Published June 8, 2008

Promise of transit tax derailed
Too many promises and too many deficits have left Miami-Dade County's transit system starved for cash five years after voters approved a new tax for the system.
BY LARRY LEBOWITZ

In 2002, voters were promised up to 88.9 miles of new Metrorail lines, stretching to every corner of Miami-Dade County. As it stands, you'll be lucky to get 2.4 miles.

County leaders promised 17 million miles of new bus service. They never got close.

Promising "New Money for New Projects,'' the 2002 campaign, led by former county Mayor Alex Penelas, vowed to bring Miami-Dade Transit into the 21st century if voters approved a long-sought sales tax.

But five years and more than $800 million later, the county has spent more than half the new money on routine Transit operations and maintenance while adding 1,000 jobs to the payroll.

There were initial achievements. The county added 11 million miles of bus service, gave free rides to seniors, and briefly experimented with 24-hour rail. It spent $40 million on hundreds of tiny public-works projects.

But today, Metrorail runs fewer trains than it did in 2002. Half the bus service that was added has been subsequently cut. And studies indicate that your commute is no brisker than it was five years ago.

Meanwhile, county managers have decreed that they can spend transit-tax proceeds in hundreds of ways -- buying everything from paper clips and polo shirts to cockroach extermination. The tax even paid for $2 million in office furniture for Transit's new headquarters in Overtown.

Documents and interviews with those who created the campaign for the 0.5 percent sales tax reveal that the effort was doomed from the beginning by parochial politics, power grabs, waste and mismanagement.

At the heart of the matter: The 2002 campaign avoided any mention of chronic financial problems that had plagued the transit agency, and it promised far more improvements than the tax could possibly deliver.

As a result, in one of the nation's most traffic-choked communities, with soaring gasoline prices pushing more people toward mass transit, county commissioners are discussing steep fare hikes -- and maybe doubling the transit tax -- to try to rescue some of the promises of 2002.

"They promoted an illusion,'' said Frank Del Vecchio, a retired lawyer and Miami Beach activist who opposed the tax in 2002. "It was a device for extracting additional tax revenue into the system that insiders realized was going bankrupt.''

If that sounds like I-told-you-so hyperbole, consider this: Just five weeks before the election that created the tax, Miami-Dade Transit ended the fiscal year with an operating deficit of $23.9 million. It was part of a pattern of deficit spending that had gone on for years.

Those deficits never came up in the carefully constructed pro-tax campaign.

Believing a "fairy tale'

In a rare interview, Penelas said he is disappointed that he risked his political legacy acting as "the pitchman'' for a campaign that hasn't delivered on its largest promises.

"If I knew then what I know now, I wouldn't vote for it,'' he said. "I wouldn't even have proposed it.''

Penelas, who is a political commentator for Univision, said he received one-time permission from the network to comment for this report.

Penelas and political consultant Ric Katz, one of the principal architects of the 2002 campaign, said they relied on assurances from County Hall insiders who crunched the numbers and said they could afford all the promises.

"I believed the fairy tale,'' Katz said. "So did many others.''

Many of those insiders were gone from County Hall within a year of the vote. One, former Transit Director Danny Alvarez, insisted that his cash-flow projections were "adequate and conservative.'' He said he didn't mislead anyone and is now being unfairly scapegoated.

Former Penelas policy aide Sandra O'Neil, who kept a binder with the growing list of promises, refused to comment for this report, citing her work with an engineering firm that has an ongoing contract at Transit.

That list would be key to the 2002 campaign. The Penelas camp knew it faced an uphill battle. Voters had rejected four previous proposals for transit tax hikes. In 1999, Penelas' call for a 1-percent tax was thrashed by auto dealer Norman Braman, whose last-minute ad campaign played on voters' fears of government waste and corruption.

Opponents likened the 1999 plan to a Christmas tree laden with gifts for special interests, especially construction and engineering firms close to Penelas that helped finance the pro-tax campaign.

In 2002, the pro-tax campaign told the big-money interests to stay on the sidelines and built a grass-roots effort. Eighty community meetings culminated in two "summits'' where citizens and municipal leaders drew up their transportation wish lists.

The result was a Christmas tree of another sort: more Metrorail, more buses, more jobs, better service. For seniors, free rides everywhere -- something no major transit agency in the nation offers. For drivers, wider roads, synchronized traffic signals and flyover lanes at major intersections.

Politicians demanded their share. County commissioners wanted specific bus routes -- many of them of dubious need -- and money for sidewalks, traffic circles and flashing school signals.

"You can't put 10 pounds of potatoes in a 5 -pound sack,'' County Manager George Burgess now says of the promises. Burgess, hired by Penelas nine months after the tax was adopted, is working with Mayor Carlos Alvarez to figure out which promises the county can keep.

One of the last-minute political deals of 2002 resulted in a hefty bite out of the tax. Penelas agreed to lop 20 percent off the top -- or $173 million over the first five years -- to split among the 31 municipalities that existed at the time. In return, the county's League of Cities, led by then-Hialeah Mayor Raul Martinez, campaigned for the tax. Martinez had opposed the 1999 version.

