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SPRINTER Funds Used For Buses — And Studies

— Money that was budgeted to fix the brakes and pay for other maintenance on North County Transit District’s SPRINTER was instead used to pay for buses and transit studies, the KPBS and inewsource Investigations Desk has learned.


KPBS Response to NCTD Statement

KPBS Response to NCTD Statement

KPBS' and iNewsource's response to letters from the North County Transit District regarding the accuracy of our SPRINTER funding investigation.

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NCTD Disputes SPRINTER Funding Story:

April 5: "NCTD's SPRINTER Maintenance Well-Funded"

April 11: NCTD Request for Clarification

The SPRINTER, a passenger train system that runs between Oceanside and Escondido, has been shut down since March because of worn brake rotors.

Aired 4/3/13 on KPBS News.

North County Transit District's Capital Improvement budgets show funding for the SPRINTER was set aside in 2012 -- and cut this year.

The North County Transit District (NCTD), a public agency funded mostly by taxpayer dollars, budgeted for problems with the SPRINTER’s brakes as far back as 2010, but this year it removed the maintenance money and replaced it with line items for buses and studies, according to budget documents.

One $500,000 study was commissioned to better understand “what public transportation means for North San Diego County.”

The budget documents shed light on who-knew-what-when about the brake problems that forced the SPRINTER out of service in early March. They also raise questions about why maintenance expenses were scratched and studies were inserted among “capital improvement” items.

The SPRINTER, a German-made Light Rail Vehicle, debuted in North County in 2008 and carried more than two million people between Oceanside and Escondido each year until a state inspection in late February found the center brake rotors on the 12 vehicles worn past compliance. NCTD took the trains out of service, and it will be months before new brakes arrive and are installed.

The agency is serving commuters with a bus route that mimics SPRINTER stops.

The SPRINTER cost the district $477.6 million, and the agency is still $32.9 million in project debt. Who is going to pay for the new brake discs, and where that money is going to come from, is still up in the air. NCTD plans to “recoup” some of the expenses from the contractors responsible for operating and maintaining the district’s vehicles, according to a recent U-T San Diego article.

NCTD’s Executive Director Matthew Tucker told the Investigations Desk in early March that the agency’s mechanical maintenance officer, Richard Berk, along with the maintenance contractor, Veolia Transportation, “failed to report” the brake problems when they were found in 2009 -- just one year after the line began operations.

However, Berk, who quit the agency in early March, has maintained that many people knew about the brake problems, including his superiors. The agency’s Capital Improvement Program (CIP) budgets bolster his statements: funding for the SPRINTER’s “Drive System Overhaul” -- which would have included replacing the brakes, according to Berk -- made it to the top of the agency’s priority list in 2012. The item was cut this year.

Although Berk was not included in the final budgeting process, he says, the brake priority was mentioned “in all discussions” that he had about the SPRINTER capital budget proposal.

Top NCTD officials declined to comment on this story, and wouldn’t make the district’s chief financial officer available. NCTD board members -- who oversee and are ultimately responsible for the public agency’s operations -- did not return phone calls.

In last year’s capital improvement budget, which looks out five years, $8.2 million was spread out over the agency’s next four years for SPRINTER maintenance. It made up more than 27 percent of its budget category -- Revenue Vehicles.

In this year’s budget, those line items were gone.

Berk told the Investigations Desk that he found out about the funding change last fall when he tried to initiate the brake replacements.

“That was the day,” he said, “they came back and said ‘there is no budget.’”

SPRINTER funding wasn’t the only item taken out of this year’s budget.

Maintenance for the COASTER, which carries 1.6 million people annually between Oceanside and downtown San Diego, was scheduled in last year’s capital improvement budget to receive $1.3 million through 2015. The funding was designated to replace the train’s generators, which historically do not keep up with the life of the vehicle itself, as well as overhauls that would include re-upholstery, painting and heavy cleaning.

That money is no longer a line item for those years. In fact, no money is set aside for any train or light rail vehicle maintenance in the current CIP budget.

Where did the money go?

The SPRINTER payments were replaced with increased funding for buses, totaling $21.9 million over the new five-year period. It was also replaced with $863,000 for various “studies” over that same period.

The studies, not normally found in a capital budget meant for long-term investments, include a $500,000 “Public Benefit Study,” as well as an undefined, $150,000 “20 Year Plan.” Multiple accountants interviewed said including the studies as capital expenses is contrary to their industry’s generally accepted principles.

