Officials from half a dozen financial institutions called Montgomery County yesterday and said they might like to buy 34 of the jurisdiction's Ride-On buses in a paper transaction that could earn the county $400,000 and give investors a way to reduce their taxes.
County Finance Director Albert W. Gault said the Dean Witter Reynolds brokerage house in New York and the First Tennessee Bank in Memphis, as well as other institutions, called to inquire about the sale of the buses after the county placed cryptic advertisements about the sale in yesterday's Washington Post and Daily Bond Buyer.
The sale of the buses is made possible by a special provision of the 1981 Economic Recovery Act.
Gault said the firms' proposals are due in Rockville by 3 p.m. next Tuesday and that he expects the county should be able to close a deal by Wednesday. The County Council is expected to approve the transaction at a Tuesday meeting, despite the fact that several of its members say they are philosophically opposed to taking advantage of what Council President Neal Potter described as an "outrageous loophole."
"Hopefully, we'll get something out of it," Gault said.
Under the planned sale, the county would sell the buses to investors who would be able to write off the $2.9-million purchase price from their taxes over the next five years. The investors would pay the county $400,000 when the contract is signed and then lease the buses back to the county, which would continue to operate them as part of the intra-county system that feeds into the regional Metro system.
Other than the $400,000 payment, no money actually would change hands. While the purchaser would pay the county $500,000 a year plus interest during the five-year period, the county's lease payments for the buses would be for the same amount.
While wealthy Montgomery County plans to use the anticipated $400,000 payment to help offset an expected $4.7-million loss in federal aid next year, the tax provision actually was intended to help financially ailing transit systems. Ten other jurisdictions or transit authorities, including those in New York, Cincinnati, Boston, Houston, Philadelphia and Los Angeles, already have taken advantage of the provision to sell some of their buses or subway cars.