A Performance Review
of the Capital Metropolitan Transportation Authority
Each day, Capital Metropolitan Transportation Authority (Capital Metro) provides essential transportation for thousands of Austin-area citizens. Its workers accomplish this task in the face of widespread criticism and controversy. And the authority's job is about to become tougher.
At present, Capital Metro faces the most significant challenge in its existence: the development of an appropriate response to the skyrocketing growth of the Austin area, which has given birth to suburbs almost overnight, choked its highways with traffic, and placed its reputation as one of Texas' most livable cities at significant risk. Capital Metro and the voters and taxpayers of its service area must mutually agree on the best course to serve a burgeoning population and cope with its transportation problems. Yet the authority is confronting this challenge in a crippled state brought about by pervasive mismanagement and a complete disregard for how it spends taxpayer money.
Capital Metro began 13 years ago with high expectations and a huge amount of tax money to spend-at present, an average of $349 per Austin-area household each year. In fiscal 1998, the authority will take in at least $127.3 million, and as of last fall had cash and investments of nearly $92 million. Capital Metro's coffers are so flush that it can afford to set aside $35 million, including a full quarter of its sales tax revenue for fiscal 1998, for future light rail or other projects. In other words, the authority collects far more from its taxpayers than it needs to operate its present transportation system.
The authority's wealth, however, has seemed to engender a dangerous laxity in the fiscal policies of past board members and managers, and a tendency to ignore the needs and expectations of its customers and owners-the taxpayers. This lack of cost-consciousness has resulted in expensive consulting studies that sit on shelves, ignored and unused; failed projects that produce little for the authority or its customers; and a general absence of budgetary restraint and common-sense accountability. This laxity has been encouraged, as documented in dozens of past studies and news articles, by the fact that Capital Metro has never enjoyed stable leadership. Its legacy, instead, has been a heavy turnover of managers and board members.
As a result of these factors, Capital Metro has developed a dysfunctional organizational culture. The authority has fallen into a predictable pattern of leaping into projects without sufficient planning or public debate, and then retrenching under a barrage of public criticism when the projects fail to live up to expectations. This spiral of failure has proven extremely difficult to end without strong outside intervention and new leadership. It also has made the public wary of Capital Metro.
Now the Legislature has given the authority a new board and governance structure, which at last is taking steps to put Capital Metro on a sound footing to face the difficult challenges of Austin's future. This report is intended to give the new board a series of practical recommendations to build public confidence and trust in its efforts. These recommendations can be accomplished without spending more money, through improvements in basic management and accountability. TPR's recommendations are designed to set the stage for these improvements, while saving Capital Metro's taxpayers nearly $4 million in 1999 and $20.8 million over the next five years.
A DYSFUNCTIONAL ORGANIZATION
TPR's review of Capital Metro found abundant evidence of the results of irresponsible management. Capital Metro's board and managers have made expensive, embarrassing mistakes; more to the point, however, they have been allowed to go on repeating them, year after year, with no consequences and no apparent ability to learn from the past. Among TPR's findings:Review scope
Despite claimed "boardings" in the millions, Capital Metro serves only about 42,000 daily riders; at the authority's present level of spending, area taxpayers are spending about $1,670 a year to subsidize each of these riders. Capital Metro has fareboxes on each bus that are supposed to track fare receipts electronically, but the electronic counts often vary wildly from reported cash counts. Capital Metro has gone for months at a time without effectively accounting for its fare receipts. Security measures for cash handling are essentially nonexistent. Capital Metro owns 162 miles of railroad, with the idea of someday using it for light rail; the authority, however, has allowed the line to deteriorate to such an extent that the Federal Railroad Administration is forcing taxpayers to spend $4.6 million on desperately needed repairs over the next three years. Capital Metro has spent literally millions of dollars on expensive consulting contracts designed to improve its operations-and yet it has repeatedly ignored the findings and recommendations of these studies. In the case of one six-figure contract concerning "long-term, strategic financial plans in connection with future transit systems," TPR found that no current Capital Metro employee could even locate any related work products beyond a single spreadsheet of financial data. Capital Metro employees who participate in 401(k) retirement programs are allowed to draw loans against their savings. The authority takes loan payments out of the employees' checks-but, until recently, it waited three months before paying the bank back, drawing interest on its own employees' money in the meantime. Capital Metro pays grocery stores and other retail locations to "allow" bus drivers to use free public restrooms. The stores never asked to be paid, but Capital Metro insists on making the payments as a "goodwill" gesture and plans to expand the program. Capital Metro's travel and training funds have been used to pay for expensive junkets by the authority's managers. One former manager made 12 trips in fiscal 1997 that cost taxpayers more than $25,000. Sales tax funds are routinely used to purchase catered meals and other perks for Capital Metro employees-a total of nearly $118,000 in fiscal 1997, including a $25,000 "Casino Christmas party" and a $13,000 employee picnic. Individual monthly cellular phone bills averaging about $900 have been common even for employees with desk jobs. Capital Metro pays $448 each for "custom-made" litter cans when perfectly serviceable containers are available for half this price; this practice cost the taxpayers about $305,000. Capital Metro spends about $150,000 annually to service its custom litter cans, yet turned down an arrangement under which the City of Austin would have provided this service.