By its own definition, NCTD’s capital projects must have a monetary value of at least $5,000, have a life of at least three years, and “result in the creation of a fixed asset” -- or “the revitalization of a fixed asset.”

This type of accounting raises serious questions about transparency and accountability, and could be seen as a way of burying expenses in the less-scrutinized capital budget in order to present a more balanced operating budget to the public, according to two certified public accountants interviewed for this story.

NCTD says its financial statements are prepared “in conformity with generally accepted accounting principals” set by the Governmental Accounting Standards Board (GASB), but a senior technical advisor at GASB told the Investigations Desk that the studies are “not appropriate” for a capital budget.

Paul Scott, a forensic certified public accountant in San Diego, said he comes across this scenario from time to time in the nonprofit world.

“Agencies are not always completely transparent when allocating expenditures,” he said, “particularly if there’s pressure on the operating budget.”

“In my experience,” he said, “this sort of mis-statement can happen one of three ways:

1) Agency managers/executives didn't know accounting standards and made an error, or

2) Didn't know the standards and obtained wrong advice from outside advisors, or

3) Knew the standards and purposefully manipulated them to serve some purpose.”

The $500,000 “Public Benefit Study” is one of five slated for the current fiscal year.

Others include:

-- a $100,000 “Document Management Study

--a $50,000 “Critical Systems Study

--a $63,000 “Bus Stop Rationalization Study

--and the undefined “20 Year Plan” costing $150,000.

The studies total $863,000 over the next five years.

In addition to the studies listed above, NCTD commissioned another study on March 29, 2013, “to rethink the role of [the agency’s] current work environment.”

NCTD is paying a consulting company -- AECOM -- $150,000 (according to NCTD sources who didn’t want to be named for fear of retribution) for research activities that include, “a visioning session, interviews, focus groups, and onsite observations” in order to “solicit feedback around our current work environment, to understand what works and what doesn’t, and explore ways in which the workplace can improve workflow, service delivery, and employee engagement.”

It is unclear how the study was approved. It’s not mentioned in any recent or upcoming board agendas, and according to NCTD policy, any contract above $100,000 needs board approval.

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Avatar for user 'ItsJustNotRight'

ItsJustNotRight | April 5, 2013 at 8:38 a.m. ― 3 years, 11 months ago

As a non-profit executive i get very bent out of shape if i see misuse and misallocation of funds. Riders on the Sprinter need to be safe and know their vehicle can stop, pretty clear to me this needs to be done. Did they really need to spend $863,000 for various “studies” instead?!! I supposed they can answer some of their own questions poised in these studies by now with all the vehicles being shut down and completely out of service. How much did that cost in revenue loss? No matter, i guess they will just figure out some way to add it to the capital expense line. I think its rather obvious they need to rethink the agency's current work environment...I can save them the $150,000 on that one and fix more brakes! Its just not right !!!

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Avatar for user 'NCTD'

NCTD | April 5, 2013 at 1:53 p.m. ― 3 years, 11 months ago

This story contains so many factual errors NCTD must respond to set the record straight. The agency wants to assure passengers, taxpayers, and regional transit partners, that funding for the maintenance of the SPRINTER light rail system was never cut, diverted, or otherwise shorted.

Read NCTD's complete response and get the facts here:
(copy and paste link in your browser)

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Avatar for user 'cspen'

cspen | April 5, 2013 at 8:01 p.m. ― 3 years, 11 months ago

There is a much bigger story here than meets the eye. Since I have been blocked from commenting on NCTDs Facebook, I will express my concerns here. When the rail lines were purchased by NCTD, they also purchased land along the route on either side with the intent to develop that land into apartments and businesses and become landlords. What happened to that plan? Do they still own the land? They drastically cut back on bus service when they installed the train, making the train useless to many who could not get to the train to ride it. I believe this was due to funding issues? They used the economy to cut bus service further in the past few years. It now costs $14.00 per day to use the bus service if you live in one of the areas affected. Areas that fall under the original charter should still be being servied on an equal basis as they were in the past. Instead the money is being diverted. Diverted to where is the question. Could this land be sold, or has it been quietly sold to people connected with NCTD at below original cost. Citizens should be on the board at NCTD, not politicians. Where is the money?

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