COST Comments: Below is the letter with attached comments which COST submitted to the Texas State Sunset Advisory Commission regarding their review and report on Capital Metro, the Austin, Texas’ regional transportation authority.

Ken Levine
Interim Director, Sunset Advisory Commission
P.O. Box 13066
Austin, TX 78711

RE: Staff Report on Capital Metropolitan Transit Authority

Dear Director Levine:

We applaud The Commission’s audit review and report regarding Capital Metro. It addresses a number of key issues at various operating levels within the agency and makes generally sound recommendations regarding them. We suggest there are a number of equally or more important issues which have not been addressed by this or other audits/reviews. Several of these are discussed in our comments below.

We observe that Capital Metro has been the subject of numerous very negative audits/reviews and reports for many years. However, the fundamental reform of Cap Metro necessary to effectively address the issues in these reviews has not been achieved to date. COST believes the top level priority should be to establish a Capital Metro board which is fully qualified with the applicable experience and capability to effectively lead the organization. The comments attached to this letter offer suggestions as to a process which could achieve this priority. Without a qualified board, it is very problematical that necessary changes can occur at Capital Metro because unqualified board members simply do not have the applicable experience, knowledge and capability to assure competent agency management and achieve needed reform. Without this reform, the pattern of past failures will continue to be repeated and long term positive changes will not be achieved.

In addition, this report and others have not addressed the key point that Capital Metro has been unable to effectively serve its ill-defined mission while achieving social equity. Capital Metro’s foray into commuter rail has created a situation in which taxpayers are currently highly subsidizing about 500 people on daily round trips, who mostly have a choice of transportation, with about $30,000 per year for the average rider. This subsidy is almost doubled for round-trip-riders traveling the entire route from Leander to downtown Austin. The financial drain of constructing and operating the commuter train for 500 people has resulted in degrading transit service for about 40,000 daily bus riders, who mostly do not have a choice, by more than doubling fares in the past 18 months and cutting bus service.

Also, reports have not discussed the fact that Capital Metro does not responsibly and transparently conduct alternative analyses which determine the most cost effective methods to achieve defined transit objectives. This results in planning ineffective systems which require massive subsidies and dramatically reduces the ability of Capital Metro to serve the most transit needs for the available dollars. One obvious example is Capital Metro’s broken promise to implement “Rapid Bus” as a part of its “All Systems Go” plan which was presented to voters at the time of the commuter rail referendum. The first route for Rapid Bus was promised to be operating in 2007. It would have substantially improved transit for up 15-20 times more people than ride the commuter train for a fraction of the costs of the commuter. However, the high costs of the train resulted in the Capital Metro board canceling the program for years and its implementation is still a long time in the future. Cost effectiveness is the bedrock foundation of a sustainable transit system which will most effectively serve the community.

Capital Metro has not been subject to comprehensive operations and financial performance evaluations, with thorough follow-ups, to assure its board accepts responsibility and accountability. We believe a thorough operations and financial evaluation should be conducted by nationally recognized and experienced people to address the broad array of issues and provide a solid baseline for future improvement. Annual follow-up reviews must be conducted to assess progress and consider “course” corrections. As the first major step, the board selection process should be reformed as soon as possible to assure selection and appointment of qualified board members who will provide the capable leadership necessary to achieve the depth of reformation required at Capital Metro. The magnitude of the long-term, entrenched issues may well call for extraordinarily capable board members in the early phases of Capital Metro’s reform. Until this is achieved and comprehensive reviews indicate solid progress, Capital Metro should refrain from making major, costly service modifications or embarking on major new projects such as rail extensions.

Best regards,

Jim Skaggs
Coalition on Sustainable Transportation

Enclosures:
-Expanded comments on Sunset Report
-Answer to Sunset Commission questions during review

These are expanded comments regarding the Sunset Advisory Commission’s report on Capital Metro dated April, 2010.

Why is it that for many years Capital Metro has been the subject of reviews and reports regarding its very poor performance? Each such instance seems to result in some general Capital Metro acceptance of the resulting recommendations, immediate scurrying around with a flurry of activities including “political” posturing and promises to fix things. The storm passes, there is rarely any follow-up to determine Capital Metro’s compliance with recommendations and sometime later another storm occurs.

This cycle continues because: While the reviews generally may make very good recommendations, they tend to deal with important but lower level operating details and processes which are the symptoms of the real problem and are not the root cause. The top priority must be to dramatically transform Cap Metro’s foundation of long term, ineffective leadership and organization if it is to achieve effective, long term, positive change and acceptable performance. A third party recommending changes to fundamentally the same incapable organization and leadership is likely to always fail because it is this leadership and organization which created the unacceptable performance. They do not have the knowledge to know how to fix it!

