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January 03, 2005

Miami gets a two-thirds hosing

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Miami-Dade Transit cannot afford to build, operate and maintain two-thirds of the Metrorail corridors promised to voters when they approved a half-cent sales tax in 2002, according to internal financial analyses obtained by The Herald.

The revised projections still call for three extensions to the original Metrorail line. But the latest forecasts contain no money for the six other corridors, costing an estimated $3.5 billion.

How could this happen?

The main reasons:

q       Fewer prospects for federal money than forecast;

q       An existing deficit not discussed during the campaign;

q       Declining fare revenue; and

q       Several expensive programs that county commissioners added to the plan.

But it was just an honest mistake, right?

Doesn’t seem like it. According to a Miami Herald investigation, here’s how the swindle went down:

County officials, including former Transit Director Danny Alvarez and former County Manager Steve Shiver, presented unrealistic forecasts in July 2002 that persuaded commissioners to put the tax on the ballot.

Current officials say Alvarez and Shiver overstated the amount of matching federal dollars that Transit could qualify for and failed to point out operating deficits that would have exploded once the lines were built.

Alvarez, who resigned in 2003, said he and Shiver are convenient scapegoats after leaving County Hall. He said that administrators and elected officials knew that they couldn't deliver on all of the corridors promised in the campaign, but that nobody chose to lead.

''They knew the situation,'' Alvarez said. ``They knew that we couldn't build more than two lines at a time with the federal funding situation. I told them . . . in July of 2003 that they were going to have to prioritize which lines went first and which would come later. To say now that we didn't tell them the situation with the federal funding just isn't true.''

Error or lie? That’s the subtitle of this study of cost projections in public works projects. The authors fall down on the “lie” side, and note that, while many transportation projects are more costly than projected, rail projects have the steepest cost escalation of all.

 

 


HERALD WATCHDOG METRORAIL
Transit taxes can't meet pledge
The 2002 sales-tax-for transit campaign promised an expansion of Metrorail, but recent financial analyses show there isn't enough money for most of the project. Miami-Dade leaders are trying to come up with fixes.


 

Jan. 2, 2005 - Sunday


llebowitz@herald.com

 

 

Miami-Dade Transit cannot afford to build, operate and maintain two-thirds of the Metrorail corridors promised to voters when they approved a half-cent sales tax in 2002, according to internal financial analyses obtained by The Herald.

The revised projections still call for three extensions to the original Metrorail line. But the latest forecasts contain no money for the six other corridors, costing an estimated $3.5 billion. Among them: a connection between downtown and the airport, the Bay Link streetcar between Miami and South Beach and trains to Aventura and Florida City.

''They definitely overpromised, and now all of us are going to have to come together and tell the citizens exactly what we can and can't do with the tax,'' said Marc Buoniconti, chairman of the Citizens Independent Transportation Trust, the watchdog group overseeing the program.

The main reasons: fewer prospects for federal money than forecast; an existing deficit not discussed during the campaign; declining fare revenue; and several expensive programs that county commissioners added to the plan.

The latest estimates set the stage for a series of tough policy decisions -- and potentially embarrassing revelations for former Miami-Dade County Mayor Alex Penelas and others who sold the sales tax to voters.

County Manager George Burgess, who inherited the problems, is moving to fix the historic funding woes at Transit and buttress support for the remaining projects. He was not involved in the 2002 tax campaign.

''We probably would have designed it differently and presented it differently,'' Burgess said of the 2002 campaign. ``Absolutely. But we can make this work.''

The emerging transit picture is different from the promised ``New Money, New Projects.''

A NEW PLAN

Controversial proposal would settle old debts

Earlier this week, the Citizens Independent Transportation Trust ratified a controversial Burgess plan that will allow Transit to spend more than $180 million in sales-tax proceeds over six years to settle old deficits, pay debt service on buses purchased before the election and cover other operations.

''This isn't what I voted for,'' Martin Nash, an 83-year-old Kendale Lakes ad executive said after the trust's vote. ``When people start to hear about this, . . . I think this could start a major uprising.''

The new projections estimate that the county can afford three Metrorail projects with a cumulative price tag of $2.3 billion: a two-mile spur from the Earlington Heights station to the airport; a 10-mile east-west segment from the airport to Florida International University; and a nine-mile north corridor along Northwest 27th Avenue.

The six corridors now on hold are the Bay Link streetcar connecting downtown Miami with South Beach; an east-west segment between downtown and the airport; a Kendall express-bus route; and trains from downtown to Aventura, along the expanding Busway to Florida City, and from Coral Gables to the airport.

WHAT WENT WRONG

Faulty forecasts, added amenities derail project

According to dozens of interviews and a review of county records and projections, here is what happened:

• County officials, including former Transit Director Danny Alvarez and former County Manager Steve Shiver, presented unrealistic forecasts in July 2002 that persuaded commissioners to put the tax on the ballot.

