MTA's David Yale On Capital Programming In An Uncertain State & Federal Fiscal Environment

David, why don't we begin by having you describe the challenges that you've been given by Roger Snoble at the MTA?

The most extraordinary challenge we've had, of course, is dealing with the State General Fund deficit and the subsequent shortfalls in the State Highway Account. The General Fund deficit came to light in late November 2002, right after Governor Gray Davis' reelection, and the State Highway Account deficit became known nine months later. That has been the one-two punch to our transportation program here in L.A. County, and we've been dealing with that almost non-stop for the last two years.

What's it like trying to manage a capital planning program for transportation in an unsettled and uncertain financial environment? How does it work itself out here?

It has been hard. The most difficult aspect of my job is that I've got to coordinate the actions of two boards – the MTA Board and the California Transportation Commission. The MTA Board's adoption of a prioritized list of projects in April 2003 was instrumental to our success. For example, once the MTA Board approves funding for a project in L.A. County, we then must propose it to the California Transportation Commission and get them to buy into it as well. Often the two bodies view what we're doing in very different lights, so we have to refer back to the priorities to make joint decisions on the run. It's often difficult to find the common ground, especially when it takes months to get on agendas that lead to MTA Board and CTC actions. Often, finding that common ground is more of an art than a science and the priority setting was critical.

Give our readers insight into why the CTC and MTA hold different takes on these projects. Why would the focus and agenda of the CTC be out of alignment from the MTA?

The two boards face drastically different questions. On the one hand, The MTA Board is responsible for planning and constructing a regional transportation system, operating a bus and rail system, and administering a one-cent sales tax that now generates over $1.2 billion a year for this County. The California Transportation Commission, on the other hand, is responsible for the oversight of Caltrans, which as the owner-operator of State Highway system has very little transit operating responsibility. The MTA is focused on transit project delivery. The CTC has been very concerned about over-committing future state revenues to deal with near-term regional transit problems when it can't even fund capital maintenance on the State Highway system. These concerns have led to inflexible CTC positions about using local transportation sales tax resources around the state to resolve near-term state funding commitment problems with later CTC repayment. Since we've got such an extraordinary state financial problem facing us immediately, I feel that the CTC needs to be more flexible about things like GARVEE Bonds and local advances of sales tax money.

Why don't you elaborate a little bit more? How has the budget situation forced the MTA to reconsider its priorities and programs?

With the first round of cuts, when the General Fund deficit was announced by the Legislative Analyst's Office, we moved a number of projects into the State Transportation Improvement Program (STIP) and out of the Traffic Congestion Relief Program (TCRP) in order to respond to the state's General Fund problem. To do that, we had to delete projects from the STIP. Once we got the priority projects into the STIP, we found that the State Highway Account couldn't support them either, so we had to look to Los Angeles County's local funding-Propositions A and C-to fund the projects locally with State Highway Account repayment to come years later. We've now gone through the process of getting all the approvals for over $300 million in repayments from the California Transportation Commission. In doing so, we have weaned ourselves from the General Fund and held together a total financial program of over $1.5 billion that includes almost $500 million of federal discretionary funds.

David, can you name the specific projects we're talking about so our readers can follow this?

The first group of priority projects we looked at was the Los Angeles Gold Line Eastside extension, the San Fernando Valley Orange Line busway, and bus and rail car purchases that are associated with the opening of the Gold Line to Pasadena. All told, that group of projects added up to a $1.5 billion program. We had to come up with $300 million here locally to plug the gap that was left by the TCRP and State Highway account shortfalls. The state won't finish paying us back until 2010.

With no anticipation of new revenues coming in the next couple of years, what projects are in jeopardy of indefinite deferral or outright cancellation?

