Magaziner: Part One of METRO Solutions — The Other Side of the Story

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We’re running a guest editorial essay today by Paul Magaziner, a local businessman and a member of Corridors United. As an alternative local opinion outlet, blogHOUSTON is interested in running more occasional opinion pieces by outside authors (which we have done in the past). If interested, please feel free to contact us. We should note that the views expressed are, as with our blog posts, those of the author.

Part One of METRO Solutions: The Other Side of the Story

By Paul Magaziner

If it’s true that you can’t teach old dogs new tricks, then METRO must be in the ranks of Moses. Everyone knows METRO started the construction of the Main Street alignment in Year 2000 without voter approval or federal funds. METRO even started construction in the middle of the night. Bad Habits are hard to break.

Business people always study their business’s past history, from failures to successes. The following is my version of the history of METRO under Mayor White, David Wolff and Frank Wilson.

As before, METRO has started construction on three rail projects without federal financing. Unlike the past, this is in direct violation of the 2003 voter referendum.

Past History: 2003 Voter Referendum

August 2003/September 2003: Ambassador Arthur Schechter’s METRO board in 2003 wanted to put forward a voter referendum in order to continue METRO’s Main Street light rail program. The nine-member board voted anything but 9-0 on many issues. That Board had two contentious points to decide prior to offering Houstonians a long term transit solution:

  1. Should the General Mobility expenditures (1/4 of the Annual Sales Tax Revenues given to METRO) be continued PAST September 2009? (Remember, it is 2003 when the referendum was put forward).
  2. How much money should this board ask for voter approval to be able to issue bonds for rail construction?

The answer to question Number One would give the 2003 METRO board the answer to Number Two.

Federal funding means one thing: Politicians.

Enter Congressmen Tom Delay and John Culberson and Congresswoman Sheila Jackson Lee into the future referendum’s “wording,” as it related to specific voter-contract terms. At the time, there were legitimate differences among the “split” METRO board as to how to finance the continuation of MetroSolutions. Since we are in Texas, let’s err on the conservative side.

Background: General Mobility

What is the General Mobility Contract with the City of Houston, Harris County, and multi-cities? It is a contract that gives back 1/4 of METRO’s annual sales tax income to the region for road construction/mobility purposes. The COH is supposed to get the lion’s share of that “rebate” — supposedly 73.7%.

Fortunately for Houston, then mayoral candidate White studied the past METRO problems including the past “underfunding” of the road improvement money to our city. Candidate/businessman White even found METRO’s books not to lend themselves to auditing.

Unfortunately, as of June 2009, METRO owes the City of Houston even more money than seen by then-candidate White in 2003. But, over the last five years, the multi-cities have made out like bandits. Evidently, potholes in Houston aren’t as important as the needs of Bellaire, West University or Piney Point. Houston is not getting its contractual share of the General Mobility funds.

The math is simple. If METRO collects $500 million in sales tax revenue, then 1/4 of that collected sales tax amount is owed “back” to the City of Houston, Harris County and the multi-cities by an agreed upon formula ($125 million. The City of Houston is supposed to get 73.7%. The City of Houston is not.

“Pay as you go” or “pay as you owe” should be easy: Simply dictate METRO’s distribution of the sales tax money as it is collected. I wonder why candidate White, as mayor, didn’t institute that policy? Instead, METRO just owes and owes. It’s now known as an unbilled METRO commitment.

This is a sad story about a currently missing $100+ million to the City for Houston road improvements. This METRO liability to the City of Houston is not even shown properly in financial statements (since it is dubiously titled an unbilled commitment), making it Enron-sad!

Another issue is the General Mobility Agreement. To be extended to September 2014 from the 2003 voter referendum, it is still an amended document nowhere to be found in Mayor White’s Administration. The “new” General Mobility Agreement remains a work in progress (and has since 2004).

The General Mobility road-improvement money was, strangely, mentioned by METRO at their groundbreaking ceremony on July 12, 2009 — it seems that METRO would like to “phase out” the General Mobility money. Never mind that it was part of the 2003 voter referendum, promised to voters until September 2014.

The General Mobility contract was also mentioned in the recent METRO bond offering of over $200 million. Page 19 of the offering states: “The Authority is also committed by the November 2013 election to seek voter authority to renew its general mobility commitments beyond that date.”

