Sara Justine Wilson, M.Sc.
© GPI Atlantic
July, 2000
Halifax Harbour is home to the largest urban centre in Atlantic Canada, where the on-going disposal of 187 million litres of raw sewage each day has resulted in a poor public image for the municipality, and a failing grade in the Sierra Legal Defence Fund's second annual national sewage report card. Poor water quality and poor aesthetics have had negative effects on the harbour ecosystem, tourism, and urban quality of life. Additionally, recreational opportunities are curtailed because of the public health risks of illness resulting from contact with the water.
This case study illustrates the costs and benefits of sewage treatment as proposed in the Halifax Harbour Solutions Plan, and notes the necessity for the implementation of full source control. A cost-benefit analysis (CBA), the economic impacts, the financing costs, and a total net benefit analysis of the Halifax Regional Municipality's plan are presented to determine whether sewage treatment for the Halifax Harbour is economically, socially and ecologically beneficial.
The analyses provide net present values (NPVs) discounted at 8%, 4%, and 0% (i.e. no discounting), over a 60 year life-span for the four sewage treatment plants. The estimated capital costs for the Halifax Harbour Solutions Plan are $307.9 million, the estimated operating costs are $8.8 million per year, and the estimated financing costs are $22.3 million per year. A surrogate value of $58.1 million was estimated for the protection of the harbour's marine nutrient cycling capacity. Conservative NPVs are characterized by low estimates of willingness-to-pay ($99.40/household/year), property value increase (5%), tourism revenue increase (2%), and the percentage of shellfisheries re-opened (30%). The mid-range and high-end estimates consist of incrementally higher benefits.
The cost-benefit analysis (CBA) estimates the net present value (NPV) of the investment in sewage treatment using the capital costs, operating costs, the marine nutrient cycling benefit, household willingness-to-pay, tourism revenue increase, property value increase, and the landed value of re-opened shellfisheries.(Table 1). The CBA results indicate positive net present value (NPV) estimates ranging from $38.5 million to $161.5 million, discounted at 8%, $162.6 million to $392.3 million, discounted at 4%, and $645.9 million to $1,227.8 million, discounted at 0% (i.e. no discounting).
Table 1: Executive Summary, Cost Benefit Analysis (CBA) Results (millions 1997$)
| CBA of the Halifax Harbour Solutions Plan | Conservative | Mid-Range | High-End |
| Net Present Value @ 8% | $38.5 |
$100.0 |
$161.5 |
| Net Present Value @ 4% | $162.6 |
$277.4 |
$392.3 |
| Net Present Value @ 0% | $645.9 |
$936.8 |
$1,227.8 |
In addition, the estimated economic impacts of the proposed Halifax Harbour Solutions Plan in terms of provincial labour income and spinoffs, and government tax revenue income are considered (HRM 1999a). The estimated net present value of the proposed project increases due to these positive benefits, but conventionally they are not added to a cost-benefit (CBA) format and thus they are reported separately. The net present value of the estimated economic impacts is $237.1 million, discounted at 8%, $355.5 million, discounted at 4%, and $727.3 million, discounted at 0% (Table 2).
Table 2: Executive Summary, Economic Impacts (millions 1997$)
| Total Economic Impacts of the Halifax Harbour Solutions Plan | |
| Net Present Value, Discounted @ 8% | $237.1 |
| Net Present Value, Discounted @ 4% | $355.5 |
| Net Present Value, Discounted @ 0% | $727.3 |
Source: HRM 1999a
In a conventional cost-benefit analysis, the financing costs of a project are, likewise, not included, because decisions regarding investment all incur financing costs, and therefore, cancel out. However, it is useful from the GPI perspective of full cost and benefit accounting to consider the financing costs of a project, because they could be relevant for comparison with a debt reduction plan. The financing costs are estimated at $22.3 million/year; a net present value of $238.0 million, discounted at 8%, $348.3 million, discounted at 4%, and $557.5 million, discounted at 0%. Financing costs and the economic impacts are included in a total net benefit analysis. The total NPV of the costs is subtracted from the total NPV of the benefits. The total net benefit conservative estimates range from a net present value of $67.7 million, discounted at 8%, to a net present value $860.3 million, discounted at 0%, and the high-end estimates range from a net present value of $190.8 million, discounted at 8%, to a net present value of $1,442.6 million, discounted at 0% (Table 3).
Table 3: Executive Summary, Total Net Benefit Analysis (millions 1997$)
| Total Benefits minus Total Costs of the Halifax Harbour Solutions Plan | |
| Net Present Value, Discounted @ 8% | $67.6 - $190.8 |
| Net Present Value, Discounted @ 4% | $202.8 - $436.1 |
| Net Present Value, Discounted @ 0% | $860.3 - $1,442.6 |
The results of the cost-benefit analysis and the net benefit analysis indicate that the investment in sewage treatment for the Halifax Harbour is economically beneficial, and will provide several social, environmental and economic benefits. In fact, further significant and positive qualitative benefits such as improved recreational opportunities, avoided health costs due to water-related illness, and enhanced marine ecosystem quality, excluded in the above analyses can be realized (Table 4).
Table 4: Executive Summary, Qualitative Non-Market Benefits
| Qualitative Benefits | Cost |
Benefit |
| Marine Ecosystem Health | Ö |
|
| Avoided Health Costs due to Water-related Illness | Ö |
|
| Recreational Opportunities and Quality of Life | Ö |
Necessity for Source Control
The wastewater flowing through sewer systems does not only consist of sewage wastes. Households, businesses, and industry contribute many other organic and toxic contaminants. As a result, source controls must accompany any sewage treatment plan to accomplish an improved environment for the Halifax Harbour. The amount of environmental and economic benefits gained depends ultimately on the degree of success in the clean-up and environmental restoration of the marine environment. The incremental benefits are evident from the comparison between the conservative, mid-range, and high-end estimates presented in Tables 1 to 3. Therefore, financing source control (e.g. prohibition of toxic substances from commercial and domestic sources, and prohibition of direct discharge from boats) will result in economic, social and ecological benefits.
The Halifax Regional Municipality (HRM) has implemented an educational programme and is in the process of presenting a new by-law that will enforce compliance with source controls through planning, monitoring, and fines. Further action is needed for effective harbour restoration. Contaminants (e.g. endocrine disrupters) that cannot be effectively treated should not be allowed to enter the sewer systems. Education directed towards businesses, industry and households should include alternatives, methods to recover and reuse substances, and information on hazardous waste recovery programmes. A good existing example is the Nova Scotia Department of Environment's Pollution Prevention Guide for Printers.
Water conservation education directed at the municipality's residents and businesses is also recommended. Water conservation minimizes overflows to sewage treatment plants and avoids the need to dump untreated wastewater due to plant capacity overflows. In addition, we recommend that current plans to separate combined sanitary/storm water sewers should only be implemented when source control is in place and when the storm water discharges meet the Canadian Council of Resource and Environment Ministers guidelines for discharge into aquatic ecosystems.
In conclusion, the Halifax Harbour Solutions Plan complemented by full implementation of Halifax Regional Municipality's (HRM's) Source Control Implementation Strategy will result in positive economic, social and ecological benefits. Indeed, it is demonstrated by GPI analyses that the greater the improvement in the harbour's water quality and marine ecosystem health, the greater the concomitant economic and social benefits.
