How much can your municipality save with the MCC Model?
The following is a hypothetical model where a city is considering a new $100 million development with MCC. In the current owner-occupied space, we estimate that they pay at least $3 million per year in operating expenses.
The Projected Results:
- Occupancy cost savings:
$1.24 million per year
- $9.13 million lease payment each year; compared to: $10.37 million GO debt payment if your city financed the construction of an equally sized building
There is also likely to be significant additional fiscal benefit in the form of a “density effect,” which is not captured in this model. With this redevelopment, property values in the surrounding neighborhood would increase—generating an estimated $6 million in net new tax revenue over just 5-8 years.
If only one new 400,000 square foot office building were built nearby, the city’s office lease would “pay for itself” in only three years based on the incremental tax revenue generated from the new development. There would be further incremental tax revenue associated with new apartments, restaurants, entertainment districts, housing, and more.
By switching to a “Consolidate and Lease” model:
- Municipalities no longer run the risk of:
- cost overruns
- time delays
- changes in administration
These can all be significant risks that jeopardize a construction project.