Are you confused by the conflicting statements related to C-Tran’s Proposition 1 initiative? Some have said that the initiative will give the Agency “twice as much money as they need!” Others have said, “the sales tax is not is not enough!”
So what are the facts?
In my business, the numbers tell the story. And thankfully, C-Tran has reported numbers which tell voters how the agency intends to use your sales tax funds.
Just a year ago, C-Tran came to the voters asking for a .2% increase in sales tax, claiming the funds were necessary for the Agency to maintain current levels of bus service. The initiative was passed, providing C-Tran with an investment of $10 million annually from local taxpayers.
This year C-Tran is asking voters for an additional .1% increase in sales tax to pay for Bus Rapid Transit (BRT) and Light Rail Transit (LRT). If passed, voters will be investing in C-Tran by an additional $5 million per year. Passing this year’s Proposition 1would effectively give C-Tran a $15 million annual revenue increase in just over one year.
Will that $15 million be enough to sustain current levels of bus service, BRT, and LRT?
C-Tran has provided that answer. And that answer is No.
Their current financial plan includes three different scenarios (“optimistic”, “pessimistic”, and “realistic’). Each of these scenarios shows the following:
- C-Tran will come back to voters as early as 2019 and ask for an additional .2% (or $10 million +) sales tax increase (see Page 33 of their plan).
- Even with $10 million in annual sales tax increases last year, a proposed $5 million in annual sales tax increase this year, and an additional $10 million in annual sales tax increase planned in 2019 (a total of $25 million per year), all of C-Tran’s financial plans show the Agency operating at a loss (i.e. expenditures will be more than incoming revenue), requiring them to deplete cash reserves (see Pages 37 – 42 of the plan).
Some may say these are “doomsday” or “worst case scenario” projections.
But, consider this: during 9 of the last 10 years (2002-2011), C-Tran has been unable to sustain profitable operations. C-Tran has shown significant net losses on the operation and maintenance of their current levels of bus service. In fact, in a year in which they received a nearly $10 million dollar increase in revenue from the passage of a sales tax initiative (2006), they were only able to eke out a $1.6 million dollar net income.
C-Tran may claim that I am being unfair in my analysis because I am not including the grant revenues they received in each of those years, which appear to “alleviate” these losses on their income statement. However, let’s be clear. Those grant revenues were strictly for purchases of capital assets (e.g. new buses). Those grant revenues are separated from the rest of C-Tran’s operating results for a reason: so that the reader of the financial statement (i.e. you, the investor) can understand the revenue and expenditures related solely to the operations of the Agency. And those numbers are clear: C-Tran continually operates at a loss.
C-Tran may also claim that I am being unfair in my analysis because as a result of the 2006 sales tax increase they were able to “bring back” services that had previously been taken away. Even with a restoration of services and an extra $10 million per year, why did C-Tran consciously decide to operate at a loss?
C-Tran has claimed that because of their large cash reserves and lack of long-term debt that they have been a “pay as you go system.” An observer during a recent community event made the following comment, “C-Tran is a pay as you tax system.” His observation is correct. A pay as you go system ensures that an agency maintains operations with current levels of revenue, and expenditures that do not exceed that available revenue. C-Tran’s entire future financial plan hinges on its ability to tax voters now and in the future. Even with a 2011, 2012 and 2019 tax increase, C-Tran’s own financial plans fail. And when those plans fail, C-Tran will be forced to come back to the voters yet again.
Tiffany R. Couch, CPA/CFF, CFE is Principal of Acuity Group, PLLC. A Vancouver, Washington based forensic accounting firm. She can be reached at firstname.lastname@example.org
Below are two additional items relating to the CRC light rail project and Proposition 1.
First Item: State Auditor confirms Sound Transit light rail ridership forecasts are unrealistic
In January, the State Auditor’s Office agreed to conduct a performance on a number of items related to Sound Transit. Part of the audit was based on a WPC request to reconcile some of the agency’s ridership and financial forecasting issues. The SAO just released the results of that audit. Here are the key findings:
- The Sound Transit Board has not always taken action to fully address COP concerns. We question some practices related to COP selection and whether COP members fully understand
their watchdog role. We found transparency to the public regarding the COP’s work can be improved.
- Sound Transit’s initial adjustments to its original ST2 plan were sufficient and appropriate. However, it now has a smaller than recommended contingency to cover possible cost overruns.
- Except for its need to increase its ST2 project contingency, Sound Transit has an organizational structure, policies and procedures, expertise, and other resources in place to successfully
accomplish most of the adjusted ST2 plan within budget. It has positively responded to previous audit recommendations.
- Sound Transit’s ST2 forecast requires a growth rate for Link light rail ridership through 2030 that appears to be challenging. Economic and employment forecasts indicate questions about its
reliability. Sound Transit should adjust ridership assumptions that no longer are valid.
The full report can be found here.
Second Item: The Washington Policy Center’s Citizen’s Guide to Clark County Proposition 1
As covered in this COUV.COM related article, the Washington Policy Center views Proposition 1 as a referendum vote on light rail. However, C-Tran leaders and others do not see the measure as a referendum, characterizing it as nothing more than a funding question.