OT: Toronto street lights sale

D. Hugh Redelmeier hugh-pmF8o41NoarQT0dZR+AlfA at public.gmane.org
Mon Feb 22 07:26:20 UTC 2010


| From: Robert Brockway <robert-5LEc/6Zm6xCUd8a0hrldnti2O/JbrIOy at public.gmane.org>

| I've seen apparently bizarre decisions made with computers such as leasing the
| systems instead of buying them when it would clearly cost more to lease them
| over the term of the lease.  There are at least two answers for this
| phenomenon:
| 
| (1) Leasing comes from a different budget to purchasing.
| (2) There are tax incentives for one decision over the other.
| 
| Even if (1) is artificial (2) is a genuine consideration.   After tax
| adjustments may make the apparently bizarre decision actually fiscally sound.

My first awareness of this was when the Government of Ontario sold its
computers to a leasing company and then leased them back.  This was in
the mid 1970s, if I remember correctly.

This made no sense to me EXCEPT that it moved money around in the
government books.

Effectively, at best, they were getting the leasing company to borrow
money for them, passing the cost along.  But the credit rating of the
leasing company was lower than the governments, so the borrowing costs
had to be higher this way.  Not to mention the markup.  And the cost
of reorganizing.
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