2022-04-12 Callimanis Presentation 5 Ricki Roth PC PH 4-12From: Alena Callimanis <acallimanis@gmail.com>
Sent: Tuesday, April 12, 2022 9:36 AM
To: Tania Flores; Cheri Flores
Cc: Rick Roth
Subject: Resending - Presentation 5 - Rick Roth April 12 presentation to Planning
Commission
Attachments: Rick Roth Apr-12 Planning Commission Presentation.pdf; Roth 4-12b
Compare Wave to ResComm.xlsx
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I apologize for the inconvenience. I sent this without the accompanying spreadsheet.
On Apr 12, 2022, at 9:33 AM, Alena Callimanis <acallimanis@gmail.com> wrote:
Please find attached the presentation and accompanying spreadsheet for Presentation 5, Rick Roth, for
the Planning Commission meeting April 12, 2022.
Rick did present at the last meeting and his comments are directed to the new information on STVR
revenues.
Thank you very much.
Alena Callimanis
LQRRD
919 606-6164
REZONING FOR THE WAVE PARK PROJECT
CANNOT BE JUSTIFIED BY CLAIMED FINANCIAL
ADVANTAGE OVER A RESIDENTIAL COMMUNITY
Rick Roth
(aka Dr. Frederick Hayes -Roth)
• Andalusia resident, 58002 Aracena, La Quinta
• Retired full Professor, Naval Postgraduate School, Monterey, CA
• Expert in Planning, Decision -Making Under Uncertainty, and Information Sciences
• Former CEO of publicly -traded Robotics/AI company (Cimflex Teknowledge)
• Former CTO for Software at Hewlett-Packard
• Former Faculty Member at MIT, CMU, and Stanford
• Published five books and more than 100 articles
A Residential Community with Special Assessment
Through 2033 is More Profitable Because Less Risky
Wave Park More Profitable only if Zero Risk, but Huge
Opportunity Costs Revealed at Realistic Failure Rates
20-year Discounted
Profit Analysis
Number of units
Average selling price
Sales Tax Revenue at
Build Out
I
Revenue Sources
Servicing Costs
Zero Risk: Discounted
total profit over 20 years
10% Annual Failure Risk
with Remediation &
Revenue Drop/Recovery 1
Wave Park
600
$2, 303, 333
$570,040
Residential
Community
600
Comment
30 residences/yr. assumed
$2,300,000
$9,422
TOT, Sales Tax, +
Prop Tax
$600K by year 3,
rising to $1600K
Sales Tax, Spec
Assmt + Prop Tax
$125K by year 3,
rising to $890K
$8.5M
$23.4M loss
$3M
$3M
A neighborhood corner market is
included in both
0.1 % special assessment before
2033, property tax after
Wave Park needs emergency
services much more than
Residential Community
Wave Park advantage if one
assumes zero risk of failure
Even a low probability of project
failure leads to huge losses
NO ONE CAN REASONABLY CITE FINANCES AS
JUSTIFICATION FOR THIS FLAWED PROJECT
• Trilogy at the Polo Fields illustrates a more profitable and
sustainable example of a residential community with just a
restaurant, clubhouse, and courts as an anchor.
