The first retraction demand from NCTD, and our response

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Mr. Carlo [sic]

I am writing you to discuss agency brand reputation—both NCTD’s and that of KPBS San Diego.

As you may be aware, North County Transit District recently shut down our SPRINTER light-rail service serving commuters along the I-78 corridor. Suspension of service was done out of an abundance of caution when pre-mature wear of the rotors to the center truck of our vehicles. The investigation has revealed that a former NCTD Rail Mechanical Engineer responsible for contractor oversight and some staff of the maintenance contractor were aware of the problem but failed to report the issue on the inspection reports, requisition replacement parts or to discuss the issue with management.

When this kind of disruption occurs to public services, we expect and invite media. We do not, however expect to be the subject of a series of salacious news stories by investigative reporter Brad Racino of your news partnering agency, The Investigative News Source. Earlier this week he posted a factually untrue story KPBS posted on line aired on the radio, ”SPRINTER Funds Used for Buses and Studies,” http://www.kpbs.org/news/2013/apr/03/sprinter-funds-used-buses-and-studies/.

This is just the latest news story he has written about NCTD that achieves unsupported headlines and misrepresents our agency actions and record while aggrandizing his role in bringing change. In this most recent article, Mr. Racino falsely accuses NCTD of not funding maintenance needs on the SPRINTER and diverting them to other programs. Since the inception of SPRINTER service in 2008, NCTD has spent $9.57 million in maintenance. This year alone more than $1.98 in maintenance costs will be paid. It is absolutely false to say we diverted maintenance dollars away from the SPRINTER and that is the cause of the shutdown.

Mr. Racino also suggests that money was wrongfully diverted to pay for studies and he uses a purported forensic accountant to accuse the Agency of “violating accounting principal.” The implication that NCTD is not following applicable Governmental Accounting standards is patently false. ASB requirements are not applicable as NCTD receives funding from the federal government that allows NCTD to use capital funding to support the costs of planning studies for future capital activities. I refer you to the PSRC’s FTA Section 5307 and 5309 Fixed Guideway Funds1, (Revised February 2012), found at: http://www.psrc.org/assets/471/2012_FTA_eligibility.pdf

NCTD is stunned that KPBS—an agency with a stellar reputation among San Diegans—would be involved with this type of journalistic fabrication. NCTD‘s reputation is being damaged with customers, tax payers, regional partners and within the transit industry. NCTD demands a retraction of the story, the opportunity to be a guest on the Midday Edition and we request a meeting with you and KPBS news management. I have attached our press release and rebuttal fact sheet for you to review and consider. NCTD is prepared to seek legal remedy should KPBS fail to rectify the journalistic integrity issues with the Investigative News Source. I don’t think this behavior is limited to NCTD. KPBS should to consider if this behavior represents the standards of KPBS brand.

I thank you for your time and consideration. I look forward to meeting with you. I can be reached at 760-967-2817, dcastillo@nctd.org.

Sincerely,

Deborah Castillo

Manager of Marketing and Communications

Dear Ms. Castillo:

Thank you for your letter concerning the news story, “SPRINTER funds used for
buses — and studies,” which I received on Friday, April 5, 2013. Your letter requests
a retraction of the news story, which KPBS and inewsource will more fully respond to
in a future letter.

As set forth below, KPBS and inewsource remain willing to review any additional
documents or other information NCTD wishes them to consider regarding the issues
addressed in the news story, including documents sought by them under the
California Public Records Act (CPRA). KPBS and inewsource remain willing to
interview Matthew Tucker on air. We had offered to do an on-camera interview on
March 25, 2013 before the news story was published, but NCTD cancelled that
interview on March 13.

As you may know, KPBS and inewsource have requested documents from NCTD
about the Sprinter brake problems that forced trains out of service, and the
maintenance funding allocated for any brake repairs, for some time now in the form
of requests for documents pursuant to CPRA. News reporter Brad Racino began
requesting the documents on March 5, 2013, and he sent additional requests on
March 15, 2013 and March 25, 2013.

To date, not all of the documents Mr. Racino requested have been produced by
NCTD. KPBS and inewsource cannot agree to any extensions for production of
those documents beyond the extensions already taken by NCTD. Let us know on or
before 3:00 p.m. on Wednesday, April 17, 2013 where and when the records to be
produced may be picked up.

KPBS and inewsource have made other attempts to interview Mr. Tucker in advance of stories
related to NCTD. Mr. Racino requested an interview before the “Security Breach” story
published and aired on February 12, 2013, but that was denied, as was a request before “SPRINTER funds used for buses — and studies.” KPBS and inewsource continue to extend
their offer to interview Matthew Tucker on air. The interview could take place on Thursday,
April 18 for Midday Edition and Evening Edition. We are open to discussing other dates for on-
air interviews in April. Please let us know by noon Wednesday, April 17 whether Mr. Tucker
will be available to be a guest on the Midday and Evening Editions shows on April 18.