This Texas Performance Review (TPR) study of Capital Metro was authorized by the 1997 Legislature's H.B. 2446. A Capital Metro board resolution of October 27, 1997 subsequently requested the Comptroller's assistance. In addition, officials of the City of Austin and Travis County also passed resolutions asking the Comptroller to perform this review.
TPR was not asked to find ways to "fill the buses" or to express opinions on potential projects such as light rail. These are highly contentious issues in the community and are best left to local leaders and the taxpayers. Instead, TPR's work focused on Capital Metro's basic underlying problems: a lack of accountability for executive decisions, actions, and expenditures; and the loss of public trust and credibility. The scope of TPR's review therefore included board governance; ethics policies; administration and management controls; organizational structures; financial management and budgeting; contracting and procurement; human resources; transit operations; the management of facilities and railroad properties; customer service and community relations; worker's compensation; internal auditing; and information systems.
TPR conducted extensive research, interviews, and surveys, including contacts with similar transit systems in other cities. Appendices I through III summarize the results of TPR's public surveys and forums. TPR also engaged a consultant, TransTech Enterprises of Corpus Christi, to conduct a comparative analysis of Capital Metro and 18 similar transit systems around the U.S. (See Appendix IV.) TPR met with Capital Metro board members, managers, and front-line employees, as well as representatives of local governments, the authority's labor unions, and federal transit agencies.
TPR made special efforts to gather input from local residents-the people who ride the buses and pay the tab for Capital Metro's operations through their local sales taxes. TPR staff rode the buses themselves, and asked employees and customers alike what changes they would suggest to improve efficiency and reduce costs. TPR held six public forums at area schools between March 21 and March 26, 1998, and distributed more than 20,000 printed surveys on buses and at Capital Metro ticket outlets. The same survey also was made available to the public through the Comptroller's "Window on State Government" website. TPR also received calls through its "Beat Waste" toll-free phone line.
Taxes and spending
A common observation about Capital Metro holds that the authority does not have a funding problem, but a spending problem. Indeed, Capital Metro has so much money that at present it can afford to set aside one-fourth of its local tax revenues for future projects.
In fiscal 1998, Capital Metro's revenue totaled $127.6 million; major sources include the sales tax, federal funds, bus fares, and investment income from cash reserves. The sales tax generates an estimated $92 million; federal funds provide $23 million; bus fares account for nearly $8 million; investments yield $4 million; and the remainder comes from other minor revenue sources.1 As of September 30, 1997, the date of its last independent financial audit, Capital Metro had cash and liquid investments of $91,923,813.2
Capital Metro's fares recover only about 10 percent of operating expenses, much less than similar transit agencies. More than half of Capital Metro's fare revenue comes from fees paid by students at the University of Texas (UT), which total $4.2 million per year.
Capital Metro's main source of funding by far is its one-cent sales tax. Capital Metro conservatively estimates its fiscal 1998 tax revenue at $92.4 million, but due to Austin's strong economy, actual tax collections could exceed this amount. To put this into perspective, Capital Metro's service area includes about 661,000 people or 265,000 households.3 Based on these 1998 numbers, the average household will pay $349 in sales tax to Capital Metro-whether the family members ride the buses or not.
