Encumbent Astoria Port Commissioner Breaks Ground On His Own Project On Port Property!
You will See a "Common Sense" overview on the financing of this Project by Rose Priven of "People For Responsible Prosperity" out of Warrenton, Oregon that casts some serious questions as to the integrity of what's going on here.
This was part of an interchange between Taggart and Priven back during the last election run for Port of Astoria Commissioners.
You be the judge
Commercial Development: Will House New Marina Office, Restrooms & Showers
C.A. Taggart Construction recently broke ground on its commercial development near the West Basin. The building will also house new showers and restrooms for boaters, as well as the Port's Harbor Master office. Completion is anticipated by Spring 2006.
1st interghange by Taggart:
Last night at a candidate function, Rose Priven (I assume on behalf of my
opponent Tom Brownson) critisized the lease the port will pay for a new
marina office and restrooms.
Her challenge was at best "a reach" and obviously not well prepared. I'll
also mention it was so far out, I hope she doesn't try to bounce this off of
Her contention was the Port was getting a bad deal on the lease.
Unfortunately, her financial skills were left behind when she did the math.
She contended over a 50 year period of the lease, the Port would pay $1
million some odd dollars. She also did not explain that I am also paying
lease to the port. When you factor in the difference, at the 50 year period,
the effectively pays $567,600. Good deal or bad deal? Well, as a developer,
that gives me about a 2% return. Rose, go find a developer that will jump at
that deal. I'll give you a hint. They don't exist.
Now lets get into the real world of real estate finance. Rose, as someone
who touts finances as an expertise, I'm surprised you would speak about
something you obviously are not familiar with.
First of all, lets compare apples to apples on something all real estate
finance folks and developers are familiar with - Term of loans. We don't
talk in terms of 50 years. Lenders don't go there. At least I haven't found
any that will.
I like examples. Let's suppose the Port decided to build its own building.
For this type of facility, $125/sqft to build is a fair assumption if not
conservative. They are leasing approx. 1850 sqft. The first math we'll do is
how much it would take to build the building. $125 x 1850 = roughly 230,000
(I like round numbers). Next tack on $25k for architect/engineering. Now,
add $100k for site utilities. Total? About $350k.
Now, the port has to borrow the money because the port doesn't have the
cash. $350k for 20 years at 7% interest. Keep in mind the interest rate is
standard because this project doesn't add jobs to qualify for low interest
Monthly payment - $2700
Principal - $350,000
Total interest paid for 20 years - $300,000
Total life cost - $650,000
Ok, still with me? Let's compare the other apple.
Port's lease paid to me - $2304/month
My lease paid to port - $1358/month
Difference - $946/month
Since the effective amount of cost to the port is $946/month, we use that
Based on 20 years, the cost to the Port is roughly $226,800
Let's summarize the 20 year cost so you can clearly understand.
Port builds its own building - $650,000
Port leases space - $226,800
Is the Port truly getting a bad deal here or a good deal?
Rose, you might want to consult your finacial handbook before you answer.
Heck, bounce it off a developer. At least do a little bit of research before
you talk about matters such as this. Conscise preparation is the first step
I don't often read this forum but I guess it is a good thing I did today. I
must have really touched a sore point last night--your anger is palpable. I
was not representing Tom Brownson as you assumed. As a matter of fact, I was
not attacking you in any way. I tried to make it clear that you acted
absolutely legally and correctly in this matter. I made a point of stating
that you had recused yourself from the proceedings. It is really up to the
other commissioners to defend their actions. Afterall, it was their
responsibility to look after the interests of the port.
I do not claim to be any financial whiz kid, but I don't buy into your
Since you prefer to talk about a twenty year period as that would be the
life of a loan, then it is clear that anyone leasing that property at $1358.
per month would pay the port approximately $325,920. over twenty years. That
is the value of the use of the property for that period of time.
Under the lease with you, the port has agreed to pay you roughly $552,960.
over a twenty year period for the lease of part of your building.
I am also willing to accept your figures on the 20 year cost of the port
borrowing money and building the stand alone facility which you stated would
be $650,000. The difference between the cost of renting for twenty years and
the cost of buying (according to your figures) is about $400. more that the
port would have to pay. Obviously, at the end of that period of time, the
port's loan payments would drop to $0. and it would own the building. If it
rented the facility from you, payments would continue for up to thirty more
years. If the port rented part of your building for the full fifty years
possible under the lease agreement, the port would pay to you about
$1,382,4000. That is the value of the lease.
If you lease the land for the full fifty years possible at $1358. per month,
you will have paid the port $814,800. That is the value of the use of the
One cannot simply say that one payment offsets the other because there is
the value of the use of the property to consider.
As I said last night, nothing is ever simple and there are nuances to
consider such as property tax, maximizing the value of the property,
available space and its configuration, etc. Nonetheless, to make my point,
let's look at a hypothetical situation.
Suppose a company leased a piece of property for $1358. per month over a 30
year time period with two 10 year extensions. Potentially, they would pay
the port about $814,800 over a fifty year period. If the port built a stand
alone restroom/office facility, it would cost $650,000. for the first 20
years then the payments would drop to $0. If the port wanted to dedicate the
lease income from that first piece of property for the building of a stand
alone facility for the first twenty years, its out of pocket expenses would
be $400. per month as opposed to $944.95 under the existing leases.
Under the current leases, the port will be paying $732,400. more than it
would cost to build their own facility. The only way the current deal can
seem to be advantageous to the port is if you fail to take into account the
value of the use of the land.
The bottom line of this deal, it seems to me, is that the Taggart company
gets to use the property for free and the port gets to rent the
restrooms/office for more than twice the money that it would take to build
its own. I can see that this is a good deal for you and your company but I
just don't see how it is a good deal over the long run for the port.
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