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Mitedu 1040 project management spring 2009 for

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Unformatted text preview: these materials or our Terms of Use, visit: http://ocw.mit.edu/terms. 1.040/1.401 1.040/1.401 Project Management Spring 2009 Construction Finance Fred Moavenzadeh James Mason Crafts Professor Massachusetts Institute of Technology Institute (Edited by Kyle Frazier) Frazier) Capital Capital Generation Generation Distribution Distribution Recovery Recovery Current Approach Current Available budget drives policy Available This “supply constrained system” has created This Large Work Backlog Large No Evaluation Benefits No Budgets that do not respond to need Budgets Current Financing Mechanisms for Construction Projects Construction General Tax Revenues, Property Assessments General Dedicated Tax Revenues (Trust Funds, Enterprise Accounts) Dedicated Equity Investment Equity Debt Financing (Bonds, Notes, Other I.O.U.’s) Debt Tolls, Usage Fees Tolls, Traditional Sources of Project Finance in Developing Countries Developing 1. Development Assistance (AID) Multilateral OECD OPEC EU, NAFTA, Mercusor Bilateral 2. Development Banks World Bank European Investment Bank Asian Development Bank Etc. 3. Direct Foreign Investment MNC’s 4. International Capital Markets Commercial Banks Syndications Current Trends Current Turnkey Projects Turnkey Design-Construction Design Project Finance Integration Project Export Credits Export Materials and Equipment Materials Feasibility Studies Feasibility Project Finance Project Consumer Credits Consumer User Finance User Counter Trade (Barter) Counter Counter purchase (Buy Local Counter Products) Compensation Agreement Compensation (Cash and Goods) Buy-Back Transaction (Buy Buy Back Project Products) Project Equity Position Equity Build and Operate Build Joint Ventures Joint Economic Risks Economic New Financing Mechanisms and Ideas New Sale/Leaseback Arrangements Sale/Leaseback Linkage Payments, Development Linkage or impact fees New types of trust funds for public New construction (E.G., Public Assets Preservation Trust Fund) Infrastructure banks or revolving Infrastructure fund accounts Innovative Packaging of financing Innovative with design/construction services (e.g. B.O.T.) Broadening of scope for activities Broadening by public works authorities (e.g. involvement of transit agencies in real estate development; commercial development of air rights) Re-assertion of the private sector Re role in infrastructure construction and operation International Capital Markets International Risks for international lending institutions Risks World debt/creditworthiness World Country/Political Risks Country/Political Riskiness of Construction business Riskiness Developer if default (equity element) Developer Co-Financing Co With development banks With Commercial banks: short maturities Commercial Development banks: long maturities Development Lower Risks? Lower Risks? Syndications Syndications Risk Distribution Risk Areas of Comparative Advantages in International Competition International Finance Finance Export Credits and Insurance Export Financing facilities Financing USA: Eximbank, USAID USA: Insurance Facilities Insurance USA: Foreign Credit USA: Insurance Association Insurance Private Export Funding Private Corporation Overseas Private Overseas Investment Corporation Comparison of Country Comparison Systems Terms of credit extended Terms Volume of activities covered Volume Variety of instruments Variety available Government Government policies/constraints Mix of services Mix International Agreements International Areas of Comparative Advantages in Areas International Competition (2) Taxation Taxation Domestic neutrality Domestic Foreign neutrality Foreign Mixed policies Mixed Corporate income Corporate Personal income Personal Accounting methods Accounting Tax treaties Tax Private Industries’ Stats/Support Private Banking industry Banking Engineering/management Engineering/management capabilities Building materials industries Building Labor Labor Integration/turnkey Integration/turnkey Other Other State-owned companies State Complete government control Complete Indirect Government Indirect involvement Advantages (credit, taxes, Advantages financial constraints, information Consortia Consortia Promotion Programs Promotion Laws, Regulations, Government Laws, Requirements Environmental impact Environmental analysis Anti-boycott Anti Corrupt practices Corrupt Political constraints Political New Organizational and Institutional Approaches Approaches New organizational structures adapted to managing, operating, and preserving New existing infrastructure Legal, regulatory initiatives addressing Legal, Problems of liability associated with innovation Problems New approaches to financing and pricing New New organizational structures, relationships, and involvement in New infrastructure. New codes and standards to reflect New New construction technology New Long-term performance, maintenance, and rehabilitation Long Evolving patterns of usage Evolving Greater attention to environmental concerns, safety, protection of workers Greater and public Pricing Philosophy in Public Sector Pricing When iinfrastructure supported by broadly based taxes When nfrastructure Treat very large number of constituents as “investors” Treat Not all constituents are users of facility Not Financing is “pay as you go” Financing As a result As Taxpayers do not perceive immediately the benefits of their taxes Taxpayers Tax funds may be diverted to other purposes Tax No direct correlation between ta...
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