The root cause goes deeper. There is a major flaw in the method used to establish Capital Metro leadership/management. This flaw results in the very high probability that, without major process overhaul, the Cap Metro board will continue to be populated with primarily unqualified members. It starts with local government officials on the Austin City Council, the Travis County Commissioners Court, the Williamson County Commissioners Court, the Capital Area Metropolitan Planning Organization (CAMPO) and small city mayors being responsible for appointing Capital Metro board members. The elected officials on these bodies do no generally have the experience and background to know and understand the experience and background required of a person to effectively serve on a complex, technical agency’s board overseeing a budget of several hundred million dollars and over 1,000 employees/contractor employees. While a “government” entity such as Capital Metro is a little different than a similar shareholder owned corporation, the basic management procedures, approaches and processes are the same and the experience, knowledge and competence qualifications are essentially the same.

According to the Texas State Transportation Code: “the board is responsible for the management, operation, and control of an authority (Capital Metro in this case) and its property.” The board member selection process, specified by the Texas Transportation Code, results in the appointment of people who predominately do not have the qualifications to effectively perform this management and legal responsibility. This is not personal criticism of the individuals selected but of the process which selects them. In most cases, these are very capable people in their primary realm of expertise and they have a strong, well intended commitment to serve the community. Further, the board is vested with the authority to “employ a general manager—,“ and, “prescribe the duties, compensation, and tenure of persons employed;”. So, generally unqualified officials appoint board members and these generally unqualified board members employ a general manager and prescribe the duties. This is a very high risk of failure chain of actions as proven by Capital Metro’s 25 years of operations. The selection process for board members has changed a little over time but the fundamental flaws still exist, even with the current primarily new board.

The Sunset Review Commission’s report regarding Cap Metro provides one a glimpse at a dysfunctional, incompetent and incapable agency wastefully spending hundreds of millions of local tax dollars and providing inferior public transit while placing severe burdens on the low income. This report is consistent with numerous audits, reports and indications over many years that Capital Metro is an agency with little grasp of its mission and direction and with almost zero accountability.

It seems the “system” keeps taking the same kinds of actions to correct Capital Metro’s dismal performance; hoping for a different result than the last time. The necessary changes will not occur without a comprehensive reformation of the process for selecting board members so that well qualified people are selected and that they accept responsibility and accountability for acceptable performance. Performance should be measured continuously and board members’ performance evaluated regularly to determine their acceptability.

In 1997, John Sharp, Texas Comptroller of Public Accounts, conducted an extensive Performance Review of Capital Metro, in which the following was stated:

“We have never, in all of the performance reviews we have conducted, seen an agency with such a lack of accountability.”
In this report they cited:
• “irresponsible management”
• “expensive, embarrassing mistakes”; and
• “dubious contracting and purchasing practices”
The current Sunset Commission report is generally well done in the limited, narrowly focused areas it discusses. It has major comments such as:
• “Capital Metro faces a crisis that could threaten its ability to maintain current services unless the Board takes immediate action to shore up the Authority’s
finances.”

• “Capital Metro’s overspending cannot be sustained.”

• “Capital Metro’s lack of adequate financial planning, combined with its high cost of services, places its long-term financial viability at risk.”

• “Spending decisions over the last several years have led Capital Metro on a risky financial path.”

• “The Authority also has a long history of subsidizing fares at levels far in excess of its transit peers.

• “Sunset staff also reviewed numerous stumbling blocks Capital Metro encountered in developing its commuter rail line. These problems stemmed from unreliable tracking of commuter rail expenses, insufficient planning, persistent technical problems, poor contract oversight, fragmented project management, and a lack of accountability for results across departments.”

• Capital Metro’s new Board must rise to the challenge of conducting its business in a new way that embraces fiscal constraint and open accountability for its expenditure of public funds.

• To address these longstanding problems, Capital Metro’s new Board must rise to the challenge of conducting its business in a new way that embraces fiscal constraint and open accountability for its expenditure of public funds.

While all of these are good review observations, accompanied by generally sound recommendations, the larger implications and root causes have not been a focus of the Sunset review. Several of the Sunset comments could be much more critical than they are to better represent the extreme serious nature of Capital Metro’s issues. But, more germane, these issues have been mostly known for years; many discussed by the board and management, but not effectively addressed.

One way to think of Capital Metro is that it is a patient on a table and has several wounds, any one of which can be fatal. There is no time for long consultations and evaluations. All the wounds need to be addressed simultaneously by skilled “doctors” who have the background and experience to make urgent, decisive, effective decisions; take necessary actions immediately and follow-up to assure continued recovery.

