The FTA has responded to Cascade’s letter, and disagrees with Cascade’s contention that the MAX Green Line is out of compliance with the Full Funding Grant Agreement. The FTA’s response is here. Quoting from the response:
In recent years, TriMet, like many transit agencies across the country, has been impacted by the decline in economic conditions. FTA recognizes that light rail projects are long-term investments that may experience one or more economic downturns during their lifecycle. While the duration of almost any downturn is uncertain, transit agencies are often faced with service reductions as a way to temper immediate financial impacts until conditions improve. Such temporary actions are not typically viewed by FTA as a breach of contract. Section 19(a) of the FTA FFGA discusses “default” in terms of “…substantial failure [emphasis in original] of the Grantee to complete the Project in accordance with the Application and this Agreement will be a default of this Agreement.” TriMet is not in “substantial failure” of completing the project nor is it in default of the FFGA as a result of recent service reductions.
The original text of this article is after the jump.
Well, not really–but it sure seems that way.
Two weeks ago, the libertarian think tank took exception to what it believes is insufficient service hours on the federally-funded MAX Green Line, and sent a sternly worded letter to the Federal Transit Authority on the subject.
In the letter, the CPI noted that the Green Line is operating with 33% fewer service hours than originally intended; claiming this to be a violation of the Full Funding Grant Agreement (FFGA), a contract which is negotiated between a transit agency and the FTA concerning the dispersement of federal funds. An FFGA generally specifies the terms and conditions for designing, building, and operating the project in question. An agency which violates an FFGA, by (for example) not using the funds for the stated purpose, or failing to operate the service once built, may be found in violation–and agencies which remain in violation after being notified of such, may have to forfeit or refund federal funding.
That the Cascade Policy Institute cares so much about the needs of MAX riders may come as a surprise to readers of Portland Transport–many of whom have been led to believe that CPI doesn’t like light rail. But there it is, in black letters, John Charles requesting that Uncle Sam intervene on behalf of beleaguered Green Line users, who are being deprived of service hours promised by TriMet:
We ask that the FTA take steps to enforce the terms of the contract by requiring that TriMet operate the Green Line at 100% of the originally planned service levels, or pay back one-third of the total federal grant funding used for capital construction, as authorized in section 19(a) of the FFGA, as well as Chapter VI, Section 12 of FTA Circular 5010
How times change.
It was only last fall, it seems, that the Institute was busy opposing another MAX project, the Milwaukie line, in its written publications, by claiming, among other things, that it would reduce bus service. It was only last fall that we were treated to the spectacle of ATU 757 members cheering on John Charles after a rousing anti-MAX speech before the TriMet board, in which he gleefully promoted the theory that MAX epansion was a grave threat to bus operations. But here we have the CPI demanding that TriMet increase MAX service, or else be subject to what would essentially be a penalty of over $100 million–“one-third the total federal grant agreement”–either of which would require cuts in service elsewhere, likely including bus service.
Did the CPI have a change of heart? Did John Charles become a trainspotter this spring, and suddenly develop a deep love for our light rail system?
Don’t be silly. However, we’ll get to CPI’s likely angle later. First, we shall consider a more important question:
The unanswered question
Is TriMet in violation of its promise to the FTA, as the CPA letter and press release alledge? More to the point, is TriMet in jeopardy of any penalties, including those proposed by CPI in its letter?
Portland Transport made an inquiry with TriMet as to this matter, and the agency shared with us the following memo which general manager Neil McFarlane sent out to the board of directors in response to the CPI announcement:
The Cascade Policy institute has released via press release a complaint they have filed with FTA – alleging that we are not in compliance with our Green Line Full Funding Grant Agreement – and that FTA should embargo future federal funds. I want to assure you that TriMet is in full compliance will all aspects of the FFGA for the MAX Green Line. The contention continues that since we opened the line with 33% less service than originally planned – we were not in compliance. Obviously, FTA will need to provide their own response. The initial service level has not been an issue raised by FTA. I am sure that FTA understands the long-term nature of our light rail projects (they are planned with a 20 to 25 year horizon and a 50 to 100 year life), as well as the difficult decision we and other transit providers have had to make to survive the great recession.
