A Million Here, a Million There ...

The Municipal Railway is paying the Italian firm of Breda Costruzioni Ferroviarie S.p.A. nearly half a billion dollars for streetcars that are, to say the least, problematic. But Muni hasn't just bought troubled rail cars; it has subsidized the factory where they are assembled.

Muni buys its rail cars through grants from the U.S. Department of Transportation's Federal Transit Administration; federal law requires that more than 50 percent of any streetcar purchased with FTA funds be manufactured inside the United States. To meet this "domestic content" mandate, Breda manufactures most of the pieces of its light rail car at a plant in Pistoia, Italy, and then ships them to an assembly plant Breda constructed on Pier 80, which it leases from the Port of San Francisco. (Breda is also using the Pier 80 facility to assemble 200 metro liners for Los Angeles' transit needs.)

In July 1993, Muni rewrote its contract with Breda to help finance a renovation of the Pier 80 plant. In this unusual agreement, Muni agreed to pay Breda 90 percent of the price for streetcars -- not when the streetcars were complete, or when they were 90 percent complete, but when the unassembled parts of the first 52 vehicles were shipped from Italy.

This agreement essentially gave Breda a loan of about $40 million in public funds to use, interest-free, for about four years, saving the Italian firm, which has annual revenues of $440 million, at least $1.3 million in financing charges it would have paid on a private-sector loan. When asked to comment on why Muni subsidized Breda's Pier 80 facility, Muni General Manager Emilio Cruz said, "I am not familiar with that level of detail.