Thursday, February 6, 2014

Why are we still talking about the CRC?

Generally speaking, you don't loan out money you're banking on getting paid back without collateral.  That's because people who don't put up collateral, who don't have any disincentive against walking away from their debt tend to walk away from their debt.

Applied to the CRC, if we think we need Washington support to build the CRC than we must have collateral to ensure their support.  That can come in the form of direct funding up front or it can be irrevocable collection rights against Washington citizens to the same effect, whatever.  What matters is that it's skin in the game, a reason for Washington to not walk away when the bridge is built but the bonds are only half paid off leaving Oregon holding the bag.

With that in mind it's hard to understand what Governor Kitzhaber is thinking.  How likely is Washington to put up collateral if they think Oregon can be suckered into going it alone?  Every step Oregon takes toward building the bridge without Washington support validates their inaction and makes their support on the next step less likely.  The path Kitzhaber is following  doesn't lead to a bridge supported on both ends.

If we really want Washington support we ought to give them a reason to give it.  The screamingly obvious one is to walk away from the CRC.  If the Feds are as loose with money as Kitzhaber's plan requires, a year isn't going to matter.  The only risk is that Washington might judge the benefit of a new bridge not worth its cost.  If that's the case aren't we better off finding that out now rather than 10 years and hundreds of millions of dollars in unsecured debt later?

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