible within the resources available. Perhaps too often i n the past, single interests have captured control of the waterfront and through lack of care, understanding, or narrowness of view they have destroyed the value of the waterfront f o r other purposes. Industrial waste discharges, f o r example, have i n some cases polluted 2 1 adjoining waters and shoreline to the extent that other a c t i v i t i e s are discouraged or made impossible. History of Waterfront Development i n North America A very b r i e f review of some of the history of water-front use and development helps cast l i g h t on the use and misuse of the waterfront resource and the factors that have influenced these. Early settlement. The American canal experience i n early settlement and development of the United States offers insights into past and current uses of waterfront. Goodrich maintains that at the beginning of the nineteenth century the American Republic was becoming impatient with the bar r i e r created by the Alleghany and Appalachian Mountains. The Spanish s t i l l controlled the mouth of the M i s s i s s i p p i River and the French dominated the fur trade i n the Mis s i s -s i p p i basin because of t h e i r r e l a t i v e l y easy access to the i n t e r i o r of the continent by way of the St. Lawrence River and the Great Lakes. There were land and natural resources i n the West to be tapped; the area to establish the f i r s t r e l i a b l e trade route tapping these would to a signif i c a n t extent dominate the future patterns of trade and economic growth. Up to t h i s point turnpikes—paved wagon roads—had 22 been the sole direct route to the i n t e r i o r , with the sea route from the Eastern Seaboard to the Mississippi's mouth and the r i v e r i t s e l f comprising a circuitous, lengthy and poor alternative. Some Americans were convinced that i f the great canal systems of England and Europe could be duplicated i n t h e i r country "a vast wilderness would r i s e 20 into instant c u l t i v a t i o n " . After the f a i l u r e of a canal project to jo i n the Hudson and Mohawk Rivers to Lake Ontario, New York State gave substantial support to a plan to jo i n these same riv e r s with Lake E r i e . This scheme found the only p r a c t i -cable gap between Maine and F l o r i d a f o r a continuous water-way to the i n t e r i o r . Thus, the Erie Canal was designed and b u i l t . The Canal was 353 miles long, contained 77 locks and was only four feet deep, but i t s mule drawn barge service was a great success. It became one of the few major canals ever to repay a l l construction, operating and maintenance costs through direct l e v i e s on users. I t s success made i t the example par excellence f o r every canal 21 enthusiast i n the United States. Numerous other waterways were constructed to jo i n the I l l i n o i s River and the Ohio River and i t s t r i b u t a r i e s with the Great Lakes and the Erie Canal. Ten years after i t s completion i n 1825 the Erie carried 54,000 tons of 23 f r e i g h t . By 1860 t r a f f i c had grown to 1 ,900,000 tons, 60 per cent of the t o t a l freight carried between the seaboard and the i n t e r i o r , and by 1890 the t o t a l volume moved was 4,500,000 t o n s . 2 2 Canal building and usage f e l l u n t i l boom conditions about 1907 caused l o c a l shortages of railway transport and once again inflamed extreme optimism about future growth. The public and many important leaders seemed convinced that the railways could never accommodate the growth that was to come. This led to the beginning of substantial federal government involvement i n inland waterways which by then were considered "public highways" and were used with-27) out charge. J Benefits of the early waterways. There i s widespread agreement that many of the early canals were both necessary and successful economically though few recovered through t o l l s the direct costs of construction, operation and maintenance. Even H. Gr. Moulton, who i n 1926 made a slashing attack on the resurgence of demands fo r public construction of waterways, f r e e l y conceded t h i s . He stated that: "The construction of the Erie Canal through the State of New York from the Hudson River to Lake Er i e i n 1825 led to a period of remarkable pros-pe r i t y along the entire route, and i t undoubtedly made New York City the Metropolis of America. 24 The opening up of the Ohio canals shortly after-wards i n a similar way gave a great impetus to industry west of the Alleghanies. It secured a wider market and better prices f o r commodities. Land advanced rapidly i n value, work became p l e n t i f u l , and wages greatly increased. Charges by wagon and stage were prohibitive, except f o r l o c a l t r a f f i c , and a region without waterway connection was u t t e r l y unable to carry on trade with the rest of the world. Upon such sections the canals conferred unnumbered benefits."24 The early boom i n waterway improvement took place i n an underdeveloped, underpopulated country i n terms of the resources available. In a sense the I n t e r i o r of the United States did not have a viable transportation system at a l l , so great was the difference between the actual service capacity of. the wagon roads and that required for dependable, low-cost movement of bulk goods i n order that the enormous productive capacity be realized. With wagon roads alone there was l i t t l e chance of the growth of economies of scale 25 that would permit standards of l i v i n g to r i s e . J Out of t h i s experience, then, grew a f a i t h i n water-way development that has persisted i n spite of r a d i c a l l y changed conditions of transportation and development. There appears to be a conviction, perhaps p a r t l y due to t h i s , that a l l waterfront must eventually be i n d u s t r i a l l y used. However, waterways are i n a much different competi-tive framework today. Highly developed r a i l r o a d and pipe-l i n e networks often are more f l e x i b l e i n location and 25 26 s p e c i a l i z a t i o n of services. The railways and trucking l i n e s are able to compete f o r the dry and wet bulk goods, the mainstays of canal transport, as well as to capture low volume high value shipments that require speed, protec-tion, and service that i s not affected by drought or freezing. For high value goods time costs money, and sales may depend on tight delivery schedules. Inventories may be expensive and d i f f i c u l t to maintain, therefore i t i s often more economic, overall, to use a more costly trans-port f a c i l i t y i n exchange f o r gains i n speed and dependabi-l i t y . Related to the above, of course, i s the fact that North America has f i l l e d i n ; industry and population are not concentrated d i r e c t l y along navigable waterways to the same degree as i n the past. Much of a nation's commerce does not have direct access to water transport nor does i t need i t . Thus, the presumption that a l l waterfront w i l l eventually be required f o r transport and industry cannot be accepted as a general rule. Public attitudes. Besides t h i s conviction that economic growth w i l l follow i n d u s t r i a l waterway development without l i m i t , Bestor suggests that other attitudes of Americans (and probably Canadians, too) has f a c i l i t a t e d what he considers needless waste and mindless exploitation 26 of the waterfront. He contends that: "Unlimited abundance has been the history of America since i t was f i r s t s e t tled. There was always more than enough of everything. We have always been proud of our r i c h natural resources, and whether we r e a l i z e i t or not, have always taken credit f o r i t , as though we created i t i n the f i r s t place. "This i s why we were tolerant of, or in d i f f e r e n t to, p r ofligate waste. What difference does i t make i f Joe's dye factory i s poisoning the Hiawatha River? What the h e l l , there are plenty more r i v e r s . This attitude, s t i l l an unconscious part of our thinking, makes us r e s i s t the concept of conservation. We hate to admit that the era of unlimited abundance i s over. "27 F i n a l l y , the t r a d i t i o n that waterways be considered public highways apparently led to the practice that no user charges be imposed on users of waterways, or that, at best, only operating and maintenance costs be recovered through t o l l s . Thus, the c a p i t a l costs of waterway development have come from general tax revenues; and t h i s 'subsidy' of waterway users and occupiers removed a possible economic control on speculative or frivolous use of waterfront land. Purpose and Scope of the Thesis It i s not within the scope of t h i s paper to i n v e s t i -gate thoroughly whether regions having waterfront resources are s t r i v i n g to obtain f u l l value from them. However, br i e f perusal of a number of zoning by-laws for example, shows that zoning for i n d u s t r i a l use of the waterfront does not 27 attempt, with few exceptions, to promote shoreline 28 occupancy by fir m s that genuinely require i t . Thus slaughter houses and f u r n i t u r e f a c t o r i e s , truck t e r m i n a l s , and new car storage l o t s can be seen occupying even deep 29 sea waterfront s i t e s i n some instances. The p r o p r i e t o r s of a l o c a l i n d u s t r i a l park have permitted a new tenant to b u i l d h i s plant on a deep sea s i t e , created and maintained through government dredging 30 operations, simply t o i n s t a l l a water i n t a k e . I t would seem that the owners of t h i s long-term development could have provided the necessary intake without l o s i n g the p o t e n t i a l deep water s i t e which was made p o s s i b l e at p u b l i c expense. Perhaps another s i g n of f a i l u r e to take f u l l e s t advantage of waterfront values i s given by the tendency t o maintain i n d u s t r i a l zoning even when changing technology, t r a n s p o r t a t i o n modes, or markets have l e f t obsolete, under-used s t r u c t u r e s i n hig h - p r i c e d waterfront areas. T y p i c a l l y these areas are u n s i g h t l y and often p o l l u t e d , but i n e r t i a r e s i s t s f a r reaching redevelopment that could reverse the 31 f a l l i n g p r o d u c t i v i t y of such areas. Summarizing the points made above and i n e a r l i e r s e c tions i t i s suggested t h a t : a. Waterfront land can serve many u s e f u l purposes. 28 b. There i s a close b i o l o g i c a l and p h y s i c a l i n t e r r e l a t i o n s h i p between a l l i t s p a r t s . c. I t has valuable p o t e n t i a l f o r m u l t i p l e uses. d. Past use has been c a r e l e s s , and prevalent a t t i t u d e s encourage wasteful use. e. Current development and zoning does not f u l l y acknowledge the diverse p o t e n t i a l values of waterfront. f . Waterfront of good q u a l i t y and a c c e s s i b i l i t y i s a t r u l y l i m i t e d resource under s u b s t a n t i a l pressure from many types of users. The foregoing d i s c u s s i o n and conclusions lead t o two f u r t h e r p r o p o s i t i o n s r e l a t e d s p e c i f i c a l l y t o the Urban and Regional Planning f i e l d . The f i r s t i s that the water-f r o n t must be accorded considerable importance i n planning a community or region. The second i s that a l l o c a t i o n of waterfront resources has not been handled w e l l . L i c h f i e l d and Mao have both recommended that B e n e f i t -Cost A n a l y s i s be used i n planning s i t u a t i o n s . L i c h f i e l d proposes that a "welfare t e s t " i s needed to determine the incidence of the e f f e c t s , b e n e f i t s , and costs of develop-ment programmes which, he maintains, are proposed w i t h i n the framework of a set of vague community goals and are based on i n t u i t i v e value judgements. Benefit-Cost A n a l y s i s he argued, would provide a s u i t a b l e method f o r t r a c i n g 29 programme and project implications and to aid i n choosing 3 2 between alternatives. Mao suggested a similar but more limi t e d use of such analysis i n urban renewal. His major purpose seems to be to is o l a t e the intangible s o c i a l and psychological benefits and costs of individual redevelop-ment programmes. Then the weight that must be attributed to them i n order to j u s t i f y otherwise unfavourable projects (judged on the basis of money-valued benefits and costs alone) can be determined. This analysis, i f completed f o r a number of projects, would also y i e l d information to help select from alternatives. The p a r t i c u l a r purpose of t h i s paper, therefore, i s to investigate the usefulness of Benefit-Cost Analysis as a technique f o r allocating waterfront amongst competing uses. Benefit-Cost Analysis was o r i g i n a l l y developed i n the United States to aid i n choosing amongst water resource development projects and programmes when i t became clear that the l i s t of proposed, te c h n i c a l l y feasible develop-ments f a r out-reached the funds available (assuming continu-ation of current le v e l s of investment) even the following twenty-five years, and that many past developments had not 34 r e a l l y j u s t i f i e d t h e i r costs. This thesis contends that important decision problems occur i n long range planning f o r the best use of the water-30 front, i n l i g h t of competing demands on i t . The following hypothesis i s to be investigated: that Benefit-Cost Analysis i s a suitable and s u f f i c i e n t technique f o r all o c a t i o n of waterfront land to competing uses. Using t h i s hypothesis as a starting point, the technique w i l l be examined i n order to come to some conclusion concerning i t s v a l i d i t y f or allocation, and to achieve an understanding as to what conditions, i f any, govern i t s v a l i d i t y and a p p l i c a b i l i t y . The procedure w i l l be as follows, with li m i t a t i o n s as stated. Chapter I demonstrated the importance of water-front and the need for better waterfront u t i l i z a t i o n . Chapter II outlines the theory and procedure f o r applying Benefit-Cost Analysis to resource a l l o c a t i o n decisions. Some problems, theoretical and p r a c t i c a l , are discussed, but to avoid reviewing a l l of the very extensive theoretical arguments i n the f i e l d , one method which i s frequently used i n water resource development questions i s outlined. Chapter III comprises an investigation of a s p e c i f i c waterfront area facing a choice between development possi-b i l i t i e s . To th i s the Benefit-Cost approach as adopted i s applied insofar as possible, using only rough estimates of costs and benefits as available, and including many assumptions. Chapter IV states conclusions as to the 31 a p p l i c a b i l i t y of Benefit-Cost Analysis i n waterfront a l l o c a t i o n and suggests a theoret i c a l framework and role f o r Benefit-Cost Analysis. Notes: "'"Edward Higbee, The Squeeze: C i t i e s Without Space, Toronto, George J. McLeod, 1965, pp. 255-265. p This a n a l y t i c a l breakdown of waterfront into elements i s not applicable to small streams, lakes, and bays i n that use of one element e f f e c t i v e l y governs the use of a l l three. ^United States, Department of Commerce, The Economic  Impact of United States Ocean Ports, Maritime Administra-tion, Washington, Government Prin t i n g Office, 1966, p. 5-^D. M. Solzman, Waterway Industrial Sites: A Chicago Case Study, Chicago, University of I l l i n o i s , 1966, (Department of Geography Research Paper, No. 107), p. 30. 5I_bid., p. 71-73. ^Ibid., p. 64. Lower Mainland Regional Planning Board, Waterfront  Lands Study, New V/estminster, 1967, p. 53, (Unpublished) . ®For example see: Sewerage and Drainage of the  Greater Vancouver Area, B r i t i s h Columbia, Vancouver and D i s t r i c t s Joint Sewerage and Drainage Board, September 1953. ^Howard Paish, "Pollution i n Canada Conference," B. C. Digest, (February, 1967), p. 27. "^Central Okanagan Regional Planning Board, Preliminary Report on Waterway Residential Developments, November, 1965. United States, National Recreation Survey, ORRRC Study Report 19, 1962, pp. 22-29. 1 p A l f r e d Bestor, "The Disappearing Seacoast," Holiday, V o l . 39 ( J u l y 1966), p. 56. 1 ^ P o l l y Redford, "Weeded—Those Vanishing Tidelands, The Reader's Digest, V o l . 91 (October, 1967), p. 119-~^Loc • c i t . " ^ A l f r e d Bestor, op_. c i t . , p. 56. l 6Canada, Canada Year Book 1967, Ottawa, 1967, p.14. 17 'According t o some estimates B r i t i s h Columbia may have up to 15,000 miles of s a l t waterfront, but t h i s depends on how generalized the measure. . C a l i f o r n i a , P r e l i m i n a r y Regional P l a n f o r the San  F r a n c i s c o Bay Region, November, 1966, p. 44. 1 9 I b i d . , p. 41. 20 C a r t e r Goodrich, Canals and American Economic  Development, New York, Columbia U n i v e r s i t y Press, 1961, p. 20. 2 1 I b i d . , p. 43. 2 2 I b i d . , p. 55. "^Edward F. Renshaw, "A Note on the Measurement of the B e n e f i t s from P u b l i c Investment i n Navigation P r o j e c t s , American Economic Review, V o l . 47, (September, 1957) p. 653 24 Harold G. Moulton, Waterways Versus Railways, Boston, Houghton-Mifflin Company, 1926, p. 39-25 Goodrich, op_. c i t . , pp. 221-5-Arthur Maass, Muddy Waters, Cambridge, Harvard U n i v e r s i t y Press, 1951, p. 163. 27 Bestor, ojo. c i t . , p. 65. An exception i s the D i s t r i c t of North Vancouver, B. C , which has a "Waterfront I n d u s t r i a l Zone" reserved f o r " p o r t - o r i e n t e d " . i n d u s t r y . 33 O Q A l l of these have been observed by the writer on deep water s i t e s i n the Port of Vancouver, B. 0. 30 J Annacis Island Industrial Park, Delta, B. C. 31 ' Wisconsin, Department of Resource Development, Waterfront Renewal, Madison, Wisconsin, 1966, p. 6. 32 N. L i c h f i e l d , "Cost-Benefit Analysis i n City Planning," Journal of the American Institute of Planners, Vol. 26 (November 196677~p. 273. 33 James Mao, "E f f i c i e n c y i n Public Urban Renewal Expenditure Through Benefit-Cost Analysis," Journal of  the American Institute of Planners, Vol. 32, (March, 1966), pp. 95-106. 34 Robert H. Haveman, Water Resource Investment and  the Public Interest, Nashville, Vanderbilt University Press, 1965, p. 1. 3 4 I I . BENEFIT-COST ANALYSIS—AN OUTLINE Introduction Any undertaking, project, or programme requires inputs of labour, c a p i t a l , and/or physical resources. People and governments are constantly faced with choosing between objectives and between alternative ways to achieve various objectives, a l l of which demand a share of the limited resources available. Benefit-Cost Analysis i s one of the techniques that has been developed i n the attempt to make the 'best' or most e f f i c i e n t a l l o c a t i o n of resources amongst competing uses and projects. The purpose of t h i s paper i s to investigate the usefulness of t h i s technique i n the alloca t i o n of waterfront resources; t h i s Chapter provides a basis f o r pursuing t h i s purpose. Benefit-Cost Analysis was evolved, p r i n c i p a l l y i n the United States, as an ana l y t i c a l technique to improve the economic e f f i c i e n c y of government. Its use has generally focussed on water resource developments— undertakings i n which the outputs of investments were c o l l e c t i v e goods or services that often could not be given unit prices, f o r which charges could not ea s i l y be collected, or for which public p o l i c y or t r a d i t i o n dictated that 'user charges' not be imposed. Governments have undertaken the provision of such c o l l e c t i v e services where private mono-35 polies might ensue i f a resource were l e f t to private development, or where the costs and benefits of essential resource developments are so great or diffuse that private concerns w i l l not undertake them. 1 More immediate problems than the above also helped speed the search f o r and adoption of standardized proce-dures f o r rating alternative projects. F i r s t l y , i t was clear that the number of project proposals f a r exceeded p the economic resources available to bu i l d them. Moreover, i t was clear that many proposals achieved exactly the same p r i n c i p a l purposes, though the side effects might vary, thus creating a d i f f i c u l t choice problem f o r p o l i t i c i a n s and t h e i r advisers. Thirdly, the question of scale arose; how f a r was i t useful to proceed with development of a resource? It was obvious that beyond a certa i n l e v e l p h y s i c a l l y feasible expansion of the output of a project was not economically j u s t i f i e d . Fourthly, i t was realized that the many vested interests i n i t i a t i n g and supporting different proposals used 'economic arguments' but that there was no procedure common to them a l l , nor were there objective c r i t e r i a f o r judging t h e i r findings.^ S t i l l another incentive to the search f o r objective rating methods lay i n the expanding awareness of the varied potential of r i v e r s i n p a r t i c u l a r . A variable mix of 36 p u r p o s e s — i r r i g a t i o n , navigation, flood control, domestic water supply, e l e c t r i c power generation and r e c r e a t i o n — could be served i n r i v e r basin development, but these purposes co n f l i c t e d i n varying degrees from project to project. F i n a l l y , spectacular f a i l u r e s of some projects to produce the returns that l o c a l supporters had claimed fo r them led to the search for greater e f f i c i e n c y through the development of more r e l i a b l e rating techniques. In summary, i t i s obvious that the costs of building ports, a l t e r i n g r i v e r s , or turning over land or resources fo r development does not permit f u l l - s c a l e experiments with numerous alternatives to test which actions i n the long run w i l l be most b e n e f i c i a l i n terms of the time, e f f o r t , and money they require. Benefit-Cost Analysis attempts to is o l a t e the s i g n i f i c a n t costs and benefits of alternatives over t h e i r l i f e t i m e s and to provide an objec-tive rating c r i t e r i o n . The Theory i n Brief The Guide to Benefit-Cost Analysis states: "The main concern of economic po l i c y should be to maximize human welfare. Obviously, the p r i n c i p a l factors of production—land, labour, and c a p i t a l — c a n be combined i n various ways. Our r e a l objective should be to assemble them i n such a manner as to produce the greatest possible benefit f o r a given act. 37 "Benefit-Cost Analysis can provide a l o g i c a l framework f o r the evaluation of one or more courses of action. It i s also a comprehensive method fo r dealing with a number of factors, some of which may be highly conjectural i n nature. "Various methods of project evaluation have been employed i n the past. The majority, however, have suffered from a common f a u l t ; they have been too limited i n scope. Generally they have not provided a s u f f i c i e n t framework upon which the various benefits and costs involved could be set out i n t h e i r true perspective."5 Clearly, Benefit-Cost Analysis i s intended to be of the widest possible scope: a l l relevant benefits and costs of a l l reasonable courses of action to achieve similar or different objectives are to be measured and included i n the analysis, i n order to achieve a broad public goal of maximum welfare. This somewhat hazy goal becomes clearer when s p e c i f i c programmes or projects are considered; then i t may be possible to stipulate s p e c i f i c objectives to be achieved at least cost, or to aim for the greatest output of usable goods and services f o r a given input of resources. Pew writers claim that the findings of such analysis should exclusively determine the outcome of decision prob-lems upon which they have been brought to bear; rather, the claim i s that i t helps ensure that the 'right' ques-tions are asked and that answers rare structured i n such a way as to provide a means for better, clearer decisions. 