EXHIBIT 1Source: Capital Metro.
Capital Metro Fiscal 1998 Budgeted Operating, Capital, and Other Expenses
Administrative Areas General Manager's Office $ 529,002 Board of Directors 87,006 Audit and Security 921,729 Legal 450,979 Human Resources 6,502,907 Government Relations 197,025 Customer Service and Public Communications 1,465,526 Chief Financial Officer 320,034 Finance 725,702 Information Systems 733,464 Contracts and Procurement 600,826 Disadvantaged Business Enterprises 153,360 Risk Management 2,670,126 Development 1,519,467 Total, Administrative areas $ 16,877,153 Operational areas Operations Administration $ 1,269,111 Planning 982,465 Public Facilities 576,593 Fixed Route Services 28,248,547 Special Transit Service 5,974,437 Alternative Transportation 1,642,627 Repairs, Maintenance, Vehicle Service Island 12,996,138 Stores 379,758 Building Maintenance 1,369,003 Total, Operations $ 53,438,679 Total Operating Budget $ 70,315,832 Other Capital Project Expenditures $ 51,784,000 Build Greater Austin 6,763,000 Railroad Operating Expenditures 493,000 Total Capital and Other Expenses $ 59,040,000 Total fiscal 1998 budget $ 129,355,832
Capital Metro's fiscal 1998 budget of $129.4 million devotes $70.3 million to operations (Exhibit 1). In addition, the authority expects to spend $51.8 million on capital costs, $6.8 million for the Build Greater Austin program, and $493,000 for railroad operating expenses. Capital expenditures include $36.1 million for buses and other transportation assets; $5.4 million for Special Transit Service (STS) and van-pool vans; $4.3 million for computer systems; $2.3 million for railroad safety improvements and right-of-way purchases; $3 million for rail consulting and environmental studies; and about $700,000 in other capital expenditures.4
Capital Metro is governed by Chapter 451 of the Texas Transportation Code, as are the transit authorities of San Antonio, Houston, and Corpus Christi.5 Capital Metro's enabling legislation was substantially changed by the 1997 Texas Legislature. H.B. 883 abolished the old structure of Capital Metro's board and replaced it with a board made up of five local elected officials and two appointees of the Austin Transportation Study (ATS), a federally designated transportation planning body for the region. The intention behind this legislation was to make Capital Metro's board more accountable to local taxpayers; the new board structure is discussed at length in the first chapter of this report.
Capital Metro is composed of three divisions-Operations, Finance and Administration-with many departments and sections. In addition, several departments report directly to the general manager.
As of April 1998, Capital Metro had 960 employees. Bus operators are the largest group of employees in Capital Metro, with more than 400 full and part-time bus drivers. Salaries and benefits were budgeted at $42.7 million for fiscal 1998, which is 61 percent of Capital Metro's total operating budget.
In most organizations, an organizational chart is a straightforward matter; however, Capital Metro has gone through several reorganizations since the performance review began and TPR finds that even the chart supplied by authority for this report is a matter under dispute. Some managers have told TPR that they really don't report to the general manager or that their section has been entirely eliminated. For example, while there is a box on the chart for "audit," there is no internal auditor or staff. In addition, the Contracts and Procurement manager stated that in practice she reports to the chief financial officer. Similarly, the manager of System Performance Analysis gave TPR a memo, just prior to publication, which indicates that the department has been eliminated entirely.
As shown on Capital Metro's March chart, several departments that report directly to the interim general manager, including Executive and Administrative Support, Management and Support, Security, Legal Counsel, Government Relations, Disadvantaged Business Enterprises (DBE), Contracts and Procurement, and System Performance Analysis.
The Finance Division has three departments: Finance, Risk Management, and Information Systems and Technology. The Administrative Division has six divisions: Human Resources, Planning, Customer Service and Public Communications, Facilities Design and Construction, Railroad Right of Way, and Rail Capital Projects. While most of the employees in these two divisions perform traditional administrative work, others provide direct support for transit operations. For example, the Customer Service and Public Communications Division's telephone information center handled about 975,000 customer calls during 1997.
The Operations Division has four departments: Transportation, Maintenance, Labor Relations and Purchased Transportation. This division provides a wide variety of transportation services as well as maintenance for Capital Metro buses.
