The Wall Street Journal earlier this month reported on the sale and subsequent leaseback of Chicago’s Skyway toll road to Macqaurie Bank of Australia. The sale price of this transaction, referred to as a SILO (sale-in, lease-out) was $1.8 billion. Good for Chicago, I say, as the cash was much needed to fund other city operations. But I also have to ask if it is really in our long-term interests to shift ownership of key US infrastructure into foreign hands, especially when there are US alternatives?
Two years ago, this transaction most likely would have been consummated with a US bank, or other financial institution. Recent tax legislation, however, has cast transactions such as these as schemes and financial artifices if a US company is involved. Same economics, same structure, the only difference being that the ultimate owner is a US lessor. What gives?
As many things go in Washington, US-owned leases to tax-exempt entities such as the city of Chicago were the casualties of hype and hysteria. There was even a documentary on PBS examining tax-exempt leases that characterized the leasing industry as ‘a bunch of hucksters.’ An interesting term to use to describe companies such as GE, Bank of America, and Citibank.
