Benefit-Cost Analysis Outline (UNFINISHED)

Benefit-Cost Analysis of Extension and Repair of Baybay Public Market in Baybay City, Leyte

A Thesis OutlinePresented to the Faculty of theDepartment of EconomicsCollege of Management and EconomicsVisayas State UniversityVisca, Baybay City, Leyte

In Partial Fulfillmentof the Requirements for the Degree ofBachelor of Science in Economics

Christopher A. LlonesApril 2015TABLE OF CONTENTS

Table of ContentsiList of TablesiiList of Figuresiii

INTRODUCTION5Nature and Importance of the Study5Statement of the Problem6Objectives of the Study7Scope and Limitation of the Study7

REVIEW OF RELATED LITERATURE8Public Market 8 Environmental Cost of Public Market9 Public Market Projects Experienced in the Philippines16 Benefit-Cost Analysis Methods 24Contingent Valuation (CV) Method24Payback period28Benefit-Cost Ratio28Internal Rate Return28

CONCEPTUAL FRAMEWORK30

METHODOLOGY35Place of the Study35Sampling Procedure35Data Collection38Data Analysis38

LITERATURE CITED39

APPENDICES40

LIST OF FIGURES

FIGURE

TITLE

PAGE

1Muntinlupa Public Market Wastewater Treatment System Flow 18

2Diagram summary of Benefit-Cost Analysis of Extension and Repair of Baybay City Public Market

34

iv

List of Tables

TABLE TITLEPAGE

1Proportional sample size allocation of Poblacion Baybay City, Leyte37Benefit-Cost Analysis of Extension and Repair of Baybay Public Market in Baybay City, Leyte

1/A Thesis outline presented in partial fulfillment of the requirements for graduation with the degree of Bachelor of Science in Economics from Visayas State University, Visca, Baybay City, Leyte on ________. Contribution No. _____. Prepared in the Department of Economics under the supervision and guidance of Prof. Ernesto F. Bulayog

Christopher a. llones

INTRODUCTION

Nature and Importance of the Study

Public markets are unique economic and social institutions which are increasingly being viewed as tools to achieve a wide variety of goals. These goals include improved access to quality food, better marketing opportunities for family farmers, improving social interaction in urban neighborhoods, increasing social cohesion, providing employment opportunities to local communities, creating entrepreneurial environment to increase small business formation, and enhancing community economic development (Econsult Corp, February 2007).In the Philippines, the present state of public market are however deplorable. A DlLG study in 1993 reports that about ninety-four (94%) of public markets all over the country are owned and controlled by the government, mostly through local government units ( an excerpt from National Public Market Code of the Philippines ). In Baybay City, problems of congestion, poor sanitation, ill-kept and maintained structures threaten the safety and health of people (and this includes a great majority of the citizens of the country) who avail of the facilities of public markets. To address this issues the local government unit of Baybay City, Leyte employs an extension and repair project for the city public market. However, the proponents of the project does not account all economic cost associated with the project. Thus, this study will evaluate the projects costs and benefits, both implicit and explicit means, which the project will impose.

Statement of the ProblemBenefit-cost analysis is not commonly practiced by the local government unit of Baybay to determine the viability of their projects, like the extension and repair of Baybay public market. It is true that extension and repair of the public market would provide larger area to accommodate growing number of vendors and centralized area for trading and various market activities. However, aside from explicit cost of implementing the project, ecological and environmental cost could also be associated with the projects implementation.The catalyst that motivated LGU Baybay to have an extension and repair of its public market is due to the damage inflected by super typhoon Yolanda (November 8, 2013) and the growing population of vendors in the city. The general premise of this study will be that the project would have a positive impact on the economy and the society in general as a whole for the years to come.

Objectives of the Study:The study will attempt to analyze the cost and benefits of extension and repair of Baybay public market in Baybay City, Leyte. Specifically the objective of the study is to:1. Determine the economic benefits of the extension and repair of Baybay public market2. Determine the cost of the project3. Provide insights for policy making from this analysis4. Serve as a guide for future benefit-cost analysis of Baybay Citys projectsScope and Limitation of the Study:The study will focused more on the actual explicit cost of doing the extension and repair of the public market of Baybay City, Leyte and will exclude environmental cost associated with the project if the researcher will encounter difficulties in establishing the environmental cost. A contingent valuation method will be used to determine the peoples value for better sanitation systems and utility management of the public market. The contingent valuation method will revolve only on the average willingness to pay per household for sanitation and utility management improvement in the public market.

REVIEW OF RELATED LITERATURE

Public Market Based on a 2012 Public Market Development essay a public market is define as a powerful economic engines. Public markets can become the heart and soul of a community; it is a common ground, a place where people easily interact, alive with social and economic activity. The potential economic impacts of public markets and farmers markets include direct benefits (e.g. profits to business owners in the market, job creation, sales and real estate tax revenues, etc.) and indirect benefits (e.g. stimulating development downtown, enhancing the park and waterfront as a place, farmland preservation, etc.).One of the most obvious, but perhaps least understood, methods of enhancing social integration in public spaces and encouraging upward mobility are public markets. Increasingly, community leaders and local government see public markets as a means of addressing some of the more vexing problems of cities (excerpt from Public Markets as a Vehicle for Social Integration and Upward Mobility). A DlLG study in 1993 reports that about ninety-four (94%) of public markets all over the country are owned and controlled by the government, mostly through local government units. Public markets are important in the economic life of the country, because these provide the physical venue where suppliers of basic commodities, mainly food are linked together with buyers and consumers, making welfare-improving exchange and trade transactions possible. Thus public markets support the life of households in the surrounding area, open up employment opportunities to vendors, and provide an indispensable impetus to economic production in general. The present state of public markets are, however deplorable. Problems of congestion, poor sanitation, ill-kept and maintained structures threaten the safety and health of people (and this includes a great majority of the citizens of the country) who avail of the facilities of public markets.

