Reference no: EM131701647

Question: Joe Babitt, a former executive of T-Mart, just started a term as mayor of Saulk Center. For the past several days he has been looking for a way to keep his campaign promise to increase services without raising taxes or service charges. While lunching at the country club with the treasurer of T-Mart, the subject of a recent sale and leaseback of one of T-Mart's stores came up. Following a common practice in retailing, T-Mart had erected a building and sold it to an investor. It then signed a longterm lease on the building. "Bingo! That's it," thought Mayor Babitt. "We can sell several of the city's buildings-as well as police cars, fire engines, and other vehicles-to investors and lease them back. That will give us the revenues we desperately need. Now I can concentrate on fighting crime." Do you agree with Mayor Babitt? If not, what are the flaws in his reasoning?