Metro Rail Overbilled by Lobbyists, Audit Shows

A major Washington lobbying firm overbilled the financially troubled Southern California Rapid Transit District more than $75,000 in expenses incurred while winning support from congressmen and Reagan Administration officials for the Los Angeles Metro Rail subway, according to an audit made public Tuesday.

The audit, the first conducted on the RTD’s outside lobbyists, was prompted by Times stories earlier this year that said the transit agency spent millions on federal, state and local lobbying since 1983 with little scrutiny over where the money went.

The audit report came four days after another overbilling problem at the RTD was divulged. Auditors said they found that district had been overcharged more than $50,000 by a Metro Rail consultant after suspicions were aroused by an unreasonable number of work hours submitted by Charles Schimpeler.

The RTD’s new inspector general who conducted the latest audit said that the lobbying firm of Bill Hecht & Associates was paid a total of $524,580 during the nearly four years it has worked for the transit district. But the report by Ernesto Fuentes, the inspector general, said that the Hecht firm failed to document $70,000 in labor costs. Additionally, the company has agreed to repay another $5,274 for unauthorized first-class air travel.

However, a spokesman for Hecht said the firm does not believe it owes the disputed $70,000 and can document it as a legitimate expense.

Others Firms Being Audited

Other lobbying firms hired by the RTD during the same period are also being audited, but those results are not yet completed. The Times survey last February found that the Hecht firm was among the best in providing receipts for its work. Several other firms gave the RTD far less detailed explanations for their billings and at least one lobbyist simply sent in statements of amounts owed with no explanations at all.

In his audit, Fuentes recommended that the district “disallow billings” under the current contract with Hecht “until documentary support is submitted to substantiate the sums claimed.”

John Connolly, a spokesman for the Hecht firm, said in a response to the audit findings that “we do not require the staff to keep ‘time sheets’ as such.” However, he told The Times that the firm will nevertheless be able to provide the RTD with further documentation for the $10,000-a-month labor costs incurred between July, 1986, and January, 1987.

“We will get him (Fuentes) documentation and we assume it will be approved,” Connolly said.

He said Hecht will deduct the first-class air fares from its next two billings to the RTD.

All told, the outside lobbyists in Washington and Sacramento received more than $1.2 million from 1983 through early this year, primarily to help the RTD win hundreds of millions in federal tax money for Metro Rail.

The RTD has spent more than $5.4 million since 1983 to spread its influence in Washington and Sacramento as well as local city halls and among community groups. Much of the money came from its economically distressed bus system because federal law prohibits local agencies from using money its receives from Washington to lobby for more money.

RTD General Manager John Dyer said in February that the lobbying expenses were justified by the results. “I would suggest that the effort was well worth the cost, the expenses, for the simple reason that we were successful,” he said. The RTD has received congressional approval for $1.25 billion to construct the first 4.4-mile section of the subway between Union Station and McArthur Park in downtown Los Angeles.

Benefits Overstated

In another Metro Rail development, a new analysis by a USC transit expert and longtime critic of the project said Tuesday that the economic benefits of the multibillion dollar subway have been grossly overstated by the RTD.

Among other things, the analysis by urban planner Peter Gordon says RTD has “double counted” financial benefits in arriving at its estimate that up to $1.5 billion in windfall rent, sales and land value increases will occur in the downtown area as a result of construction of Metro Rail.

In an interview Tuesday, Gordon said by adding two economic measures “of the same phenomenon” the RTD has violated the rules of elementary cost-benefit analysis. “It is either incredible incompetence or the worst indication of intentional manipulation” of data, Gordon said.

Gordon’s study was prepared for a group of downtown property owners who are fighting a special 20-year Metro Rail tax on some 2,000 properties near the subway’s downtown and MacArthur Park stations.

The accuracy of RTD’s estimate of Metro Rail economic benefits is significant because it has been used to justify the tax, which earlier this year increased some businesses’ property tax bills 500% or more. In the face of loud protests and court challenges, the RTD board--after collecting $20 million--voted in February to suspend collection of the tax until the subway is completed in 1992.

RTD officials said they had not seen Gordon’s report, which is likely to be used in the court fight against the tax. But Gary Spivak, RTD’s top planner, defended the transit district’s estimates and said Gordon’s charge “does not make any sense.” He said there is no reason not to add land value increases, sales increases and rent increases.

Valid Point

Although he had not seen the report, David Dale-Johnson, a real estate economist at USC, said it appears Gordon’s point is valid. “It would be double counting,” he said, adding the RTD probably should only count anticipated increases in land values.

Gordon’s report also said Metro Rail’s official ridership projections of more than 300,000 riders a day are “an impossible dream” which exaggerate the future benefits to nearby properties. His own analysis, which he said has proven to be a more accurate forecaster in other cities with subways, suggests Metro Rail ridership may be be only 60,000 to 70,000 riders a day when fully built.

Spivak said RTD’s ridership estimates are very reliable and have been reviewed by a variety of outside organizations, including the federal government. An independent analysis of ridership figures prepared for The Times found they were overstated by at least 20%.