HomeMy WebLinkAbout2004-09-13 City Council (3)City of Palo Alto
City Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT: PLANNING AND
COMMUNITY ENVIRONMENT
DATE:SEPTEMBER 13, 2004 CMR:413:04
SUBJECT:RESPONSE TO 2003-04 SANTA CLARA COUNTY CIVIL GRAND
JURY REPORT, INQUIRY INTO THE BOARD STRUCTURE AND
FINANCIAL MANAGEMENT OF THE VALLEY
TRANSPORTATION AUTHORITY
RECOMMENDATION
Staff recommends that Council approve the attached response to the Santa Clara County
Civil Grand Jury report on the Santa Clara Valley Transportation Authority
DISCUSSION
On May 27, 2004 the Santa Clara County Civil Grand Jury issued a Final Report, entitled
Inquiry into the Board Structure and Financial Management of the Valley Transportation
Authority (Attachment A). On June 18, 2004, pursuant to California Penal Code Section
933(a), the Civil Grand Jury transmitted this report to the City of Palo Alto for comment.
The Civil Grand Jury has requested that a formal response to its recommendations be filed
within ninety (90) days,’in accordance with Penal Code Section 933(c).
The draft Response to Grand Jury Report form is appended (Attachment B), as is a draft
response letter to be signed by Mayor Beecham (Attachment C). The response of
Commissioner Donald F. Gage, Chairperson of the Santa Clara Valley Transportation
Authority Board of Directors, to the Civil Grand Jury is also appended (Attachment D).
CMR:413:04 Page 1 of 2
ATTACHMENTS
A. 2003-2004 Santa Clara County Civil Grand Jury Report: Inquiry into the Board Structure
and Financial Management of the Valley Transportation Authority.
B. Draft City of Palo Alto Response to Civil Grand Jury Report: 2003-2004 Civil Grand
Jury (form).
C.Draft Letter from Mayor Beecham to the 2003-2004 Civil Grand Jury Foreperson.
D.Response to Civil Grand Jury Report by the Santa Clara Valley Transportation Authority
(VTA).
PREPARED BY:
JO’SEPH KOTT
DEPARTMENT HEAD:
/@~~Ch~portati:n Official
Director of Planning and
CITY MANAGER. APPROVAL:
[SON
Assistant City Manager
CMR:413:04 Page 2 of 2
GRAND J~ ~ ~RT ~Y
SANTA CLARA
ATTACHMENT A
June 18, 2004
Honorable Bern Beecham
Mayor
City of Palo Alto
250 Hamilton Avenue
Palo Alto, CA 94301
Dear Mayor Beecham and Members of the City Council:
The 2003-2004 Santa Clara County Civil Grand Jury is transmitting to you its Final Report, Inquiry into
the Board Structure and Financial Management of the Valley Transportation Authority.
California Penal Code Section 933(c) requires that a governing body of the particular public agency or
department which has been the subject of a Grand Jury final report shall respond within ~ to the Presiding
Judge of the Superior Court on the findings and recommendations pertaining to matters under the control of the
governing body. California Penal Code Section 933.05 contains guidelines for responses to Grand Jury findings
and recommendations and is summarized in the attached form, which should be filled out and returned.
PLEASE NOTE:
As stated in Penal Code Section 933.05, you are required to "Agree" or "Disagree" with each
FINDING(S) - Numbered None. If you disagree, in whole or part, you must include an
explanation of the reasons you disagree.
2.As stated in Penal Code Section 933.05i you are required to respond to each
RECOMMENDATION(S) - Numbered I and II, with one of four possible actions.
Your comments are due in the office of the Honorable Thomas P. Hansen, Presiding Judge, Santa Clara
County Superior Court, 191 North First Street,. San Jose, CA 95113, no later than September 20, 2004.
Copies of all responses shall be placed on file with the Clerk of the Court.~, ..........,r. -
Sincerely,~ ’
3erson
2003-2004 Civil Grand Jury
RHW:dsa
Enc.
SUPERIOR COURT BUILDING ¯ 191 NORTH FIRST STREET, SAN JOSE, CALIFORNIA 95113 ¯ (408) 882-272"1 ¯ FAX 882-2795 @
2003-2004 SANTA CLARA COUNTY CIVIL GRAND JURY
INQUIRY INTO THE BOARD STRUCTURE AND FINANCIAL
MANAGEMENT OF THE VALLEY TRANSPORTATION
AUTHORITY
Summary
The Valley Transportation Authority (VTA) faces significant financial challenges, Some are
outside of the control of the VTA Board (Board), such as the recent short-term shortfalls of sales
tax revenue due to the economic downturn and a less-than-efficient public transportation system
due to widely dispersed housing and centers of commerce. Other challenges are the result of
decisions made or accepted by the Board, some as a consequence of the structure of the Board
itself. These include: low recovery of transit costs from fares; high employee costs per service
rendered; over-promising of programs to voters; inefficient timing of expenditures; financial
forecasts designed to support program plans rather than evaluate options (and as a consequence
not identifying more optimal approaches); and decisions influenced bybenefits to local districts
rather than to the regional Santa Clara County (County) transportation system. The Grand Jury
recommends changes in the size and composition of the Board to provide better governance of
VTA finances in the future.
The overriding financial problem facing VTA at present is that it cannot afford the cost to build
and operate a BART system to San Jose. Spending limited resources on BART could squander
an oppommity to build, maintain, and operate a far larger network of transit options throughout
the county as enabled by voters approving the V2 cent Measure A sales tax in 2000. The Grand
Jury recommends delaying expenditures for BART to provide more immediate funding for other
Measure A transit projects.
Background
In the mid-1950’s, the County proposed a plan for a public transportation network throughout the
entire region. It was to be an integrated approach, designed to be a convenient and efficient
means of transporting people to critical destinations as the county grew in population. The
integrated plan was based on local buses as feeders to congregation points for express transport
to more distant destinations (either via light rail or buses), which would then also connect to
regional high-speed lines such as BART or commuter rail. The plan (with the exception of
BART and commuter rail completing the circle around the bottom of the Bay) was well accepted
and funded in subsequent years, largely by sales tax levies passed by county voters.
Over the next decades, portions of the system were developed and the master plan was revised
roughly every 10 years and updated between revisions. Compromises to the original vision were
madeover the years on a number of issues, due to funding constraints and politics. The number
of users remained below that projected by the master plan, in part because of the incompleteness
of the integrated plan, in part because of the reduced effectiveness of the system due to
compromises in the constructed routes, and in major part because of the increased affordability
and convenience of private motor vehicles and the investments VTA has made in freeways and
expressways. Operating costs for the portions of the system that were built far exceeded fare-box
revenues, with the rider-paid portion of the costs well below the national average of more than
20%, The VTA average fare box recoveries for 2002 and 2003 were only 11.6% and 12% of
operating costs ..........
The Board of the VTA was authorized in its present form by state legislation in 1994. In the
proposal originally presented to the State of California by the County Board of Supervisors, .the
Board was to be composed of five directly elected members (corresponding to the five County
Supervisorial Districts) and eleven appointed members from various elected bodies in the
County. The State enabling legislation, however, eliminated the directly elected directors.
Instead, the Board membership was to be composed of 12 voting members, 5 alternates, and as
many as two ex-officio members, all elected officials appointed to serve on the Board by the
jurisdictions they represent. The two ex-officio members are the County’s representatives to the
Metropolitan Transportation Commission (MTC), the Bay Area transportation authority. The
twelve "coting members are:
"five San Jose City Council members;
,three city council members (one each from Sunnyvale and Santa Clara’ for eight
out of ten years; the other member position and the remaining 2 out of 10-year
slots are filled by Los Altos, Los Altos Hills, Mountain View, or Palo Alto, on a
rotating basis);
¯one city council member from either Gilroy, Milpitas, or Morgan.Hill, on a
rotating basis;
[] one city council member from either Campbell, Cupertino, Los Gatos, Monte
Sereno, or Saratoga, on a rotating basis;
¯and two County Supervisors.
Board members serve a term of two years, with some serving more than one term, but not those
from the positions that rotate between the smaller cities. Board members are not required to have
a transportation background or other relevant expertise.
In the past year, the Board considered revising its composition in order to eliminate some of the
rotating Board seats. This would be accomplished by increasing the number of Board seats, with
San Jose and County Board members having more than one vote each to retain an equivalent
voting weight as at present. This effort has now been tabled until 2005.
Some boards that govem public bodies in the County use board structures that are similar to
VTA, that is, individual city councils select one of their own members to serve on a governing
board for a different function. Examples of this type of board include the Association of Bay
Area Governments and the joint powers agreement board for the county library system. While
these appointees are responsible and interested citizens, they are usually extremely busy with
activities in their own city. These board members have neither the time nor the expertise to delve
deeply into the problems facing them. The net result of this is a staff-driven organization. Thus,
although the board has the ultimate authority for decisions, the specialized knowledge and
dedicated time of the staff means that most of the strategy and tactics are set by staff. The staff
spends much of its time bringing the board up to speed on decisions that the staff has already
made. Board meetings characteristic of staff-driven organizations are generally passive
informational meetings interspersed occasionally with strong reactions when staff has Veered too
far off course in the view of a board member. Alternatively, member-driven boards lead
discussions in their board meetings on such matters as how the organization is doing against
benchmarks, how to best utilize resources, and setting goals and direction for the staff to
implement.
