U.S. Agency Approves MTA’s Recovery Plan

Federal transportation officials approved the Metropolitan Transportation Authority’s latest recovery plan Thursday, a move that will help unlock $61.5 million for Metro Rail construction and boost Los Angeles’ efforts to obtain even more federal money needed to finish the subway to North Hollywood.

The recovery plan, accepted by the Federal Transit Administration, was the third one drafted by the MTA in response to Washington’s demands--delivered more than 18 months ago--that the local agency clean up its financial act.

“We are encouraged by the current management’s approach to making difficult decisions to bring order to MTA’s fiscal house,” Federal Transit Administrator Gordon Linton said in a letter to the House and Senate committees that control federal appropriations for transportation projects. Congress had made release of the $61.5 million for the MTA in this year’s federal budget contingent on approval of the plan.

Linton’s announcement came just before crucial committee decisions will be made on next year’s federal funding for transit projects nationwide, including the Los Angeles subway.

The federal agency’s approval marks an important step in the attempts to bring order to the MTA and give it money to build the last segment of the subway to North Hollywood, but it does not address one of the MTA’s overarching problems, its enormous debt of $7 billion.

If released, after clearing other hurdles, this year’s federal money will help the MTA cover some of its subway construction bills but not its operating expenses, which include about $360 million this year to pay down its debt. Still, federal approval of the recovery plan also signals a vote of confidence in the MTA’s recovery efforts that could help persuade a wary Congress to approve still more money.

Julian Burke, the corporate turnaround expert who took over as chief executive officer last summer and crafted the recovery plan, hailed the word from Washington as marking “a great day” for the MTA. He said the federal agency’s action was the strongest sign to date that the MTA is moving in the right direction.

Los Angeles Mayor Richard Riordan, the MTA’s board chairman, was out of town on vacation but issued a statement saying federal approval “validates” his and Burke’s effort to reform the MTA “from top to bottom.”

“We’ve come a long way in restoring our credibility with the federal government,” Riordan said.

Debt Hurts Ability to Upgrade Bus Service

Still, the MTA faces major challenges as it struggles to finish the subway and meet a federal court order--called a consent decree--to improve its overcrowded and dilapidated bus system, after making the debt payments.

The debt, which has become the agency’s biggest single operating expense, is hindering the MTA’s ability to improve bus service, used by 91% of its riders.

Although the MTA has made “significant efforts to comply with the bus consent decree,” Linton said in his letter, the lack of clear milestones in the court order “makes it more difficult for ongoing compliance to be clearly established.”

Linton issued a call to bus rider advocates and the MTA to try to agree on a way of determining whether the agency is following the court order.

The MTA and civil rights attorneys who won the consent decree dispute whether the agency has complied with the order to reduce overcrowding on buses. The issue is headed back to federal court. Indeed, the gap between the MTA and the Bus Riders Union advocacy group was evident again Thursday as the two sides differed sharply over the number of new buses needed to relieve overcrowding.

For more than 1 1/2 years, the federal government has wanted a plan that confronted the MTA’s chronic financial problems, cost overruns, construction mishaps and political infighting. The federal approval of the MTA’s third recovery plan, after two efforts were flatly rejected, came at a high price.

Under pressure from Washington, the MTA abandoned its long-standing practice of inflating projected receipts from the county’s penny-on-the-dollar sales tax devoted to transit. The use of overly optimistic sales tax forecasts despite the region’s worst economic recession since the Depression allowed the MTA board of directors to pursue more rail projects than could be delivered.

After being forced to accept lower revenue projections, the MTA directors said they had little choice but to follow Burke’s tough advice and stop work on subway extensions to the Eastside and Mid-City and a light rail line from Union Station to Pasadena.

And they backed Burke’s efforts to cut staff and institute some controls over the MTA’s spending, which had run over budget every year since the agency was established.

Almost as important as the money that Thursday’s federal action helps release is the political boost it may deliver to the MTA as it gears for a tough fight for more subway construction funds next year.

At the end of a four-hour forum Thursday at MTA headquarters on the region’s transportation needs, Rep. Julian Dixon (D-Los Angeles) called on local officials to “start pulling together” if the area is to receive a large appropriation from Congress this year. “We’ve got to learn to sing the same song,” he said.

Dixon, who has championed the Metro Rail project on Capitol Hill, later said that the best Los Angeles can anticipate in the House committee for next year’s subway allocation is the same amount as contained in the current federal budget--$61.5 million. And he expressed concern that the Senate committee could include far less when it meets next week.

Before the MTA receives this year’s $61.5 million, the U.S. Department of Transportation’s inspector general and the federal General Accounting Office must also approve the recovery plan.

While praising the MTA’s recent efforts, U.S. transit officials made clear that they expect the progress to continue.

Leslie T. Rogers, the federal transit agency’s regional administrator in San Francisco, said in a letter to Burke that “much work still remains to be accomplished.”

“While you have detailed potentially effective strategies for re-engineering the MTA and reforming its past practices, these strategies must be implemented quickly to yield a more efficient and effective organization, tailored to deliver the best possible bus and rail service for each dollar spent,” Rogers wrote.

But Linton, the federal transit chief, said that the MTA can complete the subway to North Hollywood “within available and conservatively projected revenues.”

Hearing Underscores Agency’s Problems

Even as Burke staged a rare news conference at MTA headquarters to celebrate the plan’s approval, four members of Congress were wrapping up the long hearing across the hall that underscored the agency’s continuing financial and political problems.

The lawmakers, including one who will help decide the MTA’s funding, made it clear that the agency must do more to improve service, especially in their public-transit-dependent eastern and southern Los Angeles County districts.

In opening the hearing, Rep. Esteban Torres (D-Pico Rivera) noted The Times’ recent report that portrays “a transportation system mired in debt and unable to adequately meet its obligations to the transit-dependent residents of Los Angeles County.”

In response, Burke said that the MTA can manage its existing debt. “We are not on the brink of any kind of financial disaster as a result of our existing debt burden,” he said.

Foreshadowing the difficulties that lie ahead for Los Angeles, Torres said that reaching agreement on a regional transportation system is “an incredible challenge.”

That quickly became evident.

Rep. Lucille Roybal-Allard (D-Los Angeles) said Eastside residents who rely on public transit have been “shortchanged for far too long.” She criticized as “ill-conceived” a measure on the county’s November ballot to prohibit the use of any more sales tax money for subway construction.

But the strongest criticism of the MTA’s direction came from one of its own board members, county Supervisor Gloria Molina.

She pleaded with the members of Congress to impose restrictions on future federal funding for the MTA to ensure that it complies with basic financial controls, abides by worker safety laws, concentrates on improving bus service and limits cost overruns on construction projects.

Molina said accountability at the MTA must come from outside the agency. “It cannot happen here by itself,” she said.

And without naming names, Molina said the agency has been corrupted by “crooks” inside management, outside management and on the board itself.