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UC Berkeley Report Says
High-Speed Rail Estimates Are Hopelessly Flawed.
Researchers at the University of California at Berkeley have released an
analysis contending that the California High-Speed Rail Authority's ridership
projections suffer from statistical modeling flaws that render them useless.
"The forecast of ridership is
unlikely to be very close to the ridership that would actually materialize if
the system were built," concluded Samer Madanat of Berkeley's Institute of
Transportation Studies. "As such, it is not possible to predict whether the
proposed high-speed rail system in California will experience healthy profits or
severe revenue shortfalls."
Rail officials have said the
high-speed project, which would cost more than $40 billion, would start with a
San Francisco-to-Los Angeles line, and that revenue generated from that line
would be used to extend service to Sacramento. If the revenue projections miss
their mark, Sacramento residents may not have access to the expensive high-speed
rail system, which is funded in part by a voter-approved bond.
The Berkeley analysis was
commissioned by the state Senate Transportation and Housing Committee. Senator
Alan Lowenthal, who chairs the committee, said the report is "damning," and
recommended that the rail officials thoroughly scrutinize their projections.
A spokeswoman for the
high-speed rail authority defended the revenue estimates and said the ridership
projection continue to be "a sound tool for use in high-speed rail planning and
environmental analysis." (Source: The Sacramento Bee, July 2.)
Cal-Tax recommendation:
Senator Lowenthal and other state officials should continue to pressure the
authority to base their planning on realistic assumptions so financial problems
can be resolved before the rail project is halfway through the construction
phase and hemorrhaging red ink.
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Audit Says S.F. Transit
System Could Save $3 Million a Year by Managing Employees Better.
San Francisco's Municipal
Transportation Agency could save at least $3 million a year by eliminating
driver-friendly work rules and reining in overtime, according to an audit
released May 11 by the San Francisco Board of Supervisors' budget analyst.
An unusually high level of
operator absenteeism is expensive and creates unreliable service at San
Francisco's financially flailing transit agency, the audit found.
Under the current rules,
drivers have a financial incentive to call in sick and skip a regularly
scheduled day because they can still work overtime and earn time and a half,
even if they have not worked 40 hours that week, according to the audit.
The rate of unscheduled
absenteeism for San Francisco's operators is 15 percent, compared with 11
percent in Philadelphia, 6 percent in Los Angeles and 4 percent in Seattle, the
audit found.
The audit comes three days
after the agency cut service by 10 percent to save an estimated $29 million a
year. The agency, with a proposed annual operating budget next year of $750
million, already has raised transit fares and parking fees to help balance the
books.
The auditor recommends that
when management negotiates its next contract with the Transport Workers Union,
it curb overtime costs by forcing operators to work 40-hour workweeks before
they can earn overtime. The audit also recommends that Muni save $608,625 per
year by not paying the salaries of six of the seven operators who work full-time
on union duties.
Muni management's inability
to use part-time drivers also caught the attention of auditors. Because peak
demand for service is during the morning and evening commutes, overtime is used
to keep full-time operators on the clock to cover both rush-hour periods. Many
drivers, meanwhile, are pulled off the road during off-peak hours and put on
paid, nonproductive standby. Standby time, ranging from a few minutes to six
hours, is built into 49 percent of Muni's 1,278 regularly scheduled weekday
runs. (Source: San Francisco Chronicle, May 12.)
Cal-Tax recommendation: City
officials should take the auditor's recommendations, and should take control of
their employees in order to deliver better service to residents at the same or
lower cost. Since transit workers' have a generous pay provision written into
the City Charter, voters should support a proposed ballot measure that would
remove this provision and ensure that management regains more power when
bargaining future employment contracts with the transit workers.
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High-Speed Rail Authority
Has Weak Financial Oversight, State Auditor Finds.
In
a report released April 29, the
state auditor says the California High-Speed Rail Authority is plagued with
"inadequate planning, weak oversight, and lax contract management."
The agency is responsible for
managing funds authorized for building a high-speed rail network in California.
The funding includes $9 billion in general obligation bonds that the voters
authorized in November 2008.