An example of a board in the County that is smaller and more dedicated to its role is the Santa
Clara Valley Water District (SCVW-D) Board. Five board members are elected to their roles by
supervisory district, and two members are appointed by the Board of Supervisors. Although the
SCVW-D staff is every bit as involved as VTA staff in operating their business, the SCVW-D
Board does not have other governmental obligations and thus is more focused in providing
governance, guidance, and oversight to the staff.
Other transportation agencies in California, as authorized by the state legislature, have a wide
range of options for their boards. At least two transportation agencies, Santa Barbara and
Stockton, have citizens appointed as board members by county and city governing bodies.
Unlike VTA, those board members are not currently elected members of those bodies, Citizen
members are chosen for their expertise, their interest in and commitment to transit matters, and
their long-term community involvement. A few transit boards such as the board for BART are
directly elected to that role. While others require the appointees to be elected officials (like
VTA), Bakersfield explicitly requires them not to be elected officials. Board size ranges from 5
to 20 members. One VTA staff member has ’had previous, positive experience working with
appointed citizen boards, and indicated that the members were in general more experienced,
dedicated, and interested in transit issues.
A recent joint meeting of the VTA Board and the board that oversees the existing portions of
BART clearly highlighted the different operating styles of the two groups. Following
presentations~ the VTA Board asked questions for clarification. The BART Board made
suggestions and recommendations. For example, a VTA Board member asked about funding for
the BART extension to Warm Springs (obviously required to continue the line to San Jose) and
was surprised that it was in jeopardy. The money allocated for that project had been "borrowed"
to pay for cost overruns on the BART link to the San Francisco Airport. The loan was to be
repaid with operating surpluses from that link, which have not materialized. On the other hand,
the BART Board suggested that VTA should prepare a contingency plan, given the shaky
finances for BART to San Jose, which initially extends BART only to Milpitas or Berryessa.
Even considering such a plan was quickly dismissed by a VTA Board member,
Discussion
VTA Board
The Grand Jury inquiry discovered that the Board, while composed of dedicated public servants,
is not functioning well as the governing body for the VTA. It is too large, too political, too
dependent on staff, too inexperienced in some cases, and too removed from the financial and
operational performance of VTA. Some city council members expressed to the Grand Jury that
they have chosen not to be appointed to the Board because of one or more of these problems.
Past and existing Board members admit freely that VTA is very much a staff-driven rather than a
board-managed orga~zation.
VTA Board membership is not composed of members chosen specifically for their management,
transportation, or business, experience, but rather is a rotating collection of elected officials
appointed from elected bodies in the County. These representatives often do not have business or
transportation experience. The primary duty and focus of these officials is to the elected
positions in the entity from which they are appointed. Voters would not normally be expected to
choose their local elected officials on the basis of whether they have time or ability to represent
the region’s transportation interests on the VTA Board, even if they were aware of such a
possibility for additional responsibility beyond the primary responsibilities of the elected office.
The commitment in time to provide effective oversight as Board members to VTA can be
significantly beyond what is possible as a secondary appointment for an elected representative.
There are more than 10 hours of public Board and committee meetings to attend each month.
Each has staff-supplied material which should be reviewed before each meeting (but because of
other commitments may not be reviewed, leading sometimes to elementary questions at the
Board meetings). That time commitment is necessary just to be reactive; any proactive attempts
at governance would require significant additional commitments in time.
It as important to understand that VTA is a major business with a $350 million budget, has
capital expenditures with major impact on construction jobs in the County, and serves a host of
different constituencies. It is also a complex business, covering roads to paratransit, which is
managed in other counties such as Alameda by three separate boards.
The Board is to be commended for the breadth and depth of their advisory committees, which
collect excellent input from such constituencies as bicycle and rail commuters. However, the
time that Board members devote to assessing public input from outside their districts is often the
perfunctory acceptance of written reports without comment at meetings and listening to 90-
second public comments at Board meetings.
Over the period 2000 to 2003, Board member attendance averaged a respectable 83%. That does
mean, however, that on average two of the twelve voting Board members were absent fi’om each
of the twenty to twenty-four Board and workshop meetings held each year. Some had perfect
attendance records; others were absent from the meetings more than half of the time. Attendance
records are similar for the three main Board committees: 77%, or one in four Board members is
absent on average at each committee meeting, scheduled once per month (however, as many as
4
six per year are cancelled). Moreover, the attendance records do not take into account that board
members at times arrive late or leave early. Because of time constraints for these heavily
scheduled elected officials, meeting discussions are sometimes truncated, even before a crucial
topic for the meeting is completed.
A large portion of the monthly Board workshop meeting is spent explaining an overwhelming
amount of VTA staff-supplied financial and operational information. At one recent meeting, it
was necessary to explain that what appeared to be an improved financial outlook was the result
of the use lease/buyback financing to purchase capital equipment, improving the short-term cash
position for 2004 but incurring future cash flow obligations. From the questioning, it was not
apparent that all Board members knew what the implications for a lease/buyback were or if they
recalled that such a financial strategy was to be used to improve the depleted cash reserves of the
VTA.
On the other hand, ithe size of the Board, along with alternates and other advisory members,
makes it impractical for VTA staff to spend much time with each individual member to provide
information and perspective other than at Board meetings. Consequently, there is very little time
left to devote to substantive Board discussion of the management of VTA businesses. An
additional problem of any large organization is the dilution of individual responsibility. Each
Board member may have good intentions about representing the transportation interests of the
County as a region, but also may believe that they need to protect the parochial interests of the
local area that they represent. A large number of the issues raised at Board meetings by
members concern VTA actions that affect their own local constituencies. It is difficult to build a
regional consensus when it appears at Board meetings that some members are primarily focused
on issues in and benefits to their local region of the County.
Perhaps because of the political positions of the Board members, frank and open discussions on
important matters of policy are rare. The Grand Jury observed a striking example of this reserved
behavior at one committee meeting concerning the continued awarding of engineering contracts
for BART studies even though some Board members had reservations whether that was prudent,
given the recent VTA financial studies that BART cannot be completed in the next 20 years.
Discussion was quickly cut short with comments by a Board member that building the full
BART system to San Jose and Santa Clara was the only approach to be considered. "
An example of the Board not being effective as the ultimate overseer of VTA was a VTA staff
response to a request by a Board member’ asking for follow-up information on a commentary
article in the January 28, 2004 San Jose Mercury News on the costs of VTA bus operations
compared to other agencies. The commentary noted that the ayerage cost of operating a VTA bus
for one hour is $134 compared to $99.20 for peer agencies, 35% more, and that it takes 3.18
employee hours to keep a bus in service for one hour compared to a national average of 1.91
hours. One Board member raised this issue at the January 30, 2004 Board of Directors Workshop
Meeting. As described in the minutes:
"Board Member:..inquired about the analysis of the expenses and revenue in terms
of dollars per person, He further inquired if the data has been summarized and
compared to find out’ if VTA is at par with agencies operating in the same
capacity."
The response from the VTA General Manager was:
"that he, along with the Ad-Hoc Stability Committee, Silicon Valley
Manufacturing Group, and other business community members are confident that
VTA is managing well in this kind of environment."
That response contained no substantive answer to-a direct Board inquiry regarding VTA
operations. It is the fiducial responsibility of the Board, not a committee, a business lobbying
group, or business community leaders, to provide oversight and direction. The Board must
ensure that staff provide detailed explanations when operations deviate from benchmarks.
Moreover, an effective and proactive Board would have been driving decisions in p,rior years
based on early trends in that data.
The Grand Jury followed up on the same question with VTA staff, again did not receive a direct,
informative answer, but did receive a VTA response published in the newspaper and a VTA staff
memorandum to the Board regarding the commentary article. The memorandum provided
information on improvements being made and examples where VTA was not the worst of its
peer agencies, but the overall conclusion, that VTA is in serious financial trouble due to high
costs, was supported, not refuted, by the memorandum. For example:
"VTA’s experience is driven by relatively high wages, high fringe benefits, and
high absenteeism .... In FY02, the average straight wage rose to $20.32, and the
average total wages paid per revenue hour was $30.61. This rapid growth is the
result of the progression in the labor contract and the increasing tenure of the bus
operator work force.
"VTA fringe benefits for bus operators are very expensive. In FY01, it was 58.3%
of wages paid to operators; this figure rose to 63.1% in FY02. This is similar to the
rates paid by AC Transit. The average for the peer group we considered was
between 45% and 50%.
"Low attendance by VTA operators is another reason for high operating costs. In
FY01, the annual revenue hours worked per VTA vehicle operations employee
(including bus operators, street supervisors, and some management staff) was only
1,214. At AC Transit, the value was 1,320; at OCTA in Orange County the value
was 1,351. In San Diego, the value is 1,627 ....
"VTA’s ratio of active vehicles per maintenance employee was only 1.057 in
FY01. This was the lowest of our peer group. Sam Trans, by comparison, was
2.566; AC Transit was 1.739 ....
"But an older fleet is only part of the explanation for large labor requirements for
maintenance. The other, more important, explanation is high absenteeism for bus
maintenance workers, similar to the problem with bus operators. The average
hours worked by VTA vehicle maintenance employees was only 1,514 hours in
FY00 [.] By comparison, the average of the peer group was 1,838 hours."
