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Federal Way legislator wants annual state audits of Sound Transit

Democrat Mark Miloscia says it is all about helping the agency perform to public expectations, not retaliation for failure to reach Federal Way.

Mark Miloscia

Mark Miloscia Washington State Legislature

A Sound Transit train chugs into a station.

A Sound Transit train chugs into a station. Sound Transit

A Federal Way legislator wants the state to do annual performance audits on Sound Transit, contending that the authority needs that feedback to improve a tarnished reputation.

"It'd be a series of audits designed to make (Sound Transit) heroes to the public . Right now, they're not heroes to the public," said Rep. Mark Miloscia, D-Federal Way, who introduced a bill Thursday to require annual performance audits.

The State Auditor's Office is set to begin an audit shortly — expected to be finished by September — to see how Sound Transit has dealt with shrinking tax revenue, whether its ridership statistics are accurate, and whether the authority can meet its constructions obligations on time and within budget.

Miloscia said his proposed additional yearly audits would provide regular feedback to Sound Transit to ensure it is meeting its stakeholders'  concerns. His fellow 30th District House member, Rep. Katrina, Asay, R-Milton, is a cosponsor of the bill.

An underlying factor in the current and possible future audits is that the public approved an $18 billion 2008 Sound Transit bond issue that included extending Seattle's light rail line to 272nd Street in Federal Way by 2023. Last year, Sound Transit said the predicted revenues could only handle extending the rail line to Highline Community College in Des Moines, and no farther south.

Federal Way Mayor Skip Priest, in a Dec. 6, 2011 letter to Sound Transit, wrote, "For decades, Federal Way voters have been hearing empty promises that trains will reach their community. ... I am hearing daily from residents who are outraged by the way that Sound Transit has marginalized this community's needs."

Miloscia said Federal Way residents will end up paying $240 million in taxes because of the 2008 ballot without getting the light rail line they were promised in the campagin.

He said his bill is not retaliation for that situation, but a way to help Sound Transit improve  its planning and performance year by year.

Sound Transit is working on a light rail tunnel between Westlake Center and the University of Washington. And it still plans to extends the current line another two miles south of SeaTac International Airport under the 2008 package.

Sound Transit spokesman Kimberly Reason said the authority already has outside accounting firms doing annual audits to check its finances. The State Auditor's Office's last audited Sound Transit in 2007. And the authority's audits are available on its Web site. "We have a rigorous audit program,' she said.

The authority's legal staff has not yet studied Miloscia's bill, so Sound Transit does not have an opinion about it. Reason said Sound Transit wants to eventually extend the rail line to Federal Way, but the recession has trimmed South King County's tax revenue by 31 percent to shrink the authority's revenue. "Every jurisdiction has has been hit hard by the recession," she said.

Sound Transit wrote to Priest said the authority is not legally allowed to transfer tax money from a more revenue-prosperous "sub-area" and its capital projects in its three counties — Snohomish, King, and Pierce — to make up for less-than-expected tax income in the South King County sub-area covered in the 2008 ballot.

"Mayor Priest is disappointed, and we understand," Reason said.

The State Auditor's Office has so far taken no immediate position on Miloscia's bill, said agency spokeswoman Mindy Chambers. The Legislature tends to call for audits or to trim audits in many bills, and the auditor's office probably won't know what is feasible within its budget until the end of the legislative session, she said.

John Stang covers state government for Crosscut. He can be reached by writing editor@crosscut.com.


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Comments:

Posted Mon, Jan 30, 6:34 a.m. Inappropriate

Should Federal Way raise concerns?
ST’s Financial Plan (May 2011) would indicate that YES, they do have reason to cry foul – on several fronts. The table on page 2 reveals many policies that favor Seattle over the suburban cities for the period between 2009 and 2023.

