TfL rolling stock crisis
 

Silent Hunter wrote:
On Thursday, 4 January 2018 04:41:12 UTC, Chris Date (CMPD) wrote:
Anyone know if Cex buy second hand trains for cash?

https://mobile.twitter.com/Cogbat/st...52206986379264

So TfL are so hard up that they are having to "sale and lease back" an
unspecified train fleet to generate £875m to pay for the new Picc Line
trains. What a shambles - no capital monies.
(from today's Assembly budget review mtg)

That link doesn't work anymore.

Yes, the tweet that Chris was quoting has apparently been deleted — I
wonder why? It was from Paul Corfield, so perhaps he could enlighten us?

For those who don't know, Paul was previously a senior executive in LU, and
he still follows developments closely and knows how decisions are taken.
Unlike the rest of us who tend to rely on hearsay and supposition, Paul
actually monitors the original source documents.

TfL rolling stock crisis
 

On Thursday, 4 January 2018 23:13:25 UTC, Recliner wrote:
Silent Hunter wrote:
On Thursday, 4 January 2018 04:41:12 UTC, Chris Date (CMPD) wrote:
Anyone know if Cex buy second hand trains for cash?

https://mobile.twitter.com/Cogbat/st...52206986379264

So TfL are so hard up that they are having to "sale and lease back" an
unspecified train fleet to generate £875m to pay for the new Picc Line
trains. What a shambles - no capital monies.
(from today's Assembly budget review mtg)

That link doesn't work anymore.

Yes, the tweet that Chris was quoting has apparently been deleted — I
wonder why? It was from Paul Corfield, so perhaps he could enlighten us?

For those who don't know, Paul was previously a senior executive in LU, and
he still follows developments closely and knows how decisions are taken.
Unlike the rest of us who tend to rely on hearsay and supposition, Paul
actually monitors the original source documents.

It doesn't work because I deleted it.

I was a senior manager - I think "executive" is over-egging things. To be accurate I would not claim to be up to date with current decision making as the internal structure of TfL has changed considerably as have many of the people in key positions. I also think the "influence" of City Hall has changed somewhat in the current Mayoralty but that's more a "feeling" that knowledge.

I simply quoted what was said at a London Assembly meeting last week where the Budget and performance Cttee were reviewing the budget for TfL. Either Caroline Pidgeon or Sian Berry queried a capital receipt of £875m in the budget. I think it was Simon Kilonback of TfL who confirmed this was a "Sale and lease back" of an unspecified train fleet. The deal is not yet concluded so there were few other details. Both Mike Brown and Val Shawcross said "this is all standard commercial practice" - which it may well be in some industries. However it is pretty exceptional for TfL where normally a mix of internally generated surplus and govt investment grant pays for new train fleets. I can't recall a train fleet being "flogged off" to pay for a new one. It was Caroline Pidgeon who remarked that the proposal was "crazy" (or some similar term).

There is a webcast of the meeting available on line if anyone wants to sit through it. TfL's bit starts about 110 minutes in from the start. Plenty of other interesting remarks about how the budget has been cut and the impact on passengers and challenges from Assembly Members - especially on buses.

--
Paul C
via Google

TfL rolling stock crisis
 

On Sat, 6 Jan 2018 07:06:02 -0800 (PST)
Paul Corfield wrote:
mix of internally generated surplus and govt investment grant pays for new =
train fleets. I can't recall a train fleet being "flogged off" to pay for a=
new one. It was Caroline Pidgeon who remarked that the proposal was "craz=
y" (or some similar term).

And will almost certainly cost TfL more in the long run. Whoever buys the
trains won't be doing it for the good of mankind, they'll want a long term
profit. As ever short termism rules in british government.

TfL rolling stock crisis
 

wrote:
On Sat, 6 Jan 2018 07:06:02 -0800 (PST)
Paul Corfield wrote:
mix of internally generated surplus and govt investment grant pays for new =
train fleets. I can't recall a train fleet being "flogged off" to pay for a=
new one. It was Caroline Pidgeon who remarked that the proposal was "craz=
y" (or some similar term).