One of the unfortunate outcomes of the media and Capital Metro highlighting and debating individual report items is that the focus is distracted from the serious, root cause issues such as: board competency, agency management competency, the urgency of critical operational and financial decisions, the degrading of social equity/justice and Capital Metro’s mission contradictions.
None of the historical reviews and reports has resulted in fundamental change at Capital Metro. Following this same pattern, it is likely the Sunset review will not result in significant long term change. While the current Sunset Review Commission report effectively addresses a number of individual areas of Capital Metro’s unacceptable performance as did the past reviews, it does not address the foundation issues which must be addressed to achieve true reformation of the agency.
One of the most critical areas is not mentioned in the Sunset review: providing transit choices, at highly subsidized rates, to those who have alternatives while degrading service (increased fares and reduced service) for primarily low income people, who have no choice, is making a mockery of our goals of social equity/justice. It is just plain wrong. This leads to another top level decision which Capital Metro must face: What is its mission and how can it most effectively support its mission within its funding limitations? The Sunset review states that Capital Metro presents its mission as: “provide quality public transportation choices that meet the needs of its growing region.” Capital Metro is like a social service agency with such a broad mission. It can spend as much money as there is. This mission is probably too broad and provides little guidance to Capital Metro management although more qualified management could better work with it. This mission needs the next level of detail and it should be prioritized. The mission creates a potential major conflict which may not be reconcilable: Providing public transit to typically lower income, who need it in their daily lives and have no alternative, frequently involves different parts of the city/region than the providing of public transit to those who have an alternative. Highly subsidizing those who have a choice degrades the ability to serve those who have no choice. This contradiction of social services and general public transportation services must be addressed. There is clearly social good in subsidizing the lower income. A balance must be achieved between this and taxpayers highly subsidizing a very small number of the mid range income transit riders such as with the commuter train?

For example: the commuter rail requires massive subsidies for each daily round-trip rider. Most of these riders have a choice and many rode the bus before the train. At the current ridership of some 500 people per day, the taxpayers subsidize each average rider more than $30,000 per year. Those who rode the bus previously were only subsidized with about $3000 or 10% of the train subsidy. It would clearly be more cost effective to provide a new automobile, a leased automobile or fee gas or taxi passes for the train riders. At this ridership, or much great ridership, there is no measurable societal benefit as there is no congestion or pollution benefit. However, the high cost of the commuter train’s 500 people, who mostly have a choice, has been a significant factor in major fare increases and service cutbacks for 40,000 daily bus riders who mostly do not have a choice. So, what is the mission and what are the priorities? Isn’t his making a mockery of social equity goals.

As stated in the Sunset review, Capital Metro is on an unsustainable financial trend. It has been on this trend for a long time. In commercial, corporate terms, Capital Metro is dangerously close to “bankruptcy.” For years, Capital Metro’s has projected its expenses to exceed its income and, yet, the board and management proceeded as if there was no issue. They did not consider and make the tough decisions to change these negative trends.

Fundamental to financial sustainability is to understand that “cost effectiveness” is the foundation of sustainability. Some 90% of Capital Metro’s spending is funded with taxes and while it is a very large amount per year, the tax funds do have a limit. If the service being provided is not cost effective, then the quantity and quality of service is further limited or, the more that ineffective service is extended, the greater the financial deficit becomes until insolvency.

Cost effectiveness is the foundation for a sustainable trend and “long-term financial viability” but it is not mentioned in the Sunset report. It is the most important performance measure to assure financial sustainability and maximum coverage of transit service. For example, at the top level of thought and planning, a transit system must be based on a valid “alternatives analysis” to determine the most cost effective method of achieving an established transit goal. Capital Metro has a long history of not providing cost effectiveness information regarding transit modes, of avoiding its discussion and providing no transparency. Capital Metro never provided this information for light rail or for the commuter rail. If the general public knew how much each commuter rider was being subsidized by taxpayers, they would very likely totally rejected this train and any future such ineffective system.

Another example of Capital Metro’s ill-advised previous plans can be examined by looking back to their Light Rail plan and vote in 2000: Where would public transit be today if voters had approved the light rail in 2000? Cap Metro presented costs of $1.9 billion (1999 dollars) which would clearly would have been much more and close to double this amount. Cap Metro would have torn up many of Austin’s major downtown streets, causing massive congestion and closing hundreds of small businesses. Confirmed by today’s revelations, they clearly did not have adequate funds to finish light rail and would have stopped work prior to completion, leaving the city in a transportation nightmare. Public transit would have been bankrupt long ago, placing heavy burdens on low income citizens.

The original comments submitted to the Sunset Commission are attached. These comments elaborate on much of the above and discuss several other important areas including a proposed board selection process, Capital Metro’s planning deficiencies and the need for a thorough overall operations and financial audit of Capital Metro in addition to the current limited review by the Sunset Commission. These comments are still valid and few have been addressed by the current Sunset review.

Thank you for all you do.

Best regards,

Jim Skaggs, Coalition on Sustainable Transportation

Below are answers to Sunset Review Questions late in 2009.

Preliminary Issue List
Capital Metropolitan Transportation Authority (Capital Metro)

Name: Jim Skaggs _________________________________

Organization you represent: Coalition On Sustainable Transportation (COST) _______

1. What changes, if any, could help Capital Metro more effectively provide public transportation services?

Answer: Cap Metro needs to establish its primary mission and focus on doing it well. It must prioritize its services and establish cost-effective services or it cannot be sustainable. Cap Metro cannot have a primary mission to provide transit to those who need it and have no choice while spending hugely disproportionate percentages of its resources to provide exorbitantly expensive, highly subsidized train transit to very few people who primarily have an alternative. This results in the vast majority of transit riders, who use the bus, to experience degraded service with higher fares and reduced service. These majority bus riders bear the burdens caused by subsidizing the few who ride train transit.