Case A: The North sub-area (NSA)will generate 29% of the total taxes collected locally. East will generate 26%, and the south 16%. But looking at the combined spending (Capital, O&M;, O-head) by sub-area gives an entirely different picture. NSA will receive 8.0 B, paying in only 42% of that total for their ‘fair share’, whereas the SSA will receive only 2.5 B, being expected to pay for 75% of all their costs.
That’s nearly double what Seattle will pay per resident. The difference is that most of the bond proceeds and nearly all of the federal funding goes to Seattle, while Federal Way must pay for nearly all of their improvements out of local funds. Is that fair?
.
Case B: “Who pays for what services” is another area where Federal Way and the SSA have a legitimate complaint. Seattle pays for only that portion of light rail services operated within their area and nothing else. Seattle benefits greatly from many ST bus routes, yet pays nothing for any of those services through 2023. Seattle pays nothing towards Commuter Rail. Why all the free rides for Seattle, paid for entirely by suburban cities?
.
Here’s Case C: Farebox Revenues. (Table 2). Comparing suburban services show Commuter Rail ticket revenue will rise from $2.96 to $3.81 between 2010 and 2030, for a 29% increase.
ST Express Bus fares will rise from $1.55 to $2.80, for an 81% increase, with service levels remaining nearly constant for the next 20 years, while population increases.
Light Rail fares will actually go down from $1.37 to 1.35. Guess who gets the benefit of lower fares, while inflation is driving everything higher? You guessed it – Seattle.
.
If fairness, balance, and equity are the true litmus test of a regional system being built, then I have to side with Federal Way, Kent, Auburn and many other sub-urban cities that watch Seattle build it’s world class transit system at the expense of their citizens. Waiting their turn has rarely worked out for them in the past, as Seattle likes to start with a clean slate each time a ‘New’ package is put together.
I doubt that ST3 will be any different?

007

Posted Mon, Jan 30, 10:29 a.m. Inappropriate

1 of 4

Here are several misleading and incorrect assertions in this piece:

An underlying factor in the current and possible future audits is that the public approved an $18 billion 2008 Sound Transit bond issue that included extending Seattle's light rail line to 272nd Street in Federal Way by 2023.

-- What voters approved in 2008 was not a “bond issue”. What voters approved were two ordinances (Res. 2008-10 and Res. 2008-11). These had been approved several months before by Sound Transit’s board (collectively they are known as ST2). One thing they allow is for the political appointees comprising that board to sell long-term bonds an unlimited number of times, and there is no limit to how large any of those debt issuance events may be. The salient feature of that financing plan for taxpayers is that each of those debt sales is accomplished via contracts whereby Sound Transit pledges to collect sales tax at or near the maximum .9% rate while any of the bonds are outstanding. That unprecedented financing technique is abusive. It will result in tax confiscations far in excess of reasonable capital and operations costs. No peer uses anything like it.

-- That “$18 billion” figure is a deceptive half-truth. That figure is comprised of two 2007-era estimates (capital costs of ST2 projects plus Sound Transit’s operations and financing costs through 2023). That figure ignores completely the tax costs to the public. The tax costs to the public of ST2 due to the aberrant bond security tax collection pledges likely will reach $85 billion. This Sound Transit document is the basis for that tax cost estimate:

http://crosscut.com/static/static_file/2010/04/20/soundtransit1.pdf

That is from 2010. It shows that through 2040 the tax collections necessitated by the bond sale contract security pledges will be over $44 billion. Those projections were prepared before the significant downward revisions of the tax revenue forecasts for the near term, but the $44 billion figure may still be accurate. Those near-term lowered tax revenue revisions mean: 1) the bulk of the bonds will be sold later than what was anticipated for that document, 2) the amount of debt outstanding in 2040 will be greater than what the footnote shows (“$4.9 billion; Interest Balance = $2.1 billion”), and 3) there won’t be the reserves shown on that exhibit, which could have been used to pay off debt on an accelerated basis in the 2040’s. That exhibit shows the annual tax collection level in 2040 at the $2.3 billion level. That massive level of taxing will need to continue for perhaps 15 years after that, due to those bond sale contract security pledges. Those facts suggest the tax costs to the public of financing the ST2 buildout could well reach double the $44 billion shown on that document.

Calling ST2 an “$18 billion” plan is deceptive; it now looks to be more like an $85 billion taxing plan.

-- Nothing in ST2 obligates Sound Transit to “extend Seattle's light rail line to 272nd Street in Federal Way by 2023” (or by any other date). Indeed, Sound Transit officials already have told Federal Way officials that extension likely will occur in around 2040:

http://www.federalwaymirror.com/opinion/137714418.html

crossrip

Posted Mon, Jan 30, 10:31 a.m. Inappropriate

2 of 4

There is no need for legislation requiring annual “performance audits” of this local government. First, Appendix B of ST2 already specifies that Sound Transit will implement a performance audit program. Second, at the Audit and Reporting Committee meeting on June 17, 2010 staff noted it is:

“the intent of the agency to have an annual performance audit conducted, either through the internal audit division or through the Washington State Auditor’s Office (SAO). SAO has indicated that they may begin work in 2010 on a new performance audit but the work is unlikely to be concluded in 2010.”