Environmental Cost of Public MarketAwareness of sanitation and wastewater treatment issues is very low throughout the Philippines and must be elevated to build support for pilot projects and willingness to pay required users fees. Treating environmental improvement as a business will lead to greater returns and lower costs, for the environment as well as for the economy. To achieve a truly sustainable environment, we must recognize that environmental improvement and economic growth can and do go hand in handthat environmental improvement is a market just like any other. Indeed, if environmental improvement is approached as a market, then many of its presumed conflicts with economic growth evaporate. For businesses, environmental improvement can provide lower costs and growing worldwide economic opportunity. For the public, it provides trillions of dollars worth of benefits, plus significant insurance against major disasters.The terminology used in national economic accounts and policy dialogues often is seriously misleading. National accounts neither recognize the lost values and actual costs currently incurred by neither pollution nor measure and offset returns from environmental improvements against the investments that created them. Further, in political discussions, attempts to force companies and users to bear the full costs of their actions are generally termed taxes, not cost recovery. Those who oppose internalization of such costs argue that environmental improvements decrease national productivity and competitiveness and hence reduce job opportunities and growth. But far from decreasing competitiveness, environmental improvements have greatly reduced costs for most businesses. A widely accepted Environmental Protection Agency (EPA) report, The Benefits and Costs of the Clean Air Act of 1970 to 1990, estimated that every dollar spent on depollution reduced health costs by $20, and that the U.S. economy experienced gains of $6.4 trillion (with a credible range of $2.3 trillion to $14.2 trillion) as a result of the initial 1970 act alone.Ignoring the real costs of existing environmental degradation and the overwhelming contributions that improvements make to productivity skews public perceptions and focuses the environmental debate around wrong issues and data. Thinking and structuring data in terms of environmental markets, where all parties internalize their full costs and satisfy a real public demand, can enable a more reasoned dialogue, make environmental investments easier for the public and policymakers to comprehend, place alternative uses of resources (that is, for environmental improvement versus product manufacture or public transfer payments) on a sounder basis, and help allocate national resources more effectively.Unfortunately, the past practice of considering environmental conditions as externalities has seriously distorted resource allocations through implicit subsidies to producers and users of polluting systems. Such subsidies encourage underpricing and overuse of the polluting industrys products while discouraging innovation both in that and competing industries. When market like structures and incentives are used, innovation in these and supporting industries generally creates environmental results that are higher than initially expected at costs that are significantly lower than expected. Entire new industriesfor advanced sensors, new fertilizers and farm technologies, large-scale modeling, lightweight materials, and high-performance engines, to name but a fewoften have been stimulated, along with improved environmental outputs, most of which are not captured by national account data.Recognizing environmental improvement as a market dramatically changes the calculus justifying environmental expenditures. Policy discussions generally have demanded that environmental expenditures be justified on the basis of lower costs for the society. But no analyst would demand that the automobile, fashion, entertainment, or furniture industries justify themselves in terms of cost savings. These are merely valid demands calling for the resources for their satisfaction, relative to other demands. Similarly, environmental improvement satisfies real demands (for clean air, water, etc.) and creates major new markets for supplier industries.Indeed, environmental markets drive todays demand for many new technologies. In many areas, environmental targets even have replaced traditional consumer product, industrial process, or military technological goals as drivers of scientific and entrepreneurial endeavor. And these technologies will undoubtedly create hosts of unexpected new free-standing market opportunities. Properly developed, environmental markets stimulate real economic growth.Any opportunity, public or private, that calls forth previously uncommitted energies and resources can create growth. The only difference between environmental markets and private markets is that demand from many private individuals must be aggregated to purchase environmental amenities. Joint purchases (or public markets) create exactly the same growth opportunities as private markets. For example, when an individual works harder to buy an automobile, that private action stimulates growth. If he and his neighbors jointly buy the same car for a carpool, they provide an equal stimulus to the economy. If 1,000 citizens buy a vehicle as a public school bus, they create the same direct sales and jobs.Ecosystem services are natural processes, such as forests absorbing pollutants or moderating rain runoff and erosion that would have to be replaced artificially if natural habitats were removed or degraded. The value of these environmental amenities can be very large. For example, the market value to cities and farms of clean water running out of the Sierra Nevada mountains in California is approximately twice the value of the Sierra timber, grazing, and tourist industries combined.As a result of public market, between 1970 and 1990 the United States saw a 40 percent emission reduction in sulfur oxide, a 45 percent reduction in volatile organic compounds, and a 50 percent reduction in carbon monoxide. Ozone concentrations decreased by 15 percent, airborne lead by 99 percent, and primary suspended particles by 75 percent. And largely because of other public market activities, such as the adoption of improved automobile safety features and the construction of superhighways, U.S. traffic fatalities dropped from 54,589 in 1972 to 40,115 in 1993even though the period saw an increase of 60 million licensed drivers, collectively logging more than a trillion more miles per year. These gains, mostly unmeasured in national economic accounts, represented real benefits for individuals. When regulations are proposed, the affected industries tend to exaggerate potential hardships. Cost estimates based on practices at the time of imposition are generally too high, as innovations almost always quickly lower costs. If regulations use flexibly designed market mechanisms and reward higher performance achievementsas opposed to specifying particular technologies or existing best practicesinnovators often create solutions that generate both better outputs and lower costs than anyone could forecast at the time.The town of Trenton, Michigan, presents a classic example. In the early 1950s, when the town refused to allow McLouth Steel to install Bessemer converters because they produced too much air pollution, the company began a search for alternative processes. This led to the first major U.S. installation of the so-called basic oxygen process for making steel. When diffused through the steel industry, the cost savings and value gains of this innovation alone would more than pay for the industrys highly touted air depollution costs, forcing further innovations in competing processes as well.Large-scale studies have shown that governments can promote economic growth by intervening to create parity between environmental and other markets. How to optimize the benefit in social, business, and economic growth terms is the crucial issue. Many economists and policymakers are beginning to stress market like incentive mechanisms to create environmental markets. Special problems exist in this marketplace: Benefits may be highly diffuse or not accrue directly to those who must make needed expenditures; front-end costs appear measurably apparent whereas benefits are often hard to quantify; and no one knows, at the outset, what potential solutions really exist and how other systems or the public may ultimately respond. Most of these (with the exception of the lack of match-up between payers and beneficiaries) are precisely the elements that markets handle best. The major problem is understanding and aggregating the frequently diffuse demands for environmental improvement in a way that minimizes actual costs while optimizing their balance with competing demands. Economists use two starting points to establish demand potentials in a public market. The first approach is direct: Economists ask and analyze preference questions. The simplest questions are: How much money would you be willing to pay to have a defined level of cleaner water, air, etc.? What amount of money would you demand to allow someone else to decrease the quality of that resource by a specified amount? The problems of achieving accuracy in such surveys are well known, but most studies show that people would demand between two and six times more to accept a loss in current quality-of-life levels than they would be willing to pay to achieve or improve these levels. The second approach is indirect, but typically proves more precise: Economists try to create a real-world market in which interested parties buy and sell real or surrogate assets and solutions. In this way, economists can analyze how people actually perform in trade-off market situations. For example, how much do people pay to vacation in a national park or fish in a clean wilderness area rather than fish or picnic locally? Such studies can include aesthetic (noncost) factors and provide initial baselines for reasonable environmental expenditures. However, they do not measure the value nonusers might place on the