Big Issues in the Regional Transit Authority Plan, Read BEFORE you Vote

Introduction by Sue Ann Douglas

Former Oakland County Commissioner

Following are the talking points document on the Regional Transportation Authority (RTA) tax that is on the November ballot that Deputy County Executive Bob Daddow prepared for some of the county commissioners. I know it’s long but Bob is a detail guy. He also mentions another document that County Transportation authority members, Tim Soave and Chuck Moss, sent to the RTA several months ago, and is linked at the end.

This is a big deal and Oakland County is the deep pocket. About half of the Oakland County communities opted out of the SMART millage but would be forced into this millage if it passes. Unfortunately, the plan provides little detail and the RTA is doing little to assure Oakland County that a fair share of the money will be spent in Oakland County. The Oakland County areas that pay for the SMART millage will pay for this on top of that. This is how a government bureaucracy is created.

Through some deal cutting in Lansing, Washtenaw County was added to our region and is the smallest contributor. They were not part of our region for the zoo millage or the Detroit Institute or Arts (DIA) tax but now when there is a deep pocket to dip into, they are suddenly part of our region for transportation. In just the first year, Oakland County will pay over $60 million dollars where Washtenaw will get hit for only $18 million on this 20 year millage. By the way, the new director of the RTA is the former director of the Ann Arbor transportation system, which just happens to be in Washtenaw County. Hmm.

Prepared by Deputy County Executive

Bob Daddow

1) Since fall 2015, the County Executive’s office has been asking RTA Staff to answer the same basic questions (despite the media’s and RTA administration’s assertions to the contrary) –

a) What do the residents of Oakland County receive for the 1.2 mils of property taxes they are being asked to contribute to the RTA? Essentially, what is the return on the taxpayers’ investment?

b) When will the promised benefits and transit services be received? The Draft RTA Plan indicated that the build out of the bus rapid transit will take until roughly 2022 for Oakland County, but the millage will be levied on December 1, 2016 if passed.

c) What guarantees will be provided by the RTA and be placed in the Plan that will insure that the promises made to Oakland taxpayers to induce millage approval will be kept both annually and over the 20-year term of the millage?

2) The Draft RTA Plan released on May 30, 2016 for public consumption failed to adequately address Oakland County’s questions.

After the Plans May 30, 2016 release and during June 2016, the County Executive’s administration reviewed and analyzed the Plan in order to evaluate its benefits to the County taxpayers. On July 5, 2016, the County Executive’s administration and its representatives on the RTA board released a memorandum entitled “Draft Regional Master Transit Plan Concerns and Call for Remedial Actions, “detailing their concerns with the RTA’s Draft Plan The RTA’s draft document has now been shortened and titled “Master Plan Amendment No. 1 – ADA Paratransit-Flexible Transit Program” and remains in draft form as of this writing. Some of the more objectionable assumptions have been removed but others still remain and are discussed subsequently. The Master Plan Amendment No. 2 has not been presented to the RTA Board in its current form.

The Oakland County concerns recorded in the July 5, 2016 memorandum had been previously communicated to the RTA administration in face to face meetings and / or by e-mail. The Draft RTA Plan and related July 5, 2016 Oakland County response to that Plan are located on the County’s web site, as well as other related material.

3) Principal business issues with the original Draft Plan and that remain in the adopted RTA Plan approved by the RTA Board (with Oakland County representatives having voted ‘no’ on the Plan) include:

a) Numerous Financial Flaws Exist in the RTA Plan:

The RTA Act mandates that 85% of the tax money raised in each Member Jurisdiction (Oakland, Wayne, Macomb and Washtenaw Counties and the City of Detroit) be expended on public transportation service routes located in that member jurisdiction. The Draft RTA Plan had the Oakland County allocation percentage set at exactly 85%, as was Washtenaw County’s allocated percentage. The likelihood of one, let alone two counties, could have exactly the minimum allocation of transit services without adjusting the 20-year projections to accommodate this statutory requirement is simply not credible.

