Cost-Benefit Analysis Of Proposed Helmet Law And Public Swimming Pool In Edmonton, Canada

Proposed Implementation of a Helmet Law for Bicycle Riders in Edmonton

1. Imagine that Edmonton currently does not require bicycle riders to wear helmets. Furthermore, imagine that you enjoy riding your bicycle without wearing a helmet.

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2. From your perspective, what are the major costs and benefits of a proposed city by-law that would require all bicycle riders to wear helmets? List costs and benefits. (5 points)

Answer: The sale of helmets would increase. Making with the economy. Less injured people in the hospitals saving the government money.

Answer: The Following Cost Benefits would be useful

– Inconvenience Cost of Wearing Helmets to bike riders

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– Cost and efforts of Purchasing Helmet and cost of modifying bike for attachment of helmet.

– Costs of administration of by-law

– The cost of substituting bike as a mode of transport due to by law. Consumers may avoid using a bicycle due to the inconvenience costs of wearing a helmet permanently or until they acquire a helmet. They may choose a less energy efficient mode of transport such as car. This will have social and economic costs. Some of the indirect costs that may accrue from this are: increased carbon footprint due to use of cars, increased demand for fossil fuel, increased burden on public transport etc.(Gotschi, 2011)

– The reduction of risk of head injury and the reduction of  possible costs to healthcare system associated with head injuries.

– Building an industry around production/ sale of helmets and bikes. 

3. What are the categories of costs and benefits from society’s perspective? Anything to add or to delete from the list? (5 points)

The following could be the categories for social costs or benefits:

– Burden on Healthcare: Will the by-law lead to significant increase in burden on healthcare system.

– Costs/ Benefits to Bike and allied products industry: Will there be a net gain to bike industry or will there be a net loss. Net gain could be from additional purchases of helmets while net loss would be from reduced purchases of bikes. Additionally, net loss to society could be accrued if all these products are imported.

– Burden on Public Transport: The by law may increase the revenues of public transport, if cyclists prefer public transport system by giving up on  bicycles or would the burden on public transport be increased.

If the commuters substitute cars for bikes, then there will be more traffic etc.

Costs and Benefits of the Proposed Helmet Law

– Environment: The Net Carbon Footprint of the city may increase if buses and cars are preferred over bikes.(Asian Development Bank, 2010)

 4. The City of Edmonton is considering building a public swimming pool in an open park. Analysts have estimated the present values of the following effects over the expected useful life of the pool. [Create a table underneath item d. and provide answers to all questions together adding four additional columns on the right side of the table. You can do that in Excel and then copy and paste.]

Provincial grant

Construction and maintenance cost

Personnel cost

Revenue from county residents

Revenue from non-residents

Use value benefit to county residents

Use value benefit to non-residents

Scrap value

2.2

12.5

8.2

8.6

2.2

16.6

3.1

0.8

1. Assuming national level standing, what are the social net benefits of the project? ( 3 points)

2. Assuming county-level standing, what are the social net benefits of the project? (3 points)

3. How would a guardian in the county budget office calculate net benefit? (2 points)

4. How would a spender in the county recreation department calculate benefits? (2 points)

a)

Social Benefits at National Level

8.4 million

 (Revenue from county residents +

Revenue from non-residents +

Use value benefit to county residents +

Use value benefit to non-residents +Scrap value) – Total Costs

b)

Social net benefits of the project

– 3.1 million

(Revenue from county residents + Use value benefit to county residents +Scrap value) – Total Costs

c)

Calculation used by guardian in the county budget office Net Benefits = Total Costs – Total Benefits (in Million dollars)

Total Annual Cost (Construction and maintenance cost +

Personnel cost)

Revenue from county residents +

Revenue from non-residents+

Use value benefit to county residents+

Scrap value

d)

Calculation for spender in the county recreation department

Provincial grant +

Construction and maintenance cost+

Personnel cost

Revenue from county residents +

Revenue from non-residents+

Use value benefit to county residents+

Scrap value

The provincial grant provided was extra of the costs the city. i.e Total costs – Provincial grant + Construction and maintenance cost + Personnel cost 

– Benefits of scrap value are assigned to county.

– Benefits at County level can be considered as a part of the aggregate benefit at national level.

– No effects of Taxation is present here.

-Net Benefits = Total Costs – Total Benefits (in Million dollars)

5. Three mutually exclusive projects are being considered for a remote valley in British Columbia: Project R, a recreation facility, has estimated benefits of $10 million and costs of $8 million; project F, a forest preserve with some recreational facilities, has estimated benefits of $13 million and costs of $10 million; project W, a wilderness area with restricted public access, has estimated benefits of $5 million and costs of $1 million. In addition, a road could be built for acost of $4 million that would increase the benefits of project R by $8 million, increase the benefits of project F by $5 million, and reduce the benefits of project W by $1 million. Even in the absence of any of the other projects, the road has estimated benefits of $2 million.

