EuclidInfrastructure would be a whole lot more affordable to the user if you take the goverment overhead out of it.
Alas, the government overhead will be replaced by the need to show a profit...
A while back the government (at least the military) was big on "Commercial Activities" studies. Although the process was actually a thinly veiled method of enacting a reduction in force, it became clear that no single business could replace any of the organizations.
When I asked what would happen if a study found that an activity actually needed more resources, the reply was "it better not..."
The public works department does everything from plowing snow to electrical work (consumer and high voltage), to plumbing, to carpentry, to HVAC, to sewers, to water mains, and a few other things. As a result, the only contractors who could bid on it were those who would be able to marshall all of the necessary disciplines under one roof. Those companies exist, but not in most communities.
Joe's Plumbing and Heating was left out of the process.
In the end, nothing changed, except the activities being "studied" had to handle the same workload with less resources.
There were some attempts to farm certain functions out to contractors, but usually the job eventually came back to the government activity, with government workers doing the work.
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
Convicted One Euclid But yes, I could see our entire infrastructure system being privatized and financed by the private sector on a for-profit basis. If that is what Trump has in mind, I would be all for it. But what do you do if the private interest fails to maintain the asset as specified, pocketing the MRO funds instead as clandestine profit, then ultimately files for bankruptcy as their exit strategy?
Euclid But yes, I could see our entire infrastructure system being privatized and financed by the private sector on a for-profit basis. If that is what Trump has in mind, I would be all for it.
But yes, I could see our entire infrastructure system being privatized and financed by the private sector on a for-profit basis. If that is what Trump has in mind, I would be all for it.
But what do you do if the private interest fails to maintain the asset as specified, pocketing the MRO funds instead as clandestine profit, then ultimately files for bankruptcy as their exit strategy?
I think that would have to be monitored for compliance with a performance agreement. I suppose it would involve a lot of regulation, which unfortunately, might make the whole public/private partnership infeasible or unable to save any money. But if it is done right, the private sector could build infrastucture and operate as a business with no excess regulation. If that were the case, it would be a very lucrative business, so the private operator would want to hold onto it and make money rather than milk it and bail out.
Infrastructure would be a whole lot more affordable to the user if you take the goverment overhead out of it.
greyhounds Euclid Otherwise, if a private investor were to fund public infrastructure, I don’t understand where the revenue comes from that pays back the private investor. Let’s say the infrastructure project is to build a new public highway, and it is financed by a private investor. Where does the payback to the private investor come from? The highway is not generating revenue. It only provides its use for the public. "Public" infrastructure funded by private investment is quite common. With the investors being paid back by the users of the infrastructure through "User Fees". Think of electricity, natural gas, sewerage, and sometimes water from a private company. I get electricity and natural gas through such systems but I have a well and a septic system. So I pay for electricity and gas but maintain my own personal sewerage and water systems. (Well, actually I don't personally maintain them, I pay skilled people to do that when needed.) Today, with modern technology, the same thing can be done with road useage. So why not give it a try?
Euclid Otherwise, if a private investor were to fund public infrastructure, I don’t understand where the revenue comes from that pays back the private investor. Let’s say the infrastructure project is to build a new public highway, and it is financed by a private investor. Where does the payback to the private investor come from? The highway is not generating revenue. It only provides its use for the public.
"Public" infrastructure funded by private investment is quite common. With the investors being paid back by the users of the infrastructure through "User Fees". Think of electricity, natural gas, sewerage, and sometimes water from a private company. I get electricity and natural gas through such systems but I have a well and a septic system. So I pay for electricity and gas but maintain my own personal sewerage and water systems. (Well, actually I don't personally maintain them, I pay skilled people to do that when needed.)
Today, with modern technology, the same thing can be done with road useage. So why not give it a try?
I agree that we should give it a try. That was my point above when I said this:
"I understand your point. My point was that I don't understand how the private investor gets paid back when investing in a public sector infrastructure. When a private investor funds infrastructure that collects user tolls and pays off the private investor with those tolls, I would not consider that infrastructure to be public. It would be privatized infrastructure, at least while it is paying back the investor.
