Category: Economics

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Economics Infrastructure Local Government

Decoding Funding: A Closer Look at Grants and Public-Private Partnerships for Local Councils

Managing a local council’s budget is no simple task. From infrastructure to public services, CFOs are faced with the challenge of funding projects that are essential to the prosperity of their communities. Two potential sources of funding have been generating quite a buzz in council meetings across the country: grants and Public-Private Partnerships (PPPs). In this article, we unpack the advantages and limitations of these two funding avenues.

Grants: A Gift That Gives Back

Grants are like the presents that keep on giving, primarily because they don’t need to be paid back. This feature makes them a cost-effective source of financing for many local councils. Moreover, the focus of grants often aligns perfectly with the mission of local councils: benefiting the community.

Another upside is that grants often come with a degree of spending flexibility, depending on their source and nature. However, a word of caution: it’s not all smooth sailing in the world of grant funding.

Applying for grants can feel like being in a fiercely competitive race. It requires a significant investment of time and resources to prepare a compelling application – with no guarantee of crossing the finish line first. Another pitfall lies in the scope of funding. For larger, more ambitious projects, grants might fall short. The funding pool is also subject to availability and can fluctuate from year to year. Lastly, grants can come with strings attached, limiting how councils can use the funds.

Public-Private Partnerships: Sharing the Load

If you’re looking to bring big projects to life, PPPs could be the answer. They’re an effective way to facilitate large-scale projects that might be beyond the reach of a council’s independent financing. An appealing aspect of PPPs is risk-sharing. By involving the private sector, both entities share the project risks, mitigating the council’s financial exposure.

Another potential advantage is efficiency. The private sector often boasts specialized skills, innovative technology, and advanced management techniques that can help deliver projects more effectively.

But PPPs aren’t without their challenges. They often entail complex and lengthy negotiations, requiring clear agreements on roles, responsibilities, and rewards. It’s also important to remember that private entities are profit-driven, which could result in prioritizing profitability over community benefits. Lastly, the long-term nature of PPP contracts could tie the council’s hands, reducing flexibility to adapt to changing community needs.

Making the Choice

Both grants and PPPs have their unique strengths and challenges. The choice between them hinges on a council’s specific circumstances and needs. Remember, these aren’t the only funding options out there. Other strategies such as municipal bonds, levies, or direct budget allocations are also worth exploring.

In the ever-changing landscape of local government finance, it’s more crucial than ever for CFOs to stay informed about the various funding mechanisms available. Balancing community needs with financial sustainability is the art of local council financing.

Categories
Economics Local Government Lytton Advisory Waste Management

How effective is full cost pricing in managing waste?

What's the true cost of waste? - Zero Waste Consultant

Full cost pricing is a pricing strategy that aims to reflect the true cost of a product or service, including all of the costs associated with producing and distributing it. This can include both direct costs, such as the cost of materials and labor, as well as indirect costs, such as the cost of pollution control measures and waste management.

In terms of managing waste, full cost pricing can be effective in that it encourages businesses and individuals to consider the full range of costs associated with their actions, including the cost of disposing of waste. By internalizing these costs, businesses and individuals may be more likely to adopt practices that minimize waste and reduce environmental impacts.

For example, if a company is required to pay the full cost of disposing of its waste, it may be more inclined to invest in recycling or other waste reduction strategies in order to reduce these costs. Similarly, if consumers are required to pay the full cost of disposing of their waste, they may be more likely to recycle or reduce their overall consumption in order to avoid these costs.

Overall, full cost pricing can be an effective tool for managing waste by providing incentives for businesses and individuals to minimize waste and reduce their environmental impacts.

Does your local government base charges on full cost pricing and does it send the right price signals?

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development Economics Infrastructure

AI Infrastructure Planning in the Pacific?

Recently Lytton Advisory is seeing Artificial Intelligence (AI) being applied across a wide range of sectors of economies.  Currently we are engaged in national infrastructure investment planning in Samoa and Vanuatu.  This prompted us to think about some of the issues around using AI in national infrastructure investment planning.  It is a promising approach that can enhance efficiency, precision, and foresight. However, implementing this technology, especially in Pacific Island nations, is not without challenges.  Three big challenges we see are:

