For several months, news outlets in cities like Los Angeles, Washington, D.C., and Atlanta have been writing about a complex problem afflicting city transit authorities across the country.
It involves a series of sale and leaseback arrangements these entities entered into with private companies, and many of the deals included guarantees underwritten by the troubled American International Group. The deals, which provided tax breaks to the private companies that bought the transit assets, were once condoned by the IRS but are now frowned on.
The collapse of AIG has triggered huge termination penalties for several of the transit systems. Washington, D.C., has reported liabilities of $400 million, Atlanta $391 million and Los Angeles $165 million.
These and nearly 30 other transit systems have marched to Capitol Hill to ask Congress for a bailout.
While most of the major cities that were involved in sale and leaseback arrangements have come clean about their potential exposure to termination agreements, several have not given complete information about the potential cost to taxpayers.
Hartford falls into that category, according to The Tax Foundation, a nonpartisan nonprofit organization in Washington, D.C., that monitors fiscal policy at the federal, state and local level.
According to the foundation, state and local entities engaged in sale and leaseback deals involving more than $500 million in Hartford transit assets between 1988 and 2003. The termination fees on those deals, if any, would be only a fraction of that. For both Atlanta and Los Angeles, that fraction was 13 percent. For Washington, D.C., it was 49 percent.
Kevin Nursick, a spokesman for the Connecticut Department of Transportation, said the department has leaseback deals with three entities on rail cars, but is only exposed on one $10 million surety bond. “What this will cost is purely speculative at this point,” Nursick told the Hartford Business Journal.
When will we find out more? Are Connecticut officials seeking federal bailout money? If so, how much, and on what basis?
The overall volume of sale and leaseback activity involving Hartford cries out for an accounting for how much state and local taxpayers could owe.
