Thursday, March 5, 2009

New Leasebacks?

Houston Metro signed a $600 million contract to build 4 of its 5 planned light rail lines. The total cost would be almost $1.5 billion and would include a 29 LRV order from Spanish manufacturer CAF which built LRV's for Pittsburgh and Sacramento. Perhaps they got a better price(Probably not at $4 M a vehicle) but wouldn't you want all of your vehicles to be the same so spare parts are easier to come by? Currently Houston uses the Siemens S70 Avanto we've been talking about alot here recently. It's not like they couldn't have hopped on Salt Lake City's order. In fact, at that price, they could have saved $13.6 Million

But the dumbest thing I think I've seen is for a transit agency to do a leaseback deal when many of them have almost lost thier shirts recently because of the AIG collapse. Really guys?
The transit agency also will rely on $150 million in lease-back agreements to help get the first phase of the project under way. The lease agreements allow agencies like Metro to sell railcars, buses and other assets to banks and lease them back at a lower cost. The banks then can claim depreciation of the assets in tax deductions.
This seems like a whole lot of bad decision making rolled up into this project. More expensive LRVs and possibly bad bank deals during a time when banking isn't exactly healthy.

7 comments:

Christof Spieler said...

The price for the entire 103 vehicles actually works out to $3.15 million each, so it looks like they got a decent deal. And the vehicles are 100% low floor with 6, not 4, doors on a side, which is a big advantage in urban service. And, like the Siemens s70 (which is a nice car) the new cars are already in service, in Seville, Spain.

more: http://www.ctchouston.org/intermodality/2009/03/04/we-have-part-of-a-contract/

Ultimately, the choice of vehicle suppliers is related to the fact that this is a design-build-operate contract. CAF is part of a team assembled by Parsons (along with HRT and Veolia.) It's also worth noting that METRO is still fighting with Siemens over the Main Street Line -- not on the LRVs, which have performed really well, but on the electrification system, which Siemens also supplied and which has had some stray current issues METRO has fixed at its own cost and wants reimbursement for.

More: http://www.ctchouston.org/intermodality/2009/03/04/we-have-part-of-a-contract/

The Urbanophile said...

What did the AIG implosion do to the sale-leasback transactions? I know that the CTA had a problem where they might have breached some covenants and be required to repo the equipment. In general, as near as I can tell, these transactions have no economic substance and exist strictly to shift the assets into a taxable entity that can write off the depreciation.

Robert said...

I too am very disappointed in Metro's decision to abandon the S70 for its new lines. Does anyone have any idea as to whether the CAF cars are interchangeable with the S70s? Ie. CAF cars on the Main Street line and S70s on the new lines?

arcady said...

Interestingly enough, both Pittsburgh and Sacramento run a mixture of older Siemens cars and newer CAF cars.

Pantograph Trolleypole said...

Urbanophile, I believe that a European insurance company wanted to collect from Metro in DC but I think congress intervened to change the deal or delay it somehow.

Christof, phew. I didn't see the 103 part of the deal in the Chronicle article. I knew I should have waited for you to post!

Robert, I'm not sure they will be interchangable, but they will run on the same tracks. It's silly though to not have a standard coupler height and type in LRV design though.

Christof Spieler said...

METRO's now answered the compatibility issue: the new cars can tow the old ones in case of a breakdown, but they can't run in mixed 2-car trains because of software compatibility. That's not a big deal: you can run a 2-car Siemens trian followed by a 2-car CAF train or you can use the Siemens cars on one line and the CAFs on the others. The Siemens carts have a 66mph top speed and the CAFs seems to have a 45mph, so tghe Siemens cars may well be used for future suburban extensions whihc the CAFS will be used on the urban lines where speed doesn't matter but the ability to load and unload quickly does.

The really important compatibility issue is vehicle width and height, so the platforms will work with both vehicles, and the cars match in that regard. That, along with coupler design, ought to be a national standard, so everyone can chose from the same "off-the-shelf" vehicles.

Bob Davis said...

Standardizes electric railway cars? What a concept! We do have several systems where cars can migrate from one city to another, but in many cases it's like the bad old days of streetcars that were custom designed to suit each "traction company's" requests.
This was one of the hidden advantages of replacing streetcars with buses--motor coaches were a lot more standardized, and if a buyer defaulted, were easier to sell off to another operator.