< HOME  Friday, March 31, 2006

America's new FAST Track to Fascism

Every day on national cable, Lou Dobbs curses the steady flow of desperate migrant workers who cross our borders, laboring in exchange for increasingly worthless dollars. Meanwhile, under the radar, Goldman Sachs gives new meaning to the term "highway robbery" by facilitating the massive flow of foreign capital in exchange for American highways.
If somebody asked if you wanted to buy the Brooklyn Bridge, you’d know it was a con. But how about buying the Indiana Toll Road?

Before you snicker, you should know the Indiana highway was auctioned off last week for $3.8 billion.

For the next 75 years, the more than 150 miles of Interstate 80 will be run by a pair of Spanish and Australian companies that will collect the tolls, operate the pit stops, keep up the highway and try to make a profit.

Cintra SA, the Spanish firm, and Macquarie Infrastructure Group, the Aussies, are teaching Americans the business of investing in roads, bridges, water mains and the like.
All of a sudden, Americans need to be taught how to invest in infrastructure?

You may have heard of Macquarie. Last year it bought a controlling interest in the company that operates the Dulles Greenway for $533 million.

A year ago, Macquarie and Cintra took over the Chicago Skyway, adding it to a network of toll roads and bridges around the world.

And Macquarie is part of one of the rival groups bidding $1 billion to take over the Dulles Toll Road for 50 years, with the money expected to underwrite Metrorail’s extension to Dulles.

The Australians launched a sister company in the United States in December 2004. Since the $25-a-share initial public offering, Macquarie Infrastructure Co. Trust (MIC on the New York Stock Exchange) has climbed to $34.45.

Counting reinvestment of the hefty $2-a-share dividend, investors have made a 45 percent total return since the company went public 15 months ago.[!!!]

That's some return on investment! Either those privateers (read: profiteers) have a ground-breaking formula for making money from toll roads, or our governments' corruption and incompetence exceeds the bounds of human imagination. I suspect a combination of both.
Betting on infrastructure
With that kind of money to be made, Americans are lining up to try their luck at Wall Street’s hottest new game – investing in infrastructure.

Washington’s biggest financial firm, the Carlyle Group, just created an eight-member team to get into roads, bridges, etc.

Goldman Sachs & Co., which made $9 million [!!!] advising Chicago on the Skyway sale and stands to collect about $20 million in fees for putting together the Indiana Toll Road deal, is raising a multibillion-dollar fund to buy infrastructure.
Surprise, surprise. The usual suspects line up to milk a sure bet. Risk? What risk is there in leasing the only road in or out of a city or international airport? With endless access to FIAT capital, as long as people inhabit the country, you CANNOT lose.
Wall Street is getting into infrastructure because politicians have bailed out on one of the most important issues facing the nation.

Transportation was once one of the things Americans counted on their government to provide.
Uh, can someone remind this twit that building and maintaining infrastructure and providing protection from domestic and foreign thugs REMAIN the ONLY reasons why Americans tolerate government.
New York Gov. De Witt Clinton built the Erie Canal and opened up the Midwest in the early 1800s. President Dwight D. Eisenhower started the interstate highway system in the 1950s and put America on the road to being the world’s most motorized society.

But anybody who’s ever been caught in Washington traffic knows our elected officials lack the vision and the political will to deal with transportation issues that require difficult, politically unpopular decisions. Like raising taxes.
Or, issuing interest-free loans for infrastructure and ending the reign of the money masters.
Ducking tax increases is what motivated the state of Indiana and the city of Chicago to sell their toll roads. Indiana was facing a $10 billion bill for updating its highway system when Gov. Mitch Daniels, a former federal budget director, came up with an alternative to paying the price – tapping the Toll Road.

Chicago didn’t need roads; it needed money.
Isn't that special. Chicago doesn't need roads!!! That ought to win the wretched governor a nice warm spot in hell.
Monetizing the Skyway brought in $1.8 billion. That was enough to pay off $855 million in debt – only part of it due on the road itself – as well as set aside $500 million for a “rainy day fund” and give a few million in home heating assistance to the city’s poor.

If that sounds like tossing the family furniture in the fireplace to keep the house warm, you’re getting the message.

Excuse me. But, $855 million plus $500 million and "a few million in home heating" adds up to only $1,358,000,000. That leaves almost $442 million unaccounted for, give or take "a few million."
How privatization works: Neither Chicago nor Indiana actually sold its toll road. Both deals are structured as long-term leases with all the money paid up front. In exchange for the cash, Macquarie and Cintra will take over the roads and take responsibility for upgrading them, a $700 million commitment in Indiana. In return they get to collect all the tolls they can squeeze out of travelers, subject to some regulation.
Indiana is not alone. The NJ Turnpike Authority, which is in the hole for $5.5 billion, is considering forming a for-profit corporation to run the highway. The state would hold onto 51 percent ownership and the rest would be sold off to shareholders through an initial public offering, bringing in an estimated $6 billion one-time infusion of cash to the state, leaving only $500 million to spare.

