- The Washington Times - Wednesday, November 19, 2008

Metro General Manager John B. Catoe Jr. joined leaders from transit agencies across the country Tuesday in requesting help from Congress to prevent a crisis in their industry by having the U.S. Treasury guarantee certain long-term financing deals imperiled by the credit crisis.

“This is not a bailout request. This is not a request for a loan of monies,” Mr. Catoe said. “This is a request for the federal government, in the process of working with various institutions, to support public transit.”

Mr. Catoe and leaders from 10 other transit agencies said that more than 30 systems in the country could be forced to make $2 billion in payments if the deals fall apart, resulting in a crisis for bus and rail systems amid increased ridership.

The credit downgrade of American International Group Inc. - which, along with other companies provided loan guarantees for the deals - has pushed many of the borrowing agencies into technical default. It’s not that the agencies are missing payments, just that the loan guarantees were an essential condition of the loan. That has triggered a clause allowing banks to demand early termination fees and other penalties.

The agency heads are asking that the U.S. Treasury back the deals.

“This effort is a request for Congress to step in, and for the Treasury to step in to guarantee these arrangements at no cost to the taxpayers,” Mr. Catoe said.

Metro on Friday reached a settlement with the Belgian bank KBC Group that ended a long-term leasing deal that brought the agency to federal court. The bank had been seeking a $43 million payment from Metro after AIG’s lowered credit rating, but terms of the settlement were not disclosed.

Mr. Catoe said Metro still must deal with 14 other financing deals that could lead to spending more money in court. And the financing crisis comes as Metro already is facing a cash crunch. Mr. Catoe in September said the agency will need more than $11.3 billion over 10 years to keep its current level of service.

The number of trips taken on Metro trains is expected to increase 22 percent by 2020 - or roughly 1 million more daily rides.

President Bush last month signed a bill providing the agency with $1.5 billion in federal funding over 10 years. Still, Metro spokeswoman Candace Smith said certain requirements must be met to receive the money, and the funds are not guaranteed each year.

“We’re definitely feeling the squeeze everywhere,” she said.

The Treasury Department has said it is aware of the problem with the long-term deals, but declined further comment. Several members of Congress have been pressing for a solution in recent weeks.

“I made the point that it would be wrong to ride to the rescue of private Wall Street firms and then leave public transit agencies out in the cold,” Rep. Chris Van Hollen, Maryland Democrat, told the Associated Press last month.

General managers and other officials from transit agencies in Atlanta, New York, Los Angeles, Houston, St. Louis, Chicago and Boston were among those who gathered in Washington to lobby lawmakers.

Officials met with congressional staff and members, including Sen. Patty Murray, Washington Democrat and chairman of the Appropria-tions transportation, housing and urban development and related agencies subcommittee, and Rep. John L. Mica, Florida Republican and ranking member of the House Transportation and Infrastructure Committee.

This article is based in part on wire service reports.



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