38 Of course, t h i s begs the question of just how much weight should be given to the findings. In fact, several propo-nents warn against accepting the Benefit-Cost r a t i o or difference too f a i t h f u l l y ; depending on one's confidence i n the forecasts, the uncertainties and the intangible factors associated with the analysis, and the related s o c i a l and p o l i t i c a l considerations, the emphasis i n choice may be correctly shifted away from the e x p l i c i t finding of the analysis. Nevertheless, agencies such as the United States Corps of Engineers have r e l i e d heavily on Benefit-Cost r a t i o s i n the selection of projects. Often these have barely exceeded a r a t i o of one to one, the absolute cut-off point of economic j u s t i f i c a t i o n for any project or programme. Methodology In the following notes on methodology the practice w i l l be to i l l u s t r a t e points by using as examples the two hypothetical resource all o c a t i o n projects to be developed i n Chapter I I I . These are: ( l ) a port development to f a c i l i t a t e the export from Canada's West Coast of bulk goods such as coal and potash, and (2) a proposed recrea-t i o n and w i l d l i f e conservation development of the same area of shoreline, t i d a l f l a t s , and water. 59 Basic p r i n c i p l e s . Both the Guide to Benefit-Gost 7 Analysis and Proposed Practices for Economic Analysis of  River Basin Projects, the so-called 'Green Book', l i s t e s s e n t i a l l y the same set of fundamental pri n c i p l e s that must be adhered to i f Benefit-Cost Analysis i s to f u l f i l l i t s objective of economic e f f i c i e n c y . A review of these pri n c i p l e s aids explanation of the procedures to be followed l a t e r : 1. Goods and services, or the output of any investment, have value only to the extent that there i s a demand f o r them. Therefore applying a value to the savings that a port development i s capable of producing at f u l l u t i l i z a t i o n i s only acceptable to the extent that i t s capacity, i n fact, w i l l be u t i l i z e d . This i s no more than saying that i t i s wasteful to invest labour, money or resources i n something no one i s going to use. This p r i n c i p l e , i t should be noted, i s not foreign to Planners. A Planner, i n the absence of better informa-tion, must often judge whether the public i n the long-run future, i s going to demand or require some resource. In the absence of absolute knowledge about a l l future requirements he then may suggest as a p o l i c y that a l l potential short-run users of a basic resource demonstrate t h e i r need fo r i t i n some objective fashion. Such an 40 approach i s t a k e n t o h e l p a v o i d the f r i v o l o u s use of r e s o u r c e s or p o s s i b l e i r r e v e r s i b l e damage t o them t h a t would h i n d e r the development of f u t u r e a l t e r n a t i v e uses and reduce the b e n e f i t s t h a t t h e y might c r e a t e . 2. The programme, p r o j e c t , or any s e p a r a b l e element of a p r o j e c t must be the most economic of the v a r i o u s a l t e r n a t i v e means a v a i l a b l e f o r a c h i e v i n g the purposes of t h a t p r o j e c t or programme; t h a t i s , no f e a s i b l e a l t e r n a t i v e must be ca p a b l e of i m p r o v i n g on the q u a n t i t y of b e n e f i t s y i e l d e d r e l a t i v e t o the c o s t s . The c o s t of u n d e r t a k i n g the next b e s t a l t e r n a t i v e e s t a b l i s h e s an upper l i m i t t o the e c o n o m i c a l l y j u s t i f i a b l e i nvestment of l a n d , l a b o u r and c a p i t a l i n the f i r s t s e t of a l t e r n a t i v e s . 3 . A c c o r d i n g t o the Guide, the most e f f i c i e n t use of r e s o u r c e s i s a c h i e v e d when the u s a b l e output of a programme or p r o j e c t i s expanded u n t i l the m a r g i n a l B e n e f i t - C o s t r a t i o approaches the r a t i o of t h e next b e s t p r o j e c t . However, the 'Green Book' appears t o be i n d i s -agreement w i t h t h i s approach; i t emphasizes t h a t "maximiza-t i o n " of net b e n e f i t s i s a fundamental requirement f o r the f o r m u l a t i o n and economic j u s t i f i c a t i o n of p r o j e c t s and programmes. I n i t s view, the p r o j e c t must be expanded t o the p o i n t at which the m a r g i n a l r a t i o of b e n e f i t s t o c o s t s i s one t o one. T h i s statement would appear t o be i n 41 potential c o n f l i c t with the second p r i n c i p l e , which the 'Green Book' also endorses; the l a s t separable increment would i n fact be more costly than some alternative project or project element. On the other hand, i f t h i s increment isn't developed at the time, say creating a dam ten feet higher, then i t may never again be physically feasible or economic within the l i f e of a project. This issue, too, i s a choice which must be faced; a decision must be based on knowledge of the long-range requirements of society. I t i s clear that the writers of the 'Green Book1 have adopted a more cautious approach with respect to the use of resources. In a rapidly growing metropolitan region t h i s l a t t e r view i s more eas i l y endorsed, both on Benefit-Cost grounds and as an i n t u i t i v e value judgement. I f one i s certain that the long run demands of the whole range of waterfront users, for example, w i l l exceed the capacities of the waterfront, then maximization of benefits i n any one project or programme w i l l necessarily be emphasized. Secondly, one of the cost elements i n the Benefit-Cost equation i s the 'opportunity cost' of the resources; that i s , the net benefits of the next best use represent the opportunity that i s s a c r i f i c e d i n the a l l o c a t i o n of a resource to any one or set of purposes.^ To the extent 42 that demand and rare resources combine to increase the value of the waterfront f o r a l l uses, the opportunity cost attributable to any one use of the resource w i l l increase. In these circumstances a Benefit-Cost r a t i o greater than one w i l l be obtained only by maximizing net benefits. 4. The order i n which projects are to be under-taken i s dependent upon t h e i r r e l a t i v e e f f i c i e n c y i n the use of economic resources. The order i s to be determined by the size of the Benefit-Cost r a t i o of each alternative. Benefits. The benefits of a course of action are the sum of the "advantageous effects" i t produces, to whomever they accrue, within the context or setting of the analysis. Common practice i s to distinguish between 'direct benefits' and 'secondary' or 'indirect benefits'. In addition benefits are also classed according to t h e i r ' t a n g i b i l i t y ' and measurability. 1. Direct benefits are those which accrue to the users of the output of a project or programme. Theoretically, they are equal to the t o t a l amount that these consumers would be w i l l i n g to pay f o r them. Where the output has a market value, such as the rates charged for e l e c t r i c power, the price i s taken as the measure of v a l u e . B u t , as noted e a r l i e r , many outputs of govern-ment programmes are c o l l e c t i v e goods or services for which 43 user fees are not or can not be set. Direct benefits of recreation investments are a t y p i c a l example of such bene-f i t s . Moreover prices are r e l i a b l e only to the extent that consumers are f u l l y aware of the value of the bene-f i t s . 1 " 1 " A further problem i s that the value of benefits 12 may exceed the a b i l i t y of the individual to pay f o r them, as might be the case i n welfare programmes; i n such situations the 'willingness to pay' c r i t e r i o n breaks down as an acciirate measure of value. Thus the use of prices to evaluate benefits must be undertaken with great caution. "Shadow prices are sometimes devised i n order to evaluate c o l l e c t i v e benefits; thus, " t h e i r values may i n some cases be derived or estimated i n d i r e c t l y from prices established i n the market f o r similar or analogous effects, or may be derived from the most economical cost of pro-13 ducing similar effects by alternative means." At the very best these methods provide only rough estimates since two situations are never pe r f e c t l y p a r a l l e l , and the prob-lems indicated i n the preceding paragraph may apply here also. 2. Secondary benefits probably produce more disagreement than any other class of benefits. They result from economic a c t i v i t y induced by a project. How-ever, there are many dangers of double-counting and some 44 writers recommend that they not be considered at a l l as a part of the Benefit-Cost r a t i o , t h o u g h current govern-ment practice, as indicated by the 'Green Book', does not accept t h i s view. An over-simplified measure i s to consider any net increase i n national income attributable to the project as the measure of secondary benefit. However, McKean points out, many factors influence income changes at the national or p r o v i n c i a l l e v e l s and i t i s therefore d i f f i c u l t to i s o l a t e project e f f e c t s . Moreover, he f e e l s the proce-dure leads to contradictions such as counting the increased incomes of project construction workers as a benefit when 15 the cost of labour i s also counted as a project cost. J Obviously, such income can't be both a cost and a benefit. The problem of secondary benefits i s most ea s i l y handled when: a. long-term unemployment i s predicted i n the sectors from which labour w i l l be drawn fo r the project-induced a c t i v i t i e s . In t h i s case society s a c r i f i c e s no -i c output when t h i s labour i s u t i l i z e d i n the new project. Net income gains can properly be counted as a benefit. The same treatment i s applied to other under-utilized factors of production. In many cases i t i s d i f f i c u l t to estimate what use of resources would have ensued i n the 45 absence of a project, f o r the project i t s e l f may affect the rate of a c t i v i t y i n other sectors and regions. b. the choice i s between alternatives of similar scale and purpose. Then the induced secondary benefits are expected to be r e l a t i v e l y similar and, there-17 fore, can be omitted from the analysis. c. i t i s assumed that the same l e v e l of investment w i l l occur with or without the p a r t i c u l a r pro-ject, then r e l a t i v e l y similar increases i n net national income w i l l occur (though t h e i r incidence may vary). Within a narrower viewpoint, however, l o c a l increases i n net income with a given project may be of primary impor-tance, even though from a broader point of view they are considered to be simply transfers of income from outside 1 ft to within the l o c a l i t y . 3. Intangible benefits are those which are not priced i n a market and f o r which no acceptable shadow values can be determined. They can be either direct or secondary to the project. Aesthetic, conservation, and many recreation benefits are examples. These may suffer the additional problem of being unmeasurable i n any kind of physical unit, such as, f o r example, the supposed psychic benefits of recreation. Evaluation then becomes i n at best a matter of enlightened value judgements. 46 McKean argues that to attempt to apply money values to a l l intangibles i s "at best not wholly s a t i s f y i n g , and i s at worst subject to serious abuse". He gives a most extreme example i n the attempt to define a price f o r saving a human l i f e , "by consulting ( l ) the implications of past decisions, (2) the cost of saving a l i f e by the cheapest alternative method, (3) the average court award, or l e g a l compensation, fo r accidental death". His recom-mendation i s that i n the absence of reasonable 1 shadow prices', clear description of the intangibles and measure-ment, i f possible, i n non-monetary units i s useful. This provides a basis f o r weighting them i f they are to influence decisions i n a d i r e c t i o n not indicated by the 20 r a t i o of tangible benefits to tangible costs. Costs. The economic costs of a project or programme are equal to the benefits foregone when goods and services are diverted from alternative uses. These "opportunity costs" are r e a l only i f alternative uses for c a p i t a l , labour, and resources exist. Costs are generally repre-sented by the prices charged f o r the use of resources; but, to repeat, i f they would be otherwise unemployed without the project then the prices charged are not considered a r e a l economic cost to society. Thus, fo r 47 example, the Area Redevelopment Act permits United States Agencies to deduct a portion of labour costs from the cost side of the Benefit-Cost analysis i f r e l i e f of chronic 21 unemployment or underemployment can be demonstrated. Costs, as with benefits, are s p l i t into 'direct' and 'secondary' categories and again the problem of handling intangibles arises. 1. The direct costs of projects or programmes are those incurred d i r e c t l y i n the construction, operation, and maintenance of various works or i n adopting and following a p o l i c y alternative. 'Sunk costs' of f a c i l i t i e s which are i n existence and which are to be incorporated into a new project are not part of project cost; only the net benefits foregone by incorporating them into the new 22 f a c i l i t i e s are properly included. Closely a l l i e d with the direct costs are the 'associated' costs which are incurred by the consumers of project outputs i n order to r e a l i z e the f u l l value of the 23 project's potential benefits. Thus, i f a company must undertake a railway extension i n order to use a port f a c i -l i t y , t h i s cost must be weighed against the port benefits. 2. Secondary costs are those incurred i n the r e a l i z a t i o n of secondary benefits. The rules f o r handling secondary benefits apply also to costs. Sometimes so-48 calle d 'spillover' effects are considered as secondary-c o s t s — f o r example, i f downstream p o l l u t i o n conditions are aggravated when a dam i s b u i l t . However, since these are created d i r e c t l y by the project they should be counted as direct costs. 3. Direct and secondary costs may be intangible. Thus damage to aesthetic or so c i a l values may be real but impossible to quantify and evaluate. They are handled i n the same ways as suggested f o r intangible benefits. The evaluation context. Water resource develop-ments i n the United States have been undertaken mainly by federal government agencies. As a result, i t has been customary i n the development of Benefit-Cost Analysis to take a national point of view. Other points of view are possible, however, and changes i n viewpoint are c r i t i c a l i n decisions as to which benefits and costs are relevant to the analysis. In a national context, f o r example, a new port f a c i l i t y that simply draws t r a f f i c that would otherwise t r a v e l v i a existing ports at equal cost would be considered a dupli-24 cation of f a c i l i t i e s and productive of no new benefits. From a p r o v i n c i a l or regional viewpoint, a different conclusion might be reached as new investment and jobs are created l o c a l l y . Furthermore, i f a, l o c a l i t y i s involved 49 i n works f o r which i t i s a lone f i n a n c i a l l y r e s p o n s i b l e , i t i s u n l i k e l y to maximize the b e n e f i t s tha t are p h y s i c a l l y f e a s i b l e i f these i n c r e m e n t a l b e n e f i t s occur o u t s i d e i t s j u r i s d i c t i o n . Secondary b e n e f i t s are p a r t i c u l a r l y dependent on v iewpo in t s i n c e they tend t o be removed f rom the l o c a t i o n of the p r o j e c t ; i n s t e a d , they are c r e a t e d as the e f f e c t s of a p r o j e c t spread through the economy. As the context i s broadened i t i s i n c r e a s i n g l y l i k e l y t h a t such b e n e f i t s w i l l be seen on ly as t r a n s f e r s from other a r e a s . A d e c i s i o n about the p o i n t o f v iew must come f i r s t , t h e r e f o r e , be fo re p r o c e e d i n g wi th the a n a l y s i s . On i t h inges the a n a l y s t ' s c o n c l u s i o n s r e g a r d i n g t r a n s f e r s , d u p l i c a t i o n , p r o j e c t s c a l e and, f i n a l l y , the B e n e f i t - C o s t r a t i n g . Cho ice of a l t e r n a t i v e s . C l e a r l y , the a p p l i c a t i o n of B e n e f i t - C o s t a n a l y s i s t e c h n i q u e s cannot occur b e f o r e there are t e c h n i c a l l y f e a s i b l e p r o p o s a l s t o be a n a l y z e d . Where and how do these a r i s e and are they the complete set of p o s s i b l e s o l u t i o n s t o some expressed need or r e q u i r e -ment? The l a t t e r i s a q u e s t i o n t h a t i s o f t e n posed but l i t t l e e x p l a i n e d i n the l i t e r a t u r e . P r o b a b l y t h i s i s i n p a r t a r e s u l t of the way i n which B e n e f i t - C o s t procedure 50 evolved i n the United States. In fact, i t was preceded by a backlog of r i v e r and harbour development schemes— proposed by government agencies, congressmen, and businessmen—that has never been eliminated. Thus, p o l i -t i c a l and economic s e l f - i n t e r e s t has always provided a surplus of te c h n i c a l l y feasible projects i n the water 25 resource f i e l d i n the United States. However, alternatives must be considered at several l e v e l s . Not only must there be a choice between develop-ment of, say, one harbour versus another, but within a p a r t i c u l a r project the selection of individual f a c i l i t i e s , the a l l o c a t i o n of project output amongst competing users, and the order of construction and scale of f a c i l i t i e s must be determined. An important question i s whether at the l e v e l of long range planning, where general needs are i d e n t i f i e d and long term requirements are forecast but where s p e c i f i c development proposals are lacking, there can be any r e a l i s t i c application of Benefit-Cost analysis. Conversely, i t i s proper to ask whether long range planning can be considered r e a l i s t i c without t h i s kind of aid to f u l l understanding of l i k e l y values of long range development p o l i c i e s and programmes. At any rate, analysts and governments have become 51 increasingly aware that to achieve a t r u l y e f f i c i e n t result they must be constantly sensitive to new alterna-tives and new p o s s i b i l i t i e s that might only show up i n the l i g h t of intensive study of the i n i t i a l proposals. Thus such analysis i s very much an i t e r a t i v e process. Biases and prejudices, f o r example, can be reduced by constantly searching for evidence of feasible alterna-t i v e s . Certainly there i s some danger that volumes of study of one or two ways of developing a resource may tend to blind one to the possible existence of reasonable alternatives. Time streams, the discount rate, and uncertainty. Alternative actions involve different d i s t r i b u t i o n s of benefits and costs over time. A project may be 'capital intensive', such as a power dam, with heavy c a p i t a l expenditures before the f i r s t unit of output and benefit i s produced. On the other hand some programmes may be undertaken i n small increments with r e l a t i v e l y minor i n i t i a l c a p i t a l expenditures compared to annual maintenance and operation costs and annual benefits. In order to compare alternatives having different cost and benefit 'time-streams', the present values of the costs and benefits expected i n each future year are calculated and t o t a l l e d . 52 Present values are calculated by use of a 'discount' 26 rate which represents the opportunity cost of c a p i t a l . That i s , the present value i s the sum that, i f invested i n the base year at the highest interest rate available, would equal the costs or benefits expected i n each future year of the project's l i f e . The selection of a suitable rate of interest i s troublesome fo r government programmes because of the d i f f i c u l t y i n tracing public tax dollars back through governments to the individuals and corpora-tions from which they were drawn i n order to determine the rate of return those funds could have earned. However, Reuber and Wonnacott, and Eckstein carried out studies to estimate the average return to government funds had they remained i n private hands. Reuber and Wonnacott estimated that, i n 1961, the average opportunity rate was about f i v e per cent f o r federal funds and close to six per cent on 27 municipal financing i n Canada. Eckstein's conclusion was that United States federal government c a p i t a l had an opportunity cost of approximately f i v e and one-half per cent. The Guide specifies that different discount rates may be used f o r individual project alternatives.only when different sources of c a p i t a l are used, or when there are marked differences i n the r i s k and uncertainty that the 53 29 p r o j e c t c o s t s and b e n e f i t s w i l l occur as p r e d i c t e d . But i n c r e a s i n g the discount r a t e as one method of hedging against r i s k d i s c r i m i n a t e s against c a p i t a l i n t e n s i v e pro-j e c t s . T h i s i s because the compound discount r a t e has a cumulative e f f e c t on t i m e - d i s t a n t b e n e f i t s and c o s t s . Since c a p i t a l c o s t s occur i n the e a r l y years and b e n e f i t s t y p i c a l l y reach a peak a number of years l a t e r , an i n c r e a s e i n the discount r a t e w i l l reduce the present value of b e n e f i t s more than c o s t s and thus a f f e c t c a p i t a l - i n t e n s i v e p r o j e c t s more than r e l a t i v e l y u n i n t e n s i v e ones, even though r i s k may be equal. Thus, r i s k i s perhaps b e t t e r handled by u s i n g c o n s e r v a t i v e f o r e c a s t s and by showing a range of values f o r expected b e n e f i t s and c o s t s r a t h e r 31 than s i n g l e v a l u e s . The B e n e f i t - P o s t c r i t e r i o n . The Guide t o B e n e f i t -Cost A n a l y s i s s t r e s s e s that the B e n e f i t - C o s t r a t i o , while the p r i n c i p a l t o o l i n r a n k i n g and s e l e c t i n g p r o j e c t s , does not alone determine the most economic use of r e s o u r c e s . I t i s not the r a t i o t h a t i s t o be maximized, r a t h e r the net b e n e f i t s are to be maximized through expansion of the s c a l e of a p r o j e c t beyond i t s maximum r a t i o u n t i l the incremental B e n e f i t - C o s t r a t i o i s equal t o that of the next best p r o j e c t . I f the next best p r o j e c t i s a l s o r e q u i r e d , then both are expanded u n t i l t h e i r marginal 54 r a t i o s are equal t o that of the t h i r d best a l t e r n a t i v e . This i s i n l i n e with the t h i r d p r i n c i p l e o u t l i n e d i n the e a r l y part of t h i s Chapter. To sum up, i t i s acknowledged that t h i s review of Benefit-Cost theory, methodology, and problems only scratches the surface of the continuing economic arguments over the Benefit-Cost approach. However, i t i s believed that t h i s review provides a basic a p p r e c i a t i o n of the method as i t i s being used today and as i t would l i k e l y be employed i f i t were brought more f u l l y i n t o use i n the Planning f i e l d . As such, a b a s i s i s provided f o r pro-ceeding t o the i n v e s t i g a t i o n and d i s c u s s i o n of Chapters I I I and IV. Notes: "^Roland McKean, E f f i c i e n c y i n Government Through  Systems A n a l y s i s , New York, John Wiley and Sons, 1 9 5 8 , p. 3 . p Haveman, op_. c i t . , p. 1 . ^S. V. Ceriacy-Wantrup, op_. c i t . , p. 1 0 . ^United States Commission on the Reorganization of the Executive Branch of Government, Task Force Report on  Water Resources and Power, V o l . 