Regional Development Victoria. Evaluation of the Economic Impacts of the Regional Infrastructure Development Fund. Final Report

Transcription

1 Regional Development Victoria Evaluation of the Economic Impacts of the Regional Infrastructure Development Fund Final Report July 2008

2 Disclaimer This report evaluating the economic impacts of the Regional Infrastructure Development Fund has been prepared by PricewaterhouseCoopers (PwC) for Regional Development Victoria (RDV). This report is not intended to be utilised or relied upon by any organisation, or its employees, other than RDV, nor is it to be used for any purpose other than that articulated above. Accordingly, PwC accepts no responsibility in any way whatsoever for the use of this report by any other persons or for any other purpose. PwC has prepared this report primarily based on information collected from project files held by RDV, the project database maintained by RDV, a survey to grant recipients and consultation with selected grant recipients. PwC has not endeavoured to seek any independent confirmation of the reliability, accuracy or completeness of this information. While the statements made in this report are given in good faith, PwC accepts no responsibility for any errors in the information on which they are based, nor the effect of any such errors on our comments. Environmental consideration This report has been designed to be printed in a double sided format so as to reduce paper use. Front cover image Gippsland Water Factory. Image supplied by RDV.

3 Contents Summary and overview 1 Acronyms 8 Part A Part B Review background and context 1. Introduction Evaluation of economic impacts The methodological framework The evaluation framework Background to the Regional Infrastructure Development Fund History and objectives Program administration and operation Priority initiatives Outcomes of previous reviews An Overview of Regional Infrastructure Development Fund Expenditure Supported projects by status Supported projects by project proponents Supported projects by region Supported projects by project category Supported projects by project category and region Supported projects by source of investment Challenges in Evaluating the Regional Infrastructure Development Fund Data gaps and variability Deficiencies in outcome data The nature of RIDF projects Project timing RIDF s role is generating outcomes ascribing causality 26 RIDF's economic impacts on regional Victoria 5. Direct Leverage What is leverage? Direct leverage obtained by RIDF 29 Case study: Birchip Research and Technology Precinct, Loddon Mallee region Employment Short term direct construction impacts Ongoing direct employment impacts Results by project category Results by region 42 Case study: Ballarat Technology Park and IBM Regional Software Solutions Centre, Grampians region Economic benefits generated by RIDF 45 Summary and overview i

4 7.1. Direct benefits arising from RIDF Benefit cost ratios associated with RIDF 48 Case Study: Latrobe Regional Airport, Gippsland region 53 Part C Part D RIDF S economy wide impacts Appendices 8. Economy-wide impacts of RIDF An economy-wide perspective of RIDF s impacts Short run (construction) impacts Long run (operational) impacts 60 Case study: Wodonga Freight Centre LOGIC Industry Hub, Hume region Social capital generated by RIDF projects What is social capital? Indicators of social capital outcomes from RIDF Results by project category Social capital results by region Comparison with traditional measures of economic benefit 71 Case study: Narana Creations, Barwon South West region 73 Appendix A Data collection methodologies 76 Appendix B References 78 Appendix C Recipients views as to the nature of the benefits generated by RIDF 79 Appendix D Key assumptions 84 Appendix E Social capital analysis 86 ii PricewaterhouseCoopers

5 Summary and overview The Regional Infrastructure Development Fund (RIDF) is a key platform of the Victorian Government s regional development agenda. Introduced on 1 July 2000, it aims to support the competitiveness of rural and regional Victoria and enhance its growth and development through the provision of funding for capital works projects. Applications for funding under RIDF are assessed against published eligibility guidelines, and must demonstrate an ability to meet a significant number of criteria. These criteria are: Economic outcomes, including employment, new investment, and access into new markets. Socio-economic impacts. Priority areas within a state and/or regional context. Feasibility and implementable. Financial viability, leveraging additional funding from alternate sources. Use of local content in accordance with the Government s Victorian Industry Participation Policy. By March 2008 RIDF had committed almost $320 million to 163 projects across regional Victoria. Just over half (83) of these projects have been completed and, as shown in the table below, just over $134 million of RIDF funds have been expended. Of the outstanding projects, one third are under construction and the balance are in the contract negotiation stage. Value of RIDF support by region and project status ($ million). Complete Incomplete Under negotiation Total Barwon South West $37.0 $20.8 $5.2 $63.0 Gippsland $14.1 $64.3 $4.4 $82.9 Grampians $12.1 $17.5 $4.3 $34.0 Hume $21.2 $19.4 $8.8 $49.4 Loddon Mallee $29.5 $22.8 $10.4 $62.7 All Regions 1 $20.3 $7.5 $0 $27.8 Total $134.3 $152.3 $33.1 $319.7 Project proponents (ie recipients of RIDF funds) reflect a broad spectrum of regional stakeholders, with 76 per cent of funding for completed projects provided to local governments and the private sector, and the balance to public education providers and other levels of government. RIDF supports a diverse range of infrastructure projects. For the purposes of this evaluation, each project has been grouped into one of five categories which reflect the types of infrastructure and the individual project s objectives. The categories are: Education and ICT projects that support education, training and ICT infrastructure. This includes projects such as ICT business centres, university infrastructure and research centres, an upgrade to a university arts precinct, and communications projects. 1 Nine projects span multiple regions and are classified as All Regions Summary and overview 1

