Pub. L. 92-349, tit. I, sec. 101

Sec. 101. The National Capital Transportation Act of 1969 is amended by adding at the end thereof the following new sections: “guarantee of transit authority obligations “Sec. 9. (a) The Secretary of Transportation is authorized to guarantee, and to enter into commitments to guarantee, upon such terms and conditions as he may prescribe, payment of principal of and interest on bonds and other evidences of indebtedness (including short-term notes) issued with the approval of the Secretary of the Treasury by the Transit Authority under the Compact. No such guarantee or commitment to guarantee shall be made unless the Secretary of Transportation determines and certifies that— “(1) the obligation to be guaranteed represents an acceptable financial risk to the United States and the prospective revenues of the Transit Authority (including payments under section 10) furnish reasonable assurance that timely payments of interest on such obligation will be made; “(2) the Transit Authority has entered into an agreement with the Secretary of Transportation providing for reasonable and prudent action by the Transit Authority respecting its financial condition if at any time the Secretary, in his discretion, determines that such action would be necessary to protect the interest of the United States; “(3) unless the obligation is a short-term note (as determined by the Secretary), it will be sold through a process of competitive bidding as prescribed by the Secretary of Transportation; and “(4) the rate of interest payable with respect to such obligation is reasonable in light of prevailing market yields. Notwithstanding clause (3) of the preceding sentence, the Secretary of Transportation may guarantee an obligation under this section sold through a process of negotiation if he makes a determination that prevailing market conditions would result in a higher net interest cost or would otherwise increase the cost of issuing the obligation if the obligation was sold through the competitive bidding process. The Secretary’s determination shall be in writing and shall contain a detailed explanation of the reasons therefor. “(b) Any guarantee of obligations made by the Secretary of Transportation under this section shall be conclusive evidence of the eligibility of the obligations for such guarantee, and the validity of any guarantee so made shall be incontestable, except, for fraud or material misrepresentation, in the hands of a holder of the guaranteed obligation. 86 Stat. 465 “(c) The aggregate principal amount of obligations which may be guaranteed under this section shall not exceed $1,200,000,000; except that (1) no obligation may be guaranteed under this section if, taking into account the principal amount of that obligation, the aggregate amount of principal of outstanding obligations guaranteed under this section exceeds $900,000,000 unless the local participating governments (A) make, in accordance with agreements entered into with the Transit Authority, capital contributions to the Transit Authority for the Adopted Regional System in a total amount not less than 50 per centum of the amount by which the principal of such obligation causes such aggregate amount of principal to exceed $900,000,000, or (B) have entered into enforceable commitments with the Transit Authority to make such contributions by the end of the fiscal year in which such obligation is issued, and (2) obligations eligible for guarantees under this section which are issued solely for the purpose of refunding existing obligations previously guaranteed under this section may be guaranteed without regard to the $1,200,000,000 limitation. “(d) The interest on any obligation of the Transit Authority issued after the date of the enactment of this section shall be included in gross income for the purposes of chapter 1 of the Internal Revenue Code of 1954. “reimbursement for interest and related costs “Sec. 10. The Secretary of Transportation shall make periodic payments to the Transit Authority upon request therefor by the Transit Authority in such amounts as may be necessary to equal one-fourth of the total of the— “(1) net interest cost, and “(2) fees, commissions, and other costs of issuance, which the Secretary determines the Transit Authority incurred on its obligations issued after the date of the enactment of this section. “authorization of appropriations “Sec. 11. (a) There are authorized to be appropriated to the Secretary of Transportation such amounts as may be necessary to enable him to discharge his responsibilities under guarantees issued by him under section 9 and to make the payments to the Transit Authority in accordance with section 10. Amounts appropriated under this section shall be available without fiscal year limitation. “(b) If at any time the moneys available to the Secretary of Transportation are insufficient to enable him to discharge his responsibilities under guarantees issued by him under section 9 or to make payments to the Transit Authority in accordance with section 10, he shall issue to the Secretary of the Treasury notes or other obligations in such forms and denominations, bearing such maturities, and subject to such terms and conditions, as may be prescribed by the Secretary of the Treasury. Redemption of such notes or obligations shall be made by the Secretary of Transportation from appropriations available under subsection (a) of this section. Such notes or other obligations shall bear interest at a rate determined by the Secretary of the Treasury, taking into consideration the current average market yield on outstanding marketable obligations of the United States of comparable maturities during the month preceding the issuance of the notes or other obligations. The Secretary of the Treasury shall purchase any notes or other obligations issued hereunder and for that purpose he is authorized to use as a public debt transaction the proceeds from the sale of any securities issued under the Second Liberty Bond Act and the purposes for which securities may be issued under that Act are extended to include any purchase of such notes or obligations. The Secretary of 86 Stat. 466the Treasury may at any time sell any of the notes or other obligations acquired by him under this subsection. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes or other obligations shall be treated as public debt transactions of the United States. “obligations as lawful investments “Sec. 12. (a) Obligations issued by the Transit Authority which are guaranteed by the Secretary of Transportation under section 9 shall be lawful investments, and may be accepted as security for fiduciary, trust, and public funds, the investment or deposit of which shall be under authority or control of the United States or of any officer or officers thereof, and shall be deemed to be exempt securities within the meaning of laws administered by the Securities and Exchange Commission to the same extent as securities which are issued by the United States. “(b) The sixth sentence of the paragraph of section 5136 of the Revised Statutes of the United States designated ‘Seventh’ (12 U.S.C. 24) is amended by inserting, or obligations of the Washington Metropolitan Area Transit Authority which are guaranteed by the Secretary of Transportation under section 9 of the National Capital Transportation Act of 1969’ immediately following ‘or general obligations of any State or of any political subdivision thereof’. “(c) Any building association, building and loan association, or savings and loan association, incorporated or unincorporated, organized and operating under the laws of the District of Columbia, or any Federal savings and loan association, may invest its funds in obligations of the Transit Authority which are guaranteed by the Secretary of Transportation under section 9.”