Last Friday, the Washington, D.C. Metropolitan Area Transit Authority (WMATA) settled with a KBC Group, a Belgian bank that demanded $43 million in termination fee. In Tax Foundation Fiscal Fact No. 153, "Transit Agencies in Bind Due to SILO Deals and AIG Collapse," Tax Foundation Tax Counsel Joseph Henchman explains that the situation is a result of a series of leaseback transactions these agencies conducted. Federal policy first encouraged and then discouraged these SILO deals, and when AIG collapsed, heavy termination penalties kicked in for approximately 30 transit agencies nationwide. These agencies may now face serious financial shortfalls absent the U.S. Treasury Department becoming a guarantor.

            "All told some $16 billion in taxpayer-purchased assets were sold to European banks, and now agencies face termination penalties of somewhere between $2 billion and $4 billion," said Henchman.

Many agencies are now coming clean about the liabilities associated with agreeing to termination fee clauses that they never intended to pay. Below is a list of agencies that have revealed what those liabilities are:

• Los Angeles MTA: approx. $165 million
  
• DC WMATA: approx. $400 million (WMATA settled with one of its 16 SILO creditors, KBC Group. The Belgian bank demanded a $43 million termination fee penalty, but the two settled for $17 million.)
  
• Chicago Transit: $76 million (PACE did not use AIG as a guarantor and is thus not affected. Metra has restructured its deals at a cost of $75,000.)
  
• New Jersey Transit: $150 million
  
• San Francisco BART: $40 million
  
• Atlanta MARTA: $391 million
  
• Philadelphia SEPTA: $21 million
  

Some agencies, such as New York's MTA and Seattle's Sound Transit, have specifically declined to disclose their liabilities.

A full list of agencies can be found at http://www.taxfoundation.org/publications/show/23882.html.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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