The memorandum provides these and other examples of inefficient operations compared to
benchmarks such as vehicle maintenance employees away from work an average of 14 weeks
during 2000. An active board would be quite concerned about these issues and involved in
finding solutions.
VTA Financial Management
The Board allowed the finances of VTA to deteriorate badly during the recent economic
downturn before beginning to take some actions. For instance, between.2001 and 2004, revenues
from fares (10% of total revenues) and sales taxes (50% of total revenues) declined by 19%
while wages and benefits rose by 40%. In fact wages and benefits went from 72% of total
expenses in 2000 to 91% .in 2004.
Fares as a fraction of operating costs were kept unusually low compared to national averages.
Low fares were part of the problem, but not the major problem. The adult cash fare was $1.10 in
1995, increased to $1.25 in 2000, $1.40 and $1.50 in 2003, and $1.75 in 2005. Operating costs
rose even faster, partly because structural expenses such as wages and benefits ~ increased much
faster than inflation and partly because operating expenses were not cut during the downturn in
proportion to the recent ridership decline. During the past several years, those actions and lack of
actions led to spending down the reserves set aside for contingencies.
With those reserves depleted as far as practical, the Board then took the unusual step of paying
for current costs and debt by borrowing $275 million plus interest against Measure A sales tax
revenues not due to be collected until 2006 and later. That action prevented a 21% cut in transit
services this year but has not solved the current financial problem. It merely pushed it into the
future, creating two additional problems. The $275 million plus interest will not be available in
2006 and later years, having already been spent (and not all on capital improvements). The
second problem is that the structural operating deficit is projected to increase from $76 million
for fiscal year 2003-04 to $92 million in 2004-05. VTA has delayed a plan to ask voters for an
additional ¼ cent or higher increase in the sales tax (to 8.75%) until the November 2006 Election
to help cover the ongoing deficit. ’
In contrast, an uncharacteristically good example of management oversight by one Board
member occurred in late 2003 with a member’s forceful and repeated request for an analysis of
when BART could be built to San Jose, given reasonable financial projections. The answer,
which VTA had been resisting saying publicly, clearly, and unambiguously since before Measure
A was passed by the voters, was that VTA does not have the funds to complete BART anytime
in the next 20 years. Shortly after delivering that stark message, which was not welcomed by
some Board members, the VTA chief financial officer resigned for a lower-paying out-of-state
position. However, the Board has continued to spend money on BART as if that analysis had not
been done and has revised the revenue projections to again propose a BART completion by
2014.
In the past, the political structure of the board of VTA’s predecessor agency was potentially
responsible for the construction of a light rail system that deviated from the original plan. The
7
present light rail system, mainly a linear route, passes through downtown and does not connect
with the airport, as do the rail transit systems in a number of other cities. It was known at the
time of the decision that, by choosing a route through downtown, the average speed would drop
to 20 miles per hour from the potential for 55 miles per hour. That choice of route seriously
compromised the speed of the light rail system, supposedly one of the prime reasons justifying
this much more expensive transportation mode over buses. Also, a linear route rather than a
network or grid tends to limit the ridership to those whose starting and ending points are both
near the linear route. (The original 1950’s plan envisioned a light rail network, connected to the
airport as well, and used buses on local loops as feeders to the light rail stations.) VTA is adding
more spokes to the linear system, but without even more interconnecting lines, travel times
between arbitrary locations will still limit it from being a popular transportation choice.
These problems with the utility of the light rail system and other demographic factors contribute
to ridership numbers that are below original projections. In 1987, new forecasts were revised
downward just as the system was about to be put into operation, predicting 18,000 to 20,000
weekday riders by 2000. During the peak of the recent economic boom from the spring of 2000
through the summer of 2001, ridership on the Tasman West line rose above the minimum
projection levels but has fallen below again. Annual ridership numbers for the various transit
systems operated or supported by VTA are shown in Figures 1 and 2, the second on a
logarithmic scale to reveal the trends in the less-frequented transportation modes. Although the
30% falloff in bus ridership from the peak to this year is striking, the reduction in light rail
ridership is more: 43%. Thus, even with the addition of the first section of the Tasman East line,
the daily ridership of 14,500 (slightly higher on weekdays) is now below the 1987 minimum
estimate and is projected to increase only by 1000 next year after the Capitol Corridor is added.
The lower than projected ridership means that the County’s capital expenditures are not being
recovered as planned either by fares or by improvements in highway congestion. As gasoline
costs continue to rise and the County’s population grows, an effective and efficient network of
transit options would have been an economic asset to the region.
The proposed BART link has much more severe problems. It again is a linear line, but costs at
least twice as much as light rail to construct and operate (see Appendix A and Figure 3).
Although it is separated in grade from roads and can travel considerably faster than light rail,
stations need to be further apart. That means that local bus feeder routes must be longer and that
more parking facilities must be constructed than for light rail, And although faster, it will still be
quicker to travel from downtown San Jose toSan Francisco via the existing Caltrains line,
especially with the new express routes cutting the time to about one hour.
In fact if BART is built, VTA projections show no improvement for travel times by any means
from Pleasanton to San Jose. Projections do show a 10-minute improVement in public transit
time from Milpitas to downtown San Jose (but still 10 minutes slower than driving alone), The
greatest relative benefit appears to go to those who travel from Union City to Downtown San
Jose, with a BART time estimated at 43 minutes, a carpool lane time at 45 minutes, and a drive-
alone time at 53 minutes. (The reduced traffic due to the completion of BART is projected to
improve those driving times by only 2 minutes each).
8
Total capital costs for constructing BART to San Jose beyond that already spent are estimated to
be $4,112 million (in 2003 dollars), assuming no changes to more costly design options, Initial
start-up costs could be reduced by $217 to $350 million based on delaying the construction of a
few stations. These costs do not include the costs of interest on the bonds to begin construction
earlier than 2025 and do not assume any large cost overruns such as experienced on other BART
projects around San Francisco Bay. The VTA has refused to consider any plan that would greatly
reduce the construction costs, such as building BART only to Milpitas or Berryessa and
connecting to a light rail grid for travel to other points in the County, including to downtown San
Jose.
BART would rely on three key funding sources: $2,629 million fi-om VTA’s Measure A local
sales tax and other capital funding sources, $649 million from the State of California’s Traffic
Congestion Relief Program, and $834 million from Federal Section 5309 New Starts funds.
None of these funding sources are secure. The state money is on hold and may or may not be
restored if and when the state solves its own financial problems. The federal money is on hold
because VTA has not supplied a viable financial plan for constructing and operating BART and
therefore has been rated as "not recommended." And the amount of local money, a projected pot
of funds, has shnmk over the past few years. These monies are needed as well for other projects
promised on the Measure A ballot, including a transit link to the airport, which are not fully
funded (Appendix B). Some of the money has already been siphoned off to by borrowing money
now ($498 million including interest), before Measure A revenues start, to pay for current
obligations.
The 2004 draft ~nvironmental impact statement (EIS), which needed to be approved by the
Federal Transit Agency (FTA), contains the following:
"Funding to operate and maintain BART would come from a mix of sources such
as a county ½-cent sales tax, State Transportation Development Act (TDA), State
Transit Assistance (STA) Program, passenger fare revenues, Federal Transit Act,
Section 5307, and other sources (e.g., advertising, rentals, interest earnings, etc.).
Potential new funding sources could include ¼ to ½-cent sales tax, broadening the
sales tax base, joint development, benefit assessment districts, Proposition 42,
regional gas tax, and Bay Area bridge tolls.
"The financial plan indicates that this extension will need additional revenue in
order to be constructed and operated in the time frame described. The Federal
Transit Administration is approving circulation of this Draft EIS, with a
prelfl-ninary financial plan,_ in recognition of the project’s inclusion in the cttrrent
Metropolitan Transportation Plan financially constrained regional plan and as
support for the public dialogue on the project and its financial plan. The financial
plan in the Draft EIS is based on financial projections and governmental actions
that are not fimalized. As part of the New Starts process, a feasible fimancial plan
will need to be prepared to advance the project into Final Design. In addition, the
proposed project is dependent on the completion of the BART Warm Springs
Extension Project that does not yet have a final financial plan in place."
In late 2003, the FTA downgraded the BART proposal for federal money from "not rated" to
"not recommended" due to holes in the VTA financial plans. The VTA can readily understand
the FTA’s position considering VTA’s own advice to the Caltrains board:
"The shift to the...scenario should not be made, however, until the...member
agencies have reached consensus on a funding agreement to address the $220
million,.,shortfall in the...capital program and have identified and committed
fimds required for the operating subsidy required to operate an increased level of
train service. This shortfall would be significantly increased if the projected $557.6
million in unidentified "other" funds is not secured for the,, .capital program.
"Caltrains financial strategy should be based on achieving financial stability and
should be guided by service demand and financial capacity...rather than relying on
undefined and uncertain innovative financing techniques."
Instead--as outlined in a presentation entitled "Preliminary Engineering - Why Now?" -- VTA
continues to spend money on BART for the following reasons:
Keep faith with voters and those stakeholders who continually support the project and
VTA’s overall transportation efforts. _
Illustrates strong and continuing local financial commitment to project.
If VTA delays now, why would our delegation [congressional and state] keep [the]
project as [a] high priority?
