·Verizon Online DSL
reply to marigolds
Re: deploy & don't look back! Actually, you've got it backwards. The $1000 spent now could have been invested and grown to $1000+ later. The $1000 would only become worth less if you sat on it, which isn't the case because it's being borrowed.
Also, I draw the line at having taxes paying for muni broadband. Others may disagree with me on this, but I would actually vote against a muni broadband operation that was tax-financed rather than bond-financed. The infrastructure should be self-sustaining and not require a tax bailout. Nobody should be able to do predatory pricing, cross-subsidizing two completely different industries, not even a municipal government.
Let's say the bonds are ten-year at 6%. A little short and a little high for interest, but that gives us a required $12.22 per month debt payment to pay for a $1100 fiber installation. More numbers forthcoming.
marigoldsGainfully employed, finallyPremium,MVM
Saint Louis, MO
said by iansltx:City reserve funds have to be held in liquid accounts that rarely get over 1% interest. So, holding assets for investment is generally a loser. Better off reducing taxes if you go that route (and reducing taxes is not an option here since these are revenue backed bonds).
Actually, you've got it backwards. The $1000 spent now could have been invested and grown to $1000+ later. The $1000 would only become worth less if you sat on it, which isn't the case because it's being borrowed.
Let's say the bonds are ten-year at 6%.
Most likely these are revenue back Build America bonds. That means 20-, 25-, or 30-year bonds (depends on the average deployment life of the equipment purchased) with a 35% coupon subsidy from the federal government. That gives them an effect rate in the 4.5% to 4.8% range for most utilities (depending on the bond rating).
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I believe fiber infrastructure is amortized at 20 years, though I need to dig up my economics textbook to double-check that. So my 4.8% loan amount is pretty close to dead on for the bond payments they'd have to pay out each month.