Stephen Rees's blog

Thoughts about the relationships between transport and the urban area it serves

Posts Tagged ‘Comptroller General

How many audits are enough?

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It is a commonplace notion that any public sector operation is necessarily inefficient. It is an idea that is constantly repeated by right wing pundits and politicians. It is also not true. Any more than every private sector business is efficient because it has to compete in the market place. Transit in Greater Vancouver has long been under this assault. Today the Globe and Mail reveals that the Board of Translink now agrees with the Mayors that another audit is needed, it is just not sure exactly what needs to be audited. I found this quotation to be especially worthy of note:

TransLink has already had two performance reviews done since 2008, one by KPMG that it initiated itself and which Mr. Fassbender said cost about $500,000, and another one ordered by the province through the comptroller-general’s office. In addition, there is another one under way as the province’s transportation commissioner assesses whether TransLink should be able to impose a 12.5.-per-cent fare increase.

Audits do not come cheap, and there has to be a point at which one doubts their value for money – if you take the results of the first two seriously (and Translink did – cutting “$60-million in spending after the KPMG review”).

The Mayors have been annoyed for a while now – quite rightly – first for being shut out of much of decision making by the creation of  the “professional” (unelected) Board, and secondly for having a new level of auditing imposed on them by the Province. As Gatean Royer used to point out when he was City Manager at Port Moody, municipalities have been very good at getting good value for money for the services they deliver. The Province, of course, has a much shakier record – which was one reason why steps were taken to move operations like BC Ferries away from political influences. The current state of BC Hydro is also one that shows how political considerations can play havoc with an enterprise’s bottom line. Initially, the Mayor’s said that the new municipal auditor ought to have oversight over Translink too (presumably forgetting the role of the comptroller general and the transit commissioner) but the province said that the new office would be too  busy.

Ms. Watts has targeted specific spending on items such as studying whether to build a gondola on Burnaby Mountain or offering key stakeholders in the region a donation of $100 to the charity of their choice for filling out surveys.

Except that the study showed that a gondola would actually be a good investment – as long as you ignore the arbitrary 25 year life imposed and use something more realistic like 30 years. Market research firms typically offer extremely small incentives for filling out surveys – especially on line, where often it is some nebulous “chance to win” something more attractive, also popular with charities.

Ms. Jackson has been quoted as saying TransLink spends money “like drunken sailors.”

With nothing added by the article to actually back up that claim.

Translink has not always made good spending decisions – the Golden Ears Bridge being one of the worst in recent years. But a lot of the bad decisions stem from the provincial government and its frankly biased promotion of P3s. The Canada Line decision making was driven by the Olympics – and the airport. The fare gates would not be going in if the Province and the feds had not put up a lot of the money. But there are also day to day operational decisions that everyone sees and have the knowledge and experience to recognize as wasteful.

#6 Banana Service

This is the terminus of a frequent service in downtown. The layover exceeds the service interval by a considerable margin – and, it could be argued, that is needed to make service reliable when buses have no priority in traffic and have to deal with congestion – in this case along Robson Street which has only one moving lane in each direction, severely hampered by turning movements and cars parking and uparking. But as Transport Action BC points out in its submission to the Transit Commissioner layovers “should not be used as a scheduling convenience or as a de facto method of providing Operator breaks to avoid the rigours of contractual negotiations…”

This is the point where an audit could actually go badly wrong. Auditors tend to be accountants – and they have a tendency to believe that their “usual principles” have universal application. There may well be some money to be saved by cutting the number of vehicles on a route – but if service becomes unreliable it starts losing patronage very quickly. Much of the decline in public transport use in my lifetime occurred as service was cut and reliance on private cars increased – and while that seemed to make sense at the time, the decline of the quality of life in urban areas, and impossibility of accommodating increased urban vehicle traffic through road building, meant those decisions had to be reversed.

It may actually not be possible to get enough transit priority on the street to cut service costs – especially downtown. It may actually not be very clever to re-open negotiations with the union if things are going to get heated again. The last transit strike lasted four months and achieved precisely  nothing – other than a token acknowledgement that Translink did have the right to contract out its services, it just did not dare use that right with the main bus services.

