Many German cities and other public entities entered into cross-border leasing contracts in the late nineties and early 2000s.
There are two versions, the first is sale of infrastructure and immediate lease back, the second is lease to a US entity and lease back to the German entity.
The selling point was "free, immediate money" and "you can buy it back after 30 odd years".
U.S. investors got their tax writeoff from the US government, German public utilities got their tax writeoff from the German government. With contract times of 99 years and numerous clauses about what the Germans could do or not do during that time, deals that looked sweet often began souring after a few years, especially when the recession of 2008 hit.
Several high-profile contracts have been dissolved, among them the lease of the complete water supply system of the southern state of Baden-Wuerttemberg. The utility companies made a loss, the German tax collectors made a profit.
Leasing infrastructure is not a recent invention of finance wizards. One hundred years ago, the Prussian state government was leasing all over the place. One example is a police station in a small town. The government said: you build, we lease for 50 years at this rate, and when the 50 years are up, you get the building back.
It worked well for the government, and I know because we live in that former police station.
No comments:
Post a Comment