The public agency responsible for operating California’s largest network of toll roads is now looking to federal taxpayers for financial help. The Los Angeles Times reports that the Transportation Corridor Agencies (TCA) have asked the US Department of Transportation for a record $1.1b in TIFIA loan support to avoid collapse. TCA’s 51-mile system of roads generated $294m in yearly revenue. Now, motorists hammered by record gasoline prices have decided to save money by avoiding the 73, 133, 241 and 261 toll routes. Still, as late as June, TCA officials insisted that their public-private partnership model protected taxpayers. “The toll roads are designed and built with proceeds from the sale of toll revenue bonds, which are repaid entirely by tolls collected on the completed road,” TCA spokesman Jennifer Seaton wrote in an email to TheNewspaper. “No tax dollars are at stake.” The construction cost of the TCA toll roads was $1.7b. Since 1998, TCA has also levied $420m through developer fees that are passed on to taxpayers. Around 23 percent of the money collected from drivers so far has gone solely to cover the expenses required to run the collection systems, according to a report by the Washington state Department of Transportation (read report). By comparison, collection cost for the state’s eighteen-cent fuel excise tax is just 0.69 percent.
Category: Taxes
Automotive News Europe [sub] is hosting a point-counterpoint throwdown on the proposed 40b Euro bailout of European automakers. And like the debates we’ve survived over the last few weeks, even the pro-bailout advocates can offer only qualified support. At best. ANE Chief Correspondent Luca Ciferri jumps into his argument with the ambivalence that a billion-dollar giveaway demands. “Would I be happy to contribute some of my tax money to the European industry?” Ciferri asks himself rhetorically. “Not at all,” comes the answer. Great, so why do it? Because the Americans, Koreans, Japanese and Chinese all do it. Despite the fact that European automakers have garnered strong reputations on their own merits. Meanwhile, ANE Editor-in-Chief Arjen Bongard lays into the plans with gusto.
Fresh off his recent membership in TTAC’s Cassandra club, Daniel Howes of the Detroit News has gone back to spinning bad news into industry gameplans. His latest column extolls the virtues of a GM-Chrysler merger, while admitting that such a move would be disasterous for everyone except GM and Chrysler. “Seen from the viewpoint of blue-collar labor, white-collar employees, local governments, dealers, the state of Michigan and the industrial Midwest, just about anyone whose livelihood depends on the dubious survival of Chrysler would pay a dear price,” writes Howes of a possible GM absorption of Chrysler. But, from the narrow perspective of an industry suit, these myriad viewpoints are just so much firewood to be burnt at the altar of survival. And Howes is conveniently on hand to stack it up and pass the matches.
As bailout fever sweeps the globe, no automaker wants to be the only manufacturer on the block without a fat government check. Automotive News Europe [ANE, sub] reports that Jaguar/Land Rover CEO David Smith recently hit up UK Prime Minister Gordon Brown for a few bob. “The bold and concerted actions announced by our government this week to unblock the banking system and the vital first cut in interest rates from the Bank of England are welcome, but we still need to take action to stimulate the real economy,” Smith tells ANE. Smith declined to put a number on just how much “action to stimulate the real economy” Jag/Landie required. And though the boss of the proud British marques hit the right PR notes with his use of the term “our government,” he was also being a bit misleading. After all, has Old Blighty forgotten that Jaguar/Land Rover now belongs to those upstart Indians at Tata? Sure, the two brands build cars in England (for now). But is Downing Street really going to break out the bankroll to help Mumbai’s bottom line? Not bloody likely.
There was a time when $10m seemed like a lot of money. It still does to me personally, but on the scales of corporate and government finance it is, well, almost nothing. Lest we forget, Ford’s lining-up for its share of $25b in low-interest loans provided by you [via The Department of Energy] to retool its way out of a sea of red ink (in theory). Meanwhile, the AP dutifully reports that Ford’s receipt of a $10m Department of Energy grant to cover half the cost of a planned 20 vehicle plug-in Escape test fleet. “Ford is working on a three-year project to demonstrate the vehicles and understand how they will interact with utilities around the country, a key step in commercializing cars that can be recharged by plugging into a standard wall outlet.” At one million bucks per test vehicle, they’d better be good!
