Look closely at Y plan's numbers

I am a former business man from Elgin, now retired. Knowing the improbable decisions made by the city council, I like to follow the news from Elgin in the local papers.

Based on the information provided in a recent article in the Courier-News, I have "done" the numbers on the Channing development project.

Channing, of course, refers to the property formerly occupied by the Channing YMCA.

You will remember the Channing YMCA as the privately-funded organization put out of business by Elgin's recreation center.

The city council has conveyed the land to the developer, the land valued at $400,000. The city also demolished the building and cleared all debris. The city estimate of value of clearance is $600,000.

In realistic terms, the city conveyed property and improvements worth $1 million to the developer. In most development efforts, the developer undertakes the cost of acquiring the land and readying it for use.

According to the same article, the city council has also granted a cash incentive to the developer of $950,000 for the construction of 16 homes on the parcel.

On a per-home basis, the incentive in land clearance and cash equals $121,875 per home.

The homes to be erected are to be sold for $275,000 to $325,000. For purposes of this analysis we will assume an average selling price of $300,000. Now there are a lot of developers out there erecting and selling homes in the $300,000 range. Presumably they are making a profit on each one, a profit that makes the shareholders happy.

For simplicity, let's assume that a typical profit on a $300,000 home is $30,000 (10 percent). In this special case, the developer makes $30,000 per home plus $121,875 in incentives or $151,875 per home, more than 50 percent. If the shareholders of most developers are happy at $30,000 per home, this developer's shareholders must be ecstatic.

It is a general principle that in any bargain, each side has a proportionate benefit. One must wonder, where is the benefit on the Elgin side of the bargain, and who got it?

Albert Parker

Chicago