Report Fuels Drive to Create Separate Valley Transit Agency

If state lawmakers broke the MTA into two pieces, setting up one to run transit in the San Fernando Valley, both entities would be financially “viable,” according to a report issued Tuesday by the state auditor’s office.

What’s more, the proposed Valley authority, which would take over approximately 20% of the Metropolitan Transportation Authority’s debt, could finish with a $38.6-million annual surplus, the report said.

Lawmakers and other Valley advocates who contend an independent Valley agency could better manage the region’s transit services immediately seized on the report as ammunition in their cause.

While both the city and the MTA have hired private consultants to study various ways to privatize the Valley’s bus operations, the study released by state Auditor Kurt R. Sjoberg stands out for two reasons. It is the first analysis by an independent government agency. And its review covers more than privatization of the bus service--it envisions a partial dismantling of the MTA in which a new public entity would control bus, rail and other transit projects in the Valley.

The MTA, which lobbied heavily against a bill that would have established such a Valley agency, conceded that the report’s findings were “reasonable,” in a written response.

“I’m amazed at these figures,” said David W. Fleming, a prominent Valley political leader, member of the California Transportation Commission and the city Fire Commission. “It’s something that should excite people in the Valley. For a long time, we’ve wanted to build a transportation system out here that fits our needs. This is quite an eye-opener.”

Even as state analysts appeared to endorse the idea, however, the debate remained largely theoretical. The study was ordered by state Sen. Tom Hayden (D-Los Angeles) earlier this year, when he submitted a bill to establish such an agency.

After receiving a chilly reception in the Senate Transportation Committee, where critics warned a new MTA-like entity would be crippled by internal conflicts between planners and operators, Hayden amended his bill. The current version, which is stalled in an Assembly committee, would create a transportation planning board for the Valley.

Hayden spokesman Rocky Rushing said the report vindicates the original concept.

“We’re going to use this information to get the Valley legislators who’ve been sitting on the fence to get behind the bill,” Rushing said.

Under the proposal reviewed by the state, the MTA would transfer all its assets in the Valley area to the new authority, and also would redirect sales- and use-tax revenue collected from Valley residents under Proposition A and Proposition C.

In turn, the new agency would take responsibility for managing and operating part of the Red Line subway, three railroad rights-of-way including two now used by Metrolink and other trains, and 35 bus routes.

In all, the MTA would transfer $1.1 billion in assets to the new agency. The related debt on those assets, including principal and interest, is $560.3 million, which could be paid off by 2028. In the state’s analysis, the Valley authority would not assume any debt from the almost $186-million financing of MTA’s Gateway Center headquarters, because the building “is enjoyed mainly by the employees of the MTA.” The new agency would have its own employees.

State auditors also didn’t calculate the Valley authority’s share of MTA debt incurred from borrowing to pay workers’ compensation claims and lease buses. The Valley’s share, the report said, would have to be hammered out with the MTA when and if the new agency is established.

In its first year, the new authority would have local revenue of $189.6 million, according to state estimates. After making an annual debt payment of $44 million and spending $107 million in bus operation costs, the agency would have $38.6 million to expand service or develop new transportation projects.

Once the Red Line extension to the Valley becomes operational, the new authority’s share of the operating cost would be $19.9 million. The report said “it would be reasonable to expect that the MTA would operate the entire northern extension” under an agreement with the Valley agency.

Authors of the report made several assumptions in studying the idea of an MTA breakup. One is that a Valley authority would receive federal and state revenue proportionate to what the MTA now receives, which would mean $88.7 million in additional funds. But that money would be reserved for specific projects and wouldn’t be used for operating costs.

Another assumption is that the state has the legal authority to transfer tax revenue from the MTA to the new agency, which the authors acknowledged was “not certain.”

State Sen. Quentin I. Kopp (I-San Francisco) said he hadn’t read the study, but cautioned that an MTA-like agency for the Valley could be riven by conflicts between those who wanted to improve bus service and those who wanted to expand rail service.

“There’s an inevitable collision of interests,” Kopp said. Whether the authority would be profitable, he added, “is almost beside the point.”