Financially-challenged Pennsylvania motorists can breathe a sigh of relief, as The Newspaper reports that “Abertis announced the Spanish-led Pennsylvania Turnpike Partners (PTP) consortium had dropped plans to lease the Pennsylvania Turnpike until the year 2083.” In a statement, Fat Albert said “Hey, hey, hey! We don’t have the cash to play!” OK, they actually said “Progress in the approval process, which is taking longer than expected, alongside uncertainties in financial markets are behind the decision, which will give the partners of the consortium more freedom to assess other opportunities and projects, some of which are in part related to the current situation.” And most of which aren’t. And that “longer than expected” bit refers to state lawmakers rejecting a proposed 25 percent hike (plus annual 2.5 percent rises) in tolls. Hey, and it’s win – win! “Fitch Ratings responded to the announcement by removing the Spanish company from its ‘Ratings Watch Negative’ list. The ratings firm believed Abertis would have had trouble raising the $3 billion in capital needed to begin the Turnpike takeover.” [TTAC is proud to announce that The Newspaper has agreed to simultaneous posting of its future articles]
The Newspaper steps up to the platform and says, “You must be joking son, haven’t we paid our dues?” (Steely Dan fans need apply). In other words, Maryland, Tennessee and Missouri are all contemplating adding highway speed cameras to their revenue generating highway safety schemes. “Officials from Maryland, Missouri and Tennessee joined Illinois Governor Rod R. Blagojevich (D) at a two-day event designed to promote the use of speed cameras on freeways throughout the country.” Although the Newspaper doesn’t tell us any more about this highway hoedown (‘ho down?), it does give us a heads-up on Illinois’ entirely predictable plan to extend speed cameras from their current construction work sites to the rest of the state’s highway network. The good news? The Newspaper reminds us that democracy knocked-down Connectitcut’s highway speed camera scheme, so the Prairie state’s plans may also get scuttled. And, with a bit of luck and a few of your emails, MD, TN and MO’s scameras may never see the light of day. Not that I’m not objective on this issue…
General Motors is busy negotiating new tax breaks from Michigan and not Michigan (to hold a sword over Michigan’s head). Automotive News [sub] details GM’s latest game of taxpayer dodge ball. “As laid out in a company proposal seeking tax and brownfield incentives from the state, the potential project targets five sites in Michigan for expansion, improvements, new construction, renovations and installation of new machinery and equipment.” Under the current terms of the $25b Department of Energy auto loan program, the money can only be spent on retooling old factories for production of fuel efficient vehicles, of which the Volt is GM’s prime candidate. “The MEDC [Michigan Economic Development Corporation] said it expects the Volt project to retain 14,380 jobs and generate $644.3 million in state government revenue by 2023. The MEDC recommended that the Economic Growth Authority approve a 100 percent employment tax credit for 15 years. To receive the tax credits, GM would have to retain at least 2,000 ‘qualified full-time employees’ at the five sites. The company now has 21,718 employees at the sites.” So, tens of millions of dollars in tax credits? Yup. Done deal. Wagoner pops-in to Flint on Thursday to reveal the good news. And yes, I know: they all do it.
The Buffalo News reports that its elected officials seem curiously reluctant to downsize from government-sponsored SUVs. “Lackawanna Mayor Norman Polanski started driving a taxpayer-funded Ford Escape after he blew the engine in his personal Plymouth Voyager after driving through the old Bethlehem Steel site on city time [of course]. He said his new vehicle was chosen for him from a state bid list. Asked if he would consider getting a vehicle that got higher gas mileage, he said those vehicles tend to have higher sticker prices than the $17,000 the city paid for his SUV.” So what about Lancaster Supervisor Robert Giza’s $27k, city-financed Chevrolet Tahoe? “Giza did not return phone calls for this column, but he earlier said his previous vehicle — also an SUV — had taken a beating during the October snowstorm two years ago and that he frequently drives in off-road conditions, such as quarries or railroad beds.” Hamburg Supervisor Steven Walters’ $18,000 Ford Explorer? “His last car was a Ford Crown Victoria, known for its massive engine and commonly used by police departments and that his new SUV is actually getting better gas mileage. Second, he noted that he lives in the Snow Belt, where four-wheel drive is almost considered a necessity. (He said his former vehicle got stuck in his driveway three times.) ‘In this job, you do have to get out when the roads are not plowed,’ he said. ‘It’s not extremely frequent, and I certainly don’t want to mislead anyone to think that this is happening every other day, but it does happen.'”
The Newspaper does it again, exposing the hidden cash grab behind the blogger’s bugaboo: red light cameras. “In 2000 the Los Angeles County Metropolitan Transportation Agency signed a $3,497,960 contract with a Dallas-based firm, now known as Affiliated Computer Services (ACS), to issue pricey photo citations at seventeen railroad crossings. The county further ordered the company to keep a steady flow of tickets, or face corrective action… The contract sets as the baseline that the company must issue 25 tickets for every 100 alleged violations recorded by the machine. These recordings include any number of situations where either no real offense took place, or the driver cannot be positively identified — as required under California law. Nonetheless, if the total number of citations mailed falls under 25 per 100, the corrective steps must be taken to boost the number of citations mailed. In effect, this provides a direct incentive to the contractor to issue tickets regardless of whether the machine properly captured a true violation. There is no penalty under state law for a contractor to guess, for example, a license plate number when the image is unreadable.” As I don’t want to be responsible for mass blood boiling, I won’t tell you about the memo from a Roseville police chief telling his pencil pushers how to hide the hypocrisy. Suffice it to say, the safety argument doesn’t seem to be anyone’s primary concern in all this.
