The following appeared in a memo from the mayor of Brindleburg to the city council.
“Two years ago, the town of Seaside Vista opened a new municipal golf course and resort hotel. Since then, the Seaside Vista Tourism Board has reported a 20% increase in visitors. In addition, local banks reported a steep rise in the number of new business loan applications they received this year. The amount of tax money collected by Seaside Vista has also increased, allowing the town to announce plans to improve Seaside Vista’s roads and bridges. We recommend building a similar golf course and resort hotel in Brindleburg. We predict that this project will generate additional tax revenue that the city can use to fund much-needed public improvements.”
Write a response in which you discuss what questions would need to be answered in order to decide whether the recommendation is likely to have the predicted result. Be sure to explain how the answers to these questions would help to evaluate the recommendation.
The memo suggests that a new golf course and resort hotel would be a good idea for the city of Brindleburg. The city’s current mayor and his councilors seem to think so because they find that the new golf course and resort hotel have generated a 20% increase in tourists, an increase in business loan applications, an increase in revenue, and an increase in tax revenue. It is commendable that the mayor and his councilors are willing to subject their recommendation to scrutiny, but any decision they make regarding this project will be based more on emotion and opinion than facts. For example, the mayor and his councilors cite the 20% increase in tourist visits as evidence that the golf course and resort hotel are a success. However, that increase may be the result of increased marketing, rather than the success of the project itself. If, for example, the city of Brindleburg’s advertising budget had been increased, the 20% increase in tourist visits could easily have been 30% or higher. The mayor and his councilors also cite the increased tax revenue generated by the new golf course and resort hotel. However, increases in tax revenue occur as a result of increased economic activity, not as a result of a new golf course or resort hotel. The memo does not cite any figures on increases in business loan applications or revenue. Without those figures, it is impossible to determine whether the new golf course and resort hotel are a success or a failure. In addition, if the mayor and his councilors had accurate and complete data on the number of tourists, business loan applications, and tax revenue generated by hotels, casinos, and golf courses in Brindleburg, they could evaluate the success of the new golf course and resort hotel by comparing it with others in the city. It is highly unlikely that any other resorts and hotels in the city are generating 20% more tourists, business loan applications, and tax revenue than the new golf course and resort hotel. Thus, the mayor’s recommendation that the city government build a resort hotel may have more to do with the mayor’s desire to position himself as a businessman than with any evidence that the golf course and resort hotel are a success.
The mayor and his councilors also argue that the new golf course and resort hotel will generate additional tax revenue for the city. However, that argument is dependent on the accuracy of their claim that the new golf course and resort hotel are a success. The increasing revenue from the new golf course and resort hotel could be the result of an increase in tourism, an increase in tax revenue from tourists, or both. If the increase in tax revenue is the result of an increase in tourism, then the mayor’s recommendation to build a resort hotel is short-sighted. Resorts and other tourist attractions attract tourists because they offer something unique. If Brindleburg opens a resort hotel, then other towns may build similar resorts, and Brindleburg will lose its competitive edge. If the mayor’s recommendation is based on the fact that the new golf course and resort hotel will generate more tax revenue, then the mayor and his councilors may be basing their decision on faulty data. If Brindleburg’s hotel is comparable to others in Brindleburg, then the new hotel will not generate much more tax revenue than any other hotel in the city. Furthermore, the new hotel is not likely to generate enough additional tax revenue to cover the costs of building and maintaining the new golf course. Therefore, any increase in the tax revenue generated by the new hotel will be marginal. Thus, the mayor’s conclusion that the additional revenue from the new golf course and resort hotel can be used to fund public improvements may be premature.
The mayor and his councilors may be relying on faulty data in making their decision. The mayor and his councilors should take the time to evaluate the success of the current golf course and resort hotel before deciding whether to build another resort hotel. The mayor and his councilors should also gather accurate data on the number of tourists, business loan applications, and tax revenue generated by hotels, casinos, and golf courses in Brindleburg. Only after the mayor and his councilors have reviewed all of the relevant data can they make an informed decision about building a new resort hotel.