1 , June 1 9 5 5 , p. 4 5 7 . VW. R. D. Sewell and others, Guide to Benefit-Cost  A n a l y s i s , Resources f o r Tomorrow Conference, Ottawa, Queen's P r i n t e r , 1 9 6 2 , p. 1 . ^McKean, op_. c i t . , p. 5 . 7 Sewell, op_. c i t . , p. 3 . 55 United States, Interagency Committee on Water Resources, Sub-Committee on Evaluation Standards, Proposed  Practices f o r Economic Analysis of River Basin Projects, May 1958, p. 5-9 I b i d . , p. 8. "^Sewell, op_. c i t . , p. 5* 11 United States, National Parks Service, The  Economics of Public Recreation, land and Recreational Planning Division, 1949, p. 12. 12 D. W. Seckler, "On the Uses and Abuses of Economic Science i n Evaluating Public Outdoor Recreation," Land Economics, Vol. 42 (November, 1966), p. 488. 13 ^United States, Interagency Committee on Water Resources, op_. c i t . , p. 9-"^^cKean, op_. c i t . , p. 157. 15 ~\Loc. c i t . 16 United States, Interagency Committee on Water Resources, op_. c i t . , p. 9« 1 7 I b i d . , p. 10. 18 S. V. Ceriacy-Wantrup, "Benefit-Cost Analysis and Public Resource Development," Water Resource Development, ed. by S. C. Smith and E. H. Castle, Ames, Iowa State University Press, 1964, p. 16. ^McZean, op_. c i t . , p. 61. 2 0 I b i d . , p. 62. 21 United States Army Corps of Engineers, Review of  Reports on Lake Erie-Ohio River Canal, Vol. 5, Washington, Government Prin t i n g Office, January, 1965, p. 27. 22 Sewell, op_. c i t . , p. 6. 23 ^Loc. c i t . ^"Edward P. Renshaw, "A Note on the Measurement of the Benefits from Public Investment i n Navigation Projects American Economic Review, Vol. 47 , (September, 1957) , p. 654. 25 Haveman, op_. c i t . , p. 1 . 2^Sewell, op_. ext., p. 16 . 2 7G. L. Reuber and R. G. Wonnacott, The Post of Capital in' Panada, Washington, D. C , Resources f o r the Future Publication, 1961, p. 20. po Otto. Eckstein, Water Resource Development, Cambridge, Harvard University Press, 1958, p. 175. 29c 30 T 29 ^Sewell, op_. c i t . , p. 16 . Eckstein, op_. c i t . , p. 179. 57 I I I . BENEFIT-COST ANALYSIS APPLIED TO THE ROBERTS BANK WATERFRONT Introduction The purpose of t h i s Chaper i s to investigate a hypothetical application of Benefit-Cost analysis to a waterfront all o c a t i o n problem. The .procedure followed was to select two uses that would serve as suitable examples of the type of competition and a l l o c a t i o n decision problem that could arise. A waterfront area that has been the subject of several development proposals, including the selected proposed uses, was chosen and the Benefit-Cost methodology, as described i n Chapter II, was applied. The development proposals were drawn from r e a l l i f e , but much of the information required f o r comprehensive Benefit-Cost analysis was not available. Hence, they con-t a i n numerous assumptions regarding t h e i r scale, nature, and e f f e c t s . It should be reiterated that i t was not the purpose of t h i s investigation to determine the "best" of the two proposals f o r t h i s s i t e , but rather to determine the usefulness and r e l i a b i l i t y of the Benefit-Cost tech-nique . The examination of actual proposals f o r an existing waterfront s i t e helped suggest r e a l i s t i c questions that should be asked about the alternatives, t h e i r d e s i r a b i l i t y , 58 and t h e i r e f f e c t s . At the same time t h i s concentration on p a r t l y r e a l - p a r t l y hypothetical examples should not l i m i t the general a p p l i c a b i l i t y of the conclusions regarding the technique f o r other waterfront a l l o c a t i o n problems. This assessment and the general conclusions are contained i n t h i s Chapter and form the subject of Chapter IV as well. The proposals selected included a recreation and a port development proposal. Por a number of reasons t h i s selection was deemed appropriate. F i r s t , based on the discussion of waterfront uses i n Chapter I and on the writer's experience i t was decided that recreation and port uses of the waterfront were among the small number of use types that should be accorded f i r s t p r i o r i t y i n a l l o -cation of scarce waterfront resources. It was concluded that both of these require actual waterfront s i t e s ; access to or a view of the water i s not considered s u f f i c i e n t to allow f u l l y effective operation of these a c t i v i t i e s f o r a l l t h e i r requirements. This conclusion i s obvious i n the case of port a c t i v i t i e s , but there may be some doubt with respect to recreation. As evidence, the findings of the Outdoor Recreation Resources Review Commission are offered. S p e c i f i c a l l y , these findings demonstrate that water-based 59 recreation activities—swimming, boating, f i s h i n g , and water s p o r t s — a r e among the most popular and fastest growing outdoor recreation pursuits f o r the population twelve years of age and over. 1 A recent study by the Bureau of Outdoor Recreation showed that p a r t i c i p a t i o n i n outdoor recreation increased f a r faster between I960 and 1965 than forecast by the Outdoor Recreation Resources Review Commission. The Bureau further estimated that swimming would be the most popular outdoor recreation by 1980 and that by the year 2000 p a r t i c i p a t i o n i n swimming, boating and water sports would grow by 207 per cent, 215 p per cent, and 365 per cent, respectively. Thus, the writer concluded that intensive development of potential waterfront recreation areas i s of major importance i f the inherent demand i s to be met. It was further decided that, i n contrast to port and recreation needs, most other potential waterfront users are able to meet most of t h e i r waterfront-related needs i n alternate ways than through individual occupancy of r i p a r i a n s i t e s . Admittedly t h i s i s over-simplifying, but as a general rule i t was decided that most industries, f o r example, can s a t i s f y t h e i r waterfront requirements through use of the general port f a c i l i t i e s and services: likewise, i t was f e l t that luxury r e s i d e n t i a l developments and 60 commercial a c t i v i t i e s could gain most of the b e n e f i t s of exclusive waterfront occupancy through p u b l i c and p r i v a t e port, marina, and park developments. A second reason f o r s e l e c t i o n of the two proposals was that they created a genuine x^aterfront a l l o c a t i o n problem. I t was assumed that these were mutually exclusive purposes and that l i t t l e opportunity f o r j o i n t use was p o s s i b l e . Hence, the problem d i d not involve simply a question of a l t e r n a t i v e scales of development of an area say, f o r the port f a c i l i t y . So l i m i t e d a problem n e c e s s a r i l y i m p l i e s a de f a c t o a l l o c a t i o n of that water-f r o n t to eventual port use. Instead, by s e l e c t i n g e x c l u -s i v e a l t e r n a t i v e proposals, a s i t u a t i o n was created i n which maximum s t r e s s , as w i l l become c l e a r e r , was placed on the a p p l i c a b i l i t y of the Benefit-Cost technique t o a l l o c a t i o n problems. A t h i r d , more pragmatic reason f o r s e l e c t i o n , as already noted, was that they are based on a c t u a l , i f some-what sketchy, proposals. P u b l i c i n t e r e s t was aroused; thus some information was a v a i l a b l e and the p u b l i c debate engendered brought out some of the issues involved. The waterfront area chosen f o r i n v e s t i g a t i o n of these proposals and the technique was an approximately two mile square area of shoreline and sandy t i d a l f l a t s 61 on Roberts Bank i n the Lower Mainland of B r i t i s h Columbia. The next two sections describe the setting and the s i t e . The General Setting (See Figures 2 and 3) B r i t i s h Columbia i s a mountainous, rugged province. In p a r t i c u l a r , the coast range p a r a l l e l s and forms the coast l i n e i n many places: thus many deep, narrow, and steeply-sided fjords are created. Though the t o t a l coast l i n e i s very long—various estimates place i t from 10,000 up to 15,000 miles i n length—very l i t t l e of i t can be considered developable f o r urban centres and a c t i v i t i e s . Sizable urban centres have been created only at three coastal points on the province's mainland: Prince Rupert, Eitimat, and Vancouver. A l l of these are beside r i v e r mouths where useful land has been created through r i v e r and g l a c i a l depositions. Communication by road and r a i l with other parts of the province i s achieved by following t h e i r associated r i v e r courses eastward through t h e i r penetration of the coastal and other mountain ranges. The Vancouver Metropolitan Area, and the Lower Mainland Region of which.it i s a part, i s centered on the lower reaches and delta of the Fraser River, and around Burrard Inlet a few miles to the north of the r i v e r (Figure 3 ) . The Lower Mainland Region comprises an area about 100 miles long by 25 miles wide: i t i s bordered by the FIGURE 2 THE GENERAL SETTING 0 64 mountains on the north and east, hy the Canada-United States boundary on the south, and by the Gulf of Georgia on the west. The present regional population (1966) i s just over 1,000,000 people with about 850,000 i n the Census Metro-po l i t a n Area and concentrated around Burrard In l e t . The population i s expected to grow quickly, p a r t i c u l a r l y i n the r i v e r delta and Surrey uplands to the south. Popula-t i o n forecasts foresee a regional population of 1.5 m i l l i o n by 1981 and 2.25 m i l l i o n persons by the year 2001.^ Studies of the Lower Mainland Regional Planning Board suggest that a long range population i n the order of four to f i v e m i l l i o n persons can be expected by mid-twenty-first century, located within the 'ultimate urban areas' outlined i n the O f f i c i a l Regional Plan f o r the Lower Mainland 5 Planning Area. The Lower Mainland over the past f i f t y years has consistently represented approximately 55 per cent of the Province's population. Its economy i s based on i t s role as the major export port f o r Canada's western provinces, shipping wheat, lumber, minerals, and fishery products to the Orient and the Atlantic countries too. It serves as the administrative base f o r exploitation of the Province's forest resources and the marine fishery f o r salmon and ground f i s h . 65 Contributing to the Region's growth are the ag r i c u l t u r a l lands of the Lower Fraser Valley and i t s delta. These are a l l u v i a l floodplains and produce the majority, by value, of the a g r i c u l t u r a l goods produced i n B r i t i s h Columbia. These lands are also an important element i n the attractiveness of the region to wintering and migrating waterfowl. The Region's waterfront resources are varied and abundant. As noted the Fraser River flows through the Region to empty into the Gulf of Georgia. The r i v e r i s turbid and cold. Current riverbank uses include a concen-t r a t i o n of industry along the Fraser's Forth Arm and port and i n d u s t r i a l f a c i l i t i e s grouped on the New Westminster r i v e r f r o n t . With the exception of a concentration of salmon canneries and associated f a c i l i t i e s at Steveston on the South Arm, industry i s sparsely distributed along the main r i v e r to Mission, 50 miles upstream of the mouth. Most of the remainder of the riverfront i s l i n e d by dykes, with farms and bush land abutting. Many miles of the ' waterfront along the dykes are used f o r l og storage and a number of f i s h i n g bars are heavily used at certain times of the year; otherwise the use of the r i v e r i t s e l f consists mainly of tow boat and scow t r a f f i c and commercial f i s h i n g , during the spring, summer and f a l l salmon runs. 66 The saltwater waterfront resources are very important t o the Lower Mainland. At the P r a s e r 1 s mouth, t i d a l marshes and sand f l a t s have developed through t i d a l and r i v e r a c t i o n over the years. These f l a t s p r o j e c t a distance of two to three miles west from the dyked d e l t a lands t o where there occurs a r e l a t i v e l y abrupt descent from the low t i d e l i n e i n t o water more than 150 f e e t deep. This sudden ' d r o p - o f f defines the edge of Roberts and Sturgeon Banks, to the south and north of the mouth of the Eraser's South Arm, r e s p e c t i v e l y . At present there i s l i t t l e d i r e c t human use of these areas which, together, s t r e t c h along approximately t h i r t e e n miles of saltwater sh o r e l i n e and encompass about 30,000 acres of t i d a l f o r e -shore.^ A primary sewage treatment plant discharges through an open channel onto the north part of Sturgeon Bank which i s reserved f o r the purpose of d i l u t i n g and p u r i f y i n g the e f f l u e n t . At the southern l i m i t s of Roberts Bank a cause-way extending two miles to the edge of Roberts Bank provides a t e r m i n a l f o r the Vancouver I s l a n d s e r v i c e of the B. C. Perry A u t h o r i t y . Several m i l l i o n m igrating waterfowl and shorebirds pass through the f l a t s and adjacent waters annually, t o feed and r e s t , with some species also n e s t i n g i n the area. The e e l grass beds and other plant and animal 6? l i f e of the "brackish water areas and f l a t s help to sustain 7 the "bird and f i s h l i f e . Waterfowl hunting i s popular and sports and commercial f i s h i n g occur i n the adjacent offshore waters, from the International Boundary north-wards. A somewhat similar t i d a l area, Boundary Bay, i s located to the south-east of the Eraser River's mouth, l y i n g "between Point Roberts, the International Boundary and White Rock. The Bay comprises an area of approximately 1 9 , 0 0 0 acres of t i d a l f l a t s , and water area, also very l i t t l e developed, but serving extensive recreation and conservation purposes. To the north of Sturgeon Bank (Pigure 3 ) one rounds Point Grey to enter Burrard Inlet. This outer part of the Inlet, English Bay, currently provides most of the Region's developed swimming beaches and important recreational boating and f i s h i n g waters. Burrard Inlet i s constricted at F i r s t Narrows and then opens out on the east to form Vancouver Harbour, an important world port as noted e a r l i e r . The area between F i r s t Narrows and Second Narrows, f i v e miles east, contains almost a l l of the Region's deep sea oriented shipping and i n d u s t r i a l f a c i l i -t i e s , with the exception of a few i n s t a l l a t i o n s located Q on the New Westminster r i v e r f r o n t . 6 8 East of Second Narrows the shoreline i s generally-steeper and there are only scattered port f a c i l i t i e s . Indian Arm, the northward extension of Burrard Inlet, i s a t y p i c a l mountain f j o r d . I t s steep sides have attracted, to date, only summer cottage, camp and resort developments located on the numerous creek 'fans'. Its rugged topo-graphy creates spectacular recreational boating waters. The remaining waterfront resources i n the Region are the larger lakes and r i v e r s . The lakes closest to the Metropolitan population are located i n the mountains to the north of Burrard Inlet and the Eraser River, but these are exclusively reserved for domestic water supply. More distant lakes and r i v e r s tend to be rugged, cold, and are lar g e l y undeveloped. Two exceptions are lakes con-tained within P r o v i n c i a l Parks; these are heavily used f o r recreation during the summer months. Otherwise these lakes and ri v e r s compared to the warmth, a c c e s s i b i l i t y and climate of the t i d a l waterfront to the west, are a minor part of the Region's waterfront resources. The Waterfront Site As noted, a part of Roberts Bank was chosen f o r the purpose of investigating the application and u t i l i t y of Benefit-Cost Analysis. This s i t e i s referred to as 69 'Roberts Bank1 even though only a section of the Bank. The selected area i s adjacent to the north side of the B. C. Perry causeway. It measures approximately two miles square and includes about 2,500 acres of t i d a l f l a t s and water area. The land adjacent to the shoreline i s flood-p l a i n l y i n g within an Indian Reserve. The area i s within one mile of the South Delta r e s i d e n t i a l area and three miles from the small community of Ladner. Access to the s i t e from the Vancouver central business d i s t r i c t , about twenty miles away, i s v i a Highway 499 and Highway 17, the l a t t e r connecting Highway 499 with the Perry Terminal. The 'Banks' are formed by r i v e r action; but with distance southward from the r i v e r mouth the s o i l i s increasingly glacio-marine i n origin, with beach sands and gravels tending to replace a l l u v i a l s i l t s and c l a y s . 9 Several studies have shown that the s o i l s are suitable f o r development projects of the type envisioned here."*"^ The Port P r o p o s a l ^ Over the past year and a half i t has been suggested that a bulk loading port be developed i n the Roberts Bank area, s p e c i f i c a l l y to f a c i l i t a t e shipment of coal to Japan. The rationale offered f o r the proposal i s e s s e n t i a l l y t h i s : Vancouver Harbour i s highly developed, with l i t t l e available land f o r building large scale bulk shipping f a c i l i t i e s ; the Harbour entrance at F i r s t Narrows has a minimum draft of thirty-nine feet that, even i f increased to f i f t y - f i v e feet as seems l i k e l y , cannot accommodate bulk-carrying vessels i n the 100,000-200,000 ton capacity range; more-over, congested r a i l l i n e s , i t i s maintained, make d i f f i c u l t the use of e f f i c i e n t , high speed 'unit trains' which would carry coal and other bulk goods to the Harbour, take the minimum turn around time and return to the coal producing areas i n south-eastern B r i t i s h Columbia; a f i n a l argument i s that, according to the coal companies con-cerned, both the present r a i l freight rates and terminal costs per ton of coal are so high to render B r i t i s h Columbia and Alberta coal non-competitive with Australian and Chilean produced coal f o r the large Japanese market. Hence, the proposition i s that a new bulk loading f a c i l i t y be developed on Roberts Bank i n l i e u of shipment from Vancouver Harbour. With a r e l a t i v e l y small volume of dredging, ships of sixt y to seventy feet draft could be ea s i l y accommodated. This would allow Japanese shippers to minimize t h e i r shipping costs by using huge bulk c a r r i e r s which the Japanese steel m i l l s and ports are already able to accommodate. It i s also argued that terminal costs per ton of coal would be approximately one-71 half t h e i r current le v e l s i n Vancouver Harbour. A r a i l extension from Cloverdale to Roberts Bank would permit unit trains to t r a v e l v i a Canadian l i n e s , or v i a American r a i l s , i f Canadian companies would not or could not reduce t h e i r rates s u f f i c i e n t l y to make the coal competitive at price aboard ship. Thus savings i n the r a i l transport costs, i n terminal charges to the coal producers, and i n ocean shipping costs per ton to the Japanese would be s u f f i c i e n t to s h i f t about 3,000,000 tons of annual Japanese coal purchases to B r i t i s h Columbia and Alberta producers. Hints have been made that the volume of coal exported might increase up to 8,000,000 tons annually once trade i s established and transport e f f i c i e n c y i s guaranteed. Further claims include predictions that potash, sulphur, wheat, lumber and other bulk commodity shipments w i l l be made upon expansion of the basic i n s t a l l a t i o n . Benefit-Cost Analysis of the Port Proposal The f i r s t step i n the analysis was to develop fore-casts of shipments that would require the development of a port f a c i l i t y at Roberts Bank. With t h i s information a design and construction schedule of the necessary f a c i l i -t i e s was assumed, based on newspaper reports and on a discussion with J. J. Southworth of the B. C. Energy Board—the author of the report to the pr o v i n c i a l govern-72 ment recommending the construction of the Roberts Bank Port. Costs were then estimated f o r the development and i t s associated f a c i l i t i e s , and f o r the secondary costs of the project. A f i n a l step was to make estimates of the value of the different types of benefits that might be expected. Throughout the i n i t i a l analysis, a P r o v i n c i a l con-text f o r estimates of costs and benefits was taken. This was based on the l i k e l i h o o d that P r o v i n c i a l funds would be involved i n the port development and on the Government1s stated concern f o r both growth i n mining and employment i n south-eastern B r i t i s h Columbia and on expansion of port a c t i v i t i e s i n the Lower Mainland. Forecasts of shipments. Public reports issued with respect to the 'Roberts Bank Superport' have claimed that the f i r s t stage of the development would proceed immedi-ately upon the signing of a contract with the Japanese to purchase 3,000,000 tons of coal annually from Canadian producers. Table 1 gives a hypothetical schedule of coal shipments beginning i n 1971, assuming that the port would be operational i n three years. The Table also includes hypothetical increases of i n i t i a l coal movements and of several other commodities, which i t has been claimed, would welcome or require additional port f a c i l i t i e s . TABLE 1 PORT DEVELOPMENT SCHEME: FORECASTS OF SHIPMENTS AND TRANSPORTATION SAVINGS YEAR FORECASTS OF SHIPMENTS (millions of tons) FORECASTS OF SAVINGS (millions of dollars) Coal Sulphur Lumber Potash Coal Sulphur Lumber Potash Total 1971 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 2000 1.0 2.