A further justification presented, that work should be done now since it would be more expensive
later, is not valid based on the time value of money, but the Board did not challenge it.
At times, VTA has attempted to provide a more balanced financial plan by assuming large year-
to-year increases in sales tax revenue which then need to be scaled back or extended into the
furore. Their current projections for sales tax increases exceed those used in plans by the County
and the City of San Jose. Various transit advocacy groups have maintained for years that the
financials for BART were misleading and incomplete. In fact, there is circumstantial evidence
that financial estimates were presented optimistically before key decisions and negative
information delayed until after, including the vote approving Measure A.
The incremental costs to operate and maintain BART are estimated at $65 million, but VTA
hopes to recover 71% of that from fares if their ridership projections are realistic. However, in
addition, VTA has agreed that it will pay each year to help maintain the BART system as a
whole, starting at $48 million and increasing to $75 million, which means that, as it affects the
taxpayer, the projected fare-box recovery would only be about 35%.
VTA states that the overall purpose of transportation improvements along the proposed BART
route is to:
Improve public transit service in this Severely congested corridor by providing
increased transit capacity and faster, convenient access throughout the San
10
Francisco Bay Area Region, including southern Alameda County, central Contra
Costa County, Tri-Valley, Central Valley, and Silicon Valley.
Enhance regional connectivity through expanded, interconnected rapid transit
services between BART iri Fremont and light rail transit (LRT) and Caltrain in
Silicon Valley.
Accommodate future travel demand in the corridor by expanding modal options.
Alleviate severe and ever-increasing traffic congestion on the 1-880 and 1-680
Freeways between Alameda County and Santa Clara County.
Improve regional air quality by reducing auto emissions.
Improve mobility options to employment, education, medical, and retail centers for
corridor residents, in particular low-income, youth, elderly, disabled, and ethnic
minority populations.
Maximize transit usage and ridership.
Support local economic and land use plans and goals.
The Grand Jury supports all these goals but has not been convinced by VTA that the plan for the
construction of BART is the most efficient and timely way to accomplish them. In fact,
implementing the plan may be to the detriment of an integrated transportation network
throughout the region. As detailed in Appendix B, VTA’s current plan chooses to allocate
Measure A sales tax revenue to fully fund BART but to provide only 57% of the funds needed
for all other Measure A projects. If BART were given a lower priority, all other Measure A
projects could be completed sooner, building a more robust transportation system in the County.
(Indeed, VTA does not need voter approva! to delay or suspend BART. VTA would then have
the capital funds necessary to do many of the items on the regional wish list, as shown in the
lower portion of Appendix B and in Figures 4 and 5.)
A scoring system to rank the priority of the various Measure A transit projects was established
by prior Board action, but at least two Board members stated that they are uncomfortable scoring
system results. A Board member had to ask more than once for VTA staff to supply the detailed
numbers that produced the summary scores. Citizen comments at Board meetings have
questioned the score that BART gets for financial viability (higher than all but three other
Measure A projects) considering only the acknowledged problems.
There are other reasons to consider suspending spending on BART if the project cannot be
completed for at least 10 (or more likely 20) years. Commuter rail technology is already cheaper
than BART and may be better integrated into a flexible networki High-speed rail fi’om Los
Angeles may be constructed along the same corridor, connecting to the existing BART system
somewhere on the line to Oakland, as well as making the trip up the Peninsula even faster than
Caltrains. Earthquake and security concerns may make vulnerable systems such as BART less
desirable than a flexible transit network. Spending more money on BART now serves to make a
change in plans progressively more difficult and wasteful.
Anecdotal community support for BART is still high, especially in areas to be directly served by
BART. Advocates for BART, however, have not surveyed residents about BART after providing
information that BART would require at least two-thirds of the transit construction dollars over
the next 30 years, even then would not be completed for more than twenty years, would operate
at a deficit which would siphon funds from other transit programs, would be slower than
11
commuter rail to get to San Francisco and maybe Oakland, would cut commute times on 1-880
by at most 2 minutes, that federal and state funding is certainly not assured, and that VTA needs
an additional ½ cent sales tax increase to make this plan possible. And this is the situation if
there are no unexpected problems. Editorial boards of community newspapers from Milpitas to
Palo Alto to San Jose that used to be proponents no longer support the present BART plan. The
VTA has been receiving letters from some city councils recommending reevaluation as well.
Conclusions
The VTA Board has not reacted to the present budget problems with diligence, has depleted the
financial reserves in the system, and has borrowed against future tax revenues rather than
resolving an ongoing operational deficit. The Board has allowed personnel costs to expand more
rapidly than revenues.
The Board is too large, too transient, and too occupied with other duties to provide direction and
effective oversight to the staff in running VTA. The Board should be reconstituted as a smaller,
dedicated board by enabling legislation, perhaps along the model of the SCVWD, with members
appointed to serve that role as their primary public service. Recommendations to the County’s
state legislators for enabling legislation might come from any of several sources such as the VTA
Board itself or any of the cities or towns in the County. However, the County Board of
SuperviSors was involved in the original enabling legislation and may be best suited to represent
the County as a whole and the interests of transportation for the entire region.
The Board needs to reevaluate its strategic plan for how the various parts of its system will serve
the County, how funds are to be split between various capital projects by year, and what
operating subsidies are required now and in the future.
The Grand Jury supports public transit and understands the urgent need for improving transit in
the 1-880/I-680 Corridor. The Grand Jury would have been delighted to have received a logical
and financially compelling justification for putting BART at the head of its priority and funding
list from VTA. It did not. The VTA needs to discuss what the County transportation system
sacrifices in order to gain the benefits of BART. Voters need to be more demanding of
information before voting for financially unrealistic promises.
Finding I
The VTA Board, as currently constituted of appointed members from elected bodies in the
County, does not provide direct voter representation on transportation issues, makes
accountability remote, provides for conflicts in responsibilities, and overextends Board members
performing both their elected and appointed responsibilities.
12
Recommendation I
The current structure of the VTA Board should be made more responsive to the needs and
financial management of the regional transportation system as a whole by providing for, via
enabling legislation, members dedicated to transportation that are either directly elected,
appointed as their main public service responsibility, or some combination of the two. The
enabling legislation should be sponsored by one or more of the major constituent agencies in the
VTA, such as the County Board of Supervisors.
Finding II
The VTA Board as currently constituted is too large and its members too transient to efficiently
provide management oversight to VTA: As a result, the VTA Board has not reacted to the
present budget problems with diligence, has depleted the financial reserves in the system, and
has borrowed against future tax revenues rather than resolving an ongoing operational deficit.
Recommendation II
The current size of the VTA Board should be reduced, via enabling legislation, to a smaller
Board of 5 to 7 members that would be more involved in and accountable for the financial and
operational management of VTA. The enabling legislation should be sponsored by one or more
of the major constituent agencies in the VTA, such as the County Board of Supervisors.
Finding III
The VTA Board has proceeded.with a transit capital improvement plan that cannot accomplish
all that was promised in Measure A.
Recommendation III
The VTA Board should delay expenditures for BART and provide more complete funding for
other transit options. If VTA wants authorization of this change in plans by the voters, this
should be done after a clear explanation to the public of the relative costs of the various transit
options, and before a request for an additional ½ cent sales tax increase
PASSED and ADOPTED by the Santa Clara County Civil Grand Jury on this 27th day of May
2004.
Richard H. Woodward
Foreperson
13
References
Documents
Bay Area Rapid Transit website: http://www.bart.gov!about/bod!bodmembers.asp.
Board of Directors Meeting and Workshop Meeting Minutes, 2003 and 2004.
Don Gage, Chair, Board of Directors, VTA, letter to the Peninsula Corridor Joint Powers Board,
February 11, 2004.
Greg Perry, VTA Policy Advisory Committee, "VTA Costs Are Out of Control," San Jose
Mercury News, January 28, 2004.
"LRT Ridership Projections," Transportation Agency Transmittal Memorandum, June 17, 1987.
Measure A ½ Cent Transit Sales Tax, Official Ballot for the November 7, 2000, County General
Election.
Peter Cipolla, VTA General Manager, VTA Memorandum entitled "Opinion/Editorial article
regarding VTA in January 28, 2004 San Jose Mercury News," January 29, 2004.
Silicon Valley Rapid Transit Corridor - BART Extension to Milpitas, San Jose, and Santa Clara
Draft Environmental Impact Statement/Draft Environmental Impact Report/Draft Section 4(0
Evaluation [signed by VTA (1/27/04) and the Federal Transit Administration (3/2/04)].
"Transportation Injustice - Why BART-to-San Jose cost overruns will devastate bus and rail
service," Transportation and Land Use Coalition, March 6, 2003, http://transcoalition.org/.
Interviews
County Supervisor, September 11, 2003.
County Supervisor, October 10, 2003.
County Supervisor, November 6, ,2003.
County Supervisor, May 20, 2004.
Executive Director, Mineta Transportation Institute, November 6, 2003.
Executive Director, Transportation and Land Use Coalifio.n, Oakland, CA, January 20, 2004, and
May 13, 2004.
14
Interviews - Continued
Research Director, Mineta Transportation Institute, October 1, 2003.
San Jose City Council Member, December 12, 2003.
San Jose City Council Member, December 18, 2003.
VTA CFO, September 16, 2003.
Meetings Attended
VTA Board and committee meetings.
