12 November, 2018
Industries
Client
The Shire of Esperance
Disciplines
The Shire of Esperance is examining options for replacing the 80-year-old Esperance Tanker Jetty, which is currently in a dilapidated state. Synergies, in partnership with Whitney Consulting, was engaged by the Shire to prepare a cost benefit analysis as part of a business case for restoring the structure, with consequent tourism and amenity benefits for Esperance. The Shire used the business case and supporting analysis to apply for funding from the Australian Government’s Building Better Regions Fund.
The historic 80-year old Esperance Tanker Jetty is in a dilapidated state. It is a significant structure, extending 500 metres out into Esperance Bay. In its state of disrepair, the Jetty can no longer be used by vehicles, boats, anglers or pedestrians. As such, the Shire is examining options involving restoring the Jetty to a form that meets the needs and expectations of the Esperance and wider Western Australian community and delivers an acceptable heritage outcome consistent with the identified heritage values of the Jetty.
A new jetty has the potential to boost the attractiveness of the Esperance foreshore, support recreational fishing, and provide a tourist attraction.
Synergies undertook a social cost benefit analysis (CBA) to capture all costs and benefits of the project, relative to a scenario in which the project does not proceed (the ‘base case’). Based on consultation with the Shire, we assumed a base case scenario in which the Jetty is not demolished nor reconstructed but will instead be allowed to gradually degrade and fall into the water. This is considered to be a realistic outcome based on:
Whilst there are no construction costs under the base case, any benefits associated with having the Jetty are foregone.
After defining the base case, Synergies examined the costs and benefits associated with the replacement jetty project. The project’s costs comprise direct costs, such as demolition, construction and ongoing maintenance.
In terms of benefits, the replacement jetty has the potential to improve the amenity of the Esperance foreshore, retain a link to the past and serve as focal point for tourists and locals alike. The following potential benefits were identified and assessed:
The demolition and construction phases of the project will generate revenues for local contractors and businesses that supply goods and services to the project. Flow-on benefits were also assessed using Synergies’ Input-Output model of the Esperance regional economy.
The project will add to the appeal of the foreshore area and provide an additional attraction for visitors to the region. It is expected to both increase volume of visitors as well as length of stay. We focused on multi-day visitors as it is expected that day trippers are mostly locals who live in the immediate region around Esperance and therefore their expenditures as “tourists” would not constitute additional economic activity for the Esperance region. To assess the magnitude of the potential impact, Synergies examined impact of other foreshore/jetty redevelopments and Esperance tourist statistics.
The value ascribed to the Jetty by the local community will be a function of all the different types of purposes and benefits people associate with the Jetty. Synergies assessed community feedback on a willingness to pay (WTP) survey (conducted by another consultant) and a monetary value for amenity value from this data.
Studies show that Australians care about protecting the historical heritage and there is a widespread willingness to pay to protect this heritage. We examined several studies which have quantified this WTP, and applied ‘benefit transfer’ to establish a suitable estimate of heritage value.
We considered the different benefits and opportunities the jetty would provide to anglers from other forms of shore-based fishing. To quantify these additional opportunities, we estimated a lower and upper bound based on value derived from a fishing trip (based on willingness to pay studies) and number of fishing trip visits.
In addition to the above benefits, much of the timber expected to be salvaged from the old Jetty will have residual market value.
The results of the CBA analysis are expressed in present value terms, meaning that any cost/benefit incurred in the future are discounted using an appropriate discount rate to reflect the ‘time value of money’. This means that benefits or costs that occur in the near future have a proportionally greater effect on the final outcome than those that occur further into the future.
The results show that the project generates a net economic benefit using both the lower and upper bound input assumptions. The project does slightly better than break even in economic terms under the lower bound conditions (benefit cost ratio 1.23) and delivers benefits well above costs if upper bound assumptions are used (benefit cost ratio 1.75).
Of the benefits considered, those with the largest effect are the net economic stimuli from construction and tourism expenditures. The costs are dominated by the jetty construction costs.
In addition, the demolition and construction phase and the ongoing increase tourism expenditures anticipated from the jetty replacement will create additional demand for labour in the Esperance economy.
The Shire’s application to the Building Better Regions Fund was successful, and the Shire obtained a $4 million grant towards the cost of the project. Furthermore, in announcing the award of grant to the Shire, the Assistant Minister for Regional Development and Territories, Hon. Sussan Ley MP, described the application as “first class”.