I wish I felt good about the deal carved out by the City of Harvard to save its hometown Chevrolet Buick GMC dealer. This morning's paper reported that the City of Harvard and the Harvard Economic Development Corporation will cough up $500,000 to keep the doors open and the lights on.
In exchange, the dealership is to "grow its business" and hire some more full-time employees. The City thinks that remodeling and expansion will preserve the $100,000/year it has been collecting in sales taxes. Let's hope so. And the dealership must increase sales by 2% within the first year.
Has word of the recession (some say, the Depression) reached Harvard yet?
If sales go up 2%, then sales tax revenues will go up 2% (in a perfect world). So they make a $500,000 investment and get a $2,000 return?
Or else. Or else, what? Do they think they'll get their money back, if sales decline (or continue to decline)?
It's a 10-year deal. If the business closes or moves out within ten years, Harvard gets its money back, plus interest. (If there is any business value for it to claim against.) But get this: "the amount the dealership would have to repay decreases by $50,000 every year."
What a deal!
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It's GRANT, Gus, not a loan. The city is betting that by spending a total of $500K that over the ten year period they will continue to receive $100K per year in sales taxes or $1 million. If the dealership folds tomorrow, they get what? $0.00? So yeah, it's a risk but the 2% increase is really inconsequential. The additional $2K a year would be nice but... The payback amount decreasing by $50K each year is also understandable with a grant. Each year the doors of the business remain open, the city has earned $50K on their investment, so why not? Remember the word GRANT all they're doing is trying to guarantee that that $100K per year cash cow will remain on its feet, hopefully longer than ten years.
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