Infrastructure Plan Is Dominated by Profits for Wall Street
invite response
2018 Feb 21, 11:47am 2,342 views 5 comments
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1
anonymous
2018 Feb 21, 11:50am
On the subject of selling and privatizing - Florida City Ponders Privatizing 8th Largest U.S. Public Utility
A sizzling sellers’ market for power companies could prove enough for Jacksonville, Florida, to put its prized community-owned utility on the auction block.
While elected officials in the city of 881,000 on Florida’s northeastern seaboard are divided over whether to place the power, water and sewer utility, known as JEA, up for sale, market conditions may provide the kind of valuation that would make such a deal attractive, consultants hired to evaluate a sale said in a report to JEA’s board earlier this month.
The utility could be worth between $7.5 billion and $11 billion before costs are calculated, Michael Mace, a managing director with Public Financial Management, told the city council Feb. 14. A sale to private investors could probably net the city about $2.9 billion to $6.4 billion after debt is retired, he said.
The question of privatizing JEA has vexed Jacksonville officials, mostly because the value of the utility never seemed enough to make it worth while. That’s in part because JEA is a cash machine. It gave the city $117 million in the current fiscal year to help prop up Jacksonville’s $1.27 billion budget.
Elected officials and community leaders are also concerned about losing local control over the rates the JEA -- the eighth largest community-owned U.S. utility -- charges its 458,000 electric, 341,000 water and 264,000 sewer customers.
So will the Trump plan produce the touted $1.5 trillion of investment? Hard to say. But it will subsidize private investments that fit into various privileged categories. Private investors we expect will find this plan relatively generous.
It is hard to believe that a spread of small subsidies here and there, none even big enough to finance even a major highway, will do much more than fund what local governments might have spent anyway. But now public and private priorities are being reversed. What would matter the most under the plan are projects that might produce cash flow for investors rather than benefits for the public.
As for selling the federal government’s electric power and transmission companies, which could easily net tens of billions of dollars, as they say in President Trump’s New York, “fuggedaboutit.” When we hear Mitch McConnell say he’s on board with the idea then we will consider revising our view. By Leonard Hyman and Bill Tilles.
https://www.bloomberg.com/news/articles/2018-02-21/florida-city-ponders-privatizing-8th-largest-u-s-public-utility
A utility in Texas takes first steps. Incumbents are not amused. Read: "Wholesale Power Generators to Get Hurt by Grid Batteries "
https://wolfstreet.com/2018/02/13/wholesale-power-generators-to-get-hurt-by-grid-batteries/
A sizzling sellers’ market for power companies could prove enough for Jacksonville, Florida, to put its prized community-owned utility on the auction block.
While elected officials in the city of 881,000 on Florida’s northeastern seaboard are divided over whether to place the power, water and sewer utility, known as JEA, up for sale, market conditions may provide the kind of valuation that would make such a deal attractive, consultants hired to evaluate a sale said in a report to JEA’s board earlier this month.
The utility could be worth between $7.5 billion and $11 billion before costs are calculated, Michael Mace, a managing director with Public Financial Management, told the city council Feb. 14. A sale to private investors could probably net the city about $2.9 billion to $6.4 billion after debt is retired, he said.
The question of privatizing JEA has vexed Jacksonville officials, mostly because the value of the utility never seemed enough to make it worth while. That’s in part because JEA is a cash machine. It gave the city $117 million in the current fiscal year to help prop up Jacksonville’s $1.27 billion budget.
Elected officials and community leaders are also concerned about losing local control over the rates the JEA -- the eighth largest community-owned U.S. utility -- charges its 458,000 electric, 341,000 water and 264,000 sewer customers.
So will the Trump plan produce the touted $1.5 trillion of investment? Hard to say. But it will subsidize private investments that fit into various privileged categories. Private investors we expect will find this plan relatively generous.
It is hard to believe that a spread of small subsidies here and there, none even big enough to finance even a major highway, will do much more than fund what local governments might have spent anyway. But now public and private priorities are being reversed. What would matter the most under the plan are projects that might produce cash flow for investors rather than benefits for the public.
As for selling the federal government’s electric power and transmission companies, which could easily net tens of billions of dollars, as they say in President Trump’s New York, “fuggedaboutit.” When we hear Mitch McConnell say he’s on board with the idea then we will consider revising our view. By Leonard Hyman and Bill Tilles.
https://www.bloomberg.com/news/articles/2018-02-21/florida-city-ponders-privatizing-8th-largest-u-s-public-utility
A utility in Texas takes first steps. Incumbents are not amused. Read: "Wholesale Power Generators to Get Hurt by Grid Batteries "
https://wolfstreet.com/2018/02/13/wholesale-power-generators-to-get-hurt-by-grid-batteries/
2
justme
2018 Feb 22, 5:57am
justme
2018 Feb 22, 5:57am
>>Sigh. Almost as an aside to its infrastructure plan, the White House also floated an initiative to sell federally-owned assets so as to “optimize taxpayer value.” Included in this list for “optimization” were both Washington airports, Reagan and Dulles, and interestingly all federally owned power transmission assets. This list included the TVA, BPA, and the other federal transmission organizations (WAPA, SWAPA and SEPA).