Because the Draft, and now Adopted RTA Plan preparers apparently failed to understand basic Michigan property tax statutes, the Draft Plan excluded any references to and failed to address the likely impact over 20 years of the following matters:

  • The fact that new construction / new permits add taxable value outside of the Proposal A limitations.
  • The future risks associated with the recently-adopted legislation involving personal property tax loss and state reimbursement commitment.
  • The Headlee Amendment roll-back process that is likely to impact the 1.2 mils starting as early as 2019. The Consumers Price Index for FY-2016 is expected to be approximately .9% meaning yet another roll-back decline in the authorized millage rates for property taxes for Oakland County and likely other Member Jurisdictions as well.
  • DTRF advances and chargebacks, including losses related to property taxes collections.

With the exception of the rebasing of the taxable value discussed subsequently, none of the above amounts resulted in any change in the projections, even as they clearly should have.

Construction / Permits. The Draft Plan assumed the use of a December 31, 2015 taxable value base year and assumed that all CPI growth in the revenue would fund the CPI economic growth in operating expenses, essentially calling the future 19 years even (e.g. economic increases of the revenues offset the economic increases in the expenditures). This budgetary assumption approach is overly simplistic, erroneous and demonstrates the lack of understanding by the RTA administration of the Michigan property tax statutes.

Construction and new permit values add to the taxable value outside the Headlee Amendment limitation and contribute to incremental property tax revenue growth generated from that point on in the 20-year millage period. The ‘growth’ factor used for Oakland County was merely .12% beyond CPI in both the Draft Plan and Adopted Plan

The County Executive administration requested its Equalization Division to review the historical growth trends of the taxable value over the past 22 years. In both the mean and median calculations for growth, Oakland County’s taxable value has grown approximately 4.5% year in and year out over the past 22 years. The Plans, with its flaws in revenue assumption, has estimated that the County will generate $1,222.3 million (roughly 39% of all RTA property tax generated in all Member Jurisdictions) over the 20-year period, essentially with minimal growth in taxable value. With the historical analysis conducted by the Equalization Division, the actual growth is expected to generate approximately $1,798.0 million for the RTA – of a difference of $575.7 million, or a 47% error in the understatement of revenues generated.

Despite discussions with the RTA administration, the Adopted Plan failed to address this error, not only for Oakland County but other Member Jurisdictions as well.

Given the RTA Act’s requirement of expending 85% of the property taxes raised in each Member Jurisdiction on transportation routes located in that Member Jurisdiction, Oakland demanded the establishment of an on-going procedure to track compliance with the 85% rule. With the assistance of the Oakland County administration, the RTA administration developed the ‘85% Rule’ resolution. The RTA Board passed the resolution on September 22, 2016. While several of the County’s recommendations were rejected, (creating issues that likely will be needed to be addressed at a later date), many of the suggestions were accepted.

The 85% Rule resolution provides for an annual “true-up” of the differences between revenues projected to be collected from property taxes (at 85%) and taxes actually collected. It also “trues” the actual transit expenditures provided to that Member Jurisdiction based on actual collections and actual expenditures reconciled to the Member Jurisdiction audited financial statements.

Given the RTA’s failure to incorporate the likely actual revenue growth in the Adopted Plan, the problem with the understatement of the $575 million in projected revenues for Oakland County should be abundantly clear: the County is being asked to trust the RTA Board to act in accordance with State statutes and properly allocate 85% of Oakland generated resources to Oakland County for transit services

If the RTA lacks the political will to address this matter in their plan prior to any millage adoption, why would anyone think that a future RTA Board facing objections from constituents having to have their services reduced to “true up” in an area that the Board member does not represent, will? Obviously, if the RTA Board fails in their duty to property allocate these revenues to the appropriate Member Jurisdiction, then it is highly probable that the damaged party will seek resolution in the court system. Enforcement by litigation is not in anyone’s best interest.

Personal Property Taxes. The Draft Plan made no provision to address issues presented by the recently-enacted personal property tax legislation, even though personal property taxes are a significant component of Oakland County’s taxable value, i.e. roughly 15% to 18% of total taxable value.

Under the personal property tax reform legislation, in the coming years much of the personal property tax revenue will be eliminated. While the State has currently committed to replacing some of this lost revenue using a ‘tiered structure’ (with the RTA tax being at the lowest tier), the anticipated replacement is in the form of a discretionary annual appropriation by the State legislature. The likelihood of the State continuing to fund this replacement revenue indefinitely is uncertain (c.f. the Silverdome subsidy) and no mention of the risk of an appropriations failure was factored into the adopted Plan.