6 Energy and utilities projects that support the connection of water, electricity and gas. Projects in this category include water supply projects (including water treatment, irrigation, water recycling etc), extensions to the natural gas network and power infrastructure upgrades. Industry development projects which facilitate industry development. This category includes a diverse range of projects, including industrial estate development, revitalisation of existing civic or industry sites, call centres, port upgrades and industry cluster development. Tourism projects which contribute to the tourism industry. Funded infrastructure includes projects such as upgrades to arts facilities, visitor information centres, rail trails (hiking and leisure), natural tourism attractions and related infrastructure. Transport projects which support the improvements and development of transport infrastructure, such as rail upgrades and extensions, regional airports, dairy roads and cattle underpasses. The distribution of project types across Victoria s five regions is summarised in the following table. Completed RIDF projects by region and category. Education & ICT Energy & Utilities Industry Development Tourism Transport Total Barwon South West Gippsland Grampians Hume Loddon Mallee All Regions Total Analysis of the completed RIDF projects enables a number of broad observations to be made about the impact of RIDF: 1. RIDF has been an effective means of attracting additional expenditure to Victorian regions by the private sector and other governments For the 83 completed RIDF projects, the RIDF contribution of $134 million has been matched by $273 million from other sources, including the private sector, Commonwealth and local governments, as well as other branches of the Victorian Government (see table below). This equates to leveraged expenditure of $2.03 for every dollar of RIDF funding. RIDF and supporting non-ridf funding by project status. Project status RIDF Other Funding Total Complete $134.3 $272.7 $407.0 Incomplete $152.3 $299.3 $451.6 Under negotiation $33.1 $218.0 $251.1 Total $319.7 $790.0 $1, PricewaterhouseCoopers

7 Completed RIDF projects addressing industry development goals have received the greatest private sector support. This suggests that attracting funding from non-ridf sources is easier where there are tangible economic benefits, particularly those projects that either generate income directly or are pre-requisites for income generation. As a general trend, investment from other sources, particularly from the private sector, is attracted to areas with well established transport infrastructure or population densities. The overall RIDF commitment of almost $320 million for 163 projects has been matched with commitments of $790 million from local and other governments and the private sector. This equates to a direct leverage ratio (from other sources) of $2.47 for every dollar committed by RIDF. 2. RIDF has stimulated direct employment growth Completed RIDF projects are estimated to have directly stimulated the creation of an average of: 393 full time equivalent (FTE) jobs per year in regional Victoria during the construction phase of the projects (ie over the period 2001 to 2007) 3,896 FTE jobs per year in regional Victoria during the operational phase of the projects. This result equates to approximately 29 new jobs for every $1 million of RIDF expenditure. The results indicate a strong correlation between job creation and projects with an industry development focus. Completed industry development projects created the majority (56 per cent) of jobs in regional Victoria, with those projects that had an emphasis on business attraction particularly successful in creating new employment. A summary of employment outcomes for completed projects, analysed by project classification and region, is shown in the following table. Direct ongoing FTE employment created by completed RIDF projects by category and region Education & ICT Energy & Utilities Industry Development Tourism Transport Total Barwon South West Gippsland Grampians Hume ,107 Loddon Mallee ,128 All Regions Total , ,896 Summary and overview 3

8 3. Overall, a net benefit is created by RIDF as direct benefits exceeded direct costs The net present values of the gross economic benefits of RIDF are shown in the following table. Total gross benefits (10 year NPV, $ million, completed projects). Education & ICT Energy & Utilities Industry Development Tourism Transport Total Barwon South West $18.0 $61.0 $115.6 $16.7 $162.5 $373.8 Gippsland $0.0 $5.8 $29.8 $35.9 $2.5 $73.5 Grampians $0.0 $0.0 $6.1 $13.4 $0.0 $19.5 Hume $1.2 $2.9 $51.7 $30.1 $0.0 $86.0 Loddon Mallee $19.4 $0.0 $25.0 $8.1 $0.0 $52.6 Total 10 YEAR NPV $38.7 $69.7 $228.2 $104.2 $164.5 $605.3 Overall, the direct economic benefits generated by the infrastructure projects supported by RIDF have outweighed the direct costs; every dollar spent (from all sources) on completed RIDF projects has led to $1.37 worth of economic benefits. Reflecting the positive leverage gained by RIDF investments, when the total benefits are analysed relative to just the RIDF investment (ie what total benefit was stimulated from RIDF support?), the benefit of $1.37 per dollar invested rises to $4.13. As shown in the figure below, this overall positive benefit cost ratio of 1.37 to 1 masks some significant disparities between the net benefits across project types. In particular, the negative results for energy and utilities projects (including water and wastewater projects) arise because of the difficulty in demonstrating the direct economic benefits associated with supplying larger quantities of potable water or building improved wastewater facilities. Furthermore, although grant recipients claim that a broad range of industry and business benefits can be linked to water re-use and recycling initiatives, no data has been provided that substantiates and quantifies the impacts. Benefit cost ratio for total investment (by project type) Education and ICT Energy and Utilities Industry Development Tourism Transport 4 PricewaterhouseCoopers