Current officials say Alvarez and Shiver overstated the amount of matching federal dollars that Transit could qualify for and failed to point out operating deficits that would have exploded once the lines were built.

Alvarez, who resigned in 2003, said he and Shiver are convenient scapegoats after leaving County Hall. He said that administrators and elected officials knew that they couldn't deliver on all of the corridors promised in the campaign, but that nobody chose to lead.

''They knew the situation,'' Alvarez said. ``They knew that we couldn't build more than two lines at a time with the federal funding situation. I told them . . . in July of 2003 that they were going to have to prioritize which lines went first and which would come later. To say now that we didn't tell them the situation with the federal funding just isn't true.''

Shiver and Penelas could not be reached.

• After the election, county staff members and commissioners folded several big-ticket items into the 30-year spending plan that were never approved by the voters -- including $55 million toward a contract to provide special rides for the disabled and $211 million to rehabilitate trains. This left less money for rail projects.

• Nobody accurately predicted a drop in farebox collections despite hundreds of new and expanded routes.

Systemwide, Transit boardings are up by eight million a year since the tax passed. Transit Director Roosevelt Bradley estimates that 5.5 million to six million of those new boardings are by seniors riding for free on the Golden Passport, previously limited to the low-income elderly.

Analysts are estimating that the free-ride program will cost $6.8 million in 2005.

OLD PROBLEMS

Year after year, one-time fixes were used

Many of the current problems have been percolating for decades.

Prior to the 2002 election, Miami-Dade Transit had no dedicated funding source, and its revenue from property taxes did not come close to keeping pace with countywide budget growth. Year after year, Transit directors were forced to find one-time fixes to solve persistent shortfalls.

In the late 1990s, Alvarez tried a tactic that had generated big one-time revenues for other transit agencies: selling the rail guideways to private investors and then leasing them back. But no investors emerged.

Just five weeks before the election, Transit ended fiscal 2002 with an $18 million deficit.

Like several Transit directors before him, Alvarez used federal capital-improvement grants from the upcoming year to close the books.

Alvarez said the 2001-02 deficit was settled routinely and in accordance with federal guidelines. Nothing was done to hide the deficit, he said.

But now, county officials are repaying that preelection deficit with sales taxes -- to the surprise of some people who campaigned for the tax.

`SICKENING SHOCK'

Presentation to public differed from reality

''Each of the revelations is a new, sickening shock to each of us who presented this to the public, but did not know the truth,'' said political advisor Ric Katz, who helped develop the campaign for Penelas.

``If I had known, we wouldn't have pushed forward with these things this way.''

Surface Transportation Manager Carlos Bonzon says Transit should have cut service rather than run deficits. With the new tax in place, the agency can no longer turn to quick fixes, he said.

In August, Bonzon told the transportation trust that Transit not only must settle the old deficits with sales taxes but needs to use more tax proceeds to cover debt payments on buses purchased before the election.

Bonzon, who became the chief transportation administrator in September 2003, quickly discovered two serious flaws with the 2002 campaign.

The ordinance that created the tax was worded in a way that required only a $111.8 million annual contribution from general-fund revenues to maintain preexisting services. Nobody factored in rising personnel costs or fleet replacement.

REMEDIES SOUGHT

Sales-tax proceeds

will pay old bills

Burgess and Bonzon say they have stepped up on this part of the issue.

In December 2003, Burgess told commissioners that he was committing the county to 3.5 percent annual increases in the general-fund contribution to Transit, plus a 1.5 percent annual increase in gasoline taxes, over the next 30 years.

But during 2004, they realized that the numbers still didn't work because of the old deficits, the new projects that commissioners added, declining fare revenues and a $10 million cut in Transit general-fund revenue just days after the tax passed.

So last week, after months of debate, Burgess and Bonzon persuaded the transportation trust to let the county use $183 million in sales-tax proceeds over the next six years for the old deficits and potential operating shortfalls.

For 18 months, trust members had resisted using any sales-tax money for ''old'' services. But Bonzon and Burgess say the trust needs to view the sales tax as one of several revenue sources supporting a unified transit system.

After several tense talks between county staff members and trust leaders, Burgess offered to bump the general-fund contribution to Transit by $2 million over the already approved 2005 budget.

PROMISE BROKEN

Burgess deal `isn't what

we sold to the voters'

But critics say the deal still breaks the fundamental promise of the ''New Money, New Projects'' campaign.

''It may be an economic necessity today, but it isn't what we sold to the voters,'' Katz said.

Burgess defends the moves as a responsible way to use the tax to build a fiscally sound transit system that one day could feature trains reaching all corners of the community.

''We have three corridors in this [plan], and a fourth [still to be prioritized] will be under construction in 2034,'' Burgess said.

``If we're building during every year of this program, wouldn't we consider that a success? I think that would be a monumental success, not a failure.''