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 0.5 — — 0.6 — 0.5 0.7 — 1.0 0.8 — 1.5 0.9 — 1.5 1.0 — 2.0 1.1 0.5 .2.0 1.2 0.5 2.5 1.3 0.5 2.5 1.4 0.5 3.0 1.5 0.5 3.0 1.5 0.5 3.0 1.5 0.5 3.0 0.5 1.0 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 3.0 3.0 3.0 3.0 3.0 3.0 3.0 0.125 — — 0.150 - 0.125 0.175 - 0.250 0.200 — 0.375 0.225 — 0.375 0.250 0.050 0.500 0.275 0.050 0.500 0.300 0.050 0.625 0.325 0.050 0.625 0.350 0.050 0.750 0.375 0.050 0.750 0.375 0.050 0.750 500 1,000 1,500 1,500 1,675 1,775 1,925 2,075 2,225 2,250 3,950 3,975 4,125 4,150 4,175 4,175 0.375 0.050 0.750 4,175 Notes: 1 Calculation of transportation savings i s based on assumed savings per ton as follows: Coal, SO.50; Sulphur, $0.25; Lumber, $0.10; Potash, $0.25. 74' The B. C. Research Council (BCRC) report, Vancouver Harbour-Traffic Trends and F a c i l i t y Analysis, was used as a rough guide f o r an assumed all o c a t i o n and scheduling of commodities through Roberts Bank. This study, completed i n 1967, extended Vancouver Harbour shipping growth forecasts to 1985, and pointed out that I expected volumes of several bulk items f o r export would exceed the capacity of Vancouver Harbour's existing and 13 proposed shipping f a c i l i t i e s by that date. J Unfortunately the Council's terms of reference did not include study i n depth of how the forecast increases might be handled. Assumed forecasts were derived i n the absence of sp e c i f i c shipping estimates f o r Roberts Bank or informa-t i o n regarding i t s s u i t a b i l i t y f o r export items other than coal. The assumptions were as follows: 1. Coal, Shipments to begin i n 1971, with 1,000,000 tons annually, reaching 3,000,000 tons i n 1973; i n 1981 ship-ments to double to 6,000,000 tons annually and continue at that l e v e l to the end of the century. 2. Sulphur. The Research Council estimated that shipments of sulphur v i a the Lower Mainland would increase from 0.6 m i l l i o n tons i n 1966 to 2.0 m i l l i o n tons i n 1975, and to 3.0 m i l l i o n tons i n 1985; i t was assumed that Roberts Bank would attract 0.5 m i l l i o n tons i n 1975 and increase by 100,000 tons per year to 1985 when a plateau of 1.5 m i l l i o n tons would be reached. 75 3. Lumber. Lumber i n pa r t i c u l a r was foreseen by the Research Council as requiring additional loading capacity and more modern f a c i l i t i e s . The Roberts Bank port might not lead to increased t o t a l shipments but i t was assumed that i t would attract a share of lumber t r a f f i c because of convenience to Praser River sawmills and corres-ponding time and cost savings. Thus, i t was assumed that 0.5 m i l l i o n tons out of the t o t a l forecast of approxi-mately 2.6 m i l l i o n tons annually, would be diverted from New Westminster and Vancouver Harbour f a c i l i t i e s , beginning i n 1981. 4. Potash. This commodity shows the greatest prospects f o r growth i n volume shipped. Saskatchewan deposits have only recently been tapped; Port of Vancouver shipments were forecast to r i s e from 1.13 m i l l i o n tons i n 1966 to 10.0 m i l l i o n tons by 1985. It has been assumed that, beginning i n 1976, Roberts Bank would attract 0.5 m i l l i o n tons, r i s i n g to 3-0 m i l l i o n tons annually i n 1985. Other commodities such as wheat, general cargo, and imported bulk cargoes move through the Port of Vancouver. It was assumed that these goods would continue to move through Vancouver because of i t s grain elevators, i t s general cargo piers, the industries using incoming goods, and i t s complete range of specialized port, government, and administrative services. Petroleum products, too, have been mentioned as a possible Roberts Bank export; but with minor exceptions Canada i s not an o i l exporter and the BCRC study foresaw no increase. It was concluded that 76 the project would "be s o l e l y an export port i n the fore-seeable future at l e a s t . Costs of the port proposal. Crude, round-figure estimates of costs and possible design of f a c i l i t i e s have been garnered from the many newspaper a r t i c l e s reporting on the proposal. Other costs were f i l l e d i n by assumption or by reference to preliminary cost estimates included i n two studies f o r other development projects on nearby areas of Roberts and Sturgeon Banks. 1. Project costs: Table 2 l i s t s project costs by stages of development, shown i n Pigure 4, that are scheduled to meet the hypothetical shipping demands out-l i n e d above and i n Table 1. Stage IA would be designed to serve the i n i t i a l 3,000,000 ton coal shipments. The existing f e r r y causeway would be widened to accommodate a road and r a i l l i n e ; i n a' position a l i t t l e beyond the low water l i n e , a f i f t y acre bulk terminal s i t e would be created. Spoil material from the dredged six t y to seventy foot draft channel leading to deep water would serve as f i l l to build up the required land. As summarized i n Table 2, the f i r s t bulk loader and conveyor systems costing approximately f i v e m i l l i o n d ollars would be i n s t a l l e d as soon as s e t t l i n g of FIGURE 4 ROBERTS BANK-PORT DEVELOPMENT SCHEME 79 the f i l l e d area permitted. The costs of causeway expansion, the f i f t y acres of reclaimed land, u t i l i t i e s , the road and an interchange at the base of the causeway might be 4.0 m i l l i o n d o l l a r s . In Stage IB i t was assumed that the i n i t i a l project area would be expanded by ten acres to accommodate the sulphur shipments forecast to start i n 1975. It was assumed that t h i s additional area could be made operative at a cost of one-half m i l l i o n d o l l a r s . The same bulk loader machinery would be used f o r both coal and sulphur loading. Stage IC represented the expansion assumed necessary to ship an additional 5,000,000 tons of coal annually, beginning i n 1981. It was assumed that f i f t y acres of f i l l e d land would be created on the inshore side of the previous coal and sulphur terminal areas, and that the cost would be approximately equivalent to the o r i g i n a l i n s t a l l a t i o n minus, of course, the associated costs of r a i l and road connections and cost of widening the causeway which should not have to be duplicated. Stage II would precede IC, becoming operative i n 1976. Again, the assumption was that i t would cost an amount equivalent to Stage IA, or about 9.0 m i l l i o n d o l l a r s . The basic idea was that a second causexray two 80 miles to the north and p a r a l l e l to the f e r r y causeway would give storm protection to 2,000 acres of reclaimable t i d a l f l a t s which could be developed f o r industrial- and port f a c i l i t i e s . According to Mr. Southworth there i s no time estimate on when such reclamation would begin ( i n d i -cated as Stage III i n Pigure 4) or projections of the type of firm that might wish to occupy what must be considered expensive i n d u s t r i a l land, assuming an average cost of $25,000 per acre to create and service reclaimed land. No cost figure was given f o r land acquisition; i t was simply assumed that the ri p a r i a n rights held by the existing shoreline owners would be purchased at ten dollars per front foot, or one hundred thousand dollars i n t o t a l . No 'price' exists f o r the t i d a l f l a t s them-selves. Thus, i n l i n e with the 'cost' discussion i n Chapter II, the opportunity cost was calculated, on the assumption that the selected hypothetical park proposal was the best alternative use of the s i t e . Thus, the value of the net benefits to be determined i n the park evalua-t i o n was added as a cost of the port scheme. 2. Associated costs: In the i n i t i a l Stage (IA), the associated costs e a s i l y outweigh project costs because of expensive r a i l extensions that i t i s said would be required to obtain the transportation savings possible. 81 These include a seventy-seven mile long r a i l l i n k from the coal f i e l d s to the Great Northern Railway at the American "border and a f i v e mile l i n k "between Roberts Bank and existing Lower Mainland r a i l l i n e s at Cloverdale. Together these were estimated to cost twenty m i l l i o n dollars (see Table 2 ) . An additional f i v e m i l l i o n dollars was earmarked to purchase two hundred seventy-five r a i l cars to transport the coal. It was also assumed that increased road t r a f f i c to the Roberts Bank port and f e r r y terminals would require widening of Highway 17 to four lanes and improvements to the Highway 17-499 interchange. F i f t y per cent of t h i s cost, assumed to be about 1250,000 was charged to the port development as a Stage IA associ-ated cost. Later stages would not require similar f a c i l i t i e s or they would u t i l i z e these f i r s t stage i n s t a l l a t i o n s . The exception would be the additional r a i l cars necessary fo r the doubled coal shipments. It was assumed that the other commodities that would pass through Roberts Bank would move with or without t h i s additional f a c i l i t y , but through Vancouver Harbour instead. Thus any costs associ-ated with t h e i r movement, r a i l cars f o r example, would be incurred even i n the absence of the project and can be ignored. 82 3- Operation and maintenance costs: The other class of direct costs calculated represented the annual average costs of operating and maintaining the i n s t a l l a -t i o n ; i n the complete absence of any figures f o r these the following assumptions were made (see Table 2): a. Annual charges for Stage IA to be $200,000. b. Stage IB and IC to add charges at one-half the Stage IA cost per ton shipped, based on the assumption that economies of scale would occur, and i n i t i a l storm protection would be already i n s t a l l e d , and that further protection would be provided by the new je t t y b u i l t f o r Stage I I : $70,000. c. Stage II annual charges to equal the rate f o r Stage IA: $200,000. 4. Intangible costs: As shown i n Table 3, f i v e possible sources of intangible costs to the project were considered. However, the f i r s t category, the loss of 'hunting and beach a c t i v i t y days' was given a do l l a r value. Here i t was simply assumed that 25,000 'beach days' and 5,000 'hunting days' per year are currently spent at Roberts Bank and that these would no longer be possible with the port development. These were valued at f i f t y cents and two dol l a r s per day respectively. The source of these values w i l l be evident i n the discussion of the 83 TABLE 3 PORT DEVELOPMENT SCHEME: INTANGIBLE COSTS TYPE OP COST VOLUME OR QUANTITY TREATMENT Ex i s t i n g recreation-day losses: -hunter days 5,000 "days" per year Valued at $2.00 per day. -beach days 25,000 days per year Valued at $0.50 per day. -sightseeing, nature study days not estimated Assumed balanced by attractions to v i s i t o r s of the new port. P o l l u t i o n damage: -spi l l a g e of f u e l , cargo wastes, serious accident not measurable A negative effect tend-ing to reduce the Benefit-Cost r a t i o . Aesthetic losses: -dust, d i r t , odour, o i l , appearance (visual) not measurable Assumed balanced by attraction to v i s i t o r s of the new port. Conservation losses: -reduced marine and waterfowl popula-tions due to destruction of habitat effects unpre-dictable; not measurable A negative effect tend-ing to reduce the Benefit-Cost r a t i o . 84 recreation proposal benefits. The loss of 'sightseeing days' p a r t i c i p a t i o n (unmeasured), i t was assumed, would be cancelled by the sightseeing attraction of the bulk loading i n s t a l l a t i o n and the huge bulk c a r r i e r s . In fact, the l a t t e r attraction might be greater than the present natural landscape; however, estimation of the number of • v i s i t s ' that would be generated would be d i f f i c u l t and was not considered to be of central importance here. The other three possible sources of intangible costs were: a. P o l l u t i o n losses: These could result from wind-blown coal dust, sulphur, etc., or from the discharge of wastes and o i l from vessels; major accidents are possible due to storm or n e g l i -gence such that damage to waterfowl, marine l i f e , recreation areas, and commercial f i s h i n g might be severe. b. Aesthetic losses: The ugliness of p i l e s of coal i n storage and r a i l cars on sidings may be taken as a negative value, yet sightseers would be attracted by the a c t i v i t y of the harbour. As f o r the loss of sight-seeing days above, i t was assumed that these two effects would cancel each other. c. Conservation losses: It i s clear that under the joint processes of i n d u s t r i a l i z a t i o n and urbanization w i l d l i f e i s under continuing pressure. Various projects i n the Lower Mainland i n the past have reduced waterfowl habitat considerably; thus, any reduc-t i o n i n Roberts Bank habitat would be re f l e c t e d i n reduced numbers of birds 85 and the loss can he considered a r e a l but intangible and unmeasurable cost of the project. Possibly some e s t i -mate of the loss of waterfowl i n numbers could be derived, but p r i o r to the completion of the project t h i s would be very hypothetical; following t h i s a d o l l a r value f o r waterfowl would have to be computed. These effects, where no arbitrary d o l l a r value was established, could not be entered i n the Benefit-Cost r a t i o c alculation but only recorded as undetermined values operating i n a negative dire c t i o n . They could be assigned no weight at t h i s stage. Secondary costs were not estimated; rather, only the net secondary benefits of the port project, i f any, were considered i n cal c u l a t i n g the r a t i o of benefits to costs. This i s i n l i n e with suggestions i n the Guide to Benefit-Cost Analysis. Benefits of the port scheme. 1. Direct benefits. The benefits were "derived i n terms of the cost of the most l i k e l y alternative means of providing the service, i n the absence of the p r o j e c t " . 1 ^ In t h i s i l l u s t r a t i o n the above rule had to be applied to two kinds of t r a f f i c expected to use the new port f a c i l i t y . The f i r s t of these i s diverted t r a f f i c that would move, even without the project, by some alternative route or 86 transport mode. The potash, lumber, and sulphur shipments 'forecast' f o r Roberts Bank were assumed to be of t h i s type. Benefits of t h i s kind of t r a f f i c are equal to the difference between the cost of shipping-by the new project and shipping v i a the alternative. The second type of t r a f f i c i s that generated by the reduced transportation costs shippers would have to bear with the new project. The coal shipments which were expected to use the proposed r a i l and port f a c i l i t i e s f a l l i n t h i s category. In t h i s situation benefits are much more d i f f i c u l t to estimate. That i s , i t was known that the t r a f f i c did not move at the charges imposed by the best alternative previously available; and i t was predicted that a-particular volume would move at the. new rate. How-ever, unless the exact cost that each shipper would have been w i l l i n g to pay over and above the new set of rates i s known, the exact saving of the project cannot be calcu-lated. Since the 'demand curve' f o r a transportation service i s usually not known, practice i s to assume that, on the average, the generated t r a f f i c would move at a cost midway between the former lowest rates and the new, lower rates. In addition there were measurement d i f f i c u l t i e s , f o r actual rates charged are not necessarily the true 87 economic cost of moving goods. Eckstein suggests that 'out-of-pocket' costs, of a railway f o r example, are close 16 to representing the r e a l cost to society. But such costs are seldom made known by the companies involved. Therefore, estimates of the benefits, or the true savings to society, of a transportation development are d i f f i c u l t to determine. The projected coal sales are the prime reason f o r the Roberts Bank project; they are an excellent example of generated t r a f f i c . Fortunately, the assumptions, as follow, remove some of the d i f f i c u l t i e s i n determining the benefits which were noted above. The coal would come from two or three producing companies i n quite similar locations and would be shipped to one or two large Japanese purchasers. It was assumed that producers would a l l face similar production and transportation costs and that they would be offered the same price per ton by the buyers. This removed the d i f f i c u l t y of the demand curve as stated above f o r the generated t r a f f i c , for, under these condi-tions, the generated coal t r a f f i c could be considered a single movement from a single shipper. S t i l l , the only information that was available on which to base estimates of savings to shippers was that provided i n newspaper reports. Unfortunately, each party 88 to the argument over the necessity f o r a new port outside Vancouver Harbour has a vested interest i n the outcome. Thus i t i s d i f f i c u l t to place f u l l confidence i n announce-ments about the rates required to attract the orders f o r coal or the savings that could be gained by building new r a i l f a c i l i t i e s , as claimed by the coal producers. For example, the Japanese buyers might be capable of paying more per ton than they claim they are able to f o r the coal aboard-ship. And the coal companies l i k e l y could squeeze further s t i l l on t h e i r own p r o f i t s and absorb r a i l and terminal rates above those which they say they must have i n order to make working t h e i r mines worthwhile. The Canadian P a c i f i c Railway apparently agreed to reduce the r a i l rates fo r coal from $5.28 to $4.65 per ton, according to one newspaper report—how much more these could be reduced only that company knows. Similarly, the present bulk terminal loading rate f o r coal i s $0.-85 per ton: but how much could owners of existing bulk terminals reduce t h e i r rates i f a Roberts Bank i n s t a l l a t i o n entered into competition with them and was found capable of making a reasonable return at a rate of $0.35 per ton, as maintained by the coal owners? In the absence of either t h i s information or knowledge of the best delivered price Japanese steel pro-ducers obtain from t h e i r present suppliers (which would 89 give figures on the a b i l i t y to pay of Japanese buyers), i t was simply assumed that the overall true cost saving due to the e f f i c i e n c i e s gained by developing the new port would be SO.50 cents per ton. The hypothetical shipments of potash, sulphur, and lumber were classed as 'diverted t r a f f i c ' as noted e a r l i e r . If they were simply transferred from Vancouver Harbour to Roberts Bank f a c i l i t i e s with no transportation or other saving being produced, then there has been duplication of port f a c i l i t i e s with no o f f - s e t t i n g gain i n benefits f o r the investment. Por purposes of t h i s exercise i t was assumed that because of savings i n time, costs, or safety net benefits of $0.25, $0.10, and $0.25 per ton would accrue to the diverted quantities of sulphur, lumber, and potash, respectively, at Roberts Bank. 2. Secondary benefits. These, as defined i n Chapter II, are equivalent to the t o t a l gains i n net P r o v i n c i a l income attributable to the project. The clearest gain would be found i n the kind of s i t u a t i o n ex i s t i n g i n the Crowsnest coal f i e l d s , where there has been chronic unemployment or underemployment. In addi-tion, the Economic Council of Canada has stressed a need fo r a steady flow of new jobs to meet natural and immigra-17 tion-based increases i n population. I f the additional 90 workers employed i n the coal f i e l d s as a result of the project would he unemployed otherwise, then t h e i r gross income represents an increase i n the net wealth of the Province. This assumption was adopted, along with a further necessary assumption that the Japanese-originated coal payments would not come to B r i t i s h Columbia i n some other form i n the absence of the project. I f the converse were true then secondary benefits could probably not be counted' at a l l , f o r the new investment and new jobs would have occurred with or without the project and, therefore, could not be credited to the project. The projected gains i n employment i n the coal f i e l d s were taken as follows; 250 workers i n 1971, and an additional 150 i n each of 1972 and 1973. 1 8 In 1981 an additional 200 are assumed to be required to produce double the tonnage of coal. Other secondary benefits would accrue from the investment i n machinery, the induced l o c a l development i n the coal regions and of the coal mines, and employment i n the port i t s e l f . It should be added that only employment attributable to coal shipping i s an additional benefit, f o r i t was assumed that the other commodities would move anyway and thus would employ similar numbers of people. Therefore, i t was assumed that f i f t y extra workers, 91 increasing to seventy-five i n 1981, would be employed i n exporting coal. Por both these and the additional miners an average annual wage of s i x thousand dollars was assigned and t o t a l l e d i n Table 8. It seemed clear that the majority of secondary benefits would occur i n the coal producing areas. I f the port were to induce associated i n d u s t r i a l development as suggested i n newspaper sketches of the port, then further secondary benefits would l i k e l y be created. However, no information was available and the i n d u s t r i a l development p o s s i b i l i t i e s were considered very uncertain, both i n kind, scale, and whether they would occur anyway without the project; thus they were ignored. The Recreation Development Proposal (Figure 5) In Spring 1966, a Regional Parks Plan was completed for the twenty-three westernmost Lower Mainland munici-18 p a l i t i e s . One of the twenty-five proposed Regional Parks i n t h i s Plan was calle d "Tsawwassen Beach", and coincided almost exactly with the area of the proposed Roberts Bank port. The park proposal envisaged the creation of six miles of dredged beach, a marina to be developed south of the f e r r y causeway, and waterfowl conservation and hunting-areas. The proposal was based on the following 'attrac-tions' of the area; 1^ 93 1. It i s f a r enough south of the Fraser River mouth to provide good sand f o r "beaches according to geological reports. 