9 4. The impact of RIDF on the Victorian economy as a whole is positive RIDF supported projects have contributed to an increase in economic activity across the whole of the Victorian economy: During the construction phase (ie over the period 2001 to 2007) RIDF s completed projects added an average of $10.9 million annually to state income (ie gross state product). The operation of RIDF funded projects is forecast to add an average of $116.5 million per annum to Victoria s gross state product over the first ten years of the infrastructure s use. In the operational phase there are positive improvements to household consumption, real investment, employment and export and import volumes to all non-metropolitan Victorian regions. The industries in Victoria that are most positively impacted by RIDF projects are utilities, transport and cultural and recreational services industries, reflecting the major types of projects RIDF has supported to date. 5. Even though some project types do not generate significant tangible direct economic benefits, they are more likely to foster longer term beneficial social capital outcomes It is clear that, for some types of investment supported by RIDF, it is difficult to identify directly observable tangible economic benefits. 2 For example: while education is positive investment, the investments in the education infrastructure are long-lived, with tangible net beneficial outcomes difficult to identify at this time social infrastructure, by its very nature, seeks to address activities for which productive gains are difficult to identify. Looking beyond traditional immediate economic impacts, this report has established a framework to assess the degree to which project types can be said to enhance social capital outcomes. The Organisation for Economic Cooperation and Development (OECD) defines social capital as the norms and networks that facilitate joint and other collaborative actions for social and economic gains. 3 Social capital has received a notable rise to prominence in both theoretical and applied social science literature over the last two decades, attributing it to a number of aspects of community well-being; the broad claim is that social capital is a productive resource that may contribute directly and indirectly to the production of economic value. 4 A high level of economic contribution or benefit does not necessarily translate to high levels of social capital. As shown in the following table, for the most part, social capital attributes associated with RIDF projects tend to be higher for those investments where demonstrable direct economic benefits are lower. Thus, even though a RIDF project may be viewed as having lower tangible economic benefits, it may provide more diffuse (ie less direct) benefits through the generation of social capital. 2 Indeed, if only demonstrably beneficial projects were included in the benefit cost assessment then the benefit cost ratio would be 3.36:1 rather than 1.36:1. 3 OECD, 2001; The Wellbeing of Nations: The Role of Human and Social Capital (A Summary) 4 Bureau of Transport and Regional Economics, 2005; Focus on Regions, No.4 Social Capital, Information Paper 55 Summary and overview 5

10 Social capital outcomes by project classification. Social Capital Framework Element Education & ICT Energy & Utilities Project Classification Industry Development Tourism Transport Trust Cooperation Acceptance Social participation Civic participation Community Support Economic participation Size of network Network frequency Transience/Mobility Power relationships Integration into the Community Common action Sharing knowledge Benefit Cost Ratio High/strong more than 65% of projects (by category or region) achieved a yes response against the social capital indicator Medium/moderate 36-65% of projects (by category or region) achieved a yes response against the social capital indicator Low/weak Less than 35% of projects (by category or region) rated a yes against the social capital indicator The table above demonstrates that the extent and range of social capital outcomes achieved is largely attributable to the nature and attributes of the infrastructure projects funded; education and ICT projects delivered the broadest range of social capital outcomes compared to transportrelated infrastructure. Some social capital outcomes could potentially be stronger than represented in the analysis; however this may be more a function of the scope of the framework than the nature of the funded projects. 6 PricewaterhouseCoopers

11 6. The nature of incomplete and still in negotiation RIDF projects suggests that average economic benefit from RIDF will increase as these projects are completed The economic and social capital analysis in this report has focused on the impacts generated by the $134.3 million of completed RIDF investments. There remain $185.4 million of RIDF projects that are yet to be completed or are still under negotiation, and it is reasonable to expect, given the predominance of energy and utilities as well as transport and industry development in these subsequent projects, that the economic impacts of these projects will, in aggregate, be greater than the existing completed RIDF projects as and when they are completed. Summary and overview 7

12 Acronyms ABS Australian Bureau of Statistics BTRE Bureau of Transport and Regional Economics CAN Customer Access Network CGE computable general equilibrium DIIRD Department of Innovation, Industry and Regional Development FTE full time equivalent GDP gross domestic product GRP gross regional product GSP gross state product ICT information and communications technology LGA local government authority NGEP Natural Gas Extension Program NLIS National Livestock Identification Scheme NPV net present value OECD Organisation for Economic Cooperation and Development PwC PricewaterhouseCoopers RDV Regional Development Victoria RIDF Regional Infrastructure Development Fund SOURS Stock Over/Underpass Roads Safety The Act The Regional Infrastructure Development Fund Act 1999 VAGO Victorian Auditor-General s Office 8 PricewaterhouseCoopers

