December 15, 2008
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Senate Defeats Auto Bailout Bill with SILO/LILO Fix
The U.S. Senate voted late Dec. 11 to defeat an auto bailout bill that would have included a provision to help public transit agencies caught in the difficulties surrounding Sale-In/Lease-Out (SILO) and Lease-In/Lease-Out (LILO) transactions. The U.S. House earlier had approved the legislation.
It is believed that the auto bailout was the last legislative issue for the 110th Congress to address before adjournment. The draft bill had included language that would direct the president’s designee—likely the U.S. Treasury Department—to serve as guarantor for SILO/LILO transactions approved by the Federal Transit Administration (FTA) prior to Jan. 1, 2006. The measure specified that any payments made by the federal government as a result of such guarantees be recouped from transit agencies. This language was added to ensure that there would be no cost to taxpayers or the federal government as a result of the federal guarantees.
APTA worked with Congress and the Administration to provide such guarantees on SILO/LILO transactions, many of which are in jeopardy of going into technical default as a result of the banking crisis and the loss of AAA ratings on securities that are used to make lease payments. No one has asserted that these securities are in danger of failing to meet lease payments under the transactions, but the loss of the AAA ratings has raised the possibility that transit agencies that entered into such transactions will be forced to pay banks and investors more than $2 billion in payments. Having to make such large payments could result in the agencies being forced to cut service or raise fares to cover potential costs at the very time that transit ridership is growing dramatically.
APTA also sought to modify language in the bill to ensure that it covers all such transit agency transactions, including those that were approved by states and not the FTA. In addition, APTA has discussed with congressional staff the possibility of imposing a 100 percent excise tax on proceeds that transit agencies would have to pay to investors, over and above the amounts in defeasance accounts.
Lastly, the bill included separate provisions that would direct auto manufacturers that receive assistance to analyze the potential use of excess capacity to make vehicles for public transportation.