On July 9, 2012, Dan Weikel and Ralph Vartabedian report in the Los Angeles Timesthat the French railway recommended that the State of California build the rail line along the Interstate 5 corridor and partner with it or another foreign firm to hold down costs.
As state officials accelerated their effort to design a high-speed rail system in 2010, they were approached by the renowned French national railway with a suggestion: The project could use the help of an experienced bullet train operator.
Until the end of last year, SNCF, the developer of one of the world’s most successful high-speed rail systems, proposed that the state use competitive bidding to partner with it or another foreign operator rather than rely on construction engineers to design a sophisticated network for 200-mph trains.
The approach, the French company said, would help the California High-Speed Rail Authority identify a profitable route, hold down building costs, develop realistic ridership forecasts and attract private investors — a requirement of a $9-billion bond measure approved by voters in 2008.
But SNCF couldn’t get its ideas — including considering a more direct north-south route along the Central Valley’s Interstate 5 corridor — out of the station.
Instead, the rail authority continued to concentrate planning in the hands of Parsons Brinckerhoff, a giant New York City-based engineering and construction management firm. Although they have occasionally consulted with high-speed railways, officials decided that hiring an experienced operator and seeking private investors would have to wait until after the $68-billion system was partially built. Last week, the state Senate approved — by a single vote — $8 billion to get construction underway.
Once again, taxpayer monies and pledges are being allocated to enrich private sector productive capital ownership interests in the name of “job creation,” instead of ensuring that the infrastructure project is financed so that the companies benefiting from the public-supported contracts broaden ownership in the resulting productive capital assets.
Today we accept as normal public ownership of gigantic capital instruments like mass rail, subways, government office buildings, universities, water systems, and power systems. These government-owned enterprises and services could be transformed into competitive private sector companies managed by Private Facilities Corporations with the use of the asset or facility leased to the normal using body. The wages of the Private Facilities Corporation(s) are passed through to the leasing body. This would allow us to build the ownership of what is now public capital into individuals and reduce the cost of government, including public pension systems. Thus, when you build the ownership into the employees of the Private Facilities Corporation(s), who now have a vested interest in its quality of operation and maintenance, the contracted lease rental fee committed by the government entity will give the employee stockholders a reasonable return and lesson or replace the need for supplemental redistribution programs.
As for transforming government-owned enterprises and services into competitive private sector companies managed by Private Facilities Corporations with the use of the asset or facility leased to the normal using body, another variation is the Citizens Land Bank (CLB), also referred to as the for-profit Citizens Land Cooperative (CLC) and Community Investment Corporation (CIC),” a term used since the 1960s. The Center for Economic and Social Justice (CESJ.org) is now using the term “Citizens Land Bank” to avoid confusion with the now-popular usage of “Community Investment Corporation” as a non-profit vehicle with no direct citizen share ownership.
Under this financial mechanism, tax incentives and infrastructure reforms would encourage Citizens Land Banks, which would:
1. Make debt service on a leveraged CLB (a special kind of REIT) established within an eligible Super Empowerment Zone a tax-deductible business expense (as with an ESOP), so that area voters without savings can purchase a major block (up to 100%) of a CLB’s voting, full-dividend-payout common stock on borrowed funds repayable out of pre-tax CLB corporate profits and dividends. To the area voter, the principal payment on their stock acquisition loans would be treated as deferred income until CLB benefits are distributed as consumption incomes.
2. Give the CLB tax-free status (as with an ESOP trust or an REIT) so that shares of CLB stock acquired by area voters and CLB earnings can be accumulated within individual CLB accounts free of taxes until the benefits are distributed to participants, generally on leaving the area. When distributed, the CLB benefits would be taxed the same as distributions from an ESOP or IRA.
3. To create an in-house market for CLB shares, require the CLB to plan for the repurchase of distributed shares through a tax-free liquidity fund within the CLB, thus adding to the shares of remaining participants.
4. Encourage the CLB to pay out dividends to area voters as supplementary incomes from their growing equity stakes in local real estate development by allowing CLB dividends (as with dividends on ESOP shares) to be taxable at the personal level but deductible at the corporate level. Together with the incentives of #1 and #2 above, this feature, by eliminating the discriminatory double tax on corporate profits, helps to restore private property in corporate equity.
5. Defer personal income taxes on CLB-sheltered stock accumulations of area voters until the stock is distributed, sold and converted into spendable income. Allow the CLB participant a tax-free “roll-over” into a tax-exempt “Individual Retirement Account”, i.e., to further delay paying personal income taxes if the cash proceeds are re-invested into securities of other private sector equity investments. The objective here is to encourage savings and investment and to provide new sources for financing new ventures.
6. Similar to #5 above, provide a tax deferral to the seller of stock to a CLB (e.g., joint venture partners and other CLB investors) from any proceeds on the sale, provided that the seller re-invests the cash proceeds in securities of other productive enterprises within the Super Empowerment Zone. This simultaneously reinforces both the goal of expanded share ownership opportunities and of providing new sources for financing development within the zone.
7. Require an annual independent professional appraisal of the fair market value of CLB shares and provide regulatory oversight of CLBs to minimize abuses, promote understanding, disseminate reliable information on the CLB among area voters, and generally protect the property rights of CLB participants.
8. Monetize private sector productive credit by making “eligible” CLB and ESOP loans (as determined and allocated by local banks) within Super Empowerment Zones eligible for discounting under Section 13 of the Federal Reserve Act. New money issuances would be subject to 100% reserve requirement and made at a discount rate limited to a low Fed “servicing fee.” This reform would radically reduce capital credit costs, accelerate private sector growth rates and increase the competitiveness of enterprises within Super Empowerment Zones, reduce dependency on tax subsidies, and broaden citizen participation in capital ownership and profits.
http://www.latimes.com/news/local/la-me-rail-advice-20120709,0,4539140.story