Many of the Operations Division's workers technically are employed by StarTran, Inc., a nonprofit corporation that provides employee services on Capital Metro's behalf. StarTran exists because many of Capital Metro's Operations employees are unionized; the corporation is simply a mechanism allowing Capital Metro to legally comply with conflicting Texas and federal labor laws. The chief operating officer of Capital Metro's Operations Division also serves as the president of StarTran. StarTran's unionized drivers and mechanics are represented by the Amalgamated Transit Union, while 27 bargaining employees consisting of reservation agents, service coordinators, schedulers, and data entry clerks are represented by a local chapter of the International Union of Electronic, Electrical, Salaried, Machine, and Furniture Workers.
EXHIBIT 2Source: Capital Metro.
Capital Metro Organizational Structure
Capital Metro serves a broad area including Austin and seven other cities as well as unincorporated portions of Travis and Williamson Counties (Exhibit 3). The authority's subsidized transit services are important to the economy of the Austin metropolitan area. Federal Highway Administration data show that 26 percent of all American households below poverty level do not have cars; the working poor depend on public transportation to get to work and to broaden their job options.6 Public transportation also serves people with mobility problems or other conditions that prevent them from driving, and mitigates traffic congestion and the shortage of affordable parking in some parts of Austin. This mitigation factor is particularly important to riders of the UT shuttle, who otherwise must face truly difficult parking conditions around the university campus.
As of July 1998, Capital Metro had a total vehicle fleet of 530 vehicles, including 317 buses, 88 UT shuttle buses, 78 STS vans and sedans for disabled persons, and 47 "non-revenue" vehicles for internal operations. In addition, the authority provides funding for 111 vans used by commuters under its van-pool program. The van-pool program has been managed by an outside company, but Capital Metro has bought its own new vans and plans to manage the program itself in the future.
Source: Capital Metro.
Transit statistics can be baffling and it is difficult to get a sense of Capital Metro purely from the statistics it reports to the board and the Federal Transit Administration. Capital Metro reports a total of 30.6 million passenger boardings during fiscal 1997, including 19 million on fixed-route buses; 7.4 million on the UT shuttle; 1 million on the free downtown "Dillo" service; 496,000 rides on suburban park-and-ride buses; 483,000 STS rides; 527,000 van-pool rides; 268,000 boardings by students who use Capital Metro buses to travel to Austin Independent School District magnet schools; 203,000 boardings on charter buses for special events; and 1.2 million other types of boardings.7
But what do these numbers really mean and how do they reconcile to the often-heard complaint of "empty buses?" First, TPR found that Capital Metro's ridership statistics are based on haphazardly collected data and may be substantially inflated. Furthermore, a number like 30.6 million passenger "boardings" is confusing and misleading to the lay person. To cite just one example, boardings include a large volume of bus transfers-persons traveling on more than one bus to reach their final destination.
TPR asked the question: On an average work day, how many people actually use Capital Metro buses? Surprisingly, in view of the criticism it has received for perceived underuse, Capital Metro does not keep these kind of statistics. But a recent $457,000 ridership study paid for by Capital Metro did provide an estimate: about 42,000 people ride the bus on any given weekday, including the UT shuttle service; this includes a core group of about 27,000 people who ride Capital Metro buses daily.8
The good news is that TPR found that Capital Metro's problems are fixable, and believes that, with proper leadership and a focus on restoring public trust, the authority can be turned around fairly rapidly. The new board has a valuable window of opportunity before it. With leadership and effective planning, improvements in all major areas should follow. On the other hand, if its fundamental problems are not fully addressed, Capital Metro will surely continue its old ways of doing business.
Governance, Ethics, and Internal Audit. In 1997, the Texas Legislature replaced the authority's old board structure with a new one weighted heavily with local elected officials, to ensure greater accountability to area residents. In keeping with the new focus on accountability, and to prevent any recurrence of the numerous financial irregularities that have plagued the authority in recent years, TPR recommends that Capital Metro reinstate its Internal Audit Department and institute a stringent ethics program, including required financial disclosures for board members and senior managers, ethics awareness training for all employees, and the creation of an ethics officer position.