The state auditor found:
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The authority's 2009 business
plan estimates it needs $17 billion to $19 billion in federal funds. However,
the authority has no federal commitments beyond $2.25 billion from the American
Recovery and Reinvestment Act of 2009, and other potential federal programs are
small.
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The authority's plan for
spending includes almost $12 billion in federal and state funds through 2013 –
more than 2.5 times what is now available.
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The authority does not have a
system in place to track expenditures according to categories established by the
Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century, its
largest source of committed funding.
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The authority has not
completed some systems needed to administer Recovery Act funds – for example, a
system to track jobs created and saved.
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Some monthly progress reports
issued by the authority's contracted program manager to provide a summary of
program status contain inconsistent and inaccurate information.
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Authority staff paid at least
$4 million of invoices from regional contractors received after December 2008,
without having documented written notification that the program manager had
reviewed and approved the invoices for payment.
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The authority paid
contractors more than $268,000 for services performed outside of the
contractors' work plans, and purchased $46,000 in furniture for one of its
contractor's use, based on an oral agreement contradicted by a later written
contract.
"To ensure that it does not
run out of funds for administrative and preconstruction tasks prematurely, the
Authority should track expenditures for these activities and develop a long‑term
spending plan for them," the auditor recommended. "It also should develop
procedures and systems to ensure that it complies with Recovery Act
requirements."
Curt Pringle, chairman of the
authority, responded that that agency will take action to improve oversight and
planning.
However, Mr. Pringle took
issue with the report's title: "High-Speed Rail Authority: It Risks Delays or an
Incomplete System Because of Inadequate Planning, Weak Oversight, and Lax
Contract Management." He said the "inflammatory title is overly aggressive
considering that the contents of the audit's findings are not equally scathing."
Political columnist Dan
Walters of The Sacramento Bee described the threat to taxpayers: "There
is a fundamental conflict between voters being told that if they approved the
bonds the bullet train would be self-supporting, without operating subsidies,
and the apparent requirement for 'revenue guarantees,' which probably could come
only from tapping a state budget that's already awash in red ink and/or imposing
some new special tax." (Sources: California State Auditor Report 2009-106, April
29; The Sacramento Bee, April 30.)
Cal-Tax recommendation: This
is the latest report indicating that the High-Speed Rail Authority is not using
sound estimates of revenues and expenses for its budget projections, and critics
believe this is a sign that the project is on a fast track to failure. We
recommend that the agency start using realistic numbers – and err on the side of
caution – to protect the taxpayers from getting stuck holding the bag.
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Bullet Train Ridership
Estimates Changed After Bond Election.
According to newly released
documents, the rosy ridership assumptions for the multibillion-dollar bullet
train project were based on previously undisclosed assumptions that differ from
those published for public review. According to a story in the Contra Costa
Times: "An internal memo suggests the authorities behind the project
deliberately withheld the final assumptions, and the discrepancy raises
questions about the validity of the forecasts. State transportation officials
downplayed the issue, saying the differences were not significant."
Before the election, backers
said the trains would carry 55 million riders per year by 2030 (that equates to
150,684 per day!). Since the election, the rail authority revised the estimate
to 41 million riders by 2035 (or 112,328 per day).
Senator Alan Lowenthal said
the numbers don't pass the "smell test." (Source: Contra Costa Times,
February 6.)
(Cal-Tax recommendation: An
honest assessment of potential ridership is needed before billions of public
dollars are spent on this project. The Legislature and governor should actively
look into the changing – and very optimistic – estimates that are being used.)
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State Still Spends Heavily
on Travel, Conferences and New Vehicles.
The Assembly Accountability and Administrative Review Committee reports that
state agencies spent heavily last year on items that may not have been
necessary, despite state budget problems that were widely viewed as being
extremely dire.
The committee found that
during the brief three-month period of January to March 2009, the following
spending occurred:
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The Department of Education
spent $945,209 and the Department of Consumer Affairs spent $245,430 on
conferences and outside meetings;
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The Department of Motor
Vehicles spent $1.73 million on new furniture, while the California Air
Resources Board spent $433,000 on new furnishings, the Department of General
Services spent $785,785, and the Health and Human Services Agency spent
$306,393.