2. There i s growing "boating and f i s h i n g a c t i v i t y i n the adjacent waters and i t offers the closest access to other such areas i n the Gulf Islands, about twenty miles south-west i n the Gulf of Georgia. 3. Crabbing and s h e l l f i s h c o l l e c t i n g i s pursued on the f l a t s . 4. There was evidence of considerable recreational use of the f e r r y causeway shoulders even though no work had been undertaken to improve i t s p e c i f i c a l l y for recreation. A c t i v i t i e s observed included boat launching and f i s h i n g nearby, some swimming, beach parties, hunting and nature study. 5. Residential areas i n South Delta and Ladner are expected to grow considerably, according to the forecasts of the Lower Mainland Regional Planning Board, and road connections to Surrey and the Burrard Peninsula r e s i d e n t i a l areas are good. 6. .The p r i o r existence of the f e r r y cause-way means i n i t i a l development could proceed more cheaply than would otherwise be the case. 7. F i n a l l y , on the basis of forecasts made i n the Parks Plan, i t seemed clear that i n f i f t y years time, with a population possibly exceeding four m i l l i o n persons, and an undetermined, but c e r t a i n l y very substantial, t o u r i s t inflow, there would be a shortage of beaches with the Region perhaps able to supply only sixty per cent of that needed according to the standards adopted i n the Plan. 94 The Tsawwassen Beach proposal was not the most attractive "beach nor located as close to large population concentrations as some others. Thus i t was considered to be of secondary p r i o r i t y f o r development; f o r t h i s study i t was assumed that the f i r s t stage of the proposed Tsawwassen Beach would be operational by 1981. Benefit-Cost Analysis of the Recreation Proposal As with the port development, the procedure i n t h i s study was to f i r s t produce forecasts of the recrea-t i o n demand at Roberts Banks; th i s was followed by a description of design and estimated costs. Benefits were then evaluated. A P r o v i n c i a l point of view was also taken i n i t i a l l y i n the analysis of t h i s proposal. Forecasts of recreation demands. The Regional Parks Plan and the Outdoor Recreation Resources Review Commission reports provide estimated p a r t i c i p a t i o n rates per capita f o r major outdoor recreations, such as swimming, at h l e t i c s , etc. However, two d i f f i c u l t i e s arise with these figures. The f i r s t i s that they apply only to 20 persons twelve years of age and over. For purposes of t h i s paper i t was assumed that these rates apply equally to persons under twelve years of age. For a c t i v i t i e s such as hunting and boating t h i s i s incorrect; neverthe-95 less, f o r the sake of simplicity, these exceptions were ignored. The second problem i s that the t o t a l 'days' of recreation spent at a park cannot he computed by adding together the estimated 'days' of p a r t i c i p a t i o n i n each major a c t i v i t y . This i s because the above studies were primarily interested i n determining the popularity of each a c t i v i t y , hence a person could be credited with several 'activity-days' i n one chronological day. Por example, a person who picnics at a beach and who also spends a s i g n i f i c a n t time swimming there would be credited 21 with two activity-days, though having made only one v i s i t to that park and having spent only one 'recreation-day' as defined i n t h i s paper. To add the benefits of both a c t i v i t i e s together would seem to be a form of double counting, though c l e a r l y a t r i p that permitted both a c t i -v i t i e s i s probably worth more than a t r i p permitting only one of them. To solve t h i s d i f f i c u l t y the approach that was used i n an evaluation of recreation i n Boundary Bay was taken. In the report, Waterfowl i n the Boundary Bay  Area, i t was suggested that a c t i v i t i e s l i k e l y to be com-bined i n one outing should be grouped and the highest p a r t i c i p a t i o n rate f o r one of the constituent a c t i v i t i e s should be taken as the p a r t i c i p a t i o n rate f o r the group as 96 22 a whole. Thus, f o r example, swimming and picnicking were combined i n one group and the t o t a l number of recreation-days was forecast on the basis of the p a r t i c i -pation rate f o r swimming, the most popular of the two. 'Fishing', 'boating' and 'water sports' were also combined as a group. 'Sightseeing' and 'nature study' and ' s t r o l l i n g ' also seem to be d i f f i c u l t to separate and were grouped f o r t h i s study. It i s obvious that these a c t i v i t i e s are not always combined on the same day. Fishing and boating do occur independently of one another some of the time; to the extent t h i s i s true the forecasts tend to be low. How-ever, t h i s can be p a r t l y balanced by c r e d i t i n g any f a c i l i t y that permits a variety of a c t i v i t i e s with a higher value per recreation-day. Following t h i s approach, the f i r s t step i n e s t i -mating recreation demand was to project the current p a r t i c i p a t i o n rates to be used f o r each a c t i v i t y group, 23 given i n the Regional Parks Plan, into the future to r e f l e c t changing lei s u r e time, income, and mobility factors, a l l of which are increasing and which, i n the seven years since the Outdoor Recreation Resources Review Commission studies were completed, are shown to have had even greater effects than foreseen. The estimate was that 97 p a r t i c i p a t i o n rates w i l l r i s e about twenty per cent between 1965 and 1985, and an additional twenty per cent i n the period 1985 to 2000. These rates were then applied, by 5-year increments to the projected yearly increases i n the t o t a l regional population i n order to forecast the t o t a l regional demand fo r each a c t i v i t y group (See Table 4). Yearly population forecasts were calculated by assuming that there would be a constant geometric rate of gain i n each 5-year forecast period given i n Lower Mainland Regional Planning Board 24 population projections. Part of t h i s gross regional demand then had to be assigned to Tsawwassen Beach. However, t h i s could not be done outside the regional context. Without some knowledge of overall recreation resources and the intended schedulin of t h e i r development, such an assignment was not possible. On the other hand, i f i t were assumed that Tsawwassen was to be the only regional beach, then a saturation capacity fo r each a c t i v i t y group would be estimated, since demands would f a r exceed t h i s single development's capacity, as i s clear from the forecast regional demand shown i n Table 4. The following l i s t gives the shares, by a c t i v i t y group, of the t o t a l forecast regional demand .  99 assumed would be s a t i s f i e d at Tsawwassen Beach, i n l i g h t of the alternative opportunities f o r pursuing these a c t i v i t i e s . 1. Beach, swimming, and picnicking. Ten per cent of regional demand. This i s less than i t s proportion of t o t a l potential beach area i n the region but i t i s more distant from population centres and would have competition from much larger developments of a similar nature at Boundary Bay. 2. Sightseeing, nature study, s t r o l l i n g . Five per cent of regional demand because much p a r t i c i p a t i o n i n these a c t i v i t i e s occurs outside formally constituted parks. 3. Boating and f i s h i n g . A rough guess of f i v e per cent due to the exposure of the adjacent waters to strong winds even i n good summer weather, and the a v a i l a b i l i t y of alternative protected boating and f i s h i n g waters i n Howe Sound and English Bay. 4. Hunt ing. This a c t i v i t y requires an extensive area i f the quality of the sport i s to be maintained. Thus i t was assumed that the area developed for shooting would be managed so that no more than 50,000 'hunting-days' per year would be permitted. Since hunting opportunities rapidly diminish i n a heavily populated area i t was assumed saturation would be reached i n the f i r s t year of operation of the park. These percentages were applied to the t o t a l fore-cast regional demand i n Table 4 to y i e l d the Tsawwassen Beach estimates of annual 'recreation-days' shown i n Table 9. Omitted from these estimates are projections of 100 t o u r i s t use simply because there i s l i t t l e l o c a l informa-tio n : i t i s thought by the writer that t h i s area might draw considerable numbers of v i s i t o r s from Washington State, f o r example. Posts of the recreation proposal. The proposed Tsawwassen Beach consisted, i n schematic form (see Pigure 5), of an expanded north face of the Perry Causeway, a two mile long dredged beach reaching northward approxi-mately along the existing high water'line, and a new breakwater on the north, p a r a l l e l to the present causeway, with a dredged beach on i t s south face. The beach areas were assumed to be at least 1,000 feet wide with another 200 feet between the new low and high water l i n e s (assuming a 1:20 slope and a t i d a l range of about 10 f e e t ) . Areas dredged f o r beach f i l l would p a r a l l e l the beach and provide some water areas of swimming depth at a l l t i d a l l e v e l s . The area contained between the cause-ways could be dredged and b u i l t up i n a way that would permit i n s t a l l a t i o n of hunting 'blinds', and which would add to the area having the extra water depth necessary f o r the growth of eel grass which supports and provides habitat f o r crabs, s h e l l f i s h , geese and other waterfowl. Boat-launching f a c i l i t i e s at the offshore ends of each 1*.S> A, 101 causeway would provide water access f o r boating, f i s h i n g , and water skiing. 1. Project costs. On the basis of cost figures found i n the Preliminary F e a s i b i l i t y Study of the Proposed  Tsawwassen Marina Development and of cross-sections of the possible beach areas as outlined here, i t was very crudely estimated that the beaches with a l l u t i l i t i e s , roads, and parking areas could be b u i l t f o r about 81,000,000 per mile, on the average. The new north breakwater would, of course, be substantially more expensive, but f i l l i n g of the existing shoreline and inshore sections of the existing f e r r y causeway would be cheaper to develop because most of the area would require no protection, i t was assumed, from wave action. Other assumed construction costs as shown i n Table 5 would include six bath house-concession buildings at an assumed cost of $100,000 each. Land acquisition expenditures again involved an assumed $100,000 f o r purchase of r i p a r i a n rights to Indian Reserve lands at ten dollars per front foot. The opportu-n i t y costs of the t i d a l areas occupied, as with the port alternative, would be represented by the net benefits of the best alternative use of the r e s o u r c e — i n t h i s expressly limited example these are the estimated net benefits of the port proposal. 103 2. Associated costs. Other expenditures pre-requisite to achieving the forecast use of the park would include new road and interchange f a c i l i t i e s , "based on the assumption that access would be achieved predominantly by private automobile. Thus the cost schedule assumed the development of new roads to Ladner and to the South Delta r e s i d e n t i a l area, widening of Highway 17 to four lanes, an interchange at the base of the f e r r y causeway, and improvement of the interchange at the junction of Highway 17 and Highway 499. 3. Intangible costs. None were foreseen. Recreation scheme benefits. 1. Direct benefits. The benefits of recreation are exceedingly d i f f i c u l t to quantify. Por a long time they were simply treated as intangibles; a decision whether to develop the recreation potentials of a project then rested on public pressure or on value judgements as to whether the recreation days and attractions foreseen j u s t i f i e d extra projects costs or reductions i n the primary outputs such as power generation or i r r i g a t i o n . Several forces led to ef f o r t s to f i n d a means to render recreation benefits a tangible item i n water resource development analyses so that they could d i r e c t l y 104 influence Benefit-Cost r a t i o s . One incentive probably-lay i n the fact that the U. S. National Park Service, and other agencies involved with recreation, found that they were being squeezed out i n interagency competition f o r government funds because of the vagueness of recreation 25 benefits. A second reason i s simply that i n many cases the recreation f a c i l i t i e s that were provided were f i l l e d and used to capacity much sooner than expected. 2^ More-over studies such as conducted by the Outdoor Recreation Resources Review Commission forecast a phenomenal growth f o r outdoor recreation and i t began to assume new impor-tance i n federal water resource development projects. Two years after the Outdoor Recreation Resources Review Commission findings were published, s p e c i f i c standards f o r evaluation of recreation were adopted by the four United States Government Departments most i n v o l v e d — the Departments of the Army, Agriculture, Interior, and Health, Education, and Welfare. An important q u a l i f i c a -t i o n regarding the standards adopted i s clear i n the following statement from Senate Document No. 97: "Pending the development of improved p r i c i n g and.benefit evaluation techniques, desirable uniformity i n the treatment of recreation i n the planning of projects and programmes and i n cost allocations w i l l be accomplished through the application of unit values that r e f l e c t the consensus judgement of q u a l i f i e d technicians. The unit values per recreation day set f o r t h 105 herein are intended to measure the amount that the users should be w i l l i n g to pay, i f such payment were required, to a v a i l themselves of the project recreation resources."27 Thus, the recreation-day d o l l a r values that follow c l e a r l y are not intended to represent the t o t a l benefits of recreation. Many people argue that the intangible b e n e f i t s — h e a l t h , mental well-being—are more important. Nevertheless, unless some arbitrary value i s assumed, such as given below, the analyst can do l i t t l e more than estimate the number of recreation-days as an indication of output. The Supplement to Senate Document 97 provides ranges of values f o r two broad types of "outdoor recrea-t i o n day". The f i r s t of these types i s "general recreation", which i s to be valued at $0.50 to Si.50 per day. This group includes a c t i v i t i e s which attract the "majority of outdoor recreationists and which generally require the development and maintenance of convenient access and f a c i l i t i e s " . Examples are picnicking, swimming, hiking, sightseeing, etc. The second type i s termed "specialized recreation". This group "involves those a c t i v i t i e s f o r which opportu-n i t i e s , i n general, are limited, intensity of use i s low, and often may involve a large personal expense by the user". The value range i s set at $2.00 to $6.00 per day. 106 Examples are big game hunting and long range boat cruises i n scenic waters. The Supplement b r i e f l y discusses c r i t e r i a to be used to select a s p e c i f i c value f o r each a c t i v i t y . General a c t i v i t i e s would be given a value of $0.50, fo r example, i f only access and a minimum of f a c i l i t i e s are provided. The more d i v e r s i f i e d the recreation available and the greater the quality and range of services provided the greater the valuation f o r recreational use. Special-ized recreation i s valued c h i e f l y according to extensive-ness or low-density of use. Other c r i t e r i a , unassociated with s p e c i f i c development ef f o r t s f o r recreation, affect the valuation. Thus factors such as the aesthetic quality of the surroundings, the chances of catching f i s h or shooting game, the climate, the a v a i l a b i l i t y (or lack) of alternative areas f o r the a c t i v i t i e s , and the occurrence of unique or special attractions a l l influence the money value applied to the recreation-day i n a s p e c i f i c setting. The values applied to Tsawwassen Beach recreation a c t i v i t i e s , and the reasoning behind the selections, i s summed up as follows: a. Beach, swimming, and picnicking. Tsawwassen Beach would have good clean sand and water (assuming sewage discharges are controlled i n the Praser River). It would be 107 developed to a high standard with a f u l l range of services; i t would have attractive views of water and mountains, good climate, and a f a i r l y broad range of water-based recreation a c t i v i t i e s .around the year. Valuation: $1.50 per recreation-day. b. S t r o l l i n g , sightseeing, nature study. As the Beach would be too distant from population f o r substantial foot access and as there are a number of other areas more l i k e l y to attract bird-watchers and sightseers t h i s a c t i v i t y group was given a median value of $1.00 per day at Tsawwassen Beach. c. Boating and f i s h i n g . This group of a c t i v i t i e s would benefit by the some-times excellent salmon f i s h i n g i n the immediate offshore waters and i n the access provided to the excellent boating and f i s h i n g waters on the Gulf Islands. However, since these Islands are twenty miles distant and the adja-cent waters are unsheltered from winds, a middle value of $4.00 per recreation-day was selected. d. Waterfowl hunting. Waterfowl shooting i n the Roberts Bank area does not y i e l d geese and ducks i n the same numbers as Sturgeon Bank and Boundary Bay. However, i f controlled hunting areas were available, these would do much to offset the smaller numbers of desirable species of game birds. Therefore a value of $4.00 per day was selected f o r Tsawwassen Beach. These values were applied to the 'recreation-day' estimates i n Table 9 to provide a d o l l a r value estimate fo r some of the direct benefits of the recreation project. 108 2. Secondary benefits. It i s often argued that the intangible recreation benefits of improved physical and mental health manifest themselves i n econo-mic secondary benefits. H a l l suggests, i n The Hidden Dimension, that overcrowding contributes to delinquency, 30 sexual deviations, violence, and crime. I f t h i s i s true, open space and high quality recreation opportunities should hold the costs of police, s o c i a l services, hospi-t a l s and i n s t i t u t i o n s and other services below what would otherwise be the case. Additional secondary benefits also accrue, i t i s argued, by improved productivity of people at t h e i r employment and fewer accidents after a holiday involving 31 outdoor recreation. The extent of t h i s benefit would vary, of course, from person to person and i s probably interdependent with many other l i v i n g and working condi-tions. It i s doubtful that even the computer w i l l ever be able to sort out th i s maze of variables i n order to provide a monetary value f o r a l l these benefits of recreation. Other secondary benefits possibly accrue i n terms of the economic a c t i v i t y stimulated i n and around the Beach and increases i n net incomes. But whether these are to be counted depends on the viewpoint. With a 109 p r o v i n c i a l point of view, i f a new park attracts p r o v i n c i a l residents who, i n i t s absence, would have v i s i t e d a recreation f a c i l i t y elsewhere i n the Province, then no new net benefit i s created, even though the income generated may go to a different set of individuals. Moreover i t i s clear that a large part of the recreation expenditures would be made, anyway, during a normal day; for example, a roughly equivalent amount of food would be consumed whether eaten at home, purchased en route, or bought and eaten at the recreation s i t e . In the case of v i s i t o r s from outside the Province and attracted solely by the beach f a c i l i t y , a l l net income forthcoming could be attributed to the project. However, most v i s i t o r s would be i n the Region f o r a number of reasons; hence, only very extensive surveys and tests would permit an estimation of the values attributable to any one f a c i l i t y such as the proposed Tsawwassen Beach. Since only l o c a l use of the proposed beach was estimated, i t was assumed that no secondary benefits from these sources would be induced. Gross expenditure would l i k e l y be the same with or without the project. land values may r i s e i n response to the demand engendered by those who prize commercial or r e s i d e n t i a l 32 s i t e s near recreation f a c i l i t i e s ; but i n a metropolitan 110 region many factors influence land p r i c e s — a c c e s s , population growth, recreation, development by-laws, quality of the land, opportunities f o r alternative uses, speculation—and i t i s extremely d i f f i c u l t to forecast 33 the incremental value attributable to the Beach project. ^  Thus no estimation of t h i s value, i f any, was included, fo r i t may be completely i l l u s o r y i f the attributable increments would have occurred anyway, either near the si t e or elsewhere i n the region. Findings of the Analysis The f i r s t step taken i n reviewing the analysis was to calculate the Benefit-Cost r a t i o of each project on the basis of the i n i t i a l assumptions. Direct and secondary benefits and costs f o r each project, expressed i n current d o l l a r values, were set fo r t h i n Tables, by year. Present values f o r these were then calculated, using present value tables and assuming a discount rate of six per cent; these were then summed to give a cumulative t o t a l present value f o r each class of benefits and costs. The results f o r the port proposal are shown i n Tables 6 and 7, and those for the recreation proposal i n Tables 8 and 9. To simplify the work, only the benefits and costs to the year 2000 were considered, a factor which may be important to the calculated r a t i o s and which i s discussed l a t e r . It was I l l also assumed that there was no i n f l a t i o n , hut t h i s offers no r e a l problems as long as costs and a l l benefits, 34 present and future, are treated i n the same way. The cumulative t o t a l present values of the costs and benefits of the port and recreation proposals were as follows: Port p r o p o s a l — Total tangible costs = $ 33,951,000 (Table 6) Total tangible benefits = $101,567,000 (Table 7) Net benefits equal $101,567,000 le s s $ 35.951.000 $ 67,616,000 Recreation p r o p o s a l — Total tangible costs = $ 5,841,000 (Table 8) Total tangible benefits = $ 41,911,000 (Table 9) Net benefits equal $ 41,911,000 less $ 5,841,000 $ 56,070,000 Port proposal Benefit-Cost r a t i o . The port project Benefit-Cost r a t i o was calculated from the t o t a l tangible benefits and costs and by using as the measure of the opportunity cost the necessarily s a c r i f i c e d net benefits of the recreation proposal. The inclusion of the net benefits of the recreation proposal as the measure of the opportunity cost of using the site f o r the port develop-ment was based on the assumptions that the recreation project was the best alternative use of the s i t e , that 114 the recreation scheme as outlined i s the most e f f i c i e n t recreation design for the s i t e , and that the two projects are mutually exclusive. The r a t i o (R) was: £ t o t a l tangible port benefits  ~ t o t a l tangible port costs + opportunity costs 1101,567,000  ~ $33,951,000 + $36,070,000 R = 1.46 The intangible benefits and costs and unmeasured net secondary benefits that must be appended to the r a t i o are: 1. Costs: possible p o l l u t i o n and waterfowl losses (Table 3)• 2. Benefits: possible economic growth through port-induced i n d u s t r i a l develop-ment adjacent to the port area. Recreation proposal Benefit-Cost r a t i o . The recreation r a t i o was calculated as f o r the port project, except that i n t h i s case the opportunity cost of using the t i d a l f l a t s f o r the recreation scheme was represented by the net benefits expected from the port project. Once again, t h i s procedure assumed that the port project was the best alternative use, that the hypothetical port design presented e a r l i e r was the most e f f i c i e n t possible, and that the two projects were mutually exclusive. 