Friday, March 20, 2009

Say Aloha to those 'T' cars

I had half forgotten this, but Ed H. caught something on 60 minutes and reminded us of what could be another looming bomb affecting public finance here.

AIG bonuses are in the news of course… PWSA bonds were at least briefly in the news as well… but there is this little issue of how the miasma at AIG is impacting public transit systems across the county. The version of the story on PBS’ Newshour is online here. The issue are some semi-complicated buyback schemes public transit systems entered with some large capital purchases in recent decades. Basically transit systems 'sold' high cost equipment to bank or bank-like institutions who 'leased' them same equipment back and the deal worked out to some financial advantage to the agencies it appeared at the time. Problem is that these deals were insured by AIG. As AIG's financial miasma has escalated it's credit rating has put the deals at risk and potentially triggering the need for large cash payments from the affected systems. In one case a Belgian Bank has already tried to foreclose upon the rolling stock of Washington DC's transit agency. That is the bizarre world we live in now.

What I noticed last fall was that the Port Authority of Allegheny County here is indeed on the list of affected transit systems, although I have seen no news coverage on the issue here. I can be naïve.. I have to believe that if this was an issue here it would have been reported on by now. The fact that there has not been any news coverage leads me to believe any issue here is de minimus..... but you never know these days.
I have not seen any recent updates on transit systems being hit my these deals, but there is news of similar deals hitting other utilities. And with AIG in the news all the time these days, is this story really dead and buried around here?

Even if it isn't a big enough deal to be worked up about... things like this and then the PWSA bond deal are out there and clearly not made known to the public for the most part. It really really makes you wonder what other similar issues are out there that nobody has poked at at all.
Speaking of the PWSA bond deal... if anyone thinks it is just a passing political spasm... take note of the new developments in Jefferson County, Alabama where their sewer system is being put into receivership because of similar variable rate bond-induced problems.


Blogger EdHeath said...

I dunno, Port Authority has only recently seemed to decide it can't pay its workers these extravagant salaries and mind numbing retirement benefits, not to mention paying huge sums and benefits to managers and non-union personnel. So I wouldn’t be surprised if the Authority were playing it close to the vest about it’s financial arrangements for its light rail cars. I rarely ride the things, but I thought I saw on some blog that there are some new cars. Of course, investigating such matters could be a full time job (of which I already have one).

Last night, instead of going to the Dowd office opening, I attended the third of four meetings to set up a citizen journalist run online publication (to be known as PittPoint). You may have heard about it; Mike Madison gave a talk at one meeting, someone named Greg Ramshaw who was a long time producer for the News Hour and before that a reporter in Chicago is helping out, a lawyer named Ryan Hopkins is running it, and the larger Public Square Project it is part of. The reason I bring it up is that the example they used for us to practice writing about was the proposed sale/leasing of the Cities’ parking facilities that occupied some of our attention about a month ago I guess. Today (as it turns out) is the deadline for the RFP’s for this. Now, I didn’t confirm it, but I remember reading somewhere that parking only brings in four million dollars a year for the City. As I understand it, the Mayor wants a 99 year lease arrangement similar to Chicago’s, and hopes to bring in two hundred million. My problem with this is that I have doubts the current car arrangement is going to last 99 years. And I certainly doubt the parking garage buildings are going to last 99 years. So how would this work, which is to say who in their right mind would bet two hundred million on cars still being parked in these particular parking facilities even fifty years into the future. But if the facilities (buildings, lots and meters) are sold, then suddenly the new owner can get the tax break from depreciation. Assuming they would get the land too, they could opt to build new office buildings, retail space or whatever as car use falls off. A much better deal. Except that banks aren’t lending right now.

Of course, if I were the Mayor I would ask for more than two hundred million if I were selling.

Friday, March 20, 2009 12:44:00 PM  
Blogger C. Briem said...

a big topic and worth a lot of its own discussion. I am on record (sort of on the 'record'... i.e. blog musing) that the sale of the parking authority might be a good thing.. certainly should be considered. I don't think there is any analogy for example with what is happening with the transit agencies per this post. There really is no reason I can think of why a city has to be in the parking business per se, where as the assets these transit agencies leased back were their core assets.

If you go back and look at the history of the parking authority.. it is being run better now, but there were periods in the past when it was the center of corruption and management issues. It just isn't conducive to helping the city do all the other things it has to do to be in the parking biz any more than it has to. and the existance of the parking authority is at the very least a lot bigger footprint in the parking business than what is absolutely necessary. But without buses and light rail cars, there is no transit.. thus it made no sense to ever put them at risk as these SILO deals did.

I do agree the 99 year lease idea is not the greatest... sell the lots and be done. Leasing them could retain a lot more hassle than expected and mitigate the gains of the whole idea. IMHO.

Friday, March 20, 2009 1:48:00 PM  

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