More fundamentally, performance audits are pushed by Tim Eyman for a reason – they can mean whatever the government heads and the complicit auditor want them to mean. The last performance audit of Sound Transit by the SAO came out last year and it looked at computer-related purchases. That shows how a complicit auditor will poke around in the areas that Sound Transit wants examined, and steer well clear of areas where management wants the public to remain ignorant.

Performance audits have nothing to do with standards (such as GAAP) that are verifiable. Moreover, what the public should know about the bad management policies and practices at Sound Transit (such as the aberrant financing plans, the excessive taxation, the ways in which all the peers do a far better job of building and operating bus and train systems, etc.) never would be the subject of a performance audit.

crossrip

Posted Mon, Jan 30, 10:33 a.m. Inappropriate


3 of 4

This new performance audit the SAO is about to undertake will be another cover-up job designed to mislead the public about the aberrant financing practices this local government employs. Brian Sonntag’s m.o. is failing to audit Sound Transit properly. Here are two examples:

-- In annual accountability audits the state auditor is required to examine whether “the ordinances and orders of the local government” are being followed. RCW 43.09.260(5). During the entire Sound Move era (1997 through 2008) Sonntag’s office NEVER audited to ensure that taxing district was in compliance with the following spending budget mandates spelled out in Appendix B of that ordinance :

“The RTA Financing Plan will provide a budget for each of the five RTA subareas, comprised of the subarea’s projected share of local taxes, bonding capacity and farebox proceeds, and an assumption for federal funding, and related expenditures.”

Those particular budgeting requirements in Sound Move were key to the tax revenue spending limits. They were disregarded consistently by Sound Transit’s staff and board, which harmed taxpayers’ interests. Sonntag allowed that abusive conduct to continue by failing in his statutory duty to conduct annual accountability audits properly.

-- The performance audit of light rail from 2007 was structured to hide the ballooning tax costs to the public. That audit report is here:

http://www.sao.wa.gov/auditreports/auditreportfiles/ar1000005.pdf

Page 22 says:

“The estimated cost for Link Light Rail is $2.6 billion.”

At the same time in 2007 Sound Transit filed a document called an “official statement” with the SEC to sell hundreds of millions of dollars of long-term bonds. Page 4 of it says that the tax cost to the public during the Sound Move construction period would be $6.9 billion. That’s just one example of the selective, misleading data presentations in performance audit reports from this SAO.

crossrip

Posted Mon, Jan 30, 10:34 a.m. Inappropriate

4 of 4

Not only have previous performance audit reports been misleading, this new one due later this year almost certainly would focus just on meaningless aspects of Sound Transit’s policies and practices. This piece says it will look into some areas that are not significant at all in terms of the public’s interest in obtaining good management of that taxing district:

The State Auditor's Office is set to begin an audit shortly — expected to be finished by September — to see how Sound Transit has dealt with shrinking tax revenue, whether its ridership statistics are accurate, and whether the authority can meet its constructions obligations on time and within budget.

-- We already know how Sound Transit is going to deal with “shrinking tax revenue”. It will delay capital projects, extend the bond sale period, sell more bonds, and extend the maximum-rate tax collection period out until the mid-2050’s.

-- Sound Transit’s ridership projections are well-known; there’s no need to audit those. The first light rail ridership projections were in 1996; they are in the Sound Move ordinance (Table 16). Those projections were that by 2010 there would be 105,000 average daily boardings of Link light rail. The second set of light rail projections are those Sound Transit provided in late 2001, at the time it scaled back the light rail line to 13.9 miles. It then said that the initial light rail segment (Convention Center to Tukwila) would have 42,000 daily boardings by 2020. The reality is that last year Central Link (which includes the extension from Tukwila to the airport that provided a significant increase in ridership because the 194 bus route was eliminated) had only about 23,000 daily boardings. Sound Transit’s rail ridership projections are WAY too high -- nobody needs an audit to ascertain that.