VTA Chief of Staff, Chief Operating Officer, Deputy Director of Service and Operations
Planning General Counsel, Transportation Policy and Program Manager, Board Secretary,
Controller, Principal Transportation Planner Congestion Management Program, Director
Marketing and Customer Service, BART DeputyProject Manager, April 12, 2004.
15
oo
~0 0 m
Appendix B
VTP2030 Transit Investment Plan
[amounts in millions of dollars, after loans and operating subsidies]
Federal &
Total
Cost
BART to San Jose & Santa Clara $4,112
Downtown East Valley $550
Bus Rapid Transit $50
Caltrain Service Upgrades $171
New Rail Corridors Study $1
New Rail Corridors (TBD Phase 1 funded)$1,220
Airport People Mover Connector $400
Caltrain - South County $100
Rt. 17 Bus Service Improvements $2
Dumbarton Rail $278
Palo Alto Inter-modal Station $200
ACE Upgrade $22
Caltrain Electrification $650
Totals $7,756
Measure A Funds Allocation (on hold)Funding Cost Funded
$1,590 $2,453 $69 98%
$550 $0 100%
$33 $17 66%
$155 $16 91%
$I $0 100%
$188 $1,032 15%
$222 $178 56%
$61 $39 61%
$2 $0 100%
$44 $234 16%
$5O $150 25%
$22 $0 100%
$233 $417 36%
$1,590 $4,014 $2,152 72%
Non-Measure A Funds Allocation Total.Regional
Cost Funding
=$107-$107
$202
$37
Discretionary I Unfundedl %
Funding Cost Funded
$0 $o
$277 $0 100%¯$446 $1,406 24%
$150 $266 36%
$230:$58 80%
$28 $112 20%
$10 $0 100%
$100 $208 59%
$32 $53 38%
$0 $76 33%
$o $o
STIP funds allocated to BART above $0
Zero Emission Buses $277
Highway Projects $1,852
Expressway Projects $416
Local Streets $288
Intelligent Systems $140
Sound Walls $10
Paving $510
Bicycle $85
Pedestrian $113
Landscape $0
Totals
Totals
ALL Funds
BART
All Except BART
All Measure A Except BART
Totals without funding BART
Measure A without funding BART
$3,691
Total
Cost
$11,447
$4,112
$7,3351
$3,644
$7,335
$3,644
$239
Outside
Funding
$1,829
$1,590
$239
$0
$239
$0
$1,273 $2,179 41%
VTA IUnfundedl %
Funding Cost Funded
$5,287 $4,331 62%
$2,453 $69 98%
$2,834 $4,262 42%
$1,561 $2,083 43%
$5,287 $1,809 75%
$4,014 ($370)110%
17
EJi,
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(~$)
(INS)
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(iNS) ueld
Response to Grand Jury Report
2003-2004 Civil Grand Jury
ATTACHMENT B
Report Title:
Report Date:
Response by:
Inquiry into the Board Structure and Financial Management of the
Valley Transportation Authority
May 27, 2004
Honorable Bern Beecham Title:Mayor
City of Pale Alto, and Members of
the City Council
FINDINGS ]
[] I (we) agree with the Findings numbered: III
[] I (we) disagree wholly or partially with the Findings numbered:
(Attach a statement specifying any portion of the Findings that are disputed; include an
explanation of the reasons therefor.)
RECOMMENDATIONS
[] Recommendations numbered have been implemented.
(Attach a summary describing the implemented actions.)
[] Recommendations numbered
but will be implemented in the future.
(Attach a timeframe for the implementation.)
have not yet been implemented,
[] Recommendations numbered I & II require further analysis.
(Attach an explanation and the scope and parameters of an analysis or study, and a
timeframe for the matter to be prepared for discussion by the officer or director of the
agency or department being investigated or reviewed, including the goveming body of the
public agency when applicable. This timeframe shaft not exceed six months from.the date
of publication of the grand jury report.)
[] Recommendations numbered
they are not warranted or are not reasonable.
(Attach an explanation.)
will not be implemented because
Date Signature Print Name
Number of pages attached:
ATTACHMENT C
September 13, 2004
Mr. Richard H. Woodward
Foreperson
2003-2004 Civil Grand Jury
Office of the Civil Grand Jury
191 North First Street
San Jose, CA 95113
Re: Inquiry into the Board Structure and Financial Management of the Valley Transportation
Authority (VTA)
Dear Mr. Woodward:
Thank you for sending the 2003-2004 Santa Clara County Grand Jury’s Final Report entitled
"Inquiry into the Board Structure and Financial Management of the Valley Transportation
Authority" to me and other Members of the Palo Alto City Council. Please accept this letter as
the City of Palo Alto response to the Civil Grand Jury Final Report Findings and
Recommendations.
The Civil Grand Jury Findings raise a number of serious concerns. The City of Palo Alto makes
an annual contribution to the budget of the Valley Transportation Authority (VTA), shares with
several other communities a seat on the VTA Board, and participates both at the elected official
and staff level in various VTA committees. In addition, Palo Alto generates substantial sales tax
revenues to fund VTA programs and receives both transportation project funding and public
transportation services from VTA. A healthy VTA and a successful regional public
transportation system are in the interest of the City of Palo Alto and its residents.
The City of Palo Alto is troubled by the Civil Grand Jury findings with respect to VTA
governance and financial management. The following comments address both governance and
financial concerns. ,~
We have also received and reviewed the VTA response under the signature of VTA Board Chair
Don Gage. We are impressed by Commissioner Gage’s sincerity and by the earnest efforts that
VTA has made to address concerns raised by the Civil Grand Jury. We agree with Commissioner
Gage that the VTA Board and staff manage a complex organization with a large portfolio of
transportation capital projects and services. By and large, VTA does its job with great dedication
and skill. In no way should the Palo Alto response to the Civil Grand Jury Findings and
Recommendations be interpreted as diminishing VTA’s many contributions to the people and
communities of Santa Clara County.
Mr. Richard H. Woodward
September 13, 2004
Page 2
Finding I, Recommendation 1: On VTA Board Structure and Responsiveness
VTA is making some progress as regards more inclusive decision-making. These include
involving more communities in decision-making and supporting a more pro-active role for the
VTA Policy Advisory Committee, which includes elected officials from throughout Santa Clara
County who are not current members of the VTA Board of Directors. VTA has also begun
encouraging meetings of city officials to discuss transportation needs in various sub-areas of
Santa Clara County. Nevertheless, more needs to be done to make VTA governance more
inclusive and responsive.
The City of Palo Alto concurs with the Civil Grand Jury that there are serious concerns regarding
VTA governance. We understand that the VTA Board is reviewing some changes to improve the
quality and level o, frepresentation for all 15 Santa Clara County cities. If these improvements are
codified, they will improve governance given our current legislative framework. Despite these
encouraging steps by VTA, the concerns expressed in Finding I of the Grand Jury Final Report
about VTA governance structure and effectiveness have yet to be fully addressed.
We also believe that Santa Clara County communities should convene a forum to discuss options
for reform of VTA governance. It is clear from the Civil Grand Jury report that the current VTA
governance framework is inadequate to meet the challenge of overseeing a regional
transportation agency engaged both in programming large transportation projects and operating a
major public transportation system. Palo Alto urges that this intercommunity forum discuss
regional public transportation needs along with VTA governance and that these discussions take
place in open meetings in accordance with the principle of open government. With respect to
Recommendation I, we believe that a decision regarding whether or not VTA Board members
should be directly elected should wait until the intercommunity forum discussions have taken
place.
Finding II, Recommendation II: On VTA Board Size
As is the case in our response to Recommendation I, we believe that a decision regarding VTA
Board size should wait until the intercommunity forum discussions have taken place. At this
point, it is not clear that either a smaller or a larger VTA Board will be more effective and
responsive than the current Board size.
Finding III, Recommendation III: Delay Further BART Expenditures and Provide More
Complete Funding for Other Transit Options
The City of Palo Alto concurs with the Civil Grand Jury Final Report that VTA should make no
further financial commitment to the BART extension to San Jose unless and until there is a more
realistic accounting of future capital costs, as well as future operating subsidies. We fully concur
with the Recommendation III, that "The VTA Board should delay expenditures for BART and
provide more complete funding for other transit options". Palo Alto endorses the Grand Jury’s
conclusion that "VTA needs to discuss what the County transportation system sacrifices in order
to gain the benefits of BART." An open dialog with the public and the communities of Santa
Clara County is needed for this discussion to be effective.
Mr. Richard H. Woodward
September 13, 2004
Page 3
Under the circumstances and with the Grand Jury conclusions, findings, and recommendations in
mind, the City of Palo Alto believes it imprudent for VTA to go to the voters of Santa Clara
County with a request to raise transportation sales taxes. The time to consider going before the
voters with such a sales tax increase proposal is after a comprehensive dialog on VTA
governance, finances, and regional public transportation options takes place with all the
communities and the general public of Santa Clara County. Once suitable changes in VTA
governance are made and Santa Clara County communities and residents have had the
opportunity to re-visit future transportation options, another County transportation sales tax
increase measure may be desirable. At present it is not.
It is imperative that Palo Alto and Santa Clara County residents’ faith in government and in a
future vibrant, effective regional public transportation system not be diminished by current VTA
shortcomings. The sooner the problems identified by the Civil Grand Jury Final Report are
addressed, the sooner the great promise of regional transportation planning for Santa Clara
County will be realized.