But yes, I could see our entire infrastructure system being privatized and financed by the private sector on a for-profit basis. If that is what Trump has in mind, I would be all for it. The efficiency that would be gained by privatizing the whole thing would probably indeed upgrade 100% of our infrastructure at no cost to the public. It might even return a dividend in the form of lower taxes."
I began my inquiry by asking how Trump would fund public infrastructure by private investment, which requires paying back the investor. I understand that it is possible to do by adding user fees to the public infrastructure to pay back the investor. I did not ask the question because I disagree with the approach. I asked it because the explanation seems to be lacking in the coverage of having private investment pay for new infrastructure.
The emphasis in the news coverage seems to assure the taxpayers that spending a trillion public dollars will be worth it. So we are told that some of that money will come from private investment. I would say that opens the door to enormous tax relief and private sector prosperity, going way beyond just reducing the first public cost of new infrastructure. So yes, if we can mine that vein of gold, let's do it.
EuclidWhen a private investor funds infrastructure that collects user tolls and pays off the private investor with those tolls, I would not consider that infrastructure to be public. It would be privatized infrastructure, at least while it is paying back the investor.
You do know what a service agreement is right? The problem with your scenario and understanding is the land under the toll road would need to transfer and then be taxed under the Private Operator but it is not........it remains a state asset. Stands to reason the toll road built with the help of a state or federal guarantee is an asset of the guarantor in part or in full even though the service agreement states another party constructs it and collects tolls on it. It's the same as subsidy to frieght railroads we see in some cases. State owned line, state pays railroad to keep it maintained and operate it. The rail line never transfers over to the railroad unless a specific lease is involved AND if the ownership of the line transfers over to the railroad the railroad has to pay taxes on it. Also roughly akin to Equipment Trust certificates.
EuclidOtherwise, if a private investor were to fund public infrastructure, I don’t understand where the revenue comes from that pays back the private investor. Let’s say the infrastructure project is to build a new public highway, and it is financed by a private investor. Where does the payback to the private investor come from? The highway is not generating revenue. It only provides its use for the public.
JPS1 “Otherwise, if a private investor were to fund public infrastructure, I don’t understand where the revenue comes from that pays back the private investor.” Cintra is a Spanish company headquartered in Madrid. It has participated in the construction and operation of a variety of public infrastructure projects in numerous countries. In Texas it partnered with TXDOT to build Sections 5 and 6 of Texas 130, which is the southern section of the highway that runs from just north of Georgetown, TX to just north of Sequin, TX. It has also been a major funding source for LBJ Express (I-635 Lexus Lanes), North Tarrant Express and I-77 Express. Cintra also has major stakes in the Chicago Skyway and Indiana Toll Road, as well as numerous toll roads in Spain, Ireland, and Latin America. The highways are toll roads open to anyone who will pay the tolls. Cintra has been granted contracts to collect the tolls for periods up to 50 years. It recoups its investment plus a profit through the tolls.
Cintra also has major stakes in the Chicago Skyway and Indiana Toll Road, as well as numerous toll roads in Spain, Ireland, and Latin America. The highways are toll roads open to anyone who will pay the tolls. Cintra has been granted contracts to collect the tolls for periods up to 50 years. It recoups its investment plus a profit through the tolls.
But yes, I could see our entire infrastructure system being privatized and financed by the private sector on a for-profit basis. If that is what Trump has in mind, I would be all for it. The efficiency that would be gained by privatizing the whole thing would probably indeed upgrade 100% of our infrastructure at no cost to the public. It might even return a dividend in the form of lower taxes.
Rio Grande Valley, CFI,CFII
Convicted One Euclid Pence was asked to explain how the private sector will help finance the public infrastructure rebuilding. He completely dodged the question. He gave no answer, but said it will be answered in the future after they find the answer. Privatize (and toll) the interstate highways, add "truck only" toll lanes to existing highways, and creating new psuedo-government independant economic development groups with authority to levy taxes have been proposed.