The memo then goes on to tout increasing ridership on the Green Line–information which, while encouraging, does not address the issue of FFGA compliance (the FTA cares that about whether the trains run and how often, not so much who rides them).
TriMet spokesperson Mary Fetsch, in a followup, further stated:
The FFGA does not specifically describe LRT frequency levels. The document is focused on the construction of the project, schedule and costs. […] It notes that the Grantee will operate and maintain its entire system at an adequate and efficient level of service. TriMet had intended to operate the Green Line with 10 minute frequencies during peak periods and with 15 minute frequencies during off-peak hours. Due to the deep recession affecting the Portland area, we have reduced service throughout the system and are operating the Green Line with 15 min peak and off peak service. TriMet has communicated with FTA about reductions in transit service as a reaction to the recession.
TriMet worked with community to reduce service and balance accessibility with the need for cost cutting. We believe that the temporary reductions in Green Line services are a responsible reflection of the economic realities.
Fetsch also provided us a copy of the South Corridor FFGA (PDF).
Defaulting on an FFGA can be serious business, and can result in agencies being required to pay back grants. Prior to the Green Line opening, some transit users suggested that TriMet delay its operation in lieu of service cuts elsewhere–advice which, if followed, would undoubtedly constitute a FFGA violation. Likewise with the frequent calls to mothball WES (though in that case, it might come close to making financial sense… you can do the math at home).
At any rate, Neil informs his board–in plain language–that ” I want to assure you that TriMet is in full compliance will all aspects of the FFGA for the MAX Green Line”–but then softens his stance by noting that the FTA will “have to provide their own response”–which is not as reassuring as his initial stance. Michael Anderson contacted the FTA and asked them for clarification of the matter; and they indicated that they would issue a response, but gave no indication of what it might be.
So is the Green Line in compliance?
As far as I can tell…. probably. But there is certainly a chance that the FTA might issue an objection.
Unpacking the FFGA?
The FFGA is a standard contract executed between the FTA and a transit agency, upon substantial completion of a project’s planning and design. The process for getting federal funding is long, complex, and nasty… but the FFGA itself is mostly a standard form (a sample agreement with the variable terms left blank can be found here). CPI alleges that TriMet is violating sections 2(d) and 12(b) of the FFGA. Both sections are generic boilerplate, and read as follows:
[Pursuant to 49 U.S.C. § 5309, the purposes of this Agreement are to] establish the Grantee’s financial commitment to the Project including its obligation to fund the Local Share, its obligation to Complete the Project with a specified amount of Federal assistance, its obligation to achieve revenue operation of the Project by a specified date, its obligation to pay all costs necessary to Complete the Project that are in excess of the Estimated Net Project Cost, and its obligation to finance the future maintenance and operational costs of the Project;
With the Execution of this Agreement, the Grantee assures that it has stable and dependable funding sources, sufficient in amount and in degree of commitment, to operate and maintain its entire mass transportation system at an adequate and efficient level of service, including the future operation and maintenance of the Project without additional Federal assistance beyond the amounts set forth in the Financing Plan. The foregoing assurance does not preclude the Grantee from altering service through contracts with private providers of mass transportation services.
TriMet has successfully funded the Local Share (of construction funds), and has successfully completed the project construction and opened the Green Line on schedule. CPI’s accusations seem to rest on the contention that TriMet has failed to “finance the future maintenance and operational costs of the Project” and/or to maintain “stable and dependable funding sources, sufficient in amount and in degree of commitment, to operate and maintain its entire mass transportation system at an adequate and efficient level of service, including the future operation and maintenance of the Project without additional Federal assistance beyond the amounts set forth in the Financing Plan.”
