Western Railroad Discussion > Alameda Corridor, Los Angeles, Ponzi Scheme?

Uh-oh.

http://www.citywatchla.com/index.php/la-watchdog/13448-the-alameda-corridor-ponzi-scheme

.............But the finances of the Alameda Corridor are a train wreck as its operating profit of almost $100 million does not even cover its annual interest expense to say nothing about retiring outstanding debt associated with this $2.3 billion project. As a result, debt has increased by $300 million since 2004, from $1.9 billion to $2.2 billion.

This mound of unsustainable debt includes over $400 million of accrued interest that is the result of the issuance of zero coupon bonds (marketed to investors as “Capital Appreciation Bonds”), a highly controversial financing vehicle where interest payments are deferred until the maturity of the bond. These bonds have also been labeled as Weapons of Mass Financial Destruction. .........................

Those bonds must have rates well over 5%.
My bank and credit unions laugh when I ask what my deposit will earn, but then I am in the 99%
These financial schemes all end up enriching the investor class, but at least we got some good infrastructure out of it.

Things would REALLY get interesting if BNSF and UP went back to using their original lines to / from the port.

BNSF might have a tough time of it because a lot of the Harbor Sub is now gone or will be used for a light rail extension.

It'll never happen, but it's fun to fantasize!

CA_Sou_MA_Agent Wrote:
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> Things would REALLY get interesting if BNSF and UP
> went back to using their original lines to / from
> the port.
>
Note that the agreement BNSF and UP signed requires them to pay the same fees on any train to or from the harbor regardless of the actual route they use.

(And the BNSF right of way is fully occupied by light rail from Crenshaw to Imperial.)



Edited 1 time(s). Last edit at 06/20/17 05:17 by jmonier.

Zero coupon bonds are financial products similar in effect to the interest only mortgages that people snapped up before 2007-2008. That didn't end well (either). You pay $700 now for a bond you'll be able to turn in for $1,000 in a few years. The spread is the financed cost of the interest over time.

Politicians like them because they allow you to defer the true cost until you're out of office, and you can sneak all kinds of expenses in up front.

So what, the USSA is one big Ponzi scheme. The borrower is servant to the lender.

I happen to be involved in the initial discussions about the Alameda Corridor.

There were several items that the committee didn't consider on the volume moving on the corridor. They seem to ignore the amount of transloads that would take place in the coming years and also the amount of containers that would be drayed to Hobart and UP Yards downtown which reduce the amount of containers loaded to stack trains. These were containers going to points that stack trains didn't provide service and in many cases these containers moved on wheels in those days

They felt the growth of containers to the stack trains would offset the transloads which it hasn't

It was a lot of the transportation industry who believed the containers moving on double stacks would not pay for the cost of the corridor---I think 20 years later they were right--it is in the numbers then and now



Dale Smith

CajonRat Wrote:
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> So what, the USSA is one big Ponzi scheme. The
> borrower is servant to the lender.


If you owe the bank $10,000, the bank owns YOU

If you owe the bank ten million, YOU own the bank


(As people take out 72 month leases on pieces of crap cars that will be reduced to wreckage long before six years pass)

What was the last auto loan average, like 68 months? That's the average not the longest term!

Out