valhalla360 wrote:
JaxDad wrote:
From a business finance point of view I think the “subsidy“ idea is being misused, or possibly misunderstood.
If 2 different land owners are looking to calculate their “costs” of operating an RV park, in one case though the land has been in the family for several generations, the other just bought the land (at current market value) and has to carry financing on it, the “costs” will be VERY different. Ditto a park, public or private, that built decades ago and the servicing costs are now paid for.
That is NOT to say the long term owners are “subsidized” in any way, their costs are just lower.
Nope, when you calculate return on investment, it's the same.
If you have a $50million dollar park that's been in the family for generations, if you are only covering your operating costs plus say a $100k/yr profit, your ROI is absolutely horrible because you are effectively subsidizing your customers.
From a financial perspective, you would be far better off to sell and invest the money. Even at a measly 2% return, you would be able to take $1mil/yr profit with a lot less headaches.
Only difference if you are in debt to your eyeballs, the bank effectively owns the park and they have no interest in subsidizing your customers. Unless you have some external source of money (...like the taxpayer), you lose your option of subsidizing or the bank will take it away from you when you fail to make your payments.
Now you’re talking about a whole other kettle of (really stinky) fish, PROFIT.
I was talking about “costs” and more particularly “subsidies”.
Further still, there’s a whole other topic which I won’t go into, other than to mention it, not discuss it, that is can you even use the word “profit” when you’re talking about a public service?
Obviously there will be a few how would like the sale of public lands to pay down debt and have “State Parks” become “private” for-profit parks, but that’s not the subject here.
