Public Comment

How Did AC Transit Get into Its Fiscal Mess?

By Joyce Roy
Monday May 24, 2010 - 01:26:00 PM

Every transit agency in the Bay Area, and beyond, is hurting financially, but AC Transit has more financial resources than many, so if there had been good stewardship of their funds, they may have had to cut some service, but not to the bone. At a recent Financial and Audit Committee meeting they recognized it was to the bone and said after the presently slated cuts, there would be no more in the foreseeable future. 


One of those special sources for operating funds is the Measure B sales tax; almost 18% of Measure B funds are allocated for AC Transit’s operation. Of course, the present economy means a drop in sales tax. But another source, the parcel tax is more stable and brings in about $28 million annually. The board considered placing another parcel tax on the November ballot but decided against it. 


Furthermore, MTC, according to its just released report, had allocated $111,206,413 to AC Transit for fiscal year 2008-09, while allocating only $96,757,473 to Muni which has 3 times the ridership. 


So all the blame for AC Transit’s fragile financial condition cannot be laid on the state and federal governments. The board sat in the back seat and allowed the General Manager, Rick Fernandez, drive them into a ditch. He convinced them to engage in a costly “special partnership” with a Belgium bus manufacturer in spite of loud and clear complaints from riders and drivers. He did this by applying all the skills of a vacuum cleaner salesman—emphatically say it is the best vacuum cleaner in the world, have little stories about the fatal flaws of other brands, and say it is a special offer but only good for today! Thus he would induce at least 4 of the 7 members to vote on faith for no-bid buses, more and larger than needed. Often, they did not even ask what they cost and they never sought an evaluation by riders, drivers or mechanics (what do they know about buses?) 


In the many board meetings I’ve attended in the last three years, I never heard the General Manager consider the needs of riders or drivers. He never said anything like, “We must listen to our riders; they are our customers.” And would he ever consider sitting down and talking with riders and drivers? Unthinkable! His argument for air- conditioned buses was not for the comfort of riders and drivers but for resale value.  


How were well-meaning directors without a venal bone in their bodies duped? There were so many clues; why did they avert their eyes? They were given quarterly reports on travel expenses. In total $1,226,612 was spent for travel to and from Belgium; 61 employees, mostly mechanics, made 184 trips, and between the General Manager and General Counsel, 12 trips. (I had to become adept at Excel to put these numbers together.) Some staff members were even paid to go to Bus Expos to promote Van Hool buses! Because federal capital funds are not allowed for purchase of foreign buses, the GM hired a financial wiz away from MTC for “creative fund swaps.”  


In early 2008 when Bob Gammon, an investigative reporter for the Express, exposed the Van Hool shenanigans and the $500,000 secret loan to the GM, you might have thought the board would wake up. But the GM and the board’s Van Hool true believer, without being able to challenge the facts, somehow managed to dismiss it as yellow journalism.  


Bad reviews by riders and drivers were countered by, “Oh, but the Van Hools are mechanically so superior to American buses.” So, it was a rude awaking when in late 2009, the board learned that the Van Hool buses cost more to maintain than older American buses. It did not take them long to fire the GM. And to decide that the next buses would be purchased after bids sent to American manufacturers.  


So how was the board so easily duped? In January 2007 three new members were elected to the 7-member board. None had previously served on the board of a public agency. And they had little knowledge of transportation and probably had never ridden an AC Transit bus. So confronted by complex technical and fiscal issues, they took most of their cues from the board member who dropped the most names and acronyms and whose mantra was “the Van Hool bus is the best bus in the world.” So the GM could count on at least 4 votes for any bus purchase, his and the 3 new members and 4 votes on a seven member board is all you need. Once when one of the new members began questioning the GM, he told them “you don’t need to question the GM, he is not a crook like GMs in some agencies.” For a very long time, his advice was followed.  


But no longer. The board is trying to clean up its mess and they have a new Chief Financial Officer who is attempting to make sense of it. 


Transportation & social equity organizations scrutinize MTC & BART for fiscal irresponsibility but they only pay attention to AC Transit when threatened with service cuts and/or fare increases. If they had acted as watchdogs, they might have gotten the ear of the board and headed off the current mess. Otherwise, the role of watchdog falls on the shoulders of individual citizens who can simply be dismissed as cranks.  


Joyce Roy 




for Service Reductions Plan & Fiscal Emergency 

Wed., May 26, 2010 

2:00 pm & 6:00 pm AC Transit General Offices 

1600 Franklin Street