There is a reason why some services are not operated exclusively by the private sector. That can be simply stated as the need to recognize that there are worthwhile objectives that cannot be easily translated into financial considerations. Or where financial considerations are contrary to the general well being. Education and health are the most obvious examples – though the private sector keeps pushing hard for a bigger share, it has generally been resisted, not least on the evidence of its own performance. I would say that the removal of public sector provision has been disastrous in Canadian housing – and the way that private sector prisons work in the United States is appalling.  Transit used to be a business – but businesses generally gave up when they could not compete with the private car even when they had considerable protection from regulation. The privatization of public transport in Britain is an object lesson in untended consequences – and is being slowly but surely rolled back. The key to privatization being, of course, the very narrow focus on balance sheets – and the loss of a range of social and environmental benefits.

I am going to leave the last word to Gordon Price: he was talking about fare evasion but the point is the same

It’s just another indicator of how the relentless discrediting of government results in worse policy decisions when politicians have no choice but to respond to the individual stories that start with an assumption of incompetence – and don’t want facts or trade-offs to get in the way.

Written by Stephen Rees

February 13, 2012 at 11:10 am

“Major Translink Reform Needed” Part 2

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This post is intended to be a more thorough analysis of the Comptroller General’s recent report on Translink.   I know that she also looked at BC Ferries but that is not going to be part of this post, although I think it is interesting to note that the two corporations are treated rather differently. (Anyway The Tyee has already done a good piece on that.) My first go round was an admitted fast response.

The report has something very important to say about governance, and it is not complimentary to the provincial government. After all, it is only eighteen months since the new structure was imposed on what had been a regionally controlled body. That reorganisation was not well thought out and was based more on political spite than the public interest, and what we are seeing now are those chickens coming home to roost.

The key intentions of the revised legislation were to improve the governance, support TransLink in its purpose, and as discussed later in the report, improve planning, funding capabilities, financial sustainability, and accountability and transparency.

The terms of reference for our review indicate that the Province considers other intentions important.

So either we have a flip-flop – having brought in a new structure to do one thing, they now want to do something else – or incompetence. Having rammed through a change largely because the Mayors were nor sufficiently compliant, but continued to think that they were on the Board to represent the people who mostly pay for Translink, they now have a structure which does not seem to work very well.

This obsession with reorganisation is common with governments and bureaucracies. It is especially common when there is political interference in the provision of public services. Private sector companies are held up as “more efficient” but that is because they do not have to satisfy anyone but the shareholders, and the metric for that is simple to organise. Public sector enterprises typically have multiple objectives, some of which may be contradictory, or at least very difficult to measure in a satisfactory manner. Or, in the case of Translink and its predecessors, are not measured at all.

We attempted to determine levels of ridership or route capacity to identify other possibilities for cost containment and efficiency while balancing service level needs, but we found the available data of limited value. TransLink informed us they do not cost by route, but rather over the entire transit system using cost per service hour and cost per kilometre as the key drivers. As a result, TransLink has useful broad system-wide information, but, to manage their costs and conduct service rationalizations they require more specific information.

There are two reasons for this state of affairs. As part of a cost cutting exercise when still under the aegis of BC Transit, the staff who collected bus ridership data were reduced in number. Since that time, detailed ridership data has been grossly inadequate, but very little has been achieved to correct that. The electronic farebox was supposed to help, but operational and planning staff refused to develop a model that would convert the data on cash and swiped tickets to ridership, using survey data on flash passes. Automatic passenger counters (common on other systems) have yet to be widely installed. Moreover, transportation planning for the region inherited from the GVRD has never been supported with adequate data collection for anything but broad brush analysis. The GTA travel survey covers 4% of trips: ours covers 0.4%.

But the second reason, and one I think is most important for this review and its consequences, is the understanding that individual bus routes or segments of bus routes do not stand-alone as cost recovery units but serve as feeders to the system as a whole. Ms Wenezenki-Yolland seems to be suffering from the same professional purblindness that afflicted Dr Beeching. He took an axe to the branchlines of British Railways, cutting off much of the feeder traffic and creating access problems which are now having to be solved by reopening some of the routes he “rationalised”. The last decision the Mayors’ Council made was to avoid this kind of surgery by adopting a funding strategy that would avoid major reductions in service delivery. I suspect that this report will now revive the demands to cut low ridership bus routes as an “efficiency” measure. What this will achieve is the start of the declining spiral again: falling ridership, falling revenue, more cuts.

