Sound Transit: Year End 2000 COP Performance Report

COP's Year-End 2000 Performance Report on Sound Transit

The Sound Transit Citizen Oversight Panel is a 15-member volunteer body appointed by the Sound Transit Board to oversee and monitor the implementation of Sound Move.

Previous Citizen Oversight Panel reports are available upon request and on the Sound Transit Web site. Brief biographical summaries of COP members are provided in the attachment to this report.

Who is the Citizen Oversight Panel?

Panel members welcome comments and input to their work and may be contacted by calling Kaye Munson at Sound Transit at 206-398-5021, by email at munsonk@soundtransit.org or by writing to:

Citizen Oversight Panel

Union Station

401 S. Jackson St.

Seattle, WA 98104

Summary of Sound Transit Performance

Financial Plan

Project Management and Project Control

Board Oversight

Citizen Oversight Panel Year-End 2000 Performance Report on Sound Transit

Introduction

The Sound Transit Citizen Oversight Panel (COP) is a 15-member volunteer body appointed by the Sound Transit Board to oversee and monitor the implementation of Sound Move, the voter approved regional transit plan. This is the Panel's eighth semi-annual report and covers Sound Transit's performance during the second half of the year 2000.

Summary of Sound Transit Performance

In the latter half of 2000, Sound Transit experienced a pronounced crisis in management and oversight. After months of equivocation, the agency had to admit that its light rail program was hundreds of millions of dollars over budget and would be delayed by three years. As a result, its executive director and light rail director resigned, a federal inspector general's audit was begun and a public loss of confidence became apparent throughout the region. This Panel too was dismayed by the events and felt it shared some responsibility for the failure in oversight because it had not been diligent enough in following up on our past warnings to the Board.

On December 21, 2000, the Panel wrote to the Board:

Observers of the agency, including this Panel, have repeatedly sounded the alarm about escalating costs, scope creep, inflexibility, and poor communication. [T]he reappraisal of Link costs leads us to conclude that proper project management and financial controls, policies, and procedures have been lacking. Many of the problems have been evident for over a year, have been stated clearly in our reports, and yet we have seen no action to correct them.

COP credits the Board with having heard our message and having committed to reply in writing to COP recommendations and to schedule time on Board agendas for regular COP reports. Since that writing, Sound Transit has appointed new interim management, signed a $500 million full funding grant agreement with the federal government, released an updated long-term financial plan, formed a light rail Project Review Committee, developed a new work program and begun internal reorganizations, all intended to rebuild the region's faith that the light rail program should proceed. COP applauds these efforts. Panel members also acknowledge that in many areas progress continued to be made during the last half-year. Both Sounder and Regional Express started new service and moved forward with their capital programs.

Nevertheless, this report is intended to communicate to the Board in the strongest possible terms that this Panel has not yet seen evidence that all of the necessary actions have been taken. Despite the new promises made by management to the Board and to the public, COP has deep concerns that the organizational structure, financial discipline and public openness are not yet in place to allow the program to succeed. We have three major areas of concern: the financial plan, project management and Board oversight.

Major Issues of Concern

Financial Plan
The full funding grant agreement has been approved by the Board and signed by the federal government, but this Panel is hesitant to call this an unqualified accomplishment. Much work is needed before COP members will be confident in advising the Board, "Go forward and spend the money."

In estimating the original program costs for Link and the other lines of business, Sound Transit did not make just one mistake but several. Five significant areas of cost were under-estimated: real estate right-of-way costs; costs associated with tunneling; the overhead costs to manage and administer the program; the costs of community mitigation; and the costs associated with very tight project timelines. Additionally, contingencies were under-budgeted at various stages of the project. Despite the release of new, much higher cost estimates, COP is not yet convinced that similar errors will be avoided in the future.

A new long-term financial plan with much higher revenue assumptions has also been developed. The updated financial plan, which Sound Transit characterizes as "affordable," carries a high degree of risk, as noted by the Finance Plan Peer Review Committee, especially in the assumptions about federal funding. Also, it does not address the many "what ifs" it raises. Panel members see little evidence of strategic policy thinking on the part of the agency to anticipate actions that need to be taken if the cost estimates or the revenue assumptions prove to be wrong.

The promised six-month work program of analysis to review the light rail alignment and station configurations to reduce Link costs must be done. Organizational discipline, control and structure must be addressed. The risks in the financial plan must be discussed openly and Board policy options communicated clearly.

