Year-End 2003 COP Performance Report

Summary of Sound Transit Performance

The Sound Transit Citizen Oversight Panel (COP) is a 15-member volunteer body appointed by the Sound Transit Board to oversee and monitor the implementation of Sound Move, the voter-approved Regional Transit Plan. This is the Panel's fourteenth semi-annual report and covers areas COP has focused on relating to Sound Transit's actions and performance during the second half of the year 2003.

In this Year-End 2003 Report, the Citizen Oversight Panel is pleased to report that Sound Transit has begun to deliver in a very real way on the promises of Sound Move. One year ago, we stated that the management, governance and systems at Sound Transit were as strong as they had ever been and that the agency was poised to start delivering on those promises. Today we are able to point to several very significant accomplishments that are the results of the years of hard work and capacity building within this organization.

• The start of service on Tacoma Link light rail this past August;
• The achievement of the federal full funding grant agreement and construction begin on Central Link; and
• The long-awaited agreements with Burlington Northern Santa Fe Railroad for capacity improvements and Sounder service to Everett and Lakewood.

These are the largest and most visible successes for the year. However, there were many others:

• The opening of the Tacoma Dome Station serving Sounder commuter rail, Link light rail and ST Express Bus services;
• The opening of the Lynnwood Transit Center;
• The continuing construction of the Bellevue HOV Access projects, ahead of schedule and under budget;
• The start-up of a first commuter train to Everett;
• The growing ridership on Sound Transit's bus and rail services; and
• The high utilization of the park-and-ride lots and other facilities that Sound Transit has already added to our region's transportation system.

In all, the agency met 26 of the 28 milestones it set itself for the year. These events have made 2003 the best year Sound Transit has ever had. The public perceptions of Sound Transit's leadership and credibility are improving, and that too is an accomplishment worth noting.

The many successes of 2003 were not achieved without frustrating delays, escalating costs and numerous other challenges.

• A new top-to-bottom review of the Sounder program revealed that previous cost estimates were flawed or incomplete and that at $1.2 billion the commuter rail service will cost almost twice as much as originally thought. COP recognizes that many of the increased costs were outside Sound Transit's control and believes that an accounting of the increases would help the public understand them. COP recommends that management prepare a detailed public report identifying the specific reasons that resulted in the new estimates and what is being done to prevent recurrence.

• The I-90 Two-Way Transit and HOV project adopted Alternative R8A as its preferred alternative. The scale and cost of the preferred project have significantly increased from the $15.5 million original two-way center-lane transit proposal in the Regional Transit Plan to a new estimated cost of $135 million for construction. While the scope is changed and not all of these costs will be borne by Sound Transit, the increase is still startling.

• The North Link supplemental DEIS was delayed almost a year as Sound Transit continued to work with the University of Washington to analyze potential routes across the Ship Canal and the University campus. After release of the DEIS late in the year, the UW suggested and the Board agreed to study yet another potential alignment, resulting in more delay.

• Public perceptions about Sound Transit as a troubled agency have not gone away. While public confidence is improving, there is still a large percentage of the regional citizenry that must be persuaded to support the agency if a Phase II vote is to succeed. It is crucial that Sound Transit continue to communicate to the public about the agency's achievements and successes.

The next stage of delivering on several hundred million dollars in projects will especially test the agency's management capabilities and the effectiveness of its project control and financial systems. A number of experiences during 2003 revealed weaknesses in these systems:

• On the Reservation to Freighthouse Connector project, changes were authorized on site without the involvement of project control or adherence to change control procedures.
• On the Central Link project, delays in real estate acquisition mounted over many months and contractors were hired without Board authorization.

COP cautions that Sound Transit must demonstrate that it has learned from past mistakes and will continue to strengthen policies and procedures as it embarks on the very large-scale construction projects of the next several years.

Agency-Wide Accomplishments and Issues

Sound Transit Credibility and Accountability. COP has repeatedly discussed its concerns about the devastating loss of public confidence Sound Transit faced when it revealed in late 2000 that the Central Link light rail system could not be built as designed. Sound Transit had to face up to its status as a poster child for poor management and lack of transparency. For three years that lack of credibility and public confidence has been a millstone around the agency's neck.

In the latter half of 2003, the weight began to lift. Numerous signals were received that key stakeholders had regained their confidence in the agency. The Bush Administration included $75 million for Central Link in its budget; the Federal Transit Administration restored the agency's "highly recommended" rating; the US Department of Transportation Inspector General issued a clean report on Link management, design and finances; and finally Congress acted to award the $500 million FFGA.

Sound Transit management has clearly been committed to changing the organizational culture, achieving better control over project schedules and budgets, and improving the openness and effectiveness of its public communications. Management changes were made where necessary, project control systems and procedures were put in place, and an extensive program of project management training was undertaken. COP noted that Joni Earl's leadership in restoring trust and confidence in the agency was recognized in a Washington CEO cover story that credited her with the turnaround.

