1. You are evaluating two projects for Urban Development Action Grants for a moderate-sized, rural city. One project, an expansion of a local business, will cost a total of $700,000. It will generate (or "leverage") $580,000 of investment from private sources, and will generate full-time, permanent, private-sector employment for 12 low-income workers and 21 middle-income workers. The second project, a downtown redevelopment package, will cost $5,593,600. It will generate $2,065,300 of investment from private sources, and will generate 85 new private-sector jobs for low-income workers and 45 for middle-income workers. For the purpose of the analysis, measure the employment benefits by the wages paid--an average of $15,000 for low-income and $25,000 for the middle-income employees.
2. Suppose, in the prior problem, that your agency had a preference for projects which generate new employment for low-income people (weight=2.O). Suppose, further, that the next priority was leveraging private money (weight=1.5). The third priority is providing general employment (weight=1.0). Now which project is more cost-effective?
3. Suppose two alternatives for the same project have been proposed to the Housing Redevelopment Agency in
5. Suppose you are on the staff of North-South Neighborhood Development Corporation, in the Twin Cities area. You own a property, which costs $32,800 to acquire and clear. Now you want to move a house onto the site. You could acquire a shell and move it to the site for $8,000, and then rehab the whole thing for another $50,000. You could also acquire and move a better house for $17,000, and only spend $35,000 for rehab. Or, finally, you could acquire and move a house for $40,000, with no rehab costs. The city will finance half the rehab costs, charging 0% for 1/3 of the rehab loan and 2% for the remaining 2/3 (the rest of the rehab will have to be financed from conventional sources at 9%). [As a measure of benefits, figure that a comparable house in your neighborhood would sell for $95,000.]
© 1996 A.J.Filipovitch
Revised 11 March 2005