Equitable distribution of costs between households <– Date –>    <– Thread –> From: IAN_HIG (IAN_HIGantdiv.gov.au) Date: Fri, 14 Jan 1994 11:54:18 +1100 (EST)
```This is in reply to Jerry Callans coments on consultants fees and cost
distribution.

to distribute costs between households in a fair manner.  (Thank goodness
those debates are now long behind us).  Perhaps our solution to the
problem will help others find there own solutions.

We wanted to use the distribution of costs to achieve a number of
objectives some of which were mutually exclusive.  The objectives
included:
An acceptance of the user pays principle,
To not discriminate against single person households,
To encourage families,
To encourage the building of small houses,
To be equitable,
and some others I don't remember.

A perperson basis was deemed unfair to large households, a per household
basis was rejected as being unfair to small households.

We first tried to split costs in proportion to house size using a formula
such as 50% of costs to be split on a perhousehold basis and 50% of costs to
be split in propotion to house size.  We used housesize because it was
a rough measure of number of persons in the house and because some expenses
such as amount of carparking required and amount of land required
we directly related to house size.  This formula seemed ok, but put a heavey
burdon on large households.

Our second and final attempt varried this by using a logarithmic function
of house size.  (I can'nt remember the exact formula but I will post it
later).  The logarthmic relationship reduced the amount paid by large and
small houses and increased the amount paid by middle sized houses
compared to the linear relationship.

Everyone was eventually happy with this "compromise formula".  To
implement it simply we produced a table with one square meter steps
in house size showing the amount to be paids by that sized house.  New
people coming in know immediately how much they will pay and can
look up in the table the change in cost if they change there proposed house
size.

In addition to this we set the joining price in April 1991 the date the first
shares were sold.  We someone joins we charge them the initial joining price
increased by a measure fo inflation.  We use the increase in the "consumer
price index" for Hobart as a measure of the local inflation rate. By
allowing for inflation we are being reasonably fair to people who
join at different times.

Anyway I will dig out the exact formala and post it in the next few days,

hope this is usefull to somebody outthere.