Quote:
Originally Posted by The Real BigGuy
I don’t get it. The dive pays $100k to build the pier & run utilities, deeds it to the city, and a counselor says $250/month isn’t enough?
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I have a different take. The city owns the waterfront real estate that will serve the dock. If the city were to make this deal with the Dive, the city would only be deriving $1500 per year for the lease of that real estate. Assuming the dock is for the exclusive use of the Dive, during the “10 to 20 year” lease term, the city derives no financial benefit from the $100,000 expenditure by the business owners of the Dive. The $100,000 expense would be a leasehold improvement, for which the Dive alone would recognize a financial return. In fact, the dive “boat”, and the dock itself, are not taxable as real estate. The Dive would get be getting a spectacular deal.
Consider the following as an analogy. Imagine the city takes a parcel of land in the Weirs, and offers that land to a restaurant business, for an annual fee of $1,500 per year. The business has to spend $100,000 on a parking lot for the exclusive use of their patrons, and they then move a modular restaurant, valued at $500,000 (a guesstimate of the cost of the barge/building) onto the site. The restaurant operates on the site for 10 or 20 years, and they subsequently close, and move the modular off the site, at the end of the lease term. The restaurant pays no taxes on the land, the parking lot, or the modular building, which have a total value of $750,000, and which would normally require an approximately $15,000 to $20,000 tax payment to the city. At the end of the lease, the city gets the their land and a 10-20 year old parking lot back, which may or may not be marketable to another user.
Was the above analogy a good deal for the city? Was it a fair deal to competing restaurants, who would have been making a much higher mortgage payment on their land value, and which pay real estate taxes?
If the city wants the dive, they should do the following:
1. Require that the dive pay a fair market rental for the land, that would be based on a reasonable return on the value of an equivalent restaurant land site with water views, in the Weirs.
2. Require that the Dive make a payment in lieu of taxes, that would be equivalent to the amount of taxes that a comparable land based restaurant would pay.
3. Discount #1 and #2, for the net present value of the used dock the city will receive at the end of the lease term. This way, the City is acknowledging some future value of the dock that gets constructed, but which they will eventually control.
If the Dive doesn’t think the above suggested terms are financially viable, I would argue that they are looking for a prime waterfront restaurant site, at a value that is way below market value.
A better alternative would be to build public docks, and rent them out for the night. I’ll bet ya that would generate a lot more income, generate revenue/patrons for all Weirs businesses, and provide a public amenity that is sorely lacking for the boating public. Heck, I’d do that deal with the City in a heartbeat, at $1,500 per year! If nothing else, it would be popular politically, as compared to the Dive, that seems to be a polarizing topic.