-- Finally, there is no need to ascertain whether Sound Transit will bring in capital projects “on budget” because it always will. That is because that government is perfectly free to amend its budgets upward repeatedly during project construction phases. The 2007 audit report from the SAO referenced above illustrates this point. On page 51 it says this:

Sound Transit has had “second-opinion” cost estimates performed for high risk and complex construction packages such as . . . the University Link ($1.5 billion). This approach supports best practices and efforts to mitigate cost overruns.

The year after that audit report came out the University Link budget was amended upward by the board to $1.9 billion.

None of the “areas of concern” identified in this piece that would be audited would make any difference in how this government is managed, nor would these types of audits help the public improve the management and policies of that taxing district. It’s not like the public can vote in smarter or more frugal boardmembers. The management and policies of that unaccountable taxing district are completely impervious to the will of the people. People can not exert any political control over Sound Transit. Let’s say the audit report actually addressed some of the bad management practices and unfair fiscal policies – there is NOTHING people could do to improve them via political means.

crossrip

Posted Mon, Jan 30, 11:56 a.m. Inappropriate

The initial Link LRT failed to achieve ridership predictions because Seatac Airfield is NOT a major destination; it's a place people go when they're going somewhere else - glibly polluting the atmosphere to temporarily escape the hometown chaos and funnel millions into the bank accounts of tourism hucksters. The initial line will never achieve its potential if left to Sound Transit's board of tourism huckster sycophants and wannabees.

Bypassing Southcenter subtracted tens of thousands of daily Link riders. A spur there and to Renton would increase ridership, as would an extension to Federal Way. Instead, Sound Transit plans another grandiose expensive park-n-ride at 200th which will mainly serve rush hour commuters and give no one else a reason to ride in the southbound direction, thus no solution to Link's low ridership shortfall.

However, the Link tunnel to the UW campus is important to the next generation of pretentious upperclass elitists so their offspring can produce a framed piece of paper to prove their worth and justify jetset jaunts around the world to temporarily escape the chaotic hometown evidence of their idiocy.
Have a nice day, losers.

Wells

Posted Mon, Jan 30, 2:26 p.m. Inappropriate

Actually SeaTac is a huge employer, with over 10K employees. However they provide free parking so there is little incentive to take the train there.

Secondly the Port of Seattle generates a 1/3 of their revenue from SeaTac via parking which is why they recently doubled the size of the parking garage and are moving the rental cars out to their own facility. Which is Nearly but not quite next to LINK. They could have easily put a stop there and made it free, or charged the rental car companies a fee based on the number of estimated riders, but they didn't. Instead we'll see an endless cycle of transfer buses, either run by the Port or the rental car companies.

GaryP

Posted Mon, Jan 30, 8:39 p.m. Inappropriate

1 of 4

Public officials around here have been displaying a particular type of anti-social behavior. You can see it cropping up in appellate court opinions and in press releases from state and local legislature sources. Officials regularly play stupid about taxpayers’ rights. Their pronouncements suggest they believe abusing poor people as taxpayers to a greater extent than it is done elsewhere in this country is A-OK.

This learned behavior pattern probably stems from how the justices regularly disregard laws that should protect taxpayers.

Here is an example from today of a south Sound state legislator playing stupid (he pretends he does not understand Sound Transit’s financing plan AND he falsely asserts Federal Way will not get a light rail extension):

“Federal Way residents are expected to hand over nearly a quarter of a billion dollars for light rail service that we were promised but are now told we won't get," [State Rep. Mark] Miloscia said in a news release. "We have a right to know why the promise is being broken and exactly where our money and other funding for Sound Transit is going.”

http://www.federalwaymirror.com/news/138339334.html

The fact of the matter is that ST2’s terms say Federal Way will get light rail service. Also, Sound Transit officials already told Federal Way officials a light rail extension likely will be built out to there in around 2040:

http://www.federalwaymirror.com/opinion/137714418.html

Miloscia knows those things, but in his press release he asserts otherwise.

crossrip

Posted Mon, Jan 30, 8:39 p.m. Inappropriate

2 of 4

Why does Miloscia play dim about those particular issues? Because statements such as he made mislead people into believing that is how Sound Transit might be acting improperly. Meanwhile, the significant financial abuse is going on elsewhere. The ways in which Sound Transit operates that are improper are due instead to aspects of how that local government and its financing plan are structured. Those problems are entirely unrelated to any of the 2008-era “promises”.

