November 28, 2008

Mass Transit Takes a Number: The Line at the Dole Continues to Lengthen

Monique Chartier

Stung by heavy termination fees (arising out of some sort of fixed asset sale/lease back arrangement that sounds suspiciously similar to what has been proposed to solve Rhode Island's public pension problem) resulting from the collapse of AIG, mass transit authorities around the country have asked Uncle Sam for help with the resulting operating shortfalls. From a Tax Foundation November 19 press release.

City transit agencies are on Capitol Hill this week, lobbying for a bailout as they face huge termination penalties from overseas banks due to the collapse of AIG and the unraveling of "Sale In Lease Out" (SILO) deals they entered into from 1988 to 2003.

Last Friday, the Washington, D.C. Metropolitan Area Transit Authority (WMATA) settled with a KBC Group, a Belgian bank that demanded $43 million in termination fee. In Tax Foundation Fiscal Fact No. 153, "Transit Agencies in Bind Due to SILO Deals and AIG Collapse," Tax Foundation Tax Counsel Joseph Henchman explains that the situation is a result of a series of leaseback transactions these agencies conducted. Federal policy first encouraged and then discouraged these SILO deals, and when AIG collapsed, heavy termination penalties kicked in for approximately 30 transit agencies nationwide. These agencies may now face serious financial shortfalls absent the U.S. Treasury Department becoming a guarantor.

Within the framework of the logic of any bailout, a case could be made to include the mass transit systems as secondary victims of the fiscal collapse, as opposed to, say, the American auto industry, which finds itself in a bind of its own making. But with bailouts now totaling trillions, not to mention the price tag of proposed new spending initiatives, it is clear that the fetters are off and Washington now feels no constraints of any nature about spending astonishing amounts of other people's money with questionable efficacy to accomplish dubious ends. The source of this newly-found freedom - the nose under the tent - was the original concept of the bailout. Oh, the rush of that initial seven hundred billion.

Cancel all bailouts. No to the mass transits. No to everyone. Were it even shown to be an effective approach, Washington has proven itself incapable of administering such a program responsibly or with any amount of prudence.

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I believe federal funding of mass transit is money well spent-if it is used to build electric powered systems.
That leads to a savings in fuel,some degree of positive environmental impact,and a better ability of the public to get places of employment.You don't think gasoline /diesel prices are down to stay,do you?
Bailing out banks owned by offshore Arab sheiks is not such a good idea.

Posted by: joe bernstein at November 28, 2008 10:21 AM

The USA needs alternative energy technology like a vampire needs blood, but do you think we're going to get it from these sub-par math and science failures we're "graduating" from our high schools?

Posted by: Erik D. at November 28, 2008 10:46 AM

Erik-the technology for electric that works very well was perfected in the early 20th Century and then was practically eliminated across the country starting just after WW2 at the behest of GM and the oil companies.It's hardly alternative energy-it's just cleaner and less costly than gas/diesel.Additionally, a trolley car can run for 50 years(check out the Mattapan-Ashmont Line in Boston)while a diesel bus needs replacement after 4 years or so.

Posted by: joe bernstein at November 28, 2008 11:23 AM

"and then was practically eliminated across the country starting just after WW2 at the behest of GM and the oil companies"

Twenty five years ago, there was the rumor that big oil somehow killed or bought and buried a carburator that got 75 mpg. 95% of me was dubious that it ever existed but 5% always wondered.

Posted by: Monique at November 28, 2008 2:12 PM

Monique-just research "National City Lines"-it was a consortium set up to kill electric transit across the country.You know me better than to believe I would allege a conspiracy that did not exist.

Posted by: joe bernstein at November 28, 2008 3:35 PM

No, just the opposite, Joe, I believe you. So it makes me wonder what else they may have killed - like a 75 mph carburator.

Excuse me, the creatures with the large eyes have once again arrived to confer with me. Hopefully, we'll be done in time for the Trilateral meeting later.

Posted by: Monique at November 28, 2008 4:42 PM

Monique-can't forget the Bilderbergers convention either(although there may be something to that)

Posted by: joe bernstein at November 29, 2008 5:39 AM

Monique-you meant a 75 MPG carburetor,right?75 MPH didn't make sense.

Posted by: joe bernstein at November 29, 2008 2:32 PM

75 MPG, not MPH.

Posted by: Monique at November 29, 2008 7:41 PM

How about 75 MPG @ 75 MPH? Now that would be something! ; -)

Posted by: Tom W at November 29, 2008 11:18 PM

Tom W-best comment in a month!!

Posted by: joe bernstein at November 30, 2008 3:39 PM
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