117 The r a t i o (R) was: _ t o t a l tangible recreation benefits  ~~ t o t a l tangible recreation costs + opportunity costs 841,911,000  ~ 85,841,000 + $67,616,000 R = 0.54 The intangible benefits and costs and unmeasured net secondary benefits that must be appended to t h i s r a t i o are: 1. Posts: none foreseen. 2. Benefits: improvements i n physical and mental health with reductions i n the incidence of s o c i a l disorders; improved work ef f i c i e n c y , reduced p o l i c i n g and hospital costs; revenues from out-of-provinee t o u r i s t s and from those who would otherwise t r a v e l outside the Province. To sum up, the two hypothetical Benefit-Post models showed quite different c h a r a c t e r i s t i c s . The port project,-while i t would require a large investment i n direct and associated costs, would y i e l d benefits three times as great. Its r a t i o of 1.46 i s favourable. The recreation project on the other hand would require a r e l a t i v e l y small investment for development and operation and would produce very substantial benefits r e l a t i v e to t h i s investment. However, the scale of the port project i n d o l l a r terms was so great that i t s net benefits dwarfed the recreation 118 scheme's net b e n e f i t s , so t h a t a v e r y u n f a v o u r a b l e r a t i o of 0.54 r e s u l t e d . I n o r d e r t o produce a r a t i o of j u s t 1.0 f o r t h e r e c r e a t i o n p r o p o s a l the i n t a n g i b l e and unmeasured secondary b e n e f i t s would have t o be c r e d i t e d w i t h a v a l u e of $32,546,000 ( i . e . $67,616,000 + $5,841,000—$41,911,000) i n o r d e r t o produce a r a t i o of 1.0. T h i s sum i s a p p r o x i -m a t e l y e q u a l t o s e v e n t y - f i v e p e r cent of the t a n g i b l e b e n e f i t s and would l i k e l y be d i f f i c u l t t o j u s t i f y . Thus, under th e s e assumptions, the r e c r e a t i o n scheme must be r e j e c t e d , on economic grounds at l e a s t . I t i s not suggested t h a t t h e s e h y p o t h e t i c a l r a t i o s are t r u l y r e p r e s e n t a t i v e of the r e l a t i v e b e n e f i t s and c o s t s of the two p r o j e c t s . As was s t a t e d i n the i n t r o d u c -t i o n t o t h i s Chapter, the purpose of the f o r m u l a t i o n and a n a l y s i s of the a l t e r n a t i v e s was not t o t r y t o achieve a dependable r a t i n g of t h e two a l t e r n a t i v e s . R a t h e r , t h e v a l u e of t h i s a n a l y s i s s h o u l d l i e i n r e v e a l i n g the c o n d i -t i o n s r e q u i r e d t o a p p l y the B e n e f i t - C o s t t e c h n i q u e , and i n d e m o n s t r a t i n g the e x t e n t t o which t h e s e c o n d i t i o n s p e r m i t a r e l i a b l e a l l o c a t i o n of r e s o u r c e s , u s i n g the t e c h n i q u e . However, the r a t i o s d i d p r o v i d e a s t a r t i n g p o i n t from which t o examine changes i n assumptions and approach. D i s c u s s i o n of t h r e e such p o s s i b l e a l t e r n a t i v e s 119 follows, after which several important general observa-tions about the analysis are made. Alternative Assumptions Alternative provision of port f a c i l i t i e s . One of the governing assumptions i m p l i c i t i n the analysis to th i s point was that the port and recreation proposals represent an "either-or" situation. That i s , the calcu-l a t i o n of Benefit-Cost r a t i o s contained the assumption that the choice of one project meant that the t o t a l net benefits of the other were s a c r i f i c e d . What happens to the evaluation when t h i s s t r i c t assumption i s relaxed? This question could only be answered adequately by making a f u l l appraisal of the Region's capacities f o r meeting i t s port and recreation needs and determining the costs and benefits of alternative opportunities. By way of example, however, an equal area of t i d a l f l a t l i e s immediately north of the s i t e and offers v i r t u a l l y the same potential f o r port development. This area has similar road and r a i l access p o s s i b i l i t i e s and i s also adjacent to deep offshore waters. The only differences seem to be that s o i l conditions might be s l i g h t l y less favourable and that i t , of course, lacks a pre-existing causeway (the existence of the fe r r y causeway at the 120 f i r s t s i t e was expected to reduce costs somewhat f o r both the port and recreation developments). If i t i s assumed that use of t h i s new s i t e would s a t i s f y the bulk port f a c i l i t y requirements f o r the coal and other commodities, then dedication of the f i r s t s i t e to recreation would involve no opportunity cost i n s a c r i f i c e d port benefits, while use of the new s i t e for port purposes would avoid a s a c r i f i c e of the potential recreation benefits. The opportunity costs i n al l o c a t i n g the s i t e s to recreation and port uses would then be represented by the net benefits of the t h i r d best potential use of one of the s i t e s . I f there i s no such "t h i r d best use" then the Benefit-Cost ra t i o s can be recalculated with zero opportunity costs. The res u l t i n g r a t i o s were: 1. f o r the port development: p 1101,567,000 * " $ 33,951,000 + $0.00 = 3.0 2. f o r the recreation development: 121 But a situation such as t h i s no longer represents, a waterfront a l l o c a t i o n problem; the recreation and port requirements are both s a t i s f i e d and there i s no alterna-tive use competing f o r one of the s i t e s . Thus there i s no shortage and no alloc a t i o n decision. The ratios might now be useful, however, i n budgeting f i n a n c i a l resources so that they are used f i r s t f o r the most advantageous project. If a t h i r d alternative use does exist f o r either of the s i t e s then the net benefits i t could y i e l d repre-sent the opportunity cost that must be used i n calcul a t i n g each of the r a t i o s . Thus, i t was assumed that such an alternative existed and that i t s net benefits would be approximately equal to eighty per cent of the net benefits of the recreation scheme, or $30,000,000. The resu l t i n g Benefit-Cost r a t i o s were: 1. for the port development: p _ m $101,567,000  * ~ $33,951,000 + $30,000,000 R - 1.59 2.- f o r the recreation development: p _ „ $41,911,000  * ~ $5,481,000 + $30,000,000 R = 1.18 122 These changes i n "basic as sumptions d r a m a t i c a l l y i n f l u e n c e d the r a t i o s that r e s u l t e d . In the f i r s t case the p o r t p r o j e c t r a t i o rose from 1 .46 t o "5.0, while the r e c r e a t i o n p r o p o s a l r a t i o s h i f t e d from an unfavourable O .54 t o a h i g h l y favourable 7 . 7 . In the second case, the r a t i o s rose t o 1 .59 and 1.18, r e s p e c t i v e l y . The l a t t e r was most i n t e r e s t i n g as i t i n v o l v e d an a l l o c a t i o n s i t u a -t i o n i n which the r e c r e a t i o n p r o p o s a l became an economi-c a l l y j u s t i f i a b l e a l t e r n a t i v e . Again, i t should be noted that i t was not the a c t u a l r a t i o s that are s i g n i f i c a n t but, r a t h e r , that such major changes i n the r a t i o s could be brought about by changing the assumption that the two p r o p o s a l s could not both be accommodated. The B e n e f i t - C o s t approach, when r i g o r o u s l y a p p l i e d , f o r c e s the analyst t o search out other a l t e r n a t i v e s and o p p o r t u n i t i e s . Here i t helped develop a more comprehen-s i v e treatment of waterfront use than e x i s t e d at the beginning of t h i s a n a l y s i s , and demonstrated these e f f e c t s by means of r a t i o s r a t h e r than by q u a l i t a t i v e d e s c r i p t i o n s . A l t e r i n g the viewpoint. The d i s c u s s i o n i n Chapter I I p o i n t e d out that the e v a l u a t i o n context or p o i n t of view was c r i t i c a l t o d e c i s i o n s r e g a r d i n g the r e l e v a n c y of b e n e f i t s and c o s t s ; that i s , whether they are r e a l or whether they are simply ' t r a n s f e r s ' from one p a r t of the 123 Province to another. The analysis of the two proposals presented i n t h i s Chapter was based on a P r o v i n c i a l point of view, as noted e a r l i e r . But what happens when the point of view i s changed? When a Regional viewpoint i s substituted f o r the P r o v i n c i a l viewpoint the following implications are apparent: 1. The recreation project benefits tend t o ; increase because the secondary income generated by v i s i t o r s from within the Province, but outside the region, would now be admissible. Direct benefits, tangible and intangi-ble, remain the same. 2. Recreation project costs would remain the same, since they are borne within the region. 3. The most important direct and secondary bene-f i t s of the port project devolved on the mining and sale of coal (Table 7). These benefits would predominantly accrue to the shareholders i n the coal companies, t h e i r employees, and the l o c a l economies i n south-eastern B. C ; most of these benefits would no longer be relevant to the analysis (some income and dividends would undoubtedly appear i n the Lower Mainland). Secondary benefits within the Region due to port operation and investment i n f a c i l i -t i e s would remain. 124 4. The d i r e c t costs of the port are assumed to f a l l mainly on the Province as a whole, but perhaps h a l f of these costs are a c t u a l l y borne by Lower Mainland tax-payers, assuming P r o v i n c i a l tax revenue i s c o r r e l a t e d with population. The Benefit-Cost r a t i o s , i f c a l c u l a t e d under these circumstances, would thus be quite d i f f e r e n t . The port r a t i o would l i k e l y f a l l below one t o one, the minimum l e v e l of economic j u s t i f i c a t i o n of a p r o j e c t . This would of course r e s u l t from the f a c t that many of the d i r e c t and secondary b e n e f i t s would no longer be relevant and, though the d i r e c t costs f o r the port might be halved, the opportunity cost of the s a c r i f i c e d net b e n e f i t s of the r e c r e a t i o n scheme would be greater. On the other hand, the r e c r e a t i o n r a t i o would r i s e because of the increased secondary b e n e f i t s and the reduced opportunity costs. (The opportunity costs would f a l l because the now relevant net b e n e f i t s of the port p r o j e c t would be s m a l l e r ) . To i l l u s t r a t e t h i s , the r a t i o s were r e c a l c u l a t e d . I t was assumed that the b e n e f i t s and costs of the recrea-t i o n scheme remained the same but that the secondary bene-f i t s and one-half the d i r e c t b e n e f i t s of the port scheme were no longer r e l e v a n t . Port costs a t t r i b u t a b l e t o the region were assumed to be about one-quarter of the t o t a l 125 ( a l l values being expressed i n present values). The resul t i n g r a t i o s were: a. f o r the port proposal: T, _ 50$ of the direct benefits  ~ 25% of t o t a l costs + opportunity cost „ $20.100,000 (Table 7) = $8,488,000 + $36,070,000 (Table 6) R = 0.45 b. f o r the recreation proposal: R _ $41,911,000  $5,841,000 + opportunity cost $41,911,000  " $5,841,000 + $11,612,000 R = 2.39 It i s apparent that the changes i n relevant values f o r the port scheme greatly reduced the net benefits, thus the opportunity cost against the recreation scheme was greatly reduced, producing a much larger r a t i o . The change i n viewpoint reversed the r e l a t i v e d e s i r a b i l i t y of the two projects compared to that indicated by the o r i g i n a l Benefit-Cost r a t i o s . Prom a Regional viewpoint, the recreation project appears most desirable. This leaves a fundamental ch o i c e — a r e Regional or Province-wide interests to prevail? Can a balance be achieved? It i s obvious, i f Benefit-Cost analysis proceeds 126 from a P r o v i n c i a l point of view, that under extreme conditions port and i n d u s t r i a l development of a l l the regional waterfront might he ' j u s t i f i e d ' unless more weight can he given to the intangible benefits of recrea-t i o n . On the other hand, a regional viewpoint might be 'inequitable' i n the d i s t r i b u t i o n of incomes and opportu-n i t i e s to people outside the region. 35 Quite c l e a r l y , as pointed out by K r u t i l l a , J the Benefit-Cost approach does not solve t h i s problem of achieving equitable d i s t r i b u t i o n of incomes and opportuni-t i e s , a problem which must be faced i n Urban and Regional Planning. The objectives of Benefit-Cost analysis may be to maximize net national, p r o v i n c i a l , or l o c a l 'welfare*, but the technique does not provide a measure of ' d i s t r i b u -t i o n equity'. However, the approach, i n demonstrating these differences i n d i s t r i b u t i o n of the benefits and costs for different alternatives.and the consequences of changing basic assumptions about point of view, serves a useful purpose. Timing d i f f i c u l t i e s . A characteristic of projects or programmes i s that costs and benefits flow i n different 'time streams' as can be seen i n Tables 6 to 9. In order to compare values expected to occur at different dates i n the future, they are discounted to the same base year at 127 a discount rate representing the rate of return that could be earned i f c a p i t a l were employed i n i t s next "best use. It i s also generally ch a r a c t e r i s t i c that costs precede the "benefits they produce, and that the further i n the future a benefit i s expected, the smaller i t s present value. Thus, the e a r l i e r a project i s undertaken r e l a t i v e to another, the higher the Benefit-Cost r a t i o tends to become— benefits attain greater significance. Conversely, i f a project i s delayed, the r a t i o tends to f a l l . The exact effects cannot be predicted f o r they depend on the p a r t i -cular d i s t r i b u t i o n of benefits and costs over time and the discount rate that i s used. The assumption that the recreation development would begin i n 1981 was based on the Regional Parks Plan proposals which gave other parks pr i o r i t j r because of t h e i r quality, t h e i r location closer to population centres, and the types of recreation a c t i v i t i e s they could provide. However, i f development were to commence i n 1971 rather than i n 1981, then the Benefit-Cost r a t i o would r i s e because the benefits would be greater. This i s demonstrated i n Tables 8 and 9 which give the benefit and cost 'time streams' f o r the recreation development. The 1971 present values were calculated, assuming commencement f i r s t , i n 1981, and second, i n 1971. The r a t i o found i n the f i r s t 128 case was 0.54, and i n the second, 1.21, calculated as follows: p $94,510.000, * " $10,733,000 + $67,616,000 = 1.21 Such a change i n the r a t i o would influence the rating of any other proposal f o r the s i t e since the net benefit of t h i s proposal, the recreation scheme, represents the opportunity cost of al l o c a t i n g the waterfront to an a l t e r -native use. Thus, since the estimated net benefits of the recreation development increased when the project was scheduled e a r l i e r , the opportunity cost of the port pro-posal increased and the port Benefit-Cost r a t i o f e l l from the previous l e v e l of 1.46 to 0.86, calculated as follows: R _ $101,567,000  $33,951,000 + 1971 opportunity cost $101.567,000  ~ $33,951,000 + $83,777,000 R = 0.86 Prom t h i s i t was concluded that Benefit-Cost analysis tends to favour more immediate developments, a factor that has major implications f o r long-range planning and the conservation of natural resources. Hence, decisions as to timing and long-range point of view must be based on a 129 comprehensive assessment of o v e r a l l waterfront needs and the resources a v a i l a b l e t o meet these needs, and cannot r e l y s o l e l y on Benefit-Cost a n a l y s i s which c a r r i e s a b i a s towards short-run gains. Problem of I n t a n g i b l e s In the a n a l y s i s of the two development proposals c e r t a i n i n t a n g i b l e b e n e f i t s and costs were noted; a l l that could be done with them i n the Benefit-Cost r a t i o c a l c u l a -t i o n was t o l i s t them as p o s i t i v e or negative f a c t o r s . But Chaper I I noted that these i n t a n g i b l e s may sometimes be of equal or greater importance than the t a n g i b l e b e n e f i t s and c o s t s . How then can i n t a n g i b l e s be handled, i f at a l l , i n the a p p l i c a t i o n of Benefit-Cost a n a l y s i s t o waterfront a l l o c a t i o n ? The major i n t a n g i b l e b e n e f i t s found i n the a n a l y s i s were the p s y c h o l o g i c a l , s o c i a l , and economic advantages that would accrue to i n d i v i d u a l s and s o c i e t y from the u t i l i z a t i o n of the r e c r e a t i o n proposal. The major i n t a n g i -ble costs pertained to p o l l u t i o n dangers and p o s s i b l e w i l d l i f e l o s s e s a t t r i b u t a b l e to the port proposal. Thus, the r e s u l t s of the a n a l y s i s (under the i n i t i a l assumptions) gave the f o l l o w i n g r e l a t i v e r a t i n g s : Port proposal 1.46 minus Recreation proposal 0.54 plus 130 How i s a choice between the two to be made, on the basis of these indeterminate results? An i n t u i t i v e judge-ment could be made as to whether the recreation intangibles 1 are large enough to reverse the r e l a t i v e Benefit-Cost r a t i o s . But t h i s can't be done e a s i l y because of t h i s second 'unknown', the minus intangibles accruing to the port f a c i l i t y . I f either of these were 'measurable'—that i s , quantifiable i n some physical unit rather than money— then i t might be possible to proceed further. A range of money values per physical unit of each could be tested to determine how high a value would be necessary to change the r e l a t i v e ' p r e f e r a b i l i t y ' of the two. The value could then be examined to decide whether or not i t seemed 36 reasonable. But even more i n t r i c a t e waterfront a l l o c a -t i o n problems are l i k e l y ; both the number of competing uses and the variety of intangible costs and benefits could be greater. It seems clear that the above t r i a l and error process would not work very well when faced with a number of positive and negative intangible effects that are quite different i n nature. The two proposals were selected to place maximum stress on the Benefit-Cost technique. Less s t r a i n would be placed on the technique where, for example (l) the problem i s to decide which kind of port development, or 1 3 1 i t s s c a l e , would be the most e f f i c i e n t f o r a g i v e n s i t e , or (2) the problem i s t o choose the, best s i t e f o r a ' r e q u i r e d ' p o r t f a c i l i t y f rom amongst s e v e r a l p o s s i b l e s i t e s . In the o p i n i o n of the w r i t e r , an i m p l i e d a l l o c a -t i o n of wate r f ron t r e s o u r c e s t o p o r t use i s i nheren t i n both c a s e s . That some a rea of wate r f ron t shou ld be used f o r p o r t f u n c t i o n s has a l r e a d y been dec ided and the p r o b -lem r e m a i n i n g i s s imply t o f i n a l i z e the d e t a i l s of the p r o j e c t . At t h i s s u b - a l l o c a t i o n l e v e l i n t a n g i b l e b e n e f i t s and c o s t s would l i k e l y be s i m i l a r because the nature of the use i s the same. The s i z e of the e f f e c t s would v a r y i n p r o p o r t i o n t o the s c a l e of the p r o j e c t but would be of the same d i r e c t i o n and k i n d ; thus they would be e a s i e r to h a n d l e . Hence, one important o b j e c t i o n t o B e n e f i t - C o s t a n a l y s i s — i t s f a i l u r e t o accommodate i n t a n g i b l e s s a t i s f a c -t o r i l y — w o u l d be min imized at t h i s l e v e l . In genuine w a t e r f r o n t a l l o c a t i o n p rob lems, as d e f i n e d i n t h i s p a p e r , the f a i l u r e of B e n e f i t - C o s t a n a l y s i s t o i n t e g r a t e i n t a n g i b l e b e n e f i t s and c o s t s i n t o the r a t i n g procedure i s a s e r i o u s weakness of the t e c h n i q u e . Background f o r B e n e f i t - C o s t A n a l y s i s The f i n a l o b s e r v a t i o n t o be d i s c u s s e d i n t h i s Chapter i s an important one. I t r e v o l v e s around the 132 question as t o whether the Benefit-Cost approach t o a l l o c a t i o n of waterfront demands some k i n d of background s e t t i n g . I n i t i a l l y , the i d e a of determining the b e n e f i t s and costs of some course of a c t i o n t o produce a measure of economic e f f i c i e n c y seems to imply a narrowness of approach. But when the d e f i n i t i o n s of 'benefit' and 'cost' are explored, t h i s conclusion i s l e s s probable; i t i s found that these are expressed i n terms of 'opportunity c o s t s ' . Thus, as explained i n Chapter I I , the r e a l ' p r i c e ' of p h y s i c a l resources, labour, or c a p i t a l i s what s o c i e t y s a c r i f i c e s i n g i v i n g up u n i t s of these f a c t o r s of produc-t i o n i n order t o achieve some a l t e r n a t i v e purpose or p r o j e c t . I n the a n a l y s i s i n t h i s Chapter frequent reference had been made to conditions and o p p o r t u n i t i e s elsewhere i n r e l a t i o n t o the Roberts Bank s i t e and the port and r e c r e a -t i o n proposals. Por example, i n v e s t i g a t i o n of the port f a c i l i t y ' s value was meaningless unless something were known of the p h y s i c a l and shipping c a p a b i l i t i e s of e x i s t i n g harbours, and of the r e l a t i v e t r a n s p o r t a t i o n conditions and costs t o Vancouver Harbour and Roberts Bank from the c o a l f i e l d s . As shown on previous pages, basic information was needed about a l t e r n a t i v e port s i t e s and t h e i r s u i t a b i l i t y 133 i f the opportunity cost of a l l o c a t i n g the Roberts Bank s i t e t o non-port a c t i v i t i e s was to be determined. The r e c r e a t i o n proposal a n a l y s i s demonstrated s i m i l a r background requirements. I t would not have been p o s s i b l e t o determine whether a beach at Roberts Bank would be needed, how a t t r a c t i v e i t was r e l a t i v e to other beach development o p p o r t u n i t i e s , what the r e g i o n a l demand f o r f a c i l i t i e s would be and the share that the s i t e would a t t r a c t , or the extent of present use of the s i t e area, without reference t o the framework provided by the Regional Parks Plan. These and many other data inputs had t o be provided from comprehensive studies or by assumptions. I n i t i a l questions about a l t e r n a t i v e port or r e c r e a t i o n developments required answers about the projected l e v e l of employment i n the c o a l r e g i o n or r e c r e a t i o n p o s s i b i l i t i e s i n the other parts of B. C. i n order t o evaluate secondary b e n e f i t s and costs and t o determine whether they were ' r e a l ' or to be c l a s s e d as mere ' t r a n s f e r s ' . The emphasis i n Benefit-Cost a n a l y s i s on i n v e s t i -g a t i n g a l l reasonable a l t e r n a t i v e s uncovers fundamental questions regarding one's viewpoint, f o r example, or the appropriateness of the d i f f e r i n g d i s t r i b u t i o n s of the b e n e f i t s and costs amongst i n d i v i d u a l s and agencies, produced by d i f f e r e n t proposals. 