The Board's recent preliminary decision to support Tukwila's request for an alternative Link alignment at an increased cost of $40 million causes additional concern by the COP that the lessons of the past have been ignored. While we understand the agency's efforts to identify offsetting cost reductions, once again expectations and the budget have been increased.

Recommendation: Sound Transit should provide the public with a complete and easy-to-understand breakdown of current cost estimates and all assumptions used in forecasting costs associated with the factors cited above. A complete explanation of contingencies and reserves and the policies governing them should also be provided. Only complete transparency and openness can begin to rebuild the trust of those who would like to believe Sound Transit's numbers but wonder if past errors have been truly addressed.

Recommendation: The promised analysis of cost-saving options must include not only alignments, station configurations and other cost reductions within Link light rail, but also a review of how light rail can integrate with other modes. COP believes the federal money should not be spent until the options have been re-examined and reviewed with the public.

Recommendation: The Board must have a series of policy discussions on such questions as: "If costs rise again in the future, how much is too much?" and "Which potential fallback options should be used if current revenue assumptions do not materialize?" The Board must not wait until the next crisis to have these conversations.

Project Management and Project Control
Sound Transit has experienced repeated failures to control its budgets and its schedules. The agency invested more than two years and over two million dollars in implementing a state-of-the-art integrated financial and project control system. However, the three lines of business (Link, Sounder and Regional Express) have largely continued to operate as three separate programs, from each other and from the central departments. Beyond project control, COP is concerned that there has been a pervasive lack of discipline within the agency and inattention by management to current cost and schedule reporting. To manage the complex and difficult program that is Sound Move, these failures must be addressed.

Recommendation: Sound Transit senior management must make a top-to-bottom commitment to using real-time project controls and must institute real accountability to ensure the systems are being used as intended.

Recommendation: The performance audits promised in Sound Move have not been an effective tool in identifying or correcting any of the known problems in project management and project control. The performance audit function should be separated from the financial audit function to step up its capability to assist the organization in solving problems.

Board Oversight
COP members identified a number of issues relating to the Board's oversight of the program. While acknowledging that the federated Board model has its inherent limitations, there was nevertheless a sense that Board members exercised insufficient control of management's actions and did not act rapidly enough in holding management accountable. Especially in this time of management crisis, the Board has not appeared to accept a share of the responsibility for the crisis and to articulate the policies that will guide its actions in the future.

The Board has not always required full staff analysis of alternatives, but rather has often accepted staff recommendations without full review of other options. When the Board has made decisions, there has been little in the way of direct communication with the public explaining the action and providing a rationale.

Finally, a concern identified during COP's interviews with stakeholders throughout the region was that the current Board model does not always work well in providing representation to all constituents, both within subareas and across subareas within the region. To some observers, the Board appears to have coalesced into subarea caucuses that are often concerned only about projects in their subareas and not about ensuring that the regional system gets built as promised.

Recommendation: The Board must act quickly to hire a new permanent Executive Director, set clear expectations and be vigilant in demanding full information of staff and exercising oversight of management's actions.

Recommendation: Board members must be more direct and deliberate in communicating to the public the rationale for their decisions. Further, the Board should engage in public discussion of the policies underlying its decisions and the policy choices that will have to be made if current estimates and assumptions do not hold.

Recommendation: Individual Board members must be active in reaching out to each other and to all of the communities they represent. Only then can Sound Transit lead the revival of public confidence and the renewal of a regional transit constituency, especially among past supporters who have become discouraged or cynical about the program.

Other Noteworthy Topics

Relationships
In addition to the three major issues outlined above, the COP again identified the topic of relationships as one that needed to be brought to the Board's attention. Sound Transit's relationships with the federal and state governments, with the regional community and with neighborhoods and stakeholders are critical to implementing Sound Move.

Stakeholder interviews revealed progress in building relationships with local governments such as the Cities of Bellevue, Redmond, and Tukwila. Management and staff were also complimented for having positive working relations with Tacoma and Everett. In each of these cities, capital projects or transit service, or both, are evidence that Sound Transit is improving the lives of citizens. The staff and elected officials in these cities felt that Sound Transit had made efforts to improve in listening and responding to local needs and interests.

But concerns continue to exist that Sound Transit has failed to establish good relationships with key neighborhoods such as Capitol Hill, where the business community felt negotiations with Sound Transit were not carried out in good faith. In the Roosevelt community, residents and property owners are concerned about years of uncertainty over when and whether the project will reach them. These neighborhoods have a decade-long history of support for light rail, but their experiences with Sound Transit have created frustration about poor communication and concern about potential real and permanent harm to their neighborhoods. The Broadway business community has gone so far as to withdraw its support for the Capitol Hill light rail alignment due to feelings that Sound Transit betrayed the trust and good faith efforts of its members.

