Saturday, June 30, 2012

Re: Friday's council meeting

Lynn Thompson,
Both Mr. Licata and Mr. Burgess introduced themselves to me immediately after the meeting. We had a very brief discussion about I-91 and the presentation.
The impression I got from them and the impression you reported are not the same.
They still have some questions, and would like further clarification, true.
Mr. Burgess'; issue with I-91 was that it was poorly written legislation (he also mentioned this during the committee meeting). I reminded him that initiatives are only good for two years and "we do a particularly poor job of going back and revising ordinances into better laws".
If the council wanted the law to say something else then they could have re-written it years ago, or gotten rid of it (as councilmember McIver suggested on 1/27/2009, when the council exempted the Storm lease from I-91).

Ironically, I-91 set a rate of return below a fair rate. Chris Hansen's proposal returns a bond market rate (because bonds actually are being repaid).
The fact of the matter is, even when Mr. Burgess imagined the city investing $200 million in actual cash it didn't have the response and answer was that the proposal still satisfied I-91. That answer was discussed during the meeting.

When councilmember Clark said, oh great, we have another arena, the response to that was that we would own real property with a value so great that in 30 years we could crush the out of date arena, sell the property, and make a good profit on property the city paid zero cash for.

You reported a few of the open questions but not nessisarily the corrisponding closing answers.

As a side note:
What didn't help anybody, and certainty not your or the council's fault, was the presentation from the mayor's Finance folks. At no point would I present a proposal to my business partners at the big airplane company I work for with so little hard data. They didn't even bother including I-91 legislation in their materials, you know, the subject of the meeting. Sally Clark should not have to turn to council staff and ask for a different set of charts to explain the summary statements of summary statements the mayor's office called a presentation.
A presentation should stand on its own, without further explanation. It's not a surprise that the council needs more information after that presentation.

Have a great day,
Mike Baker

Sent from my iPhone
Visit me here:
http://ManyWordsForRain.blogspot.com

On Jun 30, 2012, at 10:35 AM, "Lynn Thompson" <lthompson@ > wrote:

> I was there throughout but did follow up questioning afterward. Most of the council members did not agree wIth Hall Walker's analysis or at least had unanswered questions.
>
> Sent from my iPhone
>
> On Jun 30, 2012, at 9:59 AM, "Mr Baker" <communicate.with.mike@gmail.com> wrote:
>
>> Ms. Thompson,
>> Many of the quotes used in your story came from the council in the scenarios they were giving Finance during the meeting.
>> Some of those questions and scenarios were asked before they had gotten through all of the information.
>> All of those questions and scenarios were answered. I was there at the meeting. Based on how you reported this, I'm not sure that you were actually there, but skimmed through the SeattleChannel video.
>> Either way, it's incomplete reporting, making the impression readers have inaccurate.
>>
>> Please see the summary:
>> It complies with I-91.
>> It complies with the spirit of I-91.
>> http://clerk.seattle.gov/~public/meetingrecords/2012/gpnf20120629_1a.pdf
>>
>> Could the city make a better investment with $200 million dollars?
>> The $200 million dollars doesn't exist without the tax revenue, the city doesn't have $200 million in cash to invest in something else.
>> As it is, the $200 million dollars borrowed does return a market rate, a rate higher than a 30 Year Treasury Bond.
>> Maybe you should re-watch the video, look at the chart on page 10, and summary on page 13.
>>
>> Have a great day,
>> Mike Baker
>> Seattle, WA
>>
>> Sent from my iPhone
>> Visit me here:
>> http://ManyWordsForRain.blogspot.com

2 comments:

Peter said...

Was the quote from burgess about real estate expecting a 5-6 percent return part of the hearing too, or was it from elsewhere? What about Licata and Clark quotes?

Mr Baker said...

He can correct me if I'm wrong, but Tim Burgess was using $200 million dollars cash we didn't actually have to understand if we were getting a return greater than a Treasury Bill. The answer was yes, the proposal provides a better return.
He then asked if we invested that pretend $200 million dollars in something else would we get a fair market return. The answer, again, was yes, because the $200 million we are borrowing is paid back with interest at the Bond Market rate (because we really are paying off bonds at market rate).
Also, part of the money used to pay off the bonds on the property and the portion of the arena the city will own comes from rent paid on the property.

Then the question was: do we want to own an another arena. The answer was that it didn't matter, because in 30 or 50 years we could dismantle the arena, sell the property, and make money from something the city paid zero cash out to get.

I think council staff will clear this up at Thursday's meeting.

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