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Trump's Infrastructure Scam

W

WFFaithful

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Follow the money. Messrs. Navarro and Ross propose an 82% tax credit to attract private-equity investors into the infrastructure business. Yes, 82%! A $3 billion public-private “partnership,” according to their plan, could be financed like this: $2.5 billion in municipal bonds, $410 million in tax credits from the federal government, and $90 million in private equity. This means $90 million in private money winds up controlling a $3 billion asset. Mr. Trump likes leverage, but isn’t 33-to-1 a little ridiculous?

What return on capital would private investors demand on such investments? Messrs. Navarro and Ross say between 9% and 10%. Add in the general partner’s carried interest, and that is about 12%. It could be higher, however. History suggests that building roads and bridges is not a low-risk investment. According to a 2015 Congressional Budget Office report, 14 privately financed road projects have been completed in the U.S. since 1995. Of these, three went bankrupt and one required a public buyout—29% failure rate.

By contrast, the New Jersey Turnpike authority can still borrow for 30 years at 3.4% despite the best efforts of Gov. Chris Christie to destroy his government’s credit rating. States with higher ratings pay less.

So much for financing. What about selecting projects?

To attract private money, projects must offer investors cash returns—derived, for example, from tolls on highways. In some cases, this is possible, even desirable. But for many important projects, charging fees can be impractical. Think of building schools in poor neighborhoods or repairing crumbling bridges that have no tolls.
Click to expand...

http://www.wsj.com/articles/trumps-infrastructure-mistake-1482099189
 
Can't wait for a big fat infrastructure failure next. Republicans aren't going to want to sign off on spending a trillion dollars and democrats aren't going to sign off on tax give aways and credits for private companies.
 
They'll shake down the poors and make them out skin in the game.
 
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