• Any experienced business person will assess a significant
likelihood the novel Wave Park + Hotel + Residences business
model will fail
o Bankruptcy ensues, land remediation required, new more conservative
developer picks up the pieces
• The Wave Park is at least 5X more likely to fail with consequent
costs being millions more than a residential community failure
BACKUP MATERIALS
See Roth Compare Wave to
ResComm.xlsx
I
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
A
B C
E F G H 1 J
WAVE PARK
Retail Sales
Sales Tax
Ph 1-2 Max Hotel+ TOT
Phase 1 % Completion
TOT From Phase 1 & 2
Discounted Future Dollars
Taxable Units after 2033
Property Tax after 2033
Disc. Total Revenue
DiscountRate
Costs of Servicing
DiscountedServiceCosts
Discounted Profit
9,850,857
1735850
26,037,750
6,417,000
23,398,610
5%
13,599,767
8,513,443]
0%
9,936,000
5,002,500
179,021
8,321,005
4,966,204
2,977,4981
RESIDENTIAL COMMUNITY
SpecialAssessment
Total Homes Constructed
Property Tax after 2033
1% Special Assmt to 2033
Retail Sales at Corner Mkt
Sales Tax from Corner Mkt
DiscountedTotalRevenue
ServicingCost ($20K+$1K/home)
DiscountedServiceCosts
Discounted Profit
Sales Tax Rate
'Special Assmt Rate
AvgHomePrice
Prop Tax Rate to LQ
DiscountRate
2023
Project Years
1
0
0
0
0
1
0
100000
100000
-100000
30
34500
0
0
34500
35000
35000
-500
0.047 This estimate taken
0.10% Using the 0.1% rate
2300000
0.10% Using the 0.1% rate
5%
2024 2025 2026 2027 2028
2
2000000
94221
11%
192872
0.95
272739
400000
380000
-107261
60
138000
200000
9422
140051
80000
76000
64051
3
5000000
235554
22%
385744
0.90
560722
600000
541500
19222
90
4
8500000
400441
33%
578617
0.86
839420
700000
600163
239257
120
241500 345000
200000 200000
9422 9422
226457 303873
125000 170000
112813 145754
113645 158119
from the developer's project plan
as in the Stone Ranch project
as in the Stone Ranch project
5
12100000
570040
44%
771489
0.81
1092684
800000
651605
441079
150
448500
200000
9422
372980
215000
175119
197862
6
12100000
570040
56%
964361
0.77
10
1187290
900000
696403
490887
180
552000
200000
9422
434418
260000
201183
233235
2029
7
12100000
570040
67%
1157233
0.74
40
1269705
1000000
735092
534613
210
655500
200000
9422
488779
305000
224203
264576
2030
8
12100000
570040
78%
1350106
0.70
70
1340909
1100000
768171
572738
240
759000
200000
9422
536618
350000
244418
292200
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
A B C D E F G H 1 J
The Wave Park, being novel, has a significant probability of failing.
Assumed Annual Risk of Failure
Failure remediation cost
Retail revenue and TOT drop at failure
Revenue recovery rate after failure
10% per year
5000000 once
50% once
10% per year
2023 2024 2025 2026 2027 2028 2029 2030
Project Years
WAVE PARK 1 2 3 4 5 6 7 8
Prob. of continued viability 100% 0.9 81.00% 72.90% 65.61% 59.05% 53.14% 47.83%
Cumulative failure prob 0% 10% 19% 27% 34% 41% 47% 52%
Chance of failure occuring this year 10% 9% 8% 7% 7% 6% 5%
Expected remediation cost $500,000 $950,000 $1,355,000 $1,719,500 $2,047,550 $2,342,795 $2,608,516
Expected revenue drop 0% 5% 10% 14% 17% 20% 23% 26%
Expected revenue recovery 0% 0% 1% 3% 6% 9% 13% 18%
Expected Change in Profit considering risk ($488,637) ($905,036) ($1,251,141) ($1,527,131) ($1,720,021) ($1,852,744) ($1,932,322)
Total discounted failure cos ($31,929,292)
Total discounted profit ($23,415,849)
Retail Sales 0 2000000 5000000 8500000 12100000 12100000 12100000 12100000
Sales Tax 9,850,857 0 94221 235554 400441 570040 570040 570040 570040
Ph 1-2 Max Hotel+ TOT 1735850
Phase 1 % Completion 0 11% 22% 33% 44% 56% 67% 78%
TOT From Phase 1 & 2 26,037,750 0 192872 385744 578617 771489 964361 1157233 1350106
Discounted Future Dollars 1 0.95 0.90 0.86 0.81 0.77 0.74 0.70
'Taxable Units after 2033 10 40 70
Property Tax after 2033 6,417,000
Disc. Total Revenue 23,398,610 0 272739 560722 839420 1092684 1187290 1269705 1340909
DiscountRate 5%
'Costs of Servicing 100000 400000 600000 700000 800000 900000 1000000 1100000
DiscountedServiceCosts 13,599,767 100000 380000 541500 600163 651605 696403 735092 768171
Discounted Profit 8,513,4431 -100000 -107261 19222 239257 441079 490887 534613 572738
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