Assertions Made In Your Letter

Regarding the issues raised in your letter, sources for KPBS and inewsource continue to
confirm the truth of the facts as published in the news story. Some of the information and
sources relied on are addressed below. But again, KPBS and inewsource remain willing to
review any additional information NCTD wishes to provide them and to conduct interviews with
NCTD personnel.

Re Assertion – “KPBS alleges that NCTD short-changed SPRINTER maintenance funding…”:

In your letter, we note NCTD does not refute any of the three key points our investigation
addressed, that:

  1. The Sprinter Drive System Overhaul (Overhaul) was included in NCTD’s 2012 budget;
  2. The Overhaul was removed from NCTD’s 2013 budget and replaced with bus funding
    and “studies” we reported on; and
  3. The Overhaul includes replacing the wheels and brakes of the trains.

These points are discussed more fully below. It is also undisputed that NCTD took the trains
out of service after a state inspection in late February 2013 found the center brake rotors on 12
trains worn past compliance.

Re Assertion – “KPBS alleges that “money that was budgeted to fix the brakes and pay
for other maintenance was instead used to pay for buses and transit studies””:

Re — “The KPBS article incorrectly attempts to connect a capital project to
fund the SPRINTER’s vehicle drive overhaul with the need to replace the rotors…”:

We note NCTD’s own documents connect the overhaul with the need to replace the brake
rotors. See, the February draft of the 2014-2018 CIP budget submitted to NCTD’s board.
In that proposal, NCTD allocated $735,000 for the Drive System Overhaul,” and
in the justification section, clearly states, “This project provides resources for replacement of
wheels and brake discs…”

Re Assertion – “KPBS alleges that NCTD did not follow standard accounting practices.”

Re FACT: “…The implication that NCTD is not following Governmental Accounting
Standards Board (GASB) requirements is false. NCTD is stunned that KPBS would make such a strong and toxic allegation without having the facts. NCTD’s use of capital funding is not an issue in terms of compliance with GASB…”

We note NCTD’s own documentation and three experts we interviewed, including a senior
official with the Governmental Accounting Standards Board, support the statements we made in
the news story.

  • According to Ken Schermann, who is a senior official within GASB, those studies do not
    belong in the capital budget;
  • According to NCTD’s own definition of a capital expenditure, those studies do not belong
    in the capital budget; and
  • According to two certified public accountants in San Diego, those studies do not belong
    in the capital budget.

Supplemental letter

In response to your supplemental letter, we agree that FTA money can be obtained for planning
purposes. But that does not make the planning a capital project, as evidenced in the FTA
document you quote, at http://www.psrc.org/assets/471/2012_FTA_eligibility.pdf. The issue we
addressed is whether NCTD is correct to show the “studies” on the capital budget, or whether it
should have instead included them in the operating budget.

NCTD cites three types of activities eligible for funding:

  1. Studies;
  2. Capital investments in buses; and
  3. Capital investments in rail.

NCTD therefore classifies “studies” separately from “capital investments.” Moreover, according
to our experts, “studies” are generally operating expenses that must be included in the operating
budget, whereas only “capital investments” belong in the capital budget.

FTA’s own eligibility guidelines for 5307 funding even caution against such misplacement, on
page 6:

“FTA cautions recipients not to confuse the fact that maintenance items often considered
operating expenses may be eligible for FTA capital assistance. Generally accepted accounting
principles (GAAP) and the recipient’s accounting system determine those costs, that the
recipient is to account for, as operating costs.”

It continues,

“The National Transit Database, follows generally accepted accounting principles, so a recipient
reporting to the NTD must report the operating costs the recipient has incurred as operatingcosts regardless of the costs’ eligibility for FTA capital assistance.”

Furthermore, your supplemental letter still fails to address the points KPBS and inewsource
made in our story:

1. The Public Benefit Study was included in a revenue vehicle category in a capital project
budget funded with FTA money and labeled as a capital project. NCTD has provided us with
information on the study, and said it was cancelled, but the description of the project contains no
explanation as to how it “would have resulted in the creation of a fixed asset.”

2. Regarding the AECOM study, we did not question its eligibility for federal funding, but instead
raised the issue of how it was ever approved without being on the board agenda. We still await NCTD’s answer to that question.

In your letter to Mr. Karlo, we also did not accuse NCTD of diverting maintenance dollars away
from the SPRINTER thereby causing the shutdown. We said money was planned for the
SPRINTER one year, and gone from the budget the next. Some of that money was replaced
with studies, which is true. It is also true that SPRINTER money would have replaced the
brakes, as per the definition of SPRINTER Vehicle Drive System Overhaul in the agency’s
current CIP draft. .

Conclusion

KPBS and inewsource remain willing to review any documentation from NCTD and conduct
interviews of NCTD personnel regarding the brake funding issues addressed in the news story.

Very truly yours,

-inewsource & KPBS

Update, Oct. 30, 2013: NCTD did not responded to our requests for any additional information or to the points raised at the end of this letter.

About The Author

[author_image timthumb=’on’]http://inewsource.org/wp-content/uploads/2012/07/Brad_Racino.jpg[/author_image] [author_info color=”000000″]

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

[/author_info]

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.