MTA Postpones Review of Subway Pact Accord

The Metropolitan Transportation Authority on Wednesday quietly postponed consideration of an agreement with the city of Los Angeles that would have required the agency to secure federal funding by 1999 to build an east-west subway across the San Fernando Valley.

The move is the first public indication of MTA staff and board members’ concerns that the recent dramatic cutback in federal funding could cause a serious delay in the extension of the Metro Rail Red Line subway west from North Hollywood.

To continue to get federal funding for the subway project, the MTA must get matching funds from the city of Los Angeles and the state of California. The city has managed to avoid making any payments to the MTA, however, for the past two years.

The commitment to set milestones for the construction of a rail line across the Valley was a condition that the Los Angeles City Council attached to an agreement with the MTA. Under the agreement, the city promised to give the MTA $200 million by 2004. That money was to cover the city’s 7% share of the cost of the third phase of Red Line construction, which is now underway.

Joseph Drew, the MTA’s chief executive, brokered the subway financing deal in talks with Councilman Mike Feuer and city and county transit planners in mid-August, and the City Council voted overwhelmingly Aug. 20 to accept it.

But several MTA board members who represent smaller cities in Los Angeles County immediately criticized that deal, calling it too generous to the city of Los Angeles. In addition to the Valley rail construction milestones, the deal called for the MTA to forgive a $90-million debt owed by the city. That debt was to cover Los Angeles’ obligation to pay for cost overruns on the second phase of subway construction, between MacArthur Park and Hollywood.

The accord also called for the MTA to pay more than $25 million in interest and underwriting costs associated with the floating of a $142-million bond to cover the city’s contributions. The city would need to make only a lump payment of $58 million next year, and bond principal repayments over the next eight years. If the MTA missed any of the subway construction milestones, the city could suspend payment on the bond.

The MTA board was scheduled to consider the deal, which the city has accepted, at its meeting Wednesday. The item, however, was simply marked “withdrawn” on the board’s agenda.

MTA board member Jim Cragin said he welcomed the chance to postpone a vote on the agreement for at least a month.

“Los Angeles is saying, ‘We’ll give you the $200 million, but there are strings attached.’ But we don’t want strings attached. Just hand over the $200 million,” said Cragin, a Gardena city councilman.

An aide to one of the city’s representatives on the board said his boss and other directors believed the recent dramatic cutback in federal financing of Metro Rail--to $70 million in 1997, down from the $158 million the MTA wanted--would very likely mean the city could simply not meet the Valley construction milestones.

“The MTA thought it could meet the targets if it got $90 million from Congress,” said the aide, who declined to be identified. “When the staff plugged the $70 million into their spreadsheets, they could tell there would be money missing in some years.”

Richard Alarcon, a member of both the Los Angeles City Council and the MTA board, said he believed consideration of the deal was put off to gain more time to consider the full impact of the funding shortfall.

“The MTA staff wants to make sure there is sufficient revenue flow to cover the city benchmarks,” he said.

Feuer on Wednesday expressed surprise when informed that the deal he had engineered was in trouble, at least for now.

“If in fact some MTA board members are reluctant to accept the city funding with milestones for the Valley line, then that underscores the importance of the milestones,” he said. “If the MTA’s commitment to the Valley is as fragile as this, then the city ought to reevaluate its commitment to the MTA.”

MTA board Chairman Larry Zarian said the agency staff members would be meeting with directors over the coming month to try to fashion a new deal acceptable to all.

He said a new proposal could come before the board’s finance committee early in October, with full board consideration following at the end of the month.