SaveMuni on the Central Subway audit

SaveMuni's analysis of the Central Subway audit:

CENTRAL SUBWAY AUDIT

On November 15, 2011,  the Transportation Authority held a hearing on the new MTA Audit and ignored the Audit’s 46-page “Appendix VI: Central Subway Project.” Several press articles reported that the Audit examined 29 construction projects, excluding the Central Subway Project. But in fact, the “Limited Scope Performance Audit” evaluated the Subway’s financial risks---although it did not study transit effectiveness because of the contract’s limited scope. 

* “The potential for variation in the final cost of the project is large” (Page 172): The Audit expands on the Federal Transit Administration’s (FTA) concerns about construction and financial risks. In the context of the Audit’s study of 29 MTA construction projects and their delays/ cost escalations, past performance is an indicator of future risks.

* “The Central Subway Project is the highest risk project that the SFMTA has undertaken” (Page 184): The Audit expands on the FTA’s concerns.

* “There is a 30% likelihood of the total project cost in year of expenditure dollars being equal to or less than $1,578 million” (Page 185). The audit couches potential cost overruns in terms of financial probability theory. Although construction contingency dollars and schedules have been increased, the history of large infrastructure projects, in the Bay Area and throughout the United States, shows astronomical cost overruns and unpredictability---within the same financial/ management models. Moreover, in latest project budgets, contingency dollars appear to have decreased.

* “A study of the funds required for maintaining the state-of-good-repair expenditures revealed that SFMTA’s total assets on the FTA’s Condition Code were above the 2.5 out of 5 minimum required by the FTA” (Page 197). With the current $1.9 billion in deferred maintenance and $1.6 billion in budget deficits over the next 20 years, MTA should have already devoted higher expenditures to maintain assets in a state of repair. Instead, the Central Subway will only lead to more service cuts, life-safety threats and draconian revenue hikes---unless the project is halted.

* “However, full funding is not guaranteed and the availability of funds when needed may still be an issue” (Page 198). Officials and the citizenry are increasingly scrutinizing the Central Subway’s data falsifications and misrepresentations---while the FTA reviews the final application and the State of California faces increasing budget deficits and bond indebtedness. 

* “The Audit Team is not aware of consequences for the [MTA] Board or the Board Members if performance is unsatisfactory, nor are there any criteria that define what constitutes unsatisfactory performance” (Page 210). By the Central Subway’s estimated completion date in 2019, most elected officials will not be in office and many MTA staff will be retired. History indicates that it’s too easy to spend other people’s money. The political benefits and quid pro quo of large infrastructure projects outweigh actual transportation benefits. Unless the MTA Board, staff, consultants, Supervisors and Mayor bear some personal liability, taxpayers will be singularly liable for future cost overruns and crippling deficits. 

* “Now, at the half-way point in the project, the cost estimates at completion are approximately double that at initiation” (Page 213). Again, past performance is an indicator of future performance.

* “[SFMTA] will comply with Prop K policies to delay the expenditure of Prop K funds to the extent possible without putting the project at risk” (Page 271). However, the Subway’s budgets show $72 million of Prop K funds will be expended in the next two years. The recent MTA contract for tunnel boring machines usurped $57 million of Prop K sales tax funds---in lieu of restoring service cuts or improving citywide Muni.