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A city imposes an overhead charge on one of its departments to alleviate its fiscal problems. A city's visitors' bureau, which promotes tourism and conventions,

A city imposes an overhead charge on one of its departments to alleviate its fiscal problems.

A city's visitors' bureau, which promotes tourism and conventions, is funded by an 8 percent local hotel occupancy tax (a tax on the cost of a stay in a hotel). Because the visitors' bureau is supported entirely by the occupancy tax, it is accounted for in a restricted fund.

You recently received a call from the director of the visitors' bureau. She complained that the city manager is about to impose an overhead charge of a specified dollar amount on her department. Yet the statute creating the hotel occupancy tax specifies that the revenues can be used only to satisfy direct expenditures incurred to promote tourism and bookings at the city's convention center. The manager says that she understands that the city is having difficulty balancing its budget, but she fails to see how the charge to her department will do much to alleviate the city's fiscal problems.

1. In what way might the charge have a substantive impact on the city's economic condition?

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