Management & Operations

Lawmakers Include Lease Curbs In Budget Blueprint

Posted on April 25, 1999

The House and Senate budget resolutions for Fiscal Year 2000 includes President Clinton's recent regulatory change that eliminated a key tax break benefiting transit capital investments. Under the Treasury Department's recent change in federal tax regulations, exemptions for so-called "Pickle" sale/lease-leaseback transactions have been eliminated. Named for former House Ways and Means Committee chairman J.J. Pickle, these deals are complicated and involve often multiple Wall Street investment banks and other financial institutions. The budget resolution just enacted directs the House Ways and Means and Senate Finance Committees to produce tax legislation in July. The resolution's tax recommendations include the Administration's move to eliminate tax-exempt status of these investments. Pickle lease transactions have been used by "almost all major transit agencies around the nation" for capital investments, said APTA President Bill Millar in a letter to Senate Finance Committee Chairman William Roth (D-R.I.). "Transit transactions represent only a small portion of all such lease transactions; in our view, their benefits well exceed their costs," the letter continued. The transactions that would be affected by the Administration's proposal typically involve the lease and leaseback, or sale and leaseback, of assets belonging to transit agencies. Pickle leasebacks involve domestic investors, as opposed to cross-border leases. Because the latter involve foreign entities, they are not affected by U.S. tax policy, and as such are not affected by these changes. Transit agencies are tax-exempt public bodies that cannot otherwise benefit from depreciation on their capital assets (i.e., vehicles or facilities), so at its root these transactions benefit both private investors as well as public-sector transit agencies because the investors get the tax benefits that the transit system cannot use while transit gets something it can, namely cash and/or equipment at lower prices than what they would otherwise pay. In addition, the Federal Transit Administration must review Pickle transactions to ensure that they are tax positive over the life of the lease. "We are fortunate that the change did not affect our deal," said Washington Metropolitan Area Transit Authority General Manager Richard White. His agency was in the throes of negotiating a Pickle deal involving rolling stock. "Our investors looked at the new rules and decided that their risk was still manageable. It's all about risk." New York might not be so lucky. According to Christopher Boylan, director of finance for the Metropolitan Transportation Authority, investors there put a similar deal on hold and at press time it remained unresolved. "The legislative language for the proposal is not yet available, but if drafted as proposed, it essentially would prohibit these innovative financing transactions in the transit industry," said Rob Healy, APTA's manager of legislative affairs, in an analysis of the development. "At a minimum, the proposal would prevent investors from taking any tax deductions in connection with transit assets until the end of the lease term, which would effectively eliminate the benefit to the investor."

View comments or post a comment on this story. (0 Comments)

More News

LA Metro taps Parsons to modernize RIITS communications

Provides transportation operations a consolidated, data-rich, and near real-time source of information for transportation in Southern California via an interface that allows for coordinated transportation management throughout the region.

NJ Transit reinstates MCI Commuter Coach order

In July 2016, New Jersey Gov. Chris Christie had issued Executive Order No. 210 directing the immediate and orderly shutdown of all ongoing work funded under the TTFA.

New transit planning group director joins HNTB

Steven Greene will be responsible for the development and support of the firm’s expanding multimodal transit planning practice, focusing on transit and corridor studies.

President of McDonald Transit announces his retirement

Robert Babbitt will continue to stay involved in with the company, working as a consultant and helping ensure a smooth transition to new leadership.

Gannon appointed to permanent GM post for King County Metro

Gannon, 47, served as interim GM from March 2016 until now. He was Metro Deputy GM from 2013-2016, and Human Resources manager for the King County DOT from 2011-2013.

See More News

Post a Comment

Post Comment

Comments (0)

More From The World's Largest Fleet Publisher

Automotive Fleet

The Car and truck fleet and leasing management magazine

Business Fleet

managing 10-50 company vehicles

Fleet Financials

Executive vehicle management

Government Fleet

managing public sector vehicles & equipment


Work Truck Magazine

The number 1 resource for vocational truck fleets

Schoolbus Fleet

Serving school transportation professionals in the U.S. and Canada

LCT Magazine

Global Resource For Limousine and Bus Transportation

Please sign in or register to .    Close