This thread covers a very important topic. I have said it many months ago, and it is clearly true: The "infrastructure projects" are really about selling (at low prices) public goods to private interests who will then turn around and charge the public rent to use the facilities that the public used to OWN.
This thread covers a very important topic. I have said it many months ago, and it is clearly true: The "infrastructure projects" are really about selling (at low prices) public goods to private interests who will then turn around and charge the public rent to use the facilities that the public used to OWN.
3
anonymous
2018 Feb 22, 6:14am
justme says
#MAGA
Trump and Republicans looking out for the little guy again!
>>Sigh. Almost as an aside to its infrastructure plan, the White House also floated an initiative to sell federally-owned assets so as to “optimize taxpayer value.” Included in this list for “optimization” were both Washington airports, Reagan and Dulles, and interestingly all federally owned power transmission assets. This list included the TVA, BPA, and the other federal transmission organizations (WAPA, SWAPA and SEPA).
This thread covers a very important topic. I have said it many months ago, and it is clearly true: The "infrastructure projects" are really about selling (at low prices) public goods to private interests who will then turn around and charge the public rent to use the facilities that the public used to OWN.
#MAGA
Trump and Republicans looking out for the little guy again!
4
Tenpoundbass
2018 Feb 22, 6:30am
Tenpoundbass
2018 Feb 22, 6:30am
Sounds like the think tank for the last administration projecting their grand designs on this one.
Nothing too petty for Obstruction aye Libbies?
Nothing too petty for Obstruction aye Libbies?
5
anonymous
2018 Feb 22, 6:37am
I can see why Republicans were Anti Trump
He’s like a bigtime Liberal, the Establishment Republicans must hate his yuge tax cuts and giving away our nations wealth for pennies
He’s like a bigtime Liberal, the Establishment Republicans must hate his yuge tax cuts and giving away our nations wealth for pennies
What struck us about the piece, supposedly elaborating their infrastructure plan, was that there was really nothing in particular that they wanted to build – nothing that would excite the imagination: no space race, or federal highway initiative, and heaven forbid certainly no new deal.
Thinking about it in accounting terms, the asset side of their infrastructure balance sheet was a compete blank. But the liability side of the ledger was the real focus of the Ross/Navarro exercise. They provided an answer to a question that almost no one was asking: How much leverage can one get away with and still control a federal infrastructure project? Their answer was 6-to-1.
On Monday, the White House released its long awaited “Legislative Outline for Rebuilding Infrastructure in America.” It boils down to this: The federal government claims it can facilitate a $1.5-trillion program with only $200 billion of federal money. That’s a leverage ratio of 7.5-to-1. That’s it.
And they still can’t be bothered in the text to name even one actual project they care about.
But the leverage – the debt, that is – is supposed to come from state and local sources, which are not exactly flush with cash. The states could have financed many of these projects if they had wanted to by charging tolls. The document released by the White House is anything but clear on how private investors would horn in on the goodies so to speak.
But it looks as if private investors could collect incentives for their own projects and do all sorts of lease deals with the governments that financed the projects. We would expect investment firms of every stripe to be interested. Terms this generous are seldom on offer.
So what do we think will actually get built? The “Outline” lists various evaluative criteria for potential infrastructure funding. However, answering “Yes” to the question “Can you fund capital and operating expenses without federal support” is 70% of the project’s score. New technologies and provision of economic and social benefits to the community are each accorded a 5% weighting. To put it simply, the criterion is: Will you charge tolls and high tariffs to generate hefty revenues for the project?
Is the private equity tail wagging the public infrastructure dog? Not clear at all from the text. But seems likely given the people in charge. It would be bad enough if vital public services are privatized with reduced restraints or oversight on the new owners.
But this is profoundly different. With so much depending on collecting revenues to pay off the debt, the builders will build what is economically attractive. Toll roads have much better economics than municipal water systems. We doubt the people of Flint will see much benefit.
Sigh. Almost as an aside to its infrastructure plan, the White House also floated an initiative to sell federally-owned assets so as to “optimize taxpayer value.” Included in this list for “optimization” were both Washington airports, Reagan and Dulles, and interestingly all federally owned power transmission assets. This list included the TVA, BPA, and the other federal transmission organizations (WAPA, SWAPA and SEPA).
Selling existing assets, of course, does not create new infrastructure or create jobs. But it does make work for bankers and create opportunities for private equity firms. Making the Federal agencies pay private sector returns, incidentally, means raising prices to consumers.
Let’s see how lawmakers react to having their constituents pay more. We wouldn’t bet on the sale of any electricity assets.
https://wolfstreet.com/2018/02/14/infrastructure-plan-is-dominated-by-profits-for-wall-street/#comments
#Economics #Infrastructure