RailGate Tax Credits....It's The Indemnity, Stupid.

EverythingMeansLessThan
ZeroVille


After Will McMartin's latest in The Tyee, which demonstrated that BC Rail was not a financial albatross around our necks, a lot of folks started asking just how much we, the people of British Columbia, actually got for BC Rail.

The answer, as best I can figure it, is.....

Nobody, Gordon Campbell, Martyn Brown, and/or former BC Rail 'strategic advisor' Patrick Kinsella included, knows for sure.

Why?

Well, according to Vaughn Palmer, writing this time last year, in addition to offering $750 million for the assets, CN Rail originally bid 'aggressively' on the tax credits they would receive for 'buying' BC Rail's so-called 'debts'.

Which meant that CN/Mr. McLean et al. offered up $250 million for the debt part of the deal when nobody else would.

Allegedly.

Unfortunately, in the final days before the deal went down for good Premier Gordon Campbell, in an effort to shut-up an increasingly squeaky wheel (ie. the public of British Columbia), suddenly started making noises about how it wasn't a 'sale', but instead was just an innocuous 'lease'.

Which could have, potentially, nullified the tax credit given that if CN wasn't 'buying' the railway's assets it also wasn't buying its 'debts'.

Thus, at the very last minute we made CN Rail an indemnification offer they couldn't refuse.

Which, in Wall Street parlance might, be called a:

"Tax Credit Default Swap"

Because, essentially we agreed to insure the tax credits, year-over-year.....At nine percent interest.

Yes, you read that right.

Nine freaking percent.

Compounded annually.

Thus, by 2009 the thing had ballooned so enourmously that we 'potentially' owed CN, according to our own provincial government record of public accounts...Hold onto your hat......

$550 million dollars!
(large pdf file here; small google cache listing here)

And I am not making this stuff up (just click on the google cache link above and you will get both the 2008 and the 2009 numbers straight-up; alternatively, go to pg 71 of the massive pdf file).
(but, see update, below)

Now, to the best of my knowledge this issue has not yet been resolved in 2010 (please someone, correct me if I'm wrong, but I have heard/read/seen nothing, and I pay pretty good attention).

Thus, we are currently, by my calculations, on the hook for almost $600 million.

I'll leave it the accountants amongst us to figure out when, if this is not resolved, we will actually start paying CN Rail for the making money off our Railbeds.

OK?


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And who, we can only wonder, might have helped get that indemnity deal rolling on down the tracks at the last minute?......Hmmmmmm......Let's see....Can somebody remind me again who, precisely, was advising BC Rail in the Spring of 2004 when things got a little sticky on the sale/not sale station?.....
Update, Tuesday Morning (June 01/10): Interesting, but ......After visiting here earlier this morning, a PAB-Bot flew off using a slightly different search string that did NOT include the numbers cited above....Notice the slightly different 'result' you get using the Botian's string compared to the one you get if you use my 'many numbered' string.....Anybody else smell a plot to plant a google stinkbomb-assisted scent thrower-offer here?......Regardless, looks like I'll have to get a screenshot of the actual document up instead....Will try and do that at lunchtime... Oh, and just specially for the Bots....It goes without saying that I also have screen-shots of the landing and the take-off, as well as the shortened string....Furthermore, the resulting jpg's have already been sent to multiple locations in to that great cloud-in-the-tubesky so that they can never be accidentally deleted on purpose...

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