The citizen-based Capital Improvement Projects (CIP) Committee for the city of Dundee has recommended a $25 million bond issue for the purchase of greenbelt/floodplain land to preserve low-lying green areas and wildlife habitat. Developers oppose the proposal due to the reduction of available land for commercial development. The city engineer and economic development director have made preliminary estimates for some obvious areas over a projected 15-year planning horizon. The inaccuracy of these estimates is made very clear in a report to the Dundee City Council. The estimates are not yet classified as costs, benefits, or disbenefits. Economic DimensionEstimate1. Annual cost of $5 million in bonds over $300,000 (years 1–14)15 years at a 6% bond interest rate2. Annual maintenance, upkeep,and program management3. Annual parks development budget$5,300,000 (year 15)$75,000 + 10% per year increase$500,000 (years 5-10)4. Annual loss in commercial development $2,000,000 (years 8–10)5. State sales tax rebates not realized$275,000 + 5% per year (years 8 on)$100,000 + 12% per year (years 6 on)6. Annual municipal income from parkuse and regional sports events7. Savings in flood control projects$300,000 (years 3–10)$1,400,000 (years 11–15)$500,000 (years 10 and 15)8. Property damage (personal and city)not incurred due to floodingIdentify different viewpoints for an economic analysis of the proposal, and clas-sify the estimates accordingly.

1. Annual cost of $5 millions in bonds over 15 years at a 6% bond interest rate will help in…

Answered: Economic Dimension Estimate 1. Annual…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The citizen-based Capital Improvement Projects (CIP) Committee for the city of Dundee has recommended a $25 million bond issue for the purchase of greenbelt/floodplain land to preserve low-lying green areas and wildlife habitat. Developers oppose the proposal due to the reduction of available land for commercial development. The city engineer and economic development director have made preliminary estimates for some obvious areas over a projected 15-year planning horizon. The inaccuracy of these estimates is made very clear in a report to the Dundee City Council. The estimates are not yet classified as costs, benefits, or disbenefits.

Economic Dimension
Estimate
1. Annual cost of $5 million in bonds over $300,000 (years 1–14)
15 years at a 6% bond interest rate
2. Annual maintenance, upkeep,
and program management
3. Annual parks development budget
$5,300,000 (year 15)
$75,000 + 10% per year increase
$500,000 (years 5-10)
4. Annual loss in commercial development $2,000,000 (years 8–10)
5. State sales tax rebates not realized
$275,000 + 5% per year (years 8 on)
$100,000 + 12% per year (years 6 on)
6. Annual municipal income from park
use and regional sports events
7. Savings in flood control projects
$300,000 (years 3–10)
$1,400,000 (years 11–15)
$500,000 (years 10 and 15)
8. Property damage (personal and city)
not incurred due to flooding
Identify different viewpoints for an economic analysis of the proposal, and clas-
sify the estimates accordingly.

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