Post by rodrikthompson on Jul 1, 2009 16:04:48 GMT -5
Interest paid on money borrowed to pave Hawaiian Paradise Park streets is doubling the cost of paving, property owner Bill Newman said during a general meeting of owners Sunday, June 28.
Owners are currently making interest-only payments of $836,000 per year on money borrowed by means of a bond. Newman said he was “very upset” by the payments.
Adding the interest to paving costs brings the nominal cost per mile of $225,000 to a true cost of $450,000, nearly a half million dollars per mile, Newman said.
The total cost for the 20-year payback of the $12 million bond is $24 million.
In a separate matter at the Sunday meeting, property owner Jim Brown criticized the 6-month hiring of Kaniu Kinimaka-Stocksdale as general manager of the Hawaiian Paradise Park Owners Association. Stocksdale had been on the board of directors, assigned to seek a new manager.
“It came across as quick and slick,” Brown said.
In the June 17 regular meeting of the board, a property owner asked what criteria were used to hire Stocksdale.
Association vice-president Frank Annin didn’t answer the question Sunday, instead saying, “We needed to do something. We had no leadership in the office.”
On the question of paving costs, Annin dismissed objections to current costs, saying the entire bond issue was thoroughly discussed in a two-hour meeting when the bond matter was first proposed to owners.
However, a review of the minutes of the Feb. 25, 2007 general meeting shows that statements made to owners then were significantly different from the facts now.
Les Pedersen of the paving committee said then that there would be enough money to pave all 112 miles of unpaved road, with a little money left over.
Current treasurer Ken McGilvray said Sunday that there is enough money to pave about 22 miles at current prices, bringing the total pavement to about 45 miles.
In 2007, treasurer Alan Deehr said the interest rate would be 6 percent. The actual interest rate is 6.9 percent, fixed for 20 years.
And now for some analysis. The reason that most of the roads, about two thirds, will remain unpaved is that the price of asphalt skyrocketed in 2008.
No one could have predicted the exact economic mess the world is now in. But in the January 2007 Conch, I wrote against the bond plan because it lacked flexibility “if economic conditions change with time.”
The bond plan was presented to owners one month later, on Feb. 25, 2007. The plan was based on a per-mile cost of $100,000, the minutes show. But four months earlier, association employee Morgan Sky had written in the Conch that the cost was already up to $120,000 per mile.
That’s the past. Is there any way out now, or are two thirds of property owners stuck paying for paving which will never reach their street?
Formally, the only escape clause in the bond allows the association to pay off the bond after the first ten years. But where would the money come from?
Informally, bond owner Dexia, a Belgium-based bank, has shown signs of wanting to sell the bond, despite the whopping 6.9 percent it earns for them. (Where can you put your money and be assured of 6.9 percent for 20 years?)
If there is any wiggle room at all here, Paradise Park should try to wiggle out of this mess. Right now the $836,000 per year interest which owners pay buys them only about 1.9 miles of road. If Paradise Park were free of Dexia and operating on a pay-as-you-go basis, that same $836,000 would buy owners 3.7 miles per year with no strings attached.
Owners are currently making interest-only payments of $836,000 per year on money borrowed by means of a bond. Newman said he was “very upset” by the payments.
Adding the interest to paving costs brings the nominal cost per mile of $225,000 to a true cost of $450,000, nearly a half million dollars per mile, Newman said.
The total cost for the 20-year payback of the $12 million bond is $24 million.
In a separate matter at the Sunday meeting, property owner Jim Brown criticized the 6-month hiring of Kaniu Kinimaka-Stocksdale as general manager of the Hawaiian Paradise Park Owners Association. Stocksdale had been on the board of directors, assigned to seek a new manager.
“It came across as quick and slick,” Brown said.
In the June 17 regular meeting of the board, a property owner asked what criteria were used to hire Stocksdale.
Association vice-president Frank Annin didn’t answer the question Sunday, instead saying, “We needed to do something. We had no leadership in the office.”
On the question of paving costs, Annin dismissed objections to current costs, saying the entire bond issue was thoroughly discussed in a two-hour meeting when the bond matter was first proposed to owners.
However, a review of the minutes of the Feb. 25, 2007 general meeting shows that statements made to owners then were significantly different from the facts now.
Les Pedersen of the paving committee said then that there would be enough money to pave all 112 miles of unpaved road, with a little money left over.
Current treasurer Ken McGilvray said Sunday that there is enough money to pave about 22 miles at current prices, bringing the total pavement to about 45 miles.
In 2007, treasurer Alan Deehr said the interest rate would be 6 percent. The actual interest rate is 6.9 percent, fixed for 20 years.
And now for some analysis. The reason that most of the roads, about two thirds, will remain unpaved is that the price of asphalt skyrocketed in 2008.
No one could have predicted the exact economic mess the world is now in. But in the January 2007 Conch, I wrote against the bond plan because it lacked flexibility “if economic conditions change with time.”
The bond plan was presented to owners one month later, on Feb. 25, 2007. The plan was based on a per-mile cost of $100,000, the minutes show. But four months earlier, association employee Morgan Sky had written in the Conch that the cost was already up to $120,000 per mile.
That’s the past. Is there any way out now, or are two thirds of property owners stuck paying for paving which will never reach their street?
Formally, the only escape clause in the bond allows the association to pay off the bond after the first ten years. But where would the money come from?
Informally, bond owner Dexia, a Belgium-based bank, has shown signs of wanting to sell the bond, despite the whopping 6.9 percent it earns for them. (Where can you put your money and be assured of 6.9 percent for 20 years?)
If there is any wiggle room at all here, Paradise Park should try to wiggle out of this mess. Right now the $836,000 per year interest which owners pay buys them only about 1.9 miles of road. If Paradise Park were free of Dexia and operating on a pay-as-you-go basis, that same $836,000 would buy owners 3.7 miles per year with no strings attached.
