DJ Gribbin of Macquarie hits Bingaman-Grassley bills

A senior Macquarie official, DJ Gribbin, managing director Macquarie Capital, New York, has penned a sharp critique of the toll concession legislation (S884, S885) introduced by US senators Bingaman and Grassley, saying it is surprising that they would propose disincentives to private investment at this time. The two-page commentary (attached below) says the stated concerns of the senators are already met through competitive bidding which ensures that the benefits of current tax laws flow through to the government owner of the asset, not the concessionaire.

Bids submitted to the states for road privatization will be reduced by about the amount of any tax disadvantages created.

Gribbin's "Summary and Talking Points" paper notes that S884 would discourage states and locals from doing concessions by reducing federal apportionments for any highways operated under private toll concessions -  excluding miles-traveled and lane-miles from federal-state funding formulae.

State and local toll operations don't detract from federal funding, so the proposal simply punishes states which choose to privatize tolling, as opposed to doing public authority tolling.

If inclusion of tolled vehicle-miles traveled and tolled lane-miles in federal funding is "double dipping" as the senators charge for privatized tollroads then that applies equally to public tollroads.

Gribbin says S884 embodies a "federal-centric, zero-sum-game" view of funding, suggesting that far from collecting more tax from a given volume of private deals for state roads, it will diminish those.

"The legislation creates an unprecedented penalty for one model of infrastructure delivery. (It) could effectively remove from the table one model for funding surface transportation infrastructure by making it politically unpalatable."

Reducing annual write-off allowed

S885 would discriminate against tollroad concessions by abandoning the standard 15 year depreciable life in the tax code for a whole class of similar longterm leases. For tollroads they would stretch it out over the life of the asset, or the concession period.

Writes Gribbin: "Such a change in tax treatment would make P3 concessions less attractive and would either reduce the concession payment to the asset owner or limit the scope of work that could be constructed under a P3 concession."

see

http://www.tollroadsnews.com/sites/default/files/GribbinS884,5.DOC

TOLLROADSnews 2009-05-18