I've been talking so far about the priority projects we've been able to save. There is a whole list of projects that we have not been able to save. Our Call-for-Projects program had to take a deferral of over 100 projects valued at over $600 million. The most dramatic example in that list is a project on the Interstate-5 freeway between Orange County and the 605. This is where Orange County has ten lanes coming into our six lanes, and the improvements that are needed there couldn't be more desperate. There's always a bottleneck through that section of I-5. We had both a TCRP and State Highway Account shortfall on that project so we deferred it, and now we're trying to reassemble the money for the critical path interchange at Carmenita Avenue.

Another example is the Route-14 carpool lane running north from Pearblossom to Avenue P-8 in the Antelope Valley. That project is ready to go, but there's no money for it. Caltrans has designed it, and it could literally be put out to bid tomorrow if we could come up with the money. We're proposing a GARVEE bond solution in our 2004 L.A. County TIP.

And finally, there also is the Route 5-14 direct connector project, which is a carpool lane connector between those two routes that's very similar to what you find on the 110-105 interchange. This is another important project that is at risk.

Elaborate on the challenges forced upon you by the raiding of the Prop. 42 funds to underwrite the deficit at the state level. The voters consciously thought they were voting for a sales tax on gas exclusively for transportation.

Over a seven year period, L.A. County was anticipating getting about $2-billion from the sales tax on gas for transportation projects. As a result of the General Fund deficit, all of that money is not anticipated to be available, and we've had to scrub all of it from our forecast of transportation projects going forward. The impacts of that are enormous. We've been able to borrow our way out of the most serious impacts to our highest priority projects. However, projects that would have been delivered in the next wave beyond those high priority projects now can't go forward and will be delayed, in some cases more than five years, as a result of losing that money.

Could you comment on USC's Keston Institute research and paper for Secretary of BTH Sunne McPeak on short-term transit funding alternatives for the state to employ to keep some of these projects alive? Elaborate on your interest in that report and its practicality.

I was very pleased to be able to participate in that discussion. It's high time we had some leadership in addressing how transportation is going to be dealt with going forward in California. With the election of the new governor, there's a new optimism about getting some leadership to solve some of our more serious problems, like transportation. The Keston Institute report is a good example of people getting together and starting to put new initiatives forward that could solve some of our problems. I'm particularly interested in the ideas dealing with congestion pricing and moving towards solutions like tolls. If we can get projects moving forward with a toll component, it can have the added advantage of reducing congestion on our freeway system.

The Keston report advances the notion of a firewall between transportation funding and the General Fund. Can you elaborate on that recommendation, its need and the complications that might flow from adoption of such a recommendation?

Transportation had always enjoyed insulation from the General Fund, until the TCRP came along in 1998. At that time we married into the General Fund, and it has been a real disaster for transportation – we need a divorce! The State Department of Finance has gained a foothold into how transportation funding works through this marriage with the Generaal Fund, and is now beginning to try and use the State Highway Account monies for problems in the General Fund. If we had stayed insulated away from the General Fund with a firewall instead of integrating with the General Fund in the TCRP, we may have prevented situations like the current proposal for $800 million to be used from the State Highway Account to benefit the General Fund. Those kinds of proposals wouldn't have happened before, because the State had separated out the State Highway Account with a proper firewall. Restoring the firewall couldn't be more important. We've got to figure out how to get it back in place and in better shape.

Let's close with this. If you were the czar of transportation for California, how would you rewrite the relationship between the state and the region, the transportation operators, and those building new systems? What would the roadmap look like?

The most attractive idea I've been thinking about is a proposal for two California Transportation Commissions, one for the 13-counties in Southern California, and one for the 45 northern counties. All State and Federal transportation funds would be split north/south first, and then distributed by the north and south CTC's. The State Highway Account money would have a much better firewall from the general fund, and the north and south commissions would deal with their parts of the state as separate decision-making entities that the Legislature would authorize independently. This idea arises from north/south equity studies that the MTA has recently undertaken. Preliminary results of those studies are showing that only 43% of $12.3 billion in State and Federal discretionary funds are committed in the south over the next five years compared to our 62% of the population and 60% of the vehicle miles traveled.