134 It was concluded that Benefit-Cost analysis was extremely useful i n bringing into the open important issues and information requirements even though i t was questionable whether, having been supplied with t h i s back-ground, the method could be r e l i e d upon to indicate the 'correct' a l l o c a t i o n of the s i t e amongst the competitors. Notes: ^"United States, National Recreation Survey, ORRRC Report 19, pp. 8-59. p United States, Department of the Interior, Bureau of Outdoor Recreation, Outdoor Recreation Trends, Washing-ton, D. C , Government Pr i n t i n g Office, 1967, p. 19. -IJower Mainland Regional Planning Board, Population  Trends 1921-1986, New Westminster. (Unpublished) ^"Lower Mainland Regional Planning Board, O f f i c i a l  Regional Plan f o r the Lower Mainland Planning Area, August, 1966. Measured from Canadian Hydrographic Service Charts. c Unpublished Report of June, 1966, concerning waterfowl habitat i n the Lower Mainland, provided by Canadian W i l d l i f e Service, Vancouver Regional Office f o r the Lower Mainland. 7 Lower Mainland Regional Planning Board, Waterfront  Land Study, 1966. o J . E. Armstrong, S u r f i c i a l Geology Vancouver Area, B r i t i s h Columbia, Department of Mines and Technical Surveys, 1956, on map attached, q Associated Engineering Services Ltd., Preliminary  F e a s i b i l i t y Study, Proposed Tsawwassen Marina Development, Municipality of Delta, 1966, and Swan-Wooster Engineering Ltd., North Fraser Harbour Development Plan, 1966. 135 Almost a l l information was derived from two dozen newspaper reports; about a dozen of the most useful have been included i n the Bibliography and are. not noted Other-wise. J . Southworth, Interview with the writer, December, 1967. 12 B r i t i s h Columbia Research Council, Vancouver  Harbour Tra f f i c . Trends and F a c i l i t y Analysis, Vancouver, 1967, p. 5. ^United States, Interagency Committee on Water Resources, op_. cit.', p.' 9. "^Renshaw, op_. c i t . , p. 657. 15 ^Eckstein, op_. c i t . , pp. 169-172. "^Canada, Economic Council of Canada, The Canadian  Economy from the I960's to the 1970* s, Ottawa, Queen's Printer, 1967, Fourth Annual Review, p. 241. 17 J . J. Southworth, op_. c i t . T O Lower Mainland Regional Planning Board, A Regional Parks Plan f o r the Lower Mainland Region, Mew Westminster Municipal Planning Service, 1966. 19 The writer was employed i n the Regional Parks Study and i n the selection of s i t e s . The statements given here are based on t h i s experience. 20 The p a r t i c i p a t i o n rates per capita as used i n the ORRRC Reports refer to the average number of times each person i s expected to engage i n a s p e c i f i c outdoor recrea-t i o n a c t i v i t y during the three summer months; these are expressed i n terms of the number of "activity-days". 21 United States, National Recreation Survey, op. c i t . 22 Hedlin, Menzies and Associates, Ltd., Waterfowl i n the Boundary Bay Area, 1967, p. 21. 23 ^Lower Mainland Regional Planning Board, A Regional Parks Plan, p. 23-24. 136 2d Lower Mainland Regional Planning Board, Popula- t i o n Trends 1921-1986. (unpublished). ^ U n i t e d States, Department of the Interior, The  Economics of Public Recreation, Washington, D. C , Land and Recreational Planning Division, National Park Service, 1949, p. 27. 2 6 I b i d . , p. 43. 27 United States, The President's Water Resources Council, P o l i c i e s , Standards, and Procedures i n the Formu- l a t i o n , Evaluation, and Review of Plans f o r Use and  Development of Water and Related Land Resources, Senate Document No. 97, 87th Congress, Supplement No. 1, p. 5. 2 8 I b i d . , p. 6. 2 9 I b i d . , p. 7. 5°E. T. H a l l , The Hidden Dimension, New York, -Doubleday and Co., 1966. ^1R. P. Mack and S. Myers, "Outdoor Recreation," Measuring Benefits of G-overnment Investment, edited by R. Dorfman, Washington, Brookings In s t i t u t i o n , 1965, p. 73' 32 •'United States Department of the Interior, Bureau of Outdoor Recreation, Recreation Land Price Escalation, Washington, D. C , Government Printing Office, 1967, p. 10, 33 -^Hedlin Menzies, op_. c i t . , p. 41. 34 ^ Sewell, op_. c i t . , p. 15. 5 5 J . V. K r u t i l l a , "Welfare Aspects of Benefit-Cost Analysis," Water Resource Development, edited by S. C. Smith and E. N. Castle, Ames, Iowa State University Press, 1964, p. 23. McKean, ojo. ext., p. 63. 137 IV. CONCLUSIONS: BENEFIT-COST ANALYSIS AND WATERFRONT ALLOCATION Chapter I started with a discussion of the value and importance of waterfront lands and ended with the statement that the purpose of t h i s paper was to i n v e s t i -gate the adequacy of Benefit-Cost analysis f o r allocation of waterfront amongst competing uses. Chapter II provided a "brief and necessary "background i n the theory and • methodology of the technique, while Chapter II involved a l a r g e l y hypothetical application of Benefit-Cost Analysis to a s p e c i f i c waterfront a l l o c a t i o n problem. It ended with a discussion of the usefulness and some of the d i f f i c u l t i e s encountered i n t h i s application of the technique. This l a s t Chapter consists of four parts, comprised of conclusions reached by the writer on the basis of the foregoing investigation. The f i r s t of these parts i s a statement of conclusions regarding the•strengths and weaknesses of the Benefit-Cost technique when i t s use as an a l l o c a t i o n device i s attempted. The second part stands back to examine the planning process i n i t s proper perspec-t i v e , and points up where Benefit-Cost Analysis might best f i t i n . Within t h i s framework, a possible alternative approach to long-range waterfront planning i s outlined b r i e f l y i n the t h i r d section. Fourth, and f i n a l l y , an 138 appropriate role for Benefit-Cost Analysis that emerges within the planning process i s summed up, and the hypo-thesis i s reviewed as to i t s v a l i d i t y and l i m i t a t i o n s . Strengths and Weaknesses i n Benefit-Cost Analysis It i s possible now to sum up general conclusions about the application of Benefit-Cost approach to water-front a l l o c a t i o n . Dealing with weaknesses f i r s t i t i s clear that: 1. Benefit-Cost r a t i o s are l i k e l y to change when the viewpoint or context f o r the analysis i s altered. The change may be substantial enough that the rating of a l t e r -natives according to t h e i r r a t i o s w i l l favour projects previously given low or negative ratings. Thus, i f confidence i n the outcome of Benefit-Cost analysis i s to be achieved, an acceptable point of view must f i r s t be established. This i s a function which the technique does not perform and which i s c r u c i a l to actual allocation. 2. Benefit-Cost analysis i s aimed at maximizing t o t a l 'welfare' within the area of application. But maximization of net benefits does not ensure equitable d i s t r i b u t i o n of the s p e c i f i c benefits and costs amongst individuals and groups, l o c a l i t i e s and regions. For example, when a P r o v i n c i a l point of view was adopted f o r the analysis, the secondary benefits of increased labour 139 employment and income i n t h e c o a l m i n i n g areas were an e x t r e m e l y i m p o r t a n t p a r t of the b e n e f i t s of the p o r t scheme. But would the r e s i d e n t s of the Lower M a i n l a n d s u f f e r a d i s p r o p o r t i o n a t e share of t h e d i r e c t c o s t s and r e c r e a t i o n l o s s e s of a l l o c a t i o n of R o b e r t s Bank t o t h i s purpose? On the o t h e r hand, when a R e g i o n a l v i e w p o i n t was a p p l i e d , the secondary b e n e f i t s t o workers i n t h e c o a l areas became extraneous and the r e c r e a t i o n a l t e r n a -t i v e won economic p r i o r i t y i n terms of i t s B e n e f i t - C o s t r a t i n g . I n t h i s case the miners s u f f e r t h e o p p o r t u n i t y c o s t of a l l o c a t i o n of R o b e r t s Bank t o r e c r e a t i o n . Which i s b e s t i n terms of d i s t r i b u t i o n of l o s s e s and g a i n s amongst areas and people? B e n e f i t - C o s t a n a l y s i s does not answer t h i s q u e s t i o n . Thus, i t i s c l e a r t h a t the t e c h n i q u e has no machinery f o r s e l e c t i n g p r o j e c t s t h a t are e f f i c i e n t b o t h i n terms of the s i z e of t h e net b e n e f i t s and t h e i r d i s t r i -b u t i o n . M a c h i n e r y must be found t o d e c i d e when economic e f f i c i e n c y must y i e l d t o e q u i t y c o n s i d e r a t i o n s . Only w i t h i n such a c o n t e x t can B e n e f i t - C o s t a n a l y s i s become m e a n i n g f u l . 3. The t i m i n g of a l t e r n a t i v e p r o j e c t s w i l l i n f l u e n c e t h e i r r e s p e c t i v e B e n e f i t - C o s t r a t i n g s . The p r e c i s e e f f e c t s w i l l v a r y a c c o r d i n g t o d i f f e r e n c e s i n the 1 4 0 'time stream' of future "benefits and costs. The "bias on immediacy may or may not correspond to the outlook of the community with respect to, f o r example, future conserva-t i o n values. This i s an issue which must "be decided f i r s t i f the Benefit-Cost findings of time-distant projects are to "be given proper weight i n al l o c a t i o n decisions. 4 . Benefit-Cost techniques are project-oriented, and do not lend themselves to long-range allocations of waterfront. When applied on a long range "basis, i n the absence of detailed project designs and data, the tech-nique has too few quantifiable elements with which to work, and has l i t t l e u t i l i t y . • 5 - The Benefit-Cost r a t i o can include only tangible costs and benefits. However, i t i s conceivable that intangibles could be equal to or more important than the tangible elements. In complex al l o c a t i o n problems the mixture of intangible benefits and costs of different types rules out simple cancelling or weighting of them. Thus, the Benefit-Cost r a t i o s f o r alternative uses of waterfront may misrepresent the true relationship of t o t a l benefits and t o t a l costs and, therefore, the r e l a t i v e d e s i r a b i l i t y of various projects. These problems, as noted e a r l i e r , are reduced when the alternatives are very similar. 1 4 1 6. It i s clear that Benefit-Cost analysis requires a broad background of information about resources, about the demands on them, and about the alternative ways of meeting these demands within the li m i t a t i o n s of available or potential resources. It was found that the technique was useful i n uncovering new alternatives, but i t seems an inadvisable r i s k to depend on t h i s approach to unveil a l l the suitable alternatives, or the most suitable alternative. Even though i t has been found that Benefit-Cost analysis cannot provide a basis f o r making an alloc a t i o n decision with confidence, the technique does have one great strength. In the process of systematically describing, quantifying, and, i f possible, valuing a l l the effects of a proposal and i t s alternatives, i t lays open to investigation a l l the implications and problems associated with the proposal. For example, the concept of opportunity cost,' not price per se, requires that a project be rated i n terms of competing demands that other users make or could make f o r the same resources. These advantages are perhaps best demonstrated by contrasting the technique with a purely f i n a n c i a l analysis i n which only the c a p i t a l , construction and maintenance and opera-t i o n costs are recorded on the cost side, and only the 142 incoming f l o w of funds to meet expenses and produce a p r o f i t i s shown on the b e n e f i t s i d e . Other uses and p o t e n t i a l values are t o t a l l y neglected by t h i s type of a n a l y s i s . Nevertheless, the Benefit-Cost technique approaches p r o j e c t d e c i s i o n s i n a backward fa s h i o n , i n that i t s t a r t s with the s p e c i f i c and p a r t i c u l a r f a c t o r s and moves to the more general and comprehensive i m p l i c a t i o n s . By c o n t r a s t , w i t h i n a planning perspective the necessary framework of knowledge about needs, resources, and i n t e r r e l a t i o n s h i p s between op p o r t u n i t i e s i s e s t a b l i s h e d f i r s t so that a l l i n v e s t i g a t i o n s may proceed d i r e c t l y t o the s p e c i f i c d e c i s i o n problems they face. But, i n the absence of t h i s  planning framework, adherence to Benefit-Cost procedures, honestly followed, tends to f o s t e r a more comprehensive approach than might otherwise be the case. The Planning Framework Chapter I I I c l e a r l y demonstrated that a broad background of information i s needed i f the questions posed i n Benefit-Cost a n a l y s i s are to be answered ade-quately. This 'information' however i s not simply data; i t includes i n t u i t i v e value judgements and choices as t o the goals of the community and the o b j e c t i v e s derived from these goals. Here Young's thoughts are u s e f u l t o 143 an understanding of the planning framework.1 He suggests that goal setting or the formulation of ideals, which we st r i v e f o r hut which may not he attained, comes f i r s t . Then must follow standards or measures that define these goals i n r e a l situations. It i s then possible to estab-l i s h s p e c i f i c objectives to which community action can be directed, and to then develop actual programmes, pro-jects, and p o l i c i e s to attain these objectives. Projects must be reviewed to check that they are relevant to the o r i g i n a l goals and objectives. This l e v e l of analysis i s essential i f the s o c i a l , economic, and physical resources of the community are to be given the comprehen-sive consideration they require. It i s suggested that t h i s framework i s applicable to waterfront a l l o c a t i o n and development decisions. I f Benefit-Gost analysis i s , as hypothesized, an adequate ^ technique f o r waterfront allocation, then, i t i s submitted, i t must be capable of replacing t h i s Planning framework. But the previous part of t h i s Chapter and the investiga-t i o n and conclusions of Chapter III demonstrate most c l e a r l y that while Benefit-Cost analysis may uncover some of the questions that t h i s planning framework i s intended to answer, the technique d e f i n i t e l y cannot provide solutions to these questions. 144 To. be more s p e c i f i c , while the application of the Benefit-Cost technique to different projects pointed to different Benefit-Cost d i s t r i b u t i o n s , i t offered no help i n deciding whether these differences were 'desirable' or •bad'. Decisions regarding the d e s i r a b i l i t y of 'balanced development' or 'the provision of a f u l l range of oppor-t u n i t i e s f o r l i v i n g , working, and playing' are at the l e v e l of goal selection and u n t i l these are established the results of Benefit-Cost analyses cannot be properly judged. To i l l u s t r a t e , i t was suggested i n Chapter III that Benefit-Cost analysis might continue to y i e l d ratios i n favour of additional port developments to the exclusion of recreation. Such a course would not be i n agreement with the goal of creating a 'balanced environment'. Thus i t was concluded that Benefit-Cost analysis cannot be r e l i e d upon to indicate an e f f i c i e n t a l l o c a t i o n i n terms of a l l the goals that society might adopt. Under these circumstances, where does Benefit-Cost analysis f i t into the Planning framework? I f i t i s accepted at t h i s point that goals and objectives are necessary prerequisites both to the development of plans, p o l i c i e s and programmes and to the application of Benefit-Cost analysis, i t seems reasonable to conclude that such analysis should be operative, i f at a l l , at the l e v e l of 145 project formulation and analysis. This i s what L i c h f i e l d recommends, i n essence, i n his proposal that Benefit-Cost p analysis techniques form the basis f o r a "welfare t e s t " . He especially was interested i n i t s u t i l i t y i n opening to view the "incidence of the benefits and costs of project proposals" and the interdependence between projects. In th i s role Benefit-Cost analysis i s not a technique f o r allocation, though what i t uncovers may influence a l l o c a -t i o n or lead to a re v i s i o n of i n i t i a l proposals. Rather i t i s simply an a n a l y t i c a l technique that cannot even properly be called a "test" unless c r i t e r i a that define a desirable welfare d i s t r i b u t i o n are somehow integrated into the methodology. However, noted economists, including K r u t i l l a , McKean, and Eckstein have unhappily conceded that the varying d i s t r i b u t i o n effects produced by public investments and p o l i c i e s are extremely d i f f i c u l t to judge when one considers that even the present d i s t r i -bution of welfare and income cannot be classed as good 3 or bad except on the basis of i n t u i t i v e value judgements. It i s unlikely, then, that suitable c r i t e r i a f o r d i s t r i -bution of net benefits can be incorporated into Benefit-Cost analysis to make i t a "test" i n the f u l l e s t sense of the term. 146 An Alternative Approach, to Waterfront A l l o c a t i o n Long-range plans f o r use and development of water-front resources must f i t into the planning framework of goals, standards, and objectives adopted above. Within t h i s framework, an alternative planning approach i s out-l i n e d below, and a complementary role f o r Benefit-Cost analysis i s recommended i n the following section. Bas i c a l l y , t h i s planning approach includes: ( l ) a c r i t i c a l evaluation of the requirements of dif f e r e n t types of waterfront users i n terms of qualitative and long-range quantitative needs, (2) an assessment of waterfront supply and the s u i t a b i l i t y of individual segments of i t f o r each type of user, (3) the development of a composite picture of waterfront space requirements and the available supply i n terms of quality and quantity, and (4) the development of a set of c r i t e r i a and p o l i c i e s to direct a l l o c a t i o n within the framework of the goals and objectives of the community. The procedure would be as follows. Groups of waterfront users would be i d e n t i f i e d and classed according to the kind of demands each makes on waterfront resources. Uses such as port a c t i v i t i e s , industry, transportation f a c i l i t i e s , u t i l i t i e s , r e s i d e n t i a l uses, commercial a c t i v i t i e s , recreation, and nature conservation would be 147 grouped according to the function waterfront f u l f i l l s f o r them, as discussed i n Chapter I. This functional breakdown f a c i l i t a t e s analysis of the quality and extent of waterfront that i s required "by each type and group, allows an objective assessment of the r e l a t i v e need of each type f o r exclusive or shared use of waterfront, and aids investigation of the alternative ways i n which demands of individual users might be s a t i s f i e d i n the event that demand exceeds supply. As well, the functional relationships between uses and t h e i r i ndividual and c o l l e c t i v e effects on waterfront quality within and beyond t h e i r s i t e s must be assessed so that these can be taken into account when actual a l l o c a t i o n i s undertaken. On the supply side, surveys of ex i s t i n g use i n terms of nature and intensity, quality, and quantity of the waterfront would provide general perspective about the resource. On t h i s foundation, i t would be appropriate to divide the waterfront into manageable units that demon-strate some measure of functional interrelationship, (thus respecting the observations made i n Chapter I with respect to the 'complex b i o l o g i c a l and physical i n t e r r e l a t i o n -ships' between shoreline, foreshore, and adjacent water area) and which can be separated from each other on the basis of use, physical character, quality, or geographical 148 separations such as r i v e r channels and points of land. The next step would be an assessment of the potential value of these waterfront units f o r each individual use type. This assessment would include developed waterfront where obsolescence might indicate a need to f a c i l i t a t e the change i n use. When th i s has been completed f o r each type, a composite picture would be created that would indicate those areas having high potential f o r a number of uses, those which have l i t t l e value f o r most uses, those which appear committed to existing uses, and areas which appear ripe f o r renewal and change. By reference to the demands assessed e a r l i e r , conclusions could then be drawn regarding shortages or abundance of supply by type of waterfront required. At t h i s point, assuming the existence of well-formulated p o l i c i e s and plans f o r l o c a l and regional development, c r i t e r i a and p o l i c i e s would be developed to guide the future a l l o c a t i o n of the waterfront. These would have to be i n agreement with the goals and objec-ti v e s of the planning framework. The production of s p e c i f i c waterfront plans i s probably not t h i s simple of course. L i c h f i e l d points out that "even when they (community goals) are s p e c i f i c a l l y formulated, i t i s not possible to deduce a proposal from a given set of existing 149 conditions and goals, f o r plan preparation i s as much an art as a science the process i s a compound of the i n t u i t i v e and the l o g i c a l " . ' The Role of Benefit-Cost Analysis The hypothesis underlying t h i s study was as follows: "that Benefit-Cost analysis i s a suitable and s u f f i c i e n t technique f o r al l o c a t i o n of waterfront to competing uses." As a result of the investigation conducted i n Chapter III and the conclusions formulated i n t h i s Chapter, the hypo-thesis must be found i n v a l i d i n terms of the unqualified form i n which i t was presented. In i s o l a t i o n Benefit-Cost analysis lacks the necessary d i r e c t i o n with respect to fundamental issues that would render meaningful i t s conclusions. Beyond t h i s i t was found that some important considerations could not be incorporated into the analysis and r a t i o s , including i n t a n g i b i l i t y . It i s concluded that, within the planning frame-work and the approach to waterfront a l l o c a t i o n outlined above, Benefit-Cost analysis would perform an an a l y t i c a l function, not one of allo c a t i o n . Its u t i l i t y would l i e i n such areas of concern as analyzing the d i s t r i b u t i o n a l consequences of possible alternative uses of a s i t e , checking out the implications of proposed waterfront 150 renewal a c t i v i t i e s , assessing the s u i t a b i l i t y of possible alternative s i t e s f o r a c t i v i t y , and analyzing effects of alternative scales of s i t e development. The importance of t h i s role to Planning should not be minimized. Application of Benefit-Cost analysis would illuminate the effects of tentative waterfront a l l o c a -tions and could help demonstrate to the community at large the implications of the alternative uses of i t s waterfront. Notes: hi. C. Young, "Goals and Goal-Setting," Journal  of the American Institute of Planners, Vol. 32 (March, 1966T7 pp. 76-85, No. 2. N. L i c h f i e l d , "Cost-Benefit Analysis i n City Planning," Journal of the American Institute of Planners, Vol. 26, (November, 19607, p. 276. ^ K r u t i l l a , op_. c i t . , p. 24. ^ L i c h f i e l d , op_. c i t . , p. 273. 