Metro and bank KBC Group are scheduled to appear in federal court Wednesday to determine whether the bank can collect the money immediately or whether it must wait until the matter winds its way through court.
“If the worst case happens, then we have a problem — we have a major problem,” Metro General Manager John Catoe said. “We can only take [the money] from the funds that are set aside for this year.”
Metro’s capital budget, which is used to fund the system’s railcars and maintain its escalators and other equipment, is already
underfunded for its vast and growing needs.
Metro is asking the Treasury Department, which recently agreed to spend more than $700 billion to aid financial institutions, to act as a guarantor for Metro’s financial deals and for similar deals made by 30 other transit agencies nationwide, preventing the banks from demanding immediate full payment.
“I am hopeful that they will do what they can do relatively easily,” Metro Board Chairman Chris Zimmerman said. “This is something that will cost them nothing.”
A Treasury Department spokeswoman did not immediately respond to a request for comment, but sources said Treasury officials are not inclined to grant Metro’s request because the deals in question flout the Bush administration’s tax policies. The deals between the bank and Metro allow the bank to claim large tax credits.
KBC is demanding the $43 million because of a technicality in a long-term financing deal that allows the bank to collect all of the money immediately if Metro’s insurer loses its AAA credit rating.
AIG, Metro’s insurer, lost its AAA rating in the recent national credit crisis, although it continues to guarantee Metro’s deals and Metro continues to make its payments to the bank on time. Metro made 15 other similar financing deals and would owe $400 million this year if all of the banks decided to collect. That would wipe out two-thirds of Metro’s $613 million capital budget for the year.