The Chicago Transit Authority recently generated $2.7 million in revenue by entering into an innovative lease agreement to lease some of its buses to an equity investor.
The transaction with Comerica Leasing Corporation involves 411 Nova buses valued at approximately $122 million. The Chicago Transit Board authorized the CTA transaction at its June 2002 meeting.
In leaseback arrangements, the CTA leases property or equipment to private entities. Since the CTA is a nonprofit agency, it does not pay taxes. Instead, it sells its depreciation credits to private firms (equity investors) and shares the benefit. This provides a tax benefit to the firm and revenue to the CTA.
"Leaseback arrangements are an innovative way for the CTA to gain valuable revenue by transferring tax benefits it is unable to use," said Chicago Transit Board Chairman Valerie B. Jarrett. ?The CTA has entered into successful leaseback transactions in the past and has found them to be an effective way to generate income. I would like to give special thanks to the Transit Board's Finance Chairman Douglas Donenfeld for his expertise in handling this transaction."
CTA President Frank Kruesi said, "I want to thank our financial team for leaving no stone unturned as they assembled this innovative leaseback plan to help us secure additional revenue. In this challenging economy, it is more important than ever to find ways to control costs and increase revenues and our financial team continues to meet that challenge.
This is the seventh leasing arrangement the CTA has entered into since 1995. Together, the proceeds have totaled more than $95 million.
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