As the late Paul Harvey used to say: "And now, the rest of the story...."
2 things from this article:
1. The people behind this wonderful, city-transforming project haven't even decided on an admission price. SO HOW CAN THEY GIVE ANY FINANCIAL PROJECTIONS?
2. This project, even if the referendum is passed, is still 11 million dollars short? Huh? It sounds to me like someone is waiting in the wings with a rather large donation.
Well, at least it seems well thought out. Exhale.
Here's an interesting post from the comment section of PJStar:
Here we go again!
The powers that be in the fine city of Peoria and the 'Big Yellow' (Caterpillar Tractor Co) want to improve our riverfront. With a new museum and a welcome center for the Tractor Co. A 136 million project! Cat just announced huge assembly layoffs and Management 'pay cuts'. And if you are living on the BIG BLUE PLANET we are in something called a global recession Now the fundamental thinking for this is to dump monies into the economy! Into our Infrastructure (look at Il. roads after this weather and you would say START RIGHT NOW!) I believe this is the way to go in some fashion. But to put into place a project that will cost the taxpayers for years to come is crazy! Backers here want a Museum bailout package to quote the local paper!
How I see it:
This project should break even in less than 2 years with >= 12% ROIC (Return On Invested Capital). That's pretty normal thinking in competitive business today (even inside companies it's a competitive environment to get capital). This proposal doesn't look terribly attractive financially and wouldn't get approved and funded at most companies or from any local or state government.
Even if you accept these estimates as facts, the benefits of $7 Mil to $14 Mil annually to the community with a project cost of $136 Mil means that this opportunity breaks even in 10-19 years and over 40 years it would return between 5.3% and 11.5% on the $136 Mil originally invested.
Cost of Project
$136,000,000
Annual Benefits Rate of Return Break Even on Cash Flow (yrs.)
Low Estimate $7,000,000 5.3% 19
High Estimate $14,000,000 11.5% 10
Consider that:
** public projects more frequently run over budget and take longer than planned and
** the projected benefits, which have a wild margin of error of +/- 33%, are clearly SWAGs.
Also think about the long term implications of using public money to create this block. What's the 'future value' of this investment at year 40? In 40 years will the Journal Star headline read 'Estimate of $150 Mil in tax dollars needed to revitalize the block'? Even if it's not 100% public funded today, do the tax payers of Peoria get stuck footing the bill when the commercial space is vacant? I'm sure the grandkids would like to crawl all over amazing big yellow pieces of equipment; but the price of admission for them is much bigger than the amount on the board at the ticket booth.
I'm not saying that you shouldn't donate more to this project (remember you already gave YOUR MONEY that the politicians donated on your behalf in public funding); but make sure you have a good reason why.
As an alternative, if I had $136 Mil in public and private money to spend on helping the Peoria economy, I'd provide loans to small and medium enterprises to start new businesses and create jobs. And If I was good at it, most of my loans would be repaid with interest and I'd end up in 40 years with more than the $136 Mil that I started with. But who thinks that way and how could you trust a politician to run a $136 Mil low interest commercial loan portfolio.
Hey, after my rant I feel much better. How about you?
With this financial analysis I've done the part I know how to do, I challenge someone with a more current understanding of local politics, to take the next step and answer the question 'who's pushing for this?'. I bet that's a far more interesting question than the proposed ROIC. Following the scientific method I'll propose a hypothesis: The individual(s) and company(ies) who expect to get the lions share of the $7 Mil -$14 Mil annual 'benefits to the community' are the driving force behind this."
The powers that be in the fine city of Peoria and the 'Big Yellow' (Caterpillar Tractor Co) want to improve our riverfront. With a new museum and a welcome center for the Tractor Co. A 136 million project! Cat just announced huge assembly layoffs and Management 'pay cuts'. And if you are living on the BIG BLUE PLANET we are in something called a global recession Now the fundamental thinking for this is to dump monies into the economy! Into our Infrastructure (look at Il. roads after this weather and you would say START RIGHT NOW!) I believe this is the way to go in some fashion. But to put into place a project that will cost the taxpayers for years to come is crazy! Backers here want a Museum bailout package to quote the local paper!
How I see it:
This project should break even in less than 2 years with >= 12% ROIC (Return On Invested Capital). That's pretty normal thinking in competitive business today (even inside companies it's a competitive environment to get capital). This proposal doesn't look terribly attractive financially and wouldn't get approved and funded at most companies or from any local or state government.
Even if you accept these estimates as facts, the benefits of $7 Mil to $14 Mil annually to the community with a project cost of $136 Mil means that this opportunity breaks even in 10-19 years and over 40 years it would return between 5.3% and 11.5% on the $136 Mil originally invested.
Cost of Project
$136,000,000
Annual Benefits Rate of Return Break Even on Cash Flow (yrs.)
Low Estimate $7,000,000 5.3% 19
High Estimate $14,000,000 11.5% 10
Consider that:
** public projects more frequently run over budget and take longer than planned and
** the projected benefits, which have a wild margin of error of +/- 33%, are clearly SWAGs.
Also think about the long term implications of using public money to create this block. What's the 'future value' of this investment at year 40? In 40 years will the Journal Star headline read 'Estimate of $150 Mil in tax dollars needed to revitalize the block'? Even if it's not 100% public funded today, do the tax payers of Peoria get stuck footing the bill when the commercial space is vacant? I'm sure the grandkids would like to crawl all over amazing big yellow pieces of equipment; but the price of admission for them is much bigger than the amount on the board at the ticket booth.
I'm not saying that you shouldn't donate more to this project (remember you already gave YOUR MONEY that the politicians donated on your behalf in public funding); but make sure you have a good reason why.
As an alternative, if I had $136 Mil in public and private money to spend on helping the Peoria economy, I'd provide loans to small and medium enterprises to start new businesses and create jobs. And If I was good at it, most of my loans would be repaid with interest and I'd end up in 40 years with more than the $136 Mil that I started with. But who thinks that way and how could you trust a politician to run a $136 Mil low interest commercial loan portfolio.
Hey, after my rant I feel much better. How about you?
With this financial analysis I've done the part I know how to do, I challenge someone with a more current understanding of local politics, to take the next step and answer the question 'who's pushing for this?'. I bet that's a far more interesting question than the proposed ROIC. Following the scientific method I'll propose a hypothesis: The individual(s) and company(ies) who expect to get the lions share of the $7 Mil -$14 Mil annual 'benefits to the community' are the driving force behind this."
Thanks to Karrie Alms for all her time and labor.
Gonna be a big IMAX screen!! It's gonna be neat!!
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