  • Limited Access to Quality Data: AI thrives on large, diverse, and high-quality datasets. For AI to be effective in infrastructure planning, it needs access to data on the current state of the infrastructure, usage patterns, environmental factors, and the like. However, in many Pacific Island nations, data collection and management practices may be underdeveloped due to resource limitations, which results in poor quality or incomplete datasets. These nations may lack the digital infrastructure, like advanced sensor networks, to gather sufficient real-time data for AI to work effectively. The issue of data privacy and protection also comes into play, given the sensitive nature of certain infrastructure-related data.
  • Technological Capacity and Expertise: The implementation of AI requires technical expertise and strong digital infrastructure. In many Pacific Island nations, these capacities may be lacking due to constraints in resources, education, and infrastructure. Training locals to use and manage AI systems could be difficult, and attracting or retaining AI talent may also be a challenge due to economic factors and brain drain. There’s also the task of integrating AI with existing systems, which could be outdated or incompatible.
  • Environmental Vulnerability: Pacific Island nations are among the most vulnerable to climate change. Frequent natural disasters like cyclones, flooding, and sea-level rise create an unpredictable environment for infrastructure planning. While AI could potentially help manage and adapt to these issues, the volatile environment also makes data collection and analysis more challenging. Infrastructure and equipment needed for AI, such as data centers and sensor networks, could also be damaged by environmental events.

To overcome these challenges, it’s essential to adopt a strategic approach that includes improving data management practices, investing in education and digital infrastructure, promoting technological capacity building, and implementing robust measures to mitigate environmental risks.

Trying to do this at a national level may be limiting, especially for some of the very small nations of the Pacific.  Developing AI on a regional Pacific basis, rather than a series of national ones, might bring some of the following benefits:

  • Shared Resources: AI development requires substantial resources, including technology, data, and skilled professionals. By pooling resources at a regional level, Pacific Island nations can collectively create more robust AI systems than they might individually. They can share the costs of necessary infrastructure, the development of AI applications, and the hiring or training of experts.
  • Standardization and Interoperability: A regional approach can foster standardization of data formats, protocols, and AI technologies. This makes systems more interoperable across countries, which can facilitate cross-border initiatives and collaborations. This is particularly useful for the Pacific Island nations given their geographical proximity and shared regional challenges.
  • Shared Data: AI relies heavily on data for training and functioning. By pooling data at a regional level, nations can create larger and more diverse datasets, which can help improve the accuracy and reliability of AI systems. This can also compensate for the smaller population sizes and hence smaller national datasets of these nations.
  • Regional Adaptation: Given that Pacific Island nations face similar environmental challenges, such as climate change and natural disasters, a regional AI system can be designed to specifically tackle these issues. AI models could be trained to predict and respond to regional weather patterns, sea-level rises, and natural disasters, aiding in preparedness and mitigation strategies.
  • Collective Bargaining: A region acting as a unified entity has a stronger position when negotiating with global tech companies or other international entities. This can lead to more favorable terms in data privacy, technology transfer, and intellectual property rights.
  • Capacity Building and Learning: A regional approach encourages collaboration and exchange of knowledge and best practices among nations. This can help build capacities in AI and related fields across the region, further fostering a regional tech ecosystem.

While a regional approach offers these advantages, it also presents its own challenges such as coordinating between different national interests and regulations, data privacy concerns, and managing shared resources equitably. Therefore, a balance between regional cooperation and national autonomy needs to be found.

International cooperation could play a vital role in providing the necessary resources and expertise, particularly in kick-starting a regional approach. It’s crucial to develop AI systems with an understanding of local contexts and needs, as well as appropriate safeguards for data privacy and security.

Categories
Economics Infrastructure Lytton Advisory

Risks of building infrastructure in the Pacific

Taking a broader view of construction risk management

The unique nature of the Pacific poses several large risks in building infrastructure in Pacific Island nations.  While the risks are not necessarily unique to the Pacific, the potential combination of these factors can increase the overall risk profile of building infrastructure in the Pacific and might require stronger risk responses.  The following six factors are worth considering.

Natural disasters: Pacific Island nations are prone to earthquakes, cyclones, and other natural disasters, which can damage or destroy infrastructure projects.

Political instability: Political instability in Pacific Island nations can lead to changes in government policies, which can affect the financing and completion of infrastructure projects.

Limited financial resources: Many Pacific Island nations have limited financial resources, which can make it difficult to fund infrastructure projects.

Limited skilled labor: Many Pacific Island nations have a limited pool of skilled labor, which can make it difficult to find workers to complete infrastructure projects.

Environmental concerns: Building infrastructure in Pacific Island nations often requires the use of natural resources and the modification of the landscape, which can raise environmental concerns.

