Review the following case study, then respond to the questions below.

Background: The City of Riverside, a mid-sized municipality, is grappling with a critical infrastructure challenge. Many of its bridges, roads, and public buildings are aging and require extensive repairs and updates. The city council has given the green light to a comprehensive infrastructure renovation project to address this issue. This case study delves into the financial aspects of this capital project.

Scenario: The Infrastructure Renovation Project encompasses the repair and modernization of 10 major bridges, resurfacing 30 miles of roads, and upgrades to five public buildings, including the city hall. The estimated total cost of the project stands at $50 million. Funding for this endeavor comes from a blend of federal grants, state funds, a municipal bond issue, and a portion of the city's general fund.

Questions:

1. 1. Discuss the advantages and disadvantages of using various funding sources, such as grants, bonds, and the general fund, for a capital project of this magnitude. Are there specific considerations for each source that could impact the project differently? If so, what are they?

2. Identify the key capital assets involved in this project. How should these assets be categorized in the city's financial statements, and what

rationale should guide this classification?

3. Deliberate on whether the city should establish a capitalization threshold for individual assets within the project. If the answer is affirmative, what factors do you believe should be considered when determining this threshold?

Answer rating: 100% (QA)

1 Using various funding sources for a capital project like this has both advantages and disadvantages Grants Advantages Grants provide free money that doesnt need to be repaid reducing the financial b... View the full answer