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by Free Market Duck

Two Governors Bankrupt Idaho’s Highways, or Who Let the GARVEE Bonds out?
Aug 14, 2009

Boise, ID – Former Governor Dirk Kempthorne -- after participating in Boise’s Watergate from 1998 – 2002, which included the failed $138 million University Place fiasco that nearly bankrupted the University of Idaho and its Foundation, and which was built upon the unconstitutional scam of illegally procuring finances with a fake lease-purchase agreement for the $100 million Ada County Courthouse rammed into existence without a two-thirds vote of the voters – left another legacy for Idahoans:  namely, a $666 million GARVEE highway debt, the interest of which is accruing at $50 million in year 2009 and will reach $77 million PER YEAR through 2029, according to Idaho Statesman reporter Dan Popkey.

   Popkey, who also covered Kempthorne’s participation in the University Place fiasco – and also had his own little fingers into this mess since his significant other was a law partner in one of the indicted law firms he was reporting on, and he failed to reveal that fact until waaaay after the scam was over – Popkey reported the above debt service and GARVEE principal cost numbers in an article last Sunday, Aug 9th.  If true, they are staggering and into the billions.  Not only that, the Big Question is:  why did current Gov. Butch Otter sign up for $82 million of Kempthorne’s obviously-a-bad-deal new GARVEE money?

   Run these numbers through your brains, girl friends.  Kempthorne and his Idaho Transportation Department sidekick, ITD Chief Chuck Winder, now a state senator, held the Idaho State Legislature hostage by vetoing umpteen different bills until the Legies signed off on his GARVEE Highway Bill whose original budget was set at $1.6 Billion but was eventually trimmed to $998 million with fewer projects.  Today, the total GARVEE indebtedness is slated to be $666 million.  At an average of $60 million per year debt service (interest on the $666 million), that’s a whopping $1.2 billion INTEREST on a $666 million principal.  The total debt pencils out to at least $2 Billion, with over half of it paid in interest to the federal government in lieu of receiving future federal gas taxes.  This is as bad or worse than the subprime mortgages on housing values that don’t exist.

   GARVEE bonds are simply toxic derivatives for highway financing, attempting to finance debt with non-collateralized, non-securitized future debt -- using fake, non-collateralized federal dollars from the Fed Reserve, by the way -- the gas tax value of which may or may not be there in the future, especially if we push for electric cars, and even if it is, the debt service price, the interest rate, is waaaay too high, girl friends.

   Never mind the fact that this level of interest on GARVEE bonds is exorbitant if not usurious.  Never mind the fact that if the amount of federal gas taxes collected for Idaho in the next 20 years may not cover the principal or interest on our GARVEE debt.  Who in their right mind would ever sign up for this type of subprime mortgage highway agreement?  It’s so toxic, it glows.  Apparently Governor Kempthorne would, and did, the same governor who signed off on all the above Boise Watergate financial messes.  It seems that Kempthorne had to throw Idaho one last financial bomb by ramming his GARVEE Highway Mess down our throats as he left town to become President George Bush’s Secretary of the Interior.

   As if the exorbitant GARVEE costs weren’t bad enough for Kempthorne’s grand scheme of how to build Idaho roads, the ITD apparently pulled funds from, or held up the building of, Idaho’s regular highway repair and maintenance projects, shoving the regular repair money over into special interest GARVEE projects in the hopes of replacing the funds later with future GARVEE money.  Wow, the same M.O. (modus operandi) in which the Ada County Courthouse was financed; and the same M.O. in which the failed $138 million University Place project was financed – by surreptitiously transferring funds back and forth between the U. of Idaho and the U. of Idaho Foundation, illegally, and for which U of I Foundation Treasurer Jerry Wallace was convicted.  Kempthorne and the other perp participants got off Scott free because Idaho statutes can only convict Treasurers responsible for the money, not the getaway drivers, or other sidekicks for mishandling Idaho money.  And, of course, the politicians like it that way.  A built-in fall guy, pre-planned, and taken care of after convicted.  Another story for another day.  Yo-ho, yo-ho, a pirate’s life for me…

   Back to the scene of the crime…

   So, Kempthorne’s GARVEE scheme not only was a lousy financial investment, it also destroyed the ITD’s normal highway funding mechanism and led to current Gov Butch Otter’s “firing” of 14-year ITD veteran, Director Pam Lowe, after an audit revealed who knows what since nobody’s talking details but the report tends to authenticate House Transportation Committee Chairbabe JoAn Wood’s statement in 2007 in which she said, “Whoa, dudes, the ITD lied to us.”  I embellished the, “Whoa, dudes,” but you get my drift.

