MTA Allots Funds to Workers’ Comp

While a federal judge considers whether to order the Metropolitan Transportation Authority to buy hundreds of new buses, the agency’s board of directors Thursday committed $61.3 million that could have been used to acquire or run more vehicles to cover workers’ compensation claims instead.

The unspent millions were “discovered” recently by the MTA in its Light Rail Capital Projects Fund and, apparently, derived mainly from interest earned on funds deposited in that account. As such, the money could be spent in any way the directors wished, according to MTA officials.

The decision to use the discretionary money to pay off injury claims came on the same day the MTA board was unable to muster the votes either to raise fares or to delay a fare increase planned for this fall. Unless the deadlock is broken, the agency cannot boost bus and rail fares on Nov. 1.

In sworn testimony before U.S. District Judge Terry J. Hatter Jr. last month, MTA officials insisted that the agency does not have the uncommitted funds needed to buy and operate an additional 481 buses to ease overcrowding.

The board’s 8-0 vote Thursday to allocate the $61.3 million to paying long-standing claims eliminates one of the sources of money available to buy or operate those buses.

The MTA has mounted an aggressive legal effort to overturn a decision by Special Master Donald T. Bliss ordering the transit agency to purchase the additional buses to ease overcrowding. Bliss found that the MTA violated a 1996 consent decree requiring a reduction in the number of passengers forced to stand aboard its buses.

Although Hatter has yet to issue his decision on the MTA’s appeal, the judge said from the bench that he heard nothing during last month’s hearing to convince him that the special master he appointed had acted erroneously.

County Supervisor Gloria Molina protested the move to commit the money for workers’ compensation claims, saying the agency has long known about its financial liability. “How did we get into such an irresponsible situation?” she asked. “I don’t like being surprised by this.”

Molina said the money could have been spent to address the needs of bus riders or to help build a rail line to the Eastside.

MTA Chief Executive Julian Burke agreed with Molina that the financial problem should have been addressed earlier.

“I don’t like it either,” Burke said to Molina. But, he said, auditors questioned whether the MTA was covering the liability for workers’ compensation on its books.

Molina left the meeting moments before the vote was taken.

Supervisor Zev Yaroslavsky, who has opposed shifting the funds, was not present for the vote. He was in New York on county business and appearing on a CBS News program to discuss the ban on the sale of guns and ammunition on county property.

Yaroslavsky said in a phone interview that his absence made no difference. “I don’t think my presence would have swayed one vote.”

Supervisor Yvonne Brathwaite Burke, who chairs the MTA board, said she was concerned about the $61 million building up in a transit reserve account without the board knowing about it. “Money gets lost in this agency,” she said. The MTA has had difficulty covering workers’ compensation claims in part because funds reserved for that purpose were spent to cover the agency’s operating deficit.

One of the MTA’s predecessor agencies, the Southern California Rapid Transit District, in 1992 issued $160 million in bonds to pay workers’ compensation claims. Repaying that debt will cost the MTA almost $16.5 million this year.

Terry Matsumoto, executive officer for finance, said the agency spent $102 million out of the RTD’s cash reserves for workers’ compensation to cover deficits in the first five years of MTA’s existence.

Tom Rubin, who was controller and treasurer of the RTD when the bonds were issued and is now a consultant to the Bus Riders Union, said the MTA has been “lying to everyone since the agency’s inception” about the workers’ compensation problem. “MTA appears to have been underestimating its claims liabilities for many years and it finally got to the point where they have to ‘fess up.”

The MTA’s chief operating officer, Allan Lipsky, said the agency had no choice but to address its obligations or risk calling into question the agency’s financial stability.

After the meeting, Supervisor Burke said the agency should postpone any decision on raising fares until after Hatter makes his ruling. The fare increase is a particularly sensitive subject because Hatter stunned the agency five years ago when he blocked the MTA’s last fare increase.

Hatter later allowed the basic fare to rise to $1.35, but only after the agency agreed to reinstate its popular $42 monthly pass.

The judge’s order came in response to a federal civil rights lawsuit filed by the NAACP Legal Defense and Educational Fund and the Bus Riders Union. The suit claims the MTA discriminated against poor and minority bus riders by pouring billions of dollars into construction of the Metro Rail subway and light rail lines while the bus system was allowed to deteriorate. It was that lawsuit that led to the consent decree.

On Thursday, members of the Bus Riders Union demanded that the MTA board cut fares to 50 cents and start a $20 monthly pass.

The agency’s budget assumes that the cash fare will be raised by a dime to $1.45 on Nov. 1. The price of discount tokens would rise by a nickel and the cost of passes would increase by $1 to $3.