Headlee Roll-back. Under the Michigan Constitution, the lower the Consumers Price Index (CPI) the more likely that a Headlee Amendment millage rate rollback will be required, a reduction that will impact any RTA millage over time. For example, the CPI for 2016 was .3% and that resulted in a rollback in the Oakland County authorized millage rate. Through August 2016, the CPI was .88% and trending at a point or two upwards each month – or, likely .9% for 2017, a rate that might start reducing the adopted millage starting as early as 2019. Facing that reality, it is unfortunate and inappropriate that there was no discussion of how Headlee Amendment rollbacks over the next 20 years would affect the Plan.

DTRF Advances and Chargebacks and Property Tax Losses. The Adopted RTA Plan also assumed a uniformly applied write-off for property tax collection failures, for all Member Jurisdictions using 3% to 4% against the amount levied. In reviewing Oakland County’s Comprehensive Annual Financial Report (CAFR, or audited financial statements), the CAFR indicated that the collection rate for Oakland County experienced roughly only a .5% write off in any given year over the past 10 years. The Detroit CAFR, however, reflected a 30% write off.

Why is this important? When considering the allocation of the 85% compliance requirement for transit spending in each county or Detroit, the use of an understated Oakland County collection rate allows the Plan to report compliance with the RTA statutes when history shows otherwise. In the case of Detroit, the Plan has credited revenues that won’t be collected (based on historical results) by providing for roughly 26% more in property taxes to be available for transit expenditures in the City over what will likely be collected. Assuming, as is planned, that actual service will be put on the street at the estimated rate, this will require Detroit to reduce its service levels as part of the annual ‘true-up’ effort, in part in favor of Oakland County and other Member Jurisdictions whose original projections were understated.

Any reduction in Detroit services while increasing other, non-Detroit service areas as part of the ‘true-up” efforts required to insure compliance with the statute will be exceedingly difficult for the RTA Board once service has started. Frankly, if the RTA Board cannot address the corrections in the Adopted Plan, how will they be able to address the adjustments to the service allocations when faced with a constituency base under public comment objecting to the loss of service?

The Draft Plan erroneously used the December 31, 2014 taxable value in the base year calculation of property tax revenues when the December 31, 2015 taxable values were available. Oakland County noticed the RTA administration of this error and it was corrected in the Adopted Plan. The Adopted Plan reflects the effects of using the December 31, 2015 taxable value. This resulted in an increase in the estimated revenues to be received from Oakland taxpayers generating an additional $5,233,000 more per year in property tax revenues over the 20 years – or a $104.7 million – just from the first year’s shift from 2014 to 2015.

Several issues associated with this original estimated/assumption error exist:

  • Given that the underlying growth assumption of taxable value was set by RTA staff at .12% above CPI for Oakland County, and recognizing that the fallacy of that assumption was demonstrated by the actual growth in Oakland County’s taxable value generated additional revenues of nearly 9% in the single year shift from 2014 to 2015. The final Adopted Plan’s assumption relating Oakland County growth to be only .12% above CPI went unchallenged and uncorrected. Given the RTA’s insistence on using understated assumptions creates the requirement that Oakland County insist that the RTA Board provide a transparent process to insure proper allocations of revenue are made, even if after the fact, to insure compliance with the 85% Rule.
  • As discussed subsequently, the County objected and continues to object to the fact that the Adopted Plan contemplates that the northern and western Oakland communities will receive virtually no transit services for the next 20 years, despite being asked to fund the RTA’s 1.2 mils over that period. After Oakland County objected, the RTA responded by suggesting shuffling Oakland County dollars already mandated to be spent in the County under the 85% Rule to other Oakland County areas, all without a firm commitment that all of those “shuffled dollars” would be spent in the northern and western Oakland areas.
  • However, even if one to assume all the transferred investment would be spent in the northern and western areas, the increase the Oakland property tax revenues in the Adopted Plan increased the service delivery offered to Oakland communities by only $79 million (through the rebasing of taxable value), rather than by the minimum amount of $89 million the 85% Rule would require (the property tax generated from the increase in using December 31, 2015 taxable value over that of 2014 of $104.7 million x 85% = $89 million).
  • Perhaps the RTA plans to allocate the other $10 million generated and required to be spent in Oakland County to other counties or the City. Said differently, even the attempt at correcting the Adopted Plan’s egregious flaw of not providing transit services in Oakland’s northern and western communities for the next two decades, ignoring the needs of roughly 540,000 residents was flawed.

