LovelandPolitics
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Commentary by Buddy Meyers, Chairman of Loveland's Planning Commission
November 17, 2014
I read Daryle Klassen’s comments on Sprouts and am in total agreement with his
analysis. I would like to expand on his points from a different but supporting perspective.
When Evergreen presented the re-zoning request to the Loveland Planning
Commission the question was asked by two of the commissioners if “a financial
transaction was dependent on our recommendation?” The response was a definitive
and clear NO! The commission made a recommendation to City Council to approve the
re-zoning.
A few weeks later the City Council was presented an economic development financial
package by city staff that involved Evergreen and the proposed Sprouts site. City staff
stated this “deal” had been in the works for over a year.
This deal is a $2.2 million dollar loan of the citizens’ money in the city coffers that is
managed in trust by the city staff. In addition to the loan the Sprout’s team would
receive a sweetheart deal of 3% interest paid back with the tax revenues already to be
earned by the citizens’ to be paid to ourselves. This was in comparison to the 1% our
money earns today but is actually paid to us by others.
Doing the math on this transaction there are some glaring “fuzzy financial accounting”
techniques being put forward.
First, we are going to be paid back with our own monies earned through tax collections
at Sprouts. I am sure that these dollars are net dollars collected after Sprouts subtracts
the collection fees that any merchant earns for collecting taxes for us. Now this struck
me strange, it is like a bank loaning money to you and then paying it back by taking the
banking charges everyone else pays to pay itself back for you rather than the bank
using it to pay payroll, mow the grass or fix the parking lot at the bank.
Second, the 3% interest earning projection vs. the 1% earnings that are in place today.
Must concerning is that the interest is to be paid by our sales tax revenues being
earned by the citizens’ to pay other responsibilities in the city. Since the interest is not
real, but a simple accounting book entry, there is not real cash earning to be made
here only an accounting book entry. So the net is the citizens’ lose 1% of real dollars
earned today and paid to us today by other. By my math the real lose is 1% minimum
plus we will pay out cash to Sprouts for collection so we have a net cash loss.
Third, I had thought we wanted to use economic development funds to grow high
paying jobs in the Loveland area. I would like to know what the average annual payroll
of a Sprouts location is and how many full time and part time employees are at the site.
Also how many existing jobs at the other grocers in town will be displaced rather lost, as
a result of this new entry. This has to be included in the calculations if it an investment
strategy loan by and for the citizens of Loveland.
Fourth, as Mr. Klassen asked, what is the net increase to tax revenues going to be from
the site? We have to look at net since some of the tax dollars will only be left to right
pocket money from the other grocers collecting the monies for the citizens today. To be
blunt again the city will actually net a cash loss to the sales tax collection pool since
these collected taxes will now be used to pay back a loan and not go directly in the
operating capital of the city. This may stress our budget for the services we require
from our city and current tax collections are in the cash operating budget.
Fifth, if Loveland is such a great market opportunity for Sprouts and for Evergreen why
are they selling off $2.2 million in risk to the citizens of Loveland? They have had to
assess the market here and determined the risk of failure was high enough here that
their return on investment did not meet their guidelines so let’s go ask the citizens to
cover it for us. Our City Council and city staff should be assessing the same type of risk
analysis scenario as stewards for the citizens’ for the financial health of our city.
Sixth, and the last, the failure to be honest with the Planning Commission around a
contingent financial transaction, gives me pause as the integrity and content of the
deal and relationship by the parties with the citizens.
Having been in the role of Chief Financial Officer of a business, in one of my prior lives,
and done very large deals, these six items do not make me feel real good about the
structure of this “deal”! The spirit of the agreement as we called it, just does not feel
real good.
I am excited and encourage new and existing businesses to come into our city and
compete for our business. Some may need assistance or incentives from the city, but
payback should be a portion of cash collected through providing its goods and/or
services not from the tax dollars it is collecting for the citizens.
If these are the economic development stimulation loans the city is doing and related
repayment scheme, all of these “deals” need to be reviewed. Because at some point
down the road, Loans made and their related sales tax dollar payback structures may
significantly affect cash being collected to be used for city operations. We the people
maybe asked for tax or fee increases to cover services “because we have a budgetary
cash deficit” created by bad lending practices.
We need our City Council and city staff to review our economic development and
stimulate strategy, how we make deals and ask the question “why should the citizens of
Loveland be exposed to risky deal management and negotiation methods”; and put a
more reasonable strategy and lending practices in place.
.
.
November 17, 2014
I read Daryle Klassen’s comments on Sprouts and am in total agreement with his
analysis. I would like to expand on his points from a different but supporting perspective.