6. Calculate the benefit-cost ratio and net benefits for each possible alternative to the status quo. Note that there are seven possible alternatives to the status quo: R, F, and W, both with and without the road, and the road alone. (6 points)

Social Costs and Benefits of the Proposed Helmet Law

Net Benefits = Total Benefits – Total Costs 

Project R

8

10

2

project F

10

13

3

project W

1

5

4

Road

4

2

– 2

Project R with Road

12

18

6

Project F With Road

14

18

4

Project W  with Road

5

4

– 1

7. If only one of the seven alternatives can be selected, which should be selected according to the CBA decision? Why? (4 points)

The Following criteria have been used to understand the benefits provided:

– Number of social goods provided: There are two social goods provided if Project R were to be built

– Net Benefit: The project with the highest net benefit could be selected.  Net Benefit is highest for Project R.

Since Project R along with the construction of Road maximizes net benefit, project R should be selected.

8. Excessive and improper use of antibiotics is contributing to the resistance of many diseases to existing antibiotics. Consider a regulatory program in Canada that would monitor antibiotic prescribing by physicians. Analysts estimate the direct costs of enforcement to be $40 million, the time costs to doctors and health professionals to be $220 million, and the convenience costs to patients to be $180 million (all annually). The annual benefits of the program are estimated to be $350 million in avoided resistance costs in Canada, $70 million in health benefits in Canada from better compliance with prescriptions, and $280 million in avoided resistance costs in the rest of the world. Does the program have positive net benefits from national perspective? If not, what fraction of benefits accruing in the rest of the world would have to be counted for the program to have positive net benefits? (10 points)

The following are the cost benefit analysis

Admin Cost

$40 million

Personnel Costs

$220 million

Convenience Costs

$180 million

Total Costs

$440 Million

Avoidance of resistance costs

$40 million

Personnel Costs

$220 million

Convenience Costs

$180 million

Total benefits

$440 Million

There are no direct net benefits in a direct sense since Total Costs = Total Benefits. However, in a global perspective, the knowledge gained from the process of monitoring will help the pharmaceutical industry gain insights on the kind of drugs prescribed by physicians and help them make more informed decision. The program may help improve the efficiency of global pharmaceutical industry.

9. The City of Edmonton is examining the possibility putting LED lights on High Level Bridge. Alberta Treasury Board Chair, Dave Mowat, said “It’s actually quite an imposing structure, but when it gets dark it just completely disappears. By lighting it up, I am certain it will become the signature shot of Edmonton.” Assume that you are given the task to conduct a comprehensive cost-benefit analysis of this proposed project. As components of the entireCBA task, answer the following:

10. List the set of possible physical and funding alternatives. (4 points)

No LED Lights

· No Costs

· No Benefits

Solar Powered LED Lights

· Possibility of higher installation costs

· Higher Social Benefits due to lower carbon footprint.

· Higher Social Benefit due to slightly reduced electricity bills

Non LED Fluorescent Lights

· Social Costs Higher electricity costs than LED lights

· Social Costs in the form of higher carbon footprint (Asian Development Bank, 2010)

· No visible benefits. Benefits would be accrued to the extent of the convenience costs of obtaining Fluorescent lights instead of LED Lights

Imposition of Commuter Toll on the bridge

· Administration and Maintenance costs of Toll booth (including personnel costs)

· A commuter toll may help cover up the costs of added repair and maintenance and well as investment in infrastructure.

Funding from Municipal Budget

· Reduction of city budget

· No benefits

11. List costs and benefits from the perspectives of residents (local perspective) in the City of Edmonton. (3 points)

Costs

– Costs of Installation of LED Lights (Non Recurring Costs) : LED lights tend to have high installation costs : These costs include the costs for administration of the process of lights, ensuring the equipment to provide access to electricity to the bridge, costs of light. These will be deducted from the municipal budget and hence, are indirectly transferred to consumers

– Personnel Costs of Maintaining the lights (Recurring Costs, in Million CAD Per Year):

Maintaining lights will require added efforts from the Department of Public works. These will be deducted from the municipal budget. These are transferred to consumers.

– If a commuter toll is administered then the costs of the toll is a direct cost to consumers.

– Disutility to commuter during the process of installation.

– Commuting during evening made easier: The use value of the bridge will commuting during the evening will be made easier. Thus, there will be significant convenience costs. This can have significant direct and indirect economic benefits to residents

-Developing the bridge as a tourist attraction may spur economic activities associated with tourism around the bridge. These may include restaurants, street food, souvenir shops other small businesses , riding streetcar in the evenings etc. (Travel Alberta, 2017)

12. How different do you expect the global perspective to be for this project? Will it be similar for all projects? Explain using a few sentences. (3 points)

– The Global Perspective would include Environmental Concerns regarding use of LED Lights and the reduction of carbon footprint by use of more renewable energy sources

– The global concerns will remain similar for all such projects since as a country, Canada needs to reduce its Carbon Footprint.(Asian Development Bank, 2010)

Asian Development Bank. (2010). Reducing Carbon Emissions from Transport Projects. Manila: Asian development Bank.

Gotschi, T. (2011). Costs and Benefits of Bicycling Investments in Portland, Oregon. Journal of Physical Activity and Health , S49-S58.

Travel Alberta. (2017). Explore Edmonton. Retrieved September 28, 2017, from Travel Alberta: https://exploreedmonton.com/attractions/high-level-bridge