Settling on North Shore dollar figure just isn’t going to be easyWritten by Admin
To the Editor:
We’ll start with the 1943 North Shore Road Agreement since that’s what is supposedly being settled. A park road is promised — adustless surface not less than 20 feet in width. Over $10 million has been spent arriving at the conclusion that the road is not going to be built. Instead a financial settlement is the preferred alternative. It would appear that the
settlement is in lieu of the road described in the 1943 Agreement.
Not so. The cost of this road from the EIS is $729 million. The park and Department of Interior consider that amount and that road “not relevant.” The 1943 Agreement is not relevant unless you’re Swain County.
Then the contingency clauses are critical and Swain County is constantly reminded that these clauses are relevant and binding. Would they agree to let Swain County cherry pick from this Agreement? Take what you like, discard the parts you don’t like. Of course not.
Instead they want to pay for the old road that was flooded. That would be cheaper. So now they are looking at how to calculate the 2009 value of old 288. That presents a problem too. In 1980 Secretary of Interior Cecil Andrus calculated the value as being $1.3 million in 1940 and adjusting that value by 5 percent compounded annually he came up with $9.5 million.
That doesn’t sound too bad until you take into account that the average prime interest rate from 1940 to 1980 was 4.92 percent which rounds to 5 percent.
That’s a problem. Interest rates went up. The average prime interest rate from 1940 to 2009 that’s 6.31 percent. Doesn’t sound like much but the settlement amount then becomes $94 million. Can’t do that or talk about inflation or the consumer price index. This also leaves out that the 1980 deal had much more icing for Swain County. Can’t talk about that either.
So how do they get the amount to be lower and still have an alibi claiming to be fair. Well math being what it is, the matter is simple. The starting amount has to be less and the interest rate used has to be less also. The original cost by Swain to build the road was $694,000. That’s still a problem. If we use 6.31 percent for the interest rate it adds up to more than $50 million. They’ll have to use 5 percent for the interest rate and ignore what the rates were since 1980. That’ll do it. Just over $20 million.
Did you miss the slight of hand here. We started out talking about the replacement cost of the road described in the 1943 Agreement and ended up talking about the original construction costs of the old flooded road. Slick huh? Think about it. That’s like a parent telling a teenager who just got their license that they are going to buy them a new Mercedes, then picking up a discarded “cash for clunkers” car that hasn’t been crushed yet and saying here’s your car and it’s all the same.
There is a math lesson in all this. All this math is bogus. Here’s the proof. Take any product you want. Find out what it cost in 1940. Do the magic math then go out and see what it cost today. It won’t matter if it’s a road, car, gas, or toilet paper. You’ll be hard pressed to find anything where today’s price can be calculated using one of these formulas. For the method to be considered valid it should work for most everything.
There are all kinds of problems with this magic math. The value of something is not necessarily what you paid for it. The value is the replacement cost. If someone ran into your car and totaled it, the issue is not what you paid for it. Somebody might have given it to you. The question to be answered is what will it cost to replace it equitably today. What’s the value of the Park? Is it the price the government paid for it plus a dribble of interest or is the value that so many place on it because it cannot be replaced?
Swain County has offered to settle for $52 million. You can’t build 30 miles of any kind of road in this park for this amount. It is a very generous offer. A little common sense here would go a long way.