Analysts have est Your county is considering building a public swimming pool. An

Question

Analysts have est Your county is considering building a public swimming pool. Analysts have estimated the present valu es of the following effects over the expected useful life of the pool: PV (million dollars) 2.2 State grant: Construction and maintenance costs: Personnel costs: Revenue from county residents: Revenue from nonresidents: Use value benefit to county residents: Use value benefit to nonresidents: Scrap value: 12.5 8.2 8.6 2.2 16.6 3.1 0.8 The state grant is only available for this purpose. Also, the constructi will have to be done by an out-of-county firm. a. Assuming national-level standing, what are the social net benefits b. Assuming county-level standing, what are the social net benefits of c. How would a guardian in the county budget office calculate net and maintenance of the project? enefits Ject? alculate benefits?

Explanation / Answer

a) National Social net benefits = National Social benefits - National Social Costs

In this case,

National Social net benefits = Revenue from County Residents + Revenue from non residents +Use Value benefits to county residents + Use Value benefiits to non residents + State Grant + Scrap Value - Construction and Maintenance Costs - Personal Costs = 8.6 +2.2 +16.6 +3.1 +2.2 +0.8- 12.5- 8.2 = 12.8 million dollars

b) County Social Net benefits = Revenue from County Residents + Revenue from non residents +State Grant +Scrap Value - Construction and maintenance Costs - Personal Costs = 8.6 +2.2 +2.2 +0.8 -12.5-8.2 = -4.7 million dollars

c) Social Net Benefits as calculated by Guardian of County Budget Office = Revenue from County Residents + Revenue from non residents +State Grant - Construction and maintenance Costs - Personal Costs = 8.6 + 2.2 +2.2 -12.5 - 8.2 = -7.7 million dollars

Please note that scrap value is not included for computation of social benefit value by Guardian of County Budget office.

d) Social net benefiit computed by a spender in County recreation department = Revenue from County Residents + Revenue from non residents +Use Value benefits to county residents + Use Value benefiits to non residents + State Grant - Construction and Maintenance Costs = 8.6 +2.2 +16.6 +3.1 +2.2-12.5 = 20.2 million dollars

Please note that both scrap value and personal costs are not included for computation of social benefits by spender of a county recreation department.

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