resource. Because of the very high potential values of the environment and the tendencies of affected players to distort their estimates of costs and effects of changes (up or down), careful baseline data studies are crucial to sound analysis and policy. Markets operate most effectively when data are abundant and transparent. As in finance and trade, governments have a critical role to play in providing a reliable and neutral framework of environmental data under which private parties can appropriately value resources, examine trade-offs, and evaluate trends.A more market like alternative, which is particularly effective when the impact of effluents is highly diffuse either in production or consumption, is to tax undesired actions on a unit purchase (or user fee) basis to increase their cost. A unit fee such as that on fuels (set at a level where total revenue generated just offsets total externalities created) makes the total market economy more efficient as well as providing incentives for producers and consumers to make more cost-effective decisions. In addition, unit fees provide funds to monitor actions and to cover costs for innocent parties injured by pollution. Such fees are most useful when pollution moves from many diffuse sources toward many diffuse recipients, as does auto air pollution, solid wastes created by packaging, home fuels consumption, or runoff from farms. User fees clearly are not appropriate for other situations involving point sources of emissions or extremely intensive downstream concentrations of damage from emissions (such as sewage or smokestack toxins). In these cases, localized monitoring, effluent fees, or release penalties may provide much more direct market responses and match-ups of compensation versus injury.Unit charges set at a level where total revenues just offset total externalities make the total market more efficient and provide added incentives for producer innovations and voluntary consumer choices of more cost-effective products or services. Assessing fees or taxes on those who are currently or potentially charging the society for their support (for example, energy, water, fertilizer, or gasoline consumers) makes more economic sense than do general sales or income taxes, which affect those selling services or products at full cost. Since relatively small environmental-use taxes, such as carbon or gasoline taxes, can raise very large amounts of money, they can be used to decrease the level of personal income taxes or other sales taxes, thus encouraging further growth and entrepreneurship in more socially responsible areas.An interesting extension of marketlike approaches is to convert some component of emissions into private property rights that can be bought or sold. Individually tradable quotas for releasing certain classes of pollutants are an example. Highly toxic pollutants must, of course, be absolutely prohibited. For other pollutants, whose danger increases with exposure, polluters receive a permit to release a fixed quantity of the pollutant depending on a combination of their current production of the effluent and an aggregate standard that, if implemented, would achieve desired health effects in a reasonable cost-benefit fashion. If the producer can reduce its emissions, it can sell the balance of its quota to another party. If it wishes to increase pollution, it must buy rights from a willing seller. New entrants must purchase quotas from existing holders.The net result is that the amount of pollution is, at a minimum, held constant at current cost-benefit ratios. But each party has an incentive to improve performance. Those who can reduce performance inexpensively have an incentive to do so and to sell the amount saved at a higher price to someone whose reduction costs are high. The government, aggregating the demands of consumers, can decide on the total level of pollution by adjusting quotas over time. Participants in the market decide on the value of rights and seek the least expensive way to reach goals. Although at first attacked as granting rights to pollute, tradable permits are gaining wide acceptance among business and environmental interests.Similar approaches are being taken to develop markets for privatized environmental amenities. Water supply, particularly in the arid U.S. West, has long relied on a system in which individuals own the rights to use certain amounts of water from rivers and reservoirs. Until recently, however, it was difficult for an owner to sell low-cost water rights to other users who wanted it for more valuable purposes. For example, farmers who sold such rights might lose them, since the sale would show that they did not need all they were allocated. But in the past several years, the U.S. Department of the Interior has begun to promote public water right purchases as a solution for developing adequate water supplies for cities and for wildlife, including in the San Francisco estuary, where the department assured farmers that the government would purchase water in an effort to help preserve some threatened fish species. Farmers responded by planting crops, such as wine grapes, that had higher value and required less water and by installing efficient drip irrigation systems. Together, such steps have led to the release of more than a million acre-feet of water for sale to urban and environmental users.There also are other ways to assign property rights, each of which has substantial economic consequences. A well-known example is the assignment of ownership rights for potential pharmaceutical products discovered in nature but developed privately. But under current U.S. law, naturally occurring chemicals cannot be patented, meaning that if a cure for cancer were discovered in a rainforest, it could be freely copied, making it difficult for those protecting the rainforest to profit from any new products made available through that protection. The Convention on Biodiversity calls for countries of origin to own rights to natural products found within their borders, which assists conservation but removes the incentives for drug companies to undertake the expensive task of isolating potential drugs and bringing them to market. In one effort to bypass this problem, Costa Rica has agreed to facilitate bioprospecting by the U.S. drug company Merck in exchange for royalties from any marketable drugs developed. However, it is unclear what protection either will have for natural products developed in the partnership.Ideally, private parties, not the government, would provide environmental insurance. For example, company A could anticipate external costs (increased pollution or local species losses) that might be caused by its planned expansions and prepurchase offsetting reductions from company B. Company A then has an incentive to invest in environmental benefits early, before they become of regulatory concern and the price rises. Company B, which has set aside the land, has an interest in stronger regulation, which would increase the value of its environmental assets. Governments role in such transactions would be in agreeing that the insurance meets regulatory requirements in preventing collusion or misrepresentation by the companies and in ensuring that adequate sanctions exist in the event of either partys failure, perhaps in the form of reinsurance by third parties. Because of the distractions and costs of having governments directly stimulate and enforce the terms of environmental markets, there is a growing political consensus that bypassing centralized regulatory approaches and fostering more direct conflict resolution among stakeholders (such as landowners, local businesses, local governments, and environmentalists) at ecologically relevant scales (such as watersheds) is the wave of the future. Of course, some regulatory involvement will remain critical: The incentive for warring local interest groups to negotiate is often that if they cannot reach a consensus, a distant bureaucrat will impose rules on them. For example, the 1995 San Francisco Bay-Delta Accord launched the 30-year, multibilion-dollar CalFed effort to restore water quality and fisheries in the San Francisco estuary. The agreement was signed by often-warring water interests only hours before a deadline set by the federal EPA, after which EPA was prepared to impose its own water-quality plan to protect threatened fish under the auspices of the Clean Water Act. Unfortunately, in most localities there often is insufficient objective information or technical expertise to balance in a comprehensive way the costs and benefits of land use, water quality, rare species, population growth, chemical pollution, risks of flood and fire, and so on. To the degree that this information exists at all, it is likely to be held at multiple levels and points within different government units and in different formats. Recognizing that stakeholder negotiations typically get nowhere until industry, environmentalists, and government agree on common facts, the Clinton administration has been active in developing shared standards for environmental data sets and in requiring agencies to make their data available over the Internet. For example, the Federal Geographic Data Committee, representing all environmental research and land management agencies, has set mandatory standards for remote federal sensing and mapped data. In addition, access to biological data is being centralized under the National Biological Information Infrastructure, and most agencies have extensive Web sites permitting the public to browse their data holdings. Unfortunately, data collection has not kept pace with improvements in access. Over the past decade, the federal government has substantially curtailed field monitoring by major environmental data collection agencies such as EPA and the U.S. Geological Survey.But at the very heart of the matter, parties on all sides must work to create a new intellectual framework and terminology: that environmental improvement is a valid market whose demands and satisfaction ought to compete fairly with all other consumer and commercial markets. Properly managed, that market can create great economic growth opportunities for the future.

