(The Associated Press circulated the following article on March 23.)
WASHINGTON — Atlanta, Los Angeles, Connecticut and New Jersey are among more than a dozen cities and states seeking to squeeze in deals that would net their transit systems $250 million before Congress shuts down a tax loophole.
The Senate this week is debating a bill that would block the deals, which also give tax breaks to banks and other companies that lease subway cars and other equipment from the transit systems. House tax writers would let transit systems finish the last batch of financing arrangements before shutting them down.
“We have a projected $70 million deficit for next fiscal year,” said Jim Whitaker, spokesman for Southeastern Pennsylvania Transportation Authority. “We have a $70 million hole we have to fill.”
A deal involving Philadelphia’s Broad Street subway line, negotiated with Bank of America, could mean $15 million for the transit authority if Congress lets it proceed.
The deals in question typically see train cars, buses or rail lines leased to a private corporation. The corporation gets a tax break for the depreciated value of the transit equipment. The transit system retains control of the equipment and receives a payment, often used to cover an upgrade or buy new equipment.
Critics say the transactions do little more than sell a tax break — useless to a tax-exempt city or town — to a corporation.
Transit deals in the pipeline came to a halt in November when the Treasury Department started investigating and told the Transportation Department to stop approving them. The cost to the federal treasury outweighs any benefit to cities and towns, Treasury officials said.
Fifteen deals, involving more than $3 billion in transit assets, had been submitted to the Federal Transit Administration for approval when they were ordered to stop. Cities would reap $250 million if the deals are completed, the American Public Transportation Association estimates.
Transit officials argue that the leases supplement scarce federal and state funding for public transportation.
“At a time when these states and localities are strapped for resources — look at California, that’s a good example — it’s unfortunate that this additional resource area looks like it’s going to be shut down,” said Daniel Duff, vice president of government affairs at the American Public Transportation Association.
But Senate Finance Committee Chairman Charles Grassley, R-Iowa, has said the leases, which also came under questioning during President Clinton’s administration, should end immediately.
“The promoters of these deals had a clear indication that their gig would be up sooner or later,” Grassley said in an interview.
House Ways and Means Committee Chairman Bill Thomas, R-Calif., said cities should be allowed to finish what they started.
“You can’t tell people … notwithstanding the fact it was legal when you did it, it’s not legal now,” he said. “A government should never do that.”
Atlanta is among the cities with leases stuck in limbo, and it has made lucrative use of them. The Metropolitan Atlanta Rapid Transit Authority has generated more than $100 million since 2001, said Richard Marsh, MARTA manager of financial planning and analysis. The city stands to gain $10 million to $12 million from a pending deal to lease rail cars.
“We’re definitely interested in completing the deal,” he said.
Meanwhile, transit officials in Sacramento, Calif., have a pending deal that would net as much as $26 million by leasing the city’s rail cars and buses.
“It’s not 100 percent of our fleet, but it’s close,” said Richard Davis, the transit system’s chief financial officer. But “we are in limbo,” he said.
Two deals in Connecticut are on hold that could infuse $20 million into an ongoing project to overhaul rail cars that operate on the New Haven Line in Connecticut and New York, said Bureau of Public Transportation Chief Harry Harris. The state leased rail cars to raise $29 million already invested in that program.
And in Los Angeles, officials planned an arrangement involving the computer control system that services its rail lines that would bring in $8.5 million, a small fraction of the city’s transit budget.
“We’re not going to come to a screeching halt, but we would certainly have to scramble,” said Marc Littman, spokesman for the Los Angeles County Metropolitan Transportation Authority.