The NJTP and GSP raise about $650m/year in toll revenues. That means the state will lose at least $325 million in annual revenue, FOREVER, in order to pay off some debt now.
The theory behind privatizing toll roads is that profit-motivated managers can run them better and more efficiently than government bureaucrats. Given Chicago’s ward-healing politicians and notoriously corrupt municipal contracting, it’s pretty hard to argue with that premise.
Why argue when you're getting paid not to? Since corrupt politicians are already being paid under the table by greedy corporations, this guy wants us to sell out to corporations directly!
Within six months of taking over the Chicago Skyway, Macquarie and Cintra had installed a complete electronic toll-taking system. Today more than a third of the tolls are being collected in the E-Z Pass lanes. In Toronto and Sydney, Macquarie has done away with booths entirely, collecting all the tolls electronically.

High-speed electronic toll lanes, where drivers don’t even have to slow down, are the state of the art.
Who needs freedom and democracy when you've got speed.
Most U.S. toll roads and bridges don’t have them, however, because private and public officials view the investment from different perspectives.

To government budget analysts, the issue is how much will it cost. To private operators, it’s how much it will return. So, too, with so many operating and management issues. For example, Indiana might have tackled its road problems by simply raising fares on the Toll Road, but the legislature has refused to raise tolls for 20 years.
Of course, the public sees managing public roads differently from private corporations! They're not out to pillage and plunder the population! They ARE the population! It's called Democratic governance!
The toll road privatization advocates argue that profit generates the motive for providing the best possible service. An army of anti-government academics and think-tankers supply the intellectual infrastructure for that argument.

But behind the private-is-preferable theory is the immediate reality that governments don’t have – or are unwilling to raise – the billions needed to rebuild the nation’s crumbling infrastructure.

The global theme, says Chris Leslie, managing director of Macquarie Securities (USA) Inc., is that “the fiscal constraints that governments find themselves under are driving them to explore new ways of finding money.
Notice how he characterizes the dire straits faced by our state governments as if it were part of a Broadway musical, or Hollywood adventure. These people are masters at marketing.
“Taxpayers want improved services, better roads, better airports, and yet of course nobody wants to pay higher taxes,” he said. The public sector isn’t ducking its responsibilities, he argues, “it is delegating to the private sector.”
That's a corporate euphemism for FASCISM. And the so-called "immediate reality" he speaks of has been foisted upon us by a corrupt government that has allowed international bankers to milk our national economy for centuries!
Surprisingly, America, the capital of capitalism, is far behind the rest of the world in privatizing infrastructure. Privately run roads, bridges, airports and ports are common all over Europe – even in France, where government intervention in the economy is embedded alongside liberty, equality and fraternity.

As Americans have learned in the past month, even in this country most port facilities have been privatized. Foreign companies are the major players in large part because foreign nations went to this system long ago. (One of the arguments made against the Indiana Toll Road deal was that it would be dangerous for the road to be under foreign control.)
So, the rest of the world is being overrun by fascists and Americans are supposed to gladly hop on the bandwagon?
Profitability question: Since the idea is so new in America, it’s too soon to tell if privatizing infrastructure will prove to be the most economical way of financing those projects. Government entities can almost always borrow money cheaper than private companies can raise capital, so the private sector starts with a handicap.
That's a LIE! These corporations are backed by international bankers. They make money from nothing. Governments must borrow from them!
Private toll-takers and maintenance crews will probably make less money than public employees doing similar work, but private managers demand higher salaries than the government pays.
That's if they keep their jobs at all! Here's a reply from a corporate paid shill to a poor Indiana toll collector who inquired about his job prospects once the corporation takes over:
Frankly I don't think there is a great future in manual toll collection anyway, what with the increasing use of cards and transponders. Think of supermarkets and gas stations. Most people now pay by card, fewer and fewer by cash. Cash is on the way out regardless. I'd be thinking of other work.
Doesn't it just warm your heart? And that's not all!
[P]rivatization requires profits – two tiers of profit, actually. Companies such as Macquarie, Carlyle and Goldman Sachs will earn a profit for arranging and managing these transactions, and stock and bond investors who put up the capital will get a second profit.