When Evergreen presented the re-zoning request to the Loveland Planning
Commission the question was asked by two of the commissioners if “a financial
transaction was dependent on our recommendation?” The response was a definitive
and clear NO! The commission made a recommendation to City Council to approve the
re-zoning.
A few weeks later the City Council was presented an economic development financial
package by city staff that involved Evergreen and the proposed Sprouts site. City staff
stated this “deal” had been in the works for over a year.
This deal is a $2.2 million dollar loan of the citizens’ money in the city coffers that is
managed in trust by the city staff. In addition to the loan the Sprout’s team would
receive a sweetheart deal of 3% interest paid back with the tax revenues already to be
earned by the citizens’ to be paid to ourselves. This was in comparison to the 1% our
money earns today but is actually paid to us by others.
Doing the math on this transaction there are some glaring “fuzzy financial accounting”
techniques being put forward.
First, we are going to be paid back with our own monies earned through tax collections
at Sprouts. I am sure that these dollars are net dollars collected after Sprouts subtracts
the collection fees that any merchant earns for collecting taxes for us. Now this struck
me strange, it is like a bank loaning money to you and then paying it back by taking the
banking charges everyone else pays to pay itself back for you rather than the bank
using it to pay payroll, mow the grass or fix the parking lot at the bank.
Second, the 3% interest earning projection vs. the 1% earnings that are in place today.
Must concerning is that the interest is to be paid by our sales tax revenues being
earned by the citizens’ to pay other responsibilities in the city. Since the interest is not
real, but a simple accounting book entry, there is not real cash earning to be made
here only an accounting book entry. So the net is the citizens’ lose 1% of real dollars
earned today and paid to us today by other. By my math the real lose is 1% minimum
plus we will pay out cash to Sprouts for collection so we have a net cash loss.
Third, I had thought we wanted to use economic development funds to grow high
paying jobs in the Loveland area. I would like to know what the average annual payroll
of a Sprouts location is and how many full time and part time employees are at the site.
Also how many existing jobs at the other grocers in town will be displaced rather lost, as
a result of this new entry. This has to be included in the calculations if it an investment
strategy loan by and for the citizens of Loveland.
Fourth, as Mr. Klassen asked, what is the net increase to tax revenues going to be from
the site? We have to look at net since some of the tax dollars will only be left to right
pocket money from the other grocers collecting the monies for the citizens today. To be
blunt again the city will actually net a cash loss to the sales tax collection pool since
these collected taxes will now be used to pay back a loan and not go directly in the
operating capital of the city. This may stress our budget for the services we require
from our city and current tax collections are in the cash operating budget.
Fifth, if Loveland is such a great market opportunity for Sprouts and for Evergreen why
are they selling off $2.2 million in risk to the citizens of Loveland? They have had to
assess the market here and determined the risk of failure was high enough here that
their return on investment did not meet their guidelines so let’s go ask the citizens to
cover it for us. Our City Council and city staff should be assessing the same type of risk
analysis scenario as stewards for the citizens’ for the financial health of our city.
Sixth, and the last, the failure to be honest with the Planning Commission around a
contingent financial transaction, gives me pause as the integrity and content of the
deal and relationship by the parties with the citizens.
Having been in the role of Chief Financial Officer of a business, in one of my prior lives,
and done very large deals, these six items do not make me feel real good about the
structure of this “deal”! The spirit of the agreement as we called it, just does not feel
real good.
I am excited and encourage new and existing businesses to come into our city and
compete for our business. Some may need assistance or incentives from the city, but
payback should be a portion of cash collected through providing its goods and/or
services not from the tax dollars it is collecting for the citizens.
If these are the economic development stimulation loans the city is doing and related
repayment scheme, all of these “deals” need to be reviewed. Because at some point
down the road, Loans made and their related sales tax dollar payback structures may
significantly affect cash being collected to be used for city operations. We the people
maybe asked for tax or fee increases to cover services “because we have a budgetary
cash deficit” created by bad lending practices.
We need our City Council and city staff to review our economic development and
stimulate strategy, how we make deals and ask the question “why should the citizens of
Loveland be exposed to risky deal management and negotiation methods”; and put a
more reasonable strategy and lending practices in place.
.
.
| Chairman of Loveland's Planning Commission Reacts to Sprout's Deal |
| “We are going to guarantee the beJesus out of this thing” Evergreen's representative Tyler Carlson requested a $2.2 million subsidy to develop Sprouts in Loveland. In this video, he explains they are overpaying for the property thus require city funds to make up the difference. |
| Buddy Meyers, Chairman Loveland Planning Commission |