Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The residents of the Athens Arts, Parks, and Recreation District suffered from a significant deficiency in swimming opportunities. The Arts, Parks, and Recreation District serves

The residents of the Athens Arts, Parks, and Recreation District suffered from a significant deficiency in swimming opportunities. The Arts, Parks, and Recreation District serves a community of just over 23,800 people in the center of rural southeast Ohio. The original city pool, which opened in 1972, was declared obsolete in 2002 and was expensive to maintain and upgrade (Morris, 2014). The city pool was a lap pool, though not many people actually swam laps in it.

As a result of the aging pools condition, the Arts, Parks, and Recreation (APR) Advisory Board, together with APR Department Director Rich Campitelli, recommended that a tax levy set to expire in 2016 be extended to fund construction of a new pool for the city during the summer of 2014. They also decided that a recreation pool should be constructed. Such a pool would offer a superior recreational experience compared to a traditional six- to eight-lane pool. This pool would be able to compete with newer seasonal recreation pools in the neighboring towns of Nelsonville and Marietta. In Nelsonville, a new swimming pool with slides, diving boards, lap lanes, and a gradual-entry shallow end opened in 2004, and soon thereafter Marietta opened an aquatic center with a lazy river, slides, a splash pad, and an interactive pirate ship (Schaller, 2010).The desire for a recreation pool was also economic. Experience with leisure pools in other parts of the country suggested it was probable that revenues from such a facility would at least equal operational costs and probably exceed them. Thus, instead of losing $40,000 a year (as was currently happening), the new pool would likely produce a surplus.

To determine cost and attendance projections, the Athens Arts, Parks, and Recreation District hired a consulting firm that specialized in recreational pool facilities. Their preliminary feasibility study determined that the total development cost of the pool project would be $6.6 million and that the facility would have a 30-year useful life. The consultants estimated initial annual operation and maintenance costs to be $212,000, rising at 3.2% annually. The uniqueness of the facility led the consultants to project substantial local and regional (50-mile radius) demand, with annual attendance ranging from a conservative estimate of 80,000 to an optimistic 250,000 users each year, of which half would be children. The consultants suggested an admission price of $6 for adults and $4.50 for children, with increases of 25% every ten years. The study implied that the pool would be profitable but did not provide a detailed pro forma analysis.

The Athens City Council agreed that changes to the city pool were needed and placed the issue on the ballot for vote. An extension of the 0.1% ARP income tax in the city of Athens was approved by 68% of voters on November 4, 2014. The current rate for a 30-year general obligation bond was 3.5%.

MTB Inc., a South Carolina-based sport consulting firm, was hired to analyze the capital expenses for the new project to determine if the current pool proposal was feasible from an economic standpoint.

Case Questions 1. Based on the facts presented, does the project make sense? Be sure to calculate NPV, IRR, or MIRR when answering this question. Assume a 30-year useful life for the facility.

2. Based on your analysis in question 1, would you recommend any changes to the proposed venue? Why or why not?

3. Based on your answers in questions 1 and 2, why do you think the city built the pool (which opened in 2018)?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance Theory And Practice

Authors: Anne Marie Ward

3rd Edition

1908199482, 978-1908199485

More Books

Students also viewed these Finance questions

Question

Explain basic guidelines for effective multicultural communication.

Answered: 1 week ago

Question

Identify communication barriers and describe ways to remove them.

Answered: 1 week ago

Question

Explain the communication process.

Answered: 1 week ago