Public Market Projects Experienced in the PhilippinesPublic markets in the Philippines and around Asia pose significant challenges for wastewater treatment due to the relatively high strength of the discharges and variability of flows. The Muntinlupa Public Market, located in Muntinlupa City in the southern part of Metro Manila, is one of the largest public markets in the metropolitan area with 1,448 stalls and 24 hours a day operation. With support from the U.S. Agency for International Development for planning and design, the city constructed a treatment facility which began operating in February 2006. The wastewater treatment system is an innovative combination of anaerobic and aerobic treatment coupled with filtration using cocopeat media to meet local discharge standards. It also includes a water recycling system that will allow re-use of the treated effluent for flushing toilets, watering plants and street cleaning. This technology is being applied elsewhere in the Philippines and is suitable for other locations in the region.Wastewater from public markets is generated from distinct sources and activities. These include: Meat, poultry, fish preparation and sales Fruit and vegetable (produce) sales Prepared food stalls Public restroomsWhen combined into a common outfall, the resulting wastewater mixture typically contains high levels of organic material, suspended solids, fats, oils and grease. It commonly contains two to three times the organic matter and solids typically found in residential wastewater, classifying market sources as high strength.To effectively manage high-strength wastewater, treatment infrastructure must be designed and sized not only to address hydraulic loading in terms of volume (cubic meters per day), but also organic loading, which is expressed in terms of kilograms of BOD (Biochemical Oxygen Demand) per day, and solids loading, which is expressed in terms of Total Suspended Solids (TSS). Additionally, appropriate pre-treatment devices are required to remove fats, oils and grease from prepared food stalls, and the high percentage of solids associated with butchering and produce preparation and sales activities. Such devices typically include septic tanks, grease interceptors, grit chambers and bar screens.