Cultural sensitivity: Building infrastructure in Pacific Island nations requires sensitivity to the cultural traditions and values of the local communities, which can present challenges.

A risk approach that does not consider these elements is inherently risky. How do you handle this kind of risk in your organisation?

Categories
Circular Economy Economics Local Government Lytton Advisory

Sustainability Experiements: A-B Testing Household Waste Management

As Queensland’s local governments strive to ensure sustainability in waste management, innovative techniques like A-B Testing are increasingly gaining traction. This method, commonly used in marketing to test consumer preferences, can also be applied to household waste behaviour. It involves comparing two groups – one following the current waste management practice (A) and the other testing a new approach (B).

Recently I have been thinking about three ways this might be done in a local government context:

Study 1: Recycling Education Programs. Educational programs about the importance and methods of recycling are key to promoting responsible waste management. A-B Testing can be used to measure their effectiveness. Group A could continue with the current education approach, while Group B would receive enhanced education material – perhaps more engaging, interactive content. The success could be measured in terms of recycling rates, contamination rates, and waste volume reduction.

Study 2: Waste Collection Frequency. Changing the frequency of waste collection is another variable local governments could experiment with. Group A could maintain the current schedule, while Group B could have more frequent recycling pickups and less frequent general waste pickups. This encourages households to recycle more and could result in substantial landfill reduction.

Study 3: Pay-As-You-Throw (PAYT) Policies. Finally, implementing PAYT policies could be a game-changer. Under this scheme, households are charged based on the amount of waste they produce. Group A could continue with the flat fee structure, while Group B would test the PAYT policy. The impact would be measured through waste volume, disposal costs, and recycling rates.

A-B Testing in these areas could provide local governments with robust data on the effectiveness of new waste management strategies. It’s an evidence-based approach that can drive better policy-making and offer several potential gains. There are many more options for this kind of analysis.

But what are the benefits?

For the councils, the benefits include better resource allocation, improved recycling rates, and reduced costs associated with waste management. It can also drive innovation in service delivery and contribute to sustainability goals.

Ratepayers also stand to gain significantly. Efficient waste management systems can lead to lower rates over time. Moreover, they provide an opportunity for households to play an active role in waste reduction and recycling, contributing to the larger goal of environmental sustainability.

A-B Testing allows us to bring data to the heart of decision-making, fostering an innovative, evidence-based approach to household waste management. Queensland local governments, by embracing such methodologies, can set an example in driving sustainability through informed, data-driven decisions.

#ABTesting #WasteManagement #Sustainability #QueenslandLocalGovernment #InnovationInPolicy #Recycling #PayAsYouThrow

Categories
Economics Lytton Advisory Waste Management

When should a local government deliver waste services from in-house resources?

The drive to outsourcing is an alluring one with promises of lower costs, fewer workforce issues and risk transference.  However, it is important to realise that there are a few situations in which it may be more advantageous for a local government to deliver waste services from in-house resources.

When the community is small and the volume of waste generated is low, it may be more cost-effective to have an in-house team handle waste collection and disposal.

If the local government has the necessary equipment and personnel to provide waste services, it may be more efficient to deliver these services in-house rather than contracting out to a private company.

In cases where the local government has specific regulations or policies in place for waste management, it may be easier to ensure compliance by delivering services in-house.

If the local government is able to secure funding or grants for waste management programs, it may be more beneficial to use these resources to hire and train an in-house team rather than paying a private company.

These are also the other side of the coin to consider when deciding whether the advantages of outsourcing can be realised.

How does your local council assess whether the in-house opportunities are worthwhile?

Categories
development Economics Infrastructure

Appointment

Lytton Advisory is pleased to announce that Managing Director Craig Lawrence has been appointed to a Panel of Economic Experts for Australia’s Solomon Island Resource Facility (ASRIF).

ASIRF supports the Department of Foreign Affairs and Trade in meeting the objectives of Australia’s aid program in the Solomon Islands.

Craig previously advised the Ministry of Infrastructure Development there on how to incorporate economic tools to assess climate change adaptation strategies into the transport invesment guidelines.

This year marks the tenth anniversary of Lytton Advisory’s engagement with Pacific Island nations on a range of economic and infrastructure issues.

Categories
Economics Infrastructure Lytton Advisory

When does infrastructure planning fail?

