So, we’ve covered a fair amount, albeit at a high level. Let’s take a post to bring this down to a more practical level. How much will various parts of this cost? Obviously, if the price tag was in the billions like Andhra Pradesh’s new capital city, then this idea would be dead in the water. However, I have put together enough pieces that tell me that costs can be slashed dramatically enough to make my bootstrapped city possible. Keep in mind that there are still plenty of gaps.Let’s take a look:
Buying the land is estimated at around $45,000 for a square mile. Starting size to be determined. The property needs to be secured with both physical impediments to trespassers and labor whose costs have yet to be identified.
The property noeeds to be secured with both physical impediments to trespassers and labor whose costs have yet to be identified.
The hiring of employees, the roles necessary and the speed at which they will be hired is still open. Pay, obviously, is much lower than in the west.
Where to put employees and their families during construction and how much will this cost?
Minimal equipment just to get started is estimated at $500,000 and includes bulldozers, excavators, trucks and tools
This is just to get started with ongoing and increasing cash needs as we expand.One plan I have to raise funds is to issue securities for infrastructure in the city. For example issuing $5M of securities with a 10% coupon (Future post). This would cover the first Janicki Omniprocessor with greywater treatment plus piping and some other infrastructure needs. That would cost $45,000 in interest per month which would result in negative cash flow until there are at least 3,000 households in the city (assuming an average bill of $15 per month). More Ominiprocessor’s will be necessary as the city grows so surplus revenues should be saved to support future securities issuance. Since there is a lead time of six months or more to receive the Omniprocessor plus the securities issuance process, research should begin immediately on how best to raise the funds.
Another idea to raise funds and connect with people is to crowdfund money. Whether it is Kickstarter or Indiegogo or our own website, raising money directly from people is a popular option nowadays. We can offer small perks for small amounts of money and bigger perks for large sums of money such as naming rights for streets, parks or even buildings. Between naming rights, donations and other small contributions, I would target $10M. The price for the individual perks has yet to be determined. Because projects lose upwards of 10% of contribution amount to crowdfund website, it might be smart of us to only list the small perks there and the bigger perks on our own website so we can save that percentage to be put into the city.
You might think, assuming the $5M raised from securities goes straight into infrastructure, that the remaining $10M seems awfully small to build a city. You would be correct! We intend on building a few buildings each month, securitizing those loans into MBS and selling them off our books in exchange for cash. That cash would be reinvested each month in a few additional buildings and the process is repeated. That is how you create a billion dollar city with only $15M.
That of course creates another to do item on our ever-growing list. Finding appropriate buyers for our mortgage-backed securities (MBS).
So, what’s the bottom line? On the liability side we have $5M bond/debt with a monthly $45,000 cash outflow. This is secured by the infrastructure and future cash flows. On the asset side we have $15M less any fees, etc. The $10M is unsecured, but it is the right thing to keep our word, so we shall. We have $15M or so to start the city with.
Next post, I hope to go into a discussion of the pre-phase expenditure side to examine what needs to be done, how much spending might be necessary and how much time it might take.
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Earthen oil lamps to help celebrate Diwali!