13 Part A Review background and context

14 1. Introduction Infrastructure is a key to building the competitive capacity of rural and regional communities. It is a means of generating economic prosperity, driving investment, jobs and population growth, and supporting community well-being. In today s environment, regional economies must be able to connect with the rest of the country and the world in order to produce goods and services efficiently. Connections include roads and rail, access to ports and air services and the availability of reliable communications technology. Efficient and sustainable production relies on, amongst other things, electricity, gas and water infrastructure. The availability of science, technology and innovation infrastructure is paramount to driving growth in emerging industries. There is also a need to ensure that soft, or social infrastructure is sufficient to support growth, allowing regions to prosper in an increasingly globalised and knowledge-based economy while also enhancing the attractiveness and liveability of rural and regional communities to new and existing populations. The Regional Infrastructure Development Fund (herein RIDF or the Fund ) is a key platform of the Victorian Government s regional development agenda. Introduced on 1 July 2000, it aims to support the competitiveness of rural and regional Victoria and enhance its growth and development through the provision of funding for capital works projects. These projects facilitate investment, job creation and export opportunities through the support for industry development, better linkages of transport infrastructure, improvements to tourism infrastructure and new opportunities in education and information and communication technologies (ICT) infrastructure Evaluation of economic impacts This report presents the findings of an analysis into the economic impacts of RIDF since its inauguration in It examines the impacts of the Fund through to the period ending March 2008, establishing the extent to which RIDF has delivered on its objectives. More specifically, the evaluation quantifies impacts to Victoria s economy, with a particular focus on the accumulated direct economic costs and benefits of RIDF funded projects, assessed annually and by region, and the indirect or flow-on impacts across the economy, including the impacts to key industry sectors. The evaluation also considers the social capital enhancing outcomes affected as a result of RIDF project funding, and demonstrates the economic and social impacts resulting from the Fund through a series of individual project case studies The methodological framework In recognition that RIDF supports a diversity of projects and that the Fund contributes to a range of economic as well as socio-economic outcomes in regional Victoria, the methodology for examination of impacts was multi-dimensional. The key steps, summarised further in Appendix A, were as following: Identification and verification of project and program inputs, economic outcomes and other impacts data. This involved: project reviews a review of all historical Departmental documentation held with respect to both complete and part-complete funded projects, including application, progress and final project reports a literature review analysis of program information, earlier program evaluation reports, Government policy and other documents, as well as academic research papers. A Reference List is contained in Appendix B stakeholder consultation including a survey distributed to RIDF grant recipients of completed projects across a series of project groupings: transport, tourism, industry development, education and ICT and energy/utilities, and consultation with a representative sample of RIDF grant recipients. Survey results are summarised in Appendix C. 10 PricewaterhouseCoopers

15 The construction and testing of an economic model to estimate the direct costs and benefits of RIDF at a project, thematic and regional level, identified by year. Analysis of the broader indirect economy wide impacts of RIDF through the application of computable general equilibrium (CGE) analysis using Monash University s TERM model, specified to reflect the Victorian Government s division of the State into one metropolitan and five regional areas. Development of a typology to examine the social capital outcomes generated as a result of RIDF project funding. The development of case studies to examine in more detail the effectiveness in which RIDF grants have facilitated economic change and social capital outcomes over time. Ongoing consultation with a project reference panel comprising senior officers representing RDV and the broader Department of Innovation, Industry and Regional Development The evaluation framework This evaluation report is divided into four parts: Part A provides background and contextual information. Specifically: Chapter 2 provides the background and context for the establishment and operation of RIDF, detailing its sub-programs, and the findings of previous program and sub-program reviews. Chapter 3 provides an overview of the nature of the Fund s expenditure. Chapter 4 outlines key challenges confronted in evaluating the economic impacts of RIDF and the key strategies employed by PwC to mitigate areas of uncertainty. Part B details the direct economic benefits generated by RIDF. Specifically: Chapter 5 identifies the leverage obtained from RIDF. Chapter 6 examines employment impacts. Chapter 7 contains the results of the direct economic modelling, estimating the quantitative benefits of RIDF. Part C examines the broader economic benefits generated by RIDF: Chapter 8 outlines the total (ie direct plus flow-on) impact of RIDF on the economy as a whole (ie impacts beyond those experienced just by the recipients of RIDF funding). Chapter 9 analyses the social capital producing impacts of the Fund. Part D of the report contains appendices to support the body of the report. Introduction 11

