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5/5/2010 7:11:41 AM
 
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Section 5: OPA Board Subject: OC Bayside Debacle Msg# 737705
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Joe, OPA would be FAR better off if the lease was for $75,000 and OPA paid its own taxes. OPA would have more money; the cost to Seacrets would be the same; and the county/state would not be receiving a $10,000 or so gift courtesy of OPA association members every year. This is my opinion only. If you take a snapshot of the last 18 months of downturn you might be correct that if Seacrets paid a lump sum and OPA fought the assessment value that after all costs to get the tax assessment lowered there might be some savings. However, did you look at it going the other way? Over the course of time assessments and the value of property has increased. Therefore, the taxes have increased and Seacrets bears the "risk" of those increases entirely. If the assessed value increases or the tax rate increases it all belongs to them. It is rare - the last 18 months being one of these periods - where assessed values go down. Under your plan, if property assessments went up and/or the tax rate went up we would eat any increase. Over the term of the previous lease we would have seen a reduction in net income as taxes/assessed value went up if we followed your scenario. Further, the lease gives Secrets the right to, at their own sole expense, fight on our behalf any assessment value. Given one of the few things everyone seems to agree on is that Moore is a shrewd businessman, he has the right to fight any assessment increase, at no cost to OPA, and save himself some money. If he does it inures to his benefit in tax savings and ours in a lower assessed value. Over a five year period of a normalized economy, I believe we will see an increase in property values and/or an increase in the tax rate to make up the difference in the lower revenue generated should property values remain depressed. So while there might be a small amount of savings during a downturn, I think the hedge against increased taxes and assessments is prudent and over the past ten years has provided us protection. This was my thinking on this particular issue. Ted
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For reference, the above message is a reply to a message where: Doesn't look like a $75,000 lease to me. Last August the land was appraised for tax purposes at $3,055,200. Tax for 2010/2011 period estimated at $35,000. Thus the new lease has a net value return to OPA of $75,000 in the first year. However, what Marty and others have failed to mention is the property was appraised last year by our consultant (Lipman, Frizzell & Mitchell LLC of Columbia) at $2,000,000. Today it would probably appraise at even less. To my knowledge OPA has not taken steps to seek a reduction in the state's appraised tax basis. This is kinda amazing to me, but one board member told me that since Seacrets pays the taxes it makes no difference! True. The mentality is amazing, but typical. Thus when a board member says OPA is receiving a tax benefit of $35,000 it is extremely misleading, to say the least. The true tax benefit for OPA is closer to $20,000, so the net value overall of the lease to OPA is more in the the neighborhood of $60,000 than $75,000. OPA would be FAR better off if the lease was for $75,000 and OPA paid its own taxes. OPA would have more money; the cost to Seacrets would be the same; and the county/state would not be receiving a $10,000 or so gift courtesy of OPA association members every year. Do you think such analysis came up when all the OPA experts were examining this latest lease? |
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