Does anyone in Houston want to trade $100 million in current road construction money for a “replacement” tax hike? What will METRO do if taxpayer-voters, weary of rising taxes and fees from the City of Houston, vote to keep the General Mobility contract in place?

How will METRO pay back BILLIONS in borrowed money if voters want the General Mobility Contract to stay in place indefinitely? Prudent advice would be not to count on an “extra” $125 million after 2014 to help pay future METRO debt service!

Or, does today’s METRO board consider this to be the next board’s problem?

The 2003 METRO board’s approach

Here are decisions by the 2003 METRO board, as approved in August 2003 to move the November 2003 referendum forward:

  1. Continue the General Mobility expenditure until Sept 2014.
  2. LIMIT the bonding authority of Metro to “only” 640 Million.
  3. Schedule a 2nd Voter approval of METRO authority to continue the construction that would begin after the Main Street line was to open.
  4. Provide voters with EXACT RAIL alignment routes and make the 2003 Referendum a “contract” with voters not to be altered by SUCCEEDING boards.
  5. Provide a SEQUENCE of the alignments to be built with the first $640 million in bond money along with “equal” Federal matching funds.

There were skirmishes along the way, perhaps the biggest over a part of the voter contract stating “the following agreements will be binding on METRO and will constitute contracts with voters in accordance with their terms and may not be repealed, altered or rescinded by any succeeding Board without voter approval at a subsequent election” (Section 14, from the referendum, posted on Scribd by blogHOUSTON).

Can you imagine the nerve of Congressmen Delay and Culberson, insisting METRO must keep its word to voters?

As we all know, the November 2003 METRO referendum passed by the “narrowest” of margins — not quite 51% approval.

2004: New Mayor, New METRO board chairman, new METRO CEO begin to “unwind” the voter contract

As of the same election, Houston elected a new mayor who took office in January 2004. With the new mayor came a new METRO board chairman, David Wolff, named in February 2004. By June 2004, Houston Transit brought in Frank Wilson as the CEO (Wilson has an interesting industry history).

By October 2004, at a Mobility Conference at the Lancaster Hotel, the three “W’s” (White, Wolff and Wilson) were beginning to formulate a new rail policy for Houston (see Page 6 of this report).

Even then, Section 14 of the November 2003 Referendum was starting to be disregarded as a voter contract “not to be altered by any succeeding Board” (in terms of costs, bonding, and even the technology, which was changed to a million-dollar diesel bus with rubber tires).

As per the METRO annual report on page 6, METRO “surprised” everyone by stating ALL alignments were to be built at the same time with METRO asking the FTA to pay for 100% of the North Alignment (Hardy) and 100% of the Southeast alignment. IF the FTA did that, METRO would then pay for 100% of Uptown and 100% of Harrisburg. Was this a tricky change?

The average voter would surely concluded from the referendum documents in November 2003 that all new METRO rail costs would be split 50-50 by METRO and the FTA. By December 2004, METRO seemingly was creating a whole new financing concept for the FTA New Starts Program. To borrow from this blog, The Houston METRO Way.

Losers in this referendum “unwinding”: Taxpayers and the voters, and also transit riders (recall that METRO had “promised” a 50% increase in bus service in 2003).

“Unwinding” the Uptown Line

In terms of referendum amnesia, Uptown may be Houston’s biggest loser. “Uptown” is METRO jargon for S. Post Oak Rd., or as Houstonians refer to our retail jewel, the Galleria Area. The 2003 board put an * by what alignments were to be built first, in a determined SEQUENCE of alignments with the limited bonding provided by the referendum. Uptown was to be built AFTER a 2nd referendum after 2009.

The 2003 METRO board wanted Houstonians to see how the Main Street alignment would actually work from an operational stand point (remember, Main Street light rail was not yet operational as of the Nov 2003 Referendum). The second line of defense against “additional” rail alignments would be the required second voter approval, for more bonding authority, prior to any construction taking place on Houston’s golden mile.

Today’s unelected METRO board prefers not to subject its Uptown plans to voters. Instead, METRO will pay 100% of the costs of the Uptown project. On its own authority, METRO prefers simply to take out the Post Oak esplanades, left turn lanes at intersections, current turn median, while adding new signalized lights and ignoring the vehicle traffic implications. “Shoot the dice,” as they say in Vegas.

Keep in mind that S. Post Oak rail will also place the 610 West Loop under construction. After all, the Post Oak rail is headed toward the METRO’s Northwest transit station. That should be fun construction. In fact, how about the METRO crossing gates that will be installed at Post Oak / 610 West loop? Or, the loss of existing traffic lanes under the 610 West Loop / Post Oak interchange. “Uptown” retail/condos will never be the same.