Miloscia and his colleagues in Olympia are partially responsible for the flaws with how Sound Transit is structured, as they delegated FAR too much discretionary governmental powers to the RTA board. The powers delegated were excessive because that government’s policies and management always will be controlled by a supermajority of political appointees, and people never will be able to exert any political control over those individuals. There is no other non-directly-elected local government in this country with the vast powers delegated to Sound Transit. Why? That kind of power imbalance is unconstitutional. Americans have the right to vote for and against all local government leaders who have been delegated only a fraction of the unlimited powers handed to the RTA boardmembers.

RCW Chs. 81.112 and RCW 81.104, along with the related statutes, provide too much discretionary local government authority to policy-setting political appointees. Any lawyers or judges want to discuss that particular issue? This would be a great public forum for that – lots of eyeballs here.

Milocia and a few of his colleagues may just have learned about this, but it is a problem that’s been festering for years.

crossrip

Posted Mon, Jan 30, 8:40 p.m. Inappropriate

3 of 4

This upcoming performance audit is just another whitewash effort by Brian Sonntag. The SAO hired the same two-bit accountants from Portland that produced the previous deceptive and useless audit report (in 2007, link above).

What these accountants do for their money is called “MAI” – Made As Instructed. Sonntag does not draft up the scopes of the performance audits of Sound Transit, he lets that taxing district’s lawyers tell the auditors what to put in their report. It’s a process designed to mislead the public.

That ’07 I-900 performance audit report failed to point out Sound Transit lacked internal procedures and controls to comply with the controlling ordinance’s budgeting requirements. Those were key to the taxpayer-protection provisions (now superceded by ST2).

That audit report simply disregarded the massive taxation impacts on people and individuals as taxpayers. Those are much worse than any peer imposes in connection with bus and train services.

crossrip

Posted Mon, Jan 30, 8:40 p.m. Inappropriate

4 of 4

What should an audit now of Sound Transit encompass? It should have a scope that will provide the public, state legislators, local government officials, and the press with some useful financial information – information that local government refuses to disclose:

-- It should quantify a range of anticipated future tax costs to the people and businesses of the region of securing the (growing) mountain of long-term bonds. Also, how many decades and years will that high rate of taxing likely last?

-- Why did staff last quarter raise the anticipated bond sale figure for ST2 from $5.3 billion to $6.8 billion?

-- Why is Sound Transit’s financing plan for buses and trains many, many times more punishing in terms of direct regressive taxes on people than what all the peers are doing (here the differences between the RTA’s financing plan and what the peers do – mostly federal grants, progressive taxing, little or no new taxing, etc. – should be described).

-- The audit report should contain a substantial discussion regarding whether or not the following proposition is true:

“There are no taxpayer protection limits applicable to Sound Transit under ST2 such as tax collection limits, tax revenue spending limits, bond selling limits, limits on the extent of tax collections that may be pledged as security in bond sales contracts, or caps of any type when it comes to how much can be spent on financing costs, capital costs, operations costs, and payments to other governments.”

-- An estimate should be provided of what the new tax costs would have been if the CFO’s estimate in the weeks leading up to the 2008 vote were accurate (e.g., the new tax would be rolled back in 2036). That would be a salient point of comparison to the current, much higher projections.

What we’ll probably learn in September though is that the auditors were not told by Sonntag to look into areas like that (areas that have financial meaning to people and government heads).

Brian Sonntag probably told these particular accountants instead that all they’d have to do for their six-figure fee is “describe whether current spending plans comply with the lowered tax revenue forecasts.” That kind of audit scope couldn’t yield helpful – let alone truthful – information about what we can expect going forward in terms of additional tax costs and bonding terms.

crossrip

Posted Thu, Feb 2, 9:25 a.m. Inappropriate

Audit all public agencies every year. The cost is the only way to catch the expenses flying out the window.

Posted Fri, Feb 3, 1:35 a.m. Inappropriate

And in the ridership department, Sound Transit's light rail in Seattle is not reaching the passenger count upon which the $500 million Federal grant making it possible was earned.

http://www.bettertransport.info/pitf/Linkpassengercount.htm

jniles

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