Thursday, October 27, 2005

Time Value of Other People's Money

Chalk this one up to the "Things That Make You Go...Hmmmmm" category:

Bank of Oklahoma includes many of Tulsa's finest citizens on its Board of Directors, including Paula Marshall-Chapman (Recall donor), Kathy Taylor (Secretary of Commerce) and Bob LaFortune.

What? The same Bob LaFortune that is Mayor Bill LaFortune's uncle?

Bank of Oklahoma has agreed to pay the City of Tulsa $11,000,000 over then next 20 years for the naming rights to the downtown arena.

Bank of Oklahoma claims that the City of Tulsa, while not owing a "legal" obligation, owes a "moral" obligation to bail them out of the $7.5 million loan they made to the Airport Board in order to kickstart the ill-conceived Great Plains Airlines.

The Feasibility Study that led to placing the arena question on the Vision 2025 ballot showed the "Naming Rights" money as being available to defray operational expenses of running the arena.

The Mayor said that the naming rights money could be used to either fund operations or capital expenditures.

Bart Boatright told a local TV reporter today, that the money would be used for "capital" expenses [meaning, to fund the cost overruns that the mayor won't admit to].

If you find an amortization calculator and plug in the following numbers [Present Value=$7,000,000: N = 240 monthly payments over 20 years; 5% annual interest rate; $0 balloon payment...what future value do you think you get?

Look at the following figures in green:

Principal borrowed:

Annual Payments: 12 Total Payments: 240

Annual interest rate: 5.00% Periodic interest rate: 0.4167%

Regular Payment amount: $46196.90 Final Balloon Payment: $0.00

The following results are estimates which do not account for values being
rounded to the nearest cent.

Total Repaid:

Total Interest Paid: $4087256.00

Interest as percentage of Principal: 58.389%

Uh...huh. That $11 million over 20 years becomes $7 million in today's dollars.


Has Bill LaFortune and his cronies found a way to take money from our operating budget which is funded by the first two pennies of sales tax, so that he can convert it to pay for his iconic arena that he can't purchase for $121 million he sold to the voters?

How? Give BOK the $7 million we don't owe them today, to get back the same amout in terms of present dollars ($11 million over twenty years) that would have to be further siphoned from the Civic Center.

Is he willing to give up police and fire and pools and park money, in order to not have to come to the voters for more taxes?

Is this a legal conversion under state law? If it is, it shouldn't be.

Shame on Bill LaFortune.

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