Resources: Week Three and Five assignmentsWrite a 1,750- to 2,100-word proposal for financing the project you selected in Week Two. Include the following:Introduction, Use each heading below as the

Public Finance Proposal Part I

May 27, 2019

Craig C. Hall

When dealing with government projects, it is not always certain of the anticipated benefits or the costs that the projects will bring. Understanding the outcome of a project, there are various techniques that can be employed to understand the impact or the success of a project, one of the techniques used is a cost-benefit analysis. This technique is mainly used to analyze the viability of a decision; it evaluates both costs and benefits that a decision will bring once it is implemented (Mishan & Quah, 2007) The same criteria are used when evaluating the viability of projects. For governments, the analysis is important as it guides the government to have a watch on its expenditures.

Decision Making Regarding Public Expenditures

The main reason of this analysis of government expenditures is to use this technique to give information about the viability of some projects that the government is planning to spend the taxpayer’s money on. Through this analysis, it is possible for the government to have an idea of both long-term and short-term benefits as well as the cost for the projects that are the government is considering spending money on. The City of Colorado Springs has started a project focusing on the widening of Woodman Road and including an interchange. This is an important project that seeks to improve the traffic flow on this road. The project, which is ongoing is estimated to cost more than $38 million and it is estimated to be completed in the next few years. The cost-benefit analysis of this project gives an insight into the viability of this project or reasons as to why it should not be undertaken. However, this may not be analyzed in terms of the profit it will give the government since it is a public good and does not generate profits directly to the government. The benefits can only be understood by looking at how the public will benefit from the expansion of this road (Pearce, Atkinson, & Mourato, 2006). Some of the benefits of this project include a faster flow of the traffic, creation of employment to the construction team. The downside to this project is, the costs for the project include disruption of traffic during the construction period and a huge amount of money required to fund this project. When assigned monetary values, the benefits that will accrue from this project surpass by far the costs that will be incurred for the widening of this road, the decision for this project would, therefore, be in favor of the project to be continued as the benefits outweighs the costs.

The Role Economic Theory Played

The impacts of economic theory in the cost-benefit analysis cannot be underestimated as it contributed significantly to the analysis of this project. The economic theory stipulates that the government has a role of affecting the economy through spending and the introduction of fiscal policies to regulate the economy. In this analysis, the role played by the economic theory was encouraging government spending to ensure that there is the creation of employment for the people and also the creation of enabling an environment that would boost the business operations for the people. This was significant in helping to understand the benefits that would accrue from this project.

Economic Theory Influences. Economic theory was therefore crucial in giving a better understanding into the project; It also gave the opertunity to have a better look at the project and how it would impact the entire city as a whole. Yes, economic theory was influential in the cost-benefit analysis, through economic theory, the role of government through spending in capital projects is discussed to explain the essence of government participation in regulating the economy through its capital expenditure and monetary policies. In the analysis, it was employed that this theory in emphasizing the need for the government to spend in public capital goods whose benefits will not be felt directly by the government. This is a way to inform the public of the outcome of the evaluation of the cost and benefits associated with this project. Through economic theory, it became understandable that the benefits of this project were more than what can be seen as there is more to do with the indirect benefits. It was, therefore, a major influencing factor in the decision making in this cost-benefit analysis as it affected how each decision was given costs and benefits to each category of costs and benefits.

Conclusion

Cost benefit analysis is an important tool that helps in the decision-making process, especially in the implementation of projects. The Woodmen Road widening, and interchange project seems to have more benefits that outweigh the costs and hence becomes an important project for the public. This project would alleviate traffic congestion and cut back on the possible traffic accidents since there will be more room for the current traffic.

References

Mishan, E.J., & Quah, E. (2007). Cost-Benefit Analysis (5th ed.). New York, : Routledge Taylor & Francis Croup.

Pearce, D., Atkinson, G., & Mourato, S. (2006). Cost-Benefit Analysis and the Environment.

PPRTA-1 Capital Projects (2005-2014) (2016). Retrieved from http://pprta.com/capital-project-maps/