Dear Senator Menendez:
On behalf of the American Public Transportation Association (APTA) and its more than 1,500 member organizations, I write in support of S. 1341, the “Close the SILO/LILO Loophole Act of 2009.” I commend you for introducing this important legislation in the Senate and urge its immediate passage.
As you know, many of our nation’s largest transit systems entered into “sale-in, lease out” or “lease-in, lease-out” transactions with several financial institutions over the past three decades as a way to generate much needed capital to expand and maintain their assets. Now, through no fault of their own, these agencies are faced with technical defaults on their original agreements due to the current instability of the financial markets. Despite the fact that these agencies have all honored their agreements by making timely payments on their leased assets, they are threatened with having to pay millions of dollars in penalties to asset holders because of “technical defaults” caused by the reduction in the bond ratings of the institutions that guaranteed the transactions.
At a time when our nation’s transit systems are facing severe funding shortages at the same time that they are experiencing historic ridership demand, we should not allow them to be forced to pay severe penalties that would have a crippling effect on their budgets. Particularly since the affected transit systems have acted in good faith to comply with the terms of their agreements or to negotiate satisfactory settlements. Your legislation will solve this problem by removing the threat to transit systems of paying severe financial penalties by closing the loophole that created the defaults.
I deeply appreciate your introduction of this legislation and your continued commitment to public transportation. I look forward to working with you to advance this legislation through Congress as quickly as possible.