Management Accountability. TPR also recommends a simplified organizational structure for Capital Metro that would consolidate certain functions, reduce administrative costs, and help hold the line on future growth. Moreover, the authority should reduce administrative expenditures, eliminate 24 vacancies, cut its heavy reliance on temporary workers, and suspend or postpone several consulting contracts of questionable value. TPR also proposes a high-priority strategic planning effort accompanied by business plans and uniform budget procedures for all departments, to help Capital Metro achieve concrete goals for improved customer service and efficiency.
Financial Accountability. Capital Metro has been entrusted with a large public funding source and has repeatedly failed to ensure that the money is used responsibly. TPR believes the authority should immediately halt all spending for employee perks that have included items such as $25,000 parties; stop persistent and expensive abuses of cellular phones and toll-free lines; rein in out-of-control travel expenditures that sent its employees to 21 states, Washington, D.C., and Canada in fiscal 1997; and institute a basic level of employee accountability for the authority's property.
Translating Transit Jargon
Austin Transportation Study: A federally designated transportation planning body for the greater Austin region whose oversight committee consists of 21 members, primarily municipal, county, and state elected officials.
Build Greater Austin: An interlocal agreement between Capital Metro and the City of Austin requiring the authority to provide more than $60 million for street, sidewalk, and curb repairs and construction, including improvements for people with mobility impairments, over a ten-year period ending in September 2003.
Dillo: Free downtown buses that circulate from a park-and-ride lot near Palmer Auditorium through downtown and to the state Capitol complex area and the University of Texas, and the Austin High School parking lot.
Fixed Route: Regular local bus service (including the "Flyers").
Flyer: Bus service that operates local service in suburban neighborhoods and then becomes express service to downtown.
Guaranteed Ride Home: A service available to passengers of Express/Park and Ride buses, Flyer buses, and van-pool riders providing for cab transportation home in the event a customer misses his or her regular ride. A $5 annual membership fee buys up to four cab rides good for one calendar year. Capital Metro reimburses each cab trip up to $49.50, less a $1 surcharge.
ISTEA: The federal Intermodal Surface Transportation Efficiency Act, which provided federal funding to Capital Metro for capital purchases, mainly new buses. In June 1998, ISTEA was reauthorized by Congress and renamed TEA-21.
Park & Ride: Express bus service from outer parts of the service area into downtown or between the North Lamar Transit Center and the IRS Express.
Revenue Hours: The total number of hours that buses are available to the general public.
Revenue Miles: The number of route miles over which buses are available to the general public.
Ridership: The total number of boardings including transfers. Also called "Unlinked Passenger Trips." May be based on electronic farebox data, physical counts made by "ride-checkers," or other information.
Special Transit Services: Door-to-door service for people with mobility impairments. STS vans carry more than one passenger at a time while STS sedan service usually carries a single passenger at a time.
TeleRide: Shared-ride, door-to-door service in the Leander/
Cedar Park, Anderson Mill and far south-central Austin areas. Currently paid for by Capital Metro (with a small amount of fare revenue) and provided by a private vendor.
TEA-21: The federal Transportation Equity Act for the 21st Century, signed by President Clinton in June 1998; this was the ISTEA reauthorization bill. TEA-21 will provide Capital Metro from $9 to $11 million in fiscal 1999 for capital purchases, mainly for new buses. TEA-21 also provides Capital Metro with $1.25 million in discretionary funds in 1999.
UT Shuttle: Bus service provided to connect student neighborhoods with the University of Texas campus. Also provides circulator service around campus. UT shuttle buses-88 buses in all-are owned by Capital Metro and operated by a private contractor, DAVE Transportation Services/Laidlaw Inc.
Van-pool program: Capital Metro provides vans to citizens who live and work in the same areas. Citizens must organize a pool and submit a formal application to the program.
