California Transit Finance Corporation
The California Transit Finance Corporation (CTFC) was founded by the California Transit Association in 1990 as a non-profit public-benefit corporation. The CTFC's primary activity is to acquire and lease transit buses to member agencies of the California Transit Association using Certificates of Participation. The CTFC also provides innovative financing for capital and maintenance projects and short-term cash-flow through Revenue Anticipation Notes.
Certificates of Participation
A Certificate of Participation (COP) is one way of financing capital projects without obtaining long-term debt. The California Transit Finance Corporation purchases and leases vehicles using COPs. First, the CTFC finds an agency wishing to lease a vehicle without incurring long term indebtedness. Next, the CTFC purchases vehicles and issues debt with the same duration as the lease. Finally, the CTFC leases the vehicle to the agency. The agency does not have to worry about selling the vehicle at the end of the lease. Additionally, COPs can enable agencies which cannot issue debt without voter-approval to more easily obtain and utilize capital equipment or facilities without putting the long-term assets and liabilities on their accounting books. COPs also allow the CTFC to pool vehicle purchases and financing between multiple agencies, resulting in higher volumes and lower per-vehicle purchase and financing costs.
Agencies can use FTA Section 9 funds to subsidize principal and interest payments on certificates of participation, resulting in lower annual service fees for transit vehicles, "computers, maintenance of way and other heavy equipment, maintenance of effort rail equipment, radio equipment, bus garages, property or structures for park and ride, and other buildings or facilities used for mass transit purposes" However, the funding is subject to the U.S. Congress's appropriations process. Therefore, some agencies choose to use more reliable funds for service fee payments and use Section 9 funds, should they materialize, for other projects.
Revenue Anticipation Notes
Revenue Anticipation Notes, known as Tax and Revenue Anticipation Notes (TRAN) or Bond Anticipation Notes (BAN), provide short-term financing to fill funding gaps created by delayed appropriations, unexpected tax shortfalls, or other circumstances. Revenue Anticipation Notes allow transit agencies to overcome temporary cash-flow shortages.
- Certificates Of Participation Involving FTA 49 U.S.C. § 5307 (“Section 9”). Federal Transit Administration.
Case Study—$9.66 Million California Transit Finance Corporation Certificates of Participation, 1996 Series A. The CTFC issued COPs to partially-finance an expanded and renovated bus maintenance facility for the City of Culver City's Municipal Bus Lines. The lease payments were structured so that they would not encumber the City's general revenues. The Culver City and the CTFC also used bond insurance to enhance the COPs rating to AAA levels, bringing future payments down. (City of Culver City, California)
California Transit Finance Corporation Brochure. A short-brochure about the CTFC, from the California Transit Association.
American Association of State Highway Transportation Officers. "Certificates of Participation." This overview of Certificates of Participation links several case studies.