Sincerely,
Bern Beecham
Mayor
Mayors and Councils of Santa Clara County Cities
Santa Clara County Board of Supervisors
Valley Transportation Authority Board of Directors
Santa Clara County State Legislative Delegation
Representative Anna Eshoo
Senator Diane Feinstein
Senator Barbara Boxer
Report Title:
Report Date:
Response by:
¯Response to Grand Ju.ry Report
2003-2004 Civil Grand Jury ,,~ ATTA(~H~ME~T ])
inquirY into the Board StruCture and Financial Management of the
Valley Transportation Authority
May 27’, 2004
Honorable Donald F. Title:
Gage ..
Chairperson, Santa Clam Valley
TransPortation Authority Board of
Directors, and Members of the
Board of Directors
E3
FINDINGS
I (we) agree with the Findings numbered:
[~] I (we) disagree wholly or partially with the Findings numbered: z,_zX, ZTZ
(Attach a statement specifying any portion of the Findings that are disputed; include an
explanaUon of the reasons therefor.)
RECOMMENDATIONS
[] Recommendations numbered ¯have been implemented.
(Attach a summary describing the implemented actions~)
[] Recommendations numbered have notyet been implemented,
but will be Implemented in the future,
(Attach a Umeframe for the implementation.)
[~ Recommendations numbered. require further analysis,
(Attach en explanation and the scope a~d parameters of an analysis or study, and a
Umeframe for the matter to be prepared for discussion by the officer or director of the
agency or department being investigated or reviewed, including thegoverning body of the
public agency when applicable. This timeframe shall not exceed six months from the date
of publicaUon of the grand jury report.)
[~]Recommendations numbered z, zz, zzz
they are notwarranted or are not reasonable.
(Attach an explanation.)
will not be implemented because
A~st 12~ 2004 Donald F. GageDateSignatu~Print Name
Number of pages attached: to
Valley Tran porlahon Authority
August 12, 2004
The Honorable Thomas P. Hansen
Presiding Judge
Santa Clara County Superior Court
191 North First Street
San Jose, CA 95113
Dear Judge Hansen:
The following is provided in response to the findings and recommendations presented in
the 2003-04 Civil Grand Jury’s Final Report, Inquirr’ into the Board Structure and
Financial Management of the Valley Transportation Authority, (hereafter referred to as
"the report") as transmitted to me by 2003-04 Grand Jury Foreperson Richard H.
Woodward on June 18, 2004.
We wish to thank the members of the Grand Jury for their time and effort in developing
their comments regarding the Santa Clara Valley Transportation Authority.
Unfortunately, we had the opportunity to meet with only five of the nineteen Grand Jury
members. We wish there had been an opportunity for us to directly share information
with all the Grand Jury members in analyzing the complexities of an organization like
VTA. As such, members may find themselves quickly immersed in an environment 0f,
unique terminology and interrelationships that initially may appear to reflect a local issue,
but ultimately turns out to be much more complicated.
While we do not concur with three major conclusions contained in the Grand Jury’s
report, we wholeheartedly respect the concept and process in which a citizen Grand Jury
reviews selected elements of a governmental entity and reports their conclusions to the
public. We believe the Grand Jul-y plays a valuable role in encouraging public discussion
about local government policies and practices.
3331 Horth First Slreel ¯ Son Jose, CA 95134-1906. Administration 408.321.5555 ¯ Coslo~ner Service 408.321.2300
Our specific responses to the three conclusions and recommendations contained in the
Grand Jury’s June 18 report are as follows:
Grand Jury Finding I. "The VTA Board, as currently constituted of appointed
members from elected bodies in the County, does not provide direct voter representation
on transportation issues, makes accountability remote, provides for conflicts in
responsibilities, and overextends Boardmembers performing both their elected and
appointed responsibilities."
Grand Jury.Recommendation I. "The current structure of the VTA Board should be
made more responsive to the needs and financial management of the regional
transportation system as whole by providing for, via enabling legislation, members
dedicated to transportation that are either directly elected, appointed as their main public
service responsibility or some combination of the two. The enabling legislation should
be sponsored by one Or more of the major constituent agencies in the VTA, such as the
County Board of Supervisors."
VTA RESPONSE TO FINDING I AND RECOMMENDATION I:
We disagree with the recommendation for the reasons outlined below:
This finding appears to disregard the fact that the current organizational structure
of VTA encompasses a critical nexus between land use planning authority and
transportation responsibilities. The current VTA Board structure facilitates this
critical interrelationship specifically because, as city council members or county
supervisors, each of the Board’s twelve members have concurrent and ongoing
land use decision making responsibilities.
Knowledge of transit projects and private developments within a Board member’s
jurisdiction has helped forge much better land use planning and development that
in the long term will ensure that land use decisions and public transportation
decisions will be complementary and therefore provide the maximum benefit to
the communities it serves. Selected examples include transit supportive rezoning
and a variety of developments in San Jose, Milpitas, Mountain View, Sunnyvale,
Campbell and ~s Gatos~
The report asserts that VTA is staff-driven, inferring a lack of Board
understanding, direction or authority. This is factually inaccurate. VTA follows
the time-tested structure and process, whereby the Board of Directors establishes
policy and the professional staff implements that policy. Regardless of the size or
composition of policy boards, this is a long-established and proven approach for
most public agencies, not just transportation agencies.
A very clear example of the leadership the Board of Directors regularly exercises
was the Board’s 2003 decision to pursue a court decision to utilize 2000 Measure
A funds, through bonding, to defer a staff-recommended 21 percent service
reduction. Th~s direction was given by a Board that thoroughly understood the
full extent of the financial issues before them, had considered a great deal of
public and stakeholder comments, and exercised their authority to make the policy
decision. The Board’s decision in this instance to take a different approach from
that recommended by staff.
Staff, based upon professional experience and expertise, is charged with the
responsibility of analyzing issues, reviewing options and recommending action
for Board consideration. The VTA Board provides direction to staff during all
phases of staff’s technical analysis of an issue. In fact, the Board often drives the
development of policy by requesting staff to evaluate additional options for a
specific issue. For example, this was very much the case during the work of the
~Board’s Ad Hoe Financial Stability Committee.
VTA’s policy-making processes also contain a significant number of
oppommities for public input. Prior to taking action, the Board has open and
frank discussions and regularly seeks public input. Examples of this approach
include budget decisions, fare policy revisions, service changes, long-range and
short-range capital and operating plan adoption, and major corridor project
approval. The Board’s decision-making structure and process emphasize input
from its advisory committees (most of which are composed entirely of citizen
volunteers), ad hoe advisory committees, project policy advisory boards, public
hearings, community meetings, and interagency working groups.
We don’t believe the Grand Jury’s report suggestion that the VTA Board structure
look to the Santa Barbara and Stockton transit systems as examples is a valid
recommendation. Both of these other systems are small bus-only operations in
very unique operating environments. Santa Barbara has a fleet of only 98 buses
and a staff of 180 employees. Stockton has 180 buses and 340 employees.
Neither system has light rail, commuter rail, and major construction or congestion
management responsibilities. Neither is operating in an area as large or an
environment as complex as VTA. Neither has major regional transportation
policy and service responsibilities or impacts. Therefore, valid comparisons
cannot be drawn.
The report also suggests the Santa Clara Valley Water District’s structure as a
model for the VTA Board composition. Both missions are important in their
nature. However, the Water District’s mission is much more narrow in scope and
revenue sources. VTA’s complexity, in both its mission and funding, is much
greater. Thus, this comparison does not appear to be an appropriate one. It
should be pointed out, however, that the Water District follows the same proven
protocol as VTA (and nearly all other public agencies), in that the staff conducts
technical analysis, the Board sets policy and the professional staff implements that
policy.
The report makes two sweeping statements that do not appear to be supportable
by the referenced interview list. The first statement is "some city council
members expressed to the Grand Jury that they have chosen not to be appointed to
the VTA Board." Yet on the Grand Jury interview list, they reference
interviewing only two San Jose City Council Members and no others from any
other city council. The second statement is that "Past and existing Board
members a~it freely that VTA is very much staff-driven rather than a board
managed org~zation." Once again we note that the report referenced interviews
with only fo~ members of the Board of Supervisors and two City of San Jose
Council Members,
In contrast to the statement contained in the Grand Jury’s report, it is noteworthy
that VTA’s current Board of Directors consists of: t-wo mayors, two vice-mayors,
one mayor pro-tern, the chair of the County Board of Supervisors and both the
president and vice president of the Santa Clara County Cities Association. To
date, we have never received any feedback from any jurisdiction that eligible city
council members or county supervisors have passed on the opportunity to serve
on the VTA Board of Directors. In fact, the sense we have is quite the contrary.
Because of transportation’s impact on development of a community, a VTA
Board appointment is often a much sought after responsibility among local
elected officials.
The report suggests that because VTA’s Board of Directors rotates or that they do
not have business or transportation experience, the Board members are not
qualified to serve. Wewould argue that the experience of thecurrent Board
members points to a different conclusion.
There are twelve voting and five alternate members of the Board of Directors.
