Bacon's Rebellion

There’s a very interesting story lurking within Len Gilroy’s column, “Another One Bites the Dust.” Gilroy tackles the idea that privately financed public-private partnerships are a bad deal for motorists because the private sector can’t avail itself of tax-free bond financing like state and municipal governments can.

In the last few weeks, the Pennsylvania Turnpike Commission issued $177 million in tax-exempt bonds at a 4.89 percent interest rate. Transurban, the major investor in the Interstate 495 HOT lane project, went to financial close earlier this month on $589 million of 40-year, tax-exempt bonds with an average interest of 4.97 percent, and $587 million in TIFIA loans at 4.45 percent for 40 years.

Bottom line: Transurban has a lower cost of capital than the Pennsylvania Turnpike Commission.

How did Transurban get such low financing? Writes Gilroy: “Because private investor-operators can tap into both federal tax-exempt financing vehicles and robust global capital markets, they can structure sophisticated financial arrangements at highly competitive rates that can neutralize the public financing’s supposed advantages.”

As the special session convenes today, the General Assembly has got transportation on the brain, and so do we at Bacon’s Rebellion. Indeed, it’s pretty much transportation and land use from start to finish for the June 23, 2008, edition of Virginia’s preeminent public policy e-zine — with a dash of other topics to keep things from getting monotonous.

(Don’t miss a single issue of the e-zine. Subscribe for free — just click here — and have it delivered to your in-box.)

The War on Sprawl
Andrew Jackson had his “kitchen” cabinet. Tim Kaine has his “sub” cabinet: five secretaries whose job is to marshal state resources to promote smart growth.
by James A. Bacon

Finding Common Ground
There is no other way to conduct the public business successfully. Let us hope that the lawmakers convening in Richmond today take heed.
by Doug Koelemay

Shaping a Functional and Sustainable Future in Greater Warrenton-Fauquier
by EM Risse

Another One Bites the Dust
Another toll-road myth — that governments can access cheaper infrastructure financing than the private sector — has been demolished. The proof? Transurban’s experience in Northern Virginia.
by Leonard Gilroy

A Transportation Reform Agenda
A comprehensive solution to transportation in Virginia requires a lot more than raising taxes and spending money. We have to change the way we fund and administer roads and rail.
by Michael Thompson

On the Eve of Battle
Republicans are bracing for a confrontation this week over transportation taxes and spending. Here are the thoughts, extracted from the first Tertium Quids podcast, of some GOP leading lights.
by Norman Leahy

Richmond vs. Charlotte: an Update
Charlotte, N.C., snarfed up Richmond‘s big commercial banks in the early ’90s, a coup at the time. Fifteen years later, the sub-prime fiasco is pinching Richmond, but it’s putting the Tarheels in a world of hurt.
by Peter Galuszka

Audit Time
Before jacking up taxes and throwing money around, let’s audit the plethora of Virginia transportation-related agencies and authorities, define clear goals and set priorities for spending.
by Ron Utt

Power Surge
Big increases in electric rates are all but inevitable in Virginia. Consumers need to be educated about their options before they get shocked by their electric bills.
by Barbara Kessinger

Nice & Curious Questions
Finding Felons in Virginia: Bounty Hunters in the Commonwealth
by Edwin S. Clay III and Patricia Bangs

My last post generated considerable e-mail traffic from members of the VCU community and I learned of a faculty meeting on June 19 to discuss it. Uninvited, I went to it and was allowed to stay if I respected the participants’ desire for confidentiality. Here are excerpts from a post I did for R’Biz on richmond.com:

Virginia Commonwealth University could risk its national reputation among scientific researchers, its ability to win research grant money and its credibility in the local community if it continues with secretive research agreements with Philip Morris USA, a group of VCU faculty discussed at an on-campus meeting yesterday.

Eighteen faculty and researchers came to the meeting at the Student Commons building to discuss concerns stemming from a “research service agreement” that VCU entered into in 2006 with the locally-based tobacco firm. The terms of the agreements forbid discussion about the contracts and require VCU to immediately alert Philip Morris if the news media asks about them.

The existence of the research contracts was revealed in a front page article in the New York Times last month, touching off a controversy about the manner in which VCU conducts research. Since then, VCU has been castigated by experts from other research institutions across the country and among informal blogs linking the VCU community with other scientists. VCU President Eugene Trani says that the agreements are not basic research but are commonly-used consulting agreements. According to Trani, the secrecy and special conditions involved with the contracts are necessary because of proprietary material involved.

At the meeting, the faculty discussed rumors and fears that seem to be abounding at VCU. It was said that faculty and administrators are so fearful of retribution if they question the tobacco contracts that they have been using their cell phones instead of the university phone system to talk about the matter and have been considering trying to file documents to protect themselves with the university human resources department.

A source of frustration for the faculty, they said, is that they cannot get information clarifying Philip Morris’s relationship or future relationship with several major VCU health projects, including the Massey Cancer Center, the Women’s Health Center and the proposed School of Public Health.

Some faculty involved in community outreach noted that if VCU specialists try to promote health in inner cities or other neighborhoods, their credibility could be compromised. It was pointed out, for example, that if VCU workers try to encourage children at Boys and Girls Clubs not to start smoking, they might have a difficult time if it is known that VCU encourages tobacco funding of its research.

Trani has appointed an internal task force to review VCU’s corporate-sponsored research and prepare a report by Oct. 1. The report will later be sent to the school’s Board of Visitors.

