The Ongoing Story Of The Growing "Partnership" Between The Alameda-Contra Costa Transit District And The Belgian Manufacturing Company




Berkeley Daily Planet
September 21, 2007
By J. Douglas Allen-Taylor

AC Transit officials have not released bottom-line figures on the complicated exchange of 16 North American Bus Institute buses for 16 buses made by Belgium-based Van Hool company because as late as August 28—five months after district trustees first approved the exchange on the claim by AC Transit General Manager Rick Fernandez that the deal was a “no brainer” that will “ultimately save [AC Transit] money,”—the district was still in negotiations over how much it owes the federal government for going through with the deal without federal approval.

In addition, AC Transit officials did not appear to even begin its first internal financial analysis of the transaction until after the trustee board’s approval.
Those are the conclusions that can be drawn from an analysis of documents released by AC Transit to the Daily Planet following a Planet public records request concerning the district’s justification for the NABI-Van Hool deal.
At a time when AC Transit is asking for public support in a much larger project—the installation of Bus Rapid Transit connecting several East Bay cities—the conclusions raise serious questions about AC Transit’s statistics and figures, and about how much actual fiscal oversight is being provided by the publicly-elected district board.

The deal involved the sale of 16 7 year old 40 foot NABI buses by AC Transit to ABC Company, the American distributor for Van Hool, to be replaced by yet-to-be-manufactured 40 footers to be purchased from Van Hool.
One of the complications of the deal is the original purchase of the NABI buses by AC Transit in 2000 had been partially subsidized by the Federal Transit Administration. Under FTA regulations, local transit districts receiving such bus purchase subsidies must keep their buses in operation for 12 years, or else pay back to the FTA a percentage of the subsidy for every year early the buses were taken out of service. AC Transit proposed that this payback money not actually be paid back in cash money, but be transferred as an “interest” to a current FTA Maintenance Equipment and Facility Upgrade Project grant to AC Transit.
A second complication in the deal was that to raise the money to purchase the 16 new Van Hools (originally set at 10, with 6 later added), AC Transit proposed borrowing $3.3 million in cash from its Bus Rapid Transit (BRT) Funds held by the Metropolitan Transit Commission.

In a February 14, 2007 memo from AC Transit Capital Planning Manager Kate Miller to MTC, Miller said that AC Transit “would like to fund the bus replacements with RM2 funds (from our BRT project) and then fund the BRT in 2009 (or later as needed) from the FTA program.”

In the same letter, Miller said that AC Transit officials “thought we would run this by MTC first before we approached FTA.”

The proposed NABI-Van Hool swap first came before the AC Transit Directors as a 10 bus deal on March 21. At that time, even though General Manager Rick Fernandez gave no bottom line figures for the transfer in his memo of recommendation (saying only that “the fiscal impact will be determined by the proceeds of the sale…the cost of the procurement of the new buses, and the net reduction in maintenance costs” without supplying any hard figures for any of these items), the board approved the deal on a 4-1-1 vote, Board President Greg Harper voting no, Vice President Rebecca Kaplan abstaining, and Director Elsa Ortiz absent.

Two weeks later, Fernandez returned to the board to increase the bus transfer to 16, telling directors in his memo that “staff has sought funding from MTC for replacing up to 16 vehicles…[and] is currently working with the Federal Transit Administration (FTA) to seek their approval to retire up to 16 buses prior to the end of their expected useful life and to determine an eligible asset in which to transfer the federal interest.”

But according to the documents provided to the Daily Planet by AC Transit, that last statement may not have been true.

In a memo from Capital Planning Manager Miller to Technical Service Administrator Bob Bithell entitled “Your Immediate Help Please” and dated April 10, 6 days after Fernandez’ memo, Miller wrote that she needed information on the buses to be sold “asap. FTA headquarters received wind of this through the papers before we had an opportunity to send Region 9 a letter. At this point this is rather embarrassing and I would rather not let it escalate.”

The Daily Planet published stories on the NABI-Van Hool bus transfer on March 23 and again on April 6.

On April 20, a month after the AC Transit Board approved a deal that was based, in part, on FTA approval, Fernandez finally wrote Region 9 of the FTA, asking for approval of the transfer of the federal interest in the NABI’s.
Fernandez told FTA Regional Administrator Leslie Rogers that that early retirement of the 16 NABI’s would “eliminate costs associated with mid-life rehabilitation required to keep the buses in good operating order, reduce emissions by replacing the older buses with cleaner, more fuel efficient vehicles, serve the public with newer buses with improved design, and improve service performance by deploying new buses.”

But no data figures were included in Fernandez’ letter to support the maintenance and emission reduction aims, and Rogers said they were necessary for FTA consideration.

There followed a flurry of internal AC Transit emails during the month of May as staff members scrambled to collect information on possible savings in the deal in the area of maintenance and emissions, information that was apparently never collected or analyzed by the district in its original lead-up to deciding whether or not to make the deal in the first place. Fernandez included this information in chart form in a May 30-31 letter to Rogers at FTA.

Late in June, Rogers wrote back to say that FTA would not approve the federal interest transfer, saying that “the District’s proposal to remove these buses after six years of service life for reasons of maintenance and operation costs, air quality, and FEMA bus needs, are not compelling justification for FTA to approve early disposition of Federally-funded assets for transfer of the interest to a future capital project.”

In early July, Fernandez informed district board members of the FTA denial, also informing them for the first time that the Metropolitan Transit Commission had agreed to fronting the $3.3 million Van Hool purchase money “contingent on FTA’s approval of the fleet retirement plan” but then added that “it is also staff’s belief that the $3.3 million from MTC will be available despite [that] contingency.”

Why staff believed that MTC would make money available based upon FTA approval, but then give the money anyway even though FTA failed to approve, was not explained in the memo.

Fernandez also wrote in his July 2 memo to the board that despite the fact that AC Transit would now have to reimburse FTA directly and immediately for the early retirement of the federally-subsidized NABI’s “staff has evaluated this alternative and determined that it still would be in the District’s best interest to proceed with the proposal.”

But between July and August, AC Transit officials conducted running negotiations with FTA over how the federal interest on the retired NABI’s would be figured, and how much cash the district would have to pay the federal government.

On August 28, AC Transit Capital Development Manager Miller sent FTA Region 9 Transportation Specialist Phil Barros an email including a depreciation comparison spreadsheet that calculated the amount owed by the district to FTA for the NABI retirement at $1.3 million. Miller asked Barros to confirm his agreement to the figure, but no agreement letter was included in the documents provided by the district.