Despite the cost of such deal-making, Katz said that Transit Director Alvarez and O'Neil, the Penelas policy aide, repeatedly assured the campaign that everything they were adding to the plan was financially feasible.

It wasn't.

For example, here is the cost estimate that was attached to the 44 road projects that county commissioners asked for: $0. The projects have since been estimated to cost $428.2 million.

Nor was any money earmarked for an unspecified number of flyover intersections on the list of promised improvements. Such projects, which involve raising an existing road to pass over another, cost as much as $18 million apiece today. None have been built.

For "bus service improvements,'' the plan set aside $90 million while promising to increase the fleet by 600 buses. At today's rates, those 600 buses would cost $195 million. And each would need drivers, fuel, tires and maintenance -- costs that were not contemplated in the campaign materials.

Alvarez said his successors at Transit opted for higher-end buses that drove up the costs.

The $555 million estimate for a planned Metrorail North Corridor line didn't include any funds to buy 58 new rail cars for it. Alvarez said he didn't think they were needed. Adding those cars -- and incorporating an expensive, zig-zagging alignment that the community demanded -- has helped triple the cost estimate to $1.6 billion.

But flawed as it was, that long list of projects was available for the public to review before the November 2002 election.

It was only after the election that county leaders tacked still more spending into onto the plan -- most of it for long-overdue upkeep, not the "new projects'' that Penelas had pitched.

Starved for cash

Miami-Dade Transit had been starved for cash for years. Since 1985, commissioners had increased property-tax support to the agency at an average of just 1 percent a year, not enough to keep pace with salaries and operating costs. They hadn't raised fares since 1991.

Year after year, the agency borrowed from the current year's federal grants to cover the previous year's operating deficits.

That meant less money each year for long-term maintenance and modernization, creating problems that persist today. Everyday riders contend with broken-down elevators and escalators at Metrorail stations. Buses and trains are covered with graffiti. Failing air conditioners drip on Metromover riders.

"The county pauperized the transportation system over a generation,'' said the Rev. Theodore Wilde, who served on a citizens panel that was supposed to protect taxpayers from transit-tax spending abuses. "There's no way around it.''

The agency's precarious finances were specifically downplayed in the 2002 campaign. But once the tax was approved, in early 2003 Transit leaders quickly assembled their own wish list of 23 big-ticket items to add to the sales-tax spending plan.

At the top of the list: $188.8 million to perform a long-overdue rehab of Metrorail's original 136 cars. They set aside $15.4 million more to overhaul the 12 original Metromover cars. And $14.5 million listed under the vague label "enhancements'' was actually intended to update the 1980s-era computers that run the rail system.

The initial estimated tab for the add-ons: $397 million. Today, it's more than $700 million -- and the plan to rehab the Metrorail cars has morphed into a controversial, expensive decision to buy new ones instead.

Danny Alvarez presented the list to the Citizens Independent Transportation Trust, the oversight panel promised by the campaign, at its first meeting in May 2003. The trust's volunteer members hadn't even been sworn in yet, and lacked any trained staff to vet the list.

"It was really unfair of them to put this on us then,'' said Marc Buoniconti, the only trust member who voted against the amendment at the first formal meeting in July 2003. "I knew this wasn't what was sold to the voters.''

An expanding payroll

The state didn't start to collect the tax until January 2003. But the Penelas administration wanted to immediately reward voters who had supported the tax. Transit rolled out free rides for seniors, and free Metromover rides for everyone, the morning after the election.

With the administration's backing, Transit managers aggressively added new bus routes, and improved existing ones, running up $4 million in overtime costs alone in November and December 2002 -- seven months before the oversight board would be sworn in.

Within months, county leaders were fielding complaints of empty buses all over the county.

"We did expand the bus system, I believe, way too rapidly,'' said County Commissioner Carlos Gimenez. "They just blew through all of this money, and it took them way too long to apply any standards for what was good and what was bad.''

Two weeks after the vote, Penelas and then-County Manager Steve Shiver created a new department to oversee the plan's larger promises, starting with the Metrorail corridors. But the creation of the Office of Public Transportation Management would spark an ethnically tinged rivalry that would consume County Hall politics during its 10-month existence.

The new department, under former Transit Director Alvarez, was criticized for renting expensive new offices and skimming off the highest-paid Transit employees, most of them Hispanics and non-Hispanic whites.

Black leaders complained that the less prestigious grunt work -- running the trains and buses -- was left to blacks.

Alvarez sparred with new Transit Director Roosevelt Bradley over money and turf. They also fought over the pace at which Bradley kept one of the 2002 campaign promises: new jobs.

Transit's payroll grew by 1,000 new workers in the first year after the tax was approved. Under Bradley -- who served from 2002 until he was fired last year -- the agency also reclassified hundreds of existing jobs, boosting base salaries, overtime and fringe benefits.