Euclid Pence was asked to explain how the private sector will help finance the public infrastructure rebuilding. He completely dodged the question. He gave no answer, but said it will be answered in the future after they find the answer.
Pence was asked to explain how the private sector will help finance the public infrastructure rebuilding. He completely dodged the question. He gave no answer, but said it will be answered in the future after they find the answer.
Privatize (and toll) the interstate highways, add "truck only" toll lanes to existing highways, and creating new psuedo-government independant economic development groups with authority to levy taxes have been proposed.
I guess that is the only way that a private investor can fund infrastructure improvement. The private investor can invest in infrastructure if it is privatized. Then it becomes a capital investment that generates a return to pay back the investment.
Otherwise, if a private investor were to fund public infrastructure, I don’t understand where the revenue comes from that pays back the private investor. Let’s say the infrastructure project is to build a new public highway, and it is financed by a private investor. Where does the payback to the private investor come from? The highway is not generating revenue. It only provides its use for the public.
There is also a lot of talk about the trillion dollar infrastructure plan being revenue-neutral. When a change in tax rates does not alter the amount of revenue collected, it is said to be revenue-neutral. What is meant by spending a trillion dollars in a way that is revenue-neutral?
EuclidThe plan I posted above in blue is not my idea. According to the linked article, it was developed by the President’s team. Regarding your question of whether I believe that Pence might have better ideas, I don’t know. I heard an interview in which Pence was asked to explain how the private sector will help finance the public infrastructure rebuilding. He completely dodged the question. He gave no answer, but said it will be answered in the future after they find the answer.
I doubt that source is accurate since the existing practice on public / private partnerships is a lot more straight forwards. That is for the Private Entity to issue bonds with a Government Guarantee and once the bonds are paid off and the Private Entity has earned their guaranteed return the Infrastructure reverts back to the government or in some cases the government can accelerate taking possession ahead of schedule by helping to pay back the bonds sooner and the required rate of return in a package deal.
Issuing tax credits I think would be a fairly massive issue for the IRS and revenue collection.
CMStPnP Euclid Oh here it is. Finally a clear explanation of how the private sector will invest in public infrastructure and save the taxpayers’ money: “The draft plan that circulated during the campaign would subsidize private investors by issuing mammoth tax credits amounting to more than 80 percent of their equity in qualifying projects. The controversial sales pitch is that the economic stimulus stemming from infrastructure spending will generate tax receipts to the government that offset the cost of the tax credits. Investors would then reap the revenue stream a project produces after it’s been built. That allows them to pay off the debt on the money they borrow, and, ultimately, to turn a profit.” Everybody knows that spending ourselves into debt is the fastest way to reach utopia. It works every time. That is why you see so much utopia these days. http://www.wbur.org/cognoscenti/2017/01/06/paying-to-rebuild-american-infrastructure-frederick-hewett Can I just pose a question really quick before you work yourself into a lather on this issue. Don't you think since the VP is the former Governor of Indiana they might borrow on his experience with infrastructure projects and the experience of that state before they invent this new and I might say overly ridiculous system you describe above? To me it just seems a little more on the smarter approach side to borrow from someone's expertise on the team already then reinvent the wheel.
Euclid Oh here it is. Finally a clear explanation of how the private sector will invest in public infrastructure and save the taxpayers’ money: “The draft plan that circulated during the campaign would subsidize private investors by issuing mammoth tax credits amounting to more than 80 percent of their equity in qualifying projects. The controversial sales pitch is that the economic stimulus stemming from infrastructure spending will generate tax receipts to the government that offset the cost of the tax credits. Investors would then reap the revenue stream a project produces after it’s been built. That allows them to pay off the debt on the money they borrow, and, ultimately, to turn a profit.” Everybody knows that spending ourselves into debt is the fastest way to reach utopia. It works every time. That is why you see so much utopia these days. http://www.wbur.org/cognoscenti/2017/01/06/paying-to-rebuild-american-infrastructure-frederick-hewett
Oh here it is. Finally a clear explanation of how the private sector will invest in public infrastructure and save the taxpayers’ money:
“The draft plan that circulated during the campaign would subsidize private investors by issuing mammoth tax credits amounting to more than 80 percent of their equity in qualifying projects. The controversial sales pitch is that the economic stimulus stemming from infrastructure spending will generate tax receipts to the government that offset the cost of the tax credits. Investors would then reap the revenue stream a project produces after it’s been built. That allows them to pay off the debt on the money they borrow, and, ultimately, to turn a profit.”
