ARG-141

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.


According to the memo, the mayor of Brindleburg (B) recommends that by building a golf course and resort hotel similar to those of Seaside Vista (SV) will help generate additional tax revenue that the city can use to fund much-needed public improvements. This conclusion is due to the fact that two years ago SV opened a new golf course and resort hotel, and as a result, the number of tourists in SV increased by 20%. At the same time, the number of bank loan applications in SV has increased significantly and the tax revenue has also increased, which has given SV more money to improve its roads and bridges. Although the author’s conclusion has some merit, some questions still need to be answered to better evaluate the author’s conclusion.


The first series of questions to be answered concerns the relationship between the construction of golf courses and hotels and the rise in the number of tourists. This is because just because two things happen at the same time does not mean that there will be a causal relationship. It is very likely that SV's construction of the golf course and resort hotel was accompanied by other local policies that really led to the rise in visitors, such as environmental improvements, increased government promotion of local tourist attractions, lower local prices, etc. If this were the case, then the authors would have concluded that the construction of the golf course and the resort hotel really led to the rise in visitors. If this were true, then the author's conclusion would be challenged. However, if nothing happened locally in SV that could stimulate tourism other than the construction of golf courses and resorts, then the author's conclusion would be strengthened.


Second, even if the construction of the golf course and resort hotels was the cause of the rise in tourists, we do not know exactly what role this played in the local economy. Although the author mentions that there has been a sharp increase in bank loan applications received by SV's banks this year, can the increase in loan applications really be an indication that the local economy, especially tourism, has grown? It is quite possible that it happened to be because of the recession in the local economic level, which caused everyone's cash flow to be tight and thus the need to apply for more loans to stay in business. If that is the case, the author's conclusion is challenged. Secondly, I would also need to know if the rise in local taxes had anything to do with the construction of golf as well as resort hotels. If it is the case that the rise in taxes is simply because the local government has increased the tax rate or increased the number of tax titles, then this has had a negative effect on the long-term development of the local economy. If this is the case, the author's conclusion would be weakened.


Third, even if building golf courses and resorts did result in higher taxes, would that money be used to improve SV's roads and bridges? If the answer is no, e.g. there are more local areas in SV where this tax will be needed, such as education, health care, etc., then the author's conclusion is weakened. However, if there are other local areas that already have enough money to operate and the tax would simply be used to build roads and bridges, then the author's conclusion would be strengthened.


Fourth, are B and SV analogous? Even if we acknowledge that tourism in SV is stimulated by new golf courses and resorts, we don't know if the industrial structure of the two cities is the same. If SV's industrial structure is heavily dependent on tourism, and B is an industrial city where tourism itself is underdeveloped and unlikely to grow in the future, then it is futile for B to follow SV's lead in building golf courses or resorts.


Finally, even if B can learn from SV to develop the tourism industry, will it really bring additional tax revenue? It is possible that the people who visit B have a lower level of spending, or that the most attractive feature of B to tourists is its natural beauty, which does not generate much tax revenue. If this were the case, the author's conclusion would still be weakened.


In summary, in order to fully evaluate the author's conclusion, we need to answer the above questions. And the answers to the above questions will serve to strengthen or weaken the conclusion.


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