SFist: BART Not Immune to Financial Crisis

Xenu

Mon, 27 Oct 2008 19:44:20 -0800

chomsky's comment was far more informative/understandable than any newspaper article so far.

manys

Mon, 27 Oct 2008 12:55:10 -0800

Uh, can we deal with that horsefucker "sfnative1971?" Check out their illuminating history of posts: http://sfist.com/profile/sfnative1971

chomsky

Mon, 27 Oct 2008 12:42:34 -0800

Here's the deal. Cities sell their transit system railcars, buses, etc. to banks, who then lease them back to the cities. The cities get a pile of cash for the sale, and the banks get years of lease payments and the ability to claim a tax credit on the depreciation of the property -- so supposedly both sides win! (That's a total lie of course, it lets the city have some cash up front but it obviously favors the banks, leaving the city indebted years into the future. It's serious budget mismanagement by municipalities and vampire activity by the banks.) To solidify the deal, the cities then use an insurer to insure that the payments to the bank will always be made. A clause is inserted into the insurance contract that lets the banks collect the entire balance owed them if there is a certain kind of credit event, like, say, if the insurer goes bankrupt or has its credit rating lowered. AIG insured many cities' transit deals. When their credit rating was slashed, it not only brought a firestorm onto AIG, it triggered the out clauses for the banks in all the transit system leases.

Plug1

Mon, 27 Oct 2008 12:23:01 -0800

new font for SFist?

jhatch

Mon, 27 Oct 2008 12:18:25 -0800

It's a little confusing, but it sounds as if BART entered into one of these deals with an unnamed bank/investor group and AIG was insuring (guaranteeing) the lease payments. There must be a clause in the agreement between BART and their bank, that provides that if the insurer's credit rating drops below a certain level, the bank can demand a certain percentage of the balance owed. The $40 million must be the result of that calculation...

izzyizzy

Mon, 27 Oct 2008 11:56:44 -0800

my question is, when will bart quit complaining? first it was low ridership and not enough revenue, now ridership has skyrocketed and they're still talking about raising fares, even as service takes a hit and the system reaches capacity.

fizzandpop

Mon, 27 Oct 2008 11:21:57 -0800

For the same reason the office building you're sitting in right now is probably owned by an insurance company. They have cash but no assets. Your landlord has assets but no cash. Swapsies. None of this excuses the fact that for every dollar you give to AIG, 25c goes to fat boy Rooney and his badge-kissing pals at scummy Utd.