Rebuilding America before it’s too late
They all need to be in different places at the same time - rush hour. Can President Obama help?
Part of President Obama’s gigantic economic omnibus package (of stimulus!) are a number of interesting provisions that will contribute toward the improvement of America’s infrastructure. I’m talking roads, bridges, pipelines, waste water systems, power grids and much more. Rebuilding, retrofitting, remodeling and rethinking the way American commerce moves about this great nation is key toward expanding American business for a bright future. It will play a key role in our escape from the economic downturn. It will make America as great as it wants to be again, without short term loans and debt relief to prop it up.
And with Build America Bonds, it could just happen. Give it time and we’ll see what happens. In addition to infrastructure improvements, Build America Bonds projects will promote job growth and further the president’s commitment to greener industrial projects in America. Just don’t expect a full turnaround until Obama’s second term…
Further stimulus for a stagnant economy
Steven Strahler reports for Crain’s Chicago Business that the Illinois State Toll Highway Authority is “the first governmental unit in the state to issue Build America Bonds, part of the Obama administration’s economic stimulus effort.”
Build America Bonds are an attractive option for the country in that they offer a 35 percent federal interest-rate subsidy. The sale price of $500 million is “priced at a net interest cost of less than four percent,” writes Strahler. According to the Illinois State Toll Highway Authority, this “compares well with tax-exempt issues.”
Potential issuers of Build America Bonds at this point could be the State of Illinois or Cook County, among others.
Investors want a big piece of the action
Investors are chomping at the bit to get their hands on Build America Bonds. They have obtained more than $8 billion in the bonds from issuers like the New Jersey Turnpike Authority and the Sacramento, California Municipal Utility District. More are sure to come, so keep an eye out in your home state for new roadway and transportation projects (like light rail) that will zoom your city’s business into the next phase of America’s economic development.
Proceeds derived from the Illinois Tollway’s Build America Bonds issuance will be used as the initial funds to jump start stalled plans for a $6.3-billion rehabilitation program which is currently wallowing in its fifth year. The Illinois Tollway has said that it has sold “all but $250 million of the $3.5 billion in debt it plans to issue in conjunction with this phase of Build America Bonds program.”
Better roads equals increased international demand
“It looks like Build America Bonds got very good demand,” said Jim Kubik. Kubik is the Managing Director of Public Finance at BMO Capital Markets in Chicago. His company has taken the lead on a $53-million Build America Bonds project last week on the campus of Southern Illinois University. “The larger issues will open up demand internationally,” he said. This means that as America’s infrastructure improves its efficiency, the interest of foreign investors in American business should soon increase.
Another company, Fitch Ratings, has revised its debt ratings outlook on the Illinois Tollway project to negative from a previously stable rating. Why is this? It’s because there is a potential for “lower debt-service coverage.” If the tolls the project brings in do not meet the steep projections that have been made – 20 percent above current toll levels over the next 24 months – there will be a steep loss.
This prediction by Fitch comes on the heels of stagnant toll figures. Since the Illinois State Toll Highway Authority relies on “sensitive commercial traffic” for more than 40 percent of its toll revenues, change is clearly needed.
But wait… it’s a toll road. What happened to toll money?
If the Tollroad Authority was designed to be a self sustaining entity which could finance repairs and expansions out of its revenue, why do they have to issue any such bonds? What happened to all the money from the tolls? Was it – or part of it – used to pay for social programs instigated by our misfit elected officials?
In other news, the Illinois National Guard reported a Blogo sighting. Illinois residents are advised not to panic. Apply for short term loans and seek debt relief as normal…
Related Video:
Discussion of Build America Bonds | Obama’s Infrastrucutre Plan in Action