Motivation and the Economics of Information
According to this cases study, a severe economical stress is experienced by Meadowville as a result of failure in the local industry. The situation is worsened by fallout experienced in the economical sector on September 11 2001 following a terrorist invasion on the Pentagon. A proposal that enabled construction of a shopping mall in an abandoned site for industries seemed hopeful for the residents due to the promise of several job opportunities. The hopes were however shuttered by the harsh political climate. The politicians in question were business owners who felt a threat for competition from the new uprising project. This resulted to disagreements between a foreign businessperson and the local businesspeople.
Brian Skelley is the director of the economic development of the community. Apparently there is a proposal from BJH Cook for Mountain View crossing. The project is a shopping centre, 498, 000 feet squired and costing a total of $ 30million dollars. The shopping center will be leverages by a total of ten national retailers, who are not located in the city at the moment. Brian Skelley has been asked by the council to provide recommendations regarding the proposal due to major oppositions from the citizens and commissioners. Views regarding Brian Skelley recommendations to the council will be examined.
It is essential to have an accurate revenue projection as this is important when making predictions about the highs and lows with regard to the income expected from a given project or business venture. In order to make an appropriate and highly reasoned revenue projection, there is the need to analyze the sales in pipeline, current business and the new business. It is important to note that the initial revenue projection figures reflected in BJH Cook’s proposal were unrealistic. This is due to the fact that they did not take into account the possibility of losing business from either Books-A-Million or the Lowe’s company. This accounts for the witnessed drop in revenue projection figures from a total of $862,390 to $431,195. The revenue projection estimates on Cook’s proposal are only the retail square footage proportion that Barnes and Noble, Home Depot and Wal-Mart would occupy (Hansen, 2001).
A method that estimates revenue projections effectively is based on determination of revenues that are generated at each square foot of the sales space. This method is extremely reliable because it reflects the possible differences in revenue depicted in various types of retailers. The more accurate revenue projections should be $362,220, which is a true reflection of the property tax revenue as well as new sales from the project (Hansen, 2001).
One of the effective economic incentives that could be employed to make sure that retailers do not relocate to Mountain View Crossing is the use of tax abatement. Taxpayers should be exempted from paying a given percentages of the total amount of tax. The local government makes use of tax abatement in situations where it intends to create jobs and attract private investment. This abatement may be granted to either personal or real property. Tax abatement has proved to be a fundamental tool in strengthening private investment as well as creating novel jobs and retaining incumbent jobs. The other incentive that is applicable is reducing the amount of money charged on licensing (Campbell, 2006). By reducing the licensing fees, retailers are likely to retain their businesses in Valley View Mall instead of moving to Mountain View Crossing. Moreover, low licensing fees will attract more retailers and hence more businesses in Valley View Mall and subsequent economical development and stability.
In order to retain retailers and attract more customers, it is advisable to make use of incentives. A sales incentive program could be instituted for staff and retailers who have set up businesses in Valley View Mall. The types of incentives may range from free luxury holiday getaways and free gifts such as plasma televisions. These incentives should be provided to hardworking retailers who achieve sales success. Consequently, this will attract more businesspeople and encourage the existing retailers to work harder with the aim of receiving different incentives (Campbell, 2006). Retailers would work towards increasing sales and profitability. The other forms of incentives include sales and promotions, whereby existing customers need to be informed about an upcoming sales and promotion venture. This encourages customers to have a first hand experience with various retailers and encourage them to come back along with their friends and relatives. This in turn results to increased market share and profitability.
A recommendable economic incentive that could be included as a condition of approving the proposal is subsidies. Subsidies can only be provided under the condition that BJH Cook or its subcontractors include a given percentage of local residents who are dislocated workers and underemployed in construction and demolition process. Examples of subsidies that could be employed include low-interest loans, grants, environment friendly policies and favorable tax treatment. The use of subsidies could also be beneficial in reducing environmental pollution. There are however several criticisms surrounding the use of subsidies. There is a notion that the use of subsidies implies that the local community or government is covering for the costs that should be incurred by the polluters. Relevant examples of subsidies include tax benefits meant to buy hybrid vehicles and funding waste management programs (Campbell, 2006).
The proposal needed infrastructural alterations such as improving traffic flow. The engineering city department raised concerns regarding implications of increased traffic especially during peak morning and evening hours. It was however noted that money for intersecting the roads with traffic signals that were smart and making the intersection much wide had been set aside. A recommendable way to reduce traffic jamming is through traffic calming. There are several traffic calming devices that can be used for reducing vehicle traffic and promoting the safety of pedestrians (Great Britain: Department for Transport, 2007).
There are some engineering measures that can be used for traffic calming and one of the measures is making the traffic lanes narrow. Narrowing of streets can be achieved by adding parking lanes, extending sidewalks and adding bollards. By narrowing traffic lanes, drivers view slow speeds to be more like normal speeds. The use of speed bumps is the other way that can be used to minimize delay on emergency vehicles (Great Britain: Department for Transport, 2007).
It is also recommendable to implement a surcharge meant to cover the cost of the presence of police at the mall. This is the most appropriate way through which the city could move some of the funds utilized in traffic enforcement to the side of retailers. The other recommendation to achieve this is asking retailers to provide money for constructing a police substation at the construction site.
In conclusion, the above recommendations could be submitted by Skelley to the council or the commissions’ board.
References
Campbell, D. E. (2006). Incentives. Motivation and the economics of information. CambridgeUniversity Press
Great Britain: Department for Transport (2007). Traffic calming. The Stationery Office
Hansen, J. B. (2001). Methods for estimating local authorities spending needs and methods of estimating revenue. Council of Europe.
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