Thursday, June 7, 2007

Return on Investment

The 49ers have described this stadium as a partnership where the City joins them in an investment. Now that the proposal has been taken apart by the City's own consultants, let's look at the investment at a back-of-the-napkin level. After all, many Silicon Valley start-ups began similarly in-depth.

The City is being asked to put in $160M of cash, $60M worth of land, $47M to build a parking garage, and $20M to $30M to move a power substation that's in the way. That's $297 million of capital that we are going to tie up.

So what kind of return are we getting out of this investment? How does $650K a year sound? (KMA report, page 3, 2nd paragraph.) That's 0.2% return on investment!

Compare this to some other investments:

12-month CD5.05%
Mutual fund, indexed to S&P 500, 5 year average8.23%
San Jose real estate (median home price, 2000-2005 average)12.6%

Councilmember Kevin Moore says the stadium sounds like "an absolute winner." Maybe. On the Planet Mongo. Not here.

1 comment:

Joann said...

Please check out my post on Metroblogging San Jose.
"The Red Bluff 49ers?"
http://sanjose.metblogs.com/