Recommendation: Sound Transit must reach out to re-engage the Link neighborhoods quickly and work to restore the relationships with the very communities that light rail will most affect.

Government Relations
In the area of government relations, Sound Transit has work to do in strengthening its relationships with Olympia and Washington D.C. A number of bills have been introduced in the state legislature that could damage Sound Transit's program or its ability to issue bonds.

In its federal government relations, Sound Transit must be acknowledged for its success in achieving its first full funding grant agreement for $500 million. The Board's acceptance of the FFGA and its signing by the outgoing Secretary of Transportation were the culmination of years of careful preparation and the efforts of many Board members, community leaders and Sound Transit staff. Unfortunately the celebration of this significant milestone was marred by the revelation of cost overruns and schedule delays in the Link program. What began as a local controversy, leap-frogged its way to Washington D.C. just as a new administration was taking the reins.

Recommendation: Sound Transit must develop an effective strategy to succeed in the new political landscape of Washington D.C. Particularly, the agency must forge new alliances and seek now to anticipate and manage potential future setbacks.

Sounder Service.
COP members acknowledged one of the significant accomplishments of the last half-year, the start of Sounder service from Tacoma to Seattle last September. After the initiation of service at Tacoma, Sumner, Auburn and Seattle, ridership had grown to 1350 riders a day by year-end. Since the opening of the Kent and Puyallup stations in February, ridership has increased to 1750 a day. By all reports, commuter rail users love the convenience and reliability of the new service and just wish there were more of it. Despite cost overruns and implementation delays, the service is an important addition to commuter options in the south corridor.

COP members noted continuing concern about a number of issues highlighted in previous reports, including delays in completing and formalizing agreements with BNSF and poor communication with communities about station budgets, design processes and permitting requirements.

Regional Express
Three express bus routes were added in September (Redmond to U District, Redmond to Seattle, Bellevue to SeaTac). Since the September 1999 start of service, Sound Transit has carried over five million bus riders. Currently, 20,000 weekday riders enjoy a comfortable and reliable new commuting option. Same-route ridership is up 21%, indicating a building awareness of the service among users.

Progress is being made on numerous capital projects, including the Everett transit center and Pacific Avenue overpass, Lynnwood transit center, the Bellevue Direct Access project and the Puyallup park and ride. Phase 2 of the Tacoma Dome parking expansion was recently completed, making 1200 additional stalls available to commuters using both the express bus and the commuter rail service.

Operations and Management
COP noted with high regard the appointment of Joni Earl, first as Chief Operating Officer, then as interim Executive Director. Earl has forcefully introduced necessary thinking about management accountability, reporting and openness. However, acknowledging the need for improvement and implementing it are two distinct steps. As noted above in the sections on the financial plan and project management, much more still needs to be done to ensure that the agency's capability to manage a complex, multi-billion dollar program is strengthened and consolidated for the push forward into the construction phase and beyond.

New Approaches by the Citizen Oversight Panel

Readers of past COP reports will note a considerably different format in this Year-End 2000 report. The report is much shorter than previous reports and goes more directly to key issues. After a recent review of COP operations, Panel members concluded that the previous format of twice-yearly evaluations, culminating in comprehensive and detailed reports, was not as effective at keeping pace with rapidly moving events as members would like it to be. The Panel wished to be much quicker in its evaluations and more specific and direct in its recommendations to the Board and the public.

Instead of six-month reports that roll up a half-year's worth of activities and issues, COP will now produce more frequent issue statements as events warrant. We will be more assertive in asking for responses and corrective actions. When not satisfied, we will keep asking until action is taken.

Year End 2000 COP Performance Report

COP's Year-End 2000 Performance Report on Sound Transit

Letter from the Chair

Introduction

Summary of Sound Transit Performance

Major Issues of Concern

Financial Plan Project Management and Project Control Board Oversight

Other Noteworthy Topics

Citizen Oversight Panel Year-End 2000 Performance Report on Sound Transit

Introduction

Summary of Sound Transit Performance

Major Issues of Concern

Other Noteworthy Topics

New Approaches by the Citizen Oversight Panel

Who is the Citizen Oversight Panel?

Financial Plan

Project Management and Project Control

Board Oversight