In 2003 COP was involved with management in an extensive review of the agency's subarea equity accounting practices and was able to state with confidence that subarea allocation, monitoring and tracking are managed in a systematic and rigorous way and that no violations of subarea policy were found. Sound Transit also received clean audits from its financial auditors and from the state auditor.

Another related confidence issue that COP noted in the past has been the Board's level of oversight and accountability for the agency's problems. During 2003 the Board, with direction from its Finance Committee, adopted a new strengthened scope control policy and acted diligently to question rising project costs. The Board also established a new Performance Audit Committee, with citizen representation from each subarea, to shore up outside review of its actions. Collectively, the regional public's perceptions of a lack of performance, credibility and accountability, which had been a serious ongoing problem for Sound Transit, began to change.

Growth in Transit Ridership. We were pleased to note that ridership has continued its strong growth trend, even in the depressed economy. Ridership on ST Express Bus routes is still growing in double digits and has reached 26,000 riders per day. Sound Transit has been responsive to customer demand by canceling two under-performing routes and reinvesting the service hours in routes where there is high demand. Sounder commuter trains are carrying on average 3,000 riders per day between Tacoma and Seattle. Since the beginning of service to Everett, which started during the Christmas holiday season, Sounder North has averaged 350 daily boardings. The new Tacoma Link light rail service has exceeded all expectations from its first day of operation with over 2,000 riders per day.

Supporting the region's growing transit ridership are a number of facilities such as transit centers, park-and-ride lots and parking garages. These facilities are experiencing high demand and many are already full just months after opening.

Citizen and Customer Satisfaction. COP members this year took a special interest in how citizens and users of Sound Transit services view the agency. Customer satisfaction by Sound Transit's riders is good. An agency public opinion poll fielded in December showed some gains in the agency's favorable ratings. Sound Transit name recognition is higher than it has ever been and support for high capacity transit is strong among the region's citizens. A similar, privately-commissioned poll on behalf of the Regional Transportation Investment District (RTID) showed that a majority of the region's voters believe that any new transportation revenue package must include transit as well as highway projects. However, in light of the still significant percentage of people who have unfavorable attitudes about Sound Transit, it is unclear whether the high vote for transit can be interpreted as a vote for the agency or its programs.

Public acceptance of Sound Transit is growing. Nevertheless, COP members believe there continues to be a disturbing disconnect between the reality of Sound Transit's accomplishments and lingering public perceptions of a troubled agency. COP members believe that there remains public confusion as to whether and when there will be rail access to the airport. This appears to be a contributing factor to negative perceptions. We urge Sound Transit to do more to set forth clear information about the Port's role in planning the connection to the airport and the role of issues like airport security and Sound Transit's funding shortfall in the delays.

It is crucial that Sound Transit effectively convey an account of the agency's successes on a continuing basis. The minds of the voters will be won or lost before any campaign for Phase II begins. We urge the Board and agency leadership not to rest on the favorable trends, but to continue every effort to communicate the story of improvement and accomplishments.

Project Management and Project Control. In the second half of the year, two events occurred that represented failures of the management control systems at Sound Transit. If the project management plans, practices and systems were all working effectively, it should not have been possible for a series of relatively minor or isolated events to spiral into embarrassing cost or schedule problems without management and the Board receiving an early warning. However, two such events did occur:

• On the Reservation to Freighthouse Connector project, an apparent omission led to the need for a substantial arched culvert tunnel to be designed and built after construction had already begun. What was initially viewed as a $250,000 problem within the authorized contingency, quickly spiraled into a $750,000 problem that would require Board authorization. With a major deadline looming, decisions were taken on site without the appropriate notification of project control staff or senior management and work was authorized before the Board had approved the related budget amount.

• On the Central Link Beacon Hill and Rainier Valley segments, some 500 real estate parcels and easements must be acquired prior to beginning construction in 2004. As of November 2003 only about half of the parcels scheduled to be acquired had actually been secured. Delays had apparently been mounting over many months and issues existed with the performance of certain property acquisition contractors and staff. No early warnings were offered, either in the monthly Agency Progress Reports, nor directly to the Board. Suddenly in November and December a series of revelations indicated that schedules were in trouble, and contractors had been hired and their scopes changed without Board authorization.

In each of these cases, management reacted promptly to address the weaknesses, in one instance by commissioning an outside review and in the other by making staff changes. Nevertheless, these examples indicate that despite the intensive training afforded project managers and the agency's emphasis on project control systems, it is still possible for mid-level project staff to conceal critical emerging problems in the belief they will be able to contain them. It is possible for project control staff to be left out of information flows on vital project budget and schedule issues. It is possible for project staff and department directors to omit key information from monthly progress reports and from senior management. Why is this continuing to happen, and what steps will management take to prevent it in the future?