151 BIBLIOGRAPHY A. WATERFRONT AND GENERAL REFERENCES Alameda County Planning Department. "Shore Area Planning and Development." Technical B u l l e t i n , No. 1, C a l i f o r n i a , 1959. Bestor, Alfred. "The Disappearing Seacoast." Holiday, Vol. 39 (July 1966), pp. 56-58. C a l i f o r n i a . Preliminary Regional Plan f o r the San Fran- cisco Bay Region. Association of Bay Area Governments, Berkeley, November, 1966. Canada. Canada Year Book 1967. Ottawa, Queen's Printer, 1967. Canada. Economic Council of Canada. The Canadian Economy  From the I960's to the 1970's. Ottawa, Queen's Printer, 1967, Fourth Annual Review. Canada. Resources f o r Tomorrow: Proceedings of the  Conference. Ottawa, Queen's Printer, 1962. Central Okanagan Regional Planning Board. Preliminary  Report on Waterway Residential Developments. November, 1965. Clawson, M. Land and Water f o r Recreation. New York, Rand McNally, 1953. Goodrich, Carter. Canals and American Economic Develop- ment . New York, Columbia University Press, 1961. H a l l , E. T. The Hidden Dimension. New York, Doubleday and Co., 1966. Kent, F. C. and Kent, M. E. Compound Interest and Annuity  Tables. New York, McGraw-Hill Book Company, 1963. Lagemann, J . K. "How Much Space Does a Man Need." The  Reader's Digest, Vol. 91 (August, 1967), pp. 72-76. Redford, P o l l y . "Needed—Those Vanishing""Tidelands." The  Reader's Digest, Vol. 91 (October, 1967), pp. 118-222. 152 Solzman, D. M. Waterway Industrial Sites: A Chicago Case Study. Chicago, University of I l l i n o i s , 1966. (Department of Geography Research Paper, No. 107). United States. Department of Commerce. The Economic  Impact of United States Ocean Ports. Maritime Administration. Washington, Government Printing Office, 1966. United States. Department of the Interior, Bureau of Outdoor Recreation. Outdoor Recreation Trends. Washington, D. C , Government Pr i n t i n g Office, 1967. United States. Department of the Interior, Bureau of .Out-door Recreation. Recreation Land Price Escalation. Washington, D. C , Government Pr i n t i n g Office, 1967. Wisconsin. Department of Resource Development. Water-front Renewal, Madison, Wisconsin, 1966. Young, R. C. "Goals and Goal-Setting." Journal of the  American Institute of Planners, Vol. 32 (March, 1966), pp. 76-85, No. 2. B. BENEFIT-COST ANALYSIS REFERENCES Adler, Hans A. "Economic Evaluation of Transport Projects." Transport Investment and Economic Development, edited "by G. Fromm. Washington, Brookings I n s t i t u t i o n , 1965. Boulding, E. "The Economist and the Engineer: Economic Dynamics of Water Resource Development." Water  Resource Development, edited by S. C. Smith and E. N. Castle. Ames, Iowa State University Press, 1965, pp. 82-92. Ciriacy-Wantrup, S. V. "Benefit-Cost Analysis and Public Resource Development." Water Resource Development, edited by S. C. Smith.and E. N. Castle. Ames, Iowa, Iowa State University Press, 1964, pp. 9-21. Clawson, M. Methods of Measuring the Demand f o r and Value  of Outdoor Recreation. Washington, D. C , Resources for the Future Publication, February 1959, No. 10. 153 Eckstein, Otto. Water Resource Development. Cambridge, Harvard University Press, 1958. Haveman, Robert H. Water Resource Investment and the  Public Interest. Nashville, Vanderbilt University Press, 1965. Hines, L. G. "A Rejoinder." Land Economics, Vol. 34, (November, 1958), pp. 365-367-Kelso, M. M. "Economic Analysis i n the Alloca t i o n of the Federal Budget to Resource Development." Water  Resource Development, edited by S. C. Smith and E. N. Castle. Ames, Iowa State University Press, 1964, pp.. 56-81. Knetsch, J . L. Economics of Including Recreation as a Purpose of Eastern Water Projects. Washington, D. C , Resources f o r the Future Publication, January 1965, No. 50. K r u t i l l a , J . V. "Welfare Aspects of Benefit-Cost Analysis." Water Resource Development, edited by S. C. Smith.and E. N. Castle. Ames, Iowa State University Press, 1964, pp. 22 -33 . L i c h f i e l d , N. "Cost-Benefit Analysis i n City Planning." Journal of the Ame ric a n Institute of Planners, Vol. 26 (November I960), pp. 273-279. McKean, Roland. E f f i c i e n c y i n Government Through Systems  Analysis. New York, John Wiley and Sons, 1958. Maass, Arthur. Muddy Waters. Cambridge, Harvard Univer-s i t y Press, 1951. Mack, R. P. and Myers, S. "Outdoor Recreation." Measuring Benefits of Government Investment, edited by R. Dorfman. Washington, Brookings I n s t i t u t i o n , 1965. Mao, James C. T. " E f f i c i e n c y i n Public Urban Renewal Expenditure Through Benefit-Cost Analysis." Journal of the American Institute of Planners, Vol. 32, "(March, 1966), pp. 95-106, No. 2. Moulton, Harold G. Waterways Versus Railways. Boston, Houghton-Mifflin Company, 1926. 154 Regan, M. and Timmons, J . F. Benefit-Cost Analysis. Committee on the Economics of Water Resources Development of the V/estern A g r i c u l t u r a l Economics Research Council, December, 1954. No. 3. Renshaw, Edward P. "A Note on the Measurement of the Benefits from Public Investment i n Navigation Projects." American Economic Review, Vol. 47, (September, 19570, pp. 652-62. Reuber, Gf. L. and Wonnacott, R. G. The Cost of Capital  i n Canada. Washington, D. C , Resources for the Future Publication, 1961. Seckler, D. W. "On the Uses and Abuses of Economic Science i n Evaluating Public Outdoor Recreation." Land Economics, Vol. 42 (November, 1966), pp. 485-494. Sewell, W.' R. D. and others. Guide to Benefit-Cost Analysis. Resources f o r Tomorrow Conference. Ottawa, Queen's Printer, 1962. Trice, A. M. and Wood, I. E. "Measurement of Recreation Benefits." Land Economics, Vol. 34 (August, 1958), pp. 195-207. United States Army Corps of Engineers. Review of Reports on Lake Erie-Ohio River Canal, Vol. 1-5. Washington, Government Prin t i n g Office, January, 1965. . United States. Commission on the Reorganization of the Executive Branch of Government. Task Force Report on Water Resources and Power, Vol. 1, Washington, Government Prin t i n g Office, June 1955. United States. Department of the Interior. The Economics  of Public Recreation. Washington, D. C , Land and Recreational Planning Division, National Park Service, 1949. United States. Interagency Committee on Water Resources. Sub-Committee on Evaluation Standards. Proposed  Practices f o r Economic Analysis of River Basin  Projects. Washington, Government Pr i n t i n g Office, May, 1958. 155 United States. The President's Water Resources Council. P o l i c i e s , Standards, and Procedures i n the Formula- tion, Evaluation, and Review of Plans f o r Use and  Development of Water and Related Land Resources. Washington, Senate Document No. 97, 87th Congress, Government Printing Office, 1962 and Supplement No. 1, Evaluation Standards f o r Primary Outdoor Recreation  Benefits. June, 1964. Wildavsky, A. "The P o l i t i c a l Economy of E f f i c i e n c y . " The Public Interest, Summer 1967, No. 8. C. ROBERTS BANE REFERENCES Associated Engineering Services Ltd. Preliminary F e a s i b i -l i t y Study, Proposed Tsawwassen Marina Development. Municipality of Delta, 1966. B r i t i s h Columbia Research Council. Vancouver Harbour T r a f f i c Trends and F a c i l i t y Analysis. Vancouver, 1967. Canada. Department of Mines and Technical Surveys. The  S u r f i c i a l Geology of the Vancouver Area. Ottawa, Queen's Printer. Chisholm, E. "Roberts Bank Superport Only Answer to West Coast Shipping Problems." Delta Optimist, 5 July, 1967. "Deep-Sea Shipping Costs Compared." The Vancouver Sun, 8 August, 1967. "Federal, B. C. governments to co-operate on Roberts Bank." Delta Optimist, 25 October, 1967. "Government to Develop Roberts Bank." Journal of Commerce, 18 March, 1967. Hedlin, Menzies and Associates, Ltd. Waterfowl i n the  Boundary Bay Area. Vancouver, Canadian W i l d l i f e Service, 1967. Lower Mainland Regional Planning Board. O f f i c i a l Regional  Plan f o r the Lower Mainland Planning Area. New Westminster, August, 1966. 156 Lower Mainland Regional Planning Board. Population Trends  1921-1986. New Westminster. (To be Published). Lower Mainland Regional Planning Board. A Regional Parks  Plan f o r the Lower Mainland Region. New Westminster, Municipal Planning Service, 1966. Lower Mainland Regional Planning Board. Waterfront Lands Study.. New Westminster, 1966. (Unpublished). "Lumber Handling i n Port Inadequate." Journal of Commerce, 3 June, 1967. " M i l l i o n - d o l l a r deep water f a c i l i t i e s proposed for Delta's Roberts Bank." Delta Optimist, 7 September, 1966. "Needs fo r port outlined." The Province, (Vancouver), 6 September, 1966. " P o l i t i c s and the Superport." The Province, (Vancouver), 18 November, 1967. "Port F a c i l i t i e s Can Handle Big Ships." J ournal of Commerce, 20 May, 1967. "A port we don't need now." The Province (Vancouver), 14 November, 1967. "Roberts Bank port seen i d e a l . " ' The Columbian (New Westminster), 23 January, 1967. "Roberts Bank—what does i t mean?" White Rock Sun, 19 October, 1967. Scott," R. A. D. Interview with the writer. 20 December, 1967. "$65 m i l l i o n i n harbour projects get green l i g h t . " The  Province (Vancouver), 20 October, 1967. Southworth, J . J . Interview with the writer. December, 1967. . Swan, Wooster Engineering Ltd. North Fraser Harbour  Development Plan. Vancouver, North Fraser Harbour Commissioners, August, 1966. TABLE 2 PORT DEVELOPMENT SCHEME: DIRECT COSTS' FACILITY QUANTITY RATE PER UNIT TOTAL COST YEAR(S) INCURRED STAGE IA Project costs: -riparian rights -causeway widening -terminal dredging and f i l l -utilities -causeway interchange -bulk loader machinery (installed) 10,000 l . f . 10,000 l . f . 50 acres 50 acres 1 1 '8 10 150 20,000 5,000 200,000 5,000,000 $ 100,000 1,500,000 1,000,000 250,000 5,000,000 1968 1968 1968 1970 1969 $2,000,000 1969 13,000,000 1970 Associated costs: -ra i l line from mines to border 77 miles 15,000,000 1968-69-70 -rai l line from Oloverdale to Roberts Bank -rai l cars for coal -widening of Hwy. 17 -improvement of Hwy. 499-Hwy. 17 interchange 15 miles 275 cars 6.5 miles 50,000 5,000,000 5,000,000 325,000 100,000 1968-69-70 1968-69-70 1970 1970 Operation and maintenance costs: -operation -repair, redredging 190,000 10,000 annual cost from 1971 Engineering costs 1,000,000 1968-69-70 STAGE IB -extension of Stage IA site -operation and maintenance 10 acres 500,000 20,000 1973-74 annual cost from 1975 STAGE IC -additional bulk loader and dredged site -operation and maintenance 7,500,000 50,000 1978-79-80 annual cost . from 1981 STAGE II Project costs: -new causeway -terminal site -bulk loader (installed) 10,000 l . f . 50 acres 150 20,000 1,500,000 1,000,000 5,000,000 1973 1973 1973-74-75 Associated costs: -ra i l cars for coal 275 cars 5,000,000 1973-74-75 Engineering costs 500,000 . 1973-74-75 Operation and maintenance costs: 200,000 annual cost from 1976 Costs derived from newspaper reports and figures given in conversation with J . J . Southworth. TABLE 4 PARTICIPATION FORECASTS FOR SELECTED LOWER MAINLAND RECREATION ACTIVITIES YEAR POPULATION FORECASTS OF RBCREATION-DAYS BEACH ACTIVITIES SIGHTSEEING BOATING HUNTING R.R. 2 days^  P.R. days P.R. days P.R. days (OOO's) 1966 1,006 1971 1,177 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 1.552 1,596 1,641 1,687 1,735 1,782 1,807 1,832 1,859 1,885 1,912 1,939 1,966 1,994 2,022 2,051 2,080 2,109 2,139 2,169 (000»s) (000»s) 10.5 10,563 1.7 1,710 5.0 11.2 13,182 1.8 2,119 5.2 (000»s) 5,030 0.5 6,120 0.53 12.5 13.2 13.9 14.6 19,400 19,950 20,513 21,688 21,688 23,522 23,852 24,182 24,539 24,882 26,577 26,952 27,327 27,717 28,106 29,945 30,368 30,791 31,229 31,667 2.0 2.1 2.2 2.3 3,104 3,192 3,282 3,374 3,470 3,742 3,795 3,847 3,904 3,959 4,206 4,266 4,325 4,387 4,448 4,717 4,784 4,851 4,920 4,989 5.5 5.7 6.0 6.2 5,536 8,778 9,026 9,279 9,543 10,157 10,300 10,442 10,596 10,745 11,472 11,634 11,796 11,964 12,132 12,716 12,896 13,076 13,262 13,448 0.6 0.62 0.65 0.68 (OOO's) 503 624 931 958 985 1,012 1,041 1,105 1,120 1,136 1,153 1,169 1,243 1,260 1,278 1,296 1,314 1,395 1,414 1,434 1,455 1,475 Notes: -Forecasts-are for recreation, activity groups discussed in the text and comprised as follows: Beach Activities—swimming and pic-nicking; Sightseeing—strolling, nature study; Boating—fishing and boating; Hunting. 2 Participation rates per 1,000 population at Regional Parks in the Lower Mainland; extracted from the Regional Parks Plan for the  Lower Mainland and projected to the year 2001. 3 •^Participation rates times estimated Lower Mainland population. TABLE 5 RECREATION DEVELOPMENT SCHEME: DIRECT COSTS FACILITY QUANTITY RATE PER UNIT TOTAL COST YEAR(S) INCURRED Project costs: -dredged beaches, swimming, and hunting areasl 6 miles i 11,000,000 $6,000,000 $2,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1980 1981 1985 1987 1989 -concession-bathhouse buildings 6 units 100,000 600,000 200,000 100,000 100,000 100,000 100,000 1981 1985 1987 1989 1991 -hunting shelters - r i p a r i a n r i g h t s -overpass at foot of causeway -engineering 100 units 10,000 l . f . 1 unit 500 10 200 ,.000 50,000 100,000 200,000 250,000 1981 1979 1981 1979-1981 Associated costs: -widening of Hwy. 17 -improvement of Hwy. 499-Hx*y. 17 i n t e r -change -new road to Tsawwassen -new road to ladner 6.5 miles 50,000 325,000 200,000 1,000,000 1,000,000 1980 1981 1985 1990 Operation and „ maintenance costs: 3 miles 3 miles3 50,000 100,000 150,000 average annual cost average annual cost Includes a l l services, roads, parking areas, launching ramps. Net of income from concessions. I t was assumed that the f i r s t three miles of developed beach would be l e s s exposed to storms than the remaining three miles of beach, therefore maintenance costs are assumed to be lower. TABLE 6 PORT DEVELOPMENT SCHEME: SCHEDULE OP COSTS1 DIRECT COSTS (SOOO's) YEAR Capital' Operation and Maintenance Recreation Losses' 4 current value present valued current value present value current value present value 1971 $13,275 $13,275 $200 $ 200 $22.5 $ 22.5 72 — — 200 189 22.5 21.2 73 — — 200 178 22.5 20.0 74 2,900 2,436 200 168 22.5 18.9 75 5,100 4,039 220 174 22.5 17.S 76 5,000 3,735 420 314 22.5 16.8 77 — — 420 296 22.5 15.9 78 — — 420 279 22.5 15.0 79 1,500 941 420 263 22.5 14.1 80 2,000 1,184 420 249 22.5 13.3 81 4,500 2,511 470 262 22.5 12.6 82 — — . 470 248 22.5 11.9 83 — — 470 234 22.5 11.2 84 — — 470 220 22.5 10.6 85 — — ' 470 208 22.5 9.9 86 — — 470 196 22.5 9.4 87 — — 470 185 22.5 8.9 88 — — 470 174 22.5 8.3 89 — — 470 165 22.5 7.9 90 — — 470 156 22.5 7.4 91 — — 470 147 22.5 7.0 92 — — 470 138 22.5 6.6 93 — — 470 131 22.5 6.3 94 — — 470 123 22.5 5.9 95 — — 470 116 22.5 5.6 96 — — 470 110 22.5 5.2 97 - - 470 103 22.5 5.0 98 — — 470 97 22.5 4.7 99 — — 470 92 22.5 4.4 2000 — - 470 87 22.5 4.2 CUMULATIVE PRESENT vVALUES $28,121 $5,502 $328.2 TOTAL TANGIBLE COSTS = $33,951,000 Notes: 1 Costs and timing derived from Table 2 and Table 3; tangible costs only; secondary costs are handled by calculating only net secondary benefits. 2 Capital costs include all investments in site development, machinery, utilities outlined in Project and Associated Costs in Table 2. ^Present values are calculated from current values using a discount rate of 6 per cent• ^Based on estimated losses in hunting and sightseeing and nature study recreation-days as specified in Table 3; intangible costs omitted. TABLE 7 PORT DEVELOPMENT SCHEME: SCHEDULE OP BENEFITS' YEAR DIRECT BENEFITS ($000'a) -Current Present Value V a l u e 2 SECONDARY BENEFITS (8000*s) Current Value mining p o r t t o t a l Present Value 1971 $ 500 $ 500 72 1,020 943 73 1,500 1,500 1,335 74 1,260 75 1,675 1,287 76 1,775 1,326 77 1,925 1,357 78 2,075 1,380 79 2,225 1,395 80 2,250 1,332 81 3,950 2,204 82 3,975 2,095 83 4,125 2,050 1,946 84 4,150 85 4,175 1,845 86 1,741 87 1,645 88 1,549 89 1,461 90 1,382 91 1,303 92 1,227 93 1,161 94 1,094 95 1,031 96 973 97 919 98 864 99 818 2000 4,175 772 CUMULATIVE $40,195 PRESENT VALUE £1,500 2,400 3,300 3,300 3,300 3,300 3,300 3,300 3,300 3,300 4,500 4,500 $400 400 400 400 400 400 400 400 400 400 600 600 $1,900 2,800 3,700 3,700 3,700 3,700 3,700 3,700 3,700 3,700 5,100 5,100 1,900 2,640 3,293 3,108 2,930 2,764 2,609 2,461 2,320 2,190 2,846 2,688 2,535 2,392 2,254 2,127 2,009 1,892 1,785 1,688 1,591 1,499 1,418 1,336 1,260 1,188 1,122 1,056 1,000 944 $61,372 TOTAL TANGIBLE BENEFITS $101,567,000 * d e r i v e d from Table 1 f o r e c a s t s of shipments and t r a n s p o r t a t i o n savings p e r t o n shipped, and from assumed valu e s of induced new income from new employment i n the c o a l f i e l d s and i n the po r t f a c i l i t y . 2 Present v a l u e s c a l c u l a t e d from c u r r e n t v a l u e s u s i n g a 6 per cent discount r a t e . TABLE 8 RECREATION DEVELOPMENT SCHEME: SCHEDULE QP COSTS STARTING 1981 AND 19711 DIRECT COSTS--1981 ($00C >'s) DIRECT COSTS— -1971 ($000's) YEAR Capital Operation and Maintenance Capital Operation and Maintenance current present current present - current present current present value value2 value value value value value value 1971 _ _ $4,075 $ 4,075 $100 $ 100 72 — . — — — — 100 94 73 — — — — — — 100 89 74 — — — - — . — 100 84 75 — — — — 2,100 1,663 150 119 76 — — — — — — 150 112 77 — - — — 1,100 776 200 141 78 — — — — — 200 133 79 $2,100 $1,317 — — 1,100 690 250 157 80 1,325 • 784 — - 1,000 592 250 148 81 650 363 $100 $ 56 100 56 250 140 82 — — 100 53 — — 250 132 83 — — 100 50 — — 250 124 84 — — 100 47 — 250 117 85 2,100 928 150 66 — — 250 111 86 — — 150 63 — — 250 104 87 1*100 433 200 79 — 250 99 88 — • — 200 74 — — 250 93 89 1,100 385 250 88 — — 250 86 90 1,000 331 250 83 — — 250 83 91 100 31 250 78 — - 250 78 92 — - 250 74 — — 250 74 93 — - 250 70 — — 250 70 94 — — 250 66 . — — . 250 66 95 — - 250 62 — — 250 63 96 - - 250 58 — — 250 58 97 — - 250 55 — — 250 55 98 — - 250 52 — — 250 52 99 — — 250 49 — — 250 49 2000 — • — 250 46 — — 250 46 CUMULATIVE *,A PRESENT VALUE $1,269 $ 7,852 12,268 TOTAL TANGIBLE ttc COSTS 85,841 $10,118 Notes: ^irst benefit-cost analysis assumed that the recreation development would start operations in 1981j a second analysis assumed a 1971 start to investigate effects on its benefit-cost rating. "Present values derived from current values using a discount rate of 6 per cent. TABLE 9 RECREATION DEVELOPMENT SCHEME: SCHEDULE OP BENEFITS RECREATION ACTIVITY GROUP YEAR Beach Activities Sightseeing Boating Hunting Total 1981 1971 days 1 current value •j current d a y s value days current value days current value current present present value value2 value (days in 000fs; values in $000's) 1971 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 1990 91 92 93 94 95 96 97 98 99 2000 1,940 1,995 2,051 2,109 2,169 2,352 2,385 2,418 2,454 2,488 2,658 2,695 2,733 2,772 2,811 2,995 3,037 3,079 3,123 3,167 2,910 2,993 3,077 3,164 3,254 3,528 3,578 3,627 3,681 3,732 3,987 4,043 4,100 4,158 4,217 4,493 4,556 4,619 4,685 4,751 155 160 164 169 174 187 190 192 195 198 210 213 216 219 222 236 239 243 246 249 155 160 164 169 174 187 190 192 195 198 210 213 216 219 222 236 239 243 246 249 427 439 451 464 477 508 515 522 530 537 574 582 590 598 607 636 645 654 663 672 1,708 1,756 1,804 1,856 1,908 2,032 2,060 2,088 2,120 2,148 2,296 2,328 2,360 2,392 2,428 2,544 2,580 2,616 2,652 2,688 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 50 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 4,973 5,109 5,245 5,389 5,536 5,823 6,028 6,107 6,196 6,278 6,693 6,784 6,876 6,969 7,067 7,473 7,575 7,678 7,783 7,888 2,775 2,692 2,607 2,527 2,447 2,428 2,375 2,266 2,169 2,078 2,088 1,994 1,912 1,826 1,746 1,741 1,667 1,589 1,525 1,459 4,973 4,818 4,668 4,527 4,385 4,350 4,250 4,061 3,885 3,717 3,735 3,575 3,417 3,268 3,124 3,116 2,985 2,849 2,724 2,611 2,496 2,352 2,224 2,096 1,976 1,864 1,760 1,656 1,568 1,480 CUMULATIVE PRESENT VALUE OF TANGIBLE BENEFITS $41,911 $94,510 Notes: It was assumed that of the total regional recreation-days for Beach Activities, Sightseeing, and Boating, 10, 5, and 5 per cent, respectively would be spent at the Roberts Bank recreation development; it was also assumed that the maximum number of Hunting-days that could be provided annually at Roberts Bank was 50,000 days, and that this would be achieved in the first year because of lack of alternative hunting opportunities. 2 Benefits were first discounted to 1971 assuming the recreation development would become operational in 1971; in a later alternative the project was assumed to begin operations in 1971: the discount rate was 6 per cent. 

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