   Unfortunately for Gov Otter, he followed in Kempthorne’s footsteps and vetoed 33 bills, according to Popkey, until the state legislature signed off on his bill for $82 million in new GARVEE spending.  New GARVEE spending.  Like the dude didn’t learn.  Or he learned too late.

   During the 2008-09 Legislative Session, Otter tried unsuccessfully five times to increase Idaho state gas taxes or increase car registration fees – like from $24 bucks to $150 bucks -- to pay for what everybody keeps referring to as the Magic Highway Repair Number of $240 million per year.  Big mistake, cowboy.  We are in a deep recession and Idaho has already used up all of its state unemployment insurance. Nobody has any income to pay more taxes.  In fact, we already owe the federal government $46 million in borrowed unemployment insurance money and this debt is growing rapidly.  One cannot squeeze blood from a turnip and Gov Otter cannot squeeze borrowed unemployment insurance from the feds to pay for borrowed GARVEE money from the feds, which represents future federal gas taxes on Idahoans.

   Oh what tangled webs of financial deceit we weave for ourselves – especially when we play Keynesian socialist economics, incurring future debt to pay current AND future indebtedness with more borrowed debt from the federal government, which means the Federal Reserve using paper pulp fiction dollars not backed by anything but hot air.  Are we living in Alice in Wonderland or what?

   Wouldn’t it have been a whole lot easier to have scrapped the GARVEE model of Kempthorne indebtedness, and implemented either (1) a simple Pay-As-You-Go gas tax increase at the pump, or (2) put out bids for a private highway maintenance company such as Macquerie of Australia to PAY IDAHO to repair and build new highways, charging a free market level toll?  Chicago did it; we can do it.  The latter approach is about as close to a free market method that one can get and it has the advantage of Idaho GETTING PAID for highway maintenance from a private company on a 99-year lease, and users paying as they go, instead of Idaho paying exorbitant usurious interest rates for a ridiculous GARVEE federal debt, the latter of which drains so much money in interest from Idaho’s coffers that now we can’t even pay for our regular road maintenance.

   We hate to tell you so -- actually we love to tell you so -- but FM Duck and author of Boise’s Watergate, Deep Throat II, warned EVERYBODY, including all the U.S. Senators on the committee that approved Kempthorne as Bush’s Sec of Interior, that if Kempthorne and the Boys of Boise got away with the quarter of a billion dollar 2002 Boise Watergate fiasco, then you can bet your bottom dollar that power corrupts and absolute power corrupts absolutely:  namely, the same, and new, perps will pull the same financial stunt for something else in the future.  We predicted it would be the GARVEE Highway Mess.

   So here we are.  Welcome to Gov Dirk Kempthorne’s and Gov Butch Otter’s Bankrupt Highway Robbery for Idaho, right smack in the middle of the worst Recession teetering on Depression since the 1930’s.  And the Idaho state legislature that passed the GARVEE bonds, and were lied to, must also bear the blame for our current predicament because they voted for it.

   But I would be remiss if I didn’t also offer a solution to our current highway mess.

   First, we have a possible new sheriff in town, running for Governor of Idaho:  Sharon Ullman, feisty, tax chopping, free market, take no political prisoners, business-oriented Mom in her second term as Ada County Commissioner.  What would Ms. Ullman do?  I’m not exactly sure but I would predict that she would cancel what’s left of the ridiculous GARVEE program and either put forth a Pay-As-You-Go state gas tax solution, or cut taxes elsewhere to make up for the shortage, or hire a private free market company to pay Idaho for a lease to do our roads and collect minimal tolls to make a profit.  Nothing wrong with a free market.  It’s based upon individual freedoms, supply and demand, competition, earns profits, creates jobs, users pay as they go, and does not incur a $2 billion GARVEE debt.

   Second, somebody should start thinking about reinventing Idaho as a Free Trade Zone, which means no corporate taxes, no state income taxes, and we should dump the hated property tax that, through inflation, taxes seniors on fixed incomes out of their paid-off homes.

   It’s the spending and inflation and indebtedness that must stop.  And it must stop now, at all levels, local, state, and federal or we will soon approach the hyperinflation of Germany’s Weimar Republic or Zimbabwe’s zero-valued dollar.  Taxes aren’t the real problem; spending is the problem -- especially deficit spending, the same type of GARVEE deficit spending that got us into our current highway mess.

   Thank you Governors Kempthorne and Otter.  Ullman, get us outta here, will ya?  I always knew it would take a woman to kick butt in this state. – FM Duck

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