The overall effect was dramatic. Between 2002 and 2004, according to a financial analyst's report, the agency's annual operating expenses grew 32 percent, from $343.6 million to $454.6 million. Labor made up about 70 percent of the expenses.

Transit added or augmented dozens of bus routes and introduced 24-hour train service during that period.

Ridership was up more than 30 percent, but fare revenue actually dropped. Most of the new riders were senior citizens who were riding for free under the expanded Golden Passport promised in the campaign. Fraud also contributed to the fare erosion, records show.

In August 2003, Alvarez was raising red flags with the mayor's office and the citizens trust about the escalating operating costs, declining revenues and hiring practices at his old agency.

But by September, he was gone from the county payroll. Burgess dismantled his new department and returned most of the workers to Miami-Dade Transit.

And soon, the financial problems he wrote memos about would be far more apparent.

"Houdini Math"

Penelas, in one of the less flashy promises of the 2002 campaign, pledged to protect voters from a "bait-and-switch'' tactic with the new tax.

The county, he said, would continue to fund Transit at the same level of property-tax support as that it had in the past, so the new money could be dedicated to all of the promised "new projects.''

But the fine print of the ordinance that county commissioners approved in July 2002 required only that the county meet the 2001 level of support. And it didn't contain any requirement to keep up with inflation.

Combined with Miami-Dade Transit's increased operating expenses and its decreasing fare collections, the reduction in property-tax revenues was choking the agency.

Between October 2003 and September 2005, the agency ran up $40.5 million in operating deficits on the "old'' existing system.

In what Bradley described as a break from past practice, he and others in the administration went to commissioners about the persistent deficits.

"I'm the one who exposed the problems with the existing service,'' Bradley said. "We had a rolling $20 million deficit year after year. And I'm the one who exposed that. This is a year after the (tax) passed and I'm going to the board and asking them for a loan and a fare increase. I got beat up for that, but nobody else would say it.''

In early 2005, County Manager Burgess persuaded commissioners, the watchdog panel and new Mayor Carlos Alvarez to approve a new plan: Dig Transit out of its operating hole by borrowing money from the transit tax.

Burgess' plan created a $150 million credit line from the sales tax to pay off those deficits, and to cover other operating needs between 2005 and 2011.

In return, the county guaranteed that it would increase the property-tax money devoted to Transit by 3.5 percent a year for the next 30 years. Commissioners also passed a 25-cent fare increase to bolster the existing system's revenues. It was the first fare hike in 15 years.

The plan's overall effect: A huge sum promised for "new'' projects went instead to prop up the "old'' system.

There was "a lot of Houdini math going on'' to balance Transit's books, said J.W. Johnson, a leader of the Transport Workers Union.

The math has been complicated from the beginning.

Even with recent service cuts, the transit agency is providing 24‚percent more service than it did before the tax was approved in 2002. For that reason, county budget specialists have justified tapping the transit tax for 24 percent of many of the agency's operating costs.

Transit can essentially bill 24 of every 100 paper clips, 24 of every 100 new polo shirts, even 24 of every 100 cockroaches exterminated, to the sales-tax fund.

The rule is open to some interpretation. For example, the county justified spending sales-tax money on 24 percent of the rent at Transit's new headquarters in Overtown, but the tax picked up the entire $2 million tab to furnish those offices.

The 24 percent figure will shrink if the agency's plans to cut more bus service are enacted. Next year, the tax might cover only 19 percent of Transit's rent.

Higher fares, more taxes?

Earlier this year, federal regulators dealt a huge blow to Miami-Dade's plans to leverage the new sales tax for a long-promised Metrorail extension through the heart of the black community.

After poring over Miami-Dade Transit's books, the regulators said the county no longer qualifies to compete for $700 million in matching funds for the proposed North Corridor.

The reason? Despite the sales tax, they said Miami-Dade hadn't set aside nearly enough money to maintain and modernize its existing system. The federal reviewers estimated a shortfall exceeding $1.1 billion over 30 years.

That setback also means no matching funds for the proposed East-West Corridor, which would run from near Miami International Airport to the western suburbs.

Five other lines mentioned in the 2002 plan have even less of a chance.

Today, only one tiny segment appears to be a certainty: a 2.4-mile, $526 million spur from the Earlington Heights station to a transportation hub under construction near MIA.

Meanwhile, commissioners are trying to shore up Transit's long-range prospects. They are considering a menu of fare hikes, park-and-ride fees and possibly the elimination of two key promises from 2002 -- free rides everywhere for seniors and free rides for everyone on Metromover.

Commissioners Barbara Jordan and Bruno Barreiro are floating another alternative: Increase the sales tax by another half-penny and make the system free to all.

Selling that idea won't be easy -- given the declining economy of 2008 and the unkept promises of 2002.

"We know that most of the major Metrorail projects aren't going to get done,'' said Buoniconti, who still serves on the tax oversight panel. "There were too many promises, too many assumptions about revenue, about costs. The numbers just didn't add up. They didn't come close. And now we have to deal with it.''