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New vehicles were purchased
by the Department of Transportation ($10.4 million), the department of Forestry
and Fire ($1.6 million), the Department of Motor Vehicles ($900,000) and the
Department of Parks and Recreation ($5.2 million).
(Source: Assembly
Accountability and Administrative Review Committee report, February 10.)
(Cal-Tax recommendation: When
drafting this year's state budget, the Legislature and governor should eliminate
spending for new furniture and new vehicles that are not absolutely necessary,
such as for emergency response purposes. These are tough times for taxpayers,
and they shouldn't have to pay for non-necessities for government while they are
cutting their own family budgets to the bone.)
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Santa Clara Transportation
Authority Plans Expansion Despite Massive Budget Problem.
The Santa Clara Valley Transportation Authority recently cut bus and rail
service 8 percent in order to address a projected deficit pegged at $98 million
– but that hasn't stopped the agency from moving forward with expansion plans.
The agency is working on
extending Bay Area Rapid Transit to San Jose (a project that might receive
federal funding) and is conducting studies on extending light rail from
Eastridge Mall to Los Gatos. The San Jose Mercury News notes that the
latter plan is going forward "despite high costs and modest ridership
projections."
Tom Rubin, the former chief
financial officer of the Southern California Rapid Transit District, has studied
agencies across the United States and calls the Santa Clara VTA the "worst
transit agency in the country."
One example of the agency's
problems: When the county began its push 30 years ago to expand bus service and
establish light rail, proponents said tickets would cover 85 percent of the cost
of a train trip. Today, under the agency's leadership, tickets cover just 14
percent of the cost – one of the worst margins in the nation.
Last year, the transportation
authority had projected its deficit at $22 million, but that figure jumped to
$98 million after the agency's sales tax revenue fell more than expected.
(Source: San Jose Mercury News, January 11.)
(Cal-Tax recommendation: An
agency that cannot afford to meet its current responsibilities should not be
taking on more responsibility and more financial obligations. The agency should
put expansion projects on hold and focus on getting its house in order,
especially considering that rail projects often cost much more than initially
estimated.)
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High-Speed Rail Plan on the
Fast Track to Fiscal Failure, Analyst Finds.
The Legislative Analyst's Office released a report January 11 stating that the
state High-Speed Rail Authority's business plan is badly flawed and possibly
illegal. Voters approved Proposition 1A in November 2008 to provide almost $10
billion in bond funding for a high-speed rail system linking the northern and
southern parts of the state.
Things are not proceeding
well, according to the analyst's report on the rail authority's business plan,
which was released several months late – so it appeared after the election
rather than prior to it. The LAO stated: "The Proposition 1A bond measure
explicitly prohibits any public operating subsidy. However, the plan … assumes
some form of revenue guarantee from the public sector to attract private
investment. This generally means some public entity promises to pay the
contractor the difference between projected and realized revenues if necessary.
The plan does not explain how the guarantee could be structured so as not to
violate the law."
In an editorial, the San
Diego Union-Tribune noted that the business plan also assumes that 41
million passengers would ride the trains each year. "That's far more than the 26
million passengers a year carried by the entire Amtrak system nationwide, which
has 500-plus destinations in 46 states," the editorial noted. (Source: San
Diego Union-Tribune, January 13.)
(Cal-Tax recommendation: If
the High-Speed Rail Authority does not change course to use realistic
assumptions and adhere to the provisions of Proposition 1A, Californians should
consider following the advice of the Union-Tribune's editorial to repeal
the initiative before things get worse.)
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CalTrans Buys New Vehicles
That Sit Idle.
"It's insanity. It's all cost and no benefit." That is how Assemblyman Bob
Blumenfield reacted to the news that more than 12 percent of the vehicles
purchased by the California Department of Transportation since 2007 sit unused.
The Sacramento Bee reported that CalTrans spent more than $4
million on vehicles parked and unused for months and years. CalTrans said it
takes up to three years to assemble add-on features to various trucks.
Observers also pointed out
that letting a vehicle sit for years is the worst thing for the vehicle, as
belts rot, rubber cracks, batteries die, etc.