Figure 1.0 Muntinlupa Public Market Watsewater Treatment System Flow

The full cost to construct the wastewater system was 6.8 million pesos (approximately US$136,000). During the first year of operations, O&M costs for operations staff, electricity, repair parts and consumables were approximately 27,000 pesos per month ($540). The reuse of the treated effluent resulted in a savings of 15,000 pesos per month ($300) in electricity costs because less water needed to be pumped from underground. This partially offset the O&M costs. To recoup the capital costs of the system, the City has implemented a full cost recovery plan in which stall owners are charged a user fee of 5 pesos ($0.10) per day per stall. This will cover the O&M costs and result in full cost recovery in approximately 3 years. The user fee has been collected since June 2006 and there have been no complaints, presumably because the market is well run and the project has been thoroughly discussed with the market vendor association.Since the commissioning of the treatment system on February 24, 2006, there have been several lessons learned. These include:1. The constraints with the site at the Muntinlupa Public Market, while considerable, are not atypical of public markets in the Philippines and elsewhere in Asia, especially those located in densely populated city centers. As word of the success of the Muntinlupa project spreads, several other Philippine cities are replicating it for their markets and two resorts have already built similar systems based on the design. Many are experiencing similar constraints including very limited land area, unstable or seasonally saturated soils, and the need for raw wastewater pumping. Considering these factors during the initial stages of project development is advisable.2. It is possible for local government units to develop wastewater treatment systems using their own resources to meet stringent effluent discharge standards.3. Full cost recovery of public investments in wastewater treatment infrastructure is an achievable goal when low-cost, low-maintenance systems are used.4. Public participation. A key factor to the success of the project is believed to be the significant effort in public participation driven by an intensive social marketing campaign. This effort, lead by the LINAW project, included a multimedia outreach effort to increase awareness of wastewater issues and demand for treatment facilities and increase willingness to pay user fees.The Muntinlupa Public Market wastewater project is a functioning model of low-cost, low-maintenance treatment technologies that are combined to provide sustainable wastewater treatment for high-strength flows. Using a combination of public outreach to drive the demand, and full cost recovery mechanisms to pay for the system, this approach brings the technology within the reach of many communities within the Philippines and throughout the region.Another public market related experienced in the Philipiine, according to a published report on government projects entitled Philippines Small-Scale Wastewater Treatment Systems for 3 Markets USAID Philippine Sanitation Alliance Projects in the Philippines, the country do not have an access to an improved sanitation and the country does not have any sanitation treatment infrastructure which is a major issue facing the Philippines and other Southeast Asian countries. 2008 data estimated that 24% of the Philippine population still did not have access to personal improved sanitation, 15% of which rely on shared sanitary facilities and 9% of which rely on open defecation or the use of unimproved sanitation. Given the large population of the Philippines, this means that around 10 million Filipinos still defecate in the open on a daily basis, with serious consequences to their local environment and their health, dignity, and human development. In addition, even those people that have access to improved sanitation are very likely using a basic form of improved sanitation such as a septic tank-connected toilet since only 4% of the countrys residents/businesses are connected to a sewerage system with proper treatment. Since septic tanks, even at their very best, do not in themselves provide adequate wastewater treatment, this means that the Philippines is grappling with a serious problem of groundwater and surface water pollution, with all of the resulting health consequences that this entails. It is estimated that 55 Filipinos die every day as a result of poor sanitation and that it poses economic losses exceeding $1.4 billion yearly.The small-scale wastewater treatment system for the San Fernando Public Market, in San Fernando City, La Union. As the main city market with about 700 stalls (up to 900 on the market days of Wednesday/Saturday/Sunday), it was discharging all of its sewage, grease, and washings from the meat and fish areas to a septic tank and then to a drainage canal. This was posing a significant threat to the Citys coastline (the City borders the ocean), as the wastewater was polluting the nearby beaches and threatening the health of nearby citizens. With technical assistance from the USAID-funded Environmental Cooperation-Asia project, the City constructed a sewage treatment system for all of the markets wastewater to clean up the Citys coastline. Another project is the small-scale wastewater treatment system for the Sta. Ana Public Market, in Manila City, Metro Manila. Situated alongside the Pasig River, known infamously as one of the worlds most polluted rivers, the bustling market of 220 stalls was discharging all of its wastewater, including sewage, grease, and washings from the meat and fish areas, into an inadequate and rarely desludged septic tank, which then proceeded to discharge this partially treated effluent directly to the river. Inputs like these all along the river, in addition to domestic wastewater, are the reason why the river is considered biologically dead. Thus, as part of a larger effort to start cleaning up the river, the PSA and Rotary worked with the city government and MMDA to construct a sewage treatment system for all of the markets wastewater, as a model for other markets and facilities along the rivers length. These three projects were implemented using the following process: 1) initial consultations and outreach, 2) IEC (information, education, communication) activities on the project and on improving hygiene and sanitation in general, 3) construction of the facilities, and 4) follow-up IEC and training on O&M responsibilities. The purpose of these tasks was to build effective wastewater treatment systems for the markets that would positively impact the sanitation situation of the establishment and its surrounding community. Another objective was for all three markets to meet the national governments effluent discharge standards, which was not possible with septic tanks. The specific objectives for the San Fernando City Market project were to reduce pollution inputs to the Citys coastline and contribute to the Citys overall goal of becoming a leader in the Philippines for effective sanitation management (the City has also implemented several other sanitation projects). The specific objectives for the Sta. Ana Public Market project were to reduce pollution flowing into the Pasig River and to build a model wastewater treatment plant that can be replicated in other establishments along the river. The San Fernando City Market project ran from March 2005 until Dec. 2005. The project activities included: 1) Consult with the City of San Fernando and stakeholders to develop an action plan for addressing water pollution in the city, 2) Design the treatment system for the market and associated infrastructure, 3) Consult with market vendors and other stakeholders to determine how to fund the project (a 10% increase in rent per stall, but not technically a users fee), 4) Renovate the toilet facilities of the market, 5) Undertake IEC in cooperation with the market vendors association to promote the project and promote overall hygiene improvements among the vendors and local community, 6) Construct the facility, and 7) Determination of O&M responsibilities and training. USAID-Rotary assistance to the Sta. Ana Public Market began in mid-2009 and the wastewater treatment plant was constructed from March to October 2010. The project activities included: 1) Consult with project stakeholders to obtain funding and in-kind support, namely from the City of Manila, the Metro Manila Development Authority (MMDA), USAID and Rotary (the Foundation and International District 3810), 2) Hold focus group discussions and workshops for market vendors, local officials, neighboring schools and churches, and other neighboring establishments, to inform and involve them in project activities, 3) Undertake education campaigns, via a local community organization (the Lola Grande Foundation), on improving hygiene and sanitation in the market and surrounding communities, 4) Decide on treatment technology and prepare the design, 5) Undertake the construction, and 6) Follow-up IEC on the project and determine O&M responsibilities. To ensure that garbage and grease would not clog up the treatment plant, the USAID-Rotary project hired the Solid Waste Management Association of the Philippines (SWAPP) to help the vendors association develop and implement a solid waste management program and a grease management program. The project also repaired the public toilets and sinks in the market, encouraged the local barangay to pass an ordinance requiring soap in all public restrooms and is currently developing a system that will pipe treated water to the restrooms to address water shortages. For the Muntinlupa Market project, the wastewater generated from the 1445 stalls, their vendors, and their customers are now covered by the project. In additional, the IEC activities performed by the project partners educated many people of the market and surrounding community on the benefits of proper hygiene and sanitation. For the San Fernando Market project, the wastewater generated from the 700-900 stalls, their vendors, and their customers are now covered by the project. In addition, the IEC activities performed by the project partners educated many people of the market and surrounding community on the benefits of proper hygiene and sanitation. For the Sta. Ana Market project, the wastewater generated from the 220 stalls, their vendors, and their customers are now covered by the project. In addition, the IEC activities performed by the project partners, especially the Lola Grande Foundation, educated many more people of the surrounding community on the benefits of proper hygiene and sanitation. These projects are now complete and being operated and maintained by market staff. All three are still functioning properly and serving as models for small-scale wastewater treatment in the Philippines. Muntinlupa Market, especially, is serving as a significant model, as it was the first plant of its kind in the Philippines, and also had the innovative feature of being built entirely underground due to space constraints at the project site. These treatment systems are also low cost for O&M compared to conventional systems, as they utilize mainly non-mechanized processes (other than the pumps and SBRs) that are low maintenance. As an example of the O&M costs, the Muntinlupa Market the project with the largest wastewater load incurs approximately 27,000 pesos (~ 620 USD) a month in O&M fees, which includes the salary of its two maintenance personnel. Considering the volume of wastewater treated (210m3 per day), this is a very reasonable sum. As well, the Muntinlupa Market implemented with the agreement of the market vendors a users fee of 5 pesos per stall per day, which allowed the City to recover its costs for the project in merely 3 to 4 years. By reusing the effluent for toilet flushing (for one year) and street cleaning, the Muntinlupa Market also saves money on water bills. The San Fernando Market also implemented an indirect cost-recovery measure by increasing rental rates for stalls by 10%, though the additional revenue collected also goes to other market maintenance and