The two examples cited here involved relatively small cost escalations and schedule impacts in which recovery was still possible without adverse consequences to the projects. Nevertheless, they represent procedural breakdowns and weaknesses that must be addressed. As Sound Transit enters a phase of very large-scale construction contracts in which hundreds of millions of dollars will be spent in each of the next several years, such failures could quickly spiral out of control.

Legal Uncertainty. The Washington State Supreme Court decision on Initiative 776 left uncertainty about Sound Transit's revenues and further legal questions in its wake. COP members are concerned that Sound Transit might yet lose its motor vehicle excise tax revenues and be forced to use current revenues to repay outstanding bonds, leaving insufficient funds for promised programs. We look forward to seeing the completed and updated 2004 Financial Plan soon, along with the effects of possible I-776-related legal scenarios.

Monthly Progress Reporting. COP was pleased to note the development of a new Executive Summary report that attempts to provide a high-level summary view of agency progress. In its Mid-Year 2003 report, COP urged the creation of such a report. COP members found a number of the charts and tables in the new report to be reader-friendly and useful. However, members felt more could still be done to target the informed reader who wants a summary of key issues each month, but does not have time to read the entire Monthly Progress Report. Members again suggested a summary chart listing each project with its lifetime and annual budgets and the status of spending to date. Members also offered their ideas for highlighting key issues in bold, in color or by using separate graphics to draw attention to significant pieces of information. We will continue to meet with staff and monitor the efforts to improve the monthly reporting.

Link Accomplishments and Issues

Tacoma Link.

As noted above, Link had a banner year in 2003. In Tacoma, Link started service in August with a well-attended community celebration. Ridership quickly exceeded expectations and the agency almost immediately was asked to add early morning service to accommodate rider work schedules. Together with the newly opened Tacoma Dome Station, Tacoma has the first regional transit multi-modal center serving bus, commuter rail, light rail, and Greyhound inter-city buses, with adjacent parking, in one convenient urban location.

Central Link.

Sound Transit's Initial Segment light rail program achieved the restored confidence of both the professional and political establishment in Washington D.C. The Federal Transit Administration awarded the agency a "highly recommended" rating and supported Sound Transit's grant application before Congress. With valiant support from some of the state's Congressional delegation and after painful delays, Congress acted to award the Puget Sound region its long-sought $500 million grant. This signaled the go-ahead for the Central Link program to begin construction.

The agency was able to award its first major construction contracts, totaling $94 million, for the E3 Busway track segment and the Operation and Maintenance Facility. Shortly thereafter, the Board authorized the purchase of 31 light rail vehicles at a cost of $132 million, for delivery in 2006 through 2008. The construction of the Martin Luther King Jr. Way segment received several strongly qualified bidders and a contractor for the segment has been identified, with contract award due shortly. Contracts have also been awarded to three construction management firms to perform resident engineering and inspector functions along the alignment. A favorable bidding climate benefited Sound Transit and a number of the contracts were awarded for less than the engineers had estimated.

The remaining sections of the Initial Segment have completed final design or will do so within the first quarter of next year. The Beacon Hill tunnel test shaft program was completed and yielded useful geo-technical data. Some soil settlement issues were able to be identified early and will allow for the relocation of affected utilities.

Sound Transit is evaluating an early closure of the Downtown Seattle Transit Tunnel for its retrofitting and a possible joint contracting opportunity with the Pine Street Stub Tunnel. A single contractor for both sections would create cost and schedule benefits for the program.

On the Tukwila segment, one major issue remains unresolved that COP has reported on in the past. It is the size of the parking facility at the 154^th Street interim terminus. Sound Transit and the City of Tukwila have not yet agreed on the number of parking stalls that will be required, however, they have developed a firm process for analyzing and forecasting the demand that will finally settle the issue. Hopefully an agreement can be reached soon.

North Link.

The North Link supplemental DEIS was delayed almost a year as Sound Transit continued to work with the University of Washington to analyze potential routes across the Ship Canal and the University campus. At issue were the effects of light rail operations on sensitive research taking place on campus and what thresholds of vibration and electro-magnetic fields would be acceptable. Finally, in November, the DEIS was issued and its alternatives analysis indicated that the Capitol Hill-Montlake route that cut across the campus was the lowest cost and highest ridership alternative.

But UW officials immediately stated that the impacts of this alternative could not be mitigated and suggested yet another alternate route. The Sound Transit Board agreed to study the new proposed route, delaying the selection of a preferred alternative again. This is frustrating and will result in further delay. If the result of the proposed environmental analysis yields a route that is cost-effective, has high ridership, meets other selection criteria and is acceptable to both the University and Sound Transit, this will be a more than successful outcome. COP members hope that after seven years of planning the North Link/University route can be decided soon.

