Running head: CRUNCHING THE NUMBERS
Crunching the Numbers
Public Budgeting and Finance
Prepared by: Margaret Mack
Prepared for: Dr. Angela Parham
2339 Wavetree Lane NW
Acworth, Ga., 30101
May 13, 2012
There are two infrastructure projects to choose from and the city council wants to pick only one. The projects are independent so they could choose both if they like. I have done the calculations to see which is the most beneficial and would be a better decision. When making the decision we could look at the one with the lower payback but this is the least effective rule for making our decision. The Net present value (NPV) ...view middle of the document...
Studies show that the average overall zone occupancy rate of sixty percent with the highest level reaching eighty two percent from the hours of 9:00am-12:00pm. When the seventy five percent threshold for action is exceeded, a solution is required. Also let’s keep in mind that the NPV is the highest for this project, that the internal rate of return is greater than twelve percent, and that the payback period for both years is less than 2.75.
Additionally, it would also be a good idea for us to begin project A as well. It is important to make decisions about local infrastructure development within the framework of the infrastructure development plans and the available municipal resources. The appropriate service levels should be selected and questions must be asked about affordability and sustainability. Most infrastructure development has ongoing cost implications for municipalities. For example, some forms of sanitation have much higher operating costs than other forms. Funding is often available for infrastructure development, but ongoing maintenance and operating costs must be paid from the municipal budget (Budget Review, 2003).
One department or municipality may seek private funding in order to build a school or extra classrooms, but if the education department has not budgeted for extra staff, equipment, or reading materials, it would not be beneficial. Initially they may get the grant to build houses, but must also ensure that resources are available for extending other community services like water, electricity, sanitation and so forth. Because infrastructure projects take up lots of resources, it is very important that there is coordination across government.
In municipalities with a large number of poor people the revenue base is smaller and it is difficult to get users to pay for operating costs. The council should determine how many people are at each level, including those who do not even have the basics. Since government has a pro-poor policy, the poorest should be prioritized when resources are scarce. This will also determine the type of infrastructure development projects the council will need to put in place, and at what costs. Different policy issues should be considered when deciding on infrastructure...