Saturday, November 03, 2007

Profit-sharing concept eliminated competition.

When the initial flurry of developers submitted their proposals for the Lynnwood High School site, the one developer that out-paced the other candidates was Cypress Equities. Their proposal included a profit-sharing element that would have resulted in unanticipated funds the District could ear-mark for periodic capital enhancements, like perhaps a round of capital partnerships or a few covered play shelters.

While there was at least one person in the room for the District that knew such a proposal would be difficult to monitor, and likely impossible to enforce, everyone else had their horse picked on the way to the starting gate - it was the only horse in the race.

When a company like Cypress Equities wants to come out on top in a competitive process, they can toss in a profit-sharing concept - but no doubt it is just conceptual. By now, every mortal on earth knows that corporations can run with a negligible margin of profit. After they pay all of their "expenses", dividends and annual bonuses to executives, there will be little or nothing left to share with the District.

Another peculiar element to the agreement is that it is initially pegged to an 8% return on the appraised value of the property. For those of you reading the blog on a regular basis, you know that appraisals are just opinions. I would immediately become concerned as to which party hires the appraiser, particularly since the District likes to use the other party's appraisals when parting with money. Also, if property values dip, the 8% return will fall right along with the appraised value of the site.

The local newspapers have also quoted district administration as saying that there will be periodic adjustments over time but they naturally assume the value of the site will only move upward. Traditionally, that has been the case, but a simple modification to the basic assumptions to valuation can radically alter the final appraisal at any time during the next 99 years. The formula for determining actual value of the site will have to be illuminated, otherwise any reasonably crafty appraiser can show a plummeting valuation in adjusted terms.

Like many others, I will be interested to see what materializes.

Fun Factoid: I have requested a legible copy of the 99-year agreement and will share its contents in future entries - or, you can retrieve a copy from the Public Records Repository once it is provided to the blog.


Anonymous said...

So glad you mentioned Play Sheds/Areas in your article. I worked in an Elementary school for years and brought clothing to the building for kids to change into because they get soaked when at recess in the rain. The high priced "planners" never think of such things when planning buildings, again the "kids come in last". A play shed is such a simple thing to spend tax payer dollars on, yet who would ever consider such a thing?

Anonymous said...

We have the same problem at Terrace Park. The District builds these large, inefficient schools and then lets our kids play in the rain.