At a legislative hearing on
the subject, CalTrans Director Randell Iwasaki was asked about another issue
recently in the news: why the agency spent $82,000 to send 52 staff members to a
transportation conference at a desert resort. Mr. Iwasaki defended the
expenditure, saying CalTrans agreed to host the event three years ago, and
claiming that state workers learn much and make good contacts at the event. He
added, however: "Would we do it again? Probably not." (Source: The Sacramento
Bee, December 19.)
(Cal-Tax recommendation: The
state should put a moratorium on the purchase of new vehicles, and should try to
get many more years out of its current fleet. Since it is doubtful that the
vehicle-purchasing system is the only state spending system that has been
wasting money due to lax oversight, state officials should investigate whether
similar problems are plaguing other areas of government.)
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Government Workers in San
Jose Get Huge Pension Boosts Due to Errors.
The San Jose Mercury News reports: "San Jose's employee pension
fund, already bleeding money, may be handing out millions of dollars in
overpayments, according to a recent audit that calls for a massive review."
The audit reviewed pensions
for 133 of the 486 employees who retired in 2007 and 2008. In 10 percent of the
cases, retirees were receiving pensions higher than they were entitled to. The
overpayments stemmed from errors in calculating the pay that can be credited
toward retirement.
The audit also found a single
retiree who was being shortchanged by the city.
Major errors involved pay
beyond the base salary that should not have been counted toward retirement, but
was, and retroactive raises that artificially boosted pensions. One retiree's
pension was overstated by $630 a month, the audit found.
The Mercury News noted
that this problem is not unique. In Contra Costa County, former public workers
were overpaid for more than a decade because unused vacation time had been
counted toward their retirement. San Jose and the local firefighters' union are
currently in litigation over a software glitch that incorrectly credited some
unscheduled overtime toward firefighters' pensions. (Source: San Jose Mercury
News, December 27.)
(Cal-Tax recommendation: All
government pension officials should learn from these cases, and should
investigate their own systems to ensure that proper payments are being made.
Government pension systems already are creating major financial problems due to
the generous benefits that taxpayers provide to retirees, and overpayments just
compound the problem and make it more difficult for government to pay its
current workforce to provide services.)
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Pension Spiking Is Rampant
in Contra Costa Sanitary District.
Columnist Daniel Borenstein of the Contra Costa Times reports that former
employees of the Central Contra Costa Sanitary District are getting filthy rich
thanks to rampant pension spiking.
For example, the departing
general manager boosted his pension by 37 percent, to $217,216 per year, by
cashing out nearly 17 weeks of unused vacation and sick leave time. In
retirement, he will receive nearly as much as the $234,163 per year that he took
home while working.
Mr. Borenstein analyzed the
records of 32 sanitary district employees who retired in the past five years,
and found that more than two-thirds had increased their retirement pay by 25
percent to 41 percent by taking advantage of spiking provisions.
Methods used:
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Selling back vacation time
and adding the money to the final year's salary;
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Selling back vacation time at
strategic times to increase the pay (vacation time can be sold back once per
calendar year, but the pension is based on the final 12 months of pay, so it is
possible to use a "straddling" technique to, for example, sell back four weeks
in December, four more weeks in January, and then retire in February with all
eight weeks added to the final salary);
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Cashing out sick leave upon
termination (up to three weeks' worth);
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Cashing out holiday pay (up
to 13 days of pay for holidays they worked);
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Adding time to the number of
years of service by counting unused sick leave, with no limit on the amount that
can be accrued – some workers had more than a year's worth of sick leave when
they retired, and they could apply this to their years of service, including the
three weeks that they sold back to boost their final pay!
Mr. Borenstein writes:
"Vacation time should be for workers to take time off and refresh themselves.
Sick leave should be available for illness. … The way the system works now,
employees in retirement collect the value of the unused vacation and sick leave
over and over again, approximately every year and a half, for the rest of their
lives." (Source: Contra Costa Times, December 27.)
(Cal-Tax recommendation: All
government pension plans should be corrected to eliminate pension spiking.
Government pension systems already are unsustainable, and workers who use
loopholes to spike their pensions are only adding to the problem.)
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Prison Receiver Spending
Out of Control?
