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Posted Wednesday, March 21, 2012
Pittsboro, NC - This snapshot represents a business improvement which has cost more than a reasonable person with options would invest if all factors were known in advance. It is an example of how the county has overstepped its bounds for business and homeowners building in Chatham.
It is added to another tale of a business which was told on final inspection that a new punch list was required for the certificate of occupancy. That additional work demanded $ 94,000 more than forecast at the start and a year delay for use of the facility which added over $ 500,000 to the tax base.
Permitting needs to be cut back to a reasonable time and process.
The current model is an expansion of an existing business to double its capacity for intermittent income approximately each year and one-half. The return on investment (ROI) is capital invested over the break even period or (gain minus total cost divided by total cost).
Engineering costs for a report and plan of the improvements for water, septic and electrical as well as permit costs amount to $100,000. Round figures are used for this scenario. This last includes engineering, water availability, not hook up, septic permit, and electrical design and permit. Not one shovel of dirt is moved for this part of the process requiring a year to complete.
The total cost of the project is calculated at between $300,000 and $400,000. Gross income at full usage is $55,000 per income event. The events are eighteen months apart.
The break even point ten years and eleven months, not deducting operating costs. Operating costs include site and utility maintenance, property taxes, services for patrons, and incidental costs, plus tax and fee increases.
An estimate for a return of capital is twenty-two years or 4.6 % external ROI. This may be better than a bank CD, however, using comparative investment as a standard, this project does not return what a dollar in the stock market or mutual funds would yield. Take away interest operating cost and human capital from the equation and the ROI is further reduced. The internal ROI may be 2.5% or less at forty years, not worth pursuing considering the time required. Pure ROI is -9% each year until break even.
The planning and permitting process has penalized this owner to the point that the time and money invested is not worthwhile except as a continuation of the operation. Considering that the project is an improvement, not a first time installation, the idea is flawed by adding the costs of following county regulations and fee structure. Chatham County is not business friendly.
Permitting needs to be cut back to a reasonable time and process. Zoning needs complete reorganization. Sedimentation and Erosion Control should eliminated as a county department. All fees should be eliminated and included in departmental budgets as pure cost of inspection and permit delivery. This change would let us know what departmental services cost taxpayers. But that idea is too simple and would set government back to a time when the word “profit” was not in its vocabulary. Now, a department makes a “profit” from fees with which to build its empire.
For example, in Chatham a well drilling permit costs almost $ 400. A Sedimentation Erosion Control permit reportedly costs $ 500 per acre of project. In Lee County, there are no charges for these permits and the Sedimentation Erosion Control is administered by the state, not the county. Lee County does not have such a department.
Although the Chatham regulations and fees are hangovers from the previous boards, they have not been mitigated to create the atmosphere which would make Chatham a desirable place to locate. They need to be changed, reduced, made more predictable and feasible for those who will build the tax base, offer employment and build the future community. Twenty-five years ago, the process was easy and inexpensive. Twelve years ago, it was becoming more strenuous and costly. Today, it is untenable. Rights of property owners are subjugated to the collective.
To restate the obvious, business and industry pay all the bills. To some, this truth is not obvious. The cash flow of society appears from nowhere and is bestowed on those who are right with God or are harmonized with the universe. It is their right to receive the welfare. Business and industry are bad and need to be removed from the earth, in the belief system of the privileged.
In reality, these economic generators provide jobs and income for employees. The job income allows purchase of home, vehicles, food, clothing, etc. and payment of property taxes, sales taxes, and all other taxes. Business pays property, employment, revenue and all other business taxes because products are sold outside the community, state or nation hosting the revenue generator. Government does not create money, it redistributes it and spends it. Of course, it prints some too.
Without that basic cash flow, there is no other cash flow in the system. No home or service business would create money in a closed system. No lawn mowing, plumbing, appraisal, consulting, legal, real estate or other services could exist without money from outside the system.
Add to this that the government takes a significant portion of all revenues. With that revenue, the it spends monies in certain sectors and projects. Only a small portion may be returned to the community. In the case of Chatham, it may return as a grant, a loan or some specially funded project, like the“green” home program which insulated some homes under the stimulus act.
While the last four paragraphs may seem to err from permitting, they point out the factor that government takes income from the community cash flow, subverts it to certain priorities which it holds as necessary and does not return cash to the system in proportion to the citizen spending.
Chatham’s increased spending over ten years of 70% to 100% is not justified by the number of its listed employees. The salaries have been increased by roughly 4% per year, not counting 2011-12 fiscal year. That would account for 40% increase over ten years. Yet expenses have risen more than that. In these times, real estate has fallen by 25%, individual investment returns have disappeared due to market uncertainty, lack of confidence or loss of investment capital. The county has increased taxes to cover its spending while there are many who have no income, no chance of a job, and have lost any ability to borrow or invest.
Meanwhile, back at the permit desk, an applicant for a business or home falls into a cycle from which recovery is prolonged at best, if not fatal to the investment. Not only is the process punitive, it is greedily waiting for another taxpayer to land in its snare. More conservative polity is required in these times. We can return to spending when times are better.
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