Section I: 15 points. Answer one of the following two questions.

1) The Town of Banff, located in Banff National Park (2564 square miles) of Alberta Canada

has a population of 6,700 and is only 1.9 square miles. The Park is a major destination for

tourists from all over the world with its breathtaking views of the Canadian Rockies and

close access to the Park’s amenities. As only one of two towns in the park (which is adjacent

to Jasper National Park that is 4200 square miles), the town is a primary service center for

park visitors and home to many resorts, hotels, and other commercial enterprises that cater to

tourists. Although the town was established in 1880, recent growth and environmental

pressures have facilitated its relatively recent incorporation in 1990. The town has a

managerial form with 6 council members. The town has a long-range financial plan, an

operating budget, a capital budget, a capital plan, a community plan, and several

redevelopment plans.

The town will undertake its most expensive and comprehensive capital project to replace all

public infrastructure for 8 blocks (approx. 1 mile) on its main street. This infrastructure to be

replaced includes the following: a 4 lane road, street lights, sidewalks, storm sewer, sanitary

sewer, water lines, and traffic signage. This road is the main thoroughfare through the town,

and so is well-traveled by thousands of tourists and residents during the summer.

Additionally, the majority of the non-resort commercial enterprises of the village are located

in this 8 block portion that includes restaurants, tourist shops, grocery stores, clothing and

jewelry stores, etc., so there is a great deal of foot traffic in this area during the day and well

into the night. (Keep in mind that, although small in terms of population, Banff’s population

density is high.)

As the municipal manager of this town, it is your responsibility to manage this project.

Explain the primary activities you must engage in to plan, finance, and implement the

project. Identify and describe the primary issues or problems you are likely to encounter

and the major decisions you (and your team) will make in planning, financing, and

implementing the project. The project must be completed in a short amount of time as

significant snowfall and freezing begins in early October and does not end until early-May.

Make sure you target your comments to this capital project specifically and not capital

projects in general.

2. The Village of Madison is a middle-ring suburb in a major metropolitan area. Its

boundary almost encompasses an unincorporated area of about .8 square miles. That

unincorporated area contains a large trailer park in the center (Section B), and some

undeveloped land further away from the city (Section C). That area has been used as a

dumping area, probably by the residents of the trailer park (who have to pay for garbage

pick-up from a private hauler) and nearby residents who want to dispose of large items

free of charge. The village provides most of the police and fire protection to the

unincorporated area through reciprocity with the county, which cannot respond as fast as

the village. Thus, much of the village’s services to this area are pro bono. Additionally,

there are concerns that the septic systems of the trailer park are not being maintained

appropriately by the trailer park owners, and are leaking pollutants into the village’s well

system. The trailer park currently has its own well, but water pressure and quality is

inadequate. The village is under a great deal of pressure from its citizens to annex the

area, eliminate the trailer park, and bring in more desirable development.

One of the primary concerns of the village is that developers may not be willing to

provide the necessary infrastructure to support the development. In addition to sanitary

sewers, the area will need water mains, road improvements on major streets, lighting,

signage, sidewalks, a retention pond to hold rainwater, and an improved drainage system

for storm water. Road improvements that link Sections B and C will require the village

to build a new bridge over a small river to meet load standards. Ultimately, the village

will also need a new fire station to service the entire area and nearby sections of the

village. (Given population growth on the border with the unincorporated area, the village

is close to requiring a new fire station currently.) The portion of the unincorporated area

that is closest to the village (Section A) comprises about ½of the unincorporated land

area. This section has the most miles of roads and commercial enterprises that provide

goods and services to the portion of the town that is closest to the total unincorporated

area and the trailer park.

Using the data in Attachment 2Fa (.pdf or .xlxs) and figure Attachment 2Fb, construct a

5 year capital budget that distributes the projects in a logical order over the 5 year time

period and meets revenue and debt constraints. The city plans on issuing $5 million in

debt for capital projects in the first year, and it can contribute an additional $2.5 million

in grants and own-source revenue in the first year. However, the city estimates that it can

contribute only $2 million each year after that (in years 2 – 5) from own-source revenues

and intergovernmental grants.

Make sure you explain your answer and budget figures.

Section II: 15 points. Answer one of the following two questions. Show your calculations

and explain your answers to obtain partial credit. Please put your excel file on Blackboard if you

create one.

3) The finance director has assigned you the task of doing an analysis of the water charges

the town issues to resident customers and other municipalities. The city owns and

operates 3 large wells from which it provides water to its own citizens and four smaller

surrounding communities. Water is sold to each of the surrounding communities as one

lump fee based on volume, but it is sold to its citizens based on metered use per

connection. Your task is to determine whether charges to the citizens and surrounding

communities are appropriate relative to usage and the operational and capital needs of the

water fund. Town officials recognize that the water sold to surrounding communities is

subsidizing the water used by its citizens, and many feel that this is appropriate to some

extent. However, nobody really knows the size of the subsidy because they don’t really

know how much it costs the city to produce a gallon of water. Currently, water charges

to citizens are based primarily on looking at what other communities are charging its

citizens, charging less than that amount to its own citizens, and then charging the

surrounding communities enough to make up the difference based on the percentage of

total gallons sold.

