CHICAGO - The St. Louis Metro transit agency failed to adequately control the costs of its Cross County Extension project or ensure the viability of the developers' proposed design, and issued flawed bid documents, contributing to $136 million in cost overruns on the $550 million project, according to a Missouri audit released this week.
The long-awaited 47-page audit from state auditor Susan Montee was requested by Gov. Matt Blunt in 2005. It reviewed the transit agency's operations with a focus on its management of the light-rail extension project. The audit is available at www.auditor.mo.gov/press/2008-58.pdf.
Metro - formally know as the Bi-State Development Agency of the Missouri-Illinois Metropolitan District -issued about $400 million of sales tax appropriation-backed revenue bonds in 2002 to raise funds to finance the 8.2-mile extension project. The debt is repaid with the agency's share of local sales taxes.
Metro returned to the market in 2005 for a $150 million floating-rate issue to cover the cost overruns and filed a lawsuit against the four companies - Parsons Brinckerhoff, Jacobs Engineering, STV Inc., and Kwame Building Group - that formed the Cross-County Collaborative.
Metro blamed the CCC for about $81 million of the overruns, alleging the group's incomplete design contributed to construction problems. Any settlement funds were earmarked for repayment of the $150 million issue, but last year a St. Louis County Circuit Court jury rejected Metro's arguments and ruled in favor of the companies.
The audit faulted the agency for failing to ensure that the final design of the project from the CCC was substantially complete and free of errors before construction began, and it did not retain the services of a project management oversight consultant prior to completion of the final design. The agency also failed to ensure utility relocation design work was completed in a timely fashion and did not ensure that that work was coordinated with construction work.
In addition, Metrofailed to follow federal guidance by requesting lump sum bids and issued bid documents that contained conflicting provisions. "As a result, the final estimated cost of the project, $686 million, exceeded the original project budget of $550 million by about $136 million," the audit said.
Amid the agency's ongoing struggles to keep its operating budget balanced, the audit warns that the added costs pose a burden that could "significantly impact the operations of Metro and the users of their services. Metro did not control the cost of the Cross County Extension Project and now faces significant funding shortages."
The audit also faulted Metro's board for approving and paying bonuses, executive stipends, severance payments, and retroactive raises since 2003 totaling at least $704,600 to three executive employees. The board also approved one-time economic bonuses totaling over $810,000 and granted retroactive pay increases totaling over $166,000 for salaried employees. The agency's former manager, Larry Salci - who resigned after the failed lawsuit - was included in the list of executives who received bonuses totaling $160,000 and a severance package of $250,000.
"The practices of providing these types of additional compensation payments are unusual and questionable in most government agencies. In addition, these practices may violate Article V of the interstate compact under which Metro was established," the audit said.
The audit's release came ahead of a Nov. 4 ballot measure in which St. Louis County voters are being asked to approve a half-cent increase in the sales tax to raise about $80 million in additional revenue annually to cover Metro's operations and to fund further expansions.
The agency faces an $8 million deficit in its current budget and a looming $45 million deficit in its fiscal 2010 budget and has warned that service cuts and a fare increase loom without an infusion of new cash.
One critic of Metro - Tom Sullivan of the Public Transit Accountability Project - said the audit points out management flaws he has long cited and believes voters will reject the referendum.
"The state audit of Metro points out that taxpayers will be paying tens of millions of dollars for years to come because of the transit agency's incompetence," he said. "It isn't likely voters will approve a tax hike for such a mismanaged outfit."
The audit recommends that Metro ensure all expenditures are prudent, reasonable, necessary, and essential to the operations of the agency, andthat it formalize operating practices, and establish written policies regarding expenditures and practices related to contributions, food purchases, and employee incentive programs.
Metro should also require that expenditure records contain a description of the goods or services being purchased, perform periodic reviews of expenditure records to identify problematic transactions, and review supporting documentation to determine compliance with agency policies and procedures.
Metro does already meet some of those requirements and is adopting most of the other recommendations, according to the audit.