initiatives in general. In both cases, the IEC performed by the project teams allowed market vendors to be engaged in the projects and agree to paying these additional fees in exchange for doing their part to clean up their surrounding waterways and meet national government regulations. All of the projects faced challenges. As mentioned earlier, the reuse system for the public toilets broke down and was not repaired. In San Fernando, the system quickly got clogged up with trash and grease due to poor design and construction. This was remedied, and the lesson was incorporated into the design and management of the Sta. Ana system. As for water quality, these combinations of anaerobic and aerobic treatment processes allow these plants to be very effective at reducing BOD, COD, and TSS values of the wastewater, and the chlorination/filtration steps also help to remove pathogens. For example, at the San Fernando Market project, influent BOD/COD/TSS averages around 153, 439, and 148mg/L, respectively, with DENR national standards of 100/200/150mg/L for markets. After treatment, these values fall drastically to averages of around 11/27/11mg/L, respectively far below the national requirements. The same applies for Muntinlupa, which reduces its BOD from more than 300mg/L to below 30mg/L (with a DENR standard for discharge to Laguna Lake at 50mg/L). These plants are therefore being very successful in treating the water of these markets. Overall then, these projects are successfully contributing to the improvement of the sanitation situation in the Philippines, by essentially eliminating some of the largest and highest strength inputs of wastewater into important water bodies like the Pasig River, Laguna Lake, and the countrys coastlines. While they have only a small impact in the overall picture (Pasig River is still biologically dead), their positive examples provide the groundwork for many more projects like these in the future.Benefit-Cost Analysis Methods Contingent Valuation (CV) MethodThe CV method essentially asks people what value they give to a resource (use and non-use values). You can ask people what they would be willing to pay to avoid some damaging action or, alternatively, how much compensation they would require to put up with it. The contingency part is a what if question, describing some change in present circumstances, usually some new development. The greatest advantage to this approach is that it can be applied to any valuation problem, including those for which other methods exist. The CV method is not problem-free, however: numbers put into the questions may bias the answers; respondents may get much of their information on the subject from the interviewer (interview bias); respondents may be influenced by their own perceived self-interest (strategic bias); and, the (usually) hypothetical nature of the exercise can induce laziness on the part of respondents. As a consequence, the results of these surveys are often contested. Does this mean that the CV method is not worth the effort? One of its earliest and best-known uses was in connection with the proposed construction of a massive, coal-burning electrical generating station upwind from the Grand Canyon. The project went ahead despite strong expressions of value on the part of respondents. Today, a clear day at the Grand Canyon is a rarity, and the quality of the experience for millions of visitors is significantly diminished. This example shows that the CV method can provide useful information. An excerpt from Benefit-Cost Analysis Guide(July 1998) of Treasury Board of Canada Secretariat.Use and non-use valuesCVM can be used to estimate both use and non-use economic values, and it is the most widely used method for estimating non-use values. Use values are those values which are derived from actual use of a good or service, such as visiting a national park or using a beach for recreation. They also involve non-consumptive uses like basic life-support functions associated with ecosystem, health or biodiversity, the enjoyment of a scenic vista, or event having an option to fish or watch birds in the future. The non-use values do not involve direct use of a resource or ecosystem service. They comprise several forms of philanthropic relation to nature, e.g. existence value, the value people place on simply knowing that giant pandas, whales, a certain protected area or a beach exists, even though they will never see or visit them. It also includes the bequest value, the satisfaction of preserving the natural environment for future generations.Willingness To Pay And Willingness To AcceptThe contingent valuation method is applied through conducting a survey in which people are directly asked how much they would be willing to pay (WTP) for a (change in) specific environmental service. It is also possible to ask people the amount of compensation that they would be willing to accept (WTA) to give up an environmental service. The first approach is called contingent valuation, because people are asked to state their willingness to pay, contingent on a particular scenario and the environmental service described to the respondent.The first step is to define a (change in) a good or service being valued (e.g. improving a lake water quality that would lead to a 20 percent increase in fish stock). Then decisions about the survey itself are made, such as whether it will be conducted by mail, phone or in person, how large the sample size will be and who will be surveyed (e.g. only visitors or both visitors and non-visitors; individuals at the local, national or international scale). Answers to questions regarding survey method and sample size depend mainly on the size of the research budget, while the choice of subjects will depend on (1) whether one decides to estimate only use or both use and non-use values, and (2) on the uniqueness of goods or services being valued (resources with unique characteristics are likely to have higher non-use value and thus the geographical scope of the survey should be larger). In-person interviews are generally the most effective for complex questions, because it is often easier to explain the information to respondents in person. In addition, people are more likely to complete a long survey when they are interviewed in person. However, these are also the most expensive type of surveys. The survey sample should be a randomly selected sample of the relevant population (e.g. every tenth visitor of a national park).Survey designA contingent valuation survey should include (1) a detailed description of a good or service being valued and the hypothetical change regarding the good or service, (2) questions about willingness to pay for a good or service being valued and (3) questions about respondents characteristics (age, income, education, etc.) and preferably also their preferences regarding the good or service. The willingness-to-pay question should also define a way in which payment would be made (a general tax, a voluntary donation or an entrance fee). For example, a question can be formulated in the following way: Are you willing to pay EUR __ for the previously described improvement of the river water quality in the form of a voluntary donation per year?. The valuation question is usually followed by a question which identifies the motivation of those respondents who state that they are not willing to pay anything. This enables distinguishing between the so-called protest votes (respondents who are not willing to pay anything, because they protest against a scenario presented or a payment method) and the people for whom the good indeed has no value. Protest votes are in most cases excluded from the statistical analysis, as they do not reveal peoples real economic value for the good.Some authors (such as Sagoff (1988), in The Economy of the Earth) have interpreted protest answers as refusals to act as consumers when deciding public policies. He believes that the economic approach, which treats individuals as consumers with certain preferences, is limited and that policy issues should be decided by rational deliberation among citizens. Thus, he plausibly argues that people refuse to give a price, because they want to act as citizens (deciding upon policy matters by voting in parliament or in a referendum, demonstrating and/or debating) and not as consumers in a fictitious market.The next step is to conduct the survey, which is followed by statistical analysis and reporting of the results. The main result derived from the CVM is the average willingness to pay per person. This figure is then multiplied by the relevant population (all visitors of a beach or all residents of a country, for instance) in order to derive total economic value of a good or service. For example, if the average willingness to pay of surveyed people for establishing a protected marine area is EUR 20 per person per year, and the relevant population amounts to 200,000 (e.g. annual visitors of the site), then the total benefits of such a project would be EUR 4 million.LimitationsAlthough CVM has been widely used in cost-benefit analysis and environmental impact assessment for several decades, it has been subject to many critiques. The main concern relates to the reliability and validity of its results due to a number of errors or biases that can occur when applying CVM. The most important biases are: When respondents are asked about their willingness to pay hypothetically, they tend to give higher values than what they would actually pay in a real situation. Rather than expressing value for the good or service, the respondents might sometimes actually be expressing their feelings about the scenario or the valuation exercise itself (they do not believe that a described change is feasible or that it will really take place). Respondents may give different willingness-to-pay amounts, depending on the specific form of payment chosen (e.g. if the form of payment is voluntary donation respondents may give higher values than if asked to pay through higher taxes). Starting value in the willingness-to-pay question tends to imply a value for the good (e.g. Are you willing to pay EUR 5 for?), so that a starting value well above the respondents true willingness-to-pay amount will increase the stated willingness-to-pay amount, while starting value well below it will tend to decrease it. Strategic bias arises when the respondent does not provide a true answer in order to influence a particular outcome, i.e. provision of a good. Non-response bias is a concern, because individuals who do not participate in the survey are likely to have different values than individuals who do take part in it.Payback PeriodThe length of time required to recover the cost of an investment. The payback period of a given investment or project is an important determinant of whether to undertake the position or project, as longer payback periods are typically not desirable for investment positions.Calculated as:Payback Period = Cost of Project / Annual Cash InflowsBenefit-Cost RatioA ratio attempting to identify the relationship between the cost and benefits of a proposed project. Benefit cost ratios are most often used in corporate finance to detail the relationship between possible benefits and costs, both quantitative and qualitative, of undertaking new projects or replacing old ones. As mentioned, the ratio is used to measure both quantitative and qualitative factors, since sometimes benefits and costs cannot be measured exclusively in financial terms. In cases where at all possible however, qualitative factors should be translated to quantitative terms in order for the results to be easily understandable and tangible.Internal Rate Of Return IrrThe discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero. Generally speaking, the higher a project's internal rate of return, the more desirable it is to undertake the project. As such, IRR can be used to rank several prospective projects a firm is considering. Assuming all other factors are equal among the various projects, the project with the highest IRR would probably be considered the best and undertaken first. IRR is sometimes referred to as "economic rate of return (ERR)."