The FFGA does not specify minimum levels of service that TriMet is required to maintain. CPI seems to contend that since the level of service is 33% less than that contained in planning documents, this constitutes a breach. TriMet begs to differ, claiming that the service reductions are a reasonable response to economic conditions, and that the service currently provide (15-minute all-day service on weekdays, lesser service on weekends) is a reasonable amount which provides a “adequate and efficient” level of service. Recent history seems to support TriMet’s version of things–I’m unaware of any instance of an FTA grant being rescinded, or the FTA ordering service increases on a project, due to service cuts that nonetheless left a viable service in place.
But what if the Green Line were in violation?
But what if the FTA were to agree with CPI, and decide that TriMet is in violation? Section 19 of the standard FFGA contract deals with breaches:
(a) Substantial failure of the Grantee to Complete the Project in accordance with the Application and this Agreement will be a default of this Agreement. In the event of default, the Government will have all remedies at law and equity, including the right to specific performance without further Federal financial assistance, and the rights to termination or suspension as provided by Section 11 of the Master Agreement, “Right of the Federal Government to Terminate.” The Grantee recognizes that in the event of default, the Government may demand all Federal funds provided to the Grantee for the Project be returned to the Government. Furthermore, a default of this Agreement will be a factor considered before a decision is made with respect to the approval of future Grants requested by the Grantee.
19(b) deals with nonperformance during the construction phase, and is not germane to this discussion.
(c) In the event of a breach of this Agreement by the Grantee and before the Government takes action contemplated by this Section, the Government will provide the Grantee with ninety (90) days written notice that the Government considers that such a breach has occurred and provide the Grantee a reasonable period of time to respond and to take necessary corrective action.
Several things to note: First, a breach must be “substantial” for a default to occur–even if one were to conclude that the service levels stipulated into planning documents are incorporated into the FFGA and thus form a minimum baseline service which must be maintained, an argument could be made that service which isn’t quite as good but which is still useful does not constitute a substantial breach. Secondly, the FTA has to notify TriMet in the event it considers the agreement breached, and give the agency 90 days to correct. TriMet has been operating at the present service levels for over a year and a half, the FTA is well aware of this (as TriMet, like all transit agencies receiving federal funding, must file regular operational reports), and they have not objected. Finally, while repayment of granted funds and exclusion from future grants are remedies which are available to the government in the event of an uncured breach, CPIs “theory of damages” (that since service hours have been reduced by 1/3 for slightly over 18 months; TriMet should remit 1/3 the capital costs) seems to have no legal basis: the Green Line is designed to operate for decades, not months or years, thus a 1/3 remittance based on a short-term service decline is not based on any reasonable damage calculation.
The worst thing that would likely happen to TriMet, as far as I can tell, is if the agency is informed if it is in violation, they would then reallocate service to bring the Green Line into compliance. This would probably result in service cuts elsewhere, and the agency and the CPI would trade a few barbs in the media, but TriMet is unlikely to permit itself to run afoul of the FTA for very long. Life will go on, at least in the short term.
But as hinted above–I suspect that this is not about Green Line service levels.
Derailing the Milwaukie line
Right after the Charles letter issues demands concerning the Green Line, it alson contains the following (emphasis in original):
We also request that until one of these actions take place, FTA withhold all capital funding for future TriMet rail projects, including but not limited to the $1.5 billion Milwaukie light rail line and the $932 million rail extension to Vancouver, WA.