Everybody knows that spending ourselves into debt is the fastest way to reach utopia. It works every time. That is why you see so much utopia these days.
http://www.wbur.org/cognoscenti/2017/01/06/paying-to-rebuild-american-infrastructure-frederick-hewett
Can I just pose a question really quick before you work yourself into a lather on this issue. Don't you think since the VP is the former Governor of Indiana they might borrow on his experience with infrastructure projects and the experience of that state before they invent this new and I might say overly ridiculous system you describe above? To me it just seems a little more on the smarter approach side to borrow from someone's expertise on the team already then reinvent the wheel.
The plan I posted above in blue is not my idea. According to the linked article, it was developed by the President’s team. Regarding your question of whether I believe that Pence might have better ideas, I don’t know. I heard an interview in which Pence was asked to explain how the private sector will help finance the public infrastructure rebuilding. He completely dodged the question. He gave no answer, but said it will be answered in the future after they find the answer.
schlimmSome on here overlook the fact that a federally guaranteed loan in the 1930s allowed the PRR to extend electrification. And the PRR repaid in full, including interest.
The first Hiawatha Trainsets were paid for entirely with Federal Money and a FDR Depression Era make work program, in fact most of those Hiawatha cars had plaques mounted in them stating that fact.
schlimm Murphy Siding schlimm Murphy Siding Euclid CMStPnP CShaveRR It's a "public-private partnership"...that's pretty sure to mean that the public pays the taxes and the benefits go to entrenched private companies. Actually maybe not, I think during the Japanese PM trip he will announce they are picking up the tab for the Dallas to Houston HSR route as what Texas Central previously stated. Not 100% sure but it's a strong possibility as Texas Central is still insisting it will get built without U.S. Taxpayer money AND they need to cough up some serious Capital before 2018 if they are to start construction then. So we will see. In this "public-private partnership," what does the private investor get for their invenstment? A guarantee from the government on the loan, silly. Some on here overlook the fact that a federally guaranteed loan in the 1930s allowed the PRR to extend electrification. And the PRR repaid in full, including interest. True, but I can't help but believe that's the exception. We've become almost numb to the idea of different levels of government guarantees of loans that the private sector thought was too risky. What's the saying? Fools rush in where angels fear to tread? GM repaid their "bailout" and others (the major banks, Fannie May) have as well.
Murphy Siding schlimm Murphy Siding Euclid CMStPnP CShaveRR It's a "public-private partnership"...that's pretty sure to mean that the public pays the taxes and the benefits go to entrenched private companies. Actually maybe not, I think during the Japanese PM trip he will announce they are picking up the tab for the Dallas to Houston HSR route as what Texas Central previously stated. Not 100% sure but it's a strong possibility as Texas Central is still insisting it will get built without U.S. Taxpayer money AND they need to cough up some serious Capital before 2018 if they are to start construction then. So we will see. In this "public-private partnership," what does the private investor get for their invenstment? A guarantee from the government on the loan, silly. Some on here overlook the fact that a federally guaranteed loan in the 1930s allowed the PRR to extend electrification. And the PRR repaid in full, including interest. True, but I can't help but believe that's the exception. We've become almost numb to the idea of different levels of government guarantees of loans that the private sector thought was too risky. What's the saying? Fools rush in where angels fear to tread?
