WASHINGTON, DC – Public transportation leaders from across the country came to Washington, DC today to meet with congressional leaders and urge immediate action on the transit leasing crisis caused by the loss of a AAA rating by AIG.
“Thirty-one of the nation’s largest transit systems, including MARTA, would be financially crippled in the coming months if nothing is done to resolve this crisis. The innocent victims will be the millions of riders who rely on public transit every day,” said Dr. Beverly Scott, Chair of the American Public Transportation Association (APTA) and CEO of Metropolitan Atlanta Rapid Transit Authority (MARTA).
Dr. Scott and leaders of ten other public transit systems are making their case to congressional Members and staff today. Joining Dr. Scott were the heads of ten other public transportation systems including: Washington Metropolitan Area Transit Authority, New York MTA, New Jersey Transit, Santa Clara Valley Transportation Authority, Los Angeles MTA, Sacramento Regional Transit, St. Louis Metro, Chicago Transit Authority, Massachusetts Bay Transportation Authority, and Houston Metro.
Scott pointed out that these transit leasing agreements, known as Sale-in/Lease Out and Lease-In/Lease Out (SILO/LILO) transactions were promoted by the Federal Transit Administration from the late 1980s through 2003, as an innovative, legal way for public transit systems to gain additional revenue. To secure these transactions, sale proceeds in the form of Treasury securities were placed into an account that insurers, such as AIG, guaranteed. The contract terms also stated that the insurer had to have a AAA credit rating. With the collapse of AIG, it lost its AAA bond status and transit systems are now in “technical default” and the investors seek to recoup the 100% of the tax benefits that would have been allowed.
“Through no fault of their own, transit agencies could be forced to pay hundreds of millions of dollars in fees to make the investors whole,” said Scott. “The banks have the opportunity to gain 100 percent of the tax benefits that have been disallowed, which would in turn devastate transit agencies, which will be required to pay more than $2 billion to the banks immediately, at a time when the public, and our riders, can least afford it.”
“The U.S. Treasury has the power under the recently enacted Emergency Economic Stabilization Act of 2008 (P.L. 110-343) to take over the role of AIG and other insurers in SILO/LILO transactions,” said Scott. “This would prevent any predatory action by banks against transit systems and the public, and because the Treasury would be backing its own securities, there is no financial risk on the part of the federal government. APTA has strongly urged the U.S Treasury to take this action and to take this action immediately.
“We urge Congress to contact the U.S. Treasury and request that they intervene on our behalf,” concluded Scott.
To see today’s APTA News Conference, go to the following links: