Agenda - 03-01-1994 - VII-A - Laserfiche WebLink

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a 70 CONSIDERATIONS CONCERNING COST-BENEFIT ANALYSIS The following comments are taken from A Primer for Policy Analysis, by Edith Stokey and Richard Zeckhauser,and are intended to provide a basic understanding of what cost-benefit analysis encompasses. "Benefit-cost analysis is the principle analytical framework used to evaluate public expenditure decisions. This approach requires systematic enumeration of all benefits and all costs, tangible and intangible, whether readily quantifiable or difficult to measure, that will accrue to all members of society if a particular project is adopted." "Benefit-cost analysis is ex an it attempts to evaluate a project before it is undertaken to decide in what form and at what scale it should be undertaken, and indeed whether it should be undertaken at all." "The rationale for benefit-cost analysis is economic efficiency; it aims to ensure that resources are put to their most valuable use, including the significant possibility of leaving them in private hands. As a practical matter, benefit-cost analysis is most helpful in assessing well-defined projects. It would be of great assistance in choosing among alternative pollution-control systems for a particular river system, or in deciding whether mad repairs in a community should be made with a new, more weather-resistant asphalt. For wide-ranging programs, such as the War on Poverty of the 1960s, benefit-cost analysis is most useful as a paradigm." "But it would be unfair to praise the merits of preject evaluation techniques without identifying their liabilities as well...The techniques are potentially dangerous to the extent that they convey an aura of precision and objectivity.Logically they can be no more precise than the assumptions and valuations that they employ...." "In principle, the procedure followed in a benefit-cost analysis consists of five steps. 1. The project or prgfeets to be analyzed are identifiable. 2. All the impacts, both favorable and unfavorable, present and future, on all society are determined 3. Values, usually in dollars, are assigned to these impacts. Favorable impacts will be registered as benefits, unfavorable ones as costs. 4. The net benefit(total benefit minus total cost)is calculated. 5. The choice is made." "All benefit-cost analyses hinge on the Fundamental Rul :In any choice situation, select the alternative that produces the greatest net benefit." At the CommiedoneW February 1, 1994 meeting, the following items were suggested for Inclusion in a cost-benefit analysis: 1. What will be the fiscal impact;i.e.,impact on the County's operating budget and tax base, of non- residential development in the Economic Development Districts? 2. What additional residential growth will be generated as a result of the Economic Development Districts? a. How many of the employees working at businesses in the Economic Development Districts live in Orange County?