Each has responsibilities in transportation policy and plarming in their respective
jurisdiction. There is also one Ex-Officio non-voting member who represents the
County on the Metropolitan Transportation Commission (-MTC). The County’s
other MTC Commissioner currently represents a city group on the VTA Board
and serves as Chairman of the Joint Peninsula Powers Board (Caltrain). While we
have recently welcomed three new Board appointees tlais past year, the current
total accumulated transportation policy experience of the Board exceeds 99 years.
The average years of transportation policy experience of current VTA Board
members is 5.5 years.
Board members also have a substantial amount of business experience earned in
the private sector. VTA’s Board boasts a wide range of professional backgrounds
(some retired, some current), including business, the technology industry,
en~eering, education, legal, finance, and government, It is important to
reinforce that the p~ary role of any public sector board is to establish policy,
represent their constituents and work for the community as a whole. We believe
that the backgrounds and experiences of the members of the current Board help
them to fulfill these responsibilities well.
Finally, it is also important to point out that the Board of Directors recently
appointed a subcommittee of Board members to review the current Board
Structure with the goal of reviewing whether the Board’s current composition was
still inclusive and responsive to transportation and land use related concems of the
cities and the county. The subcommittee’s conclusion was that the current
structure did not need to be revised. However, it was recommended that the
Policy Advisory Committee (an advisory committee composed of representatives
from the County and all 15 Santa Clara County cities) needed to take a more pro-
active approach in reporting out on issues and offering recommendations to the
Board. This has been successfully implemented. The Board will revisit the board
structure issue next year to evaluate the success of the Policy Advisory
Corranittee’s efforts.
Grand Jury Finding II. "The VTA Board as currently constituted is too large and its
members too transient to efficiently provide management oversight to VTA. As a result,
the VTA Board has not reacted to the present budget problems with diligence, has
depleted the financial reserves in the system, and has borrowed against future tax
revenues rather than resolving an ongoing operational deficit."
Grand Jury Recommendation II. "The current size of the VTA Board should be
reduced, via enabling legislation, to a smaller Board of 5 to 7 members that would be
more involved in and accountable for the financial and operational management of VTA.
The enabling legislation should be sponsored by one or more of the major constituent
agencies in the VTA, such as the County Board of Supervisors."
VTA RESPONSE TO FINDING II AND RECOMMENDATION II:
We disagree with the Grand Jury’s report recommendation in this area for the following
reasons:
The report concludes that the VTA’s Board very size precludes effective
oversight of an organization this large. However, the report offers no supportable
basis for that conclusion. We do not believe that the size of the current Board in
any way hinders effective decision-making ....................
The report concludes that the size of the Board was a negative factor in how the
Board has reacted to the fiscal crisis now being faced VTA. The report states that
if the VTA Board were smaller in size, the Board would have: 1) been able to
react sooner and better to its fiscal crisis; 2) not utilized reserves; 3) found a way
to resolve the financial situation while continuing to provide needed service; and
4) continued to advance important construction projects.
The reality and known facts simply do not support this conclusion. VTA was the
first public sector organization in the greater Bay Area to recognize and publicly
share its analysis that this fiscal downturn was going to be longer and cut deeper
than any downturn the Valley had seen in recent history. The downturn would
mean a reduction in sales tax revenue, a primary source of funding for VTA
operations. The longer the downturn, the less operating revenue VTA would have
for services. As it would turn out, VTA would experience ten straight quarters of
sales tax revenue and a 30 percent decline in revenues.
Given these circumstances, it was not the size of the Board that made addressing
the financial and service problems so difficult. It was a combination of the severe
decline in sales tax revenues over a 2.5-year period coupled with a desire on the
part of the Board and staff to maintain as much transportation service as possible
for as long as possible.
This difficult situation notwithstanding, the Board nevertheless moved
expeditiously but carefully to address the financial situation. Under the Board’s
leadership, VTA staff took immediate steps to reduce costs, defer several capital
projects and institute efficiency improvements.
In early 2002, the VTA Board Chair, with the unanimous support and approval of
the full Board, requested representatives of the business community to conduct an
operational review of VTA and to recommend potential savings or revenue-
enhancing measures. Several of the business review team’s recommendations
have been implemented. By late 2002, the Chair, again with the support and
approval of the entire Board, also appointed a special Ad Hoe Financial Stability
Committee made up not only of Board members, but also key stakeholders from
the community-at-large, the business community and labor to review VTA’s
financial situation in depth and develop viable recommendations that would lead
to fmancial stability for the organization.
The Grand Jury’s report is critical of VTA’s use of its financial reserves. Yet the
reserves served the purpose for which they were created. It was under the
Board’s direction that a 15 percent operating reserve was established and attained.
This was a significant change from the VTA’s predecessor organization, the
County Transportation Authority. The reserves provided VTA the "rainy day"
financial resources needed to minimize the impact of this unprecedented
economic downturn on our service to our customers for more than two years.
It should be noted that a Grand Jury report a few years ago was critical of VTA
for having too much in financial reserves and recommended that it would be
better spent on more service. However, fortunately, the Board decided to
maintain its reserve levels. As a result, over the past two financially difficult
years, Santa Clara County transit riders have benefited from that decision because
VTA was able to provide more service than would have been the case if the
reserves were not there.
As previously noted, the current Board developed and implemented a strategy to
bond against funds that VTA will not begin to receive until April 2006 as a means
tot 6~,~: ~ ~J ~nt~ ~rv~ ~ed~ct~on. ~r ~ ~xt~iv~ co~~ ou~h
pro~ss, ~e Bond’s decision to t~ ~ bond~g approach w~ d~ct r~s~t of
~ r~sP0nsiwn~ss to ~ conc~ms of a public ~at r~s on VTA s~ic~ ~d to
whom ew~ VTA Bo~d m~mb~r is ~ctly acco~tabl~.
In addition, in 2004 the Board adopted a nineteen-point strategy recommended by
the aforementioned Ad Hoe Financial Stability Committee. The strategy is
designed to restore financial stability created by the loss of significant sales tax
revenues by reducing costs and increasing revenues. The development of the
strategy included a significant amount of input from the public and discussion by
members of the VTA Board.
In trying to maintain qua!ity services in a fiscally-challenging environment, the
Board has directed VTA staff to implement several policies and programs that
many in our community were not happy about--fare increases, service
modifications, and higher service standards. But in the final analysis, VTA has
been able to maintain a very high quality service; our vehicles are safe, clean and
are on time. Service has been reduced to meet the fiscal challenges, but service
quality has not diminished.
Grand Jury Finding III. "The VTA Board has proceeded with a transit capital
improvement plan that cannot accomplish all that was promised in Measure A."
Grand Jury Recommendation IlL "The VTA Board should delay expenditures for
BART and provide more complete funding for other transit options. IfVTA wants
authorization of this change in plans by the voters, this should be done after a clear
explanation to the public of the relative costs of the various transit options, and before a
request for an additional ½ cent sales tax increase."
VTA RESPONSE TO FINDING llI AND RECOMMENDATION III:
We differ with the Grand Jury’s recommendation in this area for the following reasons:
Perhaps the strongest reason for making the BART project the top priority is
keeping faith with the voters who overwhelmingly supported Measure A and the
BART project in November 2000.
VTA remains committed to delivering all of the projects over the 30-year life of
Measure A. From VTA’s perspective, it is not a question of which projects
should be completed but rather how can we deliver all the projects approved by
the voters plus add cost-effective service in the future. It is important to
remember that Measure A primarily covers capital costs. Additional operating
revenue, beyond that generated from Measure A, will be needed to support
current and future VTA services.
The report makes a connection between VTA’s fiscal situation and the BART
project. This is an understandable but erroneous assumption~ In fact, without the
BART project and Measure A, VTA would be in a much worse fiscal crisis.
There should be no doubt that the BART project was the signature project that is
responsible for the 71 percent voter support of Measure A. Polling done since the
November 2000 vote confirms that BART remains the region’s top transportation
priority.
Though Measure A was not originally intended to support current services, it is
the future revenue stream from Measure A that provides the basis for VTA to
sustain the current level of services until an additional, ongoing revenue stream
for operating costs can be identified. Without the public’s strong support of the
BART project in Measure A, VTA would b.ave had to implement a 2! percent
service reduction. Thanks to the region’s strong support for BART, this
significant reduction in current service has been, at least temporarily, avoided.
The Grand Jury report infers that VTA’s former Chief Financial Officer was
forced to leave VTA for a lesser position out of state because of a statement he
made regarding the deliverability of the BART project. Nothing could be further
from the truth. The fact is he and his spouse (also formerly a VTA employee)
found a unique opportunity to remm to their home state and hometown where
both of their families reside.
The Grand Jury’s report challenges VTA’s statements that delaying the BART
project will add cost. However, the report did not offer data or information
supporting its challenge. We have calculated that a five-year delay could escalate
the BART project cost by nearly $700 million. We continue to have confidence
in thal calculation.
The report asserted that the future fare box recovery ratio for BART would be in
th,e range of 35 percent. Unfortunately, the report provided no explanationor data
to support its assertion. All of the projected ridership calculations for this project
done by experts in ridership modeling have consistently concluded the BART
extension would see a fare box recovery rate at or above 70 percent. Given the
lack of credible information to the contrary, VTA continues to have confidence in
the 70 percent projections.