b) 85% Rule True-up Process. The process by which the RTA intends to monitor and enforce 85% Rule compliance was recently identified in a resolution passed by the RTA Board on September 22, 2016. That resolution was adopted over the objections of the Oakland County representatives. While many of the process issues identified by Oakland County were addressed, not all of the issues were properly resolved at the time the RTA administration decided to proffer the resolution to the RTA Board. The failure to address these issues now, invites needless conflict and possible litigation, later.

Compliance with the 85% Rule must be regularly tracked over the 20 year period. The required ‘true-up’ process must reconcile what was originally allotted to the counties and City in the RTA’s operating budget with actual revenues generated and actual expenditures made in those Member Jurisdictions’ areas. The ‘true-up’ must identify any needed budgetary corrections (either additional revenues which will be difficult to use or changes in service levels) between counties and the City.

c) Lack of Transit Service in the North / West Community. In reviewing the Draft Plan and now the Adopted Plan, Oakland’s northern and western communities (some 39 communities) receive little or nothing in exchange for the underestimated $625 million to $650 million in the property taxes they will be asked to pay. (We note that If the taxable value growth factor is properly considered at the historic 4.5% previously noted, the actual property tax revenues expected to be paid by the northern and western suburbs not meaningfully benefitting from the RTA Plan would be closer to $919 million and $956 million!)

Ultimately, the RTA Plan adopted by the Board (without the support of the Oakland County representatives), included roughly $122 million in funds that could, (but not must), be allocated in these 39 communities. All of that money would come solely from the 85% of Oakland County property taxes that must be spent by the RTA inside Oakland County. This creates a significant future exposure to the County arising from a successful ‘true-up’ process that results in other Member Jurisdictions having to reduce transit services that had been improperly supported by Oakland County tax dollars that were mandated to have been spent in Oakland County and that should have been spent in providing services to the County’s northern and western suburbs.

The draft proposal entitled, “Master Plan Amendment No. 1 – ADA Paratransit-Flexible Transit Program” states that under the proposed amendment there is a “…increase in funding to Oakland County….” That statement is simply wrong; under the proposed amendment Oakland County does not receive any increase whatever. Rather, the amendment seeks to move 85% funds required to be spent in Oakland County to areas of the county ignored in the Adopted Plan. The County has objected to this erroneous RTA statement but the RTA administration is yet to correct its misrepresentation.

The current draft version of the Amendment No. 1 contains the following re-allocations within Oakland County from the services originally contemplated by the Adopted Plan to be provided in the southern communities of the County:

  • The adopted Plan called for the possible shift of roughly $43.0 million of transit services away from the 9 Mile Road corridor to the northern and western communities. Similarly, due to the “better estimates” the RTA administration has proposed shifting approximately $21.7 million from the capital program in south Oakland County to support of services that may include northern and western Oakland County. These shifts are only within Oakland County allocated dollars for transit services and do nothing to resolve any disparity in services between the counties / Detroit.
  • Roughly $79.6 million in additional funds arising from correcting an error Oakland pointed out in the Draft Plan involving the incorrect use of the FY 2015 assessment period is also proposed to be used in part to cover the needed northern and western suburbs’ transit needs. The additional funds that could be allocated to the northern and western suburbs arise from the rebasing using FY 2016 taxable values, yet even then the allocation improperly shorted Oakland County $10 million when considering the need to comply with the 85% Rule.
  • The $144.5 million proposed to be allocated internally within the County in order to mitigate deficient transit services in the north and west includes an amount of $36.1 million that is devoted to ADA services located within 3/4th of a mile off of Woodward (such allocation is based on a federally-mandated formula. While the County supports the need for expanded ADA services the allocation of 25% of the $144.5 million ostensibly offered by the RTA administration to mitigate the northern and western communities’ lack of services will allocate better than half of these ADA moneys back to the communities outside the northern and western communities.
  • The draft Amendment No. 1 reflected a total of $266.1 million (excluding an incorrect ‘gross up’ reflected as an increase of services to the northern and western communities) based on a formula using the age 65 population in the RTA region as a proxy for amounts to be reallocated for ADA services. How and where these services could be provided should be informed by more direct input of county / City public officials. Unfortunately, by using the age 65 population proxy, which represents 31% of the amounts to be distributed for transit services, again shorts Oakland County as the County taxpayers are providing nearly 40% of all property taxes generated for the RTA’s benefit. The amount shorted that again benefits other counties and the City is approximately $24 million over the 20 years.

