Monday, April 28, 2014
METRO IS JUGGLING A LOT OF BONDS
I've been going through the audit report Claire McCaskill had done on Metro after the Shrewsbury lawsuit fiasco.
I wish there was some sort of honorary degree in Public Transit I could get from a university. Just reading through the legalese in these things is ridiculous.
I admit I have to read slowly, and re-read a lot. But it is not completely incomprehensible. Let's look at this paragraph from page 8 of the document, which is page 12 of the PDF web page file:
The Cross County Extension Project exceeded the original project budget by nearly $126 million and resulted in the issuance of an additional $150 million in bonds in 2005 to finance the project and $20.8 million in bonds in 2007 to refinance a portion of the debt service payments due in 2008 and 2009. The total debt service costs over the life of these additional bonds will exceed $293.5 million and will not be fully paid until 2036. The additional debt service must be funded by the Proposition M sales tax and as a result Proposition M sales tax funds available for funding operations will be reduced. A proposal to increase the Proposition M sales tax rate by ¼ cent had been placed on the February 2008 ballot in St. Louis County. However, that proposal was removed from the ballot by county officials following the unfavorable outcome of the Metro lawsuit against the CCC. Also, in early 2008, Metro was informed that St. Louis County would reduce Metro's funding from the ½ cent transportation sales tax by $8.5 million for fiscal year 2009 and $10 million for fiscal year 2010.
Now, those $150 million in extra bonds is a problem. Not only did they go way over budget, end up in litigation, lose the court case, end up paying a lot in legal fees and settlements, they also created a bunch of debt for themselves (a bond is essentially a way to borrow money, a big IOU).
And some of these bonds were to refinance the debt service payments due in 2008 and 2009 on other bonds!
They planned to repay this IOU (the "additional debt service") by Proposition M, which actually never made it to the ballot. (So, I was wrong that Prop A was a bond measure re-packaged to voters, the Transportation Bond failed. Prop A was just a quarter cent increase and three years later version of Prop M.)
And it seems that any monies that come from the County on Transportation Sales Tax IS decided by the County Executive. In both 2009 and 2010 they are looking at increasing reductions in the amount of money they can ask for.
So that explains A LOT about Prop A.
It also explains why Metro was hit so hard by the sub-prime mortgage fiasco that hit all the banks, and in turn, all bonds. The report continues with this:
As of April 30, 2008, Metro reported holding cash and investments of approximately $131 million and various trustees held $41 million. In March 2008, Metro prepared an analysis of cash and investments that indicated about $71 million would be available to fund operating deficits that were expected in fiscal years 2008, 2009, and 2010, if additional revenue sources could not be identified. The analysis predicted that cash and investments available to fund operations would be about $12 million by the end of fiscal year 2010. Also as of April 30, 2008, Metro and its trustees were holding $28.2 million in Missouri Higher Education Loan Authority (MOHELA) securities that they have been unable to sell due to disruptions in the financial markets. The remainder of Metro's cash and investments, about $72.8 million held by Metro and its trustees, are restricted and unavailable to fund operating deficits.
As early as April 2002, Metro's former Chief Executive Officer (CEO) informed the St. Louis County Council that Metro was facing serious shortfalls in operating the region's mass transit system. In the fall of 2006 and spring of 2007, the former CEO and executives of St. Louis County met with legislative leadership to discuss new state funding to abate the pending financial shortfall. In May 2008, Metro adopted the budget for fiscal year 2009 that included a projected budget deficit of $10.8 million for fiscal year 2009, and also included $8.3 million in budgeted "other revenue sources" which were described as "the amount needed to balance the budget. The additional needed revenue could come from a successful tax referendum in St. Louis County, passenger fare increases, and/or revenues not yet determined. If no other revenues are identified, service reductions will be planned and implemented" during fiscal year 2009. The budget also projected a deficit of $45.8 million for fiscal year 2010. The planned spending for capital improvements was also reduced from $360.6 million in fiscal year 2009 to $68.6 million in fiscal year 2010. Metro has scheduled a series of public hearings regarding various options for fare increases that may become effective in January 2009. Those options range from increasing the cost of all passes and transfers to increasing all fares, passes, transfers and cutting service.
The second is obscene, considering what the former CEO was paid. In 2002 they KNEW BEFORE THE FINANCIAL CRISIS that they were already FACING SHORTFALL!
What did they do? They jacked up the public for more sales tax and higher fares.
SOUND FAMILIAR? (Yes, City voters, you have ANOTHER Transportation tax in the coming election. Alderman Lewis Reed was conducting a survey about it in the Missouri History Museum a few weeks ago. The survey asked voters to choose what they wanted to spend it on. Metro was one of the choices. I haven't had a chance to look into the City yet at all, but I bet that money doesn't go straight to Metro for basic operating expenses. I bet there are a lot of restrictions on it. And Council and Commission approvals. The people they should be asking, the riders, are not even considered except as an afterthought.)
Metro has all the earmarks of Lehman Brothers in September of 2008.
People that think the current system is "doing the best it can" and "Metro is similar to other Transit Agencies in cities of a similar size" need to consider the lesson of Lehman Brothers. What they did was no worse than Bear Stearns.
Metro might be doing what everyone else is doing, but that doesn't mean they are doing what they SHOULD BE doing.
Metro needs to be re-structured. It needs another public audit. REAL SOLUTIONS need to be found. Those solutions might be unique to St. Louis. Metro likes to brag that it is the only public transit agency of its' kind in the country (still trying to figure out exactly what this means-- something about the way they are structured and the partnership with the two states). If it is the only one of its' kind it shouldn't be too difficult to actually make it work for the people that ride it.
And actually, right now, it is not working for anyone.