Guidelines for future developments: preparing a sustainability framework plan and business case

Transcription

1 Armstrong Creek Building a sustainable future Guidelines for future developments: preparing a sustainability framework plan and business case This document shows you how to develop a comprehensive framework plan and business case to guide sustainable urban growth planning and investment in Victoria and beyond. Included in this guideline: Introduction What is a framework plan? How to create a successful framework plan and business case key steps - Step 1: Identify and engage key stakeholders - Step 2: Establish the scope of the framework plan - Step 3: Determine sustainability inputs and outputs - Step 4: Develop your business case - Step 5: Implementing the framework plan: putting plans, policies and procedures in place Applying these guidelines: the Armstrong Creek development Introduction An integrated, sustainable approach to the planning and design of urban infrastructure can lead to significant environmental, social and economic benefits. These include savings in: public sector capital investment ongoing household (lifecycle) costs business (operating) costs. This approach reflects best practice in public sector investment for urban development. It can also be applied to the development of Precinct Structure Plans or where there is a need for a sustainable growth development. The development of a framework plan (or Interagency Infrastructure Delivery Plan), underpinned by a sound economic, social and environmental business case, is critical to the delivery of any urban development. These guidelines focus primarily on the broader economic (public sector) implications of development, rather than the narrower financial (private sector) aspects of urban development. Page 1

2 What is a framework plan? A framework plan is an outline plan which provides guidance on how an urban development or precinct should be developed. A framework plan should include co-ordinated input from local council, key agencies and developers. It should identify and consolidate all technical, cost and benefit data, as well as addressing the following elements: - Roads and bridges - Rail lines, public transport services and access points - Residential housing options and areas - Commercial and/or industrial precincts - Employment options and areas - Water and wastewater provision - Energy generation and distribution - Major activity centres - Neighbourhood activity centres - Local centres - Schools and colleges - Parklands and biodiversity corridors - Rural land management - Water and energy demand management - Telecommunications - Cultural and heritage provision. Creating a successful framework plan requires the support of all key stakeholders from Local and State Government and the private sector. The framework plan will be an evolving document that can be used to: Facilitate co-ordinated infrastructure delivery Speed up land delivery Improve affordability Deliver improved environmental outcomes. How to create a successful framework plan and business case key steps The following are key steps that will enable you to create a successful framework plan and business case for sustainable urban development. Step 1: Identify and engage key stakeholders and decision makers Form partnerships between local councils, state agencies, developers and communities to ensure that sustainable development principles are followed from the initial planning stages through to development, including: - Collective agreement on the vision for the future of a particular location or precinct - Joint operation of working groups and committees to oversee technical studies - Collective agreement on how specific infrastructure components should be interactively developed - Shared efforts to minimise delays in the delivery of services and available land releases. Step 2: Establish the scope of the framework plan Create an initial framework plan that can be used to identify: Relevant inputs and outputs Assumptions Project monitoring Evaluation criteria Project risks. This requires specification of individual project components. (The Logframe 1 methodology could be used as a template). Attention also needs to be given to the likely nature of risk associated with specific infrastructure program components, e.g. cost and delivery targets for key infrastructure items. 1 Logframe stands for Logical Framework and is essentially a very simple method of tying in goals and objectives into inputs, processes and outputs. It is widely used by development agencies such as the World Bank. Logframe was developed in the 1970s mainly for infrastructure development projects, dating back to a mixture of strategic planning and management by objectives models, with all the strengths and weaknesses of such approaches on highly complex projects. Guidelines for future developments: preparing a sustainability framework plan and business case Page 2

3 Armstrong Creek Building a sustainable future Technical working groups should be established to scope the project and outline key planning and design principles, and to define specific performance criteria for each of the key building services and infrastructure components, including: - Identifying the range of technical skills offered by all stakeholders - Specifying specific infrastructure investigations to be undertaken - Identifying how sustainability principles can be introduced at all early planning stages. What should the framework plan address? The framework plan should address the following: Establish a shared vision for the development, i.e. identify the overarching goals and the specific objectives. In particular: - All key stakeholders should understand and agree on the vision and objectives - The overarching vision needs to be clearly defined prior to the specification of key objectives for the development - These specific objectives can be prioritised where the agreed range is significant and varied. Establish the physical dimensions and components of the proposed development area: - Work out the boundaries of the proposed urban development and clarify the ownership of all properties involved - Establish the legal and technical status of all physical infrastructure already in place, including roads, drainage, service easements, water storages, etc. - Identify points of interconnection with surrounding regions, such as shared recreational and educational facilities, transport hubs and commercial centres. Establish 20-year (minimum) forecasts of the scale of residential and commercial development under a range of future growth scenarios. Policies for both the urban and non-urban areas should be formulated within this timeframe as well. These forecasts should include: - Consideration of alternative future growth scenarios in order to accommodate future changes in economic growth, employment and investment conditions - Strategic development goals to allow for residential, industrial and commercial land uses - Forms of land use patterns that can emerge in the immediate short-term and long-term. Establish a timescale for non-sequential land development that all parties agree to. This should cover: - Urban land release - Water and wastewater service delivery - Public transport - Energy generation and distribution - Activity/community centres - Commercial and industrial land release - Educational facilities - Open space and recreational facilities. Step 3: Determine sustainability inputs and outputs Define the development principles for both the urban and non-urban areas to cover a minimum 20-year time period, including: - Agreement on specific residential, commercial and industrial land demand estimates by year, e.g. the number of allotments to be available per year under low, most likely and high development scenarios - Defining the individual logistics and supply issues involved in the delivery of building services and infrastructure components, e.g. water, wastewater, service and access roads, telecommunications, etc. - Establishing principles to cover open space and rural land areas and corridors for wildlife conservation management. Page 3