In summary, the northern and western suburbs are expected to contribute as much as $919 million to $956 million in transit property taxes to the RTA to secure, optimistically, approximately $126.5 million in net transit services (roughly $144.5 million, less ADA reallocation back to the south end of approximately half of the required amount of $36.1 million – or, $18 million), a return on their contribution of roughly 13% , all of which are from revenues that must be allocated to the County anyway and arise solely from the rebasing and shift of resources within the County.

Contrast this with the RTA’s stated return for the City of Detroit on their property tax contributions of 371% (even as the base of property taxes is overstated by roughly 30% for the incorrect use of property tax write-off percentages). When considering the state and federal grants allocated to the City as well, the return on City property taxes (even as overstated) would be approximately 821%.

d) Guarantees:

ReFlex: In the October of 2015, the SMART board was approached by the RTA administration with a plan to restore services along Woodward and Gratiot that had been eliminated in the City and Suburbs in 2011 due to the lack of available funding. Essentially, the suburbs were asked to fund services along these routes in Detroit even though the City is an opt-out community and does not provide property tax revenues to SMART. The RTA administration gave SMART two choices to consider in providing this new service:

  • If SMART choose not to provide the funding necessary to provide these transit services in the City the funding formula allocating federal capital funds controlled by the RTA would be altered from 52% SMART / 48% DDOT to an allocation of up to 70% DDOT / 30% SMART, thereby essentially freeing up funding for DDOT to perform the services at the expense of SMART services in opt-in suburban communities.
  • Before the RTA came into existence, the formula had been in 1989 at 65% DDOT / 35% SMART, a political decision that was never changed and that was not representative of the actual services being rendered. That formula cost SMART over $100 million in capital funding that it would have otherwise receives if the formulas applies to the 70 other Michigan transit operators had been applied to SMART.
  • Option 2, was that SMART could “voluntarily” support the services by spending $2 million on the ReFlex service in exchange for the RTA keeping the funding formula allocation at essentially 50/50 for three years. Given the 20 year history of inequitable 65/35 treatment and given that the RTA by simple majority vote could impose the inequity again, SMART agreed to this option. And even as SMART has chosen to fund these services for a three-year period (starting with a 90-day pilot period) at $2 million, DDOT is being required to only contribute $500,000 as compared to SMART’s $2.0 million.

The hostile nature of the Reflex “negotiations” in October 2015 contributed significantly to the concerns expressed by Oakland County representatives since that time that any RTA Plan must provide guarantees to insure benefits promised to induce support for any transit tax were actually delivered. Such guarantees obviously demanded that the ability of the RTA Board to change financial investments and formulas by a simple majority vote be curtailed. Obviously any allocation formula committed to collegially prior to the millage vote and could simply be changed after the vote during a 20-year period if guarantee could not be provided.

This learning experience, as well as other flaws in the Draft Plan, gave rise to the demands involving the need for ‘guarantees’ that the commitments before the vote would be truly honored after the vote. In in November 2015, some seven months before the RTA released their draft plan, Oakland’s representatives started insisting that the RTA plan provides guarantees that the mandated level of services would be provided.

Failing to include any meaningful guarantees of their own design in the plan released on May 30, 2016, the County demanded that the RTA change their by-laws to provide that any funding formula and allocation determinations by the RTA Board must require a majority vote, plus one vote from each of the member jurisdictions (Detroit and Macomb, Oakland, Wayne and Washtenaw Counties) and that any amendment of this requirement could only be made by a majority vote, plus one vote from each member jurisdiction. The RTA has made this change.

