Bubble Gum Petroleum Inc. is a petrochemical company located in Galveston County, Texas. The company recently secured a project which requires installing pipelines through one of the mid-west states. The new pipelines planned to go through one of the economically stressed cities in the state. Billy Bob Sticky Fingers is the newly elected Mayor of this city and is asking the ISEN 210 students to advise him on the current situation.

In this City, about 1/3 of residents (1,200 families) are unemployed and lost their jobs due to closing some manufacturing facilities in town. Bubble Gum Petroleum, Inc. plans to create 400 new positions from operating the heavy earthmoving machinery to small heath care and childcare centers, bringing over $25,000,000 income annually to this City for the next 15 years. Furthermore, the upfront investment for renovating the existing facilities and the new buildings is estimated to be $50,000,000. 

The City will collect 5,000,000 property taxes annually from Bubble Gum Petroleum Inc. and the homeowners collectively over the next 15 years, and also the payroll tax generates additional annual revenue of $6,000,000 for the next 15 years (project life is estimated to be 15 years) 

The pipeline is expected to go under a river which runs through the City. This river provides drinking water for residents and ranchers (cattle owners) after proper processing and purification and also generates required water for agricultural needs, including corn crops. If the pipes leak during the first 15 years, Bubble Gum Petroleum Inc. pays for the repair and replaces the damaged systems. Bubble Gum Petroleum Inc also agrees to test the water weekly to ensure it is free of any contamination during their 15 years contracts. However, the county's civil engineers estimated the average life of pipes is about 15 years, and after that, the annual repair and maintenance will cost the City about $1,500,000. If the pipe leaks and the river get polluted, the polluted water can cause a server health hazard, leading to hospitalization or even loss of lives. It is estimated that the cost of hospitalization and medical attention can annually cost the City about $1,000,000 for the first year, and this cost annually increased by $500,000 for the life of the project. Bubble Gum Petroleum agrees to contribute $500,000 annually toward healthcare during the life of this project. 

1) If the interest rate is estimated to stay about 5% per year compounded annually, would you recommend this project to Mayor Billy Bob Sticky Fingers 

2) If City Hall approves the project, Bubble Gum Petroleum Inc. will build an 8,000 sq. ft. Mansion for the Mayor and allocate $75,000 every three years to purchase a vehicle. a. Would you see any ethical issues here, and should Mayor accept this offer? Why or why not (5 points)? Is there any conflict of interest? 

3) This project as described can vitalize this City economically where otherwise, unemployment could rise to 50% over the next few years. Based on the number you are calculating under Part (1), what would you be the economic and societal impacts of this project? (a detailed discussion is required, 

4) As a consultant to this City, what type of terms and conditions would you recommend to be included in this contract to ensure your proposed solutions meet the health, safety, and welfare of the residents?

Answer rating: 100% (QA)

ANSWERS 1 If the interest rate is estimated to stay about 5 per year compounded annually we recommen... View the full answer