One possible point of conflict involves Dr. Francis Macrina, VCU’s vice president for research, who is heading the investigative committee into corporate funding. Faculty members raised questions about possible conflicts of interest within the review committee. They noted that Macrina is head of the review committee although he oversaw the negotiations of the contracts that touched off the corporate funding controversy.

The research service contracts with Philip Morris involve a total of about $284,000 and involve studies of pulmonary disease and wastewater pollution. VCU provided this reporter with copies of the Master Service Agreement under the Virginia Freedom of Information Act, but refused to provide specific “task orders” that give details about the actual work to be done.

For more details, see R’Biz in richmond.com.

— Peter Galuszka

The NY Time’s Jay Tierney has a good post that is also a useful tonic for what seems to be a creeping Malthusian trend on the Rebellion of late.

He discusses an article by George Mason University economist Robin Hanson that focuses on “singularities,” the stunning advances that have completely transformed the way we do just about everything (think the creation of agriculture and the industrial revolution). Hanson believes we’re due for another such event, perhaps within our lifetimes. What might it be? Hanson thinks it could be intelligent machines (no, not Terminators) that will increase growth 60 to 250 fold over current levels.

It’s all a big guess, of course. But I think it’s a far more likely outcome than the ashen forebodings that are both easy and fashionable to embrace.

In other words: Chins-up, people!

WaPo had an interesting front page “analysis” by Neil Irwin this morning:

“Why We’re Gloomier Than The Economy: Consumer Anxiety Outstrips the Data.”

Earth to Neil: Citizens can Read.

They can read the headlines we noted in the recent post “HEADLINES, HEADLINES.”

They can read the other headlines on today’s front page of WaPo and every other MainStream Media Outlet:

“Iowa Flooding Could Be An Act of Man, Experts Say” and citizens know the era of Corps of Engineer ‘flood control’ providing ‘protection’ is past. They can shoot all the pigs on levies they want but the water will keep rising because the there is no storage area.

“Bush Calls for Offshore Oil Drilling, President Joins McCain in Seeking to Lift Long-Standing Ban” and citizens know Bush, McCain and Car Tax Gilmore all would like to barrow from the great grand children to buy a new belt instead of the addressing the consumption / obesity problem.

Citizens also know the economic data is cooked to make a ‘growth is good’ stew. All the economists MainStream Media quotes are paid directly or indirectly by the Business-As-Usual advocates who thrive on ever-expanding levels of consumption.

Finally, more and more citizens are coming to realize that MainStream Media is also an Enterprise that lives on advertising by those same Business-As-Usual advocates. See THE ESTATES MATRIX

EMR

Mr. Peter Galuszka took one for the team when he bought, read and reported on Thomas Sowell’s “Basic Economics.” I was unable to respond to his post in a timely fashion, so I’m posting here to show where our political perspectives from the Right and the Left blend on the basics of basic economics. Because, I theorize, we are both children of the Enlightenment and agree that rational empiricism is the foundation of good science.

Likewise, we might posit, jointly if I may presume so, that good governance for policy issues that involve issues with scientifically-based alternatives should rack and stack alternatives with clear links to rational empiricism. Analysis. Good analysis.

Here are my comments on Mr. Galuszka’s (PG) findings.

I would grade him with an A-. And I was a tough grader at the Department of Social Sciences, USMA. The minus comes from his last comment which is addressed at the end of this list.

I, too, used Paul Samuelson’s text on econ as an undergrad and went took economics at Keynesian grad schools.

But, what jumped out at me in Herman K. Bator’s bedsheet model of the macroeconomy was how little government spending did and how much productivity did. Nothing beat improvements in productivity as a single variable change in the olde GNP.

Since then I read Milton Friedman on the role of capital growth. But, even in grad school I got the idea that the way to cut the American pie for the American People better is, first, to grow the pie. Bigger slices for all are possible.

I agree with PG that unions are important. Unions and shareholders are the only checks and balances on corporate bad behavior. When the legislatures try to fix the corporate barn doors after the horses have run, they pretty much muck it all up for everyone – creating a new set of winners and losers in the business/government mixed economy.

I argue that unions and shareholders have vital roles in the future to provide the moral suasion needed on organizations run by sinful men (as we all are) and to protect the employees. My political issue with unions is ideological – and not pertinent here.

I agree that CEO compensation is out of whack. But, it isn’t an issue for government. It’s an issue for the unions, shareholders and the public marketplace of ideas.

The impacts of free trade are tough to live with. But, economic risk has always been brutal. The long range study I led (back in 90-92 for the period 2005-2015) pointed to the biggest single driver of change would be – domestically and internationally – political understandings (reactions) to economic changes. Whole regions can lose industries in no time. But, there are counters that can mitigate such events – to a degree – like Commonwealth Trust Accounts and SS that are individually owned. Producing more capital can offset the loss of an industry. New industries will be created.

I don’t see the problem with foreign corporations given our laws and shareholders – what is different now that is so scary?

My only complaint with PG’s findings is his comment about not seeing the application specifically for Virginia.

We need a Macro-Economic model of the Commonwealth. The GA could put together a consortium of our universities for a couple of million and get a first class model for tax policies. And the economic effects of transportation and land policies, as well as environmental policies.

We may still break Right and Left on issues, but where possible, lets do so from the same common economic analysis.