- Cost benefit analysis of the Newark Reservoir (2020)
- Cost benefit analysis of the proposed Newark Reservoir (2002)
The objective of this paper is to update an in media res (during the course of a project) cost/benefit analysis (CBA) of the Newark Reservoir originally prepared in May 2002 during project construction four years before the reservoir came on line. Three alternatives are evaluated: (A) no reservoir, preserve land for 112-acre city park, (B) no reservoir, 112-acre site developed for 200 homes, and (C) 317 mg reservoir, preserve land for 112-acre city park. The project standing is the City of Newark with 33,600 residents in 2018. The discount rate over a 20-year assumed project life is 3%. The CBA employs the equation: Net Present Value (NPV) = Present Value Benefits (B) minus Present Value Costs (C) or NPV = B – C (Boardman 2001). The alternative with the highest NPV provides the most economic benefits to society.
This updated cost/benefit analysis of the Newark Reservoir Park indicates that Alternative C (Build the reservoir) is the most socially beneficial to the standing of Newark from a CBA perspective. This corroborates the decision by Newark City Council to commence construction on this project as per the referenda to raise property taxes and increase water rates that were approved by the voters at 4:1 and 3:1 approval margins, respectively. If for some reason the reservoir was not built, then an advisable alternative was to buy the farm and build a city park only as this Alternative A (Park only) has appreciable environmental and recreational benefits. If desired, CBA sensitivity analyses can be conducted for other City projects and open space acquisitions.
Alternative C – Build the reservoir with city park has the highest NPV at $2,403,603/yr since the water supply, recreational, and environmental benefits out-weigh the cost to build and maintain the reservoir over 20 years. The recreational benefits for this alternative are very significant.
Alternative A – No construction of a reservoir but build a park is the next highest NPV at
$643,743, less than the build a reservoir alternative. The park accrues significant recreational benefits over the years that outweigh the relatively modest construction cost of a park (as compared to the reservoir) and the added cost to buy water from private water utility during drought.
Alternative B – No construction of reservoir and build 200 homes has by far the lowest NPV at -$119,696 that indicates the project to build homes instead of a much needed reservoir and popular park is not cost effective to the residents of Newark. There are hardly any social benefits to the City except for relatively modest property tax income.
(May 19, 2002, rev. July 4, 2020)