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August 2, 2000
City Council Approves TTC Subway Car Investment Plan
Finance - Yesterday, Toronto City Council approved an innovative method of
financing for the Toronto Transit Commission's subway cars. This program, if
successful, would provide a $50 to $80 million benefit to the City, over the
next 26 years, with an existing program of 372 subway cars. The value of the
subway car program is estimated at $851 million.

Traditionally, the Toronto Transit Commission (TTC) has purchased subway cars
with the City financing the purchases through debentures. Early this year, the
Finance Department issued a Request for Proposals for financial advisory
services to assist in developing a lower cost alternative to finance the
purchase of these subway cars. The advisory team of Macquarie North America
Limited and the law firm McMillan Binch were chosen and asked to identify the
least cost financing solution.

The method recommended to the City involves a sale-leaseback of the cars with a
US investor. As a result of the tax benefits available to US investors on this
type of transaction, the US investor is able to lease the subway cars to the
TTC at a lower rate, which represents a substantial saving over the cost of
traditional debenture financing. A condition of the deal is that no operational
interference will be experienced by the TTC. A US cross-border lease would be
in Canadian dollars and therefore the City would incur no currency risk.

Although new to the City of Toronto, this method of financing is commonly used
throughout the world for passenger rail rolling stock and infrastructure, buses
and aircraft. The advisors have now been authorized to structure the
transaction, negotiate with the potential equity investors and debt providers,
and execute the transaction with the City and TTC.

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