16 2. Background to the Regional Infrastructure Development Fund This Chapter outlines the objectives of the Regional Infrastructure Development Fund (RIDF), the administrative arrangements and priority areas for funding. This Chapter also summarises the key findings of previous reviews in relation to RIDF and its subprograms History and objectives RIDF was created by the Victorian Government under the Regional Infrastructure Development Fund Act 1999 as a Trust Fund in the Public Account. The Government s objective in creating the Fund was to provide leadership and opportunity through working partnerships with regional communities and other spheres of government to attract investment and create jobs across the whole State. 5 This is achieved by the provision of financial assistance for capital works relating to: the improvement of transport within regional Victoria and connecting regional Victoria with other parts of the State the development of industries within regional Victoria the development and improvement of tourism facilities in regional Victoria or that will benefit regional Victoria providing regional Victoria with access to education and information technology; and/or generally benefiting or supporting the development of regional Victoria. 6 RIDF was established with an initial funding contribution of $ million over three years from 1999 for projects in one of 48 municipal districts defined by the Act. An additional allocation of $180 million over five years was made in the Budget, which included funding for the provision of natural gas in regional communities and interface councils and support for economic and social infrastructure in small towns. With the introduction of its regional development policy in late 2005, Moving Forward, the Victorian Government injected a further $200 million to renew and enhance the Fund. In doing so, it provided new funding for regional arts, local ports and the creation of a program to support the development of regional intermodal freight hubs Program administration and operation The Department of Innovation, Industry and Regional Development (DIIRD) administered RIDF between 2000 and In July 2003, the administration was transferred to RDV, a statutory authority created under the Regional Development Victoria Act Applications for funding under RIDF are assessed against published eligibility guidelines, and must demonstrate an ability to meet a significant number of criteria. These criteria are: economic outcomes, including employment, new investment, and access into new markets socio-economic impacts priority areas within a state and/or regional context feasibility and implementable 5 Regional Development Victoria, 2004, Regional Development Victoria, Regional revival shared growth, Regional Infrastructure Development Fund 6 Regional Infrastructure Development Fund Act Regional Development Victoria, 2005, Moving Forward: Making Provincial Victoria the Place to Live, Work and Invest 12 PricewaterhouseCoopers

17 financial viability, leveraging additional funding from alternate sources; and/or use of local content in accordance with the Government s Victorian Industry Participation Policy. Project proposals are referred to an Inter-Departmental Committee, comprising broad representation from Victorian Government Departments for appraisal, with recommendations for project funding made to the Minister for Rural and Regional Development for endorsement (and Minister for Finance for secondary approval when grants are in excess of $2 million). RIDF is open for applications year round Priority initiatives While RIDF grants are provided under the one main program banner to deliver the specific infrastructure outputs as required by the Regional Development Victoria Act 2002, RDV has delivered targeted sub-programs across the lifetime of the program to further benefit or support regional development. 8 Reflecting the continued evolution of the Fund, some sub-programs introduced at inception remain active, while others have been completed or replaced. Other priorities have been announced with subsequent Government allocations to the Fund. Fully expended, completed and/or closed sub-programs include the Customer Access Network (CAN) Demonstration Program, Dairy Power Infrastructure Upgrades, National Livestock Identification Scheme (NLIS), Re-use Irrigated Private Plantations Program, and Rural Community Infrastructure Allocation. Current priority initiatives to be considered through the Fund relate to: Arts and Cultural Facilities Infrastructure Aviation Infrastructure Biofuels Infrastructure Dairy Farm Gate Access Intermodal Freight Infrastructure Local Ports Infrastructure Local Roads to Markets Program On Farm Energy Program Pathways Infrastructure Regional Electrical Access Program Rural Showgrounds Program Small Towns Development Fund Stock Over/Underpasses Road Safety Program Water for Industry Infrastructure Outcomes of previous reviews As part of the Government s ongoing monitoring and evaluation of the Fund and in order to identify whether it has achieved its key objectives, DIIRD/RDV commissioned a number of previous reviews of RIDF, or its various sub-programs. 9 These reviews are summarised in the following sections Victorian Auditor General s Office, Results of special reviews and other investigations, October 2005: Operation of the Regional Infrastructure Development Fund 9 Regional Development Victoria, 2004, op cit 10 In addition, in October 2005 the Victorian Auditor-General s Office (VAGO) examined the financial and operational position of RIDF and assessed whether RDV had adequate systems and processes to monitor, evaluate and report on the outcomes of RIDF. Therefore the focus of the review was on the functioning and evaluation of the RIDF program generally and not on the specific projects funded. The examination found that while RIDF funds had been directed at projects that met legislative requirements, the distribution of the funds could be improved to ensure that they achieve optimum outcomes against Government priorities in rural and regional Victoria. Background to the Regional Infrastructure Development Fund 13