Human Resources. Capital Metro's Human Resources Department fails to provide adequate information to employees on employment policies and employee benefits, and to process employee paperwork promptly. In addition, hiring and pay policies have allowed managers to place unqualified employees in some positions. Training programs and performance evaluation processes are largely ineffective. While the number of workers' compensation claims has dropped, the average cost per claim has doubled in the last year. TPR recommends a reorganization of the Human Resources Department, placing it directly under the chief financial officer, to make staff members accountable for specific responsibilities. Another proposal would help Capital Metro fulfill its fiduciary responsibilities in administering employee benefit plans. Still other recommendations would help guarantee that Capital Metro's employees receive equitable benefits and strengthen the performance appraisal process and training program. Recommendations for workers' compensation call for an authoritywide safety policy, improved accident investigations, an employee wellness program, a special program for employees with multiple claims, and a clear policy on preventing fraudulent claims.
Transit Operations. Daily bus service is the cornerstone of Capital Metro's mission. TPR found that Capital Metro's accounting for its fare revenue is shockingly lax; months have elapsed without effective reconciliation of cash receipts. The authority's ridership data-the single most important measure of transit performance-seems equally shaky. In this area, TPR recommends immediate steps to improve Capital Metro's accounting of fare revenue and ridership counts, as well as its near-nonexistent security procedures for cash handling. TPR also found that the costs of the authority's services vary wildly, with some costing taxpayers as much as $27 per passenger per trip. TPR urges Capital Metro to develop clear, written criteria for evaluating and improving the cost-effectiveness of its services, and begin by eliminating TeleRide, a particularly expensive and unproductive service.
Capital Metro supplies UT with shuttle service for its students through a separate contract with a private transportation company. The UT shuttle is a significant money-loser for Capital Metro; the authority's taxpayers subsidize the shuttle service by as much as $2.4 million annually. TPR recommends that the authority readjust these contracts at the earliest opportunity to put the service on a cost-recovery basis and ensure the most cost-effective operation possible. Similarly, TPR proposes tighter management for Capital Metro's van-pool program.
Contracts, Procurements, and Disadvantaged Business Enterprises. Capital Metro has been repeatedly criticized for dubious contracting and purchasing practices, and rightly so. TPR proposes improvements to the authority's purchasing procedures and contract planning, administration, and monitoring functions. The general manager should enforce authoritywide compliance with these new policies and procedures and establish strong disciplinary consequences for noncompliance. The costs of the authority's services vary wildly, with some costing taxpayers as much as $27 per passenger per trip.
Facilities. TPR's review found major problems throughout Capital Metro's facility operations, including a lack of accountability, poor decision-making and record-keeping, disregard for standard business practices, and the absence of sound management plans. TPR recommends that Capital Metro expedite the completion of a comprehensive master facilities plan; strengthen its management of leases along its railroad right of way; consolidate facility-related sections into one department; improve its purchasing of bus stop amenities; and reconsider its involvement in non-transit activities, specifically trash collection.
Customer Service and Public Communications. TPR also found that Capital Metro's response to customer complaints is unnecessarily slow, and that its tracking of consumer complaints does little to resolve the problems identified. Moreover, Capital Metro has attempted to build community support through donations and sponsorships to community organizations, a highly unusual practice inadequately guided by written policies. TPR's proposals in this area would improve Capital Metro's complaint handling and its recordkeeping regarding customer contacts, and suspend donations and sponsorships to community and national organizations until and unless procedures are put in place to allocate them fairly.
Information Systems. Finally, TPR recommends that Capital Metro immediately consolidate the authority's computer systems staff, functions, and resources, and develop a strategic plan for information technology to guide the agency's needs for the next five to seven years. TPR also proposes that Capital Metro establish a working committee to monitor major information procurement projects, and continue to hire independent technical firms to help assess the authority's needs, write contractual specifications, manage negotiations, and monitor implementation.
Overall, TPR's recommendations will result in a $4.2 million savings in fiscal 1999 and nearly $22 million over five years. TPR has recommended some reinvestment of funds to correct slight understaffing in certain areas, totaling over $200,000 in fiscal 1999 and nearly $1.1 million over five years. A detailed list of costs and savings by proposal is shown in the accompanying fiscal impact table. Suggested implementation strategies, timelines, and estimates of fiscal impacts are included in each proposal.
CAPITAL METRO PROPOSALS
FY 1999 through FY 2003
CAPITAL METRO PROPOSALS
FY 1999 through FY 2003
CAPITAL METRO PROPOSALS
FY 1999 through FY 2003
|Texas Comptroller of Public Accounts|| Window on State Government|
Privacy and Security Policy