Sounder Accomplishments and Issues

For Sounder too, 2003 was a year of major achievements. Ridership on the Tacoma segment continued to grow and on-time performance was near 95%. In December the long-awaited Everett commuter train began service and has achieved about 350 boardings a day since then. In September an interim milestone was reached with the completion of the Reservation to Freighthouse Connector and the opening of a new commuter rail platform at the Tacoma Dome Station, cementing the operation of service between Tacoma and Seattle. The completion of this milestone was significant because numerous related projects had to be completed on tight schedules to achieve the date. As noted above, it was achieved despite the need for a last-minute work-around solution that violated Sound Transit's project control procedures.

Mid-year saw the announcement of agreements in principle with Burlington Northern Sante Fe Railroad for operation on the Everett and Lakewood segments. This represented a break-through after more than two years of difficult negotiations and delays. The detailed purchase and sale and operating agreements were finally adopted by the Board at a special meeting called for the purpose on December 17.

Despite the accomplishments, Sounder is behind schedule and much more expensive than ever anticipated. A full-scale review of program budgets, completed in December, revealed new cost increases for the Sounder program. The higher costs of the BNSF agreements, loss of over $100 million in partner funding contributions, expanded scope and newly discovered errors and omissions in earlier cost estimates put the cost of the Sounder program at almost $1.2 billion, compared to $610 million in 1998. While still affordable within the subarea budgets of Snohomish, South King and Pierce Counties, COP members were nevertheless again frustrated to learn of these significant increases. Members recognized that Board members also reacted with concern to the escalating costs. COP recommends and fully expects that the Board will act with appropriate due diligence in reviewing all proposed expenditures.

Regional Express Accomplishments and Issues

ST Express Bus service continues to grow and expand. Utilization is high at supporting facilities like transit centers and park-and-ride lots that Sound Transit has built. With all planned routes now implemented, Sound Transit is focusing on improving productivity, refining routes and marketing bus services.

Three large HOV Direct Access projects totaling over $130 million in value were under construction in 2003: the Bellevue, Lynnwood and Ash Way access ramps leading to newly built transit centers and park and ride lots. The complicated Bellevue project that is rebuilding two existing ramps and adding a third one in downtown Bellevue is ahead of schedule and under budget. In Issaquah, the SR 900 arterial HOV enhancements were also under construction. The Lynnwood Transit Center was opened for service in the latter half of 2003.

Eight other direct access projects are in development, all of them behind schedule due to inadequate funding or difficulties reaching agreement with local jurisdictions and WSDOT on what should be built. The Totem Lake (Kirkland) Freeway Station, Eastgate Transit Access at 142^nd, and the Federal Way Direct Access at 317^th are due to be advertised or begin construction in the coming year. Four projects are at risk because they are tied to the successful passage of an RTID revenue package (Renton Direct Access, Federal Way Inline Station at 272^nd, Mountlake Terrace Freeway Station and South Everett Freeway Station). Recent direct access cost estimates are significantly higher than the original Sound Move plan.

The I-90 Two-Way Transit and HOV project released its DEIS in 2003 and the Steering Committee adopted Alternative R8A as its preferred alternative. This alternative would put HOV lanes in the two new outer roadways of the I-90 floating bridge and potentially two-way high-capacity transit in the center lanes. This alternative was strongly supported by East King County jurisdictions. A group called the I-90 Safety Coalition has repeatedly expressed concerns about R8A with its narrowing of existing lanes and shoulders. The Coalition supports converting the center express lanes for two-way high capacity transit. The scale and cost of the preferred project have significantly increased from the $15.5 million original two-way center-lane transit proposal in the Regional Transit Plan, approved by the voters in 1996. Two-thirds of the Board will need to amend the project description and approve new total estimated costs of $135 million for construction (not all to be borne by Sound Transit) after the FEIS is available in the spring of 2004.

At the urging of the City of Seattle and others, Sound Transit has begun working with the Puget Sound Regional Council on an updated regional plan to determine the preferred technology for the I-90 HCT. Environmental interests are urging Sound Transit to move forward with the HCT component concurrently with the two-way transit improvements, however, both will require considerable additional revenues from the RTID or another source.

As COP has noted in the past, the funding and schedule issues with the Regional Express capital projects are largely due to insufficient project definition and poor understanding of project costs at the time Sound Move was developed. Compounded by high expectations among local jurisdictions, the need to reach agreements with third parties, and lack of funding at key partner agencies like WSDOT, these issues have led to a number of projects having to be discontinued or put on hold to seek new funding. Regional Express staff recognized the need to be more realistic with their projected cash flows when they proposed amended budgets in the spring last year and scaled back schedules for completion. As Phase II planning gets underway, COP urges that projects be much further along in their conceptual design and estimating, and that adequate contingencies be allowed, before being included in any future capital programs.