Logic behind Provinsalia remains elusive By Roberta Actor-Thomas -- Guest Commentary
Lake County Record-Bee, and Clear Lake Observer, February 11, 2009
The Provinsalia developer's supporters in Clearlake like to talk about the hoped-for benefits Provinsalia will bring to the City of Clearlake, but have Mayor Chuck Leonard, Councilman Curt Giambruno, or City Manager Dale Nieman explained how the Provinsalia development could actually make a profit? The answer is, no, they have not. And no wonder.
It's customary in a large development like Provinsalia for infrastructure like streets, sewers, curbs, gutters, drainage, lighting, power, water, the golf course and its clubhouse to go in before any houses are built. The cost of this infrastructure varies widely in a new development of this type, but can average from $60,000 an up for each house. That's close to $40 million if you multiply by 665 houses! Wow.
Cost of each lot: $7,500. (That's the $5 million spent so far by the developer on the land plus the environmental study, then divided by 665 lots, the number of lots in Provinsalia.) Infrastructure cost, per house: $60,000 (this is before any houses are even built) Cost to actually build a 1,500 square foot house: $187,500 ($125 per square foot, which is a bit of a lowball number, could be closer to $150 per square foot). Get your calculators out that's $7,500 + $60,000 + $187,500 = $255,000. So the houses will cost $255,000 to build, and according to the development's supporters, they will sell for around $240,000??? Wait a minute, you say, that's a loss of $15,000 per house.
So maybe the plan Advertisement Quantcast is to just sell the lots after the infrastructure is in. That might be the way to make this pay off: Land cost: $7,500 per lot. Add the cost of the roads, drainage, curbs, gutters, streetlights, lighting, golf course, clubhouse, sewers, power and water, a mere $60,000 per one third acre lot. Now you can sell those babies for $67,500 per lot or more, if you actually want to make a profit. No problem a third of an acre lot in Clearlake on a paved street is going for around $40,000 right now so 665 of these at $67,500 per lot should sell like hotcakes, right?
Okay, okay, maybe the developer just wants to say whatever he needs to say to get the votes of three Clearlake City Council members to certify the Environmental Impact Report and rubber-stamp, oops, I mean approve the subdivision without making sure that all of the promised infrastructure ever actually gets built. Then perhaps he can start selling lots right away, before putting in the roads and sewers, etc. And maybe skip town one jump ahead of the posse, leaving Clearlake holding the bag, with 665 angry new landowners wanting to know when their promised roads and sewers will be built. If they've invested $5 million for 665 lots, that's just $7,500 per lot, remember? So if they sell each lot for say, $25,000, they'll do all right, maybe walk away with five million dollars apiece or something, leaving behind a paper subdivision. Lake County needs another paper subdivision like it needs an outbreak of salmonella.
If we pretend for a moment that houses are actually going to be built, supposedly the developer behind this project is going to use his own money, almost $40 million, to put in the infrastructure. Developers normally use (risk) someone else's money even when times are good. Banks are not currently giving out loans to build golf courses and tract houses in remote communities and there is a good reason for this.
Which makes more sense? Scenario A) The developer intends to do the infrastructure construction for a net loss of at least $15,000 per lot, or Scenario B) the developer has no intention of spending money on infrastructure, he just intends to sell the lots and run?
But if you ask Leonard, Giambruno, and Nieman, this project is exactly what Clearlake needs. They have been projecting away on how much shopping and tax revenue Clearlake will rake in when those houses are sold to imaginary extreme commuters. There's just one problem. The numbers don't add up these houses aren't going to be built.
However, the biggest brain-teaser of all is figuring out what is motivating the Planning Commission and City Council members who support this boondoggle. What's going on at Clearlake City Hall? If you find this problem as puzzling as I do, you should give these gentlemen a call and ask them what heck is going on. Maybe send them a calculator so they can run the numbers, too.
Roberta Actor-Thomas is a programmer/analyst currently involved with regulatory reporting, fraud and security issues in the health care industry.