Cap Metro’s primary objective should be to provide transit to those who need it and have no choice. This is very different than their current objective to provide transit as a means of offering alternatives to those who already have transportation choices. These two very different transit missions are diametrically opposed and cannot be sustained within reasonable budgets. Before Cap Metro can serve enough people to make any difference (even if enough would choose the service and this is not likely) with this strategy of highly subsidized train service; the agency will be bankrupt as it is now approaching. Finding more ways to fund the agency and the wasteful spending of more tax dollars is not a sustainable answer to this dichotomy.

This is why Cap Metro must thoroughly restructure its mission and focus. As discussed below, new, experienced leadership is required at the board level as well as the hiring of a CEO/President who is an inspirational leader with strong credentials in complex organizational management. It is obvious, this leader will need to reorganize Cap Metro and replace a number of key management people with those qualified for this challenging task.

2. What changes, if any, should be made in the operations and oversight of Capital Metro?

Answer: Capital Metro should have a strong, experienced board as discussed in question 3 below. Cap Metro should be required to establish sound performance measures and regularly report performance relative to these measures. Cap Metro should be required to report its financial and operating performance using transparent methods which clearly reveal its performance. Today, Cap Metro’s annual report is so obfuscated in content and format that it is impossible for the board, management, oversight authorities or any member of the public to decipher their true performance. For example, we would challenge anyone to read this report and have a clear understanding of even Cap Metro’s basic performance in its major operating segments such as freight rail, the bus system or the commuter train. Capital Metro seems to purposely allocate and present cost incorrectly to mislead anyone reading the report.

Cap Metro should report its status and performance on at least a monthly basis with absolute integrity. For many years, Cap Metro’s distorted and misleading reports have deceived the public as well as most of its own management and board that were not qualified to thoroughly examine and understand the reporting. Capital Metro is so secretive about their financial status that a previous board member complained that they could not even receive the financial data they requested and many citizens have been denied information through the freedom of information act.

The State’s transit agency formation and operating regulations provide little accountability for Cap Metro and the procedures for selecting the board of directors and management has consistently resulted in filling these key agency leadership and management positions with people who are not qualified resulting in the same result: unacceptable performance. The answer to question 3 below further addresses this issue.

3. What changes, if any, should be made to the membership and length of terms of Capital Metro’s board members?

Answer: The Cap Metro Board should be populated with people experienced in the management of complex operations with budgets of several hundred million dollars per year. It can be argued that essentially none of the board members over the past, more than 10 years and probably much further back, have little or no experience to qualify them to be Cap Metro board members.

Senator Watson’s bill to improve the board’s expertise was a reasonable idea but its implementation has fallen very short of the desired improvement goals. It will likely fail to make measurable improvements. The board members selected under the new bill have minimal experience and do not meet any reasonable definition of the bill’s required experience. These members will be little, if any, improvement over the previous board members. In addition, the two new members selected to meet the bill’s requirement have strong conflicts of interests with their careers which will prevent them from making the rationale, objective decisions needed even if they possessed the required experience and capability. The several elected officials on the current Cap Metro board also present similar conflicts of interest in addition to their lack of applicable management and business leadership credentials.

The board should have one-year terms consistent with any public corporation and the board members should be elected each year by the people within the Cap Metro area. These elections could be cost effectively conducted by mail-in, electronic ballot or personal appearance at the annual meeting as in corporate board situations. A brief resume of each candidate and a brief candidate statement could be part of the voting information.

The processes used to select board members have failed for more than 20 years to produce qualified board members. A comprehensive overhaul is clearly needed to produce qualified board members who will serve the best overall interest of Cap Metro’s shareholders/stakeholders including taxpayers and transit riders. This could be done by establishing specific and firm criteria for all board members. An expert, independent panel should be selected based on specified experience and knowledge. The panel should exclude all elected officials and parties with potential conflicts of interests. This panel would review applications and interview candidates to assure they meet required qualifications. Candidates meeting qualifications would be placed on the ballot along with incumbent board members who qualify. Those receiving the highest number of votes from the voting public are elected for a one-year term. The number of candidates will probably not be large but a maximum number could be established at no more that double the number of board members. This could be done by the ‘expert panel’ scoring candidates qualifications and putting the top scoring people on the ballot. This system includes accountability with a series of needed checks and balances and addresses conflicts of interest which the current selection process does not provide.

It may also be appropriate to consider paying Cap Metro Board members a nominal fee. This may attract qualified people which have not volunteered and been selected for the board to date. This lack of qualified members is also the result of another underlying weakness in the process: Past board selections and the current selection of members under the new Watson bill have inherent weaknesses in that most of those involved, including the CAMPO committee also have little experience to judge qualified board members or have a biased agenda in filling board seats. This is addressed in the paragraph above.

