February 07, 2007
More on the Lottery sale...
What is the price for the sale? We've talked about this a bit but Perry's now mentioned $14 Billion in the SOTS (which sucked, by the way. Put cynicism behind us? Fuck you, 39%). One has to wonder what would be a reasonable price that makes sense. Here's an idea...
Any number must be based on revenue and profits (cash flow) discounted over the life of the 'lease' or sale using historic growth rates, reasonable inflation and interest rates. However, that only gets you to the net present value (NPV) at par. What I want to see is how much of a premium we can get. Income producing assets, like the lottery, are only worth selling provided one can realize a multiple to that net present value. What's reasonable? How about 2 times that NPV. So, if the state can reasonably expect 25 billion over the next 50 years (which seems to be the lease term that Republicans LOVE) in constant 2007 dollars, then a reasonable sale price would be 50 billion. Today. When you consider that the lottery is currently funding in $1 bn annually, I think that's a pretty conservative estimate.
That money could be used to shore up education (expanding and renovating facilities) and employees (both state and teacher) retirement today, then help build out the local portion of our transportation needs. AFTER that is all done and only after can a tax cut be considered reasonable. Why? Because we are barely making ends meet with the tax dollars we collect today and every single piece of infrastructure in this state needs improvement.
Under this scenario, it might be reasonable to lease the lottery. However, if this is the case, why not just borrow against the revenue that the lottery brings in and cut the private company (middle man) and their necessary profit margin out of the loop completely?
I guess Perry hasn't thought about that. He clearly, from the $14 bn price he mentioned, hasn't realistically appraised the value of the asset. Further, he's proposed using the money for a variety of things, none of which replaces the $1 bn per year currently coming into the state. What will replace that money, 39%? Your trust funds might be OK provided your cronies aren't managing them, the population of uninsured doesn't grow and the amount of money per recipient doesn't need to be increased. Ever. Oh, and you earn a rate of return HIGHER than we are getting now on the public employees retirement funds.
In other words, your brilliant idea is anything but. Thanks for playing though, 39%! Maybe you'll do better next time!
Just like a stupid Republican to sell something for a $1 that's worth $10 and claim to have done the right thing. You're too stupid, 39%. It makes me brain hurt how stupid you are.
Posted by mcblogger at February 7, 2007 11:03 AM
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