schlimm Murphy Siding Euclid CMStPnP CShaveRR It's a "public-private partnership"...that's pretty sure to mean that the public pays the taxes and the benefits go to entrenched private companies. Actually maybe not, I think during the Japanese PM trip he will announce they are picking up the tab for the Dallas to Houston HSR route as what Texas Central previously stated. Not 100% sure but it's a strong possibility as Texas Central is still insisting it will get built without U.S. Taxpayer money AND they need to cough up some serious Capital before 2018 if they are to start construction then. So we will see. In this "public-private partnership," what does the private investor get for their invenstment? A guarantee from the government on the loan, silly. Some on here overlook the fact that a federally guaranteed loan in the 1930s allowed the PRR to extend electrification. And the PRR repaid in full, including interest.
Murphy Siding Euclid CMStPnP CShaveRR It's a "public-private partnership"...that's pretty sure to mean that the public pays the taxes and the benefits go to entrenched private companies. Actually maybe not, I think during the Japanese PM trip he will announce they are picking up the tab for the Dallas to Houston HSR route as what Texas Central previously stated. Not 100% sure but it's a strong possibility as Texas Central is still insisting it will get built without U.S. Taxpayer money AND they need to cough up some serious Capital before 2018 if they are to start construction then. So we will see. In this "public-private partnership," what does the private investor get for their invenstment? A guarantee from the government on the loan, silly.
Euclid CMStPnP CShaveRR It's a "public-private partnership"...that's pretty sure to mean that the public pays the taxes and the benefits go to entrenched private companies. Actually maybe not, I think during the Japanese PM trip he will announce they are picking up the tab for the Dallas to Houston HSR route as what Texas Central previously stated. Not 100% sure but it's a strong possibility as Texas Central is still insisting it will get built without U.S. Taxpayer money AND they need to cough up some serious Capital before 2018 if they are to start construction then. So we will see. In this "public-private partnership," what does the private investor get for their invenstment?
CMStPnP CShaveRR It's a "public-private partnership"...that's pretty sure to mean that the public pays the taxes and the benefits go to entrenched private companies. Actually maybe not, I think during the Japanese PM trip he will announce they are picking up the tab for the Dallas to Houston HSR route as what Texas Central previously stated. Not 100% sure but it's a strong possibility as Texas Central is still insisting it will get built without U.S. Taxpayer money AND they need to cough up some serious Capital before 2018 if they are to start construction then. So we will see.
CShaveRR It's a "public-private partnership"...that's pretty sure to mean that the public pays the taxes and the benefits go to entrenched private companies.
It's a "public-private partnership"...that's pretty sure to mean that the public pays the taxes and the benefits go to entrenched private companies.
Actually maybe not, I think during the Japanese PM trip he will announce they are picking up the tab for the Dallas to Houston HSR route as what Texas Central previously stated. Not 100% sure but it's a strong possibility as Texas Central is still insisting it will get built without U.S. Taxpayer money AND they need to cough up some serious Capital before 2018 if they are to start construction then. So we will see.
In this "public-private partnership," what does the private investor get for their invenstment?
A guarantee from the government on the loan, silly.
Some on here overlook the fact that a federally guaranteed loan in the 1930s allowed the PRR to extend electrification. And the PRR repaid in full, including interest.
True, but I can't help but believe that's the exception. We've become almost numb to the idea of different levels of government guarantees of loans that the private sector thought was too risky. What's the saying? Fools rush in where angels fear to tread?
GM repaid their "bailout" and others (the major banks, Fannie May) have as well.
Thanks to Chris / CopCarSS for my avatar.
Euclid In this "public-private partnership," what does the private investor get for their invenstment?
C&NW, CA&E, MILW, CGW and IC fan
The US government guaranteeing a loan is not the US government giving a loan. The guarantee is there to signal to lenders who will be lending money to the borrowers that there is a backstop behind it in the event of defaut. Typically loan guarantees will have pledged assets that will reimburse the guarantor. In the instance where core capacity for railroads is the issue, the idea is that if a railroad has the need to create additional capacity to improve service levels, they are able to borrow at a lower interest rate, thereby increasing the odds that a project is feasible. The railroad would still have to pay back the lenders on the bond payment schedule.