4. How well does Capital Metro’s long range planning fit with the region’s transportation needs, and could strategic planning be improved?

Answer: Cap Metro’s long range planning has been from superficial to shameful for many years. It does not start with clearly delineated, specific primary missions and flow to a functional evaluation of the most effective manner to meet the mission’s goals. Cap Metro rarely follows its plans and rarely succeeds in implementing them as specified. The plans are not based on sound functional analysis of the alternative methods to address specified goals. Cap Metro’s planning and actions seem to be more driven by politics and ideology than sound thinking, analysis and evaluation using the abundant experience throughout the nation.

Plans could be dramatically improved by establishing the primary mission, performing sound alternatives analysis to determine the most cost-effective approach to achieve the mission and focusing the agency and its resources on this mission’s priorities.

Cap Metro must focus on providing effective transit service to those who need transit and have no alternative. Cap Metro’s current transit mission dichotomy results in making a mockery of the community’s stated goals for social equity. Those citizens with lower incomes, and no transportation alternative but transit, are being negatively impacted by major disproportionate subsidies for those who will ride rail transit, many of whom have an alternative mode of transportation. These large subsidies provide little or no societal benefit and drain resources resulting in inferior transit for those who have no choice who bear the burdens are higher transit fares, reduced bus service (especially to those areas which traditionally have higher percentages of low income citizens) and longer trips, as reflected in Cap Metro’s 2010 plan. The current Cap Metro plan/strategy to degrade current and needed transit service for more than 40,000 daily bus riders in order to serve a maximum of 1,000 people (if all train cars are full: sitting and standing room) is not a responsible transit plan. Transit and the overall community would be better served if Cap Metro, even after investing well over a hundred million dollars, would cancel the commuter train and focus future resources on the goal to establish an excellent bus system. Of course, this will not happen as too many people have too much ego invested and perceived embarrassment to stop. However, the $8-10 million (and growing) in annual commuter rail operating expenses will continue to siphon funds from the backbone bus system and degrade social equity.

Capital Metro’s planning (or lack there of) seemed to provide it no clue, or the clues were ignored by management and the board, that its approach was leading to financial disaster. Prior to “discovering” that it was approaching bankruptcy, Capital Metro spent millions in preliminary planning and had plans to move ahead with a central downtown circulator using rail transit. This plan was focusing on rail transit through downtown on Congress Avenue. A plan to install an exorbitantly expensive fixed rail transit system totally ignores the following:

a. Austin is an adolescent city and is growing and changing rapidly. Fixed rail transit provides little flexibility to meet changing demands. It would be very expensive to move or revise. For example: The Waller Creek project could significantly change the downtown circulator needs and rail transit on Congress Avenue would not serve Waller Creek.

b. Rail transit would the most expensive alternative and would offer no advantages over the use of buses. In fact, there are many disadvantages compared to buses. The high cost of rail would require subsidizing the relatively few rail riders by city taxpayers much as Cap Metro’s commuter will require huge subsidies, an average of 10 times that of a bus.

c. A train on Congress Avenue would significantly increase congestion for 99+% of the travelers.

d. A train mingling with cars and pedestrians would significantly increase safety hazards.

e. The myriad of electric wires, support poles and train connecting devices would provide visual obstruction of some of the most cherished views of Congress Avenue and the capital building. These views belong to all the citizens of Texas.

f. Fixed rail on Congress Avenue would prevent many of the civic uses of this traditional street for major parades, charity runs, celebrations, marches, etc.

Preceding the light rail election in 2000, Cap Metro was embarked on a $1.9 billion (by their estimate) light rail plan. The fact that their currently advertised $105 million (it really cost much more with proper cost allocation) commuter rail has brought them almost to financial bankruptcy is an indicator of just how inadequate and dangerous their planning in 2000 was for a light rail which most experts would have estimated to cost more than $3.0 billion. Cap Metro’s light rail plan also projected one-third of the ridership would be UT students as it was at the time for buses. At the time, UT ridership was about 8.5 million boardings per year. Today, the UT ridership is down to 5.3 million in the past 2009 fiscal year, a 37% drop: Another major flaw in Cap Metro planning.

It is likely that many of the underlying problems defined in the 1998 State Comptroller’s audit were not adequately addressed in the short time between the audit and Cap Metro focusing its primary energy on a light rail proposal for the 2000 election. This probably led to many of the shortcomings in the proposal. In a similar move, following the light rail election loss, Cap Metro spent millions for about three years continuing to study light rail. Then in the fall of 2003, they suddenly stopped the light rail work and shifted to the current commuter rail concept with just over a year till the election in 2004. This was clearly not enough time to do the proper evaluation, alternative analysis and engineering which led to the many problems we have witnessed in implementing the commuter, which still has an indefinite start date.

The good news is that Capital Metro ran out of money before wasting another more than a billion dollars on a downtown rail. The bad news is that the city of Austin has picked up the rail baton and is moving full speed while making many of the same major mistakes Capital Metro made in implementing the commuter rail and in planning for the circulator.

