Auto Industry Bill Would Guarantee Financing Deals for Transit Agencies

via MassTransitMag:



Auto Industry Bill Would Guarantee Financing Deals for Transit Agencies


By Colby Itkowitz
Congressional Quarterly Today


A provision in the package of emergency loans to domestic carmakers would also rescue the nation's public transit agencies from defaulting on billions of dollars in financing agreements.

The draft bill would assign the presidential appointee overseeing auto industry restructuring to guarantee many of the transit agency financing deals.

American International Group Inc. (AIG) guaranteed many of the lease-back agreements that transit agencies used to pay for buses, trains and other equipment in the 1990s. The insurer's collapse threw the deals into technical default and allowed investors to demand immediate repayment with hefty termination fees.

"It's good that the government is recognizing that there is a role for them to play here and it won't cost anything," said John Cline, a lobbyist for the Los Angeles and Houston transit agencies. "That's what separates us from others who are petitioning the government these days."

Under the complex financing deals, agencies "sold" newly purchased capital equipment to investors such as banks that could deduct the depreciation from their taxes. Agencies got a cash infusion and, in turn, leased back the equipment. .......(more)

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