If the only objective of running Translink was to avoid tax increases and keep the shareholder happy this might make some sense. But the transit system is much more important than the traditional, mistaken view taken by business types. Transit is subsidized because its major competitor is also subsidized. The car also imposes significant social and environmental costs  that increasing transit use may help to mitigate.   I just did a search of the document for the phrase “mode share”. I found nothing. There is much of course about ridership, but absolutely no discussion of the extent to which this may or may not have been successful in attracting new transit users from trips that would otherwise be made by car. We do know that across the US, rising gas prices and a declining economy have combined to reduce car use and increase transit use. Again, this report does not seem to address these issues either. But we also know that if we are to reduce greenhouse gas emissions in this region, reducing car use is critical. Provincial policy of course is to encourage a considerable increase in car use to an extent that will of itself exceed any effect seen from the carbon tax. (And of course the increased exploitation of the province’s fossil fuel reserves and the new pipelines to deliver Alberta’s tar sand output to Asia will significantly compound the problem. The forestry sector is also now a net producer of ghg and is no longer a carbon store.) The report makes no mention of the topic of greenhouse gas. Presumably this reflects the fact that our Premier is much less interested in global warming now that he has been re-elected.

But even if we ignore greenhouse gases, the benefits of adopting policies that reduce car dependency are manifold, and places – most but not all outside of North America – that have not just good transit systems but also encourage walking and cycling have reaped the rewards of that. Part of the reason being that other governments at all levels recognize that transportation policies that focus on keeping cars moving and reducing funding for alternatives are self-defeating. Congestion in cities seems to remain at a constant level: there is a sort of equilibrium where users put up with a lot of delay, and society suffers greatly, but nothing much changes. Cities that were gutted by the interstate freeways, of course, saw significant decline and flight to the suburbs which is only now being arrested and in some places reversed as the viaducts are pulled down and the streetcars return.

Transportation, density of development and urban planning are all intimately intertwined. Most people seem to understand that. Not, apparently at least one CMA.

But let us now return to the vexed question of “governance”. I have used quotation marks because the choice of the word is in itself significant. It came into vogue a few years back when discussing what was going wrong with North Americas businesses. There has been very legitimate concern over the ability of company executives to use corporations as a sort of personal piggy bank. A few spectacular crashes, and a much smaller number of successful criminal prosecutions are but the tip of the iceberg. CMAs will probably tell you that these cases were the result of a few bad apples and that enough has been done to ensure that the rot does not spread. I disagree. I think what we have seen has been the deification of Gordon Gecko. At one time, some of the most successful companies were those that took good care of their workers and their customers. I am not talking about the robber barons who became philanthropists after they made more money than they knew how to spend on themselves. I refer to people like the quakers who ran chocolate businesses, to give their coreligionists an alternative to alcohol, but were also pioneers in urban planning and especially housing provision.  Even Henry Ford recognised that paying the men on his assembly lines enough that they could afford to buy his products made good business sense. British retailer Simon Marks (of Marks and Spencer) introduced all kinds of in-house services for the shop assistants he employed to keep them happy and healthy. This kind of approach is now seen as quixotic. Work is shipped overseas, to the cheapest labour and lowest environmental standards possible. Wal-Mart grows wealthy by destroying the economy of small towns. And Microsoft – well, you get the point.

These excesses have concerned shareholders – but so also has been the vexed question of how much to reward the people manage the company. I would say that the current business model – which now includes huge amounts of government support to keep going the businesses “too big to fail” – is flawed. Yet that is the model that is being cited in this report as the one we should follow for transit. Even though in this case there is little evidence of the excess rewards for executives, and 80% of the operating costs are labour costs. Although that figure I just quoted is now out of date, since it comes from five years ago and my memory. Increasing debt service being another whole issue.

the cost of operating the Canada Line (net of bus fleet operating efficiencies) is expected to exceed the additional system revenue it generates until 2025, with costs exceeding incremental revenues by $14 million to $21 million for most years until then.

The big issue, you will recall, between the Mayors on the Board of the GVTA and Kevin Falcon was the cost of the Canada Line. That was one of the reasons why they voted it down twice.

We were advised that while TransLink had both the Evergreen and Canada Lines in their long term plans, the region‟s and TransLink‟s priority was the Evergreen line. The provincial priority was to participate in the Canada Line, in part because they felt it had a stronger business case and because of the desire to have the line available for the Olympics. Given the provincial and federal funding availability, TransLink proceeded with the Canada Line.

Not quite. The Mayors were also told that the Evergreen Line would be built – and it has not been. Moreover, there is no provincial or federal funding in place to support the increase in operating cost. Senior governments will provide capital that brings them ribbon cutting opportunities in key constituencies, but they are much less interested in keeping the system going. Except, in the case of Kevin Falcon and his strange obsession with fare gates, which will never recover their cost and will also raise operating costs significantly. With almost no perceptible change in “security” and  no impact at all on fare evasion.