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CONCEPTUAL FRAMEWORKFor a project to be accepted, it must undergo various criterions to determine its viability in the community as a whole. In welfare economics, a project can only be accepted if those who will gain from the activity can fully compensate those who will lose and still be better off or pareto-efficiency occurs. In Kaldor-Hicks criterion pareto efficiency occurs when one party benefits from a decision, but the other arent made worse off, which is one of policy making consideration; as long as the policy generates positive net benefits to enable losers be compensated to achieve pareto improvement (Perkins, 1998; Boardman et.al. 1996).In the absence of market prices, other means must be used to attribute values to these non-market or intangible benefits (cost). The principle is straightforward: benefits should be valued at the willingness-to-pay, that is the amount of consumptions or real income that households will be willing to forgo in order to receive the benefits (Broadway, 2006).Cost benefit analysis is a tool to help decision making by the public sector about allocation of resources. It is conducted to evaluate the present value of a project. The net present criterion involves rating of the projects and aggregating the social benefits and cost into a single measure. Net present value was computed by getting the difference between the sum of the discounted gross benefit and the sum of discounted gross cost. Thus, the formula used in calculating NPV is as follows:

Where:Bi= BenefitsCi= Costt = time of cash flows= the discount factor (r is the discount rate issued)A project is financially viable if NPV is greater the 0 or it is positive. Otherwise reject the project. In the case of two or more competing investment projects, select the project with the highest NPV result (Aragon, Corazon T.). Since NPV shows the cumulative net benefits expressed in present value throughout the project life, it is useful to determine how much profit is generated per year to have an annual comparison throughout the project life. The used of annuity formula converts NPV into equal annual net benefits throughout the project life. Annualized net benefit expressed in present value can be calculated using the following annuity formula:

Where:A= annualized net benefit in present valuer= discount ratet= project life= capital recovery factorAnnualized net benefit enables the analyst to compare the profitability of two or more investment project and determine how much net income or benefits annually through the estimated project life. On the other hand, in order to determine how much benefit is generated for each unit cost of the project benefit-cost (B/C) can be used. This is the ratio of the sum of the present value (or discounted value) of gross benefits to the sum of the present value (or discounted value) of gross cost (Aragon, Corazon T.) This (B/C) ratio can be computed using the following formula:

The decision rule is to accept investment projects with (B/C) ratio greater than 1. Reject if otherwise. In the case of two or more competing investment projects, select the project with the highest (B/C) ratio.The break-even point of a project is important to find the maximum rate of return that an investment project could pay if all resources were borrowed or to recover the investment and operating costs and still break-even. FIRR (Financial Internal Rate of Return) is the discount rate that equates the present value of the projects benefits and costs, so NPV is equal to zero or (B/C) ratio is equal to 1 and to determine also the point of break-even. In equation form, FIRR is the r where:

So that,

It can also be computed through program like excel. Any projects or investments with an FIRR greater than the opportunity cost of capital would be a profitable investment. Otherwise, reject the project. In the case of two or more computing investment project, select the project with the highest FIRR.All proposed project are associated with risk and uncertainty, sensitivity analysis method is a straightforward to measure the effects of risks and uncertainties in investment analysis. The analyst will alter prices of input, outputs and other associated factors and look what would happen to NPV or FIRR if prices and costs were different and find out of which factors is the project is sensitive most.Another method is the payback period which identifies the number of years it takes to recover all the capital invested.

The payback period method does not measure profitability of a project; it merely measures of how quick the investment will contribute to the liquidity of the project.The analysis of repair and expansion project of Baybay public market can be illustrated below.

