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Sunday, July 7, 2013

Letter to the editor

Disagrees with permanent solution for the Whalerock controversy

EDITORS NOTE: this letter to the editor arrived in an email from John Van Slyke, Jr. of Arnolda. Mr. Van Slyke makes some points that will come up during discussion of a possible town purchase of the Whalerock land. The regular authors of this website have stated their positions and more articles on the pros and cons will be published if a referendum on the purchase is held.

To whom it may concern;

Please stop advocating for the town to purchase the Whale Rock property from Mr. LeBlanc. There is no reason why the town should even consider the idea of buying the site of Whale Rock for at least the following reasons.

Mr. LeBlanc purchased this parcel of land in a private transaction for his own business reasons and purposes.  He is an entrepreneur, and he is the sole risk taker.  In our system, entrepreneurship is rewarded.  One who puts up equity capital in a project assumes all of the business risk and he or she is entitled to keep all of profits.  That is the way our capitalist system works.  

The following chart from your piece shows how the system works.  If Mr. LeBlanc had sold his interests in 2007 for anything near the valuation shown in this chart, it is highly likely that he would not be complaining about anything.  The reason is that Mr. LeBlanc would have had every right to put the proceeds from a sale minus taxes, minus repayment of debt and minus transaction costs in his pocket.  

However, the reality of the market changed dramatically in October, 2007 which was the beginning of the Bush recession and the start of the great market crash of 2007 and early 2008.  Mr. LeBlanc was not alone in getting caught in the down draft.  Thanks to Wall Street, the world financial system was nearly destroyed.  The US was plunged into the greatest economic downturn since the Great Depression.  

That was clearly unfortunate for Mr. LeBlanc, but that is his problem as an entrepreneur, not the Town of Charlestown.

Of course, any entrepreneur can make appeals to others, but no one has an obligation to step in and bail an entrepreneur out.  The only way out is to restructure the financing of the project.  When a recapitalization must be done under duress or pressure, the result is invariably a reduction in valuation of equity and serious dilution for owners and shareholders.   The golden rule applies.  He who has the gold rules.  There is absolutely nothing new here.

In short, for whatever reasons, it appears that Mr. LeBlanc made what may turn out to be a money losing decision, and he was not helped by external events in the US economy.  There is no evidence I am aware of that anyone forced Mr LeBlanc to make his decision to buy the Whale Rock parcel.  

People make decisions to take risks only to have these risks become realities.  This happens all the time in our country and even our local area.  Anyone who has ever paid too much for something is intimately familiar with the problem Mr. LeBlanc may or may not have at this time.  

However, no one, least of all the Town of Charlestown,  is obliged buy out Mr. LeBlanc.  No way.

The only Issue is whether it would it be in the Town's interest to do so.  My answer is no. 

I have looked at the site plan for the Whale Rock parcel.  I have read and studied the Town's master land use plan.  I also have driven up the roads around the Whale Rock site.  I cannot see how this piece of ground has any municipal or recreational use. We already have outstanding facilities at Ninigrett Park, and the Town owns land adjacent to that site.  The higher and better use of scarce money from the Town would be to make improvements to Ninigret Park, the Town dock and so on.

Finally, I also have a real problem, emphasis added, with anyone using what amounts to scare tactics about the Indians and a casino project as has been said repeatedly with respect to the Whale Rock site.   Such statements have racist overtones and they are way, way out of line.

Once again, Mr. LeBlanc is the entrepreneur.  He owns the risk and he is entitled to the rewards from whatever he can do with this venture. Whatever happens is a private matter for Mr. LeBlanc, not a public matter for the Town of Charlestown. No way.