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Astrodome To Be Turned Into A Movie Studio


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Before the topic shifts from the focus of my question, does anybody know the answer? Sorry to be so pushy!

I have no idea. But I would assume that option 3 is the same as option C.

Edited by mfastx
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An unbiased recap will demonstrate how a quick 'back of the envelope' calculation gradually became more complex as new assumptions were added, challenged, tested to their extremes, justified, and challenged again.

Your summary of "my plan" is disingenuous. I do not call for preserving the Astrodome until Year 44 and then tearing it down. That's just one scenario that I evaluated to try and demonstrate the properties of a present value analysis, since the numbers for that year made the conceptualization of present value easier to digest. And I honestly don't think that finding private money to do something with it will be the least bit difficult in such a large span of time.

Your re-interpretation of my analysis confuses an example of the wrong way of calculating present value for the right way. Present value is not equal to the sum of all payments made in 2010 Dollars throughout the life of a project. That is not a shortcut. Your big bolded statement is unsupportable and false.

The explanation that followed your big bolded statement is revealing in the sense that 1) you have either understood present value the entire time and have merely been wasting our time instead of trying to put the issue to bed right off the bat, or 2) that you either learned something from the master B):P or took my advice and researched the issue. The problem with it is that your conclusion that inflation nullifies the discount rate is that it is not supported by long-term historical investment data. Additionally, TIPS bonds (which are U.S. Treasury-backed securities with a principal amount that automatically adjusts with inflation) can and are able to be auctioned at positive interest rates.

Your shortcut theory only works if people, investors, and nations are willing to forgo a unit of consumption today for the very same unit of consumption in some number of years. But at that point we're talking about hording, not investment. And even if that's what is going on in the global capital markets right now, it is not a reasonable expectation that this will be a decades-long phenomenon. Do you disagree with this criticism, and if so, why?

The 45-year present value analysis that I presented earlier revealed that if there is even a 0.1% positive difference between the nominal discount rate and the average annual inflation rate, Plan A (under your $2 million annual cost assumption and our mutually agreed-upon assumption that the aesthetic benefits of the extant Astrodome are at least as much as the proposed plaza) cannot possibly be the financially optimal choice. And even then, I think that 45 years is an excessively conservative assumption for how long it might take for private capital to be able to do something with the structure. Do you disagree with anything I've said in this paragraph?

Yes, I disagree with quite a lot of it, but more importantly, I've actually calculated the numbers, using your preferred numbers and assumptions.

1) My summary of your plan is not disingenuous. It is your plan to continue maintaining for X years followed by the magical appearance of a fully private scheme for the dome that is disingenuous. Given that we've been looking for a private sector plan with private sector money for 10 years without success or anything close to success, I think we can pretty safely say that the chances of a fully-privately funded plan for the Dome is not going to happen. Not with a sufficient degree of likelihood to bother calculating. Therefore, for planning purposes, the necessary, not disingenuous, end-game of theNiche Plan is demolition, or as I said in earlier posts, maintaining in perpetuity.

2) I have indeed understood present value all along and have demonstrated as much. It is you who thought that the present value of 88 Million 2055 dollars was even a relevant number. Further, I acknowledged that there will be some difference between the inflation factor and the discount rate, but as I stated, I would not expect it to be a large difference. The existence of the difference is why I called it a shortcut. Calculations follow showing various differences between the inflation rate and the discount rate. None of them, from a .1% difference to a full 2 percentage point difference show a result in which theNiche Plan is financially preferred to Plan A (immediate demolition).

3) The 45 year present value analysis you presented earlier was fundamentally incorrect, as I have repeatedly demonstrated. Nobody cares what the Present Value is of 88 Million 2055 dollars. It could not possibly be less relevant to this discussion. Putting that aside, let's take a look at your statement that even a .1% difference between the discount rate and the expected inflation rate. Earlier you told us a discount rate in the low 3's would be most appropriate. I do not disagree with that (HOORAY for agreement!) So let's use a 3% discount rate and, then a 2.9% inflation rate. Let the calculation begin:

$88 Million in current cost adjusted for the expected annual inflation rate of 2.9% will be approximately 309,570,000 in 2054 dollars. Then we apply the 3% discount rate to that to come up with the 2010 present value = approximately $84,318,000. That is the Present Value of the 2054 cost of demolition. Note my shortcut answer of "close to $88 Million" is several orders of magnitude closer than your calculation of $9.3 Million. Further note that, when added to the 44 year cost of maintaining the Dome, Plan A is financially far better than theNiche Plan. So your statement that even a .1% positive difference effectively makes your plan financially superior to Plan A is clearly and demonstrably (and in fact demonstrated to be) false.

Let's try it with a larger difference between the discount rate and the inflation rate. Let's try a 3% discount rate and a full percentage point lower inflation rate (rather than the .1% we tried above) for a 2% inflation rate. The 2054 cost of demolition will be approximately $210,325,000. Applying the 3% discount rate gives us a 2010 present value of approximately $57,286,507.05. Then we have to add the cost of 44 years of maintenance: $2 Million per year, inflation adjusted for 44 years, discounted back to present value with theNiche's preferred discount rate of 3%: almost $70 Million. Total 2010 present value cost of Plan A: $88 Million. Total 2010 Present Value cost of theNiche Plan: approximately $127 Million. If my calculations are incorrect, I am open to correction.

Let's try an even bigger investment premium over the inflation rate: 4% discount rate and a 2% inflation rate. That would give us a 2055 cost of demolition of $210,325,000 and a 2010 present value of $37,447,598.21. The present value of 44 years of maintenance using these numbers: $58,131,000. Total present value of theNiche Plan: approximately $95.5 Million. Present value of Plan A: $88 Million.

How about a 3% discount with a 1% inflation rate: The 1% inflation rate will lead to a 2054 cost of $136,340,000. Applying the 3% discount rate gives us a 2010 PV of: $37,135,000. The present value of 44 years of maintenance using 1% inflation and a 3% discount rate: $56,744,000. Total 2010 PV cost of theNiche Plan: $93,879,000. Total 2010 PV cost of Plan A: $88 Million.

Where have I gone wrong with these calculations?

Edited by Houston19514
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Before the topic shifts from the focus of my question, does anybody know the answer? Sorry to be so pushy!

Actually, I think there is the possibility of incorporating the movie studio into either Option 2 or 3 (and the Reliant Park website refers to them by numbers, not letters.

EDIT: The master plan seems to only mention the movie studio in connection with Option 3. (I thought I had read somewhere that it could be part of either Option 2 or 3.)

So to be safe, just vote for Option 3. That's the coolest option anyway, if we can find a way to pay for it...

Edited by Houston19514
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Upkeep is expensive. Just running the AC all the time is expensive. But here in H-town if you don't run the AC then your just inviting mold and a bigger problem.

By the way, someone wrote in the Chronicle last Sunday the best use for the dome: pick it up and set it down on the big oil leak in the Gulf.  Kill 2 birds with one stone. 

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  • 6 months later...

per bidclerk.com

est. start date: Nov 2011

status: conceptual (downgraded? from Design, per bidclerk)

Description: Site work, renovation and new construction for a mixed-use development in Houston. Preliminary design plans call for the renovation of an existing sports and convention center complex. Construction will include a 1,000-room hotel, convention facili...

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  • The title was changed to Astrodome To Be Turned Into A Movie Studio

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