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Cap Metro board approves second agreement for payments to city

Tuesday, April 20, 2010 by Josh Rosenblatt

Continuing its efforts to put the Austin public transit authority’s financial house back in order, Capital Metro’s board voted Monday on new payment arrangements for a second agreement with the City of Austin.


The vote was a carry-over item from last week’s meeting, when the board approved an amendment to an interlocal agreement with Austin to repay the balance of a one-quarter-cent sales tax commitment initially made in 2001. (See In Fact Daily, April 16, 2010).


The new amendment concerned commitments Cap Metro made in an interlocal agreement with the city under the terms of the Build Greater Austin (BGA) program, starting in 1994. The program was renamed Build Central Texas (BCT) in 2004.


From 1994 to 2004, the transit agency accrued $79 million in commitments to the city under BGA/BCT. Unlike with the quarter-cent debt, Cap Metro is current with its BGA/BCT payments; it has paid the city $71.7 million and still owes $7.3 million.


Initially, the city had requested that the board take up both amendments at the same time and approve them before the City Council addresses them this Thursday. However, board members Frank Fernandez and John Langmore expressed reservations last week over the clarity of the BGA/BCT amendment language. Board members did end up approving the measure but only after adding a friendly amendment giving them more time to look over the language and determine that Cap Metro’s financial obligations were clear and transparent.


“I want to know how we articulate and make sure that we won’t be held to a standard that we can’t reach as it relates to payment,” Fernandez said at last week’s meeting. “This plan may be fine but we just haven’t seen it.”


On Monday, Fernandez told board members that he was satisfied with changes staff had made to the agreement and that he would be voting to approve.


The changes provide Cap Metro with a more concrete sense of its financial obligations and timeline, and make its financial process more transparent, a goal many members of the board said was a priority when they began work in January. In return, the city gets more flexibility in how it can use reimbursed funds from the BGA/BCT program.


Under the terms of the agreement, Capital Metro will pay the city on the following schedule: 2010 – $1 million; 2011 – $1.5 million; 2012 – $1.8 million; 2013 – $1.8 million; and 2014 – $1.2 million


Fernandez told In Fact Daily that the payment limitations are important for the financial success of the transit agency going forward. “The major substantive change was putting in the agreement clear limits as to how much money we would be responsible or obligated to outlay in any given year,” he said. “In the past, that’s what we got in trouble with. With the one-quarter-cent agreement, it wasn’t set in stone. What this does, like the new amendment to the one-quarter- cent agreement, is say, ‘This is what we’ll pay at max, consistent with what our cash flow constraints are.’”


The agreement also provides the city greater flexibility when it comes to moving funds from one program to another for cash-flow purposes as well as to add and subtract projects. The city can modify the list of approved projects to which the reimbursed funds would be going provided Cap Metro staff certifies that the change meets the program’s agreed-upon criteria. The city agrees to provide written notice to Cap Metro 45 days prior to any proposed modification to the approved projects.


“The city is asking for flexibility to move funds between the two,” Fernandez said, “and we’re comfortable with that as long as it’s within certain parameters that are outlined in the agreement and that we have administrative approval.”


The board voted unanimously to approve the amendment, with Mayor Pro Tem Mike Martinez and Council Member Chris Riley recused.


“This agreement goes a long way to getting Cap Metro’s finances back in order and more transparency on both sides,” Fernandez said, “so that we all know what our mutual obligations are.”

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