All of this, it seems, stems from the collapse of insurance mammoth American International Group. According the Associated Press:
Bay Area Rapid Transit, the San Francisco Bay Area's commuter rail system, could also feel the impact of AIG's woes. Six years ago, BART struck a "sale-in, lease-out" deal to sell its rail equipment for $230 million. The agency put $23 million into its general fund and gave most of the balance to AIG, which agreed to make lease payments to the investors over the next 30 years, spokesman Jim Allison said.Under the terms of the financing deal, BART would have to pay a $40 million payment to the investors if AIG's credit rating drops below B-triple plus. AIG's rating recently fell to A-minus, triggering payments from other transit agencies that reached similar equipment-financing deals involving AIG.
In addition to the agencies asking the Treasury Department and congressional staffers for financial assistance, this could also spell out increased fares at some point in the (near?) future. (Although BART, we should point out, is slightly less vulnerable compared to other cities.)
So the question, to those of you out there in the financial services industry, is this: why did BART go with AIG? It's an insurance company, so why would they be collecting rent payments?