2021-01-18 GC - Item 3 - Attachment 4 - Cost Benefit Analysis for Noosaville Inundation Options

Tourism benefits are therefore calculated based on:

• the assumed effect of inundation on tourism visitation to Noosaville and its accessibility

• the proportion of tourists who only visit the Noosaville area in Noosa LGA (to calculate net impact
  on tourism at the LGA level)

• the average expenditure per tourist

• the average benefit per dollar of expenditure to the local community 2.

Under each of the project options, the reduction in inundation will lead to an increase in tourism
benefits compared to the base case.

Residential nuisance benefits
Under the base case, low-level inundation is expected to cause inconvenience to the local community
due to road closures. These nuisance benefits are calculated based on the effects of road flooding
close to residential properties. Given the short duration of the road closures (less than 30 mins), it is
assumed that there will not be a significant inconvenience for the majority of Noosaville residents.
These effects are therefore only applied to the population directly affected, i.e. those living in the
affected residential areas.

Under the base case these nuisance effects are calculated based on the assumed length of time the
roads are closed, the value of time, and the size of the local population. Under the project options the
reduction in inundation of roads within Noosaville is therefore expected to deliver benefits compared
to the base case.



Limitations and sensitivity analysis
The cost benefit analysis has been undertaken using the best available data and evidence on the
impacts, costs and benefits of the base case and adaptation options. However, much of the data is
limited and the analysis has relied on assumptions based on expert knowledge. Sensitivity analysis has
been undertaken by testing the effect each of the following input assumptions has on the NPV,
individually. The sensitivity analysis has focused on using the most conservative input assumptions to
test the lower bounds of the benefits of each option.

Sensitivity analysis has been undertaken on the following input assumptions:

• 4 per cent discount rate – the discount rate used under the central analysis is 2.3 per cent in line
  with Noosa Shire Council’s average borrowing costs, a 4 per cent rate has been included in the
  sensitivity analysis to align with State Government guidance

• 1 per cent improvement in tourist visitation – under the central case it is assumed that under
  options 1 and 2, tourism visitation will be 5 per cent and 2 per cent higher respectively than under
  the base case due to reduced impacts from inundation. Given the high level of uncertainty over the




2 The average benefit per dollar of expenditure to the local community is based on an assumed profit rate. This is
    because it is important to also account for any costs associated with tourist expenditure to avoid overestimating
    the benefits. Consistent with the Queensland Government’s Project Assessment Framework, changes in gross
    regional or state product should not be included in cost benefit analysis. The profit rate has therefore been used as
    an alternative to any GRP assessment of tourism.




REPORT | Noosa Shire Council CHAP – Phase 7                                                                             7