Capital Metro’s plans do not adequately consider the fact that the percentage of area jobs is rapidly decreasing in the central, downtown area and increasing in the suburbs. In most major cities, the downtown employment is about 10% of the regional employment and the Austin area is approaching this relationship. Transit plans have been based primarily on a wheel spoke concept where the primary destination is the central city which is no longer the single primary destination.

Capital Metro has attempted to establish itself as a ‘land use’ planning authority and implementer. It has a department for this and has significantly based its planning on increasing the living density around train stations and on development near stations. There is no foundation of experience to indicate this approach to be successful or cost-effective in significantly increasing transit ridership or providing significant societal benefits.

There will always be factions which, in sum, believe a public transit agency should do all things for all people. Addressing all demands is not possible within any reasonable bounds of financial responsibility and is the main reason that a specific, primary mission must be established and addressed with strong focus. Transit systems which are inefficient and not cost effective (Note: “cost-effective” does not mean profitable because no public transit system in the Nation is profitable) will be inferior for those who need it most and will be unsustainable. We are witnessing this with Capital Metro and transit agencies in many other cities.

Capital Metro should seriously reevaluate the wisdom of the plan for being in the freight business which it has been operating for many years. They have lost many tens of millions of dollars in this operation but have not reported these losses in a transparent way which could easily be understood by the taxpayers who primarily fund Cap Metro’s operation. Cap Metro alleges its plan was to retain the freight track ownership until needed for passenger rail. If so, the millions in freight loses should be allocated to the cost of the commuter train capital and the continuing freight looses should be allocated to the commuter rail operations. The legality of Cap Metro’s retention of this track while loosing many million of dollars over many years should be reviewed: In truth, this track has no valid relationship to Cap Metro’s primary mission and has led to the added, wasteful spending of hundreds of millions to put passenger trains on a small portion of the track.

Some deny that Cap Metro is a social service agency but by every sensible definition this is a major reason for its existence. It receives well over 90% of its operating budget from taxpayers and distributes services to a very small percentage of the citizens at highly subsidized rates. A large portion of its customers are low income. A major and priority service to the community is this social service mission of serving those who need transit, do not have an alternative and cannot afford to pay the full cost. Cap Metro provides negligible or negative societal benefits for congestion, air quality or development.

5. Does Capital Metro provide sufficient opportunities for public input and incorporate this input into its planning efforts? If not, how should this be changed?

Answer: Most major decisions within Cap Metro seem to be essentially pre-determined by those controlling Cap Metro. Public input is primarily to comply with regulations and is not structured to gather input which is truly representative of the region. Much of the “so called” public input is provided by the same, self-selected and limited number of activist people and groups who have a definite and biased agenda.

The only way to achieve true, representative public input would be through a public input selection process which would assure required numbers of geographically dispersed, representative samples of people to reflect the opinions of the entire community. The current “self-selection” process for public participants will not provide representative and adequate public input and results in major distortions regarding public input. It is probably an expensive waste of time.

6. Please add any other comments about Capital Metro. If you suggest any changes, please provide:

● background information on the current problem and what you would like to see changed,
● benefits of your recommendation, and
● any potential difficulties that may arise from implementing your recommendation.

Answers:

1. Audit: There should be an immediate financial and operations audit of Cap Metro by unrelated parties who are experienced and thoroughly understand public transit financial and operating performance. The last major State Comptroller’s audit of Cap Metro was in 1998 and its report was filled with major issues as reflected in the report’s introduction: “TPR’s review of Capital Metro found abundant evidence of the results of irresponsible management. Capital Metro’s board and managers have made expensive, embarrassing mistakes; more to the point, however, they have been allowed to go on repeating them, year after year, with no consequences and no apparent ability to learn from the past.” In appears that much of this irresponsible management and lack of accountability still exist 11 years later in 2009. The changes made in Cap Metro leadership and operations as a result of the 1998 audit were not adequate to address the underlying issues and there were no follow-up similar audits. It now appears that changes being made currently are repeating the same errors of 1998 and do not adequately address these same issues, leaving a high probability of future continuing problems.

There are many indications there has been a gross lack of transparency and numerous misleading and incorrect recordings and presentations of Capital Metro’s financial and operating performance and projections which seem to be designed to purposefully hide Capital Metro’s poor performance and mistakes and deceive and mislead the public and those to which the agency is accountable.

The fairly recent departure of a long term Capital Metro board chairman, the current departure of the long term Chief Executive and the poor performance and apparent irregularities all make it obvious that a financial and operations audit is appropriate and demanded to provide a sound baseline for the future operation of Capital Metro.

We would be pleased to recommend potential, qualified folks to participate in this important audit.

2. Management Processes: Cap Metro should use sound, tried and proven approaches in evaluating transit systems and modes. Cap Metro has not followed structured and disciplined engineering and evaluation approaches to determine the most effective alternative to achieve established transit objectives nor have they followed these approaches in implementing transit projects. This has and is resulting in the wasteful spending of hundreds of millions of dollars.

