The Financial Case Against Chalmers

I wanted to avoid posting further as the posts on Chalmers are making me quite prickly today. But I cannot let financial analysis go unchecked so I have to comment on a few posts from the Judge Report (here and here).
First, the controversy around the $890K figure. The $890K represents a combined rate of taxes of school, city and county. It is not just the city tax rate as the calculation relies upon $57/thousand which suggests a fully assessed value of $15.6 million or approximately $200K per unit assuming 80 units. So to claim the $890K is strictly the tax burden from the city and thereby generate ludicrous assessed values misstates the analysis completely.
Now, I admit that we are looking at projections so we need to discount and future earnings are not today’s earnings; I’ll admit that upfront. Still, the analysis presented above does not address these issues which are more relevant but instead builds upon a faulty set of assumptions that no one is claiming.
Second, the return for Kaufman is ultimately in the sale of the units not in the income stream from the rentals. To view the returns on this project strictly based upon income streams during the time which the property will not be fully assessed and not taxed again misstates the numbers and the true revenue stream. The true return on this project is 5 to 10 years in the future when the properties convert to condos for resale.
If you’re going to pick apart Kaufman’s financial case or the mayor’s, you need sound financial analysis with clear statements of your assumptions and process. I see neither.

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3 Responses

  1. I strictly relied on exactly what Mayot Thane said herself, and what her assumptions were. As I said on The Judge Report, she was asked to clarify this on Sam and Mike last week and clearly stated it was her understanding that the $890,000 was city only, not city-county-school. If she doesn’t know the difference, that is a very, very bad thing.
    Based on your and other peoples objections to using Mayor Thane’s figures, I recalculated and her projections are still completely absurd. It would be helpful if she gave us the assumptions she used to arrive at her figures.
    That she throws figures out and expects everyone to buy them without justifying them is way too typical of her modus operandi.

    • flippinamsterdam says:

      I always understood the figures to be the combined rate. If the figures were presented as city only, then your calculation and criticism would be sound on that point. However, I still take issue with the second portion dealing with the revenues from the rental as covering taxes. I don’t have an issue with challenging the numbers; I’m not suggesting you have to accept any number; I certainly don’t accept numbers on faith either.

  2. Fair enough. I’m using the only figures I am aware of, which are Uri Kaufman’s own projections of rental income. If that income is insufficient to cover even the taxes, assuming 100% occupancy, then the project can’t work. The assessment would need to be a whole lot lower or it can not be viable.

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