Nor can anyone know yet how profitable the business will be.
They know it WILL be profitable. So, who cares how profitable? They'll just milk the market for whatever it's worth. Meanwhile . . .
[T]here’s the question of how well the public will be served by privatization. It could take several years of private operations before anyone can judge how well it is working.

Facing a multibillion-dollar backlog of road-building needs, governments aren’t likely to wait for the facts. Already, Pennsylvania is investigating some kind of private deal for the Pennsylvania Turnpike. Other projects are in the works in California and Texas.

Prudence would argue for going slowly, doing what amount to clinical trials of privatization before prescribing it as a cure for the ailments of America’s infrastructure. But bridges are crumbling, roads are jammed and the infrastructure privateers are standing at the door, checkbooks in hand.
Americans would be well served to reflect on this quote by Brian Freeman, Executive Director of Chrysler Loan Guarantee Board while Chrysler was in bankruptcy:
Patience and Prudence
Bankers function by reference to prudence. It's imprudent for them to do anything until they have to.
But for everyone else, it's a desperate rush to sell whatever they've got. Why? Could it be because bankers control the money supply and therefore control the means by which they manufacture and exploit need and direct or destroy a nation's economy?
Many politicians aren’t willing to take the risk of passing tax increases. But lawmakers across the nation are willing to take the risk of passing the buck to the private sector.
How perverse. It's not a GOLDEN-plated opportunity on a silver platter - it's a chore!
It’ll take so many years to know whether this is the right decision that the politicians who promoted it will be long gone by the time anything can go wrong.

In the meantime, there’s money to be made investing in infrastructure.
Is America the land of the living brain-dead? Is everyone on dope? Does everyone have their heads cranked so far up their asses that they can't tell shit from shinola?

Our forests, our ports, our industries, our national defense, and now our roads? WTF is left?!! Our water? Not for long.

Wakeup America. You're on the express lane to Fascism.


At Saturday, April 01, 2006, Anonymous Anonymous said...

Do the people know that there are 83 million rifle and hand gun permits issused in the US? That's right, 83 million! Not counting illegal guns!

That's a militia much larger than the Chinese army.

When they come for the guns they will be telling us that we will be completely defendless.

Let's see how soon they ban guns for our protection.

At Saturday, April 01, 2006, Anonymous Anonymous said...

Spiking of fascism;
Satellite Photographs of Halliburton's American Concentration Camp

At Saturday, April 01, 2006, Blogger qrswave said...

More incentives for private corporations to snatch up our roads and milk us dry!

"Panelists said there are several reason private firms are eager to 'help' [they act like they're doing us a favor!!!]. Unlike government, they can deduct a road's depreciation from their annual taxes. That alone was worth at least $300 million in the Chicago Skyway deal, said Robert Poole, transportation director for the Reason Foundation, a California nonprofit.

Congress recently made road privatization even more attractive by cutting the window for filing environmental lawsuits and allowing private firms to float tax-exempt bonds, said Tyler Duvall, a deputy assistant secretary for the U.S. [This means the banks that back these guys up will be getting all their interest TAX-FREE!!!]

Department of Transportation. Environmental objections to road construction now must be launched within six months, not six years. The tax change, meanwhile, can eliminate millions in borrowing costs."

This is because our spineless congress will not do what our Constitution mandates they do - control our money supply for the benefit of the people - not the bankers!

At Saturday, April 01, 2006, Blogger Unknown said...

This is a very timely topic. Highway 407 ETR (electronic toll route - full-seed transponder technology) in Ontario, Canada was built by a European Consortium and there were enough loopholes in the contract to bilk users for all they were worth and sending disputes to collection agencies. I stopped using the highway a long time ago. Yesterday, it reached a compromise with the government and appointed an ombudsman.

Governments come and go, but consortiums last much longer. The whole idea of national infrastructure in private hands is going to meet a bitter end, sooner or later -- either by complete co-option of governments, or by forced re-nationalization by populist governments. That throws a wrench into the law of contract.

Fortunately, all these cycles have been repeated in many countries around the world. As our public resources dwindle, we in the US are mirrorring many of the problems that the rest of the world has been experiencing at the hands of moneychangers.

At Saturday, April 01, 2006, Anonymous Anonymous said...

This is a great article. I have been fighting the "Trans Texas Corridor Project" here in Austin, Texas, for years. (I refer to these as the NAFTA corridors.)

One thing I think needs to be brought more to forefront in this discussion is the fact that our government is not really short on funds to take care of infrastructure.

The people who talk about the CAFR (Comprehensive Annual Financial Report) like Walter Burien and others allude to the possibility that all levels of governmental entities actually have a hidden off-budget fund that is gigantic. This is either true or not true. I tend to see it as true.

