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McCracken, Cowman defend Cap Metro decisions

Tuesday, March 24, 2009 by Kimberly Reeves

Board members Council Member Brewster McCracken and Leander Mayor John Cowman went out of their way to defend the financial decisions of the regional transit agency yesterday, saying Capital Metro was being prudent and responsive to unanticipated problems of dropping revenue and rising expenditures.

Much of the talk was a response to a recent article by transportation reporter Ben Wear in the Austin American Statesman, which accused the agency of going on a capital spending spree on rail lines and park-and-ride lots that depleted the transit agency’s reserves. At yesterday’s meeting, agency officials vigorously refuted implications the agency had been less than prudent with its expenditures, saying it had met all its obligations and payments.

While Wear wrote the agency owed various local jurisdictions up to $110 million, officials insisted the transit agency is current with its fiscal obligations. Capital spending was, as Wear wrote, upwards of $300 million over five years, but sales tax revenue for that same time period was $783 million, the agency’s financial staff noted in a pre-board meeting briefing.

Agency officials were so firmly committed to their numbers – and that recent dips in reserves were do to unexpected bumps in the economy that the agency had and would continue to deal with – that officials said the agency was open to a state audit and had requested a review by the State Auditor’s Office.

During yesterday afternoon’s board meeting, McCracken offered his own soliloquy about the solvency of the transit agency, saying capital project expenditures now were funded separately from the recent growth in operating costs the agency had faced. The agency was not caught flat-footed, McCracken said. Instead, agency staff had constantly hammered at the need for operating budget restraint.

In 13 months, Capital Metro saw unprecedented fuel costs growth, from $11 million to $27 million, McCracken said. Among transit agencies, Cap Metro had seen some of the lowest fare box recovery and the lowest fare prices in the state. The decision to stop Build Greater Austin – given the growing operating expenses —  was a tough but wise decision. And the board had finally taken a hard, but critical, vote on fare increases in an effort to address the rising operational costs.

Yesterday, Capital Metro announced a voluntary buyout program for agency employees as a potential cost-savings measure. Talking to a television crew outside the meeting, Cowman said he continued to be a proud member of the board of Capital Metro, a board that continued to be fiscally prudent.

“We have to make some tough decisions,” Cowman said. “We’re all facing shortfalls, all over the United States. We look for solutions. We accomplish those solutions. We’re a solution-based company.”

As sales tax and ridership goes down, the transit agency would make adjustments, McCracken said. That’s the only way to respond to tough economic times. And although the local union presented the board with a petition at its last meeting to remove CEO Fred Gilliam, after yesterday’s board meeting Cowman expressed continued confidence in Cap Metro’s top leader, saying that Gilliam had done – and continued to do – an excellent job for the agency.

In his comments, McCracken implied recent changes in the agency’s financial team were necessary for the agency to move forward. The improvement of the financial team, under the current leadership, had improved dramatically. The agency also had worked to create a separate capital budget so that operating expenses and the agency’s capital budget could be kept in perspective.

“That’s what happens when operating expenses increase faster than revenues,” McCracken said. “We started to lose our capital reserves. We had to cancel bus purchase orders. With the creation of a capital budget, we’re able to prevent the total erosion of our capital expenses before operating expenses eats it all up.”

Capital Metro also had been through a thorough peer review process from CAMPO with favorable results, McCracken said. That was like having a tough physical, twice over, to try to diagnose any problems with the agency. McCracken said he was confident the agency would implement many of the changes recommended by CAMPO in the coming months. Still, people are critical about Cap Metro right now.

“We get criticized – and people get mad at us – for spending money on a rail system after they told us to build it. Can you imagine what it would be like if they had told us to build it and we hadn’t spent the money?” McCracken asked his colleagues. “It’s hard to do something like a new rail system… Are we going to have to make some significant and important financial reforms into the future? Definitely.”

Cowman, who says rail service has strong support in the north, also bristled a bit at newspaper accounts over the weekend that said the start of MetroRail service was postponed indefinitely. Indefinitely implies no particular start date, Cowman said. There will be a start date for MetroRail, and it will be soon, Cowman said.

Work on the rail lines would be complete next week, Cowman said. While MetroRail faced a delay due to operator problems – the reason for the recent postponement – that problem would be resolved. It’s a positive thing that Capital Metro has caught a problem in advance and addressed it, not a negative thing, Cowman said.

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