Cap Metro did not follow project evaluation steps and approaches required by the federal government to be considered for partial government funding of the commuter rail. Therefore, local taxpayers paid the $30 million which Cap Metro promised would be paid by the federal government and the additional tens of millions which were wasted because Cap Metro did not follow the governments specified process. This is a major reason Cap Metro faces bankruptcy.

In its response to the Sunset Commission, Cap Metro blames numerous outside influences for their missteps and failures. For example, Cap Metro points to the requirement for an election as a major reason for its failings in implementing the commuter on the schedule and within the budget promised. This excuse is absurd and rather childish: Cap Metro alleges that spending a few million to take the necessary steps on the front end would have resulted in criticism had they lost the election. However, Cap Metro, did not seem to have concern for the certain criticism for not taking the necessary management steps and costing the taxpayers many times the cost of taking the right steps and missing the schedule by being at least 2 years late? Nor has Cap Metro been concerned for the wasteful spending of tens of millions of dollars hanging on to the freight business while waiting to put a passenger train on the tracks and continuing to suffer freight looses which they do not consider a cost of the commuter train. These clumsily contrived “hindsight” excuses and rationale are “smoke screens” designed to deceive the public and to hide the real problems and issues which are rooted in their incompetence.

3. Cost-effective analysis and selection: Cap Metro’s ‘All Systems Go’ plan released in 2004 promised several ‘Express Bus’ and ‘Rapid Bus’ lines and the first Rapid Bus was to start operations in early 2007. This line is still years away because the resource drain and Capital Metro’s focus on the commuter prevented moving ahead with Rapid Bus. This first Rapid Bus line (North Lamar – South Congress) would have provided dramatically improved transit service for a minimum of 6 times as many people projected to ride the commuter train daily, for a fraction of the costs and with excellent flexibility to immediately respond to changing transit demands.

Express Bus and Rapid Bus can do anything rail transit can do for a fraction of the costs. In most cases, the Express Bus routes along the commuter rail corridor can provide faster, more comfortable trips for a fraction of the taxpayer subsidy per passenger and provide much greater cost-effective flexibility than the commuter train.
4. Communications: For many years, Capital Metro has communicated and reported with a lack of transparency and integrity. Its communications are distorted to mislead the public and it has lied about many issues. One fundamental fact is that Cap Metro has experienced a 10 year declining trend in ridership and a 10 year increasing trend in costs. Current operations will continue these trends. This is not sustainable and should be a foundation issue immediately addressed by the board and management.

5. Broken Laws: Capital Metro appears to be have broken several laws in their operations. Among these are the following Texas Transportation codes:

a. Code 451.061 states a transit agency can only collect taxes sufficient to meet its obligations. For years Capital Metro collected tax amounts far in excess of its obligations resulting in many wasteful spending examples and the building of a huge cash reserve. Increasing cost substantially in excess of inflation while experiencing decreasing ridership rapidly depleted the reserves leading to Cap Metro’s current state of projected bankruptcy. The State Comptroller’s audit in 1998 stated “In other words, the authority collects far more from its taxpayers than it needs to operate its present transportation system.”

b. Code 451.103 states that an agency cannot exceed its approved budget of operating expenses. Cap Metro has exceeded their budget.

c. Code 451.153 requires the major municipality (Austin) in the Cap Metro area to approve transit stations based on meeting specified criteria. I doubt Austin City has approved Cap Metro’s commuter train stations and these stations do not meet many of the State Code’s required criteria for stations.

d. Code 451.454 requires a performance audit at least every 4 years. While Cap Metro has contracted for what they called audits to meet this requirement, it was clearly a sham, as Madoff’s audits were. These audits did not uncover any of the underlying major issues which are now being publicly exposed. Audits were not performed by unconflicted third parties who have thorough knowledge of transit operations and financial performance.

In addition, there have been numerous instances of Cap Metro evading responses to ‘Freedom of Information’ requests and, unfortunately, some were ill-advisedly upheld by the Attorney General’s Office with little investigation of the situation.

As mentioned above, the operation of the freight business is very questionable.

6. Austin City Transit and Development: It is a major mistake for the City of Austin to follow its current path of picking up Capital Metro’s dropped train transit baton. The city is now proceeding down a similar path which Cap Metro followed leading to its major financial demise. The city is ignoring the need for sound, disciplined approaches with an unbiased alternatives analysis and is proceeding with the pre-determined view that a train is the answer to transit needs in the central Austin area. This will lead to the same unsustainable, high cost, highly subsidized train transit which Cap Metro has created with the commuter. It will not provide responsible cost-benefit solutions and will clearly result in net negative community benefits. The City should not decide to be another public transit agency serving in the same area as Capital Metro.