Here in Texas, the Governor and his cabal (all disgusting "Republicans" in the pocket of George W. Bush and company) secretly moved money out of each of state's regions' road account at the Texas Department of Transportation and in to his Trans Texas Corridor Fund and other secret accounts. That set up the "financial crisis" that was then "sold" to the citizens which provided the pretext for another aspect of the Corridor bill which was the triple taxation of the conversion of exisiting, already paid for, city and state highways. (Triple because we taxpayers already paid for their construction, are now being made to pay for their conversion to toll roads, and will pay about $2000 per year in tolls to get to work and play.)

So they have inflicted on us the typical Hegelian dialectic or what we call the "problem reaction solution" plan. They created the phony "financial crisis" situation. Then, they let we the pitiful people react and flailing around futilely trying to fight and stop this, all the while holding phony "open houses" for citizen input meetings. They moved forward with the corridors and toll roads which is their pre-planned solution.

It is giant corruption. Every single one of our state representatives and state senators, one hundred percent of both houses, voted to inflict this fascism on Texans.

The roads are now being constructed with illegal aliens construction workers and horribly shoddy and dangerous construction work.

I do not know how to fight this, but at present I must work alone. I send emails and letters naming names and telling it like it is. I will not work with any group that works within the dialectic and dialogs in phony "visioning" meeting to predetermined consensuses.

I am thinking that crowds of people picketing our politicians residences telling them to abide by their oath of office or expect even more direct consequences to their person. Sound extreme? I do not think so.

At Saturday, April 01, 2006, Anonymous Anonymous said...

I've long given up hope of the American people ever waking up. They ham and yawn incessantly about how America is the most free country in the world and they actually believe it. I've given up feeling sorry for them, now I think they deserve everything they have coming at them because they are so abysmally stupid and willfully ignorant.

At Saturday, April 01, 2006, Blogger jomama said...

Like the man said, your gummint is outta cash.

Outta town without even an Amerikun Express card.

What will you do?

At Saturday, April 01, 2006, Blogger vper1 said...

What will you do?

Move in with jomama.

At Saturday, April 01, 2006, Blogger qrswave said...

Some interesting information: Goldman Sachs
Top Recipients Among Federal Candidates, 1990-2004

* Jon S. Corzine (D-NJ) $581,870
* George W. Bush (R) $527,549
* Charles E. Schumer (D-NY) $457,690
* John Kerry (D-MA) $342,750
* Bill Bradley (D) $310,650
* Jack Ryan (R-IL) $214,161
* Rick A. Lazio (R-NY) $192,300
* Alfonse M. D'Amato (R-NY) $183,950
* Tom Daschle (D-SD) $150,500
* Hillary Rodham Clinton (D-NY) $148,980
* Chris Dodd (D-CT) $146,516
* John Edwards (D-NC) $144,500
* Bill Clinton (D) $138,359
* Evan Bayh (D-IN) $131,700
* Nita M. Lowey (D-NY) $123,290
* Arlen Specter (R-PA) $109,750
* John McCain (R-AZ) $105,720
* Kay Bailey Hutchison (R-TX) $94,100
* Al Gore (D) $92,750
* Joe Lieberman (D-CT) $89,250

At Sunday, April 02, 2006, Blogger AJ said...

..." Sound extreme? I do not think so. "

My thoughts exactly.I am right there with you.

Excellent article Qrs and superb research.

I lived in Chicago for many years. The blatant corruption was appalling.

Example: They had built a brand spanking new highway cutting north through town from I5, following just west of downtown through Schaumburg. Of course this was in Cook county jurisdiction. Less than a year later, they had torn up several lanes of this beautiful road to "repave" it. Unfu*king believable.

Another example:
10 years ago the Chicago O'Hare airport was taking bids for those automatic toilet seat paper surround machines. The contract went to the Chicago company (how cozy), even though it costs several million *more * (per year)-than the nearest German Company that was bidding for it. The reason quoted by Chicago? "Very complicated electrical components require a company close by to facilitate problems."
The Germans response:
"We cannot understand how Americans do business. How complicated is a small motor plugged into a wall outlet?"

In response to your comments on foreign ownership/leases:

What is worse? That we allow the corruption and incompetance of local and federal government to continue and end up with even greater incompetance and worse service, or letting the morons have some money up front in the hopes a private group can bring some sense of reality/competance to operations? I would rather pay a little more for a road that doesnt have potholes large enough to destroy two $75.00 tires- and Chicago had PLENTY of those.

At Monday, April 03, 2006, Blogger Michael Price said...

