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Weekly UpdatesThe major benefits of the regeneration program are those of sales and rentals after project completion, better living standard and environment for present and future residents and lower social costs, especially in relation to employment and economic and cultural growth. In addition, the regeneration intervention may be expected to enhance the value of the Sao Paulo community's property because the regenerated site will create economic and cultural development which would otherwise have occurred elsewhere in the city.
The major expenses of the regeneration program are those related to property costs, improvement costs, tenants' relocation costs and forgone rent revenue.
7. ESTIMATING BENEFITS AND COSTS OF THE URBAN RENOVATION PROJECT
In order to incorporate the effects of the project into a cost-benefit framework it is necessary both to measure and compare them over a common denominator. An economic assessment should consider the total value of benefits received compared to the total costs incurred in the project. Therefore, in this section we offer a discussion of how project benefits and cost were measure and valued for the cost-benefit analysis.
7.1. Benefits
Benefits are those effects that accrue to the SRUBP which include: (i) asset sales after improvements; (ii) asset rentals after improvements and (iii) lower social costs. Revenue from asset sales in the present study comes from the estimated investment value of the individual property after the improvements. The property investment value was determined using the basic formula (1) established in the municipal tax code (CIMI, 2003) which represents a reasonable estimate of the economic price for the existing properties.
[V.sub.t] = [V.sub.c] x A x [C.sub.a] X [C.sub.l] X [C.sub.q] X [C.sub.v] (1)
where: [V.sub.t] = Investment Value; [V.sub.c] = Base cost per sq. m.; A = Gross floor area plus the area surplus to the enclosure; [C.sub.a] = coefficient of use; [C.sub.1] = coefficient of location; [C.sub.q] = coefficient of quality and comfort; [C.sub.v] = coefficient of age.
The base cost per sq. m. is updated every year by Portugal's Ministry of Finance and it is based on the annual cost index. Revenue from asset rentals is given by the estimated rental value in use of the individual property after the improvements. A regression analysis based on the present rental values stored in the database of the Sao Paulo community was carried out in order to estimate the rental value in use after the improvements. The lower social costs were measured by the unemployment benefit savings which accrue due to the number of jobs created after the project completion. It is expected that 67 new jobs will be created with the regeneration programme.
7.2. Costs
The projects costs are those relevant to the agency that undertakes the project. They include the cost of land and building assets, intervention improvement costs, tenants' relocation costs and rent revenue forgone.
The value of the opportunity cost of the land and existing building assets, as they stand before the intervention, was valued using the formula (1). It gives the estimated investment value. The improvement costs include the costs of renovating the building assets and the upgrade and construction costs of public spaces and urban facilities. Tenant relocation costs included expenses incurred with tenant compensation. Improvement costs, upgrade and construction costs of public space and urban facilities and tenant relocation costs were valued at market prices. Revenue forgone is the income lost from rentals.
Table 2 presents the costs and benefits figures for the regeneration programme for the studied area.
8. ECONOMICS OF THE STUDIED AREA
The cost-benefit analysis requires the identification of a baseline or status quo scenario, against which the costs and benefits of alternative project interventions are assessed (Moran and Sherrington, 2006). A CBA compares alternatives over time as well as space, and uses discounting to summarize its findings into a measure of net present value (NPV) (Hanley and Spash, 1993). An essential element in evaluating the economic benefits of a project is the definition of an alternative to the project, the 'without project' scenario. What would happen to existing built heritage? In the case of regeneration programmes, which involve bringing existing built assets back into normal operating conditions, the without project scenario would be that no further investments are made and that the built assets will continue to degrade further.
A cost-benefit analysis of the project was carried out for the studied area. It is based on cash-flow analysis of the two categories of cash-flows of the project:
1) the operational cash-flows: cash received or expended as a result of the intervention activities during the operational phase;
2) the investment cash-flows: cash received or expended through capital expenditure, investments and acquisitions;
The cash likely to be generated by the project is estimated for every period during the expected life and the cash likely to be needed to develop and sustain the project is then subtracted. The net cash flows are included in the economic profile of the regeneration program.
According to the EU Guide to CBA (1997 the analysis of NPV is a standard method for assessing the present value of competing alternatives over time. The time dimension is very important in counterbalancing costs and benefits. This is because a project requires a high capital investment in the first months and provides benefits over a long time period. This means it is necessary to calculate the present value of all cost and benefit effects by using a suitable discount rate. The discount rate used in this study is 3.5%. The NPV found for the regeneration program is positive, which means that the intervention is worthwhile for the implementing agency. In addition, it is expected to increase the number of residents with 275 new residents coming to the Sao Paulo community.
9. CONCLUSION
Cost-benefit analysis has been widely accepted as an appropriate tool for appraising regeneration and renewal programs. It may be true as well that a project for which the economic analysis is good or excellent will be easier to implement and will tend to be given a higher rating for the expected achievement of development objective, both during project supervision and after project completion.
Analysis of the economic effects of urban regeneration and renewal initiatives or strategies is an useful tool for assessing planning policies and decisions in central urban areas. The economic evaluation of regeneration and renewal raises issues common to every cost efficiency analysis or cost benefit analysis of a major investment in building. This paper describes the regeneration framework established in Portugal for old urban areas. It outlines a framework to assess the costs and benefits of urban regeneration. The case study identifies the main cost and benefits of the S. Paulo Community in Lisbon's downtown. This paper shows that urban regeneration can help to reverse the current state of physical degradation prevailing in the built heritage and to regenerate economic activity in the central areas of major cities.
Received 5 July 2007; accepted 30 January 2008
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