Ross: Limited hangout route | Arkansas Blog

Thursday, September 24, 2009

Ross: Limited hangout route

Posted By on Thu, Sep 24, 2009 at 6:27 AM

Roby Brock reports receipt of more information from U.S. Rep. Mike Ross relevant to the sale of his pharmacy. (UPDATE: Ross' office sent the data along to me this morning. This is probably not the start of a beautiful friendship, still .... ) The sale price was $724,000 for land, building, assets and good will and another $110,000 was paid for a 10-year non-compete agreement. His House disclosure filing had given ranges that indicated a slightly higher price. Ross says the price was below average for pharmacies based on a per-prescription formula.

The summary provided to Ross by the drug chain that bought the store provides a breakdown for figures underlying the sale price. It also says Ross' wife was paid the same (undisclosed) salary as another pharmacist in the store in 2007 and 2008. No mention is made of the current year. It says the chain pays about $330 a month to rent warehouse space from Ross in another Prescott building.

Still lacking is disclosure of a two-year dividend that Ross said his family received on their stock in their pharmacy. I remain curious as to how much he personally had invested, as opposed to borrowed, on the real property, since he's talked about a modest investment return on his investment in the property. Missing, too, is any indication of whether Prescott has generally experienced any rise in real estate values over recent years. Also, Ross has still not explained the central point of the ProPublica reporting that prompted all this: why the amount paid for his real property (other assets, including the ongoing business value of the drugstore, were valued separately) substantially exceeded its assessed value and the value estimated by a local real estate appraiser.

PS -- Ross smears the reporting by ProPublica/Politico as somehow linked to ACORN. Too ridiculous to belabor with disputation. And still more on ProPublica here. Funnier is his linkage of the reporting with, which Republicans see as the premier pro-Democratic organization. Isn't Ross a Democrat?

PPS -- Based on reporting so far, I"m inclined to think the call for a Justice Department investigation is over the top. But legitimate questions remain on the value assigned to the land in the deal. The reporting has prompted more financial disclosure by Ross, always a healthy thing. I also tend to think it's a stretch to link a sale several years ago to the current health care debate. Ross, as beneficiary of a pharmacy and a former employee of a drug company, was never likely to be anything but favorably disposed to the retail drug industry. His ready lease/purchase to the campaign finance bundlers of the insurance industry (and the pollution industry in the cap-and-trade debate) is far more problematic -- though a routine, if despicable, practice among members of Congress.

PPPS -- Finally talked to my accountant friend.

He dismisses Ross' claim of 4 percent annual return. The asset may have appreciated by that degree, but it's no measure of return. Did he pay rent to a family corporation during that time? Even if not, he has the same benefit as rent by NOT having to pay it. He has some tax advantages on the investment. There's the matter of how much money he had in the game. The return, more like 14 percent annually, my friend estimates, is pretty fair, not scandalous. But really fine in a depressed area like Prescott. I think he figures it right. The deal was at top dollar, without entering into never-never land. Could an average pharmacist whose owners didn't include a congressman get the same deal? Seems a stretch.

UPDATE: Yes, Mike Ross rented the pharmacy to himself. The rent was reported in financial disclosures in the $15,000 to $50,000 range annually. My accountant says you have to count that figure as part of his return, not just the difference in sale prices on the property.

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