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.