The village board on Monday, Feb 4 http://www.youtube.com/PleasantPrairieWI, voted in a combination of new financing and some re-financing for a series of bond issues that result in a new high of over $100 million in debt. Last year, when I was running for Village President the total amount was about $94 million.
Before all the 'the village can do no wrong' minions get in a lather, I will say what I said before. There is good debt and there is bad debt. Surprizingly to most for sure, I will say that most of our debt IS good debt. I define good versus bad as in good is debt that is used to secure an 'investment'. Bad is debt caused by living beyond means. The problem and the reason for writing this is because one can easily become the other.
For example: A family buys a home to live in and in order to do so the family gets a mortgage that by all counts is reasonable based on the family's income -- GOOD DEBT as the home is an investment that 'should' appreciate over time more rapidly than the cost of the mortgage. Over the following years the family decides to 'improve' their home via a home equity loan since 'their home is more valuable now anyway'. So they spend a lot of money for an addition, etc. Now they have a more valuable asset (the home), but they also have much more debt. So far so good as long as the family's income keeps pace, and the economy and local values remain solid. BUT, this entire scenario can easily become BAD if any of the above happen. Income drop could lead to inability to pay for the now bloated debt. Macro economic conditions could also lead to similar disconnects, and likewise national declines in real estate values could also lead to same. Any number of reasons could make that family's game plan financially fail.
My point: The village has debt I believe UNEQUALED in WI for a muni this size. $100MM in debt is about $5500 for every citizen of PP. This would be like Kenosha County being in debt to the tune of $825 million, or the city of Kenosha at $550 million, or the state at $32 BILLION!
IF ALL WORKS OUT, Abbott comes, Recplex gets paid off, etc, I will be the first to congratulate village leadership for the success and vision. $77 million of the $100 are related to TID#2 (Abbott effort) and the Recplex remaining debt. I believe it CAN happen, and I hope it will.
BUT, it is irresponsible not to consider the downside in any case like this. That is what I think the citizens need to be aware of, and possibly should be worried or at least concerned about. What I see is an absolute refusal to ponder (at least publicly) among our village leaders. I just keep hearing how everything is so great.....I hope it continues to be. If this was the case in life, why would anyone ever need insurance for anything????
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3 comments:
Why can't we get some gaurantees? KABA will at least get $12 MM back from Abbott if they don't produce the jobs required. Why not atleast get some kind of money back if they pull out. What if Illannoysusall makes a better offer? Or worse yet, gasp, Somers and Bristol become the new PP?
Interesting aspect about KABA getting $12MM back if Abbott doesn't move ahead. Sounds like a lot of money Abbott would be giving back, huh?
Well according to Abbott's 2006 annual report. Sales were $22.5 Billion. Earnings Before Interest and Taxes (EBIT) was $2B (and that was a bad year compared to 2005 EBIT of $4.4B.
My point is that $12MM to Abbott is a drop in the bucket, and you can make whatever you want to out of that.
To put it in perspective, if your gross income is $50,000 before all of your expenses (including taxes), that $12MM to Abbott is like giving YOU $26.70 to move to another state -- is more explanation necessary?
What Abbott needs is a friendly environment to corporate taxes, and not political verbage about how corporations are bad.
This will be a MUCH bigger effect than any incentive already given.
BUT, keep listening to the like of Obama and Clinton as 'corporations' are evil.
Governor "I'll take credit for that" Doyle was here in Pleasant Prairie announcing Abbott's arrival, and no one from Abbott was there. Now, he is an Obama man. Come on people, wake up.
Abbott is waiting to see what happens on November 8 at a minimum.
Maybe Gene can explain it to you.
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