This type of loan guarantee is common for Municipal, County and School District infrastructure projects such as water towers, sewer systems, airport infrastructure and school buildings where a local bond is sold by the local entity but it is sold with with the bond rating of the state that is guaranteeing the loan (also called credit enhancement). Instead of the local entity borrowing with a bond rating in the high B or low A categories, which carry higher interest rates, they can instead sell the bonds at the state's bond rating - typically at least Aa2/AA - and can cut their interest rate tremendously, even potentially in half in some instances.
Anyone who has refinanced their home to a lower interest rate knows how much of a difference a lower interest rate makes on their monthly payment.
It is the same concept with having the US government guarantee - credit enhance - a loan for core infrastructure. Instead of borrowing at, say, 6-7-8-9 percent for core infrastructure, borrowing at 4 or 5 percent results in a lower payment and the lower payment in fact makes it more likely that the borrower will be able to make its payments.
And the railroad still has to pay back the loan, so they aren't going to propose projects willy-nilly.
What if lower interest rates made finishing the Sunset Route two main track project feasible, or second bridge over Lake Pend O'Reille, or making Stampede Pass tunnel capable of handling double stacks, or any of the CREATE projects more feasible, etc., etc.
If intermodal is to be railroading's savior then transit times have to improve, and will almost certainly require more capacity in the right selected places.
So the railroads need access to lower-cost capital.
ACYWhatever trump does, "Mexico will pay for it". And it will be terrific. Just wait and see. Tom
Tom
And if anybody tells him anything to the contrary .... they are miserable losers with fake news.
Never too old to have a happy childhood!
Whatever trump does, "Mexico will pay for it". And it will be terrific. Just wait and see.
schlimm Sorry, but you seem to have gotten in a muddle.
Sorry, but you seem to have gotten in a muddle.
I am sorry that it seems that way.
But we are not talking about the government loaning money or guaranteeing a loan. We are talking about the private sector paying for public infrastructure. How does that work?
I don't believe this would be a loan to the government by the private sector. If that were the case, what good would it do for the taxpayer? The money would have to be paid back to the private investor by the government / taxpayer. The premise of the private sector investment is to relieve the taxpayer from the total cost of infrastucture rebuilding. The only way private funding could accomplish that is if it were a private investment in public infrastructure in a way that the infrasturcture itself pays back the private investor.
kgbw49 4. Cut the overall corporate tax rate to 15% to free up more cash flow for capacity investments.
4. Cut the overall corporate tax rate to 15% to free up more cash flow for capacity investments.
When you have government unwilling and/or unable to cut it's spending, and tax liability is reduced for the big fish in the pond, who get's left holding the bag?
Very good posting kgbw49- well thought out, well put.
These are the directions that it's moving toward...I only hope it can become a reality. Lot of dark forces with an agenda opposed to these ideas.
From a freight rail standpoint, I think the most effective option would be a combination of items:
1. Taking what is commonly referred to as the Short Line Tax Credit (AKA Section 45G Tax Credit or Rail Track Maintenance Track Credit) of up to $3,500 per track mile and then make it permanent, increase it to $5,000 with an automatic inflation adjustment annually to be announced by USDOT annually in December, and also let Class I railroads be eligible. While all Class I railroads spend more than that, it is a way to get capital into the railroad industry.
2. Have the USDOT give loan guarantees to reduce the cost of capital for all capacity increases that result in either CTC on dark territory or second main track installation (including bridge projects such as, for just one example, the BNSF bridge at Sibley MO over the Missouri River). This would basically let the Class I railroads borrow at Aaa/AAA interest rates for capacity expansion so would greatly cut their overall cost of capital and encourage capacity expansion, maybe making the difference of whether capacity expansion happens or not.
3. Allow capacity expansion projects noted above to be depreciated over 10 years to further lower the income tax burden on railroads.
The idea behind these four items is to encourage capacity construction which would foster faster transit times to allow railroads to better compete to grow traffic.
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