4 Identify the availability and proximity of resources for both the urban and non-urban areas including: - Energy - Renewable Energy - Water/Recycled Water - Telecommunications - Public Transport. Develop key sustainability performance indicators for both residential and commercial development. These should include: - Minimising total potable water consumption (water delivery targets, water recycling targets) - Minimising greenhouse gas emissions per household - Minimising energy consumption - Minimising waste generation and disposal maximising recycling - Minimising total land cost delivery - Minimising annual household costs - Minimising the dependence on private vehicle ownership and use - Maximising the level of public transport use. Step 4: Develop your business case The framework plan should be underpinned by a sound whole of development business case to support necessary public sector funding. This will be achieved by determining estimated capital costs and operating costs for all major infrastructure components for both a conventional development approach and a sustainable development approach. Determine and evaluate costs, benefit and risks of both the Business as Usual and the sustainability approach using a business case. When developing your business case, it is important to: Use technical working groups to estimate the Business as Usual delivery procedures and related costs of specific infrastructure Engage technical consultants to specify the nature of specific sustainability options Embrace the whole community by considering a broad range of factors, including: - How land will be zoned, serviced and released for residential and industrial use - Provision of essential building services and infrastructure, such as energy, water, wastewater management, access roads, telecommunications, schools and community centres, open spaces and recreational facilities - Public transport planning and service delivery to achieve optimal sustainability outcomes (i.e. energy savings, reductions in greenhouse gas emissions, decreases in car ownership levels and less road congestion). Identify costs and benefits Identify all costs and benefits relating to both the conventional and sustainable development options over a 20-year timeframe. These will need to be estimated in constant prices according to Department of Treasury and Finance and COAG investment procedures, including: - Closely following cost-benefit procedures - Eliminating all taxes from the costs - Using the correct discount rate as determined by the State Government - Estimating separate investment criteria for both the Business as Usual /conventional approach to the delivery of infrastructure and the sustainable approach to delivery (Economic Internal Rate of Return [EIRR], Net Present Value [NPV] and Benefit-Cost Ratio [BCR]). Estimate and monetise all forecast sustainability benefits, including: - Specifying the assumptions relied upon to estimate the benefits - Estimating the additional or incremental gains from the introduction of each sustainability component, e.g. savings from water recycling, savings from energy consumption per residential allotment - Identifying the rate at which the benefits will grow per year over the 20 years. Guidelines for future developments: preparing a sustainability framework plan and business case Page 4

5 Armstrong Creek Building a sustainable future Identify the differences in benefits and costs over 20- to 30-year time periods between a conventional and a sustainable approach to urban development, by: - Undertaking two separate business cases, as required by State/COAG agreements to compare the differences in the delivery of benefits - Clearly identifying the range of sustainability outcomes or deliverables that could be achieved in both cases (e.g. reductions in potable water, energy and private vehicle use). Evaluating costs and benefits Complete a series of 20-year cost-benefit analyses for both the conventional and sustainable development program options. Report the key investment criteria (i.e. EIRR, NPV, BCR), involving: - Preparation of comprehensive spreadsheet models, incorporating all capital, operating and maintenance (O&M) costs, benefits and residual values, with associated economic criteria - Providing detailed assumptions underpinning each of the cost and benefit components - Ensuring that benefits are carefully scheduled to follow the completion of all capital costs (avoid inflating the impacts in early years) - Checking that all growth rates for O&M costs and individual benefits can be justified. Fully estimate the economic cost and benefits of not adopting a sustainable approach to urban development so that an informed decision can be made. By developing a clear picture of the with and without sustainability options, it is possible to: - Engage a wider audience or stakeholder presence by identifying the economic cost penalty of not proceeding with a sustainability agenda - Provide an alternative form of project or development program justification to that developed from a business case, supported by a cost-benefit analysis - Allow for both direct and indirect (multiplier) impacts to be identified, quantified and monetised (multiplier impacts are not included in cost-benefit analyses). Risk analysis Complete detailed risk analyses for the sustainable development approach. Specify how specific risk levels can be mitigated, including: - Identifying which of the benefit and cost components are most likely to be uncertain and be least reliable - Completing a series of what ifs or sensitivity tests for the key economic variables to determine how the economic criteria (EIRR, NPV, BCR) change (e.g. increase capital and O&M costs by 20%; reduce key sustainability benefits such as water savings or energy cost reductions by 10% or 20% per year; compare the results with and without the sensitivity analyses) - Examining the specific cost or benefit variables most at risk and identifying mechanisms to limit the riskiness by alternative technical options or re-specifying the nature of the sustainability benefit. Identify the range of benefits that accrue to key stakeholders over the timeframe Determine benefits for key stakeholders for the preferred development option (i.e. householders, commercial enterprises, developers, local councils, infrastructure providers, State Government), by: - Using the individual cost and benefit columns of the business case cost-benefit analysis, identify the range of benefits to various stakeholder as a percentage of the total benefits - Identifying the rate of growth of specific beneficiary groups over the 20-year period - Identifying if specific O&M cost components are more intensive than others. Page 5

