O.C. Train-Silencing Project Is Hampered by City’s Financial Woes

A struggling railway project in Placentia that has been criticized by community activists for granting lucrative consulting contracts cannot afford to pay millions of dollars in overdue bills from a major contractor.

Officials for the Burlington Northern Santa Fe Railway Co. say the city owes the railroad about $5.1 million for signal and track improvements commissioned by OnTrac, a rail project that has been underway since the late 1990s.

Of the total, Burlington says that more than $4 million is at least 90 days past due. It says additional bills will be sent to the city soon.

“They had been paying us, and then they stopped,” said Lena Kent, a spokeswoman for Burlington Northern Santa Fe. She added, however, that the rail company is working with the city to settle the matter.

The unpaid invoices are the latest financial hitch for the small north Orange County city and the special agency it formed to oversee OnTrac. The city’s reserves are almost exhausted, parkland has been sold off to help fund the project, and the director and consultants overseeing OnTrac have been asked to defer 50% of their pay to help make ends meet.

OnTrac director Christopher Becker could not be reached for comment. Placentia Finance Director Steve Brisco said that while the city cannot pay the bills immediately, the company’s contract is vague and the outstanding bills do not have to be honored until all work is complete.

The $500-million OnTrac project is designed to improve the speed and safety of rail traffic by building crossings at 11 busy streets and placing tracks below ground in a concrete trench. It will also lead to the creation of a so-called quiet zone where trains are restricted from sounding their horns and whistles.

The quiet zone is considered an innovative approach to improving the quality of life in residential areas along the city’s railroad right of way, a busy freight corridor that is used by more than 100 trains a day.

Over the last year, OnTrac has been hit by a number of financial setbacks, including the delay and potential loss of $12 million from a $28-million state grant.

Also, Placentia, which has chipped in about $12 million to the project, wants to reduce future contributions because of its own bleak financial condition.

With its reserves nearly depleted, Placentia has sold $3.5 million in parkland and issued about $11 million in certificates of participation, a type of bond.

“The state has pulled funding at a very inopportune time. This is not a situation of our own making,” said Councilman Scott Brady, a former OnTrac board member. “I’m confident the state will have transportation funding in the near future and will take care of projects that were shorted in the last go-round.”

Burlington Northern Santa Fe has been installing crossing gates, creating detours and realigning track for the quiet zone and new underpasses at Melrose Street and Placentia Avenue. The railroad is donating 10% of the work to the city.

Kent said the city paid about $1 million in bills before payments stopped last fall. City officials say, however, that Burlington Northern’s agreement does not specify when bills must be paid.

“The contract does not say anything about progress payments,” Brisco said. “Traditionally on joint projects, the city does the work and then we lay out the bills at the end.”

Kent disagreed -- but said the city has pledged to give the railroad a written commitment to honor the billings. The city hopes to pay some of the charges with $3.4 million in federal money that is forthcoming, Brisco said.

OnTrac’s financial problems have become so acute that nine of the project’s private consultants, including its director, have offered to defer half of their fees for four months to comply with a City Council recommendation to trim expenses.

The group includes Becker, economic advisors, management consultants, lobbyists, a public relations firm, attorneys and a liaison to railroad companies. The deferrals will save about $153,000 over four months.

The City Council is considering the offer and whether to set performance standards that must be met before the consultants can recover their deferred fees. A hearing on the matter is set for March 16.

Brady has proposed, for example, that OnTrac be required to secure at least $50 million of the $220 million in federal funds the project is seeking.

“We are trying to share the pain,” Brady said. “We must fund our consultants, but we need to look at a way to save money in the process. This is a fair way to do it.”

The project’s ample use of private consultants has come under fire from a group of community activists that asserts that OnTrac has handed out millions of dollars in lucrative contracts without competitive bids.

They targeted the salary of Becker, the city’s former public works director who was hired as a private consultant to head OnTrac. In 2002, he earned almost $500,000, according to city records, making him the highest-paid transportation official in the state.

The director’s contract was revised in March 2003, but he still had the potential to make at least $300,000 a year, plus 15% of the value of future consulting contracts granted for the project.

“I’m very concerned about the consultants,” said Councilwoman Constance Underhill. “There seems to be lots of duplication out there for administration, financial services and oversight functions. Maybe we need less of them.”

Becker has defended his salary, saying he has been an indispensable part of the project from the start and has developed expertise in dealing with railroad companies.

OnTrac defenders say the consultants have given the project a high profile that will help in securing government funds.

Meanwhile, OnTrac has been trying to borrow $5.6 million from the Orange County Transportation Authority to purchase Office Depot on Placentia Avenue.

The property is one of several needed for the project’s right of way.

OnTrac officials requested $11.8 million late last year on an emergency basis, but they have lowered the amount needed.

As security for the loan, the city is considering the use of real estate and money from its share of Measure M, the county’s half-cent sales tax that is used to fund local transportation projects.

OCTA officials say they want a firm schedule for repayment and for the city to identify reliable sources of funds, such as government programs, that can be used to pay the debt.