Management & Operations

Transit leases with private companies in jeopardy

Posted on March 23, 2004

More than a dozen U.S. city and state transit agencies are in limbo pending Senate deliberation on a bill that would block their ability to earn millions of dollars. Under review are deals made when transit systems lease train cars, buses or rail lines to private corporations.

“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 for the American Public Transportation Association (APTA).

Transit systems in Atlanta, Los Angeles, Connecticut and New Jersey are among those affected. Fifteen leasing deals averaging more than $3 billion in assets have come to a halt after the U.S. Treasury Department told the Transportation Department to stop approving them. APTA estimates that the deals would have reaped $250 million for transit agencies.

“You can’t tell people, notwithstanding the fact it was legal when you did it, it’s not legal now,” said House Ways and Means Committee Chairman Bill Thomas, R-Calif., to the Associated Press. “A government should never do that.”

Under these type of leases, the transit system retains control over the equipment and receives payment to cover upgrades, while the corporation gets a tax break for the equipment’s depreciated value. Critics have said the deals should stop because they merely provide a tax loophole for corporations.

“The promoters of these deals had a clear indication that their gig would be up sooner or later,” Senate Finance Committee Chairman Charles Grassley, R-Iowa told the AP in an interview.

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