6 Step 5: Implementing the framework plan: putting plans, policies and procedures in place Finalise the framework plan (or Interagency Infrastructure Delivery Plan). This plan should include co-ordinated input from the local council, key agencies and developers. It should also identify and bring together all the technical and cost-benefit data, and address key elements such as: - Roads and bridges - Rail lines, public transport services and access points - Residential housing options and areas - Commercial and/or industrial precinct areas - Employment options and areas - Water and wastewater provision - Energy generation and distribution - Major activity centres - Neighbourhood activity centres - Local centres - Schools and colleges - Parklands and biodiversity corridors - Rural land management - Water and energy demand management - Telecommunications - Cultural and heritage provision. Develop a strategy to progress the framework plan and program through State Government. Specify the nature of the required public sector investment by: - Summarising the overarching array of sustainability benefits to be generated - Identifying a time schedule for project implementation - Documenting the nature of the Local Government, State Government and private sector investment requirements, by year, for the project s life - Identifying the extent of user pays and cost-recovery opportunities for each of the investment needs. Identify ownership and structure of the project implementation unit required for the implementation of the proposed development plan or program of investment, including: - Clarifying the roles of the various stakeholders moving forward - Establishing and agreeing as to which agency or authority will have primary responsibility for implementation - Determining which stakeholder groups will finance the necessary ongoing technical, environmental and planning studies and investigations - Developing a management structure to enable the ongoing implementation of the development program. Establish clear governance principles to ensure the timely delivery of the proposed plan or program. - Identify the roles of all relevant State Government agencies - Establish how progress will be documented and reported - Identify which agencies will be responsible for advisory or liaison roles with State Ministers. Develop precinct plans that integrate the above, and: - Define objectives - Identify opportunities and challenges - Identify the various components of the vision - Provide schedules for the delivery of components and services. Guidelines for future developments: preparing a sustainability framework plan and business case Page 6

7 Armstrong Creek Building a sustainable future Applying these guidelines: the Armstrong Creek development The principles that form the basis of these guidelines were used in the development of a business case sponsored by Sustainability Victoria, on behalf of the Victorian Government. The business case assessed opportunities to achieve better environmental outcomes for the Armstrong Creek development while not compromising the economic and social objectives of the City of Greater Geelong. The Armstrong Creek business case demonstrates the financial and economic case for sustainable development. Using a whole-of-development analysis, it shows that combining a range of existing sustainable technologies, with a strategic development roll-out, provides financial, social and environmental benefits. This case study illustrates a sustainable future for all Victorians. Creating a sustainable development at Armstrong Creek could deliver $466 million in savings (NPV) to residents, developers and the community over 15 years, including $48 million in capital investment savings (NPV) compared with a conventional development approach. This is illustrated in the graph below. An important additional finding is that in terms of the total benefits to be derived from the alternative, sustainability-based approach to the development of Armstrong Creek, more than 80 per cent of the total benefits are expected to flow to home owners in the Armstrong Creek growth area. Economic results of the business case $ $ Net benefits from development ($million) - $ $ $ $ $ Year 1 (2011/12) to Year 12(2025/26) Net present value (NPV) BAU Development approach =$69m Sustainable development approach =$535m Overall additional NPV Benefit over 15 years = $466m - $ Alternative sustainable development net benefits stream Figure 1 Economic results of the business case (Note: net benefits are not discounted cash flow) BAU Approach net benefits stream Page 7

8 For more information To download copies of the reports, fact sheets and guidelines, please visit /armstrongcreek For any enquiries, please Guidelines for future developments: preparing a sustainability framework plan and business case