Using the figures in Attachment 3F (.pdf or .xlxs), do the following:

1) Using an average cost approach (not a marginal cost approach), determine how

much it costs the town to provide a gallon of water to citizens and surrounding

communities considering all direct, indirect, and depreciation expenses. Note that

the cost to citizens is different than the costs to surrounding communities. To

determine varied costs, consider that some expenses should not be borne by the

surrounding communities that purchase water.

2) Determine how much citizens and surrounding communities are currently being

charged for a gallon of water and what the charges should be if subsidization of

water service to citizens by surrounding communities were not occurring (using

an average cost approach).

3) Identify any other problems with the current water charges issued by the city, and

explain how you distribute administrative costs.

To answer this question correctly, you will need to distinguish direct from indirect costs

and distribute indirect costs in a reasonable way.

4) The costs of disposing of solid wastes has skyrocketed in the last 10 years due to limited

land fill space that has increased the need for recycling solid wastes. Currently the city

has a cart system in which all garbage (recyclable, and non-recyclable) is placed by

households into the same cart, which is disposed of by the city in the same refuse packing

truck. Garbage carts from single family and duplexes (two-family) households are

retrieved from their permanent storage location, usually the back of the house or

driveway, by the city worker and brought to the truck on the street. Condominiums,

apartment complexes, and private businesses use a dumpster system with separate

recyclable and non-recyclable bins and collection of this refuse is contracted out. The

city makes no attempts to sort or recycle the house and duplex garbage after it is

collected.

The city’s finance director has charged you with doing an assessment of the average costs

associated with three options for collecting house and duplex refuse. These options are

explained below, but you will need to make some assumptions to complete this question.

A) Contract out the entire system: private firms agree to use their trucks and

personnel to collect the garbage and sort it after collection. The city is responsible

for providing and replacing the garbage carts, but this option does not require new

carts or increasing the number of carts provided to each resident and duplex.

However, the contractors will not retrieve the carts from their permanent location,

so citizens must bring them to the curb for pick-up on designated days.

B) Purchase new carts and replace entire fleet of packing trucks with new model truck:

purchase an additional cart for each household to hold recyclable items, and require

residents to separate recyclable and non-recyclable refuse into the different carts.

Thus, each household will have two carts. This option also requires replacing the

existing fleet of packing trucks with new ones that empty recyclable and nonrecyclable

garbage into different collection containers on the same truck. This

system allows one truck to collect both types of garbage in the same run. These

new trucks fill up faster than the old trucks, so more new trucks must operate to

collect and dispose of the same amount of refuse in the same time frame. Carts are

retrieved from their permanent location by garbage workers.

C) Purchase new carts and run double pick-up: purchase an additional recycling cart

for each household similar to option 2. Rather than purchasing a different fleet of

packing trucks, this option requires the government to make two sets of refuse runs

each week on each household using current trucks. One run collects recyclables,

the other non-recyclables. This will require purchasing additional standard packing

trucks to handle additional runs and hiring additional personnel. The city will

require citizens to bring their refuse to the street (possibly on different days for

recyclable and non-recyclable) to increase the coverage rate (per house) for each

truck during a shift.

Using the figures in Attachment 4F (.pdf or .xlxs) do the following:

1) Determine how much each of these options will cost the city over the next 5 years.

Assume a 3% inflation rate and a 4% discount rate. (Assume that the 1st year is

year 0. Inflation and discount are not applied until year 1.)

2) Identify which option is the best from a financial perspective.

3) Identify and discuss any other financial and non-financial factors that should or

could be considered in choosing an option in this situation.

Section III, Question 5: 20 points. This question requires that you read the case on City

Council Hearings in Pine Ridge Arkansas in Attachment 5F.pdf Explain the politics associated

with these budgetary relationships, and how the problems identified in the case could be resolved

by answering the following questions.

A) Identify the players in this political situation and their stake in the current situation: what

are their priorities and likely political positions on the problems created by this situation

and appropriate solutions. (Please do not list the council members separately, but discuss

how they are likely to coalesce around particular types of solutions to the problem and

leverage the problems in similar ways.)

B) Based on what you know about the politics of revenues, balancing, and executing

budgets, identify the strategies that are being employed by the players and what strategies

they are likely to employ to close the deficit and resolve the PISD’s long-run and shortrun

problems (be mindful of the actors’ overall objectives).

C) Based on the principles and recommended practices you’ve learned in class and the

readings, what would be the appropriate or most desirable solutions to the problems

created by this situation, including policies and practices that the city should adopt to

resolve the immediate and long-term problems?

• Attachment 1
• Attachment 2
• Attachment 3
• Attachment 4
• Attachment 5
• Attachment 6
• Attachment 7
• Attachment 8