Top 10 Traps & Tips: Why Infrastructure Projects Fail - ArcBlue.com

Decision-makers do not get it right all the time.  Understanding potential avenues of failure provides a good basis for being able to identify risks associated with failure and develop strategies to avoid them.  Avoidable errors always seem more egregious than unforced ones. Infrastructure planning can often fail due to a variety of reasons.  

Lack of long-term vision: Infrastructure projects often have long lifespans, and it is important to have a clear vision of the future needs of the community in order to plan effectively. If the infrastructure is not designed to meet the needs of the community in the long term, it may become outdated or inadequate.

Insufficient funding: Infrastructure projects can be expensive, and if there is not sufficient funding available to complete the project, it may not be feasible to proceed. This can be especially challenging when infrastructure projects are designed to serve a large, diverse community with a variety of needs.

Political considerations: Infrastructure projects can be influenced by political considerations, such as the interests of local politicians or the preferences of specific groups within the community. This can lead to projects being implemented that do not fully consider the needs of the community as a whole.

Poor coordination: Infrastructure projects often involve multiple stakeholders, including government agencies, private companies, and community organizations. If these stakeholders are not effectively coordinated, it can lead to delays, cost overruns, and other problems.

Environmental and social impacts: Infrastructure projects can have environmental and social impacts that are not fully considered during the planning process. For example, a highway project may disrupt natural habitats or displace communities, leading to negative consequences for the environment and local residents.

Technological advancements: Infrastructure projects may be designed and built using technologies that become outdated or inferior to newer alternatives. This can lead to problems with the performance and maintenance of the infrastructure, and may require costly upgrades or replacements.

Planning frameworks that do not address these issues imperil successful delivery of infrastructure over time.

How do you manage planning risk in your organisation? I would be keen to read your views in the comments.

Categories
Economics Lytton Advisory Policy Waste Management

Can local governments help create markets for recycled waste?

Governments need to act to encourage plastic recycling markets - Today's Environmentalist

Local governments are typically involved in collection and disposal of municipal and household waste.  To what extent are local communities required to participate in the full product lifecycle and how can this occur?

There are several ways that local governments can help create markets for recycled waste.  

Developing policies and regulations that require businesses and residents to recycle certain materials, such as plastic or cardboard. This creates a demand for recycled materials and encourages businesses to invest in recycling infrastructure.

Providing financial incentives for businesses that recycle, such as tax credits or grants, to encourage them to invest in recycling technology and infrastructure.

Working with local organizations and businesses to identify and create new markets for recycled materials. This could include partnering with manufacturers who use recycled materials in their products, or working with retail businesses to sell recycled products.

Promoting the use of recycled materials through marketing and outreach efforts, to educate the public about the benefits of recycling and encourage them to support businesses that use recycled materials.

Providing infrastructure and resources to support recycling, such as collection and processing facilities, to make it easier for businesses and residents to recycle their waste.

Collaborating with regional and national organizations to facilitate the exchange of recycled materials and create larger markets for recycled products.

To what extent is your local government participating in these approaches?

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Cost Benefit Analysis Economics Infrastructure Local Government Lytton Advisory Policy

Five CBA Epiphanies

Healthcare business graph and data of Medical business growth, .Businessman analyzing data and growth chart, investment, financial and banking, Medical business report on global network.

I have been doing cost benefit analyses for a few years now. The concept is deceptively simple but provides a solid framework for insightful decision making.

It is a tool used to assess potential costs and benefits of a decision or project, usually in monetary terms. It is commonly used to evaluate the feasibility and potential impact of projects, policies and regulations.

Recently I have been thinking about the usefulness of the approach given that many major project often seem to float past this analysis.

Here are five epiphanies that might help CBA evangelists:

The true value of a decision lies not just in its financial cost and benefit, but also in its impact on people and the environment.

CBA forces us to weigh the pros and cons, but it’s important to remember that some benefits and costs are difficult to quantify and may have long-term effects that are not immediately apparent.

It should not be the sole factor in decision-making, as there may be intangible or ethical considerations that cannot be easily measured in financial terms.

CBA is a useful tool, but it is important to remember that it does not account for future uncertain events. Therefore, it should be used in conjunction with other decision making tools for a comprehensive evaluation.

Cost-benefit analysis can be misleading if it only looks at short-term financial gains and ignores long-term social and environmental costs. A more holistic approach should be used that accounts for all the potential impacts of a decision.

These are just some of the insights about CBA, but there are more that might be organisational or project relevant.

Is CBA a key driver of your organisation’s project appraisal process or just another compliance element in developing business cases?