18 Regional Infrastructure Development Fund economic impact evaluation The National Institute of Economics and Industry Research completed an inception evaluation of RIDF in June The report provides an outline of each project including the funding structure; the project objectives; the impact on the local region; the direct and total regional impact in terms of the gains in output and employment flowing from the project; and an estimate of the net additional impact on the Victorian economy. The study classified each project into four groups: community; direct industry support; tourism; and knowledge economy. The study reported the impacts for each project in terms of: additional investment funding from RIDF, the application and other sources employment associated with development potential to increase visitors to the region regional economic benefits such as increases in visitors, boost to local industry construction and associated investments the investment made by parties other than RIDF. An additionality factor was applied to estimate the State operational impact of each project. Overall, the review found an estimated net present value (NPV) of the consumption gain to Victorian residents of $879 million in 2002 dollars over 20 years. This translated into a benefit cost ratio of 8 to Economic Impact of the Natural Gas Extension Program In August 2005, KPMG undertook an economic review of the impacts arising from supplying 34 towns with reticulated natural gas as part of the Natural Gas Expansion Program (NGEP). 12 The results estimate the capital cost of the network expansion to be $147 million, with 20 years of operational and maintenance costs estimated at $14.6 million (June 2004 dollars). The economic review was based on data provided by the gas distribution businesses as part of the tender process, and an application of the Monash Multi-Region Forecast (MMRF) model to estimate the direct, indirect and flow-on effects to the Victorian economy. The findings were that the overall NPV of the entire NGEP across the construction and operation phases was estimated at $427.6 million over a 20 year period. In addition, the analysis estimated that additional employment of over 7,900 employment years would be generated over 20 years that is, an average of 395 FTE jobs per year Evaluation of Selected Regional Infrastructure Development Fund Sub-Programs Impact Consulting Group undertook an evaluation of selected RIDF sub-programs in September Consultations and surveys as well as an assessment of documentation and other materials were used to assess the programs. The review focused on qualitative evaluations of: the Stock Over/Underpass Road Safety (SOURS) program the Dairy Power Infrastructure Upgrade (DPIU) program implementation of the National Livestock Identification Scheme in Victorian Saleyards. It noted the benefits of each program as well as options for continuation and improvement. 11 National Institute of Economics and Industry Research, 2003, Regional Infrastructure Development Fund economic impact evaluation, a report of the Department of Innovation Industry and Regional Development 12 KPMG, 2005; Economic Impact of the Natural Gas Extension Program 13 Impact Consulting Group; Evaluation of Selected Regional Infrastructure Development Fund Sub-programs, Final Report; September PricewaterhouseCoopers

19 3. An Overview of Regional Infrastructure Development Fund Expenditure Summary of Key Evaluation Findings By March 2008 RIDF had committed almost $320 million to 163 projects across regional Victoria. Just over half (83) of these projects have been completed, with over $134 million of RIDF funds already expended. Of the outstanding projects, one third are under construction and the balance are in the contract negotiation stage. Project funding for completed projects has been distributed to a range of proponents, including local government (recipients of almost fifty per cent of funding), the private sector (27 per cent), as well as education providers and other levels of government (12 per cent respectively). Across the five regions of Victoria, the largest number of projects has been supported by RIDF in the Loddon Mallee (42 completed, incomplete and projects under negotiation). However, in terms of financial commitment, the Gippsland region has gained the most RIDF support ($82.9 million) across all projects (32 projects). To date, the largest amount of RIDF expenditure ($37.0 million) on completed projects has occurred in Barwon South West. Thus far, RIDF support for industry development projects has outweighed other project categories for completed projects, both in terms of the number of projects supported (32) and value of expenditure ($60.2 million). Overall, RIDF commitment to energy and utilities projects ($125.7 million) exceeds all other project categories. Of total funding committed to RIDF supported infrastructure projects across Victoria, RIDF funding accounts for 29 per cent of the total investment, with the balance being provided by other sources. This Chapter provides an overview of the projects funded by RIDF. The overview examines the distribution of funding and nature of funded projects based on their completion status, grant recipient, region, category and value. 3.1 Supported projects by status As at March 2008, RIDF has committed almost $320 million for 163 infrastructure projects. The status of each project varies and can be classified as: Complete the infrastructure works for the project are complete and the infrastructure is operational. There are 83 completed projects, representing over 50 per cent of all project commitments. Incomplete the infrastructure is currently under construction and is not yet operational. There are 54 incomplete projects representing one-third of all project commitments. Under negotiation the project has received funding commitment from RIDF, however the contractual arrangements for grant funding have not yet been finalised. Projects under negotiation, 26, account for 16 per cent of all project commitments. A breakdown of projects by their completion status is presented in Figure 3-1. An Overview of Regional Infrastructure Development Fund Expenditure 15

20 Figure 3-1, RIDF supported projects by project status (as at March 2008).* Under negotiation, 26, 16% Complete, 83, 51% Incomplete, 54, 33% * In terms of RIDF funding for each, complete projects represent $134.2 million in funding, incomplete projects represent $152.3 million, and projects under negotiation represent $33.1 million. 3.2 Supported projects by project proponents RIDF funding has been allocated to a broad range of regional stakeholders. While these projects have leveraged additional funding and delivery partnerships with other stakeholders as outlined further in Chapter 5, the primary recipients of RIDF funding are categorised as: local government education providers other State and Commonwealth government departments and agencies the private sector, including regional infrastructure providers, business groups, and other regional organisations. The number of funded projects by grant recipient is demonstrated in Table 3-1. Table 3-1, RIDF supported projects by grant recipient (as at March 2008). Project proponent Complete Incomplete Under negotiation Total Local Government Education Private Other Government Other (not specified) Total Of all funding committed, almost half has been allocated to local government, and over a third to the private sector. The balance has been granted to education providers and other government entities. The distribution of grants to recipients of funding for now completed projects is consistent with this trend. See Figure 3-2 following. 16 PricewaterhouseCoopers

