Friday, December 24, 2010

Again, the non-story that mainstream media ignores

Remember when Dave Crebo, the PABster speaking for the Ministry of Transportation, insisted to Laila Yuile we pay no shadow tolls to ease the passage of snow bunnies headed for Whistler? I am not aware if they ever apologized to Laila for serving up bull crap when accurate information should have been forthcoming. I suppose if being untruthful is one of your regular duties, it comes easier than it would otherwise.

Regardless, shadow tolls are well understood by money people as evidenced by this recent publication issued by the Boston office of RBC Global Asset Management (of course, the initials stand for Royal Bank of Canada). It discusses the appeal of very low risk, long term investments to institutional investors who seek assets to match their long term liabilities. The document also covers different repayment methods.
"Shadow tolls – With a shadow toll, the government makes a payment to the investor at a rate based on the number of cars travelled, but there is no physical toll booth on the road. Motorists avoid congestion, and there is no collection cost of operating the booth. Often the government funds the payment through fuel taxes, vehicle registration fees or other charges not directly based on who actually uses the road. In some cases, the government is willing to provide a floor of how much it will pay, so there are characteristics similar to an availability payment and revenue, therefore, is not purely driven by the number of cars."
Of course, this is exactly the kind of investing in infrastructure that institutions have always done.  Government bonds, largely sold to institutional investors, funded projects including roads, bridges, schools, hospitals and other capital work that served the public over long terms. Government employed its own professional staff who supervising capital projects, arranged construction through competitive bidding by private contractors and financed the projects through direct government debt.

The difference today is the insertion of a layer of shadowy matchmakers. Their main skill is in gaining influence over decision makers, convincing them to discard competitive bidding in return for the RFPs (Requests for Proposals), followed by negotiated design-build contracts. Whether a project is a formalized Public Private Partnership or an extended term operating agreement, government takes almost all risk and financing sits ultimately in the hands of long term investors.

Costs of projects rise of course so that dealmakers, who no longer work for government, take large profits out early. Political operators get rewarded financially. Public information about deals and details is minimized because of 'privacy concerns' for private companies. Government exchanges direct debt for future payment commitments and they can more easily mislead voters about real financial positions. Institutional investors do what they have always done which is to minimize risk.

The reality is that dealmakers are allied closely with decision makers and profit shares always find the proper home. That is the attraction to a very small group who set self interest above public interest.
Recommend this post

5 comments:

  1. The role of government today is to divert taxpayer dollars, legally, to friends of the government. This is done by having, unnecessary high wages for management and staff; selling state owned assets; and building gold plated mega-projects.

    In each case, the government has created the legal precedent to over pay for what they could get in the real world at a very much cheaper price.

    In today's ponzi scheme economy, the very foundation of our financial markets are rotten and full of corruption, that they are only allowed to exist by the very same governments financing their friends by building over priced government projects.

    Like all ponzi schemes, the run out of money and I'm afraid that the Western economy is going to make the Madoff multi-billion dollar ponzi scheme look like peanuts.

    In the future, names like Wall St., the Dow, or TSE will equal such names as Auschwitz and Dachau, with their public revulsion.

    ReplyDelete
  2. Merry Christmas Norman,to you and yours! I have a Christmas greeting for you on my site, complete with a Liberal Christmas Carol...lol

    ReplyDelete
  3. I was horrified, Laila Yuile was attacked. She had her children with her at the time. The threats are now, not only verbal but physical as well. Some of the canvassers, are being stalked by, menacing people in dark clothing. They need to call the police, they could be in danger, of being physically attacked too. I had read, a canvasser was, abusively yelled at by, two people that came out of a pub. Ida Chong was seen across the street watching. Campbell and the BC Liberals, have made our beautiful province, into a cesspool, and decent people are being attacked, in every dirty foul way, they can think of. Christy Clark call us the Taliban, because we object to, Campbell's dirty tactics. The BC Liberals, are becoming, no different than the Nazi's were. Campbell for sure, is a fascist dictator, and his sanity, is as much in question, as Hitlers was. This is not normal behavior. Verbal attacks, threats, stalking and now physical attacks? We want, the BC Liberals, the hell out of our province.

    ReplyDelete
  4. Norm,
    You never cease to amaze me with great articles. Looking forward to the New Year.
    Merry Christmas & may the New Year bring you good health.

    Guy in Victoria

    ReplyDelete
  5. With all these grand give-a-ways going on it amazes me that some people, like Sheila Orr, are happy with the way the province is going. Happy that the economy is so good and on track to get better.

    Damn, I wish I lived in her box....

    ReplyDelete

Courteous and relevant comments are welcome. Please use a consistent screen name so other readers can connect your contributions.