Financing ICLEI and other pie in the sky projects

In our earlier post we outlined the source of the ICLEI plan to develop resilient communities. Resilient. Sounds so nice, doesn’t it?

Then, the kicker: “They might also support the development of specialized financial instruments…” For those of you dozing off, that means clever new ways to tax citizens to accomplish that “large-scale redevelopment.” “Redevelopment” means “urban renewal,” or scrape a neighborhood down to bare earth and put up high-rise apartment buildings. Or build billion-dollar light rail projects.

How to finance such ambitious plans? With Structured Investment Vehicles. Collaterized Debt Obligations. Sound familiar? The complex financial instruments widely believed to have caused the near-collapse of our banking and financial system. This isn’t new. The authors of the report admit as much, but casually brush it off.

Oregon, and we assume, other states are already doing this with a lovely revenue stream once considered infinite – lottery revenues. Oregon now has billions of dollars of bonds being paid off with lottery revenues. Did voters approve these bonds? No. They just approved use of lottery revenues for beneficial-sounding projects – economic development, affordable housing, education, etc.

Just looking at the first thing that popped up in a quick Google search, we see that Florida, for example, has more than $3 billion worth of lottery-funded bonds for education. These are “book entry” bonds, meaning there are no certificates, only electronic entries in some computer.

Oregon, a much smaller population state at 3.8 million people, (compared to Florida’s 18.8 million people), has $1.1 billion in lottery-funded debt outstanding.

How does this work? IFO had a hard time wrapping her mind around this concept. Here’s what she came up with as an easy to understand model. Let’s say she rents out her tool shed for $100 a year. That is a revenue stream. She could issue $2,000 worth of bonds for 20 years at an interest rate, or yield to investors, of 5% per year. She can use the $2000 for whatever purpose she wants. The tool shed rental income will pay it off.

What if the guy who is paying the rent can’t pay any more and no one else wants to rent it? How dare you ask that rude and insulting question! Next question!

ICLEI also proposes that cities or utilities offer loans to businesses and residents to retrofit and make their buildings “resilient.” You know. Green. Voluntary now, mandatory later? Anyway, they then propose that these cities and/or utilities get together and combine and offer these loans as income streams to bigger entities.

Today McMinnville! Tomorrow the entire United States!

ICLEI is also active in France, Germany and South Africa, if their publication is to believed, so perhaps the slogan should be:

Today Germany! Tomorrow the World!!!


About InvestingforOne

I've been investing in various assets by myself using a discount broker for many years. Over that time, I've developed some theories that others might find useful. Plus, there is more to investing than money. Time, talent, work, friends, family all go into developing a good and satisfactory strategy.
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