The report also fails to note the impact of U Pass – on revenues, costs and ridership. Like Martin Crilly, she notes the effects of suburban bus expansions and the apparent spare capacity of low ridership routes but says nothing about the number of pass ups on routes serving post secondary institutions that have UPass – most of which is borne by the bus system.  She does notice Community Shuttles. But what she does not remark is that these are now simply lower cost ways of operating regular bus routes and no longer seek to increase the penetration of subdivisions to improve transit access and thus encourage a shift in mode share. A shuttle is now just a cost cutting measure that provides inadequate space at peak periods for some key demographics who we ought to be encouraging to change their perception of transit. But again, this is a subtlety beyond the comprehension of the accountant.

clarification and reinforcement of roles, responsibilities and accountabilities and improved strategic alignment and communication amongst respective government parties is required.

The one significant change that I would say is needed is not that the Ministry of Transportation and Infrastructure needs to be included in the model. As she herself notes

The Act does not identify the ministry’s role or responsibilities in the governance structure

That means it does not have any. It does, of course get consulted. But it has no expertise in transit at all. It exists to build roads. (The function of maintaining those roads has been privatised.)

What is really needed is for the Province to back off and allow the region to determine for itself what kinds of transportation system it needs to support its regional growth strategy. Indeed at one time there was just such an agreement (“Transport 2021“), crafted under the direction of the then Mayor of Vancouver and Chair of the GVRD – Gordon Campbell. I do not expect a Comptroller General to say anything of the sort. But that agreement, on the face of it, would have been a good start – if the province of BC had actually lived up to its commitments instead of seeking to undermine it at every opportunity. And that applies to governments of both persuasions, who behaved equally badly.

The new arrangements that Kevin Falcon’s Act brought about were the insertion of two extra layers of administration. The new professional Board and the Transit Commissioner. If anyone is responsible for raising the costs of administration and creating the “uncertainty” and the need for more accountability and transparency it is he. Not the Board, or the Mayors, who are trying their best to sort out the dog’s breakfast they have been served. And who are thwarted by the province’s interventions at every turn.

It actually does not matter very much what changes are put in place as a consequence of this report. The current government has demonstrated that it has absolutely no intentions of adhering to the principles that this report endorses. Transparency and accountability cannot be said to be strong suits of the BC Liberals. Their expertise lies in spin and obfuscation – and even, when necessary, downright lies. The Premier and his Minister continue to peddle the notion that the Gateway will reduce greenhouse gas emissions through reducing congestion, when even their own, flawed, documents supplied to the EA contradict them. They do not adhere to any principles other than their own survival – and whatever bee Campbell happens to have in his bonnet at the moment. Whatever structure is put in place will have to bend to his will if he decides to change direction – as he almost certainly will. He runs his cabinet as a dictator, and it is a shame that the voters of this province have allowed him to get away with such a shoddy performance. His record contains far worse than a deck and a pocket knife. The Convention Centre alone cost more than the fast ferries – and at least they were able to be sold. We will be stuck with the Gateway and its consequences for many years – and quite likely his Olympics too.

The current fuss about too many executives and not enough transparency is a classic blind. It is a diversion to conceal the short comings of the present administration, that imposed its will and then found it got results that it had not anticipated and seeks to shift the blame elsewhere.  We now hear very little about the $14bn Transit Plan for the region. The one that Translink was trying to incorporate into its own planning cycle. There is a lot in the CG’s report about how cumbersome that process is as well. And again, derived from the same badly drafted bit of legislation.

Careful reading the CG’s report shows that the responsibility for the current mess cannot be fairly laid at the feet of local politicians, or the unfortunates who are trying to do their best working for Translink. I do not blame Tom Prendergast one bit for deciding to return to New York. That won’t be a bed of roses either, but at least Mayor Bloomberg can set a direction and expect to see it followed. No local politician in BC can do that.

The Minister in her remarks on Friday was careful to be non-committal about the report’s recommendations. They are not, of course, binding. And they do not require anyone to admit that the SoCoBriCTA mess is their fault. But equally, none of the recommendations will produce what the region desperately needs; which is a much expanded transit system, properly funded, and integrated into a sustainable land use plan. Instead we will have freeways, urban sprawl, poor transit service for most of the region and continuing high car usage. Frankly I find it hard to get excited about the concerns of the Comptroller. She seems to me to be filling the role of the purser on the Titanic, worrying about the audit of the bar receipts, as the ship continues at full steam ahead towards disaster.

Written by Stephen Rees

November 8, 2009 at 5:36 pm