Some Austin City leaders have alleged a downtown train will increase development and property tax receipts. There is no foundation for this claim. A study commissioned by the Austin City Council to evaluate the impact of downtown rail transit on development indicated no additional gain in downtown property values or tax revenues. The study indicated it was a zero-sum situation: While a train may result in developments near the train station, it would be at the expense of the developments being some other place in the area and the net result on property values and taxes is zero. The facts are very obvious: Downtown Austin is blessed to be one of the fastest growing major cities in the nation and none of it has been inspired by trains on downtown streets.

In 1985, voters approved the formation of the Capital Metropolitan Transportation Authority (Capital Metro) as the sole public transit agency for this region and approved funding the agency with one penny of the sales tax collected in the Capital Metro area. Another public transit agency serving the same area will complicate and confuse the public transit situation while creating substantial additional costs. This will only serve to further degrade transit service while dramatically increasing costs. This very large cost increase will result in unacceptable and unsustainable tax increases for the citizens of the region while an overwhelming percentage of the citizens will experience no or negative benefits. We should focus on fixing the problems at Capital Metro and not compounding or duplicating the problems with another, overlapping transit agency. It is not at all clear that the federal government system can deal with the funding of two transit agencies in the same area. A recent Washington Post article about the Washington, DC metro contains a final line very applicable to Austin: “But giving Metro more money without addressing its misplaced priorities will only encourage more of the same.”

7. Better ideas than outdated rail technology:

Cap Metro has been so focused on train solutions that it has resisted evaluating new ideas for more effective transit. It has put Express Bus and Rapid Bus on a lower priority and has not fully evaluated alternative concepts such as Cellular Mass Transit (CMT). CMT offers promise to provide more effective bus transit over a much broader area for much less cost. CMT is a system of dividing the region into “cells” and connecting cell to cell using express buses with local bus/van distribution to final destinations, all using ‘right-sized’ vehicles which are on-demand with minimum wait times. This cellular approach contrasts to the primary ‘wheel spoke’ approach now used and can significantly reduce travel times for many while covering broader area two-way transit.

8. Six steps to success:

Capital Metro has the primary responsibility for public transit services which are a vital part of Austin’s and the region’s social fabric and quality-of-life for many of its citizens. Capital Metro is floundering in its critical roll of providing effective transit services. The path Capital Metro is pursuing has proven to be unsustainable and is resulting in degraded transit services for the citizens of the community who depend on transit daily and have no alternative. These citizens are faced with rapidly rising fares and decreased service.

Experience would indicate that major negative trends, such as those currently established by Capital Metro, can usually only be changed if major actions are taken and these actions almost always include changes in a significant portion of the leadership team.

The agency is experiencing its greatest challenges since its formation in 1985. It will require leadership with extensive experience and demonstrated success in the management of large, complex government, private or publicly traded organizations, through extremely difficult periods. It will take this knowledge, skills and understanding to constructively address Capital Metro’s many issues effectively and very quickly.
Capital Metro leadership must have accountability as discussed earlier and needs the following major six ingredients to successfully manage its operation and provide public transit which serves the greater good of the region:

1. Experience: Almost all of Capital Metro board members have very little experience to qualify them for board positions of a complex agency spending several hundred million tax dollars per year with projections to spend some $7 billion over the next twenty years. The agency needs a major overhaul of its leadership with an experienced team ready to hit the ground running. This is not a learn-on-the-job situation.

2. Vision: Capital Metro’s board and management must clearly define the agencies specific mission priorities and its realistic and sustainable vision for the future. These are clearly not understood today by the community or the agency. The agency seems confused and trying to be all things for all people in a poor attempt to satisfy many factions and political forces. This vision cannot be a broad, all-encompassing statement designed to please all, as this leads to the many problems which exist and are described above.

3. Focus: The agency must focus, focus, focus on its defined priorities and not be distracted by forces to take divergent paths which would dilute its resources of time, energy and money.

4. Communications: The agency must operate with total transparency. It must communicate often and clearly with all constituents: employees, riders, citizens, regional political leaders, and communities.

5. Disciplined management processes: As experience has shown, many of the agency’s major problems could have been avoided by the application of disciplined, structured, well know and developed management processes and approaches to complex programs, projects and operations.

6. Integrity: Last on this list, but of vital importance, is Capital Metro leadership’s unwavering commitment to operate with absolute transparency and integrity in every aspect of the operation. The essence of management is “doing what you say” and this is rooted in integrity. Integrity immediately brings honesty and ethics to mind. It is certainly these, but, in a much broader sense, it includes credibility, sincerity, reliability, principle, decency, right, responsibility and character.

Thank you for this opportunity to respond to the Sunset Advisory Commission’s questions. We stand ready to be of any further help you may need of us. We urge your review to be comprehensive, candid and “hard hitting” where needed. Capital Metro has not had a thorough, frank review since the Texas Comptroller’s review in 1998. This review’s findings of gross incompetence and errors probably should have been followed up frequently until satisfactory performance was achieved. The “softball” reviews of years since 1998 have not been impactful and have resulted in little change to the agency’s unacceptable operations.

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