Productivity improvements are measured by producing the same goods and services for less money. Discounted Cash Flow analysis assumes that discounting future benefits is the same as getting less money. If we analyse two proposed projects, if one achieves the same result with more discounted benefits, then that is chosen because the money is deemed more productive. Unfortunately, money being productive is not the same as the project being productive. A project that reduces the cost to society over a long period will be rejected by a project that sells a public good and gets an immediate return, allowing the buyer to supply the service at a higher cost.
The Federal and ACT governments evaluate most projects the expensive way and often choose the least productive solution by evaluating with discounted cash flow techniques. If they don’t follow the rules, they are open to political and public attacks because the time value of money is the community's standard way of measuring the economic benefits. We have seen the result of this approach with the sale of public goods and services to private interests. Private interests want a return on their investment, which comes at the public's expense.
It also means that governments need help to fund community-owned projects even though these will be the most economically productive as they cut out the need to borrow or repay money if the project assets remain in community hands. An excellent example of how Canberra benefits from community projects is the social clubs and religious groups, a great feature of life in Canberra.
The ACT government can extend the idea of social clubs to include well-being community-owned social and environmental projects using low-cost permanent local product and services markets. A project for Urban Forests and another for Walking are outlined below by adapting an economic modelling approach that provides affordable housing for all who wish it and is described in Permanent Housing Markets for affordable housing.
Community-Owned Urban Forests
Forty-two per cent of Canberrans live in suburbs with less than 20 per cent tree cover. To bring Canberra to 40% tree cover, we must plant and maintain 190,000 trees annually to reach 40% by 2040. The benefits from tree cover include reduced air-conditioning costs, increased walking, increased well-being of residents and workers, and reduced heat-related medical costs and deaths.
An urban forest is not just the trees but the supporting water sources and lower canopy shrubs, small trees, underground roots, and fungi that support the trees. To establish a mini-urban forest with plantings of the equivalent of 100 trees costs about $40,000. Local people can invest in the urban forest and contribute voluntary labour. The investors must sell to other Canberra investors who receive an annuity of 10% for twenty years. The annuity lasts about twice as long as the average superannuation-allocated pension.
The min-urban forest owned by the investors can only be sold to other local investors. The forest earns well-being and cooling funds from the government of $4,000 a year or about $40 per tree equivalent, which pays for maintenance and upkeep of the forest provided by local service companies whose capital expenditure is funded similarly to the urban forests.
To plant 200,000 trees a year will require the establishment of 2,000 urban forests or the investment of $80,000,000 in superannuation funds. The ACT government will pay $8,000,000 annually, and the community will gain in lower energy, health, and well-being measures. The actual figures will be calculated by comparing areas of Canberra with mini-urban forests and those without. Note that $80 million is less than 5% of the annual superannuation payments made by ACT residents and is a similar fraction of ACT residents' annual payouts, as we know that the number of retirees is about the same as the number of new members.
The ACT government will gain by reducing its maintenance costs of the urban landscape.
Paying to Increase Walking in the ACT
The ACT government pays about $28M annually to upgrade and maintain cycle and pedestrian pathways. These payments can be leveraged to substantially increase capital expenditure on active travel while reducing health costs, increasing active travel, and improving the general well-being of Canberrans.
The Australian Transport Assessment and Planning estimate the benefits of walking at $2.77 per km, and this number will be used in the following analysis.
If we paid people to walk, we could gain $2.77 for each km walked. $28M will pay for about 10,000,000 km or 10,000 people walking 5 km daily.
If we pay 10,000 people to walk for 5 km each day, the community gains about $28M in savings and pays for the money spent on footpaths and cycle paths. If we pay 50,000 people to walk each day, we pay for $100M of active travel infrastructure each year.
It is proposed that community groups be invited to encourage their members to walk by providing an app for their phones that records how long they walk outdoors. For each km they walk outdoors, the community group receives $2.77. The community group must spend this money on active travel facilities organised by the ACT government. The community group works with the ACT government in deciding how the money is spent because it pays for the pathways and cycleways.
The ACT will rapidly gain a second-to-none set of bike and pedestrian pathways that will make the community wealthier, encouraging even more residents to walk and ride on short journeys.
