HomeMy WebLinkAbout3.F. Facility Pre-build
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CITY OF SHAKOPEE
Memorandum
TO: Mayor and Council
Mark McNeill, City Administrator
FROM: Gregg Voxland, Finance Director
SUBJ: Facility Pre-build
DATE: October 19, 2006
The concept of building a facility in advance of the actual needed date
was raised at a budget discussion. The economic advantage of building
sooner to avoid escalating construction costs may be significant
depending on the cost inflation rate compared to the interest rate.
Example building a $4,000,000 building 3 years in advance:
Cost inflation @ 6% $764,000
Interest cost @ 3.5% (399,000)
Estimated Maintenance $32,000 @ 3% (99,000)
Gain 266,000
Of course the public perception of having a new building sit empty and
generating revenue to pay the debt service in that time would need to
be addressed.
Gregg.Voxland
Finance Director