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BINARY ECONOMIC MODES FOR THE PRIVATIZATION OF PUBLIC ASSETS - page 9 / 14

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the regulated utility at levels sufficient to assure amortization of the loan for stock acquisition.

In a model of CSOP technology as applied to the financing of new capital from 1960 to 1980 for Pacific Telephone and Telegraph, a public utility providing telecommunications services in California, Robert H. Ashford calculated that 70 percent of the company stock ($5.6 billion (U.S.) book value) could have been acquired by its customers through a CSOP with no increase in utility rates (Ashford, 1984). Notwithstanding this opportunity, in actual fact this $5.6 billion (U.S.) of new capital formed by PT&T went

primarily to those who already owned PT&T of its needs for new capital through debt.

shares even though This continuation

the utility financed most of the concentration of

capital ownership was supported by the public regulators who established sufficient to amortize the debt for acquisition of capital improvements.

rates

for

PT&T

  • General Stock Ownership Plan

The General Stock Ownership Plan (GSOP) is a binary economic method of assuring broad participation in the creation of new capital. Until 1978 the GSOP was a conceptual model only, but through the influence of U. S. Senator Mike Gravel (D. AK) U.S. Federal legislation was adopted authorizing the creation of General Stock Ownership Corporations under the Internal Revenue Code of 1954 (Gauche, 1981). This legislation authorized the charter of General Stock Ownership Corporations by state governmental entities and required the participation in ownership of all the residents of the chartering state. Under the Federal statute a GSOC could be formed either by act of a State legislature or by statewide referendum. Each resident of the state would be issued a share of stock free of charge. The corporation would borrow money to invest in profit-making ventures with the loan secured by the assets and, if necessary, by a State guarantee. Through this method the citizens of the State would become owners of capital. The earnings from the GSOC investments would be used to retire the loan and the balance distributed to the shareholders (Gravel, 1978a). The Federal legislation provided these new forms of corporations with favorable Federal income tax treatment.

Senator Gravel pursued the concept with the Alaska State government in 1979 and authorizing legislation was introduced in both the Alaska State Senate and House, but did not receive the necessary support to become law. A subsequent initiative petition for the creation of an Alaska General Stock Ownership Corporation failed to win approval of the

voters in (AGSOC)

1980.

The concept of the Alaska General Stock Ownership

was

described

in

brochures

for

the

initiative

campaign:

Corporation

AGSOC would be chartered by the state legislature. Incorporators would be appointed by state officials who would name the board of directors. Every Alaska resident as of a date set by the legislature – man, woman and child – would receive one share of AGSOC stock. There would be no charge. During the first five years, the stock could not be sold unless the owner left Alaska to live elsewhere. In that case, the owner would have to sell his or her share back to the AGSOC itself (at book value). These shares would then be available for sale (at book value) to new residents, including those born after AGSOC was formed. After five years, AGSOC shares could be traded, but still only Alaska residents could own AGSOC stock. Each resident would be limited to owning ten shares. Once AGSOC was formed, it would operate independently of the

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