My suspicion is that this maneuver isn’t about improving Green Line service at all (that train, after all, has already left the station), any more than CPI’s habit of trying to chat up transit workers and poverty activists in opposition to MAX is about improving bus service. While CPI does sometimes offer meaningful criticism and advice for the agency, such as this comment on the proposed fare increase (I don’t agree with all of it, but I consider it fair comment); CPI is organizationally opposed to publicly-subsidized and/or publicly-operated transit. Unlike OPAL or other critics of TriMet, who agree with the agency’s fundamental mission but disagree with its execution of strategy, and wish to reform TriMet, CPI’s CPI’s stated goal is to replace public transit with a “market-based system where roads, bridges, transit and airport facilities are operated (and possibly owned) by private vendors who charge user fees that vary based on supply and demand conditions.” In other words–to get rid of TriMet. This posture makes it harder to take operational criticisms of the agency seriously–especially when it takes seemingly inconsistent positions as to the mix of services the agency ought to provide.
CPI has been steadfast, however, in its opposition to the next train to leave the platform, Milwaukie MAX–or to virtually any increases in funding for the agency, seemingly for any purpose. I believe that when it comes time for the FTA to disperse funds for MLR later this year, once final engineering is complete and construction is ready to begin, CPI will be there to object–claiming that TriMet isn’t sufficiently financially viable to run the project, or that the actual service levels that TriMet intends to deliver will be less than what was outlined in MLR’s funding proposal. I don’t suspect these endeavors to be very successful–TriMet enjoys a good reputation with the FTA overall, and transit providers all over the country have been cutting back service–but I suspect them to be tried.
The libertarian alternative?
Some libertarians may object to my dismissal of CPI’s goals and concerns. “Market-based solutions” sounds good in theory, after all, and in fairness, CPI also takes positions against publicly-subsidized roads. (And bashing the gubmint is a popular pasttime, even among liberals). Some libertarians (not all) make grandiose claims about how all will work smoothly in Libertopia once the shackles of government are discarded–and consider the superiority of privatized, unsubsidized transit to be manifest and not a legitimate subject of debate. But for many, the quality of (current) public services is a secondary concern–the primary concern is reduction of government; a restructuring which is seen as an end goal in itself, not as a means to some other specific purpose. And if the “jitney” idea doesn’t work out, and transit goes away altogether? Tough–if the free market can’t provide a service at a profit, then obviously there is little need for it and it shouldn’t be provided. If the hidden hand of capitalism smacks you on the backside, so be it.
There aren’t too many examples of “market based transit” functioning in the developed world. Hong Kong has successful (and profitable) private transit operators, but the HK government is heavily involved in their finance, regulation, and operations. Routes are assigned by franchise, fares and schedules are fixed, and uniform standards of service are imposed on the franchisees. For lower-usage routes, HK does have less-regulated services which resemble jitneys; but the main trunk routes (and the bus system) are highly regulated, and there is no lawful competition there. And the government and private enterprise often gets highly entangled when it comes to new project planning, at a level which would likely be considered corruption here. Hong Kong is also insanely dense, and ownership of automobiles is highly expensive and inconvenient–it’s an excellent transit market, in other words, no matter the organizational arrangements.
Of course–if you’re really cynical, you might suspect that the real point of the so-called libertarian agenda (I say “so-called” because it is often supported by players who are quite clearly not libertarians) is not any sensible notion of liberty or freedom, but to shift the costs of providing public services from taxpayers, particularly the wealthy, to the working stiffs who depend on the service. A cynic might also suspect that another goal is to bust public sector unions like ATU. (Members of the union might give more careful consideration to who they shower with applause, as quite a few of CPI’s backers would love nothing more than for all of you to lose your jobs). And the really cynical might even suspect the point is to kneecap a potential competitive threat to petrochemical interests. To be clear, I don’t have any reason to suspect John Charles’ bona fides–many libertarians I know are sincere in their beliefs and despise corporate handouts and cultural warfare (and the shooting kind as well) every bit as much as progressives do. But as far as some of the entities who provide much of the funding for libertarian think tanks are concerned, I’m nowhere near as charitable. Quite a few energy interests and moguls fund CATO, for instance. I don’t know who funds CPI specifically–they do not disclose this information.
But regardless–calling for an increase in transit service is a rather interesting position for a libertarian think tank to take.