Two areas remain unresolved at this writing that could significantly alter the funding formulas prior to the millage vote:

  • 85% Rule Process. As noted previously, Oakland County provided substantial input into the 85% Rule resolution adopted by the RTA Board on September 22, 2016. Because there were still unresolved issues present at the time the RTA administration proffered the resolution to the RTA, the Oakland County representatives dissented in their support. Several of the issues involved clarifying certain future actions and the definition of the eligible expenditures that support the actual expenditures to be permitted as part of the 85% Rule financial ‘true-up.’ In addition, the 85% Rule resolution erroneously states that Detroit would be permitted to provide their actual financial information through their audited financial statements between 11 to 12 months after year end; such permission is in conflict with Public Act 2 of 1968, as amended.
  • Master Plan Amendment No. 1 – ADA Paratransit-Flexible Transit Plan. In addition to the financial issues cited earlier, the governance structure of the local input is cumbersome and fails to fundamentally understand the underlying issue of the lack of services in the northern and western communities. The present draft of Amendment No. 1 would have other local public officials outside of the county voting on the transit plans funded by Oakland County taxpayers and proffered by Oakland County representatives. That is unacceptable.

Simply put, the final draft must provide assurances that the local public officials and other representatives within Oakland County will have the authority to craft transit plans for their citizens and not offer other, non-County representatives the opportunity to veto the County’s decisions on transit plans funded via Oakland County tax dollars. This local governance is particularly important given the financial flaws in the Adopted Plan giving rise to the likely significant increase in transit dollars (not least of which is the $575 million growth error cited previously).

The RTA has called for a plan within the adopted Plan to be produced in explaining the nature of transit services to be provided in areas not previously contemplated in the draft plan, including the northern and western communities in Oakland County. The current adopted “Mobility Plan” (as referenced in the Adopted RTA Plan) is too generalized to be meaningful and had numerous flaws and errors in it and remains, at this writing, unresolved with no acceptable amended draft available.

e) M1 Rail. During the formation of the RTA legislation, the investors in the M1 Rail, which runs from the Renaissance Center to the new center area, promised to construct it and then operate it for 10 years outside the funding source used to fund operating expenses for SMART / DDOT. About two years ago, legislation was passed that enabled the 10-year commitment to be reduced to 7-years (again, promises made, promises not kept which also gave rise to the need for ‘guarantees’ involving the RTA and its Plan).

At present the RTA administration has drafted a resolution to be taken up by the RTA Board in the future concerning the RTA’s commitment to hold the investors responsible for operations for a 10-year period before considering accepting the M1 Rail into the operations of the RTA and thus, mitigating services otherwise available for transit outside of Detroit.

The following issues in the RTA administration’s draft resolution exist as of this writing:

  • Despite indicating that the M1 Rail will not be transferred to the RTA until 2027 (thus, beginning to draw RTA resources), the resolution does nothing to amend the Adopted RTA Plan projections over the 20-year term. The adopted projections and this M1 Rail resolution would leave intact the financial assumption (ostensibly to be ‘conservative’ which makes no sense at all) that the M1 Rail will be transferred in 2024; such transfer date remains offensive to Oakland County.
  • Recent media reports have indicated that the capital cost overruns in the construction of the M1 Rail will be covered, in part, from those private commitments funding operations. In a recent Crains’ article, it was indicated that there are no operating funds currently projected to be available beyond 2022. Assurances were provided by the M1 Rail administration that the ridership, which is estimated to be 5 million annually when fully mature, will cover a portion of the unfunded operation costs. Other sources will have to be pursued outside the state and federal funding normally allocated to DDOT / SMART operations. [Note, the ridership of the PeopleMover is half that projected for the M1 Rail].

f) On or about August 15, 2016, the Amalgamated Transit Union issued a complaint letter to the RTA and other elected and public officials in the southeastern Michigan area relating to the RTA mandated ReFlex Project. The ATU alleged that ‘the allocation of federal funding between DDOT and SMART, and the decision to ad unneeded service for suburban riders while perpetuating poor and deteriorating service to Detroit violates Title VI of the Civil Rights Act of 1964.’ The ATU is seeking ‘to have the historical formula of 65/35 restored as the appropriate allocation of federal funds. Further, we seek review of the decision to implement the proposed Reflex routes to serve suburban communities, in light of ongoing service problems in Detroit.’ Should resolution of this complaint adversely affect Oakland’s taxpayers, future RTA Plan amendments will be required.