21 Figure 3-2, Proportion of completed RIDF projects by grant recipient (as at March 2008).* Other Government 12% Private sector 27% Local Government 49% Education 12% * The distribution of RIDF grants in financial terms to local government proponents was $55.4 million; $20.7 million to education proponents; $26.1 million to private sector proponents and $32.1 million to other government proponents. Compared to completed infrastructure, for projects currently under construction and in negotiation there is an increased allocation of grants to the private sector, and fewer project grants to education providers and other government. This may be due to the fact that RIDF priorities have changed over time to respond to changing regional needs. 3.3 Supported projects by region Victoria s regions The Victorian Government plans, funds and delivers its services through a number of geographic regions; there are five rural and regional areas of Victoria, in addition to three metropolitan regions. The rural and regional areas which provided the basis for the analysis of the impacts of RIDF are: Barwon South West This region comprises ten local government authorities (LGAs) including all LGAs along the south west coast of Victoria. According to the Australian Bureau of Statistics (ABS) figures, the estimated population of Barwon South West at 30 June 2007 was almost 360,000, the largest defined Victorian region in terms of population. The major industries in the region include dairying, tourism, manufacturing, sheep/wool and beef. Gippsland The Gippsland region comprises six LGAs and includes all the LGAs along Victoria s south east coast. The population of this region at June 2007 was estimated to be over 250,000, making it Victoria s fourth most populous region. The region s industries are predominantly dairying, energy, manufacturing, tourism and timber. Grampians The Grampians region is located in Victoria s west and runs from Moorabool and Hepburn to the West Wimmera area. It comprises 11 LGAs and is Victoria s least populous region with an estimated population at June 2007 of almost 217,000. Its key industries include wheat, mining, manufacturing, information and communications technology (ICT) and tourism. Hume Located in Victoria s north east, the Hume region comprises 12 LGAs and borders New South Wales. According to ABS figures, at June 2007 the region had a population of almost 263,000, making it the third largest region in terms of population. Viticulture, horticulture, dairying, and tourism are the main industries of the region. Loddon Mallee This region comprises ten LGAs and is located in Victoria s north west, bordering New South Wales and South Australia. At June 2007, the population of this region was estimated to be almost 308,000 which, in terms of population, is the second largest region in Victoria. The key industries are wheat, stone fruits, horticulture, viticulture and mining. Figure 3-3 depicts the location of RIDF funded projects. An Overview of Regional Infrastructure Development Fund Expenditure 17

22 Figure 3-3, Location of RIDF funded projects. Please note that this map contains projects funded and announced to May PricewaterhouseCoopers

23 3.3.2 Distribution of RIDF projects by region Table 3-2 provides a breakdown of RIDF supported projects by project status ie the number of projects that have been completed, are incomplete or under negotiation by each region. Nine projects span multiple regions (eg the Customer Access Network (CAN) Demonstration program, the implementation of National Livestock Identification Scheme Saleyard (NLIS) infrastructure, and the cattle over/underpass program) and are classified as All Regions in Table 3-2. Table 3-2, Number of projects supported by region. Region Complete Incomplete Under negotiation Total Barwon South West Gippsland Grampians Hume Loddon Mallee All Regions Total Figure 3-4 provides a visual representation of the proportion of completed projects by location. The largest number of projects was supported in the Loddon Mallee (23 projects, or 28 per cent of all projects) and Barwon South West (17 projects representing 20 per cent of all projects). Figure 3-4, Proportion of completed projects by region. All Regions 7% Barwon South West 20% Loddon Mallee 28% Gippsland 16% Hume 19% Grampians 10% The funding distribution broadly aligns with the regional population levels; that is, the greater the population the higher the number of projects supported in each region by comparison to regions with lower population levels. An Overview of Regional Infrastructure Development Fund Expenditure 19

24 3.4 Supported projects by project category The RIDF program supports a diverse range of infrastructure projects. For the purposes of this evaluation, each project has been grouped into one of five categories which reflect the types of infrastructure and the individual project s objectives. The categories are: Education and ICT projects that support education, training and ICT infrastructure. This includes projects such as ICT business centres, university infrastructure and research centres, an upgrade to a university arts precinct, and communications projects. Energy and utilities projects that support the connection of water, electricity and gas. Projects in this category include water supply projects (including water treatment, irrigation, water recycling etc), extensions to the natural gas network and power infrastructure upgrades. Industry development projects which facilitate industry development. This category includes a diverse range of projects, including industrial estate development, revitalisation of existing civic or industry sites, call centres, port upgrades and industry cluster development. Tourism projects which contribute to the tourism industry. Funded infrastructure includes projects such as upgrades to arts facilities, visitor information centres, rail trails (hiking and leisure), natural tourism attractions and related infrastructure. Transport projects which support the improvements and development of transport infrastructure, such as rail upgrades and extensions, regional airports, dairy roads and cattle underpasses Distribution of RIDF projects by project category To analyse the impacts of RIDF, each complete, incomplete and under negotiation project has been categorised into one of the five project categories, as shown in Table 3-3. Table 3-3, Number of projects supported by project category. Project Type Complete Incomplete Under negotiation Total Education and ICT Energy and Utilities Industry Development Tourism Transport Total Over one-third of all completed projects are industry development projects, with the balance comprising a relatively equal number of energy and utilities, tourism, transport and education and ICT projects. Incomplete projects and projects in negotiation are predominantly energy and utilities projects, as well as transport and industry development. Figure 3-5 summarises the proportion of completed projects under each type. 20 PricewaterhouseCoopers

