Wednesday, April 8, 2009

County & MMPI: The cost and what's next

So if the county commissioners approve their new deal with MMPI for a convention center and Medical Mart next Thursday, what happens next?

The county has to buy the land from the city (and a parcel on St. Clair from a private owner). Meanwhile, the county and MMPI have to nail down more details in further financial agreements. The deal really starts after those two things are done.

The cost: Let's say it takes five months for those next steps. That'd make it an 18-year lease, Sept. 2009 to Sept. 2027. I'm coming up with a total of about $842 million for the county, plus the cost of buying the land, the unknown excess "pre-development costs," and any unabated taxes.

That includes a new $12 million construction manager/developer fee that wasn't in last year's agreement. But the deal keeps shrinking the longer it takes to make it happen, because the Sept. 2027 end date has stayed the same. A 20-year deal, like the one in last year's agreement, would have cost about $923 million.

By the way, you might have heard people say this is a $400 million project. That's the initial cost of construction. The $842 million is the cost of constructing the project and running it, plus the cost of borrowing. The county will float bonds to pay for building the project, and the cost of the debt service payments could reach $36 million a year. (The cost of borrowing greatly increases the final cost of most public projects, just like it increases the cost of buying a house. For instance, 30-year mortgage to buy a $100,000 home right now will cost more than $180,000 to pay back.)

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