To illustrate the benefits of public-private financing, the CAN DO Economic Development Department has prepared the following case study. Option 1 is conventional financing, while Option 2 includes public financing that results in substantial interest savings.
Project: Construction of a 100,000-square-foot industrial flex building. About 50 jobs will be created to house a manufacturing business. The total project cost of $3,500,000 includes construction, design and administrative costs. The building is being constructed in a KOZ site.
| Option 1 – Conventional Financing | |||||||
| Source | Amount | % | Rate | Term | Monthly Payment | Annual Payment | Cost/ Square Foot |
| Bank | $3,150,000 | 90% | 7.25% | 180 | $28,755.18 | $345,062.17 | $3.45 |
| Equity | $ 350,000 | 10% | |||||
| Total | $3,500,000 | 100% | |||||
| Based on 5-year T-Bill Rate plus 300 bps; interest will change after five years. | |||||||
| Option 2 – Public Financed Project | |||||||
| Source | Amount | % | Rate | Term | Monthly Payment | Annual Payment | Cost/ Square Foot |
| PIDA | $1,400,000 | 40% | 3.25% | 180 | $9,837.36 | $118,048.35 | $1.18 |
| Bank | $1,750,000 | 50% | 7.25% | 180 | $15,975.10 | $191,701.21 | $1.92 |
| Equity | $350,000 | 10% | |||||
| Total | $3,500,000 | $25,812.46 | $309,749.56 |
$3.10
|
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| Cost Savings Through Use of Option 2 – Public Financed Project | |
|
Monthly Cash Flow Savings
|
$2,942.72
|
|
Annual Cash Flow Savings
|
$35,312.61
|
|
Per Square Foot Savings
|
$0.35
|
|
Interest Paid from Conventional Financing (1)
|
$2,025,932.40 |
|
Interest Paid from Public Financing (2)
|
$1,496,242.80 |
|
Total Interest Savings Over Life of Loan
|
$529,689.60 |