"The Australians launched a sister company in the United States in December 2004. Since the $25-a-share initial public offering, Macquarie Infrastructure Co. Trust (MIC on the New York Stock Exchange) has climbed to $34.45.

Counting reinvestment of the hefty $2-a-share dividend, investors have made a 45 percent total return since the company went public 15 months ago.[!!!]"

I wouldn't take Macquarie Bank's profit reports too literally if I were you. There are big questions about their accounting practices.
"EMMA ALBERICI: Traffic analyst Dr John Goldberg is one predicting doom and gloom for this growing network of private toll roads. He's recently completed a 5-year analysis of two of the country's biggest - Melbourne's CityLink project and the M2 in Sydney. His reading of the financial foundations for these private roads is explosive.

JOHN GOLDBERG: The traffic forecasting is a tool of the financiers. They're there to serve the interests of the bank modellers. I've been disgusted, frankly, at the ethical standards of some of these people, you know, both in Melbourne and in Sydney. They know they're doing wrong but they're paid to do it.

EMMA ALBERICI: CityLink is owned by the Transurban group and makes up 65% of its income. The M2 motorway was Macquarie Bank's first toll road. It was floated on the stock exchange at $1. When it was sold to Transurban earlier this year investors received $10 a share. It looks like a licence to print money but is it? John Goldberg says the share prices of toll roads are being propped up by borrowed money and government tax breaks and he claims the long-term debt picture is much bleaker than the company's originally published.

JOHN GOLDBERG: The prospectuses are based on the Macquarie Bank models and they're frankly misleading or let's say they're deceptive and people think that in the long term super funds are going to get these huge returns when in actual fact the project themselves are drowning in a sea of debt. It's becoming like a mini Enron, this thing.

MARK BIRRELL, INFRASTRUCTURE PARTNERSHIPS AUSTRALIA: What we're trying to ensure, I think, in Australia is that people will invest in more infrastructure, knowing very well we can't just rely on governments to provide infrastructure - we need more than that.

EMMA ALBERICI: As far as the infrastructure industry is concerned, there's plenty of practical, sensible reasons for private enterprise to take on big ticket public projects. Mark Birrell, who chairs the Industry Group, is a former minister for Major Projects in the Victorian Kennett government.

MARK BIRRELL, INFRASTRUCTURE PARTNERSHIPS AUSTRALIA; For a large risky investment like this to go ahead, the private investor has to know that, say, over 20 to 25 years they're going to get a fair return. That is their call. But they're taking a risk on that as to how many people will want to use the tunnel. They're the ones if it doesn't work who pay the price.

EMMA ALBERICI: Well, not exactly. There are some pretty solid taxpayer-funded guarantees that protect the private operators against losses. Here in central Sydney, for example, the State Government is acting to make sure the toll tunnel gets its share of traffic by closing and narrowing alternative routes. They call it "traffic calming" but it's anything but.

MARK BIRRELL: This one has been controversial. I think in many ways we've learnt a lesson, the operator has learnt a lesson, that you have to have more communication with the public about what is going to occur. There shouldn't be any surprises.

EMMA ALBERICI: The roads in the Macquarie Infrastructure Group and Transurban portfolios struggle to make a profit on toll revenue alone but they still manage to pay out generous dividends to investors of 25% plus hefty fees to investment banks. That's helped make Macquarie the share market darling it is. They've relied less on actual traffic flows and more on notional cash flows, money generated by big bank loans and a generous tax deal called the infrastructure borrowing tax offset scheme.

JOHN GOLDBERG: They're getting 40% - Transurban is - 40% of its revenue from the tax offset scheme, 35% in the case of M2. And yet what is most interesting, particularly for the Transurban case, is that there's no net profit even with that contribution from the infrastructure borrowing scheme."

At Thursday, June 01, 2006, Anonymous Anonymous said...

Seems like an example of the business is required here, so here is the OHIO TURNPIKE COMMISSION CAFR (Comprehensive Annual Financial Report) for 2004.

Pay special attention to the GASB notes per statements 34 and others. Also after you read the notes and disclosures per the BONDS issued, see if you can pick out how they are funding their own bonds by investment or have the money available and stashed away to pay the bonds ( a liability ) in full at this time.

The link to download the report as a .pdf file is:


Look and learn!

Walter Burien

At Friday, June 02, 2006, Anonymous Anonymous said...

see a pattern here ??

goldman sachs is 'consulting' on illinois' selling/leasing of the illinois lottery

credit suisse is 'consulting' on illinois' selling/leasing of the illinois tollway

all this, with a 'democratic' governor

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