The Newspaper reports that the California state legislature has blessed AB3021, a measure that will expand toll roads throughout the Golden State. The CA trip A ain't too pleased with the provisions contained therein. "We support the use of tolls as one option to pay for new infrastructure; however, because the very broad toll authority proposed in this bill is not limited to new construction and because revenue from the tolls could be used for a wide array of transportation and related efforts (well beyond the roads, streets, and highways used by toll payers), we must oppose the bill. Those goals should not inappropriately be placed on the shoulders of motorists by allowing the widespread tolling of facilities already paid for by existing taxes without clear and direct benefits for the toll payers." In other words, the cash cows will graze freely while providing precious little milk for the motorists paying through the nose for the farmers' livelihoods. Or something like that.
As Detroit gears up for the beggar-bowl bailout-fest, the Volt is taking center stage as, well, the only reason to invest in Detroit's future. We already know that GM is pushing hard for consumer tax breaks to bring high-flying MSRP estimates down to earth, but it seems production incentives will be the first Volt-related handouts out of the gate. MLive.com reports that Flint's city council has approved three tax incentives worth tens of millions of dollars to bring Volt engine production to the rustiest town in the rust belt. GM's Volt engine plant is expected to cost the company $359m before incentives, and will "preserve" some 300 jobs. The exact cost to Flint taxpayers is as yet unknown, but the city is clearly bending over backwards to reinvent itself as the home of Detroit's energy-efficient renaissance. Flint has agreed to cutting 50 percent of the Volt factory's real property taxes, saving GM $6m, but also bringing in $6m in new property taxes… so far, so tax-neutral. But the city council has also agreed to abate 100 percent of the new factory's personal property taxes, meaning all factory equipment would be tax-free until 2033. Savings to GM from this measure are as yet unknown, but are expected to eclipse the $6m in real property tax savings. The city also agreed to designate the site of the factory a brownfield redevelopment site, making it eligible for state incentives which GM is still pursuing. Flint also approved a fourth undefined tax break to extend the renaissance zone through 2023 for the existing Flint Tool and Die plant. Complaints from a former local NAACP leader that such incentive mean that the Volt engine will be "built on the backs of the working poor" went ignored, as the eco-friendly backslapping from industry and government carried the day. This, ladies and gentlemen, is what we call a preview of coming attractions.
And so it begins. The Wall Street Journal' s lead editorial makes it perfectly clear that Motown's plans to tap your taxes is well advanced. And guess what? It's a god damn conspiracy! "Earlier this month… the top dogs at Ford, GM and Chrysler had a meeting of the minds and decided that the way out of their current losing streak would be to ask the feds for a lifeline. They figure they'll need $40 billion or so to ride out their current troubles until they reach the promised land of hybrids, the Chevy Volt, and, who knows, maybe even profits. We've since heard that lobbyists for the car makers are taking their pitch for direct federal loans around Washington, with a goal of unveiling the plan after Labor Day — conveniently in the frenzy of the fall election campaign. They've briefed Congressman John Dingell, the dean of Michigan Democrats, as well as officials in the Bush White House… The plan is for the government to lend some $25 billion to auto makers in the first year at an interest rate of 4.5%, or about one-third what they're currently paying to borrow. What's more, the government would have the option of deferring any payment at all for up to five years." TTAC will have an editorial on this shortly.
Nissan's taking a hit where it didn't expect, thanks to their failing full-size truck sales. According to the Madison County Journal, when Nissan built their plant in Canton, Mississippi, the automaker struck a deal with the county for accelerated depreciation on machinery. The company claimed it would depreciate faster, as it would be "used more frequently across multiple work shifts." Obviously, the local politicians would have said yes to a back massage write-off clause to get the plant. So they agreed. But things aren't working out quite like they planned. The county pays $1.67m per year on debts related to incentives they bestowed upon Nissan. Last year the plant only brought in $1.64m in taxes. And now that the plant isn't generating the estimated tax revenue due to production cuts, the county wants to tax the machinery using a standard depreciation scale. Of course, Nissan protested, saying "the assessment should not be based on a bond payment, it should be based on true value… nothing has changed to take away from the spirit of [the original] agreement." The county says that that may have been the case originally, but running two shifts instead of three changes the equation and doesn't wear out the machinery as fast. The county board of supervisors passed the new tax assessment unanimously. Anyone want to place any bets on whether Nissan will invest any more on expanding their operations in the Magnolia State?
I'm flabbergasted. Presidential hopeful John McCain (or someone on his staff) pens an opinion piece for The Detroit News and the paper doesn't make ANY mention of the Arizona senator's bespoke opus on their on-line home page OR the Autos section. In fact, I would have missed McCain's rant entirely if not for an article in… The Detroit Free Press. WTF is that all about? Anyway, John is holding fast to his "no federal bail out for losers" position. Per se. "With a transition to alternative-fuel vehicles, we can rejuvenate the auto industry, drive cheaply and cleanly and be more secure. I will bring customers to the showroom with up to $5,000 in tax credits to encourage the purchase of these cleaner cars." Did he say American cars? No? Shit! Chill Motown; McCain's left himself some mighty fine wiggle room. "I will continue to meet with the leaders and workers of the Big 3 automakers. If the industry should need federal assistance, I will consider any reasonable proposal they develop that moves the industry to a more stable and prosperous future." So I guess that means McCain still considers it unreasonable to suggest that a federal bailout is reasonable. Or the other way around.
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