And will almost certainly cost TfL more in the long run. Whoever buys the
trains won't be doing it for the good of mankind, they'll want a long term
profit. As ever short termism rules in british government.

Yes, it's just a way of borrowing money at a significantly higher interest
rate than TfL would pay if it could offer its own bonds, or if the Treasury
funded the trains.

It's not as if the banks doing the lease-back will be bringing in any
private sector efficiencies like a main line ROSCO might. These trains are
completely specific to LU, so there are no potential benefits from their
being leased rather than owned.

TfL rolling stock crisis
 

In message , at 09:49:27 on Mon, 8 Jan
2018, remarked:

mix of internally generated surplus and govt investment grant pays for new =
train fleets. I can't recall a train fleet being "flogged off" to pay for a=
new one. It was Caroline Pidgeon who remarked that the proposal was "craz=
y" (or some similar term).

And will almost certainly cost TfL more in the long run. Whoever buys the
trains won't be doing it for the good of mankind, they'll want a long term
profit. As ever short termism rules in british government.

What government wants is stability (whichever political party in power
we are talking about).

Thus, raising taxes to fund those trains could result in voters making a
change at the top, which tends to cause all sorts of costly consequences
reversing earlier policy decisions.

A long term lease (which is the opposite of short-term-ism actually)
does at least make things predictable.
--
Roland Perry

TfL rolling stock crisis
 

On Mon, 8 Jan 2018 10:08:07 -0000 (UTC)
Recliner wrote:
wrote:
On Sat, 6 Jan 2018 07:06:02 -0800 (PST)
Paul Corfield wrote:
mix of internally generated surplus and govt investment grant pays for new =
train fleets. I can't recall a train fleet being "flogged off" to pay for a=
new one. It was Caroline Pidgeon who remarked that the proposal was "craz=
y" (or some similar term).

And will almost certainly cost TfL more in the long run. Whoever buys the
trains won't be doing it for the good of mankind, they'll want a long term
profit. As ever short termism rules in british government.

Yes, it's just a way of borrowing money at a significantly higher interest
rate than TfL would pay if it could offer its own bonds, or if the Treasury
funded the trains.

It's not as if the banks doing the lease-back will be bringing in any
private sector efficiencies like a main line ROSCO might. These trains are
completely specific to LU, so there are no potential benefits from their
being leased rather than owned.

Unless Island Line make an offer ;)

TfL rolling stock crisis
 

On Mon, 8 Jan 2018 10:13:16 +0000
Roland Perry wrote:
In message , at 09:49:27 on Mon, 8 Jan
2018, remarked:

mix of internally generated surplus and govt investment grant pays for new =
train fleets. I can't recall a train fleet being "flogged off" to pay for a=
new one. It was Caroline Pidgeon who remarked that the proposal was "craz=
y" (or some similar term).

And will almost certainly cost TfL more in the long run. Whoever buys the
trains won't be doing it for the good of mankind, they'll want a long term
profit. As ever short termism rules in british government.

What government wants is stability (whichever political party in power
we are talking about).

Thus, raising taxes to fund those trains could result in voters making a
change at the top, which tends to cause all sorts of costly consequences
reversing earlier policy decisions.

A long term lease (which is the opposite of short-term-ism actually)
does at least make things predictable.

Oh please. It'll cost a damn site more long term, its just kicking the actual
costs down the road for the next government/administration to have to explain
to the public. Its exactly the sort of moronic short term thinking that got
us the NHS PFI debarcle simply because the treasury have some pathological
aversion to any sort of direct public investment unless absolutely necessary
regardless if it'll actually be cheaper in the long run than the
keep-it-off-the-books route.

TfL rolling stock crisis
 

Roland Perry wrote:
In message , at 09:49:27 on Mon, 8 Jan
2018, remarked:

mix of internally generated surplus and govt investment grant pays for new =
train fleets. I can't recall a train fleet being "flogged off" to pay for a=
new one. It was Caroline Pidgeon who remarked that the proposal was "craz=
y" (or some similar term).

And will almost certainly cost TfL more in the long run. Whoever buys the
trains won't be doing it for the good of mankind, they'll want a long term
profit. As ever short termism rules in british government.

