Double the Money:
SPRINTER funds used for buses — and studies

SPRINTER funds used for buses — and studies

Money that was budgeted to fix the brakes and pay for other maintenance on North County Transit District’s SPRINTER was instead used to pay for buses and transit studies, inewsource has learned.

The SPRINTER, a passenger train system that runs between Oceanside and Escondido, has been shut down since March because of worn brake rotors.

The North County Transit District (NCTD) budgeted for problems with the SPRINTER’s brakes as far back as 2010, but this year it removed the maintenance money and replaced it with line items for buses and studies, according to budget documents.

One $500,000 study was commissioned to better understand “what public transportation means for North San Diego County.”

The budget documents shed light on who-knew-what-when about the brake problems that forced the SPRINTER out of service in early March. They also raise questions about why maintenance expenses were scratched and studies were inserted among “capital improvement” items.

The SPRINTER, a German-made Light Rail Vehicle, debuted in North County in 2008 and carried more than two million people between Oceanside and Escondido each year until a state inspection in late February found the center brake rotors on the 12 vehicles worn past compliance. NCTD took the trains out of service, and it will be months before new brakes arrive and are installed.

One of the SPRINTER's non-compliant brake rotors | Photo: Nicholas McVicker

One of the SPRINTER’s non-compliant brake rotors | Photo: Nicholas McVicker

The agency is serving commuters with a bus route that mimics SPRINTER stops.

The SPRINTER cost the district $477.6 million, and the agency is still $32.9 million in project debt. Who is going to pay for the new brake discs, and where that money is going to come from, is still up in the air. NCTD plans to “recoup” some of the expenses from the contractors responsible for operating and maintaining the district’s vehicles, according to a recent U-T San Diego article.

NCTD’s Executive Director Matthew Tucker told inewsource in early March that the agency’s mechanical maintenance officer, Richard Berk, along with the maintenance contractor, Veolia Transportation, “failed to report” the brake problems when they were found in 2009 — just one year after the line began operations.

However, Berk, who quit the agency in early March, has maintained that many people knew about the brake problems, including his superiors. The agency’s Capital Improvement Program (CIP) budgets bolster his statements: funding for the SPRINTER’s “Drive System Overhaul” — which would have included replacing the brakes, according to Berk — made it to the top of the agency’s priority list in 2012. The item was cut this year.

Although Berk was not included in the final budgeting process, he says, the brake priority was mentioned “in all discussions” that he had about the SPRINTER capital budget proposal.

Top NCTD officials declined to comment on this story, and wouldn’t make the district’s chief financial officer available. NCTD board members — who oversee and are ultimately responsible for the public agency’s operations — did not return phone calls.

In last year’s capital improvement budget, which looks out five years, $8.2 million was spread out over the agency’s next four years for SPRINTER maintenance. It made up more than 27 percent of its budget category — Revenue Vehicles.

In this year’s budget, those line items were gone. (story continues below)

Berk told inewsource that he found out about the funding change last fall when he tried to initiate the brake replacements.

“That was the day,” he said, “they came back and said ‘there is no budget.’”

SPRINTER funding wasn’t the only item taken out of this year’s budget.

Maintenance for the COASTER, which carries 1.6 million people annually between Oceanside and downtown San Diego, was scheduled in last year’s capital improvement budget to receive $1.3 million through 2015. The funding was designated to replace the train’s generators, which historically do not keep up with the life of the vehicle itself, as well as overhauls that would include re-upholstery, painting and heavy cleaning.

That money is no longer a line item for those years. In fact, no money is set aside for any train or light rail vehicle maintenance in the current CIP budget.

Where did the money go?

The SPRINTER payments were replaced with increased funding for buses, totaling $21.9 million over the new five-year period. It was also replaced with $863,000 for various “studies” over that same period.

The studies, not normally found in a capital budget meant for long-term investments, include a $500,000 “Public Benefit Study,” as well as an undefined, $150,000 “20 Year Plan.” Multiple accountants interviewed said including the studies as capital expenses is contrary to their industry’s generally accepted principles.

By its own definition, NCTD’s capital projects must have a monetary value of at least $5,000, have a life of at least three years, and “result in the creation of a fixed asset” — or “the revitalization of a fixed asset.”

Money, Power and TransitThis type of accounting raises serious questions about transparency and accountability, and could be seen as a way of burying expenses in the less-scrutinized capital budget in order to present a more balanced operating budget to the public, according to two certified public accountants interviewed for this story.

NCTD says its financial statements are prepared “in conformity with generally accepted accounting principals” set by the Governmental Accounting Standards Board (GASB), but a senior technical advisor at GASB told inewsource that the studies are “not appropriate” for a capital budget.

Paul Scott, a forensic certified public accountant in San Diego, said he comes across this scenario from time to time in the nonprofit world.

“Agencies are not always completely transparent when allocating expenditures,” he said, “particularly if there’s pressure on the operating budget.”

“In my experience,” he said, “this sort of mis-statement can happen one of three ways:

1) Agency managers/executives didn’t know accounting standards and made an error, or
2) Didn’t know the standards and obtained wrong advice from outside advisors, or
3) Knew the standards and purposefully manipulated them to serve some purpose.”

The $500,000 “Public Benefit Study” is one of five slated for the current fiscal year.

Others include:

The studies total $863,000 over the next five years.

In addition to the studies listed above, NCTD commissioned another study on March 29, 2013, “to rethink the role of [the agency’s] current work environment.”

NCTD is paying a consulting company — AECOM — $150,000 (according to NCTD sources who didn’t want to be named for fear of retribution) for research activities that include, “a visioning session, interviews, focus groups, and onsite observations” in order to “solicit feedback around our current work environment, to understand what works and what doesn’t, and explore ways in which the workplace can improve workflow, service delivery, and employee engagement.”

It is unclear how the study was approved. It’s not mentioned in any recent or upcoming board agendas, and according to NCTD policy, any contract above $100,000 needs board approval.

UPDATE 1- April 3, 2013: In response to this story, Paul Dyson, the president of the Rail Passenger Association of California and Nevada, sent an email to NCTD Board member Chris Orlando:

UPDATE 2: Since publication, NCTD has sent emails and published tweets calling this story “just plain wrong,” and has demanded a retraction. We’ve included NCTD’s letters — and our response — below.

Listen to NCTD Executive Director Matthew Tucker discuss this story, along with inewsource reporter Brad Racino, on Midday Edition here.

We'll let you know when big things happen.

About Brad Racino

Brad Racino is a reporter, producer and editor at inewsource. To contact him with tips, suggestions or corrections, email bradracino@inewsource.org or call (619) 594-3569.