TRANSPORTATION: PUBLIC URBAN AND PASSENGER: UPDATE: DC Metro Delayed Upgrades Due To Tax-Shelter Deal

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TRANSPORTATION: PUBLIC URBAN AND PASSENGER: UPDATE: DC Metro Delayed Upgrades Due To Tax-Shelter Deal

David P. Dillard
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UPDATE: DC Metro Delayed Upgrades Due To Tax-Shelter Deal
By Martin Vaughan
Of DOW JONES NEWSWIRES
JUNE 25, 2009, 4:32 P.M. ET
<http://online.wsj.com/article/BT-CO-20090625-715283.html>



WASHINGTON (Dow Jones)--Washington Metropolitan Transit Authority
officials told safety regulators in 2006 that they wouldn't replace aging
subway cars involved in a fatal crash Monday because of tax-shelter
leasing arrangements that Metro had entered into with banks.

The National Transportation Safety Board recommended in March 2006 that
Metro either accelerate retirement of the 30-year-old, Rohr 1000-series
railcars or retrofit the cars to better withstand collisions. That
recommendation came after NTSB's investigation into a 2004 collision in
the Metro system.

In a Jan. 10, 2007, response to NTSB, Metro officials wrote: "WMATA is
constrained by tax advantage leases, which require that WMATA keep the
1000 Series cars in service at least until the end of 2014. The 296 Rohr
railcars make up over a third of WMATA's current rail fleet and have
performed well for over thirty years."

Metro said it would replace the cars in 2015.

Carol Kissal, chief financial officer at Metro, said in an interview that
the decision not to replace the cars until 2015, and ignore the NTSB
recommendation, was primarily based on the expectation that the cars would
be used until the end of their 40-year life, and not because of
restrictions from the leasing deals.

She said the leasing agreements didn't explicitly prohibit Metro from
retiring older cars. But most other cars that Metro could have used to
replace the 1000-series cars were themselves under leasing arrangements
that could not be terminated, Kissal said.

"We could have replaced the asset, under most of the tax contracts," said
Kissal. "But we did not have any free, clear, unencumbered assets to
replace it with."

She said Metro had no ability to terminate the leasing deals, unless the
assets themselves were damaged.

In an October 2007 response to Metro, NTSB wrote, "In view of WMATA's
response to the Board's recommendation, it appears that further dialogue
on this issue would prove futile."



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The complete article may be read at the URL above.




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