The report asserts that spending money on the BART project now may make any
changes more difficult and wasteful. VTA has often publicly noted that: 1) we
currently own the majority of the fight-of-way to downtown San Jose; 2)this next
phase of.work is limited to preliminary engineering; 3) preliminary engineering
will help refine the project design and ultimate cost even more accurately; and
4) the preliminary en~eering cost of $170 million will be partially supported by
State and Federal funds. In addition, we have publicly noted that VTA will be
unable to proceed beyond preliminary engineering phase to final design phase
without the approval of the Federal Transit Administration. That will not occur
until a fiscally sound long-term financial program is in place to support the entire
VTA system. While the BART project is a major expenditure of public funds, we
believe the aforementioned parameters will minimize the need for future changes
and wasteful spending.
Throughout this period VTA has also continued to manage nearly $2 billion worth
of capital projects, all designed and delivered on time or well ahead of schedule
and well-under budget. Despite the unprecedented economic downturn, VTA,
working with the County, has been or will be able to successfully deliver nearly .
every project in the 1996 Measure/LZB Transportation Improvement Plan.
Examples include: Highway 101 widening; Interstate 880 Widening; Highway
85/87 Interchange; Route 85/101 North Interchange; Route 237/880 Interchange;
Route 87 HOV lanes; Route 152 improvements; Highway 85 Noise Mitigation;
Tasman East Light Rail; Capitol Light Rail; Vasona Light P(ail; and several
Caltrain station and track improvement projects in Santa Clara County.
In conclusion, we believe the Grand Jury’s report fails to recognize the tireless work by
the VTA Board of Directors, VTA’s stakeholder Advisory Committees, VTA’s dedicated
workforce and labor leadership to guide this organization through these difficult fiscal
times. We readily recognize there is always room for improvement and we are always
receptive to thoughtful, constructive criticism. It was in that spirit that the Board
requested the l~usiness community to review our organization and subsequently
established the Ad Hoe Financial Stability Committee. As noted earlier, we have or are
implementing many recommendations from both these introspective reviews.
The entire VTA Board is committed to:
the provision of quality transportation services,
building the projects supported by the voting public,
maintaining a fiscally sound approach to the provision of services and the
construction of projects, and
continuous internal improvement of the organization.
In carrying out its responsibilities, the VTA Board routinely listens and acts on the
significant amount of input from the public. We have managed to maintain quality
services in a difficult fiscal environment and keep htmdreds of millions of dollars worth
of capital projects on or under schedule and on or under budget. Again, while there is
always room for improvement in any organization, we believe the key onclusions reached
in the Grand Jury’s report are the result of incomplete information about the fiscal
environment VTA now faces and the specific actions the Board has taken-and continues
to take-to ensure VTA maintains the maximum quality and quantity of transportation
services in Santa Clara County. In addition, the Grand Jury report does not appear to
9
reflect a clear tmderstanding of the relationship between the B~T project, the public
support of that project and VTA’s current operations fiscal crisis.
However, we do appreciate the Grand Jury’s efforts to encourage public discussion on
VTA’s operations and direction. Please know that we remain committed to doing
everything we can to provide this commtmity and this region with the highest quality
transportation network we can.
Sincerely,
Chair, VTA Board of Directors
cc:Board of Directors
Peter M. Cipolla, General Manager
10
September 2, 2004
The Honorable Thomas Hansen
Presiding Judge--Santa Clara County Superior Court
191 North First Street
San Jose, CA 95113
GRAND JURY REPORT CONCERNING THE SANTA CLARA VALLEY
TRANSPORTATION AUTHORITY
Dear Judge Hansen:
On behalf of the Mountain View City Council, thank you for the opportunity to review and
comment on the Grand Jury report concerning the Santa Clara Valley Transportation
Authority (VTA).
The City Council shares the concerns discussed in the report and agrees with Findings 1
and 3 but has noposition on the recommendations. The Council has previously sent letters
to the VTA Board rega_rding governance and allocation of funds for North County projects,
thus, demonstrating our concerns. Copies of these letters are enclosed for your
information.
The City of Mountain View thanks the Grand Jury for its efforts and analysis of these
complex and challenging topics.
Matt P~
Mayor
MP/JB/9/pWK/971-08-2.4-04L^
Enclosures
cc:VTA Board of Directors
Santa Clara County Board of Supervisors
Santa Clara County Cities (All)
City Council
CM, CC,.PWD, TPM, SAA--Skinner, F/c
September 22, 2003
_Ms. Jane Kennedy-, Board Chairperson
Valley Transportation Authority.
1331 North Pirst Sireei, Building B
San.Jose, CA 95134
¯ De~ _Ms. Kerp.nedy:
September 16, 200.3, the MOuntain Vi.ew CityC0unci! considered the iopi6 of V~ey
Tr~porta~on Au~ori~ (~A) govern~c~ s~uc~e, as requesied by ~e Ci~ of ~plias ~ ils
propos~ io e~ge ~e ~A Bo~d of D~ectors to provide consisieni repres~la~0n for ~
d~es .... ’.
As a result of that discussion, the Council i~ok formal acion authorizing me to send a ~le~eJ
enconraging.the VTA Boazd of Directors ~o consider .,sh.~dying allernaiive governance s~nci~es
that p~o~dde balanced individual city represenia~on and meanmofu! partimpa.uon to_ small-
and medium-sized dies in the Cqtunty.
Fur~er, ihe City .Co,mncil directedstaff ~o moniior ~e ad hoc conmunillee govern~_nce re~iew
. and report back with the ad hoc committee reconmniendation in October..The Ci~T Council may
take addilonal action ai that ’-~_rne based on the " ’ ~ "’cornm~ee s reconune~ndalion, l~in~lly, io assu~e
brooddiscussion of the go~ern~_nce opiions~ the City Cotmdl is also requesiing
CounV Ciies Association agendize the topic at an upcoming mee~h.’ng. ..
T!ia_nk you for you~ consideralion of il-is important issue~ P.lease let me know i~ you have any
.!~MK/yJ/6/PW-Ki 907-09-22-03L-E-i
cc: ,.M_r. Jose Esie~s, Mayor
City of Milpitas "
hff. Pete ~po~a,
~. Jo~e Benin, %~A Tri~portaion Policy
City
C_M, ACM, PWD, TPM, F/c
OFFiCZ OF THE MAYOK AND CITY COUNCIL
March 2, 2004
Mr. Don Gage, Chairman
Board of Directors ’
Santa Clara County Valley Transportation Authority
3331 North First.Street, Building B-2 .
San Jose, CA 9513z1
Dear Chairman Gage and members of the b~ard,
Thank you foryour leadership in this time of organizationa! and financial crisis.
This letter focuses on the VTP 2030 project pri.oriti6s that we must soon submit to
~hetropolitanTransportation Commission, and particularly on transit project priorities.
e portfolio ofprojects we choose wil! help determine th~ shape 0fthe valley’s fifteen
cities for the next quarter c~ntury. Our taxpayers and constituents are counting on our
leadership to.provide an intelligently designed, cost-effective, time-efficient, and flexible
system for the changing economy andsociet-y.
Given that the priorities should be based on demo~aphic.travel forecasts; we are
concerned about the Staff recommendations issued for the February 27, 2004 Board
Workshop. Until 2030, the only projects proposSd to be funded are the Downtown East
Valley, BART and operating assistance. Most of the other Measure A piojects are
delayed until beyond 2030. If bond.in.g costs are included 6r if more Conservative
revenue or cost projections are used, these Measure A projects could fall Off the list~ "
entirely. Calirain electrification’ and new corridors a~e not included at all. Yet, the VTP
2020 travel forecasts showed the largest increase in travel demand in the northwest
.area of the county.
We respectfully request the Board allocate funding within the 25-yeaz VTP 2030 plan for
projects that are important to supporting the needs of Our area:
-Bus Rapid Transit ($33M)
-Caltrain Service U~grades ($155M)
-.Dumbarton Rail (~4~M) "
-Caltrain electrification ($233M)
-Palo .Alto Intermodal Center ($50)
These total $505 million or approximately one-eighth of the Measu_re A revenue
projection.for the next 25 years. We also request a reasonable fraction be implemented
within the expenditure plan for the next ten years. "
Next, as the ~it.eria for ranking VTA projects was developed in 2001, and our finandal
outlook has changed dramatically since then, we i’ecommend that:
1) . Criteria be developed whic~ measures cost-effectiveness of each
project under consideration (e.g. cost/rider vs. increasing ridership
regardless of cost).
2) That the VTA assign more than5 points, out of ID0 points, to reasonable
assurance of f-unding.
We realize that by revising the criteria, project ramldngs may change. However, if vce
expect to go to our taxpayers with another tax measure, we believe it vital to be
forthright about the ~%’ue range of Options, trade-of£s and risks.
In sum, VI~2030 is not a routine update o£ the last plan. Measure A was supported
c0_unty-wide because it promised many projects including BART, dean-air Buses,
rail, expansion and electrification of Caltrain and other proiects.
.The VTA s~ faces a fis.C! crisis, even with reduced operations. Compounding this issue
Is an uncertaun future for federal and state funding for maintenance and capital
~nprovements. We need to Iook.st the painful facts candidly, and make new. choices in
this constrained envirorurnent..Although we expect the economy to.improve in t’kne,.
our iransp0rtalion system must be trim, flexible, and smart to ensure success for the
entire County through future business cycles tocome.
We look forward to a constructive dialoo~ue,
Sincerely yo .urs,