Assume that you are the chief procurement officer (CPO) of a major municipality. You have been tasked with overseeing the construction of a new downtown parking structure. The estimated cost of the project is $10, 000,000. It is also estimated that the parking structure will generate approximately $1.100.000 in revenue fees a year. Your final two options are as follows:

Option A: The city can issue a revenue bond worth $10,000,000. Your annual payments to bondholders would be $ 2, 000,000 per year for the next 10 years. All the revenues from the parking structure will come to the city. The main issue with this option is the fact that to issue the revenue bond you nee to call for a local referendum. While it is highly likely that the city constituents will vote "yes", due to the political nature of the undertaking, it might take two years before you actually have access to the funds.

Option B: Enter into a P3 agreement with a private firm - ParkConstruct. This would be a mixed financing option. The city will have to pay $1,000,000 per year for the next 10 years. The rest of the cost will recovered by the private partner from the parking fees, which the firm will retain in its entirety. A very important stipulation of the P3 agreement is such that the city has to guarantee ParkConstruct a minimum of $1.000,000 in fee revenue per year. If the revenue is less than that, the city is obligated to make up the difference. If revenue is higher than that, the city will not be liable for any additional payments, however, the firm will keep all the revenue.

Given the above case, answer the following questions. At least 100 words per question. Thank you.

1. As the CPO, which option will you chose? Why? Please, make sure to show your calculations.

2. What are the main risks under option A? In your analysis, please include the types of risks (operational, financial, political, etc.) you believe are present and how the agency might mitigate them.

3. What are the main risks under option B? In your analysis, please include the types of risks (operational, financial, political, etc.) you believe are present and how the agency might mitigate them.

4. Given your answer to question 1, what changes in the alternative option would it take for you to change your decision? In other words, what would need to change in the option you did not select in order for it to become your new favorite option?

Thank you for your help.