http://almanacnews.com/print/story/print/2011/05/25/letter-sunk-costs-rule-applies-to-downtown-plan


Almanac

Viewpoint - May 25, 2011

Letter: 'Sunk costs' rule applies to downtown plan

In your editorial of May 11, regarding the unfavorable EIR on the downtown plan, you expressed much dismay about the $1 million fee paid to consultants that could be "wasted" and about the setback that would occur if the development plan is scuttled along with the $1 million "invested."

In any college business school program, one of the basic concepts taught is "sunk costs." These are preliminary costs incurred for a project prior to the point at which a decision must be made to proceed or not proceed. At that point, all such sunk costs are irrelevant to a decision as to whether the project should be a "go " or a "no go." The only relevant decisions factors are the future projected costs and the future projected benefits of the project.

While it is regrettable that $1 million was spent, it should not be taken into consideration in any analysis on what to do now. Be on the lookout for dubious positions that only serve as a way for officials to "save face" or to project some form of "skin in the game."

James R. Brenzel, Garland Drive (The author is a Menlo Park business owner)

Comments

Posted by Hank Lawrence, a resident of Menlo Park: Sharon Heights
on May 24, 2011 at 11:05 am

Mr. Brenzei is spot on. We need more people running for City Council who own their own businesses, are accountable to the bottom line, and know how to make painful cuts in order for the business to survive.

For too long we have had council members schooled in the Slocum thought who feel that Menlo Park has a bottomless pit of money or make decisions that resonate with their leftist philosophies, or curry favor with special interest groups such as employee unions who, in turn, for disgorement of city funds to their causes will, contribute handsomely to their future political campaigns.


Posted by Michael G. Stogner, a resident of another community
on May 24, 2011 at 11:12 am

James R. Brenzel......Right On