Business case
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Business case
A business case is one of the most frequently used tools by economists to facilitate the preparation of a robust and feasible urban plan. Business cases capture the reasoning for initiating a project by estimating the revenues and costs for the public authorities (which are partly covered by private parties/investors) and by identifying changes in demands for government utilities and services resulting from the project development. The core of a business case may be incorporated into the planning application's "supporting report", which contains detailed information about the various aspects (compliance with planning policy and/or masterplans, costs and revenues) of the planned urban object.
Point of view business case
A business case can be derived from different point of views. In case of a business case for an investment project by an private company, the focus will be aimed at the costs and benefits for the company. Public projects such as spatial development or infrastructure projects have to be viewed from the point of view of different actors, including users, operators, and society as a whole. Therefore, a business case can also be an integrated part of a Social cost-benefit analysis or an Economic impact study.
Costs and benefits of a spatial development
An important goal of a business case is to estimate the project-specific investment revenues of the urban development project. These revenues depend on many factors and consists of many different categories. A new highway, for example, leads to a reduction of travel time, travel costs, tax revenues, safety benefits, scale and agglomeration advances due to an increased size of the market, an improved functioning of labour markets in the region, etc.
A spatial development, however, will not only lead to revenues (exploitation benefits etc.), but also to investment costs. These costs depend on many factors and consists of many different categories. In general, the most important cost factors are labour costs and material costs. Other important cost factors are: overhead costs, maintenance costs, legal fees, administrative costs et cetera.
Project-specific investment costs are not only influenced by the size of the spatial development, but also by the economies/diseconomies of scale and the length of the construction period, and hence, the exposure to economic uncertainties (changing interest rates, inflation, et cetera). Moreover, the investment costs are influenced through the relative cost and supply of labour and materials.
Security costs
Damage to or destruction of an urban object can be prevented with the help of security measures in the urban object design. Costs to prevent future damage or destruction, theft etc. are summarized by the term "economic impacts of security measures".
Related subjects
Urban planning processes employ a host of economic tools/models (see clickable map):
Other related subjects:
Footnotes and references
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