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The Big D seems to be stating that COTA is financially irresponsible for buying property outright (at 2010 prices) instead of taking on debit or leasing.
What am I missing?
Article: Well-off COTA turns nose up at rent, mortgage payments
Columbus Underground Messageboard » General Columbus Discussion » Transportation
Dispatch: COTA is wasting our money
[12 posts] [8 contributors]
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heresthecasey
Funkytown
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ugh.
Posted 2 years ago # -
cbustransit
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ya...and the article ends by saying how COTA is going to get 2,000 more hours of bus service for the deal. this is a really poorly conceived article.
Posted 2 years ago # -
gramarye
In Exile
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Actually, the article may have a point. Not only are purchase prices rock bottom right now, interest rates on mortgages for creditworthy borrowers are as well. If there were ever a time for a public authority to finance with debt, this would be it. For example, suppose COTA had just put a token down on the new HQ and got the rest with a fixed rate loan (or bond sale). It would probably have very low capital costs over time.
In addition, the cash saved from not paying up front could potentially have been a down payment on *other* financing things--including, potentially (though I don't know the legal strictures on this), the $103 million necessary for the streetcar line. If that weren't feasible, they could at least expedite the deployment of fare cards, upgrade stations (to include minor conveniences like, say, roofs and route maps), upgrade their Web site, etc. (Hopefully they still have the cash for those, since those are orders of magnitude less expensive, of course.)
The time to pay cash is when interest rates are high and purchase prices are low.
The time to finance with debt is when interest rates are low and purchase prices are low.
When interest rates and purchase prices are high, of course, that's when you really ought to *sell,* but that's problematic for government agencies sometimes. Moreso than private actors, anyway.
Posted 2 years ago # -
gramarye
In Exile
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I would not go so far as to say "irresponsible," either. That is a bridge too far. I don't see how a government agency deliberately choosing to avoid debt can possibly be considered irresponsible; I'd be a hypocrite if I said anything different, considering my stance on the federal deficit.
However, I'm generally a little friendlier when it comes to state and local government budgets, because they typically allow deficit spending only for capital expenditures and require separate capital and operating budgets (with the operating budget perforce remaining balanced). I presume, though I don't know, that COTA operates on this model. Defraying capital expenditures over time is understandable when interest rates are low. That said, choosing not to do so and therefore avoid interest--even low interest--entirely can't be written off as irresponsible, either.
COTA may be foregoing some opportunities for expansion when there isn't much competition for loans. It's been able to grow anyway until now because, as the article noted, it's been getting a substantial amount of federal grants. Those grants may dry up if the federal budgetary pressures increase, which seems likely. That said, recklessly growing too fast is clearly a worse strategy than occasionally being overly cautious.
Posted 2 years ago # -
lisathewaitress
SoHud
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i guess i am too stupid to understand how paying cash for something is irresponsible.
Posted 2 years ago # -
Rockmastermike
The Bacon District
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cota had an influx of cash from the feds that they might have to spend immediately or return. I'm not absolutely sure that's the case, but if those strings really are attached, then investing in needed capital expansions at rock bottom prices with cash is the best possible move instead of putting off paying for it next year with interest without the extra stimulous cash to do it.
Posted 2 years ago # -
Andrew Hall
Dennison Place (The Circles)
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Am I reading this correctly? Their new HQ cost the equivalent of 50 yrs worth of their rent?
A.
Posted 2 years ago # -
Rockmastermike
The Bacon District
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Andrew Hall wrote >>
Am I reading this correctly? Their new HQ cost the equivalent of 50 yrs worth of their rent?
A.No. they were paying 150,000 in rent. Their new stuff (two facilities one replacement and one new.) is 28mill plus 13mill, not 75m. the 50 year figure is that guy talking about the 'expected life of a building'
It is not clear from the article if that 150,000 was rent on ONE facility or two, but I suspect it was one.
frankly, I think that guy is a) pulling "50 years" out of his butt, and b) his time value of money argument doesn't really hold up if one assumes interest payments are usually quite a bit higher than rate of inflation.
It's a lame hit piece with language that seems deliberately steered towards making cota look like "spoiled rich folks".
Posted 2 years ago # -
Andrew Hall
Dennison Place (The Circles)
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Misread different numbers.
A.
Posted 2 years ago # -
Luce Cannon Mims
Columbus
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Mr. Caruso also covered this story:
(if I pasted it right)
It colors my perspective, and likely also his. I like the bus stop at the end of my street just fine. Would feel desperately panicky if it turned into a turnaround for 120 plus buses a day.
I understand that COTA was pretty indifferent to the residents' worries at the meeting. That's business, I guess.
Posted 2 years ago #
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