What government wants is stability (whichever political party in power
we are talking about).

Thus, raising taxes to fund those trains could result in voters making a
change at the top, which tends to cause all sorts of costly consequences
reversing earlier policy decisions.

A long term lease (which is the opposite of short-term-ism actually)
does at least make things predictable.

This is a form of off-balance sheet government borrowing. It would be much
cheaper if the Treasury borrowed the money directly. With the best PFI
deals, the greater efficiency of a private sector builder/provider/operator
more than makes up for the higher interest rates they have to pay, but
there's no potential for such efficiencies in a sale/leaseback deal.

And because the depreciating asset has very little value to anyone other
than LU, the lender has to include a risk premium. It's not like a building
sale/leaseback, where the asset has an intrinsic, and possibly growing,
value. At the end of the lease, the LU trains will be worth little more
than scrap value, so the lease charge has to be high enough to cover their
declining value. That's not true of, say, an office building.

TfL rolling stock crisis
 

In message , at 10:35:41 on Mon, 8 Jan
2018, remarked:

mix of internally generated surplus and govt investment grant pays for new =
train fleets. I can't recall a train fleet being "flogged off" to pay for a=
new one. It was Caroline Pidgeon who remarked that the proposal was "craz=
y" (or some similar term).

And will almost certainly cost TfL more in the long run. Whoever buys the
trains won't be doing it for the good of mankind, they'll want a long term
profit. As ever short termism rules in british government.

What government wants is stability (whichever political party in power
we are talking about).

Thus, raising taxes to fund those trains could result in voters making a
change at the top, which tends to cause all sorts of costly consequences
reversing earlier policy decisions.

A long term lease (which is the opposite of short-term-ism actually)
does at least make things predictable.

Oh please. It'll cost a damn site more long term,

How do you know what the cost of political upheaval after raising taxes
is likely to be?

its just kicking the actual costs down the road for the next
government/administration to have to explain to the public.

The thing is, they don't ever have to explain it [again]. It's nailed
into the long term (that's good isn't it) operational costs, just like
the rent for the new HQ building they are leasing rather than buying.

I don't know what the ratios are for TfL (maybe PaulC can help) but on
National Rail leasing the rolling stock represents only 11% of the fares
basket.
--
Roland Perry

TfL rolling stock crisis
 

In message
-sept
ember.org, at 10:36:22 on Mon, 8 Jan 2018, Recliner
remarked:
Roland Perry wrote:
In message , at 09:49:27 on Mon, 8 Jan
2018, remarked:

mix of internally generated surplus and govt investment grant pays
for new =
train fleets. I can't recall a train fleet being "flogged off" to
pay for a=
new one. It was Caroline Pidgeon who remarked that the proposal was "craz=
y" (or some similar term).

And will almost certainly cost TfL more in the long run. Whoever buys the
trains won't be doing it for the good of mankind, they'll want a long term
profit. As ever short termism rules in british government.

What government wants is stability (whichever political party in power
we are talking about).

Thus, raising taxes to fund those trains could result in voters making a
change at the top, which tends to cause all sorts of costly consequences
reversing earlier policy decisions.

A long term lease (which is the opposite of short-term-ism actually)
does at least make things predictable.

This is a form of off-balance sheet government borrowing. It would be much
cheaper if the Treasury borrowed the money directly.

Does TfL have the powers to demand the Treasury take out such loans?

With the best PFI deals, the greater efficiency of a private sector
builder/provider/operator more than makes up for the higher interest
rates they have to pay, but there's no potential for such efficiencies
in a sale/leaseback deal.

And because the depreciating asset has very little value to anyone other
than LU, the lender has to include a risk premium.

Are you sure this leasing deal has no penalty for early termination?

It's not like a building sale/leaseback, where the asset has an
intrinsic, and possibly growing, value. At the end of the lease, the LU
trains will be worth little more than scrap value,

The same value as to TfL, had they owned them outright, then.

so the lease charge has to be high enough to cover their declining
value.

Which is what all leases for diminishing assets do, inherently.

--
Roland Perry