The Sacramento Bee
has published several news stories in recent weeks calling into question the
spending practices of the federally appointed prison health care receiver. Some
examples:
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The receiver issued a
$400,000 contract for five employees of a law firm to build support for a
proposed facility in San Joaquin County. The five include former state Senator
Mike Machado and the son of Congressman John Garamendi. Mr. Machado is being
paid $300 an hour for "community outreach" efforts.
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Overtime pay accounts for
nearly 20 percent of all wages for prison nursing care. In 2008, California's
prisons spent $60 million on overtime for prison health care workers. While
prison officials blamed a staff shortage, The Bee noted that "only 62 of
the state's more than 400 vacant prison nurse positions are posted on the
receiver's career Web site." On top of that, the hiring process can take more
than a year.
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Thanks to overtime pay, 52
nurses and three physician assistants earned more than the $187,535 salary of
the corrections secretary who oversees the prison system. Nurses who sit and
observe inmates on suicide watch receive $84 an hour.
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The state paid a medical
assistant in a Tracy facility for working an average of 26.5 hours a day. A
certified nursing assistant in Delano was paid for working an average of 24.7
hours per day (based on a five-day week).
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The state paid a temporary
agency $393 per hour for a nurse practitioner in Vacaville – more than six times
the average paid to state employees for the same work. Overall, the state spent
$152 million from July 2008 to May 2009 on temporary workers – about $22 million
more than the jobs would have cost if state employees did the work. (Source:
The Sacramento Bee, December 11, 13 and 14.)
(Cal-Tax recommendation: The
federal judge who appointed the receiver should become involved to increase the
receiver's respect for the state taxpayers who are paying his bills.
Californians are unlikely to favor massive spending to help convicted felons at
a time when budget problems are having a negative impact on services for
law-abiding residents.)
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Indio Employees Live High
on the Hog. The
city of Indio (Riverside County) is facing a multimillion-dollar deficit. Yet,
since 2008, city employees have used city credit cards to charge $805,000 for
pricy meals, out-of-state trips, tickets to sporting events and even a trip to
Quebec for the city manager's wife.
The Palm Springs Desert
Sun reviewed 1,000 pages of credit card statements, for cards held by 20
percent of the city's employees, and found that spending increased substantially
this year over last.
Indio Mayor Gene Gilbert said
he was "blindsided" by the news, and he acted to pull all the credit cards
except those issued to department heads.
The Desert Sun
revealed that $9,200 was charged to the card issued to Mark Wasserman, the
assistant to the city manager, for two trips to see the Los Angeles Angels play
baseball and one trip to see the Minnesota Vikings play football.
Mr. Wasserman said the
$805,000 is less than 1 percent of total city expenditures. (Source: Palm
Springs Desert Sun, January 4 and January 5.)
(Cal-Tax recommendation: Cut
up the credit cards! For employees who absolutely need them, put tighter
controls on their use, and require quick repayment of any questionable spending,
like international travel expenses for spouses.)
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Lathrop City Council Uses
Tax Dollars to Send Holiday Cards.
Dennis Wyatt, managing editor
of the Manteca Bulletin, reports that the Lathrop City Council recently
used scarce tax dollars to send out hundreds of cards with a color photo of the
five-member council and a "season's greetings" message.
Mr. Wyatt writes: "This, of
course, cost money and staff time. There's the card itself, the envelope, the
postage, and the time it took to stuff the envelopes and mail them. Forget the
fact that Lathrop is bleeding red ink all over the place, may face a reduction
in police manpower plus other municipal workers, and its civic leaders are
seriously pondering a sales tax for fire protection due to financial woes that
are threatening the fire district's ability to protect property and lives.
There's always money to stroke the collective ego of politicians."
The writer then says: "It
would be interesting to know what the California Taxpayers' Association and the
Fair Political Practices Commission would think about the card mailed at
taxpayers' expense. It is so blatant that it defies justification." (Cal-Tax:
Since he asked – We love holiday cards, but we agree that elected officials
should use their own money and time to send out holiday greetings. 'Tis the
season to be jolly, yes, but 'tis always the season to use tax dollars wisely,
and only for legitimate government purposes.) (Source: Manteca Bulletin,
December 29.)
(Cal-Tax recommendation: The
Lathrop City Council members should reimburse the city for the money spent on
this card, and all elected officials should remember that every penny saved is
like another penny of new revenue.)
