... 70 days till November 3rd ...
Dear neighbors,
Today's update is about the numbers — the cost, GBRA's share, our share, the taxes, and what you can expect them to be.
While these are estimates, we think they are conservative and are likely to continue to go down. We are confident they will not go up. Our construction team is working hard to try to get the actual bids in hand before the election. When we have those, and the final confirmation on the zero percent, we will be very close to the actual figures.
All numbers are “best current estimates” and assume a zero-percent interest rate.
Our contract with GBRA is in essence a mortgage. The tax level will be set to “pay the mortgage.” Under our contract, we will be liable for a fixed annual payment, just as you would if you were to buy a house. That payment will be the result of the actual bid cost of the dam and the interest rate we receive. Our contract tax will be set at the rate to make that payment, less the amount of hydroelectric revenues we receive.
If our properties were appraised at full value, the tax rate to generate our annual contract payment would be less, but the actual dollar amount of tax would be about the same. Because we will use the total valuation to set the rate we need to raise the fixed payment, everyone will still be paying their prorata share, which is based not on the rate, but current property values and the actual debt payment the district will pay annually.
THE NUMBERS
These numbers start with the estimate for construction costs from the engineering plans, which is $35 million. It also includes the armoring, which GBRA is planning to pay once they know the exact cost. From our pre-bid consultations with contractors, we know that $35 million is likely to be a very conservative estimate.
Construction Costs $35 million — likely to be much less
Annual Debt Payment ~ $1.2 million/yr ( 0% interest/30 yrs)
Hydro Revenue $700,000/yr (10-year average)
Total Contract Tax $500,000/yr ($15 million total)
Contract Tax $.17/ $100 valuation — or lower
WCID Operations Tax $.03 /$100 valuation — or lower
Total Tax Rate $.20/$100 valuation — or lower
WHAT IS GBRA'S SHARE?
GBRA has already spent $3 million on the engineering and design of our dam. They are planning to spend some $21 million ($700K for 30 years) to pay for its construction via the hydro revenues, as well as the cost of armoring the dam, which is estimated to be $6-7M.
Before we put in a dime of our money into new taxes, GBRA has already contractually committed $30 million for a $35 million project that could actually cost a good deal less once we see the bids.
GBRA's contribution will be substantial.
BUT WHAT ABOUT MY TAXES?
More than 75% of properties on the lake are valued less than $500,000. The median property value is $281,341 —half are above that, half below.
$100,000 Property Valuation Tax = $ 200/yr $17/mo or less
$200,000 Property Valuation Tax = $ 400/yr $34/mo or less
$300,000 Property Valuation Tax = $ 600/yr $50/mo or less
$400,000 Property Valuation Tax = $ 800/yr $67/mo or less
$500,000 Property Valuation Tax = $1,000/yr $83/mo or less
So those are the numbers as we know them today. We think once the bids come in, the picture will be even better.
Now, please bear with me, as I am going to editorialize a bit from here ...
Financially, this is a great plan for Dunlap’s waterfront owners. From a financial perspective, even if your taxes increase by $1K per year for 30 years because you have a $500K property, it equals what is likely going to be a 150-250K dollar increase in the true market value of your property. That $30K investment is equivalent to a $150-250K increase in net worth today... immediately... not in 30 years.
At the end of 30 years, when the dam is paid for, I won't be here, but my kids and grandkids will, and the market price of lakefront property in this area is likely going to be astronomical.
Among the growing number of owners who have really looked at this part of the plan, outlined in the FAQ, there is strong agreement that the ROI on this deal is a no-brainer. This plan will produce equity and value that we can either recognize now on a financial statement, or in cash if we sell sooner rather than later. If you look long term, it will build on that immediate increase and build more equity year upon year — value that we can leave to our kids and grandkids.
That value is going to be whole a lot lower if we still have a muddy, algae-filled stagnant river like most of us do now.
For most folks, this is likely to be the single highest return financial investment a property owner in the WCID could make right now in these uncertain times. [end editorial]
Questions? Hit reply and send 'em along. Much more coming over the next 70 days!
Sincerely,
Larry Johnson