

BART’s Tax Shelters - mgunes
https://darwinbondgraham.wordpress.com/2013/08/05/barts-tax-shelters/

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anigbrowl
Sale and leaseback is a long-established capital allocation tool. The value it
provides is short-term liquidity; another way to think about this is the
opportunity cost of illiquidity. There's nothing nefarious about it.

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malandrew
In this case it most certainly is nefarious because it's not being used as a
capital allocation tool, but as a means to get tax reductions where there
should be none. This loophole allows local agencies to get paid for letting
private corporations get tax deductions that they should not be getting. I may
be totally off base here, but near as I can tell the correct market-based
solution is probably not to make this illegal (although that probably can't
hurt) but to give local agencies like BART the ability to file tax deductions
in the same way the private enterprise doing the LILO is. This would remove
the incentive to perform a LILO since the local agency would be gaining short
term liquidity in the form of "tax returns", assuming their they can deduct
taxes beyond the $0 taxes they owe by virtue of being a government
institution.

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anigbrowl
I'm not clear why you think they shouldn't be getting them. Depreciation is a
normal deductible business expense. The suthor is clearly angry about this but
hasn't really made his case for what he thinks is wrong. BART gets about 5% of
the deal value up front in cash with no interest payable, which seems about
right given historical interest rates. The alternative is floating a bond at
interest which costs a lot more over the long term.