Figure 2.0 Diagram summary of Benefit-Cost Analysis of Extension and Repair of Baybay City Public Market

METHODOLOGY

Place of the Study:The study will be conducted in Baybay City, Leyte. Baybay is a city located in the province of Leyte, Philippines. It is often called by the locals as the City of Baybay and it is preferred by the local government officials. It is the 2nd largest city in the province in terms of land area. Covering an area of 46,050 hectares, Baybay is composed of 92 barangays, 23 of which are in the poblacion. The remaining 69 are rural barangays. It is situated on the western coast of the province of Leyte.Sampling Procedure:The survey will use the household population situated within Poblacion of Baybay City. Three hundred sixty seven (367) household will be randomly selected using Slovins formula:n= where:n= the sample size N= the total number of sampling units in the populatione= the margin errorA 95 % confidence interval or 5 % margin error is set to determine the sample size. To determine the respondents, a stratified random sampling will be used. The household will be grouped according to the zone or barangay they belong. A proportional sample allocation formula adopted from Marcolita (2006) cited by Tampus (December 2014) will be used to determine the total number of samples per zone or barangay.

Where:= sample size of the stratum = population size of stratum = population sizeHousehold head or representative household member 18 years or older will be considered as respondent for the off-site survey. On the other hand, 30 stall vendors will be randomly selected for the on-site survey. Table 1.0 illustrates the proportional sample size allocation of Poblacion Baybay City, Leyte.

Table 1.0 Proportional sample size allocation of Poblacion Baybay City, Leyte.

Name of Barangay (POBLACION)Total No. of HouseholdNumber of Sample Household

ZONE 178864

ZONE 2998

ZONE 3917

ZONE 420116

ZONE 5696

ZONE 616914

ZONE 7796

ZONE 816814

ZONE 9817

ZONE 10504

ZONE 1112010

ZONE 1216313

ZONE 13474

ZONE 14393

ZONE 1516814

ZONE 1619816

ZONE 1711910

ZONE 1828323

ZONE 19575

ZONE 2013411

ZONE 2115012

ZONE 2223219

ZONE 2356746

STO. ROSARIO44336

TOTAL 4,515 367

Data Collection:The study will be conducted in Baybay City, Leyte. Both primary and secondary data will be used for the benefit-cost analysis. Primary data will be coming from the survey on household both off-site and on-site survey. Secondary data will be taken from the city project plan, publications, and various documents from the government offices.Data Analysis:The study will used descriptive statistics. The study will also employ benefit-cost analysis tools such as payback period, contingent valuation method, IRR, Benefit-Cost Ratio and others.

LITERATURE CITEDECONSULT, 2007. Estimating The Economic Impact Of Public Markets Accessed on January 28, 2015 from http://www.pps.org/pdf/pps_public_markets_eis.pdf

INTERVIEW SCHEDULE

Basic Information

Name: _______________________________________________________________________Zone: ________________________________________________________________________Municipality/City: ___________________________ Interviewer: _______________________Date of interview: ___________________________

Part I. Socio-Economic Background

1. Age: _______2. Gender: [ ] Male [ ] Female3. Civil Status: [ ] Single [ ]Married [ ]Widower4. Educational Attainment______________ No formal Schooling ______________ Elementary Level (indicate grade)______________ Elementary Graduate______________ High School Level (indicate year)______________ High School Graduate______________ Vocational______________ College Level (indicate year)______________ College Graduate______________ Masters Degree______________ Others, please specify ______________________________________

5. Occupation[ ] Unemployed[ ] Self-employed[ ] Government Employee[ ] Private Sector Employee[ ] Others, please specify

6. Household Size[ ] Adults[ ] Children (15 years and below)

7. Ownership of the house[ ] Owned[ ] Rented[ ] Living with a relative

8. Kindly check and specify monthly income where your household belong including other members of the house. Rest assured that this will be kept confidential.

Actual AmountMonthly Income BracketActual AmountMonthly Income Bracket

[ ]_____________less than 1,000[ ]_____________50,001 - 55,000

[ ]_____________1,001 - 5,000[ ]_____________55,001 - 60,000

[ ]_____________5,001 - 10,000[ ]_____________60,001 - 65,000

[ ]_____________10,001 - 15,000[ ]_____________65,001 - 70,000

[ ]_____________15,001 - 20, 000[ ]_____________70,001 - 75,000

[ ]_____________20,001 - 25,000[ ]_____________75,001 - 80,000

[ ]_____________25, 001 - 30,000[ ]_____________80,001 - 85,000

[ ]_____________30,001 - 35, 000[ ]_____________85,001 - 90,000

[ ]_____________35, 001 - 40, 000[ ]_____________90,001 - 95,000

[ ]_____________40,000 - 45, 000[ ]_____________95,001 - 100,000

[ ]_____________45, 000 - 50,000[ ]_____________more than 100,000

Part II. Public Market Approach

1. Do you know about the LGU Baybay extension and repair on the citys public market?

[ ] Yes[ ] No2. Are you satisfied with the proposed project?

[ ] Yes[ ] No

3. Check the reasons why you visit the market.

[ ] products[ ] place[ ] people[ ] price[ ] convenience[ ] business transactions[ ] others, please specify ____________________

4. What is the greatest benefit of the public market for you?

[ ] business opportunity[ ] price[ ] entertainment[ ] products[ ] freshness[ ] bring people together[ ] convenience[ ] others, please specify _____________________[ ] helps economy 5. Kindly check among the choices what you dont like most about the public market?

[ ] vehicle congestion[ ] poor sanitation[ ] poor garbage management [ ] bad odor[ ] stall management system[ ] people[ ] others, please specify _________________________________________________

6. ( For on-site survey, question 6 and 7 is for vendors) How much is your monthly rent? Kindly specify.______________________________________

7. Kindly check the source of fund for your start-up capital in erecting your business.

[ ] bank loan[ ] merchant association loan[ ] credit card[ ] personal loan[ ] savings[ ] others, please specify __________________

Part III. Willingness to Pay

1. At this status quo or condition of the public markets sanitation and utility management, supposed the LGU Baybay will collect 50 pesos per household for the improvement of sanitation and utility management, are you willing to pay? If no, proceed to no. 6.

[ ] Yes[ ] No


[ ] Yes[ ] No


[ ] Yes[ ] No


[ ] Yes[ ] No


[ ] Yes[ ] No

6. If you answered no, what are the reasons why you are not willing to pay?

[ ] Im okay with the sanitation condition right now[ ] I have other more important to pay for.[ ] I pay too much tax already[ ] It should be only for high income earners[ ] Others, please specify

Benefit-Cost Analysis Outline (UNFINISHED)

Documents

repair of baybay public

present state of public

study public markets

national public market

facilities of public

economic cost

repair project

economics christopher