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Financing capital projects


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a power point prepared by Mr. Redmond

Published in: Economy & Finance, Business
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Financing capital projects

  1. 1. Financing Capital Projects Presented by: John D. Redmond
  2. 2. Financing Alternatives <ul><li>State or Federal Government Appropriation </li></ul><ul><li>Grants </li></ul><ul><li>Operating surplus </li></ul><ul><li>SPLOST </li></ul><ul><li>Increase tax rate </li></ul><ul><li>General obligation debt </li></ul><ul><li>Revenue bonds </li></ul>
  3. 3. Financing Alternatives (Con’t) <ul><li>Bonds issued by an external source, i.e., a Development Authority or a Special Financing Authority </li></ul><ul><li>Public or private donations </li></ul>
  4. 4. Capital Project Example <ul><li>Parking Facility </li></ul><ul><ul><li>Multi-level </li></ul></ul><ul><ul><li>300 parking spaces </li></ul></ul>
  5. 5. Parking Facility <ul><li>Estimated cost of facility and land is $6,000,000 </li></ul><ul><li>300 parking spaces </li></ul><ul><li>62% average occupancy assumption </li></ul><ul><ul><li>4 months @ 100% </li></ul></ul><ul><ul><li>2 months @ 75% </li></ul></ul><ul><ul><li>2 months @ 50% </li></ul></ul><ul><ul><li>4 months @ 25% </li></ul></ul>
  6. 6. Parking Space-Days <ul><li>300 spaces x 120 days x 100% = 36,000 </li></ul><ul><li>300 spaces x 60 days x 75% = 13,500 </li></ul><ul><li>300 spaces x 60 days x 50% = 9,000 </li></ul><ul><li>300 spaces x 120 days x 25% = 9,000 </li></ul><ul><li>Total = 67,500 </li></ul>
  7. 7. Financing Assumption <ul><li>Project to be financed with a 20-year revenue bond @ 5% per annum </li></ul><ul><li>Annual debt service = $480,000 </li></ul><ul><li>Annual occupancy = 67,500 space-days </li></ul><ul><li>Average Daily Revenue per space-day to service debt =$7.12, or $1/space/hour </li></ul><ul><li>67,500 x $7.12 = $480,600 </li></ul>
  8. 8. Alternate Scenario <ul><li>Same 300 space parking facility and land at cost of $6,000,000 </li></ul><ul><li>Add one additional level to facility and build 6 luxury condos on the top level at an additional cost of $3,000,000 </li></ul><ul><li>Sell 6 condos for $1,500,000 each, for total sales of $9,000,000 </li></ul><ul><li>Realize additional annual parking revenue of $480,000 less cost of maintenance </li></ul>
  9. 9. Alternate scenario financing <ul><li>$9,000,000 construction loan (short-term) to be repaid upon sale of condos </li></ul><ul><li>Could be financed with General Obligation Debt or temporary financing arranged by a Development Authority (best option if GO Debt would take City over its Legal Debt Margin) </li></ul><ul><li>GEFA Loan is another possible financing source </li></ul>