Cost / Benefit Analysis
          Cost / Benefit Analysis
          Cost / Benefit Analysis
          Cost / Benefit Analysis
    Performing a Cost/Benefit Analysis is basic 
     Performing a Cost/Benefit Analysis is basic 
     to all financial decision-making
     to all financial decision-making
    We each do it consciously or unconsciously 
     We each do it consciously or unconsciously 
     every day for every action we take or 
     every day for every action we take or 
     purchase we make
     purchase we make
    Major expenditures of public funds requires a 
     Major expenditures of public funds requires a 
     more formal process
     more formal process
    Cost / Benefit Analysis
    Cost / Benefit Analysis
    Cost / Benefit Analysis
    Cost / Benefit Analysis
  A Cost/Benefit Analysis is most 
  A Cost/Benefit Analysis is most 
  commonly used in local 
  commonly used in local 
  government as part of the Capital 
  government as part of the Capital 
  Budgeting process and the Capital 
  Budgeting process and the Capital 
  Improvements Program (CIP).
  Improvements Program (CIP).
        Cost / Benefit Analysis
        Cost / Benefit Analysis
         Cost / Benefit Analysis
         Cost / Benefit Analysis
    In local government, the benefit is the 
     In local government, the benefit is the 
     maximizing public welfare versus 
     maximizing public welfare versus 
     maximizing profit in business
     maximizing profit in business
    Broader and more complex
     Broader and more complex
    Must estimate the value of benefits and 
     Must estimate the value of benefits and 
     costs that are indirect and intangible
     costs that are indirect and intangible
      Cost / Benefit Analysis
       Cost / Benefit Analysis
       Cost / Benefit Analysis
       Cost / Benefit Analysis
    At its essence, it is a one to one 
    At its essence, it is a one to one 
    comparison of the combined benefits 
    comparison of the combined benefits 
    versus the combined costs of pursuing 
    versus the combined costs of pursuing 
    a course of action or public policy
    a course of action or public policy
    Realistically determining the costs and 
    Realistically determining the costs and 
    benefits is the challenge in government
    benefits is the challenge in government
    Cost / Benefit Analysis
    Cost / Benefit Analysis
     Cost / Benefit Analysis
     Cost / Benefit Analysis
  “A public project is desirable when the 
  “A public project is desirable when the 
   present value of its estimated flow of 
   present value of its estimated flow of 
   benefits, discounted at the 
   benefits, discounted at the 
   community’s cost of capital, equals or 
   community’s cost of capital, equals or 
   exceeds the project’s cost”
   exceeds the project’s cost”