g) SMART Millage – 2018. In 2018, the SMART millage expires and will require a renewal. As noted in a single sentence in the Adopted Plan on page 138, the RTA administration has assumed that the millage for SMART (and entities as well) will continue throughout the entire 20-year RTA millage term. Should the SMART millage fail in 2018 or later, it is unlikely that the RTA can successfully secure sufficient ridership for the limited corridor routes of Woodward, Gratiot and Michigan Avenue. Again, significant Plan amendments will be required.

h) Other issues of note:

  • Finally, with the Adopted Plan and related funding being directed to providing significant emphasis on the north / south flow of ridership (in and out of Detroit), it is interesting to note that the flow in and out of Detroit (page 75) represents only 482,000 of the 5.23 million riders, or just 9.2%. The time period is not cited.
  • The Adopted Plan cites that the PeopleMover is expected to upgrade its equipment in 2020; such upgrade is expected to be very costly (page 46). The source of the funding for this upgrade was not cited.
  • The 85% Rule resolution adopted by the RTA Board on September 22, 2016 identified some controls over the supplanting of funding should local contributions decline, either by future millages failing or as the result of the Detroit’s City Council adopting a budget of a lesser amount than actual operating subsidies would require. More work is needed here.
  • The City’s funding for the existing transit services is cited in the Adopted Plan (page 42) indicating that the City has an operating subsidy of $52 million for FY-2015. The actual amount contributed by the City to DDOT, as reflected in the City’s audited financial statements, which were available and noted in Oakland County’s July 5, 2016 memorandum to the RTA administration, was $82 million, a $30 million error.
  • Even with the failure to identify the correct level of operating subsidies required, the June 30, 2015 DDOT accumulated deficit was approximately $29 million (net of the GASB No. 67 and 68 accruals relating to unfunded pension; the inclusion of which would put the deficit at $330 million). Even as the last three years’ actual operating subsidies for DDOT has missed the budgeted subsidies, the DDOT operating budget for FY-2016 was approximately $62 million. Further, the DDOT has been expanding its transit services over the past year meaning its actual expenses are likely to be higher than the operating budget originally approved by City Council (the City makes no adjustments to its operating budget during the year).
  • The importance of this understatement would be in determining the future identification of the level of service (sometimes called ‘maintenance of effort’) at the time of the adopted Plan was passed with the expectation that future contributions from each entity (as identified on page 138 of the adopted Plan) would be consistent.
  • By shorting the amounts cited in the adopted Plan, expectations of the future minimum contributions could be based on the lower $52 million level used in the calculation of the level of services before supplanting would occur – thus, permitting some additional funding from the limited RTA resources even if the City reduces its support of DDOT with the expectations of recovering an amount from the RTA in order to retain service levels. A similar concern would exist should the millages of the other entities fail or be reduced below the existing levels.
  • The level of service base amount of operating subsidy required by the City set by the RTA Board as part of the adoptee 85% Rule resolution was set at $82 million – the amount cited in the City’s 2015 audited financial statements.
  • The Plan cites the approximate capital and operating costs of a mile of service for the M1 and bus rapid transit. As noted on page 99 of the draft Plan, the capital cost per mile for rail service runs between $40 million to $50 million (the M1’s capital costs are approximating $187.3 million for 3.3 miles (as referenced in a recent Crains’ article), or roughly $56.8 million per mile) while similar services for the bus rapid transit would cost between $5 million to $15 million per mile – meaning perhaps that M1 is spending $120 million more in capital costs than would have been necessary in a BRT system. As noted on page 127 of the draft Plan, the SMART operating costs (less fuel) per vehicle run $70.71 per hour; while similar M1 rail services are expected to cost nearly twice that amount or $131.21 VRM. Maintenance for M1 is 3.5 times more costly than the SMART bus maintenance for similar services.

Other issues with the Draft and Adopted RTA Plan can be found on the County’s web site in the 19 page memorandum from Messrs. Moss and Soave – although in the interest of time they have not been outlined herein.

 

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