25 Figure 3-5, Proportion of completed projects by project category. Transport 16% Education and ICT 12% Tourism 17% Energy and Utilities 17% Industry Development 38% 3.5 Supported projects by project category and region Table 3-4 details the number of completed projects by region and category. Table 3-4, Completed RIDF projects by region and category. Region Education and ICT Energy and Utilities Industry Development Tourism Transport Grand Total Barwon South West Gippsland Grampians Hume Loddon Mallee All Regions Total The largest number of education and ICT projects was delivered in the Loddon Mallee region (five projects, representing 50 per cent of all projects in that category) with more than half of the energy and utilities projects completed in Hume and the Loddon Mallee (four projects each). Of all tourism projects, more than 50 per cent were in the Grampians and Loddon Mallee regions (three and five projects respectively). Over two-thirds of transport projects were completed in Barwon South West (five projects) and Gippsland (four projects) Value of supported projects by region and status of project Table 3-5 and Figure 3-6 examine the RIDF commitment in each region and by project status. Of the total $320 million invested by RIDF, more than 40 per cent, or $134 million has been committed to completed projects. A further $186 million or almost 60 per cent has been committed or is under negotiation. An Overview of Regional Infrastructure Development Fund Expenditure 21

26 Table 3-5, Value of RIDF support by region and project status ($ million).* Region Complete Incomplete Under negotiation Total Barwon South West $37.0 $20.8 $5.2 $63.0 Gippsland $14.1 $64.3 $4.4 $82.9 Grampians $12.1 $17.5 $4.3 $34.0 Hume $21.2 $19.4 $8.8 $49.4 Loddon Mallee $29.5 $22.8 $10.4 $62.7 All Regions $20.3 $7.5 $0 $27.8 Total $134.3 $152.3 $33.1 $319.7 * Figures may not add up because of rounding Figure 3-6 diagrammatically represents RIDF expenditure in each region for completed projects. Figure 3-6, Proportion of RIDF expenditure of completed projects by region. All Regions 15% Barwon South West 27% Loddon Mallee 22% Gippsland 11% Hume 16% Grampians 9% The largest proportion of RIDF expenditure for complete projects was Barwon South West (27 per cent) followed by the Loddon Mallee region (22 per cent). At present, incomplete projects in Gippsland represent a substantially higher value than completed projects, largely due to a number of incomplete energy and utilities projects (as following) Value of supported projects by project category and status Of completed projects, industry development represents the largest share of RIDF expenditure, at $60.2 million or 44 per cent of total expenditure for complete projects. This is almost three times that of spending on education and ICT projects and energy and utilities projects. See Table 3-6 and Figure PricewaterhouseCoopers

27 Table 3-6, Value of RIDF support by project category and project status ($ million). Project Type Complete Incomplete Under negotiation Total Education and ICT $20.9 $6.0 $2.0 $28.9 Energy and Utilities $21.8 $101.4 $2.6 $125.7 Industry Development $60.2 $16.0 $19.1 $95.3 Tourism $18.3 $17.5 $5.4 $41.2 Transport $13.0 $11.4 $4.0 $28.5 Total $134.3 $152.3 $33.1 $319.7 The significant value of incomplete funding attributed to energy and utilities projects ($101.4 million) is a factor of the incomplete Natural Gas Extension Program projects. This value includes a RIDF grant valued at $27 million for the supply of natural gas to South Gippsland, as well as other projects, including a RIDF contribution of $25 million to the Gippsland Water Factory project. Figure 3-7, Proportion of RIDF expenditure of completed projects by project category. Transport 10% Education and ICT 16% Tourism 14% Energy and Utilities 16% Industry Development 44% 3.6 Supported projects by source of investment For the majority of projects the funding supplied by RIDF represents only a proportion of the total funding used to complete its construction. Additional funding provided is considered leverage generated by RIDF and is discussed in more depth in Chapter 5. However, it is important to understand that RIDF is only a percentage of total funds spent in the region. Table 3-7 distinguishes between RIDF funding and other funds for complete, incomplete and under negotiation projects. Of total funding committed to RIDF supported infrastructure projects across Victoria, RIDF funding accounts for around 29 per cent of all funding. This trend is consistent across both complete and incomplete projects; however projects currently in negotiation achieve a greater proportion of leverage, with around 87 per cent of all funds being provided by other sources. This is outlined further in Chapter 5. An Overview of Regional Infrastructure Development Fund Expenditure 23