In 2003, there was a conservative, accountable approach to the construction and financial components. Voters approved this plan. By 2005/2006, conservative and accountable were OUT. And Houston’s most valuable sales tax area is set to become a METRO First Strike sacrificial lamb in the “new” surprise construction sequence.

“Unwinding” the voter-approved technology, alignments, and funding

METRORAIL as the approved technology by voters was on the table just months after the 2003 Referendum. By 2005, METRORAIL was being changed to a million dollar bus with rubber tires called BRT (Bus Rapid Transit), with the nontransparent switch drawing criticism from U.S. Rep. Gene Green. As of September 2007, the FTA was even about to approve federal financing for BRT. But then — a switch back to LRT (Light Rail Transit) in October, with METRO’s announcement that METRORAIL was now affordable on ALL 5 alignments. METRO MAGIC!

Of course, the Brass Maiden’s legal complaint had stung the METRO Board in 2007. How dare the Richmond Avenue “Maiden” question the will of a few powerful people by legally demanding that the voter referendum “contract” from 2003 be followed. I assume METRO’s able legal team told the unelected METRO board that if the Maiden ever got them into court, a bus with rubber tires, instead of METRORAIL, would be hard to explain. The result: A small victory for accountability, and a switch back.

Voters could never have realized that well after 2003, METRO would give to the FTA a number of “other” alignment routes known as Locally Preferred Alignments (LPAs), heavily influenced by hand-selected committees. Many folks on Richmond Avenue and elsewhere actually understood the referendum as a voter contract that specified routes on maps, along with text clarifying the exact routes (as Culberson/Delay worked to guarantee). For example, WESTPARK meant the line would be placed on US 59 from the Main Street METRO transit station to Westpark, then proceeding to the Hillcroft station.

People may be tired of talking about the so-called University Alignment or the hundreds of business owners opposing the Richmond Avenue portion of the alignment. Fine. What about the four miles on the east side of Main Street, that is part of that same “University alignment? METRO select committees created that new four miles out of thin air, with no engineering reports ever in hand. “The University Alignment” was as close to a Utopia Brand name as METRO could make it. Shangri La would have been good. In 2005 -2006 METRO called this alignment the East – West alignment – a tough brand name sell. University Alignment just sounds better! (METRO actually used University on all its engineering documents relating to the Southeast alignment prior to 2006). Then, METRO started talking up voters having approved “Corridors” which sounded better still (but that term, unfortunately, was not part of the ballot).

Let me stop right here in the METRO hair ball story of 2004- 2007 by asking one more question: What happened to 50-50 financing on ALL alignments? Bye Bye! Construction has finally started, without the guarantee of federal financing.

METRO is paying 100% of two alignments with no Federal financial participation (Uptown / Harrisburg). This also means these alignments have gone without federal environmental protection analysis. That’s not good, not good at all! Secondly, METRO has asked the FTA as part of its New Starts Budgets for 2010 (Table 2A, Summary) on the North / Southeast Alignments for the following: Total cost shown on both: $1.357.6 Billion. Total request of funding is 49% or $665.2 million. What is the Problem with this? METRO’s own cost estimates to the FTA in 2008 were over $1.8 billion dollars on these two alignments. Quick math shows METRO is now asking for only aprox 33% of the total costs! Industry average for a light rail project in the United States shows a 40% under estimating of costs. Houston will be in big trouble even IF we get FTA fiinancing.

Conclusion: The “unwound” alternative

I referred above to the 2003 METRO board’s conservative effort to move rail forward and provide accountability to voters/taxpayers, and I have shown how a subsequent board and mayor “unwound” that approach, contrary to the 2003 referendum’s covenant with the voters who approved it:

The current METRO board’s “new” approach:

  1. All alignments built at one time.
  2. METRO paying 100% of two alignments with no federal financial participation (or environmental impact scrutiny)
  3. Locally preferred alignments (by committees heavily influenced by Mayor White and METRO)
  4. Switch from METRORAIL to BRT, only to be followed by a switch back in 2007

History does repeat itself. If you can get away with breaking one voter covenant, why not a bunch of voter covenants?

Paul Magaziner is a local businessman and founder of a nationwide digital printing company with 200+ employees, and a member of Corridors United.

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